Pension Insurance Corp. Serves as Lifeboat for Alliance Boots

(September 1, 2010) — Alliance Boots PLC, a European pharmacy and beauty products company, said it has insured itself against any further possible costs associated with a portion of its final salary pension scheme.

The deal, which the company said would “ensure long term security” for the members, represents a continued effort by employers to relieve a potential spike in the price of paying for its employees’ pensions as a result of lackluster investment returns and increases in life expectancy.

Alliance Boots insured part of its pension liabilities with specialist buyout fund Pension Insurance Corporation (PIC), which was created to assume the pension risks of companies drowning in deficits. The deal will see Pension Corporation assume control of the old defined-benefit pension scheme of Alliance Unichem, which merged with Boots to form Alliance Boots in 2006 – the scheme now has about 3,000 members with liabilities of about £300 million. According to The Guardian, parent company Alliance Boots is not considering outsourcing the management of its much larger Boots pension schemes.

The transaction, which could be announced this week, will reportedly take the value of the assets managed by Pension Corporation’s insurance arm to about £4.5 billion.