Standard Life reinsures £6.7 billion of annuity liabilities
14-02-2008
Standard Life has reinsured £6.7 billion of UK annuity liabilities to Canada Life International Re, to reduce the risk that its customers will live longer than expected.
The figure represents half of the company's £12 billion UK immediate annuity liability.
Standard Life will still provide service to its annuity customers, but has offloaded much of the risk onto Canada Life, which is owned by Great-West Lifeco.
Group chief executive, Sandy Crombie, said: "This transaction is believed to be the largest of its kind in the UK, and follows a full analysis of the strategic options for our annuity book and a competitive tender process.
"It substantially reduces pure longevity risk while providing a significant increase to embedded value, a release of cash and a reduction in capital requirements."
Standard Life has a large back book of annuity business in the UK predating demutualisation in July 2006.
Following demutualisation, shareholders bear the longevity risk on these annuities, while investment risk is borne by the Heritage With Profits Fund and Standard Life said it has decided to reinsure a major block of its business to reduce the risk.
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