Prudential Closes $3.2 Billion in New UK Longevity Reinsurance Deals

US-based Prudential Retirement, a unit of insurance giant Prudential Financial, has concluded $3.2 billion in previously undisclosed longevity reinsurance contracts, which the company says is another sign that pension de-risking activity in the UK is continuing at a brisk pace.

As part of the transactions, Prudential assumes the longevity risk for approximately 13,200 British retirees.

“The market for pension de-risking solutions is expanding at its fastest pace in years,” said Prudential in a release, “in part because such activity has become more affordable than at any point in the last decade.”

Prudential said the affordability of pension buy-ins and buy-outs is due in part to the improved funded status of UK pension plans.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

“The average UK pension scheme is at or near full funding, a material improvement over the last two years,” Amy Kessler, Prudential’s head of longevity risk transfer, said in a release. “Pensions are actively taking advantage of this environment by locking in these gains and transferring risk, knowing that such periods don’t last forever.”

According to JLT Employee Benefits, the funding level of the pension plans of the FTSE 100 and FTSE 350 companies reached 100% and 99%, respectively, in October, while the funded level for all private sector pension plans in the UK is 98%.

Prudential said the longevity reinsurance contracts follow at least 10 others during the last 12 months that are $1 billion or more in size. It also said 2018 is shaping up to be one of the best years on record in the market.

“The unprecedented level of market activity in 2018 favors insurers and reinsurers who have invested in their pricing teams and analytics,” said David Lang, vice president at Prudential Financial. “It also favors pension schemes that come prepared with credible and complete data.”

Earlier this month, International Paper purchased a $1.6 billion group annuity contract from the Prudential Insurance Company of America, which moved the benefit obligations of 23,000 retirees to the insurer. The deal was the second-largest agreement in 2018, behind FedEx’s $6 billion arrangement with MetLife in May.

Tags: De-Risking, Pension, Prudential, UK

Invesco will buy OppenheimerFunds from insurer MassMutual for $5.7 billion.

The arrangement will increase Invesco’s value to $1.2 trillion and place it in the upper echelons of asset management firms by size.

Aside from the money, MassMutual will receive a 15.5% stake in Invesco, coming along for the ride in the firm’s ascension to 13^th-largest globally (sixth-largest in US retail). It has also nominated former OppenheimerFunds CEO William F. Glavin Jr., as its representative on Invesco’s board.

One of the key attractions for Invesco is Oppenheimer’s global and emerging markets equity skills. Another is its US third-party distribution system.

For more stories like this, sign up for the CIO Alert newsletter. 

Martin L. Flanagan, Invesco’s president and CEO, said the “compelling, highly strategic, and accretive” deal would enhance the organization’s US and global market leadership, meet client goals, and, of course, deliver strong financial results.

“OppenheimerFunds’ culture and commitment to high-conviction investing complement our own, and the combination will create significant opportunities for the talented professionals of both companies,” Flanagan said.

Invesco expects the move to increase earnings per share by about 18% in the first nine months of 2019, and around 27% in 2020.

MassMutual Chairman Roger W. Crandall said the deal will allow the insurer to “continue to benefit from a strong, diversified global asset management business,” and stay focused on its purpose “to help people secure their future and protect the ones they love.”

Tags: Invesco, MassMutual, OppenheimerFunds