Philips—maker of razors and Sonicare electric toothbrushes—has agreed to transfer $1.1 billion of US pension liabilities to three insurers, the Amsterdam-based corporation announced today.
Market-leader Prudential splits $900 million of current retiree obligations evenly with US-newcomer Legal & General (L&G) America. OneAmerica takes on the remaining $200 million of future liabilities for Philips workers who have yet to retire.
This is L&G America’s first major pension-risk transfer (PRT) deal, marking the official US arrival of the UK’s dominant bulk annuity provider.
“This is a very important deal to establish our US presence,” Kim Lisella, L&G America’s head of distribution, told CIO. “We’ve been working very hard over the last couple of years to think about how we can leverage our expertise in the UK and establish it here.”
In 2014, L&G alone wrote more pension-risk transfer business in the UK than the entire US market transacted that year, she noted.
L&G America’s President of US Retirement George Palms wasn’t shy about laying out the firm’s ambitions. “Our goal is to become a major player in the US market, and ultimately to compete with the top players. That said, we are perfectly comfortable collaborating and splitting deals.”
Independent fiduciaries that advise on PRT deals—in this case, State Street Global Advisors—have championed multi-insurer annuity purchases, which diversify counterparty risk and ease capacity issues.
Prudential’s split its last major PRT deal, as well: Kimberly-Clark divided $2.5 billion in liabilities between the Newark, NJ-based giant and MassMutual.
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