Scottish Widows, Lloyds TSB’s main insurance subsidiary, is considering putting a £2bn annuity portfolio up for sale, as part of moves to unlock excess capital.
That Widows is considering offloading a slice of its £5bn annuity book underlines the attractiveness of this route for insurers, after a raft of specialist investors, awash with capital, rushed into this market.
Zurich Financial Services this month agreed to transfer a portfolio of annuities to Swiss Re, handing over £3.7bn of assets, £200m less than the value of the liabilities, equating to a good price for Zurich, according to industry watchers.
Andy Briggs, managing director of marketing and distribution at Scottish Widows, said: “We are generally looking at a range of ways of de-risking the balance sheet and at the repatriation of capital to the group.”
However, he declined to comment further.
Consideration of the annuities sale comes as Lloyds TSB is conducting a process to sell its Abbey Life closed life assurance fund, which is expected to fetch about £1bn.
It is thought Resolution Life, Hugh Osmond’s Pearl and Swiss Re are among those companies selected to go forward to the next round of bidding for Abbey Life.
The moves offer attractive alternatives to selling the whole of the closed life books managed by Scottish Widows.
Widows has about £5bn of in-force annuities – contracts that promise to pay the owner an income until they die. About half of these were taken on after Widows demutualised.
It is thought it would be complex to try to offload those taken on before demutualisation, making freeing those taken on post-demutualisation, slightly more than £2bn-worth, more likely.
The portfolio could appeal to one of the many investors interested in acquiring parcels of annuities.
While Prudential and Swiss Re remain active, they have been joined by investors such as Edmund Truell’s Pension Insurance Corporation, Jonathan Bloomer’s Lucida and Isabel Hudson’s Synesis Life.
Lloyds TSB has indicated it could take out up to £1bn-£1.5bn of excess capital locked in Scottish Widows.