After its business model was shadowed by an array of doubt since the Brexit vote, insurance giant Legal & General has moved swiftly to show its market strength.
Just yesterday, Insurance Business UK
reported on Legal & General being named as one of the most exposed companies post-Brexit
with shares falling around 19% since the referendum and fears mounting that there will be a period of low interest rates which would impact badly on the company given its position as one of the leaders of the bulk annuity market. Today, however, it has signed a £750 million deal with the ICI pension fund.
Legal & General is set to take on £750 million in liabilities from the ICI scheme in what has been described as a pension buy-in.
Speaking to The Financial Times
about the deal, Cheryl Agius, Legal & General’s head of strategic pension risk, commented that “this is a further step forward in the de-risking programme which we are helping the ICI Pen
sion Fund Trustees to deliver for their scheme members.”
In usual circumstances, low interest rates are seen as bad for the pension buyout market as insurers will usually only take on liabilities from fully funded schemes – with low interest rates squeezing pension deficits. From the end of May to the end of June, UK deficits rose from £295 billion to £384 billion, according to the Pen
sion Protection Fund.
However, this deal suggests there is an appetite for bulk annuity deals – with Legal & General highlighting that the deal was signed after the referendum vote.
Overall, the company has completed £4.5 billion in annuity deals this year, including scooping £2.9 billion in business from Aegon – this compares to just £2.4 billion of deals for Legal & General in 2015.
Legal & General named among ‘most exposed’ post-Brexit