Under the terms of the agreement Philips will transfer about $900m (£594m, €806.5m) of its current retiree pension obligations to be split equally between Legal & General America and The Prudential Insurance Company of America. Each of the insurers will then provide 50% of the total monthly benefits to the Philips’ retirees.
In addition the American United Life Insurance Company, a OneAmerica company, will issue annuities to members of the plan who had not retired by May 2015, taking the total transaction between the three insurance companies to $1.1bn and covering a total of 17,000 plan participants.
Nigel Wilson, chief executive of Legal & General, said the signing of the group annuity contract marked the firm’s entry into the US pension risk transfer market.
“We have a successful US life assurance business, are rapidly growing our investment management business, and have now entered the US pension risk transfer market,” he said in a statement,” he said.
Longevity insurance
Covering the growing longevity risk in corporate defined benefit pension schemes has become a growing busines for insurance companies.
In July Axa UK announced that its company pension scheme has closed a deal with the Reinsurance Group of America (RGA) to cover the its defined benefit pension plan covering about £2.8bn of liabilities.
Canada Life’s reinsurance division reached a deal with insurance giant Aegon in August to cover the longevity risk on a €6.0bn portfolio of Dutch annuities.
Legal & General Investment Management America will manage the assets for the new US pension risk transfer business and Legal & General America’s Banner Life Insurance Company will issue the group annuity contract.
Legal & General said it had amassed a global annuity book of over $68bn as of June 30, 2015 and guarantees annuity benefits to over a million annuitants.
