Legal & General Retirement America and RGA Partner to Complete $700 Million Pension Risk Transfer Transaction with FirstEnergy
- None.
- None.
Insights
The pension risk transfer (PRT) transaction between Legal & General Retirement America, Reinsurance Group of America and FirstEnergy represents a significant move in the management of pension liabilities. By offloading approximately $700 million in pension obligations, FirstEnergy is effectively transferring the associated longevity and investment risks to the insurers. This move can be seen as a strategic effort to de-risk the company's balance sheet, potentially leading to improved financial stability and possibly a more favorable view from credit rating agencies.
For stakeholders, such a transaction typically has a neutral to positive short-term impact as it reduces the volatility of pension-related expenses. In the long-term, it may contribute to a more predictable cash flow management. However, the cost of the transaction itself and the potential loss of investment returns on the pension assets transferred must be considered. Such a deal could be seen as a positive signal to the market, indicating proactive financial management by FirstEnergy's executive team.
This PRT deal is indicative of a broader trend in the market where companies seek to mitigate long-term financial risks associated with pension schemes. It's important to note that the market for PRTs has been growing, as companies aim to focus on their core business operations rather than pension fund management. The size of this transaction suggests that it is significant but not uncommon, as the PRT market has seen even larger deals in recent years.
From a market perspective, the successful completion of such a transaction could signal to investors and analysts that FirstEnergy is taking decisive steps to manage its legacy costs and long-term liabilities. This may lead to a reevaluation of the company's stock by investors who prioritize financial prudence and risk management in their investment decisions.
In terms of legal implications, a PRT transaction involves complex contractual arrangements and regulatory compliance. The deal must adhere to the Employee Retirement Income Security Act (ERISA) and other pension-related regulations. It is essential for such transactions to be executed with transparency and due diligence to protect the retirees' benefits. The legal framework ensures that the retirees' benefits are secured and that the risk transfer is conducted in a manner that is equitable for all parties involved.
The transaction's completion without any reported complications suggests that Legal & General Retirement America and Reinsurance Group of America have a robust legal and regulatory compliance framework in place. This may instill confidence in current and future clients considering similar transactions with these entities.
The transaction will secure the retirement benefits of approximately 2,000 retirees
The retiree lift-out was executed in December and covers approximately 2,000 retirees – representing about
“Partnering with RGA enables us to deliver a unique risk-management solution to FirstEnergy and its annuitants that is backed by the financial strength and experience of two leading insurance companies,” said George Palms, President of LGRA. “We take great pride in our level of dedicated customer service and through this transition, we look forward to servicing and protecting the retirement income for these participants.”
“RGA is dedicated to delivering attractive risk management solutions to
“Importantly, these pension benefits remain protected and retirees of our former subsidiaries and beneficiaries will see no changes in the value of their benefits as a result of this transition,” said April Marx, Director of Total Rewards for FirstEnergy.
About Legal & General Retirement America
Legal & General Retirement America (LGRA) specializes in customized pension risk solutions for institutional clients in the US market. Established in 2015, Legal & General Retirement America is a business unit of Legal & General America,
More information on LGRA can be found at www.lgra.com.
About RGA
Reinsurance Group of America, Incorporated (NYSE: RGA) is a global industry leader specializing in life and health reinsurance and financial solutions that help clients effectively manage risk and optimize capital. Founded in 1973, RGA is today one of the world’s largest and most respected reinsurers and remains guided by a powerful purpose: to make financial protection accessible to all. As a global capabilities and solutions leader, RGA empowers partners through bold innovation, relentless execution, and dedicated client focus – all directed toward creating sustainable long-term value. RGA has approximately
Insurance products are issued by RGA Reinsurance Company (RGA Re), a subsidiary of Reinsurance Group of America, Incorporated. RGA Re is solely responsible for its financial condition and contractual obligations. RGA Re is not licensed in
FirstEnergy
FirstEnergy is dedicated to integrity, safety, reliability and operational excellence. Its electric distribution companies form one of the nation's largest investor-owned electric systems, serving more than six million customers in
View source version on businesswire.com: https://www.businesswire.com/news/home/20240314518621/en/
For LGRA:
Carolyn Gasbarra
Vice President, Edelman Smithfield
Carolyn.Gasbarra@edelmansmithfield.com
For RGA:
Lizzie Curry
Director Public Relations
Lizzie.Curry@rgare.com
For FirstEnergy:
Tricia Ingraham
FirstEnergy Communications
tingraham@firstenergycorp.com
Source: Legal & General Retirement America
FAQ
What was the value of the pension risk transfer transaction completed by Legal & General Retirement America and Reinsurance Group of America with FirstEnergy?
How many retirees are covered in the pension risk transfer transaction?
Which companies were involved in the pension risk transfer transaction with FirstEnergy?
