RSA's UK schemes complete £6.5bn buy-in with PIC in largest ever bulk deal

The deal by the Sal Pension Scheme (SALPS) and the Royal Insurance Group Pension Scheme (RIGPS) is understood to be the largest ever bulk annuity transaction from pension schemes to insurer.

The biggest buy-in and buyout transactions announced since 2007

The schemes said the landmark deal followed an improvement in funding levels due to rising gilt yields - improved funding that they said created a favourable opportunity for the sponsor to accelerate the schemes' de-risking, as well as de-risk its own balance sheet, and for the trustees to enhance member security.

The deal addressed significant issues of timing and complexity, with pricing agreed amid the market volatility during the liability-driven investment (LDI) crisis. Complex structuring considerations included accommodating the schemes' existing longevity and asset swaps.

The transaction was facilitated by upfront contribution from the sponsor of approximately £500m.

SALPS chairman Ray Cox and RIGPS chairman David Smith said in a joint statement: "We are delighted to have completed this transaction, securing the pensions for members of both Schemes for the long term.

"PIC were flexible in their approach, presenting innovative solutions to previously intractable problems, as well as proactively addressing issues which might have derailed the process. We want to thank the various advisory firms for their support and hard work in completing this landmark transaction."

RSA Group is a wholly owned subsidiary of Intact Financial Corporation (IFC).

IFC executive vice-president and chief financial officer Louis Marcotte added: "The current market environment provides an excellent opportunity to remove UK pension exposure on IFC's balance sheet and maintain the security of the benefits of 40,000 RSA UK pension scheme members."

PIC head of origination structuring Uzma Nazir explained: "We are proud to have completed an extremely complex bulk annuity deal, the largest pension scheme to insurer transaction the market has yet seen.

"From pricing during the unprecedented volatility of the LDI crisis in the autumn of last year to structuring the buy-in to address the issue of asset suitability, this transaction overcame many of the hurdles that very large pension schemes face as they accelerate their de-risking plans in light of rising gilt yields."

Nazir added: "The transaction could only have been completed with strong teamwork from the Trustees, the sponsor, and their respective advisors, and I want to thank everyone involved for their constructive engagement which enabled this positive member outcome."

Lane Clark and Peacock (LCP) advised RSA and Intact on all aspects of the buy-in process. Partner and head of pensions strategy Michelle Wright explained: "We're proud to have advised Intact and RSA on all aspects of these ground-breaking buy-ins, from conception through to completion.

"The unprecedented scale and complexity of the transaction has truly expanded the art of the possible in the bulk annuity market, providing new options for the UK's largest schemes and their sponsors. The transaction represents the culmination of significant effort and collaboration across multiple parties and sets the tone for record-breaking deal volumes in 2023."

PIC's in-house legal team, who worked on all legal aspects of the transaction for PIC, were advised by CMS Cameron McKenna. LCP advised RSA and Intact on all aspects of the buy-in process, from whether a transaction might be viable through to completion. Slaughter and May provided legal advice to RSA and Intact. Aon and Sackers advised the trustees of SALPS, and WTW and DLA Piper advised the trustee of RIGPS, throughout the entire transaction process. Penfida provided covenant advice to both trustee boards.

PIC said that, following full implementation of the transaction, its solvency ratio will be in excess of 200% on a pro-forma basis, based on 30 December 2022 market conditions. It said further details on its solvency position would be provided along with PIC's 2022 year-end results in March.