Apollo, Carlyle and KKR weigh bids for Pension Insurance Corporation

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Apollo, Carlyle and KKR are studying separate bids for Pension Insurance Corporation ahead of a deadline this week, as big private capital groups look for a way into the thriving market for UK corporate pension deals.

London-based PIC has more than 300,000 policyholders amassed 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 did the biggest UK deal of its kind, when general insurer RSA offloaded £6.5bn of liabilities to the group.

The three US private equity groups are considering bids ahead of the deadline, said people familiar with their positions, although their interest remains preliminary and they will not necessarily submit offers, while there may be other potential bidders.

Canada’s Brookfield Asset Management also studied a bid but decided not to move forward, said two people briefed on the matter.

Investment bank JPMorgan is advising on the deal and has invited bids, said people familiar with the process.

The deal would probably value the group at a discount to its “own funds”, according to one market insider, referring to a measure of shareholder equity that was £6bn on an adjusted basis at the end of June.

Apollo, Brookfield, Carlyle, KKR and JPMorgan all declined to comment.

Low interest rates lit a fire under the corporate pensions market, with improved scheme funding levels meaning hundreds of billions of pounds of pension obligations are expected to be transferred from corporate balance sheets to insurers in the coming years.

Private capital groups have spent months exploring how to take part in the UK market’s growth, according to advisers, with buying an existing provider seen as quicker and easier than trying to back a new entity.

Some bulk annuity providers such as Aviva and Legal & General are part of broader groups offering other types of insurance and investments 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, and includes 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 capital groups have built up substantial investments or tie-ups 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 10th — $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 rising. Eurovita, an Italian life insurer owned by a fund operated by Cinven, the British private equity firm, went into special administration this year after the owner did not provide the level of capital injection requested by the regulator.

Additional reporting by Ivan Levingston