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Monday, 7th July 2008

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Standard in £100m deal



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STANDARD Life has struck a re-insurance deal that could boost its operating profits by £100 million this year.
The city-based firm said it had re-insured £6.7 billion of its UK pension annuity liabilities with Canada Life International Re, a subsidiary of Great-West Lifeco.

The move effectively slashes its exposure to more than half the risk of the firm's annuity policyholders living longer. The company currently has around £12 billion annuity liabilities.

Standard believes it's the biggest deal of its kind to be struck in the UK and analysts at Panmure Gordon described the announcement as "extremely good news".

"It significantly reduces the mortality risk and sensitivity to mortality assumption changes going forward," they added.

The company said it would use the cash from the deal to "take advantage of the profitable opportunities available to us" as well as broadening its product range.

Standard chief executive Sandy Crombie said the move "substantially reduces" the company's longevity risk at the same time as boosting profits.





The full article contains 172 words and appears in Edinburgh Evening News newspaper.
Page 1 of 1

  • Last Updated: 15 February 2008 11:38 AM
  • Source: Edinburgh Evening News
  • Location: Edinburgh
  • Related Topics: Standard Life
 
1

Evan Owen,

Snowdonia 16/02/2008 09:20:29
Not the sign of a strong company.
2

Active Sassenach,

Luton, England 17/02/2008 17:53:40
Reinsurance has often proved the last gasp of the desperate and it was Equitable Life that brought the concept into such disrepute.

I am assuming that the FSA approved the transaction which, effectively, lays open a claim by Standard Life against Great-West Lifeco for any of Standard Life's annuitants that live longer than expected.

Has anyone considered the position of the annuitants? They presumably expect their income to continue. If it turns out that the reinsurance premium was not sufficient for the risk, what arrangements are in place? Does Great-West Lifeco have assets in the UK to cover it? Would the risk fall back on the with profits fund?

Or is this another of those Northern Rock tricks - the annuity equivalent of sub-prime lack of transparency? Beware of an old man - and a demutualised financial institution - in a hurry.


 

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