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January 19, 2011 11:57 pm
Pension Corporation, the specialist insurer set up by Edi Truell, has offloaded £500m ($799m) worth of risks attached to pensioners living longer than expected as it looks to free capital so it can compete for new business.
The company, one of a handful of businesses set up to take on UK defined benefit schemes from company pension funds, has been trying to raise up to £600m in fresh capital from new investors since late 2009, but so far has not succeeded.
Pension Corporation still managed to write more than £750m worth of business during 2010, however, which saw it insure or buy pension liabilities from companies including Alliance UniChem, Alitalia, Aggregate Industries and Liberty International.
The company will say on Thursday that it has laid off £500m worth of longevity risk to reinsurers, which it expects will free capital that will allow it to write between £250m and £300m of new business, according to people close to Pension Corporation.
The market for pension scheme buy-outs, insurance, bulk annuities and longevity swaps, which are all different ways in which companies can reduce the volatility and funding risks attached to their schemes on their balance sheets, is expected to show strong activity this year, according to industry consultants.
More than £15bn worth of pension risks could be passed on to insurers this year, according to some forecasts.
However, a similar volume of business was predicted for last year and less than half was actually completed.
The latest reinsurance deal means Pension Corporation has now offloaded over £2bn of the more than £3bn of longevity risks taken on since it was set up.
Mr Truell wants to raise fresh capital in order to compete for larger deals or to take part in further consolidation of the annuity and pension insurance market.
The company twice tried to buy Paternoster, the rival business set up by Mark Wood, the former Prudential executive, which was hit hard by the financial crisis and forced to close to new business.
Rothesay has ambitions of reaching £10bn of assets under management as swiftly as possible.
Mr Truell is looking to new investors for Pension Corporation’s capital because its existing backers either cannot or do not want to put more money into the company.
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