Rolls-Royce closes in on deal to dump £4bn pension liabilities to PIC | USAEMALL.com

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Rolls-Royce is nearing a deal to transfer its UK pension obligations to Pension Insurance Corporation that would shift liabilities worth nearly £4bn off the engineering group’s balance sheet, according to people familiar with the transaction.

In so-called pension risk transfer deals, organisations pay insurers to take on their financial obligations to pensioners.

UK businesses from Boots to British Steel have insured their pension obligations or offloaded them to PRT specialists in recent years. Higher interest rates have reduced the value of the liabilities in pension plans, making the deals more affordable.

Rolls-Royce and PIC declined to comment on the planned agreement.

Demand for PRT deals is expected to reach £500bn by 2033, according to estimates from consultancy LCP.

Insurers specialising in the arrangements have, meanwhile, become prime takeover targets for alternative asset managers, since they provide a captive customer for asset management services. The Rolls-Royce agreement comes weeks after Athora, an insurer backed by US private capital group Apollo, announced that it would acquire PIC.

Canadian asset manager Brookfield, which already had a presence in the UK PRT market, recently announced plans to pay a 75 per cent premium to buy Just Group, another PRT specialist, which has focused on smaller transactions.

Shares in Rolls-Royce recently hit a record high as the London-listed aerospace and defence group benefited from strong demand for its aeroplane engines, as well as power generators for data centres.

Bloomberg first reported the news of the expected deal between Rolls-Royce and PIC.