Abu Dhabi wealth fund agrees investment in Pension Insurance Corp.

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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, has been confirmed as investing in a significant chunk of pension risk transfer specialists Pension Insurance Corporation (PIC).

As we wrote Back in April, the Abu Dhabi sovereign wealth fund had been named as an investor showing interest in taking some of private equity specialist J.C. Flowers’ stake in Pension Insurance Corporation (PIC).

This morning that has been confirmed, and the Abu Dhabi Investment Authority (ADIA) said it has reached an agreement to acquire up to a 21.4% stake in Pension Insurance Corporation Group from funds advised by J.C. Flowers & Co., subject to regulatory approval.

The Emirate of Abu Dhabi is recognised for its investments into insurance, reinsurance and ILS asset classes, having previously owned part of reinsurance firm Ariel Re and having also backed the Credit Suisse ILS team linked reinsurance firm Kelvin Re, through investments made by its sovereign wealth funds. ADIA’s Private Equities Department (PED) led this acquisition of PIC shares.

PIC has a strong track record in pension risk transfer, with now more than £25 billion of financial assets under its control to support the pension benefits of over 150,000 individuals.

Hamad Shahwan Aldhaheri, Executive Director of the Private Equities Department at ADIA, commented, “This investment is a further demonstration of our ongoing strategy to seek out principal investments in market-leading businesses with strong management teams. PIC has proven its ability to respond to the growing trend for UK companies to de-risk their defined benefit pension obligations and, as such, has strengthened its position as the industry’s leading pension insurance provider.”

Tracy Blackwell, CEO at PIC, added, “We are delighted to welcome ADIA to our small group of committed shareholders with financial services expertise and long-term investment horizons. We are confident that, together, they will continue to build on the valuable support provided by J.C. Flowers over the past 12 years, and ensure that PIC is ideally placed to meet the increased demand from pension fund trustees.”

The pension risk transfer business is forecast to experience ongoing growth, with longevity risk on of the key drivers. The result is expected to be more pension buyouts, longevity reinsurance and longevity swap deals, suggesting market growth that PIC will be well-positioned to capitalise on.

The acquisition underscores the Abu Dhabi sovereign wealth funds appetite for insurance-linked returns, demonstrating 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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