The Apprentice: The Longevity Pitch

CIO imagines a radical new approach to de-risking investments.

Time: 9:00 a.m.; Place: Pension CIO’s office; Attending: Investment consultant, CIO.

“So, about this longevity risk hedge you’re planning. More of your pension fund members are retiring, but they’re not dying.”

“I have an idea that I think will save you a lot of money: greetings cards and funeral homes.”

“No, no, bear with me. It could work. A UK high street greetings cards retailer, Clinton Cards, saw a 22% rise in sales of 100th birthday cards in the past 12 months, according to this press release.”

“People are living longer. Your pensioners are living longer. They all have families, right? And what do families buy old people? That’s right, birthday cards!”

“And it gets better: There was a 48% rise in 95th birthday cards, so the 100th birthday cards are only going to sell better and better. The income from these companies could go a long way if you go in big.”

“Tim Fairs, marketing director at Clintons, said that if these increases are anything to go by, we should expect his company to increase its range to include cards for people celebrating their 125th birthdays.”

“Why are you laughing?”

“Okay, if the birthday thing doesn’t get you, the funeral homes will.”

“Another UK firm, Avalon, said in a press release that—no, I don’t get all my ideas from unsolicited emails. Avalon is a ‘leading provider of prepaid funeral plans,’ so it knows what it’s talking about. In 12 months, it’s seen inquiries increase 300%, and the number of funeral plans written almost doubled in that time.”

“So, people are living longer, but also people are dying. What? No, I didn’t say people weren’t dying, that would be a stupid thing to say. My cat died only last month, and I’d rather not talk about it if you don’t mind.”

“These are two really lucrative markets, and buying related companies’ stock is so much cheaper than setting up your own insurance company to transact a longevity swap, like BT did. Add a bit of leverage and you’re as good as hedged!”

“What do you mean, fired?”