AXA UK Group Pension Scheme closes longevity swap deal with RGA to secure £2.8bn of pension liabilities

The AXA UK Group Pension Scheme has closed a longevity swap deal with Reinsurance Group of America (“RGA”) to manage longevity risk relating to £2.8 billion of pension liabilities held in its defined benefit (DB) section.

13 July 2015

Posted in Inside AXA

by Daniel O’Byrne (see media contact)

  • Longevity swap covering £2.8 billion of pension liabilities
  • Covers the benefits of approximately 11,000 existing pensioners of the defined benefit section of the Scheme
  • Risk ceded to two subsidiaries of Reinsurance Group of America (“RGA”)

The AXA UK Group Pension Scheme has closed a longevity swap deal with Reinsurance Group of America (“RGA”) to manage longevity risk relating to £2.8 billion of pension liabilities held in its defined benefit (DB) section. The arrangements cover 11,000 DB scheme pensioners and provide long term protection to the Scheme against costs resulting from pensioners living longer than initially expected, hence, enhancing security for Scheme members.

The swap will form part of the Scheme’s investment portfolio and will provide income to the Scheme in the event that members live longer than currently anticipated.

RGA is an international global life and health reinsurance company, with approximately $2.9 trillion of life reinsurance in force and assets of $44.7 billion (as at 31 December, 2014).

The swap covers around half of the Scheme’s liabilities. In respect of this transaction the Group Pension Scheme Trustee and the Company appointed Towers Watson and Linklaters LLP as lead advisors.

Stephen Yandle, Chairman – AXA UK Pension Trustees Limited, said: “I am delighted to announce that the AXA UK Group Pension Scheme has taken an important step to ensure that our DB scheme members’ benefits are strongly secured against continuous improvements in life expectancy.

By significantly de-risking the scheme, this will benefit all our DB scheme members and will not affect any payments to members as they will continue to receive their pension as normal.

This is a very positive step in providing additional security of members’ pensions.”

Emma Ferris, AXA UK Director of Pensions, ALM & Capital Management, said:
“AXA UK is pleased to have worked with the Trustee’s directors’ in the delivery of this transaction, which demonstrates the company’s commitment to pro-actively manage its risks.

We’ve leveraged our own internal expertise, and worked hard with the Trustees, the advisors and RGA to develop an innovative solution which provides Scheme members with additional security, as well as improving the risk management and capital position of AXA UK.”

“RGA is delighted to support AXA in reducing risks within their pension obligations through this transaction,” said Cormac Galvin, Vice President, RGA UK. “As a global leader in the underwriting of mortality and longevity risks, RGA remains committed to supporting insurers in managing risks inherent in longevity portfolios.”

“RGA’s deep biometric expertise, investment capabilities, and experience in structuring asset and financial risks enable us to develop broad, holistic solutions that reinforce our valued business partners’ continued growth and profitability,” said John Laughlin, Executive Vice President, Global Financial Solutions, RGA.