Exclusive-Brookfield weighs move into UK pension insurance market -sources

By Pablo Mayo Cerqueiro, Amy-Jo Crowley and Iain Withers

(Reuters) -Brookfield, through its affiliate Brookfield Reinsurance, is weighing entering Britain’s burgeoning pension insurance industry and is open to an acquisition to bolster growth, three people familiar with the matter told Reuters.

The company is scanning the market for potential deals to access the bulk annuities space, where possible targets could include companies like Just Group and Pension Insurance Corporation, two of the people said.

Bulk annuities are a form of insurance whereby a company’s pension plan offloads liabilities to an insurer.

Deliberations are at an early stage, and there is no certainty that Brookfield will proceed with the move or a transaction, cautioned the people, who spoke on condition of anonymity.

Brookfield spun off its reinsurance arm in 2021 as a separately listed entity. However, the unit contracts administration and management services from its former parent.

Brookfield invests assets originated by Brookfield Reinsurance in North America as part of the services agreement.

Shares in Just Group closed up 7% on Tuesday.

Brookfield, Just Group and Pension Insurance Corporation declined to comment.

The move is part of a broader trend where deal houses such as Brookfield and Apollo Global Management have in recent years pushed into the life insurance and annuities industry in search of long-term capital to invest.

Private investors now oversee more than $900 billion of life and annuity assets in Western Europe and North America, according to an early 2022 report by McKinsey & Co.

For Brookfield, a UK deal would mark its first investment outside of North America through its reinsurance arm.

This year it hired former investment banker Shashank Bhalla as head of reinsurance in Europe to oversee efforts, one of the people said.

Bulk annuities have grown in popularity in the UK among pension scheme trustees, with close to 30 billion pounds ($36.64 billion) of pension liabilities transferred to the insurance industry last year, according to data by broker Aon.

Besides Just Group and Pension Insurance Corporation, existing players include Aviva, Legal & General, Phoenix Group and Rothesay Life. M&G re-entered the market this year.

The Bank of England has voiced concerns about the fast growth of the bulk annuities market, urging insurers not to “over-indulge in new business in the short run.

Britain represents a significant market for Brookfield to invest in, with 1.3 trillion pounds of defined benefit pension schemes in the UK private sector at the end of September 2022.

($1 = 0.8189 pounds)

(Reporting by Pablo Mayo Cerqueiro, Amy-Jo Crowley and Iain Withers; Additional reporting by Carolyn Cohn; Editing by Anousha Sakoui, Josie Kao, Louise Heavens and Susan Fenton)

Jessica Weisman-Pitts