Coats buys £350m bulk annuity policy from Aviva
Industrial thread maker Coats Group said the trustee of its UK pension scheme had purchased a £350m bulk annuity policy from Aviva.
The deal insures benefits payable under the scheme for around 3,700 pensioner and dependant members, representing roughly 20% of the scheme's liabilities.
“The purchase of this policy sees all the scheme's financial and demographic risks fully hedged for the covered liabilities. The scheme will receive a regular stream of income that matches the pension payments for the covered members, making it a precise liability hedging asset, thus further de-risking the scheme and reducing future balance sheet volatility,” Coats said on Tuesday.
It added that the buy-in is consistent with plans to fully insure the scheme and remove it from the group balance sheet.
“Once the scheme is fully funded and cash contributions cease, the group's free cash generation will improve significantly allowing increased investment in growth or the return of excess capital to shareholders.”
“When the technical provisions deficit for the scheme was last formally assessed at 31 March 2021, as part of the triennial valuation cycle, it showed a £193m deficit. Updates since then indicate that the deficit had fallen closer to £55m by mid-November 2022, with a further reduction to £25m-£30m expected following the buy-in.”
Reporting by Frank Prenesti for Sharecast.com