Financial conglomerate AXA has sealed a £2.8 billion ($4.4 billion) longevity swap for its UK defined benefit pension with Reinsurance Group of America (RGA).
The arrangement covers 11,000 pensioner members of the AXA UK Group Pension Scheme, and roughly half its liabilities.
Stephen Yandle, chairman of trustees, said the move was “an important step” and had de-risked the pension “significantly”.
“We’ve leveraged our own internal expertise, and worked hard with the trustees, the advisers, and RGA,” said Emma Ferris, AXA UK director of pensions, “to develop an innovative solution which provides members with additional security, as well as improving the risk management and capital position of AXA UK.”
James Mullins, partner and head of consultancy group Hymans Robertson’s buy-out solutions, noted that five pensions connected to UK insurers have recently completed longevity swaps.
“It is also interesting that the three most recent of these transactions involved the pension scheme passing their longevity risk directly onto reinsurance companies, rather than using a third party intermediary,” Mullins said. “We believe this trend will continue.”
The AXA transaction is the 30th longevity swap involving a UK pension in the past six years, according to Hymans Robertson. The deals have de-risked more than £53 billion of liabilities. By far the largest of these—accounting for roughly 30% of this total—was the £16 billion longevity swap completed by the BT Pension Scheme last year.
Details of longevity swaps completed since June 2009. Source: Hymans Robertson (correct as of March 31 2015)
Related: UK Insurer Secures £2.8B of Longevity Swaps & De-Risking Activity Picks Up After Slow Q1