Pension buyout market sales jump in Q4 - Aon

LONDON Thu Feb 14, 2008 6:36am EST

LONDON Feb 14 (Reuters) - The market for transferring UK company pension risks to insurers looks to have finally taken off, judging by the mushrooming value of deals done in the final quarter of 2007, pension advisory firm Aon Consulting said.

While the 75 deals done during the period was similar to the number done in previous quarters, the 1.9 billion pounds ($3.74 billion) value of business placed was more than double that placed in the preceding three quarters put together, the firm, a unit of Aon Corp. AOC.N said on Thursday.

Big deals involving the pension liabilities of firms such as Emap EMA.L, P&O, Lasmo and Weir Group (WEIR.L), were responsible for the jump. That increased pace of business could be maintained in 2008, indicated by the number and size of pension schemes seeking quotations in the final quarter.

During that period, 432 schemes with a total value of nearly 41 billion pounds were quoted for by buyout insurers, said Aon.

In 2007, the market was dominated by two players, Paternoster and Legal & General (LGEN.L) which each wrote business worth over 1 billion pounds during the year. The next player wrote only just over 100 million pounds, Aon said.

Firms have increasingly sought to close and offload the liabilities in their defined-benefit pensions schemes as volatile equity returns, tougher regulation and longer life expectancy combined to make them a growing financial headache.

But Aon sought to put into context the jump in sales in the much-hyped market, where players from Goldman Sachs (GS.N) and Morgan Stanley (MS.N) to Aviva (AV.L) and Aegon (AEGN.AS) are vying for a slice of a market with an overall value in excess of 1 trillion pounds.

"It is worth noting that 99.8% of defined benefit schemes (by value) did not buy out in 2007," said Paul Belok a principal at Aon Consulting.

"So far buyouts have tended to be for special cases -- for example where there is a driver from corporate activity requirements, strong funding levels, pressure from large overseas parent companies." (Reporting by Simon Challis; editing by Elaine Hardcastle)

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