Brookfield Explores Entry into Thriving UK Retirement Insurance Market with Acquisition Plans – Sources

Brookfield, through its subsidiary Brookfield Reinsurance, is considering entering the booming UK retirement insurance market and is open to an acquisition to support its growth, according to three sources familiar with the matter. The company is scanning the market for potential deals to access the bulk annuity sector, with possible targets including companies like Just Group and Pension Insurance Corporation, according to two of those sources. Bulk annuities are a form of insurance where a company’s pension scheme transfers its obligations to an insurer. The discussions are still in the early stages, and there is no certainty that Brookfield will proceed with the operation or a transaction, warned the sources, who spoke on condition of anonymity. Brookfield separated its reinsurance branch in 2021 as a separately listed entity. However, the unit enters into administration and management service contracts with its former parent company. Brookfield invests the assets created by Brookfield Reinsurance in North America as part of the service agreement. Brookfield, Just Group, and Pension Insurance Corporation declined to comment. This initiative is part of a broader trend where brokerage firms such as Brookfield and Apollo Global Management have invested in the life insurance and annuity sector in recent years in search of long-term capital investment opportunities. According to a report by McKinsey & Co from early 2022, private investors currently manage over $900 billion in life insurance and annuity assets in Western Europe and North America. For Brookfield, an operation in the UK would mark its first investment outside of North America through its reinsurance branch. This year, it hired former investment banker Shashank Bhalla as head of reinsurance in Europe to oversee these efforts, according to one of the sources. Bulk annuities have gained popularity in the UK among pension scheme trustees, with nearly £30 billion ($36.64 billion) of pension obligations transferred to the insurance sector last year, according to broker Aon’s data. In addition to Just Group and Pension Insurance Corporation, existing players in the market include Aviva, Legal & General, Phoenix Group, and Rothesay Life. M&G re-entered the market this year. The Bank of England has expressed concerns over the rapid growth of the bulk annuity market, urging insurers not to « rush headlong into new short-term business. » The UK represents a significant market for Brookfield’s investments, with £1.3 trillion of defined benefit pension schemes in the private sector as 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 and Josie Kao)