MetLife, Inc.’s ( MET Quick Quote MET - Free Report) unit Metropolitan Tower Life Insurance Company and Principal Financial Group, Inc. ( PFG Quick Quote PFG - Free Report) , a leading global investment management firm, recently inked a deal with Philips North America LLC to shift Philips North America Pension Plan obligations worth around $1.2 billion to MetLife and Principal Financial.
Signed in fourth-quarter 2020, the agreement has resulted in MetLife and Principal Financial offering a guaranteed retirement income solution by utilizing their collective capabilities in pension risk transfer (PRT), retirement expertise and strong financial standing. The solution is likely to provide relief to around 11,000 retirees, beneficiaries and deferred participants covered by the Philips North America Pension Plan.
By virtue of the latest agreement, MetLife in its capacity as a lead administrator is expected to provide monthly benefits to around 9,000 retirees and their beneficiaries covered by Philips’ pension plan. Further, Principal Financial is entrusted with the responsibility of around 2,000 deferred participants of Philips’ plan.
This move is in sync with MetLife’s efforts to assist plan sponsors backed by its strength in dealing with longevity and market risk. For long, pension plan providers have been rolling out pension plans and seeking efficient de-risking strategies for mitigating risks associated with these plans. Though the COVID-19 pandemic triggered financial volatilities globally, it had less impact on the PRT market across the United States. The same has been substantiated further by a MetLife survey conducted last year, according to which market volatility and spike in mortality rates stemming from the pandemic have continued to provide a boost to PRT transactions.
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MetLife has been conscientiously undertaking moves similar to the latest one from the beginning of this year. This month itself, the MetLife unit has entered into a PRT agreement with
Dow Inc. ( DOW Quick Quote DOW - Free Report) as a result of which pension obligations worth around $700 million will be covered under Dow’s defined benefit (DB) pension plans. In January, the same unit inked back-to-back deals with Lockheed Martin Corporation ( LMT Quick Quote LMT - Free Report) and Weyerhaeuser for assuming pension obligations worth $1.4 billion and $765 million, respectively. These deals reinforce the trust that plan sponsors have on MetLife owing to the latter’s capability of securing the future of their plan participants by assuring a guaranteed lifetime income.
With these constant initiatives, MetLife has been trying to capitalize on the prospects present in the US PRT market. The prospects remain in 2021 on the back of entrance of new insurers resulting in an increase in the insurance companies’ endeavors to adopt de-risking strategies, per Legal & General Retirement America. Despite being a year plagued with uncertainties resulting in transaction delay for plan sponsors, the same institutional retirement firm estimated that the year 2020 concluded with the total volume of the US PRT market attaining more than $14 billion in the fourth quarter. This indicates a substantial rise from the prior three quarters of 2020.
With the pandemic heightening financial insecurities among individuals, an aging U.S. population and increase in number of people attaining retirement age are likely to persist as woes. Being a leader in the PRT market, MetLife through the above-mentioned moves has come to the rescue of retirement plan participants for whom a secured future is the need of the hour.
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