CASE STUDY: MONITOR AND TRIGGER

BUYOUT TEAM
Trigger-Based Trades

THE CHALLENGE

The client not only wanted to reduce the risk in its defined benefit pension scheme but also limit the impact of any transaction on its corporate balance sheet. They wished to reduce future balance sheet volatility and lower the risk of needing to increase deficit funding contributions at future valuations. The Trustees of the scheme were also keen to improve the scheme’s risk profile by exchanging the scheme’s bond-type assets for a closer matching asset in the form of a pension buy-in.

KEY FEATURES

£120m & £85m pensioner buy-in policies secured 5 mnths total monitoring period for trustees’ trigger pricingPrudential pre-selected insurance counterparty5 tranches of pensioner liabilities monitored

THE JLT SOLUTION

JLT’s Buyout Team was appointed by the Trustees to investigate whether a pensioner buy-in could be secured for a competitive price that also satisfied the sponsor’s objectives. With this in mind, we:

Monitor & Trigger JLT Solution 

WHAT WAS THE OUTCOME?

  • The vast majority of the scheme’s pensioner liabilities were insured through two transactions of GBP120 million and GBP85 million respectively.
  • A firm commitment to trade at the agreed trigger price allowed the insurer to source attractive, higher-yielding assets from within its wider group structure to support its pricing of the bulk annuity deal.
  • Market testing demonstrated that the achieved pricing was very competitive.
  • The trigger-based structure allowed initial and follow-up trades to take place quickly when the timing was right for the client.
  • The overall corporate balance sheet impact was within the agreed limit.

WHAT THE CLIENT SAID

 

Quotes

We are very pleased with this innovative solution to facilitate buy-in transactions as part of JLT’s long term plan to pro-actively manage its balance sheet.

- Mike Reynolds, Group Finance Director, Jardine Lloyd Thompson Group plc

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