Lloyds sells £6 billion of Scottish Widows annuities to Rothesay

Lloyds Banking Group will offload a £6 billion (S$10.22 billion) portfolio of bulk annuities from its Scottish Widows subsidiary to pensions insurance specialist Rothesay Life. 

The portfolio includes benefits for about 42,000 people, the companies said in a statement, which noted the deal will have an immaterial financial impact for Lloyds. The deal will initially be structured as a reinsurance agreement for the in-force bulk annuity portfolio and, for now, the policies will continue to be serviced by Scottish Widows.

“This sale will enable us to focus and invest in the insurance, pensions, investments, retirement and protection markets where we want to grow, whilst ensuring positive outcomes for our bulk annuities customers,” said Chira Barua, who leads both the Scottish Widows division and the insurance, pensions and investments businesses at Lloyds.

The deal marks Rothesay’s sixth acquisition of in-force bulk annuities, according to the statement. The company, which has £60 billion in assets under management, pays out an average £2.5 billion in pension payments each year. 

As part of the deal, the companies will carry out a so-called Part VII transfer next year, which is a court-approved process for moving a business from one entity to another. At that point, policyholders included in the sale will begin to receive benefits normally from Rothesay. 

Scottish Widows has grown rapidly in the space since it entered the market in 2015. Still, with a market share of about 4 per cent it lacks the scale of rivals Legal & General Group and Pension Insurance, which each control about a quarter of the market. 

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Bulk annuities are insurance policies brought by pension plans to offload the long-term risks of their defined-benefit pensioners. Such deals have become more attractive in recent months as rising gilt yields improved pensions’ funding positions. BLOOMBERG