The InterContinental Hotels Group (IHG) has insured its pension scheme liabilities in full through a £440m buyout with Rothesay Life.
Rothesay Life said favourable market conditions meant only a minimal additional contribution over assets currently held in the the InterContinental Hotels UK Pension Plan would be necessary in order to secure the benefits in full.
The scheme trustee has also secured all future pension increases, which were previously only provided at the discretion of the corporate sponsor. Any missing beneficiaries who emerge in the future will also be covered.
InterContinental Hotels UK Pension Plan trustee chairman Sam Dow said: “The trustee’s first priority has been to ensure the future security of members’ benefits. The plan’s strong funding, following additional financial support from its corporate sponsor, prompted consideration of a buy-in/ buyout of the plan’s liabilities.
“All parties worked professionally and collaboratively to agree the final price and terms over a short time, resulting in a great outcome for the members of the plan.”
IHG finance director Tom Singer added: “IHG fully supports the trustees’ decision to insure the defined benefit section of its UK Pension Plan with Rothesay Life. This transaction will provide additional security for members of the plan and will also help to de-risk IHG’s balance sheet by transferring the defined benefit liabilities of the Plan to Rothesay Life.”
The trustee was advised by Mercer, Hymans Robertson and Allen & Overy and the corporate sponsor was advised by PwC and Freshfields. Independent Trustee Services, in its role as director of the trustee, provided support in the negotiation of the transaction.
Mercer principal Harry Harper said: “We are pleased that the partnership approach between the company and trustee led to an effective broking process; we were able to proceed rapidly once conditions were right and agreed a unique contract with Rothesay Life whereby the insurer will be able to quickly issue individual policies to members.”
This comes after reports surfaced in August that Rothesay Life’s parent company Goldman Sachs was looking to sell a majority stake in the insurer because impending regulation on capital requirements, such as Basel III, was making it less appealing for banks to hold such businesses.
Rothesay Life wrote more than £1bn of new bulk annuity business in 2012 and has already written £1bn in 2013. It said this growth has been achieved through the steady accumulation of pension scheme clients and the acquisition of Paternoster in 2011.
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