UK - Morgan Crucible has agreed to partially buy-out its two defined benefit pension schemes with Lucida, in a deal valued at around £160m (€203m).
Morgan Crucible, the ceramics and carbon materials manufacturer, revealed in addition to the £160m cost of annuity policies which will be secured with Lucida, the firm intends to make a one-off contribution of around £4m to "facilitate the transaction".
The company said the decision to transfer the current pensioner liabilities of its two pension schemes - the Morgan Pension Scheme and the Morgan Group Senior Staff Pension and Life Assurance Scheme - to Lucida, followed a "rigorous selection process" of which an important part was "maintaining the security and service standards for the scheme members".
Recent figures show the two pension schemes had combined assets of £330m to the end of 2006 but also a deficit of £47.7m at December 31 2007, so Morgan Crucible confirmed the "risk transfer" would result in a £7m improvement to its IAS19 balance sheet position.
Morgan Crucible also said the deal would secure the pensions of around 3,000 current pensioners, and confirmed it will continue to offer its DB schemes to current employees and deferred pensioners.
Kevin Dangerfield, chief financial officer at Morgan Crucible, said: "Having worked closely with the trustees throughout this process, Morgan is very pleased with the outcome of this transaction.
"This enhances the security of our UK pension schemes whilst transferring a substantial amount of the longevity and investment risk to Lucida as the insurer," he added.
Geoff Weir, director of benefits and compensation at the company, revealed the selection process included a set of criteria and objectives established by the trustees, which Lucida met at a "very competitive price".
He added: "Our pensioners will continue to receive a high standard of service, with the added protection of backing from a regulated insurance company. The security of our scheme members is paramount."
Meanwhile, Jonathan Bloomer, executive chairman of Lucida, claimed the firm's first buyout deal was secured after a "rigorous vetting and selection process" in which Lucida's "team, strong long-term capital backing, and commitment to customer care" gave it "an edge in a very competitive market".
The trustees appointed Lane Clark & Peacock (LCP) to act as advisers during the buyout process, who admitted there has been a "surge in demand" for specialist buyout advice from both companies and trustees when looking at a risk management programme for their pension scheme.
Richard Murphy, partner at LCP and leader of the specialist team, said: "The objectives of Morgan Crucible and the trustees of the pension schemes - on quality, security and value - were strongly aligned. By structuring the buyout contract as an investment of the trustees, we were able to ensure the transaction was a win for all concerned.
"The trustees now have the security that pensions currently in payment are provided by a Financial Services Authority-regulated insurance company backed by substantial capital, with the comfort that Morgan Crucible still stands behind the pension promises as before," he added.
Reports of the deal between Morgan Crucible and Lucida first emerged in February, at the same time as Paternoster agreed terms with Chrysalis, although at the time neither company would confirm the reports. (See earlier IPE story: Paternoster secures Chrysalis deal)
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