International Paper agrees to transfer $1.6 billion in pension liabilities to Prudential Retirement

International Paper (NYSE: IP) will settle approximately $1.6 billion of its pension obligations by purchasing a group annuity contract from The Prudential Insurance Company of America, a subsidiary of Prudential Financial, Inc. (NYSE: PRU). As part of this agreement, Prudential will assume the responsibility for paying pension benefits to about 23,000 of International Paper’s retirees.

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Scott Kaplan, Head of Pension Risk Transfer, Prudential (Photo: Business Wire)

This agreement is the second pension risk transfer between the two companies in just over a year. Last October, International Paper agreed to transfer approximately $1.3 billion of its pension liabilities to Prudential, an agreement covering 45,000 of International Paper’s retirees.

Such agreements reflect a growing desire among companies to take active steps to reduce the risks, costs and liabilities associated with running a defined benefit pension plan. In the last two years, pensions have generally become better funded because of rising asset prices and interest rates. Stronger funding levels put companies in a better position to consider pension risk transfer as a solution for addressing their pension obligations. When choosing to transfer pension risks, companies are seeking shelter from the increasing costs and substantial risks of market volatility and longevity increases.

Glenn O’Brien, managing director and head of new business for Prudential Retirement, said, “We are proud that Prudential has again been chosen to help secure and maintain the retirement benefits of International Paper’s retirees. International Paper is entrusting its pension promises to a company with deep experience in managing retirement benefits, and we are committed to providing these retirees with a seamless transition.”

Scott Kaplan, the head of pension risk transfer at Prudential, said, “As a leader in pension risk transfers, Prudential is able to leverage its investment capabilities, its actuarial expertise and its strong balance sheet in ways that help companies reduce their risks and enable them to focus on their core operations. Equally important, Prudential is fundamentally committed to keeping its promises to these retirees and their beneficiaries.”

Since 1923, Prudential has offered pension solutions to companies and organizations. Prudential currently makes more than $10 billion in pension payments to more than 1 million retirees and their beneficiaries annually. Prudential is the global leader in pension risk transfer solutions. This agreement with International Paper follows several other prominent transactions, including those with General Motors, Verizon, Motorola, Bristol-Myers Squibb, The Hartford, Kimberly-Clark, Raytheon and JCPenney.

About Prudential Retirement

Prudential Retirement delivers retirement plan solutions for public, private, and nonprofit organizations. Services include defined contribution, defined benefit and non-qualified deferred compensation recordkeeping, administrative services, investment management, comprehensive employee education and communications, and trustee services, as well as a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.3 million participants and annuitants. Prudential Retirement has $433 billion in retirement account values as of June 30, 2018. Retirement products and services are provided by The Prudential Insurance Company of America (PICA), Newark, N.J., or its affiliates.

About Prudential Financial, Inc.

Prudential Financial, Inc. (NYSE: PRU), a financial services leader with more than $1 trillion in assets under management as of June 30, 2018, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. For more information, please visit news.prudential.com.

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