Pensions Corporation prices rivals out of market

Published by LCP, the report shows that Pension Corporation wrote £407m in Q2, in addition to £339m in Q1, giving them 56 per cent of the buy-in, buyout market for H1 2012. In addition, the company closed a £320m buy-in with Cookson Group in July, which brings their market share for the year to date to 65 per cent.

Charlie Finch, partner at LCP, said the success of Pension Corporation in picking up some “very attractive” investments, such as bank-covered bonds, had provided high returns, which in part has enabled them to offer lower prices.

However, he said it was still a competitive market. “We expect Pension Corporation to write a high amount of business in the second half of the year, and other insurers will certainly be monitoring their pricing to make sure they stay competitive,” he explained.

Finch suggested Pension Corporation’s success was also attributable to having its capital used for just one source.

“Unlike other insurers, such as Prudential or Legal & General, where the relevant division has to fight for capital allocation, Pension Corporation’s capital is specifically available for deals in this market.”

The company has agreed a £400m capital raising deal with Reinet, which will close later this year, further increasing its business capacity.

Co-head of business origination for Pension Corporation, Jay Shah, said: “We’re a specialist insurer, and all our transactions are brokered by experienced pensions specialists to ensure they’re suitable for us and our clients, so we haven’t gone out to be purposefully aggressive on pricing. Nonetheless our premiums are clearly very strong at the moment – we wouldn’t be winning the business we are if that weren’t the case.”

Paul Belok, principal and actuary at Aon Hewitt, said: “Market share can vary year to year – 2011 was reasonably spread – but their competitors will be thinking about what to do and how to respond.”

Pension Corporation’s dominance is also potentially explicable by multiple insurance companies committing significant resources in early 2012 to competing for a £5bn deal for Phoenix Holdings’ annuity liabilities, which was awarded to Guardian Financial Services in July.