Europe’s pension problem spurs return of veteran investors
LONDON: British pensions specialist Clive Cowdery has raised US$2bil in commitments from investors for a new fund to buy up life insurance policies from companies struggling to make enough money to cover long-term payouts, sources told Reuters.
The fund is one of a series of new ventures designed to capitalise on the difficulty life insurers and company pension schemes face in generating the returns required in an environment of low interest rates and tougher capital rules.
Besides Cowdery’s fund, the newly formed European Insurance Consolidation Group (EICG) is also looking for life insurance deals while pensions veteran Edi Truell and fund Clara Pensions both plan to take on defined benefit schemes from British firms.
Specialist providers say they can run pensions and life policies at a lower cost by using economies of scale, investing more astutely and using actuarial expertise to match assets more closely to liabilities – and thereby reduce risk.
Cowdery, founder of The Resolution Group, one of UK life insurance’s biggest names, would be focusing on life insurance policies closed to new customers in continental Europe and the United States, three sources told Reuters.
Cowdery declined to comment.
EICG director Jurgen Schweigert, who is a former Resolution executive, said there were a number of life insurance policy portfolios up for sale, including two books in southern Europe with about 5bil (US$6.1bil) in assets.
“There is a lot of capital out there chasing this opportunity,” Schweigert told Reuters, declining to give more details about any of the assets on offer.
Existing insurance entities backed by private equity firms Apollo and Cinven are also vying for Italian insurer Generali’s 43bil of German life insurance business, banking sources told Reuters.
Generali declined to comment. British insurer Prudential sold £12bil (US$16.8bil) of closed annuities books this year to Rothesay Life and market sources estimate there are about £100bil of such portfolios available in Britain.
Some large insurers have pulled out of offering costly pensions in Britain, or the rest of Europe, to focus on growth areas – such as Asia, in the case of Prudential.
In Britain, companies are starting to transfer pension schemes calculated on workers’ final salaries to insurers, to take the pensions risk off their balance sheets.
Such schemes, which guarantee a fixed payment to pensioners, have been closed by many companies because of their cost but still have a collective deficit of £116bil.
Truell, co-founder of the firm which became specialist annuity provider Pension Insurance Corporation, is one of the backers of The Pension Superfund, a new venture designed to manage British company pension schemes. — Reuters