Abu Dhabi wealth fund targets Pension Insurance Corp. investment

by Artemis on April 6, 2018

According to a report, the Abu Dhabi Investment Authority (ADIA), a sovereign wealth investment fund owned by the Emirate of Abu Dhabi and tasked with investing funds on behalf of the Government of the Emirate, is looking to buy a significant stake in pension risk transfer specialists Pension Insurance Corporation (PIC).

The Emirate of Abu Dhabi is well-known for its investments into insurance, reinsurance and ILS asset classes, having previously taken a stake in reinsurance firm Ariel Re and backed the Credit Suisse ILS team linked reinsurer Kelvin Re, through its sovereign wealth investment funds.

Sky news reported this week that the Abu Dhabi Investment Authority (ADIA) is one of the candidates to acquire investor J.C. Flowers’ stake in Pension Insurance Corporation (PIC).

Private financial services focused investor J.C. Flowers has a 21.4% stake in PIC which it is looking to offload, the report says, with the Abu Dhabi sovereign wealth fund expected to take the majority of that.

Investment bankers at Evercore are running the sales process, Sky reported, and a sale of the stake could value PIC at as much as £3 billion.

CVC Capital Partners, the private equity focused investor, may take a small chunk of the stake Sky suggested, which would take its stake in PIC to 20%.

PIC is one of the leading pension risk transfer firms, providing full buyouts to corporate pension plans and making use of reinsurance capital to back its deals, or to offload longevity risks it assumes.

The pension risk transfer business is expected to continue to grow, with longevity risk a key driver, resulting in more pension buyouts and longevity reinsurance or longevity swap deals, suggesting market growth that PIC could take advantage of.

The news that the Abu Dhabi sovereign wealth fund is interested in taking a stake underscores the liking for insurance-linked returns at the fund and in the Emirate and demonstrates another way this huge investor can benefit from global re/insurance market trends and growth, as well as the lack of correlation these assets show to broader financial market indices.

Given its use of longevity swap and reinsurance transactions to manage its pension exposures, Pension Insurance Corporation features heavily in our Longevity Risk Transfer Deal Directory.

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