H2 2023 buy-in and buyout volumes up 75% yoy
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Insurers wrote about £28bn of buy-ins and buyouts in the second half of last year, up from roughly £16bn in the last six months of 2022, new analysis has found. Derisking activity is expected to stay high this year.
Hymans Robertson said the H2 2023 figures were also 32% higher than the £21.2bn of transactions in the first half of that year. This brings the total 2023 volume to £49.1bn, which Hymans called “an all-time high for both the number and the value of transactions”.
More than 60% of bulk annuity deals by value consisted of seven deals worth more than £1bn each, according to Hymans. In total, 226 transactions took place last year, with an average size of around £217m. Just over half of deals (130) were done in the second half of the year.
Pensions professionals expect the high level of activity to continue this year, after interest rate rises pushed up the funding levels of many schemes. Latest figures from the Pension Protection Fund show there were 4,553 schemes in surplus last month, compared with 497 schemes in deficit. The aggregate PPF funding level stood at 146.5%.
“Many defined benefit schemes have continued to use their improved funding levels to target whole-scheme buy-ins,” said James Mullins, head of risk transfer solutions at Hymans.
“As they did in 2023, our expectation is that large transactions are likely to continue to drive market volumes in 2024 and beyond. Over the next few months, we expect around 15 buy-in transactions in the range of £1bn to £2bn to come to market,” he added.
If true, this means larger transactions worth up to £30bn could be added to numerous smaller and a handful of mega deals.
“Changing market conditions have increased the capital insurers have to write new business. As the insurers’ backbooks mature, capital reserves can be freed up and allocated for new transactions,” explained Mullins.
Recently publicised transactions include the £870m buy-in of the De Beers UK Pension Scheme, as well as a £510m buy-in of the Next pension fund, both with Pension Insurance Corporation, while Just Group wrote a £44m buy-in for the scheme of Energizer and a £60m buy-in of the Epson (UK) Ltd Pension Scheme.
