The Abu Dhabi Investment Authority (ADIA), one of the largest sovereign wealth funds in the world, is to acquire up to 21.4% of the Pension Insurance Corporation Group (PICG) for an undisclosed amount from private investment firm JC Flowers.
PICG is the parent company of Pension Insurance Corporation (PIC), the specialist insurer that provides bulk annuities to UK corporate pension schemes in what has become an increasingly buoyant market in recent years.
“This investment is a further demonstration of our ongoing strategy to seek out principal investments in market-leading businesses with strong management teams,” said Hamad Shahwan Aldhaheri, executive director of the private equities department at ADIA.
“PIC has proven its ability to respond to the growing trend for UK companies to de-risk their defined benefit [DB] pension obligations and, as such, has strengthened its position as the industry’s leading pension insurance provider.”
In the past 12 months PIC has backed pension fund buy-ins and buyouts worth more than £2.3bn. Competition within the sector has increased markedly in recent years, though, as companies seek to de-risk their existing DB pension schemes.
Earlier this month, the trustees of the Littlewoods Pensions Scheme agreed an £880m (€1bn) pensioner buy-in deal with Scottish Widows and, in the first quarter, Rothesay Life acquired a £12bn portion of Prudential’s annuity book.
According to JLT Employee Benefits, more than £19bn of bulk annuity transfer deals, longevity swaps, buy-ins, and buyouts have been struck in 2018 so far – close to the £21bn agreed in 2017.
Tracy Blackwell, CEO at PIC, said: “We are confident that… they will continue to build on the valuable support provided by JC Flowers over the past 12 years, and ensure that PIC is ideally placed to meet the increased demand from pension fund trustees.”
PIC has more than £25bn of assets, representing the benefits of over 150,000 individuals.
Estimates put ADIA’s overall portfolio holdings at between $800bn (€692bn) and $875bn.
The PIC purchase is the latest in a long line of investments by ADIA designed to build up its private equity arm across a range of sectors, including financial services, healthcare and technology.
In recent years, ADIA has acquired stakes in KKR India Financial Services – a wing of the US private equity giant KKR – and US firm Hyatt Hotels, as well as holdings in the UK’s Gatwick Airport and Thames Water.