Between a falling life expectancy rate and strong markets, it’sexpected that more businesses will look to move their pension plans to specialist insurers in2018.

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That’s according to a report in the Financial Times, whichcites consultancy LCP saying that because of the life expectancy drop—for a 65-year-old man it’snow half a year shorter than it was last year—companies are findingit easier to make buy-in and buyout deals with insurers.

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The report quotes Charlie Finch, a partner at LCP, saying,“There has been lots of movement in mortality rates this year, andpeople have been taking stock of what that means.”

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Finch adds, “The average pension scheme has seen a reduction inliabilities of 3 per cent—that’s a huge movement. There is£2tn [$2.703 trillion] of liabilities [in pensionschemes], so that’s £60bn [$81.067 billion] knocked offthis year from private sector schemes.”

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Between shorter life expectancies driving down liabilities andstrong markets boosting the value of assets in pension plans, LCP says in the report that theresulting lower deficits are making deals more likely. In fact, itpredicts an increase to more than £15 billion in 2018from 2017’s approximately £12 billion.

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And insurers are increasingly looking toward such deals, withcompanies that haven’t previously dominated the field seeking totake advantage of the “stable long-term cash flow” that the bulkannuities can provide.

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Some firms are looking to enlarge the size of the deals theytake on, while others are entering the market.

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John Baines, a partner at consultancy Aon, says in the reportthat he has seen more insurers quoting on big deals. He’s quotedsaying, “Two or three years ago, you would have had two or threeinsurers bidding on a £0.5bn deal. Now it is five orsix.” He adds that he is expecting to see big deals early in theyear, saying, “£10bn of transactions are priced and readyto go in the first two quarters of 2018.”

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In addition to new deals, “back book transactions,” withinsurers selling off old books of business to other insurers, areexpected in 2018. Prudential, the report says, will be selling morethan £10 billion in old annuities, which “will mostlikely be divided among a number of buyers. First round bids weredue in by the end of last year.”

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