L&G Secures £2.5B Buy-Out in International Risk-Transfer Deal

Legal & General (L&G) has secured a £2.5 billion partial buy-out of the TRW Pension Scheme as part of a “ground-breaking” risk transfer project, claimed to be one of the largest and most complex completed in the UK to date.

As well as the pensioner buy-out, TRW—a US-headquartered car parts manufacturer—used pension increase exchange offers, enhanced transfer values, and winding-up lump sums to reduce the risks connected to deferred members.

Mercer, which acted as the lead adviser to the TRW trustees, claimed the project was the “largest and most complex” de-risking deal so far completed in the UK. In total, two thirds of the pension fund’s liabilities—and some 30,000 members—were covered by the project.

TRW also co-ordinated the UK de-risking exercise with other arrangements covering its smaller US and Canadian pensions. Adrian Hartshorn, senior partner at Mercer, said these plans combined annuities and the payment of lump sums to reduce their liabilities in a cost-efficient manner.

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Neil Marchuk, chair of TRW’s UK trustee board, said the buy-out “materially de-risks our remaining pension obligations and provides security to members”.

Ronnie Bowie, actuary and partner at Hymans Robertson—which provided actuarial and investment consultancy services to TRW—hailed the completion of the deal as “innovative” and “ground-breaking”.

The UK move follows a liability-driven investment (LDI) strategy implemented by TRW in 2007 with L&G Investment Management.

TRW locked in a price agreement with L&G early on in the process, according to Mercer, which “provided certainty for all parties” and allowed the pension fund to focus on transitioning its assets from an LDI model to a portfolio suitable to be transferred to the insurer.

L&G has been particularly active in the de-risking market this year. It was one of two insurers, along with Prudential, to take on £3.6 billion in liabilities from chemical company AkzoNobel’s ICI Pension Fund.

In total, more than £8.5 billion in assets and liabilities has been transferred to insurers and other third parties in the UK in 2014.

JohnCorrigan_ChrisBuzelli (Art by Chris Buzelli)John Corrigan is to retire from his position as chief executive of Ireland’s National Treasury Management Agency (NTMA).

Corrigan—a veteran of CIO’s Power 100 list—will step down on January 4, 2015, having led the NTMA through Ireland’s recession, financial crisis, and bailout. The NTMA oversees the management of the country’s National Pension Reserve Fund.

Corrigan will be replaced by Conor O’Kelly, deputy chairman of Investec’s Ireland operations.

“I would like to thank John Corrigan for his leadership of the NTMA and for his counsel to me during an extremely challenging period in Ireland’s recent history,” said Michael Noonan, Irish minister for finance.

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Noonan said Corrigan had helped the NTMA make “a very significant contribution to Ireland’s recovery,” citing its role in helping the country exit an €85 billion ($106 billion) bailout programme, instigated by the European Union and the International Monetary Fund in 2010.

Willie Walsh, chair of the NTMA’s advisory committee, also thanked Corrigan for “the tremendous commitment and surefooted manner in which he managed Ireland’s full return to the sovereign debt markets” in 2012.

Before joining Investec, O’Kelly was chief executive of Dublin-based NBC Group and led a management buyout of the company in 2003. NBC Group was later bought by Investec.

Walsh said O’Kelly’s experience “will be invaluable to the NTMA as it manages the wide range of commercial and market-facing mandates that Government has entrusted to it.”