Prudential Retirement®, a unit of Prudential Financial, Inc., has concluded about $2.6 billion in previously undisclosed longevity reinsurance contracts, an important signal of an unprecedented start to the 2019 U.K. pension risk transfer market.
As part of these transactions, Prudential Retirement is assuming the longevity risks of approximately 16,000 pensioners.
Amy Kessler Prudential Financial (Photo: Business Wire)
This early 2019 de-risking wave has been driven in part by many pensions seeking to close agreements prior to the original March 29 Brexit deadline. But with the Brexit deadline extended until late October, pensions that have not yet transacted have an unexpected window to move forward and de-risk.
Demand for de-risking solutions has also been driven by the robust funded status of U.K. schemes, which have improved markedly since 2016. The funding level of the average U.K. pension scheme stood at 100.1% on March 29,1 putting many in a favorable position to reduce risks.
“Pension schemes that can afford to de-risk have raced forward in the opening months of 2019, taking advantage of the window before Brexit to reduce their risks and lock in gains,” said Amy Kessler, head of longevity reinsurance at Prudential Financial. “Brexit brings increasing levels of uncertainty that could wash away recent market gains and funding improvements, putting de-risking out of reach for those with lower hedge ratios. But with funding at the highest levels in a decade, pensions are de-risking at an unprecedented pace.”
“Another impetus to de-risk is the notable decline in U.K. mortality rates during the last 10 months,”2 said Christian Ercole, vice president at Prudential Financial. “The resulting level of market activity favors insurers and reinsurers who have invested in their pricing and analytics teams, and it also favors pension funds that come prepared with credible and complete data.”
Prudential is a global leader in the pension reinsurance market with more than $60 billion in international reinsurance transactions since 2011, including the largest longevity risk transfer transaction on record, a $27.7 billion transaction involving the BT Pension Scheme.
About Prudential Retirement
Prudential Retirement delivers retirement plan solutions for public, private, and nonprofit organizations. Services include defined contribution, defined benefit and nonqualified deferred compensation recordkeeping, administrative services, investment management, comprehensive employee education and communications, and trustee services, as well as a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.4 million participants and annuitants. Prudential Retirement has $446.5 billion in retirement account values as of Dec. 31, 2018. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, Connecticut, or its affiliates.
Reinsurance contracts are issued by PRIAC or The Prudential Insurance Company of America (PICA), Newark, N.J. Both are wholly owned subsidiaries of Prudential Financial, Inc., and each company is solely responsible for its financial condition and contractual obligations. Neither PRIAC nor PICA is licensed or regulated by the U.K. Prudential Regulation Authority as an insurer or regulated by the Financial Conduct Authority, nor does either conduct business in the United Kingdom or provide direct insurance to any individual or entity therein. Prudential Financial, Inc. of the United States is not affiliated with Prudential plc, a company headquartered in the United Kingdom.
About Prudential Financial, Inc.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1 trillion of assets under management as of Dec. 31, 2018, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit news.prudential.com.
1 100.1% – Average funded status for FTSE100 is at 100.1%, according to Aon Hewitt Global Pension Risk Tracker, March 29, 2019. Funding ratio (cumulative assets/liabilities) of all pension schemes in the FTSE100 index on the accounting basis.
2 SIAS/CMI – Mortality Improvements Outlook 2019+, April 2019.