Prudential has scored another mega pension-risk transfer deal, this time with Motorola Solutions.
The Illinois-based communication company has agreed to purchase a group annuity contract from the insurer by the end of 2014, reducing its pension obligations by $3 billion.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees,” said Gino Bonanotte, Motorola’s CFO. “Our retirees’ benefits are not changing, just who provides them.”
On top of the Prudential deal, which affects 30,000 pensioners, Motorola is to offer lump sum payments to 32,000 deferred members, up to a limit of $1 billion. The two plans combined will halve the company’s pension liabilities to $4.2 billion from $8.4 billion, Motorola said.
The transaction is expected to be completed in 2014, Prudential said, and it will assume benefit payments starting early next year.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees. Our retirees’ benefits are not changing, just who provides them.”—Motorola Solutions.
This is the third largest US pension buyout deal and another win for the insurance giant.
In 2012, Prudential nabbed a $26 billion deal taking over the majority of GM’s pension liabilities and a $7.5 billion contract with Verizon.
“Pension liabilities have become an increasing concern for corporations around the world,” said Phil Waldeck, head of pensions and structured solutions for Prudential Retirement. “Over the past few years, Prudential has been very focused on working with plan sponsors—like Motorola Solutions—to help them reduce pension risk while also providing retirement security to their retirees.”
Prudential—nominated for an Industry Innovation Award—expanded its services to the UK, signing a $28 billion de-risking agreement with the BT pension scheme in July.
A few weeks later, the insurer struck another deal to take on $350 million of auto part manufacturer Visteon’s $1.1 billion defined benefit liabilities.