Lucida PLC

Merchant Navy Officers Pension Fund secures members’ benefits with Lucida

Sep 29 2009

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London – 29th Sept 2009 – The Trustee of the Merchant Navy Officers Pension Fund (MNOPF) has secured around £500 million of pension liabilities through a bulk annuity contract purchased from Lucida plc, an insurance company focused on the annuity and longevity risk business. 

The agreement entails Lucida insuring over half of the total pensioner benefits of the Old Section; a section of the fund which closed in 1978 and covers almost 22,000 retired members. 

Andrew Waring, the Chief Executive of MNOPF said: “Security has been the Trustee’s watchword in deciding to de-risk, in selecting a provider and in negotiating the contract. This insurance policy takes a significant step along that path and is an important contribution to our wider strategy of progressively reducing risks across the Fund.”

Jonathan Bloomer, Executive Chairman of Lucida, commented, “We are delighted that MNOPF has chosen to partner with Lucida to help them manage their risks and protect their members’ benefits. Our team, our commitment to excellent customer care and our strong capital position enabled us to be successful in this competitive process.”

Watson Wyatt Project Lead and Senior Consultant, Paul Kitson said “Annuities and similar solutions are the ultimate matching asset for pension schemes and protect them from market movements and increasing life expectancy. Multi-billion pound pension funds like MNOPF are looking to de-risk in stages but be ready to move quickly and take advantage of opportunities such as this as they arise”

Robert West, Head of Pensions at Baker & McKenzie who provided legal advice, comments, "The uncertainties of the last year in the financial markets have left many trustee boards with a strong desire to increase members' security through buy-in arrangements. This agreement between MNOPF and Lucida breaks new ground for industry-wide schemes and provides renewed impetus in the marketplace".

Editors Notes

• The MNOPF is an industry-wide scheme set up in 1937 to allow shipping companies to provide retirement and death benefits for their officers. The transaction involves the Old Section of the fund which was closed in 1978.

• This bulk annuity policy is a ‘buy-in’ rather than a ‘buyout’. This ‘Buy-in’ agreement involves Lucida insuring the longevity and asset risks of a proportion of the Old Section of the MNOPF. The insurance policy becomes a new asset class within the pension scheme, overseen by the MNOPF Trustee alongside the other scheme assets. This means that individuals remain entitled to benefits from the scheme rather than from Lucida and will receive their benefits in exactly the same way as now. 

• Exchanging existing low-risk assets for an annuity policy which more precisely matches the scheme’s liabilities was an investment decision that did not require additional funding from the MNOPF’s participating employers.

• The deal commences immediately.

• As Lucida’s principal shareholder, funds controlled by Cerberus Capital Management, L.P. and its affiliates (collectively, Cerberus) have injected £80m of new capital to support this transaction.

• MNOPF’s long-term actuarial and investment advisors Watson Wyatt and legal advisors Baker & McKenzie led the de-risking and selection process.

 

For further details contact:

Lucida
Jemima FitzMorris
Marketing Executive
Lucida plc
jemima.fitzmorris@lucidaplc.com
+44 (0)20 7647 1623

Watson Wyatt
David Robbins
+44 (0) 20 7227 2973     
+44 (0) 7507 632653  
david.robbins@watsonwyatt.com  

About MNOPF
The Merchant Navy Officers Pension Fund was established in 1937 and for over 70 years has provided benefits designed to meet the needs of ship's officers. The industry wide MNOPF is set up under English Law in the form of a trust, managed by a company, MNOPF Trustee Limited. Half the directors of the trustee company are nominated by employers and half by the union, Nautilus International on behalf of members.

About Lucida
Lucida is an insurance company focused on the annuity and longevity risk business, including the defined benefit pension buyout market and the market for bulk annuities. Lucida offers tailored solutions to the risks, volatility and administrative burden associated with corporate defined benefit pension schemes. Lucida is backed by funds controlled by Cerberus Capital Management, L.P. and its affiliates.  Cerberus is one of the world’s leading private investment firms. Lucida plc is authorised and regulated by the Financial Services Authority (“FSA”). www.lucidaplc.com

About Watson Wyatt
Watson Wyatt Worldwide (NYSE, NASDAQ: WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,700 associates in 33 countries and is located on the web at www.watsonwyatt.com.

About Baker & McKenzie
Baker & McKenzie
Founded in 1949, Baker & McKenzie provides sophisticated advice and legal services to many of the world’s most dynamic and successful organizations through more than 3,900 locally qualified lawyers and more than 5,800 professional staff in 67 offices and 39 countries.  Baker & McKenzie is known for having a deep understanding of the language and culture of business, an uncompromising commitment to excellence, and world-class fluency in the way we think, work and behave.  Baker & McKenzie’s global revenues for the fiscal year ended June 30, 2009, were US $2.11 billion.  Baker & McKenzie has a well-established and highly-regarded UK pensions practice in its London office.  www.bakernet.com