Unisys Transfers Approximately $200 Million of its U.S. Defined Benefit Pension Obligations to F&G Through the Purchase of Group Annuity Contracts
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Insights
Transferring pension obligations to an insurer, known as a pension risk transfer, is a strategic move for corporations aiming to stabilize their financial position. Unisys's decision to secure group annuity contracts with F&G Annuities & Life, Inc. is indicative of a broader trend where companies are offloading longevity and investment risks associated with pension plans. This strategy is particularly advantageous for companies looking to focus on core business activities without the distraction of pension fund volatility.
By locking in the cost of retirees' benefits with a fixed annuity contract, Unisys effectively removes the pension liabilities from its balance sheet, which can lead to a more predictable financial outlook. The one-time charge is a non-cash accounting adjustment that reflects the cost of this transfer, which is significant but not unexpected in such transactions. Investors should note that while this charge will affect reported earnings, it will not deplete cash reserves, which is a positive for liquidity.
The $129 million pre-tax settlement charge is substantial and will likely draw the attention of analysts and investors. It's important to dissect this figure in the context of Unisys's financial health. The charge will influence the company's profitability metrics in the short term, but the long-term benefits could outweigh the initial financial impact. By eliminating the pension liability, Unisys reduces its exposure to market volatility and interest rate changes, potentially leading to a more stable credit outlook and possibly lower borrowing costs in the future.
Investors should also consider the scale of the transaction. A $200 million liability transfer is a significant move for Unisys and it showcases the company's proactive approach to managing its pension obligations. The market's response to this news may vary, but typically, such strategic financial de-risking is viewed favorably as it aligns with shareholder interests in reducing financial uncertainty.
For the insurance sector, deals like the one between Unisys and F&G are substantial. They signify a growing market for pension risk transfer products. F&G's role in this transaction is to assume the pension benefit obligations, which translates to a long-term revenue stream, albeit with associated risks. The insurer's ability to manage these risks effectively through investment strategies and actuarial assessments will be critical to their profitability.
Given that the retirees and beneficiaries involved have relatively lower monthly benefits, the risk profile of the group is likely to be different from that of a group with higher benefits. This could impact F&G's risk assessment and pricing strategy. Furthermore, the involvement of highly rated insurance subsidiaries suggests a level of security and reliability, which is important for Unisys's retirees and aligns with regulatory expectations for such transactions.
This agreement reflects the company's continued focus on reducing pension liabilities, volatility and costs while securing retiree pension benefits with highly rated insurance companies
As part of the transfer, F&G's insurance subsidiaries, Fidelity & Guaranty Life Insurance Company and Fidelity & Guaranty Life Insurance Company of
Unisys anticipates this action will result in a first quarter one-time, non-cash, pre-tax settlement charge of approximately
About Unisys
Unisys is a global technology solutions company that powers breakthroughs for the world's leading organizations. Our solutions – cloud, data and AI, digital workplace, logistics and enterprise computing – help our clients challenge the status quo and unlock their full potential. To learn how we have been helping clients push what's possible for 150 years, visit unisys.com and follow us on LinkedIn.
About F&G
F&G Annuities & Life, Inc. is committed to helping Americans turn their aspirations into reality. F&G is a leading provider of insurance solutions serving retail annuity and life customers and institutional clients and is headquartered in
Forward-Looking Statements
Any statements contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Unisys cautions readers that the assumptions forming the basis for forward-looking statements include many factors that are beyond Unisys' ability to control or estimate precisely and are made based upon management's current expectations, assumptions and beliefs as of this date concerning future developments and their potential effect upon Unisys. There can be no assurance that future developments will be in accordance with management's expectations, assumptions and beliefs or that the effect of future developments on Unisys will be those anticipated by management. Forward-looking statements in this release include the impact on the
RELEASE NO.: 0401/9941
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SOURCE Unisys Corporation
FAQ
What agreements did Unisys (UIS) close recently?
How many retirees will be affected by the benefit obligations transfer?
What will be the one-time settlement charge as a result of this action?
Will this action impact Unisys's cash position?
