Brookfield and Utmost to enter bulk annuity market

In a call with analysts in early May, Sachin Shah, CEO of the company’s Wealth Solutions group, said Brookfield had filed paperwork with UK regulators in preparation for entering the bulk annuity market.

It has already established itself as a major provider of individual and bulk annuities in the US and has completed approximately $3bn (£2.3bn) worth of pension risk transfer business to date. Shah said Brookfield planned to write between $7bn and $10bn of new business a year in the US.

Regarding the UK, he said: “We should be in a position by the end of the year where we’re actually bidding on transactions. Similar to our US strategy, we’ll start small and eventually migrate into the larger transactions.”

Shah added: “We’ve seen very meaningful growth in some of the pension aggregators in the UK. But there’s still probably 20 years and close to $1trn of [liabilities] that have to come off corporation balance sheets in the UK alone over the next two-decade period.

“We see tremendous growth there, and it’s a market where we think, given our asset origination and what’s called matching adjustment in the UK, we could be highly successful.”

The Brookfield Annuity Company, which carries out Brookfield’s bulk annuity business in the US and Canada, is led by president and CEO Janice Madon, who took on the role in December 2023.

Charlie Finch, partner at LCP, said: “Brookfield’s planned entry demonstrates how vibrant the UK bulk annuity market is. It will take the market to a record 11 participants following the entry announcements earlier this year by Royal London and Utmost.

“Brookfield already participates in both the US and Canadian bulk annuity markets, and has the potential to be significant provider in the UK market. Their entry will add further capacity and competition as record numbers of defined benefit schemes enter into buy-ins and buy-outs, with volumes of up to £600bn predicted over the next 10 years.”

Nikesh Patel, head of client solutions UK at Van Lanschot Kempen, said he expected more new entrants to the bulk annuities sector this year and next year.

“This will increase the capacity to undertake new transactions, as well as increase competition for deals,” Patel said. “However, the underlying capacity constraints remain; new insurers are still competing for the same talent who can appropriately price and transact in this market. The length of time it has taken for Brookfield to enter the market also highlights an issue beyond resource: requisite FCA approval is both expensive to gain and time consuming, which will create an additional barrier to entry, thereby limiting the number of new entrants.”

Introducing: Utmost Life & Pensions

In a recent report on the UK bulk annuity market, consultancy LCP cited UK-based Utmost Group as another new entrant to the sector.

In its 2023 annual report, the company said it was “in a strong position to enter this market” due to its existing capabilities in insurance.

Utmost has been recruiting for key positions since last year, and most recently hired Craig Baker from Phoenix Group as chief investment officer.

At Phoenix, Baker was most recently head of policyholder assets and held other senior investment roles over more than 12 years with the insurer. Before that, he spent a decade in investment positions at Lloyds Banking Group.

Utmost said it had “laid the foundations” for participation in the bulk annuity market during 2023, including building administration and pricing propositions, engaging with regulators, and liaising with consultants.

The company stated: “Our plan is to have completed our first transactions during 2024. We see this as a key objective, helping to provide a service to the rapidly growing market as well as helping Utmost to deliver on its growth strategy.”

Utmost Life & Pensions was formerly known as Reliance Life until it was acquired by Utmost Group in 2018. It is led by CEO Stephen Shone, who has held the role since April 2018.

Utmost Life & Pensions has £5.4bn in assets under management and serves approximately 300,000 customers. These include former Equitable Life customers who transferred to Utmost on 1 January 2020.

Transaction volumes are expected to exceed £50bn this year, according to multiple forecasts, with large deals supplemented by a growing number of services for the smallest schemes.

Further reading

Royal London enters bulk annuity market with two deals (11 March 2024)

The changing face of bulk annuities (19 February 2024)

Bulk annuity supply to increase in 2024: Hymans (2 February 2024)