Legal & General has announced that it has agreed to a £4.8 billion full buy-in with the Boots Pension Scheme, the UK’s largest single transaction of its kind by premium size.
This buy-in secures the benefits of all 53,000 retirees and deferred members of the Scheme, and, for L&G, is the largest single transaction by number of members.
The sponsoring company, Boots, is a leading health and beauty business in the UK with over 2,000 stores. Legal & General observed that it has a long-standing relationship with the firm, having provided investment management services to the Scheme for over 20 years.
“This buy-in begins the conclusion of a de-risking process that the scheme first embarked on in 2001,” Legal & General said.
The company also noted that the transaction represents “Another innovative step forward in DB pension de-risking by providing a combined investment and insurance solution for the Scheme’s asset holdings, allowing the Scheme to achieve the certainty of a transaction whilst also maximising value by transferring its assets (or the associated sale proceeds) to Legal & General.”
Cardano was the strategic advisor to Walgreens Boots Alliance and lead broker for the transaction, while Baker McKenzie provided legal advice. Aon was strategic adviser, lead investment adviser and broker for the transaction representing the Trustee, while Sackers provided legal advice. Slaughter and May and Simmons & Simmons provided legal advice to Legal & General.
Andrew Kail, CEO, Legal & General Retirement Institutional, commented, “We are very pleased to have agreed this buy-in today with the Boots Pension Scheme, representing our largest ever single transaction.
“This is a testament to our long-standing relationship with the client, and I am proud that we have been able to work seamlessly across our insurance, reinsurance and investment management capabilities to deliver an excellent outcome.”
Alan Baker on behalf of Law Debenture, as Chair of Trustee, Boots Pension Scheme, added, “This agreement with Legal & General gives added protection to our members’ long-term benefits by removing market uncertainty and other financial exposures.
“We welcome the additional payment from Boots, in addition to the sum it has already committed. As a result, the Scheme will not be reliant on Boots to pay benefits to members and pensions will be protected for decades to come.
“I would like to take this opportunity to thank my fellow Trustee directors and our predecessors, the Scheme officers and advisers for their hard work over many years to reach this positive outcome for our members.”
Sebastian James, Senior Vice President and Managing Director, Boots, said, “We are very pleased to have achieved the gold standard outcome for our pension scheme and to have fully secured the benefits of all members with a highly respected insurer.
“This will provide greater certainty to both the scheme members and to Boots, and is an excellent outcome for both parties.”
John Baines, partner in the Risk Settlement team at Aon in the UK, noted, “This transaction is further evidence of the innovation that can be achieved at scale and pace in an incredibly busy, yet buoyant, insurance market.
“A key element in achieving this transaction, was dealing with the significant portfolio of illiquid investments held by the scheme.
“Working in close partnership with the sponsor and trustees, we applied our experience, innovative solutions and lessons learned from other deals of similar size, ensured this wasn’t a barrier to securing benefits.
“This, combined with taking action on investments early and having the right investment toolkit, ensured risk was managed effectively, costs were reduced and the transaction completed.”
In related news, just last week, Legal & General Assurance Society Limited completed a c.£500 million buy-in with the DB (UK) Pension Scheme.
At the half year, Legal & General’s global PRT premiums totalled £5.0 billion. Since then, the company has completed a further £7.2 billion of new business in the UK, and a further $1.5 billion in the US.
In aggregate, Legal & General has transacted circa £13.4 billion of global PRT this year.
