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.