Apollo, Carlyle and KKR are considering separate bids for the Pension Insurance Corporation ahead of a deadline this week, as large private equity groups look for a way into the thriving market for UK corporate pension deals.
London-based PIC has amassed more than 300,000 policyholders through so-called bulk annuity deals, where it takes over pension fund liabilities and the assets backing them from their sponsoring companies. This year it completed the largest UK deal of its kind, when general insurer RSA transferred £6.5bn of liabilities to the group.
The three US private equity groups are considering bids ahead of the deadline, people familiar with their positions said, although their interest remains preliminary and they will not necessarily make offers while there may be other potential bidders.
Canada’s Brookfield Asset Management also reviewed a bid but decided not to move forward, two of the people said.
Investment bank JPMorgan is advising on the deal and has solicited bids, people familiar with the process said.
The deal would likely value the group at a discount to its “equity”, one market insider said, referring to a measure of shareholders’ equity that stood at £6bn on an adjusted basis at the end of June.
Apollo, Brookfield, Carlyle, KKR and JPMorgan all declined to comment.
Low interest rates have lit a fire under the corporate pensions market, with improved scheme funding levels meaning hundreds of billions of pounds of pension liabilities are expected to be transferred from corporate balance sheets to insurers in the coming years.
Private equity groups have spent months exploring how to participate in the growth of the UK market, advisers say, with buying an existing provider seen as quicker and easier than trying to back a new business.
Some bulk annuity providers, such as Aviva and Legal & General, are part of broader groups offering other types of insurance and investment, but PIC, founded in 2006, is a privately owned specialist in the market.
It is 49.5 per cent owned by Reinet Investments, a vehicle backed by South African billionaire Johann Rupert, with CVC Capital Partners among its shareholders. Apollo’s interest in PIC was first reported by Sky News.
PIC and CVC declined to comment. Reinet did not immediately respond to a request for comment.
The private equity groups have built up significant investments or stakes in the life insurance sector. KKR last month said it would buy the remaining stake in Global Atlantic, the life insurer it took control of two years ago.
In the US, almost a tenth – $850bn – of the life insurance market is owned or managed in partnership with private capital groups, according to the IMF. Such insurers tend to hold a higher proportion of illiquid assets, and the Fund has urged national regulators to consider the risks to the wider financial sector.
Scrutiny of the buying spree is growing. Eurovita, an Italian life insurer owned by a fund run by British private equity firm Cinven, went into special administration this year after its owner failed to provide the level of capital injection required by the regulator.
