Bulk annuity business soars back up to 2014 levels

Total bulk annuity business has bumped back up to peak volumes as seen in 2014 as it rose to £3,596 by the end of June 2015.

According to Aon Hewitt’s latest Risk Settlement market update, the total amount of bulk annuities soared in the second quarter of this year after a slow first quarter when total business was recorded at £803m.

A total of 34 cases were written in Q2, compared to 27 cases in Q1. Aviva led the way with total deals, writing just under a third (10). Legal & General closely followed with eight, Just Retirement with seven and Pension Insurance Corporation with four.

Partnership and Prudential both wrote two cases each and Rothesay Life wrote one.

Despite Aviva partaking in the most transactions, the two cases written by Prudential amounted to the largest proportion of business at £1,170m, almost three times more than the value of deals secured by Aviva.

As is usually the case, larger deals dictated total value with £300m plus transactions in Q2, compared with one in Q1.

Aon Hewitt said it understands that only two of these were full scheme buyouts, with pensioner buy-in transactions “dominating activity in the market”.

“The £675m transaction for Rothesay Life was notable as the conclusion of the Lehmans insolvency process; this concluded a seven year process we went through with the trustees to ultimately realise sufficient funds to secure full benefits, so that this scheme did not need PPF support,” Aon Hewitt said.

The year’s largest transaction has since been disclosed in July, a £1.6bn buy-in with Rothesay Life for the Civil Aviation Authority.

“This suggests a £10bn market volume for 2015 could be attainable, short of 2014's record level (£13bn) but a demonstration of resilience in a year when low yield levels created different market conditions for some trades, and insurance companies grappled with the major challenges of adjusting to the new Solvency II requirements,” Aon Hewitt added.

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