Legal & General goes big game hunting
Legal & General’s insurance division is fixing its sights on the larger end of the bulk price annuity market, following strong Q3 market performance.
The company posted its strongest quarterly performance since Q4 2011 this month, closing 27 BPA transactions valuing £410m. The quarter included a £250m buy-in for a large industrial manufacturing company.
Tom Ground, head of pension scheme insurance solutions at L&G, said: “We’re increasingly looking at the whole scale of the market, and realising that we need to be making transactions of large value.
We’re very well placed to move towards the larger end of [the market]
“We’re very well placed to move towards the larger end of things; we have £28bn of annuities assets under management, so we can take exposure to big companies.”
Ground also outlined a trend in the company’s transactions, that saw greater use of a mechanism similar to deferral, in which companies continue to foot the payroll bill on liabilities for a fixed period.
The £250m transaction in this quarter was based on this instrument; the company will continue to fund payroll for 10 years, before the liabilities are transferred to L&G.
Ground’s projections for Q4 2012 and Q1 2013 are for a highly active market.
“Our pipeline is very good, and our quote volume is rapidly rising – in fact we issued 112 quotes this quarter, from both ends of the size spectrum. I expect us to have lots to report looking towards spring 2013,” he said.
Partner and BPA specialist at LCP, Charlie Finch, said L&G’s new focus on the larger end of the market was indicative of general market changes. “Traditionally they’ve focused on the smaller side of the market.
“Now, Rothesay are quoting down to £50m and L&G expanding towards the big deals. The market is changing, and trustees should be carefully monitoring it to make sure they’re in a position to make the right choices if they want a buy-in, buyout or swap for their scheme.”