Legal & General (L&G) has announced bulk annuity sales in the first half were £1bn lower than last year, but it expects another £7bn of deals in the second half.
In its half yearly report published 09 August, L&G said it completed 14 UK pension scheme buy-ins and buyouts totalling £0.5bn in H1, compared to £1.5bn in the first half of 2017.
The insurer is currently quoting on more than £20bn of bulk annuity deals in the UK, and anticipates market transaction volumes to be weighted towards a number of large transactions expected in the third quarter.
Of these, £7bn is currently being "exclusively negotiated" with pension schemes, and is expected to close in H2.
As part of its preparation for an "exceptionally busy second half", the firm said it has been carefully managing its pipeline, employing disciplined pricing, and focusing primarily on large deals and innovative new transactions that expand potential client base.
Its recent £325m bespoke buy-in of Heathrow Airport's defined benefit (DB) plan was supported by an investment in a bespoke corporate bond structure issued by Heathrow Airport.
L&G said falling deficits and improving affordability of buyouts means it expects further growth in this market. The UK's private sector DB market is estimated to have £2.3tn of liabilities, of which only around 7% has been insured through buy-ins or buyouts to date, said the firm.
The insurer is also reviewing long-term longevity assumptions and intends to update this to account for higher than expected mortality - revealed in the latest CMI Mortality Projections Model - in its full-year results. It expects this to result in savings between £300m and £400m.
Chief executive Nigel Wilson: "We are reviewing our long-term mortality assumptions and expect to make a full-year release in H2, which will be larger than the £332m released for full-year 2017."
Separately, L&G's defined contribution (DC) business continued to grow with total net inflows of £3.5bn, compared to £1.7bn in 2017, driven by the bundled business which provides administration and investment services to DC schemes. Its total DC assets under management (AuM) have increased by 15% to £72.3bn, up from £62.8bn in 2017.
Meanwhile, its master trust recently surpassed £5bn in AuM, reflecting the continued appeal of the structure for DC schemes wishing to outsource their governance, investment and administration.
Just Group has completed a £74m pensioner buy-in with the UK pension scheme of a US-listed engineering business.
The Smiths Industries Pension Scheme has secured a £146m buy-in with Canada Life in its fourth bulk annuity and its sponsor’s tenth overall.
The Prudential Staff Pension Scheme has entered into a £3.7bn longevity swap with Pacific Life Re, insuring the longevity risk of over 20,000 pensioners.
The Baker Hughes (UK) Pension Plan has secured approximately £100m of liabilities through a buy-in with Just Group.
There have now been a total of 30 longevity swaps over £1bn publicly announced. The full list, provided by Willis Towers Watson and through PP research, is as follows...