Pension Corp Taps Debt Market to Fund More De-risking Deals

The UK pension insurer is seeking to raise £300 million in its first ever bond issue.

Pension Insurance Corporation (PIC) is raising capital in the debt market for the first time this week in anticipation of more large de-risking deals in the UK.

The group hopes to raise £300 million with a 10-year bond issue, Chief Investment Officer has learned. Royal Bank of Scotland—one of PIC’s backers—and Morgan Stanley are understood to have co-ordinated the process.

While issuing debt to help finance de-risking deals is the norm for most insurers in this space, PIC has so far not followed this path. According to its 2013 financial report the group had a statutory surplus of £537 million at the end of the year, which translated to a solvency ratio of 249%.

This year is already shaping up to be a record 12 months for de-risking deals in the UK. Legal & General and Prudential teamed up to insure £3.6 billion of liabilities for the ICI Pension Fund in March, while PIC completed a £1.6 billion buy-in transaction at the start of June, insuring more than half of the liabilities of oil giant Total’s UK pension fund.

PIC has insured more than £4.3 billion worth of liabilities for 14 UK corporate pension schemes in the past 12 months, including a £1.5 billion buyout transaction with the EMI Pension Fund in July 2013.

The company was a winner in CIO’s 2014 European Innovation Awards in May, taking home the top prize in the Swaps/Buy-in category for its boundary-pushing deals and asset allocation.

Related content: Mega Buyouts Land in the UK & Will the UK Budget Make Pension Buyouts Cheaper?