Legal & General acquires £3bn UK annuity portfolio from Aegon
We are delighted to announce Aegon has chosen us to secure its policyholders' annuities.
The transaction has been structured initially as a reinsurance contract and covers approximately 27,000 of in-payment policyholders who will remain customers of Aegon during this period. They will continue to be serviced by Aegon until the effective date of a Part VII Transfer which is subject to regulatory and court approval.
Transitional benefits will be available to offset the Solvency II risk margin. Legal & General has chosen not to reinsure the longevity risk in relation to this transaction. On a proforma basis, the 'Day 1' impact of this transaction decreases the Group's Solvency II surplus by c.£50m and the Solvency II coverage ratio by c.3 percentage points.
Kerrigan Procter, Managing Director of Legal & General Retirement, said: "We are delighted Aegon has chosen Legal & General to secure its policyholders' annuities. Back book annuity risk transfer deals can be executed efficiently under our post-Solvency II model. Our pricing of this transaction is consistent with achieving our cost of capital hurdle rate. In the UK there is an estimated £100bn of Individual Annuities in back books and we expect further consolidation of these back books.
"As well as this deal, other significant transactions in recent months include a further buy-in with ICI in excess of £300m, the UK's largest medically underwritten contract for Kingfisher for £230m and our first two US PRT deals for $450m and $65m. "
Alex Wynaendts, CEO of Aegon, added: "I am very pleased that we are able to announce this transaction. Achieving the divestment of our UK annuity portfolio is an important step in the strategic repositioning of our business in the United Kingdom. The divestment enables us to fully focus on growing our platform business. At the same time, I am pleased that we have found in Legal & General a good home for our annuity customers."
Legal & General Retirement has written approximately £550m of total annuities year to date, in addition to the £3bn Aegon transaction, with a further £150m in lifetime mortgage lending. Globally as at 31 March 2016, Legal & General manages an annuity book of £45.5bn, and provides annuity benefits to over a million customers. In full year 2015 Legal & General Retirement (LGR) completed £2.4bn of bulk annuity deals. LGR's operating profit grew 49% in 2015 to £639m and generated £417m net cash, up 22% on 2014.
As at the end of December 2015, Legal & General Retirement had c.£10bn of undiscounted VIF, on an EEV basis, which over the next five years is expected to unwind c.£0.4bn each year.
We are going to be holding a conference call to talk through the transaction, the continued attractiveness of the bulk market opportunity in the UK and US and why Legal & General is well placed to benefit from those opportunities.
For more information, please contact:
Laura Doyle, Head of Investor Relations
Tel: 020 3124 2088
Richard King, Head of Group Corporate Communications
Tel: 020 3124 2095
Notes to editors:
Legal & General Group Plc:
Established in 1836, Legal & General is a leading provider of insurance, savings and investment management products in the UK. The Group has a market capitalisation of £14.0bn (as at 31 March 2016) and is responsible for investing £746bn worldwide (as at 31 December 2015) on behalf of investors, policyholders and shareholders. We have over seven million customers in the UK for life assurance, pensions, investments and general insurance plans and over one million customers in the US who rely on us for life assurance. In 2015, Legal & General's operating profit (on the IFRS basis) was £1,455m and adjusted earnings per share were 18.58p for the period, a year on year increase of 14% and 11% respectively.
For more information on Legal & General, please see http://www.legalandgeneralgroup.com/
Legal & General Retirement:
Legal & General Retirement has participated in the insurance solution pension de-risking market for nearly 30 years and was voted Risk Reduction Provider of the Year at the 2016, 2014 and 2013 UK Pensions Awards and Risk Management Provider of the Year at the Pensions Age Awards 2014. Legal & General was also voted Insurer of the Year at the 2014 Insurance Risk Awards, Winner of the Engaged Investor Trustee Awards in 2015, and Derisking Provider of the year at the Pensions Expert's Pension and Investment Provider Awards 2015. Legal & General provides annuities to pensioners and has completed a number of landmark transactions. These include the $900m deal with Philips in the US in partnership with The Prudential Insurance Company of America in 2015, the £3bn bulk annuity arrangement with the ICI Pension Fund, the largest bulk annuity policy arranged by a pension scheme in the UK to date, secured in March 2014, the UK's largest medically underwritten deal for £230m with Kingfisher in December 2015 and the £3.2bn longevity insurance transaction with the BAE Systems 2000 Pension Plan in February 2013. Legal & General manages £43.4bn of annuity assets as at 31 December 2015.
Legal & General offers a range of de-risking solutions, which includes buyout, buy-in, longevity insurance and liability-driven investment (LDI), to pension schemes of all sizes. Legal & General is also able to tailor a combination of LDI and longevity insurance to provide "DIY buy-in" solutions. Legal & General has expertise in investment management, all aspects of defined benefit provision as well as an in-depth understanding of mortality trends and longevity risk. The excellent services we are able to provide also include payroll, administration and communications services.
This announcement may contain certain forward-looking statements relating to Legal & General, its plans and its current goals and expectations relating to future financial condition, performance and results. By their nature, forward-looking statements involve uncertainty because they relate to future events and circumstances which are beyond Legal & General's control, including, among others, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory and Governmental authorities, the impact of competition, the timing impact of these events and other uncertainties of future acquisition or combinations within relevant industries. As a result, Legal & General's actual future condition, performance and results may differ materially from the plans, goals and expectations set out in these forward-looking statements and persons reading this announcement should not place reliance on forward-looking statements. These forward-looking statements are made only as at the date on which such statements are made and Legal & General Group Plc does not undertake to update forward-looking statements contained in this announcement or any other forward-looking statement it may make.