Paternoster Limited, an insurance company formed by CEO Mark Wood, is planning to acquire defined benefit pension scheme liabilities from UK companies. Yesterday it announced today that it had secured 500 million of equity financing from a consortium of institutions led by Deutsche Bank and Eton Park International LLP.
“We are delighted to have successfully completed our fundraising and by the positive market reception we have received,” says Wood. “We believe that the corporate defined benefit pension market is one that has historically been overlooked and underserved. With an exclusive focus on this market, an experienced management team and the substantial financial backing we have received from our institutional partners, Paternoster is positioned to provide a much needed solution to UK companies, defined benefit pension scheme trustees and to current and future defined benefit pensioners.”
Upon completion of this financing and its pending approval by the Financial Services Authority (FSA) as a regulated insurance company, Paternoster reckons it will be well positioned to make acquisitions in the 1,000 billion UK defined benefit pension fund marketplace.
Paternoster says it has identified demand from UK companies and pension scheme trustees to transfer their defined benefit pension liabilities to an FSA-regulated insurance company, freeing companies and trustees from exposure to longevity and investment risks in their pension funds, whilst pensioners will benefit from having their pensions managed by a well-capitalised and regulated specialist.
Paternoster believes there is growing demand from UK companies to remove defined benefit pension obligations from their balance sheets as additional pressure builds on them to recognise and manage volatile deficits. This is being driven by a number of factors including the recent empowerment of the Pensions Regulator, the establishment of the Pension Protection Fund and pressure to increase disclosure in relation to pension fund obligations in company accounts.
Paternoster’s non-executive directors will include Sir Howard Davies (Director of the London School of Economics and former Chairman of the FSA), Lord Leitch (a non-executive director of Lloyds TSB plc and former Chief Executive of Zurich’s UK operations) and Jeremy Goford (former senior principal of Tillinghast Towers Perrin and past President of the Institute of Actuaries).
Anshu Jain, Head of Global Markets and Member of the Group Executive Committee of Deutsche Bank, described the Paternoster proposals as an “exciting opportunity.” He adds that “pension fund trustees face ever-more complicated risk management questions and we’re committed to providing straightforward capital market solutions. This plays to our recognised strengths of client orientation and innovative solutions. Paternoster has a strong management team and board of directors and we’re delighted to be working beside them.”
Erland Karlsson, Chief Executive of Eton Park International, said his partnership had invested because it believed Paternoster had “a unique expertise in prudently managing long-term pension risks.”
Paternoster has been advised by Numis Corporation and Hawkpoint Partners Limited on the formation of Paternoster and structuring of the fund-raising. Numis has supported the establishment of Paternoster and provided the initial venture capital funds. Numis has also acted as broker to Paternoster in the fund-raising and will continue to be a shareholder in Paternoster.