Lloyds Bank to Enter UK Bulk Annuity Market

Scottish Widows is building a team to break into the growing de-risking sector.

Lloyds Banking Group subsidiary Scottish Widows has hired a director of bulk annuities as it looks to break into the UK’s de-risking market later this year.

Emma Watkins will join the insurer as head of bulk annuities on June 1, and Scottish Widows will bring in more staff in the coming months to establish its capability to conduct buy-ins and buy-outs. It plans to become active in the market by the end of 2015.

She joins from consultancy firm LCP, where she was head of buy-out business development. Last year she was lead adviser on Pension Insurance Corporation’s £1.6 billion buy-in deal with the Total UK Pension Plan, the second-biggest transaction of its kind so far in the UK. Prior to joining LCP in 2012, Watkins was director of business development at MetLife Assurance.

The defined benefit pension de-risking market was identified as a “good opportunity” for Lloyds during a strategic review of the business conducted by Group Chief Executive António Horta-Osório last year.

Watkins told CIO that the new venture would combine Scottish Widows’ insurance capabilities and familiar brand with the facilities of its parent company, “most importantly in asset origination”.

“The relationship with Lloyds is clearly key,” she added. “With buy-ins and buy-outs, trustees want to work with someone they and the corporate sponsor can be comfortable with.”

A spokesperson for Scottish Widows said the group planned to “leverage our group strategic advantages… to build a market leading franchise.”

An LCP spokesperson said Watkins would leave the team “on a high,” as the consultant had been hired as lead adviser “on nearly 60% of successful £100m+ buy-ins and buy-outs in 2014.”

The UK’s de-risking market grew exponentially last year with a number of record-breaking deals. Buy-in and buy-out transactions totalled £13.2 billion in 2014, a 69% increase on the 2013 total and significantly higher than the previous record of £8 billion set in 2008.

Legal & General, Pension Insurance Corporation, and Rothesay Life have been the dominant forces in the last three years, according to Aon Hewitt’s latest de-risking report, accounting for more than three-quarters of the annual total in 2012, 2013, and 2014.

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