After my comments back in November (How To live Longer) increasing longevity has finally hit the front page. Many pension funds will suffer a further hit from changes to mortality assumptions now being proposed by regulators and this must surely finally mark the end of the defined benefit system.
Meanwhile Standard Life has done a great deal to offload over half of their £12bn pension annuity liability exposure to Canada Life International Re thereby significantly cutting the risks from increased longevity. Apparently this transaction also increases embedded value profits by some £100m a year, releases some cash and frees up capital. It sounds too good to be true. With that kind of deal to do so what if they lost out to buy Resolution - anyway as of today Pearl still haven't closed that deal. The paper profits I was showing on Standard Life post IPO have since evaporated but it is now trading well below embedded value. The institutions are still very underweight this stock so it should come back strongly once confidence returns.
Philosophy of the Day
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