Home ListingNovember 15, 2013

MassMutual Chalks up First Buyout since Rothesay Life Deal

<em>The Massachusetts-based insurer has announced a sizeable bulk annuity deal with North Carolina manufacturer SPX.</em>

Reported by Featured Author

(November 15, 2013) — MassMutual, one of the buyers for two-thirds of Rothesay Life, has unveiled a sizeable bulk annuity deal for a US manufacturer.

The North Carolina-based SPX’s pension fund has agreed a deal where its pensioners will be insured by MassMutual. In addition, former SPX employees who are entitled to a future pension benefit will be offered a voluntary lump sum payment, reducing SPX’s defined benefit liabilities by as much as 75%, or $800 million.

Jeremy Smeltser, chief financial officer of SPX, said: “From a company perspective, the $250 million voluntary pension contribution we made to the plan in the first quarter of this year, and the current economic environment, have put us in position to take these actions, which are not expected to require any additional funding.

“These actions are both consistent with our strategy to reduce volatility in pension costs and funding requirements and are expected to strengthen our balance sheet and improve our financial flexibility.”

MassMutual has been expanding its buyout presence on both sides of the Atlantic since the start of the year. In February, it bought £100 million ($157 million) of Rothesay Life’s perpetual subordinated debt.

Rothesay Life then sold 6% of its company shares to MassMutual in September, as part of a tri-partite deal which also saw private equity house Blackstone and sovereign wealth fund GIC buy up two-thirds of the Goldman Sachs-owned entity.

It’s not all good news for MassMutual however. A class-action lawsuit has been filed against the pension risk transfer specialist by its own employees, claiming it charged excessive fees on its 401(k) and engaged in self-dealing by limiting investment options almost exclusively to its own products.

In addition, the suit alleges the firm’s CEO, Roger Crandall, who controls the group annuity contract that offers the Fixed Interest Account, has invested it all—$500 million—in a general account fund.

Thomas Clark, director of fiduciary oversight for Fiduciary Risk Assessment and FRA PlanTools, told benefitspro.com that putting fixed income funds into a general account was “a relic” of an idea as most use synthetic products that spread the risk while guaranteeing a rate of return.

MassMutual has vowed to fight the lawsuit, saying in a statement: “We believe the comprehensive retirement benefits we offer our participants help them save toward a secure financial future, and we will defend vigorously against these baseless allegations.”