The U.S. subsidiary of one of the world’s biggest technology giants, Philips, agreed last week to a $900 million deal with two insurers. Those insurance companies include U.K.-based Legal and General (L&G) and U.S.-based Prudential, according to the industry news source International-Adviser.com.
The agreement is what’s known as a pension risk transfer, as Philips will transfer the $900 million they owe in retirement obligations and annuity payments to 14,000 former employees in an even 50/50 split between the insurers.
Nigel Wilson, chief executive of L&G believes the agreement, which is the company’s first of such in the U.S. market, will open up many more opportunities for them. He expressed this in a press release LandG released to PRnewswire.com.
“We are very pleased to have signed an agreement with Philips for our first U.S. pension group annuity contract,” Wilson said. “The U.S. is a key market for Legal and General. We have a successful U.S. life assurance business, are rapidly growing our investment management business, and have now entered the U.S. pension risk transfer market. We are a leader in these markets in the U.K., and plan to be a major participant in them in the US.”
Annuity payments are common in corporate retirement accounts for many reasons, not the least of which is their flexibility. Payments generally have several options, including payments over a designated time span, like 10 or 20 years, or for as long as the person happens to live.
Another portion of the agreement concerns employees who had not yet retired by May 2015. American United Life Insurance Company, a OneAmerica entity, will provide their annuities bringing the grand monetary total to approximately $1.1 billion and covering 17,000 people.
According to the company’s press release, Legal and General currently controls over $68 billion worth of annuity payments to over a million annuitants.