London, 18 February, 2014 – 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 Rothesay Life's announced purchase of MetLife Assurance Limited's £3bn book of annuity business.

Dominic Grimley, principal consultant in Aon Hewitt's Risk Settlement Group, said:
"We believe that this resolution over the ownership of the MetLife bulk annuity company, which has been the subject of speculation for a year, is a very positive outcome for its policyholders. The reassurance of Rothesay Life's size, reputation and market commitment will give comfort. We expect that Rothesay Life will already be considering how the MetLife assets are invested. The administration transition will also be helped by Rothesay Life's existing relationship with JLT, benefit administrators for MetLife and for the £3bn Paternoster backbook that Rothesay Life acquired in 2011.

"The bulk annuity market participants have changed regularly since 2006, and the implications of this latest change are not yet completely clear. Rothesay Life will continue to seek larger deals over £100m, but the acquisition gives them the opportunity to expand their target market downwards. MetLife have continued to quote for new business, but with understandably less traction while their future was undecided. So, in this case, the loss of a provider may in practice provide another viable option for schemes that could not previously obtain a quotation from Rothesay Life.

"For the smallest schemes though, a Rothesay/MetLife option is probably less likely to be available, so this may increase their reliance on using the new market in medically underwritten quotations to obtain competitive pricing pressure for their business."

Dominic Grimley continued:

"If you consider the large number of market entrants over the 2006 to 2008 period when bulk annuities took off, PIC and Rothesay Life are left as the clear survivor. They have established size, with the liabilities, and in some cases the operations, of  the Paternoster, Synesis, ALICO, Lucida and MetLife businesses all 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.

"While we believe there is sufficient capacity in the market to cope with existing demand, as more closed schemes make firm plans for de-risking, it's conceivable that providers will choose the auctions in which they participate more selectively and schemes with less clear processes for achieving a transaction may miss out. All this continues to emphasise the vital importance of clear planning for all transactions."

Media Contacts:
Colin Mayes                                          Giles Abbott
Aon Hewitt                                             Capital MSL
01372 733689                                        020 3219 8805
colin.mayes@aonhewitt.com                   giles.abbott@capitalmsl.com
 

Notes to editors

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 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.

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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 65,000 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