De-risking activity tops £17.6bn in H1 2019 – LCP

The total buy-in and buyout volume by UK pension schemes reached £17.6bn in the first half (H1) of 2019, compared to £7.8bn in H1 2018, according to analysis by Lane, Clark and Peacock.

It means the last 12 months in the buyout and buy-in market have been the busiest on record, with £34bn recorded in total. This more than doubles the £14.9bn recorded in the 12 months to 30 June 2018.

LCP’s analysis is based on insurer half year figures, including Aviva’s results today as the final insurer to report.

It found that 70 per cent of H1 2019 volumes were written by Legal & General (L&G) and Pension Insurance Corporation (PIC) who between them absorbed most of the increase in volumes. L&G wrote £6.3bn (H1 2018: £0.5bn) and PIC wrote £6.0bn (H1 2018: £3.3bn) giving them a 36 per cent and 34 per cent market share respectively.

The record £34bn volumes in the past 12 months included the three largest buy-in/out transactions ever: the £4.6bn pensioner buy-out by Rolls Royce in June 2019, the £4.4bn pensioner buy-in by British Airways in September 2018 and the £3.4bn buy-in by British American Tobacco in May 2019. There have been two further £1bn plus transactions to date in 2019 by the schemes of Marks & Spencer and Commerzbank.

The £7bn longevity swap announced this week by HSBC is the second largest longevity swap ever but the first such transaction in the past 12 months.

Commenting, LCP partner Charlie Finch, said: “Total first half volumes have comfortably topped £15bn in line with our predictions, marking a record half year for buys-in and buy-outs as activity continues at a frenetic pace.

“FTSE 100 transactions are continuing at a rapid pace. In the past week alone we have seen giant longevity hedging transactions announced by British American Tobacco and HSBC taking the number of FTSE 100 transactions to six so far this year. Our team has had its busiest year to date, completing a record of £10bn deals so far in 2019 as large blue-chip companies increasingly seek specialist support to de-risk their schemes.

“Insurer pricing has held up well and we continue to expect 2019 full year buy-in and buy-out volumes to exceed £30bn as large transactions compete for market capacity in the second half of the year.”

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