Legal & General has completed a £4.4 billion buy-in for British Airways PLC’s pension scheme, Airways Pension Scheme (APS), in what it claims to be the largest ever bulk annuity policy arranged with a UK pension scheme.
The transaction, which covers nearly 22,000 pensioners under British Airways’ APS scheme, also included the conversion of existing longevity insurance into a bulk annuity.
The UK pension risk transfer (PRT) market has seen record levels of activity over the first half of 2018, with Legal & General actively quoting on more than £20 billion.
Legal & General has since completed £4.8 billion of UK PRT transactions, including the APS buy-in, and is now actively quoting on £27 billion of UK PRT deals.
In total, Legal & General said that it has completed £6.0 billion of global pension de-risking transactions year to date, including £5.3 billion of UK PRT, £0.4 billion of International PRT, and £0.3 billion of Longevity Insurance.
Benjamin Serra, a Vice President and Senior Credit Officer at Moody’s Investors Service, commented on the transaction: “A number of UK life insurers remain focused on growing risk products such as bulk annuities, and the £4.4 billion deal announced today by Legal & General illustrates that the demand for these products is high.
“However, bulk annuity players rely on reinsurers to off-load longevity risk, and the ability to source higher-yielding illiquid assets is critical to their profitability.”
“Legal & General,” Serra added, “thanks to its expertise in funding real estate and infrastructure developments, is one of the few insurers able to compete on very large bulk annuity deals and make them profitable”.
