Prudential Wins $2.5 Billion Risk Transfer

The insurer will take on pension liabilities for packaging company WestRock.

Prudential has completed a $2.5 billion pension-risk transfer (PRT) with the WestRock Company, the insurer announced Thursday.

The partial buyout reduced the packaging company’s US pension obligations by 40% and covered approximately 35,000 plan participants. At the time of the transaction, the plan was overfunded, and WestRock said it intended to keep it that way.

“WestRock is committed to the long-term financial health of the plan and has taken steps to protect all participants of the US pension plan,” said WestRock CFO Ward Dickson in a release. “This transaction represents a further step towards managing future pension cost and risk, benefitting participants remaining in the plan while entrusting certain retirees’ and their beneficiaries’ pensions to a financially strong and secure institution with expertise in the long-term management of retirement benefits.”

This latest transaction follows a string of PRT deals Prudential struck in the last two years, including risk-transfer agreements with Kimberly-Clark, Philips, JC Penney, Motorola, Bristol-Myers Squibb, and Timken.

“Managing pension risk continues to be at the top of the list of many companies’ challenges, and this latest transaction reaffirms US companies’ appetite for pension risk transfer solutions,” said Peggy McDonald, senior vice president in Prudential Retirement’s investments and pension solutions business.

Global pension-risk transfers had reached $270 billion in 2015, including $67 billion in US deals, according to Prudential.

Russell Investments Chief Research Strategist Bob Collie told CIO in May that risk transfers were inevitable for many pension funds.

“If you’re frozen, at some point you will be doing a risk transfer,” he said.

Related: Pension-Risk Transfer Inevitable, Says Russell & Pension Risk Transfers Climb to $260B

| Amy.Whyte@strategic-i.com | 646-308-2775