Rothesay Life has insured two Smith & Nephew pension funds in a £190m deal.

Both transactions involved an exchange of UK gilts for a bulk annuity insurance policy covering a portion of the FTSE 100 medical technology business’s liabilities.

The transactions are with the trustees of the Smith & Nephew UK Pension Fund and UK Executive Scheme. The London-based multinational disclosed pension obligations of USD $260m in its 2012 annual report, mainly in relation to its UK and US schemes.

Rothesay Life says the bulk annuity transaction provides the funds with low risk assets, and additional protections including cover against longevity and pension increase risk. Trustees were advised by LCP, and the company by KPMG.

“This transaction illustrates the continuing trend for defined benefit pension schemes to use their gilts to purchase bulk annuities, which we saw develop last year,” Rothesay Life chief executive Addy Loudiadis says.

Rothesay Life says it wrote more than £1bn of new bulk annuity business last year, and says there is a “strong pipeline of opportunities” ahead.

“So far in this year, we have also seen strong interest in full buy-outs. The combination of these factors make us confident that 2013 will be a growth year for bulk annuities,” Loudiadis says.

The bulk annuity market has shown signs of growth this year, after falling to £4bn in 2012 from £5.2bn the year before according to figures from Legal & General.

Aon Hewitt statistics released today indicated £876m of bulk annuity business was placed in the first quarter of this year, compared with £491m in the same period last year and £348m in the first three months of 2011.

The number of cases written was also well up, at 54 this year compared with 27 and 43 in the first quarters of 2012 and 2011, respectively.

Rothesay Life, Legal & General, and Pensions Insurance Corporation wrote 90 per cent of the business in the period, Aon Hewitt says.

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