Prudential in $2.2B longevity reinsurance deal with Legal & General

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A unit of Prudential Financial Inc., is providing UK based insurer Legal & General Group with a $2.2 billion (£1.35 billion) longevity reinsurance cover for a portion of its pension bulk annuity business.

This is the latest large longevity risk assumption by Prudential Financial, which has entered into a number of the largest deals in the marketplace in recent years. Prudential has become one of the largest providers of longevity reinsurance, often entering into deals on its own rather than as one of a panel of reinsurers.

Legal & General (L&G) holds £24.6 billion ($39 billion) in bulk annuity assets as of June 30th 2014 and has completed £3.1 billion ($4.9 billion) in new annuity transactions in the half-year to June 30, 2014. As L&G increasingly provides annuity transfers to pension funds it assumed a growing amount of longevity risk, some of which it can retain but increasingly it will need to look to solutions to transfer this risk using longevity swaps or reinsurance.

Prudential unit Prudential Retirement Insurance and Annuity Company (PRIAC) is providing longevity reinsurance on approximately £1.35 billion ($2.2 billion) of Legal & General’s pension bulk annuity portfolio. The protection helps L&G to optimise its capital, while offloading some of the longevity risk associated with its assumption of annuities portfolios.

“This transaction represents another milestone for the longevity reinsurance market and we’re pleased that Legal & General has chosen to partner with PRIAC for this arrangement,” commented Bill McCloskey, vice president, longevity reinsurance at Prudential. “This collaboration underscores our proven ability to tailor reinsurance solutions for the largest and most sophisticated pension insurers in the world.”

Tom Ground, Head of Bulk Annuities and Longevity Insurance at Legal & General, added; “Legal & General is pleased to be able to tap into PRIAC’s longevity reinsurance capacity to support the growth of our market-leading pension risk transfer business in the UK.”

PFI has completed the largest known pension and longevity risk transfer transactions in the UK and North America, having completed the General Motors, Verizon and BT Pension Scheme transactions as well as recently entering into agreements with Motorola and Bristol-Myers Squibb to settle pension liabilities.

We’ve added this transaction to our list of longevity swaps, risk transfer and reinsurance transactions.

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