18 May 2018Insurance

Aviva secures major bulk annuity deal with M&S

Aviva's most recent bulk annuity transaction with retailer Marks and Spencer (M&S) is more than 50 percent larger than any of Aviva's previous bulk transactions, according to Jefferies analysts.

On May 17, UK insurer Aviva completed a £925 million bulk purchase annuity transaction with the Trustee of the Marks and Spencer Pension Scheme.

Previously, the largest Aviva bulk deal was £600 million from the Pearson Pension Plan in October 2017, according to Jefferies.

Aviva wants to re-enter the large bulk market and a successful completion of such a large transaction with M&S demonstrates Aviva's competitive advantage as the only composite underwriter of bulks, the analysts noted.

The transaction “perfectly encapsulates” Aviva's competitive advantage and shows why a move back into the larger bulk market will be successful, according to Jefferies.

Firstly, as a conglomerate, Aviva has considerably more diversification, meaning that hypothetically the group's cost of capital should be lower than monoline peers such as Legal & General. In turn, this should mean that Aviva can offer a more competitive price and win a material market share in this rapidly growing market, the analysts argued.

In addition, as a conglomerate, Aviva already has deep relationships with many of the corporate clients seeking to de-risk their defined benefit pension schemes. In this specific instance, Aviva already provides both the health and general insurance cover for M&S employees, as well as travel insurance to M&S Bank's retail customers, according to Jefferies.

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More on this story

17 October 2017   Aviva said on Oct. 17 that it has completed a £600 million bulk annuity deal for the pension plan of learning company The Pearson.
6 March 2017   Aon Hewitt has said that there are clear signs that changes in regulation are changing behaviour – and the timing of deals – in the pension scheme bulk annuity market.
9 October 2018   Aviva CEO Mark Wilson is stepping down and a search for a successor has been started.