Rothesay Life has been established on the core pillars of high-tech and sophisticated Risk Management, conservative Investment philosophy, continuous Innovation to meet clients’ needs and Excellence in delivery.
The company operates in a structurally high growth market and, despite record low interest rates, the bulk annuity and pension buyout business has been strong. Our strategy is to be patient, disciplined and creative in underwriting which is critical in a market where levels of competition can vary. We do not chase volume and instead focus on value and risk.
We create bespoke solutions that secure the long-term pension and annuity obligations of our clients and strive to provide the highest levels of service to support our policyholders through their retirement.Addy Loudiadis CEO
Rothesay Life Business Model: New Business Origination, Underwriting, Investment Management, Risk and Capital Management and Operations and Administration.
- 01. New Business Origination
Dedicated and experienced marketing and origination team source new business from across a broad range of sources. Ensuring disciplined selection whilst promoting the company and maintaining long-term relationships.
The Rothesay Life new business origination team comprises very experienced insurance and pensions professionals who are experts in their relevant fields. While the Group has completed deals ranging in size from £42m to over 1bn, the team focuses on a solution driven approach which means the Group has been at the forefront of innovation and a market leader in execution of large transactions.
- 02. Underwriting
Cautious and controlled risk underwriting is combined with detailed legal and operational due diligence carried out by specialist Rothesay Life teams to achieve maximum pre-deal certainty.
Our underwriting team comprises actuarial, pensions, operational, trading, investment and legal expertise, all of whom have extensive experience in their respective areas. We operate an integrated asset-liability risk model and benefit from sophisticated systems which allow all pension liability acquisitions to be assessed real time using prevailing market conditions and investment opportunities. This approach allows us to be opportunistic where we see value and reactive to client needs, but also protects the balance sheet by ensuring consistent quality of origination.
- 03. Investment Management
Rothesay Life's investment team identify long-term investments which lock-in returns to back annuities while minimising the exposure of the business to credit and market risks.
The Group invests in fixed income instruments which we use to match the long-term annuity liabilities they back. We aim to minimise credit default risk by investing in an optimal combination of liquid, low-risk government bonds, less liquid highly-secured or collateralised investments and cash:
- Government and supranational bonds: 41% of the portfolio is invested in low-risk government bonds and supranational bonds. This portion of the portfolio backs our very long-dated cashflows but is also available to meet collateral calls and cash requirements
- Secured investments: 41% of the portfolio is invested in secured lending against property or other collateral. Many of these investments are bespoke where very high levels of collateral have been negotiated and returns are generated through liquidity premium
- Infrastructure: 7% of the portfolio is invested in regulated infrastructure such as water, energy and transportation. These investments are typically long-dated and backed by ring-fenced and low-risk income streams
All figures correct as at 31 December 2015.
The Group adopts a market consistent approach to reserving for residual credit risks as they arise and adopts a dynamic strategy of monitoring and re-hedging these risks daily as they arise.
- 04. Risk and Capital Management
Rothesay Life’s risk management principles are driven by the key objectives of the business: to make timely payments to policyholders over a very long-term, to produce stable earnings and cashflows from in-force business, and to limit policyholders’ and investors’ downside risk. Sophisticated systems ensure daily capital and risk reporting which allow the Rothesay Life risk management team to manage all aspects of the balance sheet dynamically, react appropriately to evolving market conditions and maintain capital efficiency.
The Group monitors and controls exposures through a robust risk and control framework which encompasses the management of both in-force business and new business underwriting:
- Integrated system infrastructure which captures all assets and liabilities centrally and provides us with the capability to report and monitor risk daily at both the portfolio and the individual transaction level.
- Close co-ordination of underwriting, reinsurance, investment and risk hedging functions ensures risk management is central to all aspects of the business, and that new business pricing reflects latest market conditions, hedging costs, investment opportunities as well as comprehensive liability analysis.
- An independent risk and capital management control function provides continuous monitoring of risk exposures and daily attribution of profit and loss, providing timely information to management and enabling dynamic risk based decision making.
- 05. Operations and Administration
Individual policyholders and scheme trustees (and their members) are at the heart of everything we do. We follow the FCA’s Treating Customers Fairly guidance and strive to ensure a best-in-class policyholder experience. Our complaint record and policyholder feedback reflect this.
We follow a strategic outsourcing model for the provision of administration services. Our strategic partnerships have expanded over time reflecting acquisitions that we have made and our approach to new opportunities. Multiple administrators provide us with both scale and contingency. Key to being able to successfully follow our guiding principles is our robust management of our third party administrators (TPAs) - Willis Towers Watson, JLT Employee Benefits and Capita Employee Solutions, all of whom are well established pension administrators. Each TPA has dedicated teams exclusively for Rothesay Life.
The Operations team manages the TPAs and its workflow through a series of robust and established processes. These have been reviewed by the Pensions Administration Standards Association (PASA) who have awarded us with their Gold Standard. We are the first insurer to receive Accreditation from PASA.