October 18, 2012
--- The Prudential Insurance Company of America has
signed an agreement with Verizon Communications Inc. to transfer approximately
$7.5 billion of the Verizon Management Pension Plan obligations to Prudential.
closing, which subject to certain conditions is expected to occur in December
2012, the Verizon Management Pension Plan will purchase a group annuity
contract from Prudential. The insurer will assume responsibility for making
payments to the retirees covered by the agreement—approximately 41,000 Verizon
Management Pension Plan participants who retired and started receiving pension
benefits before January 1, 2010.
Verizon transaction is expected to be the second largest insured annuity
settlement in U.S. history, trailing only the GM deal (see “GM Transfers Some
size of the pension settlement actions announced in 2012 is redefining the
market," noted Ari Jacobs, senior partner and Global Retirement Solutions
Leader at Aon Hewitt. "In the U.S., the entire volume of pension liabilities
annuitized in recent years has been about $1 billion per year and no single
transaction has exceeded $1 billion since the 1980s. The transactions by
Verizon and GM are orders of magnitude larger than this and likely to be
important in the continuing trend in pension de-risking and settlement
strategies. Companies considering this strategy need to understand that each
situation requires a unique approach to achieve their goals." Aon Hewitt
was the lead strategy partner to Verizon in this transaction.
In May 2011,
Prudential completed the nation’s first pension buy-in transaction when
Hickory, North Carolina-based Hickory Springs Manufacturing Company signed on
as Prudential’s inaugural client (see “Pru Completes
Nation’s First Pension Buy-In”).