Shell Closes $4.9B Pension Risk Transfer With Prudential

Prudential Financial Inc. announced on Wednesday it had closed a $4.9 billion pension risk transfer deal with Shell USA Inc.

The transaction would be the first major pension risk transfer in the U.S. this year, following record years for the pension risk transfer market in 2022 and 2023.

“Prudential is honored to help continue meeting the retirement security needs of Shell’s retirees,” said Alexandra Hyten, head of institutional retirement strategies at Prudential, in a statement. “We are confident that our commitment to flawless execution—from the transaction itself to participant onboarding and service delivery—will serve Shell retirees well, protecting the lifetime income they’ve worked hard to earn.”

Prudential will take responsibility for making payments to the 21,500 affected Shell retirees beginning May 15. According to Shell’s most recent 5500 filing, the company’s pension fund had 26,536 active participants at the end of the 2022 plan year and 9,299 retired or separated participants entitled to future benefits. At the end of 2022, the plan had assets of $14.468 billion.

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Including the transaction, Prudential has completed seven of the 10 largest PRT transactions on record, according to the release. These deals include Prudential’s $16 billion pension risk transfer for 100,000 IBM retirement plan participants and beneficiaries in 2022. Prudential innovated the modern pension buyout market with its $25.1 million General Motors deal in 2012.

2022 was a record year for the PRT market, with $48.3 billion in single-premium buyout deals, according to data from S&P Global Inc., showcasing an increased activity in companies transferring pension liabilities to insurers. According to LGRA, the market for PRT deals is projected to be $45 billion in 2023.

Pension risk transfers are also increasing at record numbers in the U.K., where higher interest rates have boosted the funded statuses of U.K. pension plans, leading to an increase in transactions as plan sponsors seek to offload their pension liabilities.