London, 26 June, 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), has commented on the implications for the bulk annuity market of Legal & General's purchase of Lucida plc.

Dominic Grimley, principal consultant in Aon Hewitt's Risk Settlement Group, said:
"We believe that this resolution over the ownership of the Lucida book, which has been the subject of speculation for some months, is a very positive outcome for its policyholders. The reassurance of long-term market commitment, a known brand and the size of L&G's existing annuity administration services will give comfort. We also expect that, from an investment and administration viewpoint, the book acquired can be comfortably integrated.

"Lucida had closed to new business last year, so this purchase doesn't actually affect the existing competitiveness of the market – but having said that, we wouldn't want to lose any more operators.  While we believe there is sufficient capacity in the market to cope with existing demand, if we did reach more benign investment conditions, it's conceivable that market capacity could be found wanting.  That doesn't as yet seem to be a real threat but it has to be borne in mind."

Dominic Grimley continued:
"However, this deal could mark the end of a period of tidying-up after some of the new settlement market entrants over the 2006 to 2008 period pulled back from the market, with the liabilities, and in some cases the operations, from the Paternoster, Synesis, ALICO and Lucida businesses finding new homes. In all these cases the stability of the insurance model has been demonstrated, with policyholders experiencing change by getting a new bigger counterparty but seeing no disruption to their benefits or to their coverage.

"The market is still proving to be competitive for deals falling into Lucida's past target market - £100M+ transactions - which are typically for pensioners. There are several deals of this size currently in the market, with four organisations competing and price pressure being demonstrated as the insurers look to maintain market share and to find investment opportunities to give a compelling price. Lucida, as with some other players, found it hard to price competitively on a consistent basis, and also to establish their credentials without an initial stepping stone of taking on smaller deals.

"As things stand, market pricing has been stable in the first half of 2013, so bulk annuity opportunities continue to be available and relatively attractive.  If schemes are in the right circumstance, the opportunities are there."

Media Contacts:  

Colin Mayes                                  Giles Abbott
Aon Hewitt                                     Capital MSL
01372 733689                                020 7307 5340
colin.mayes@aonhewitt.com           giles.abbott@capitalmsl.com

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About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.