Pension Buyout Solutions OUR SOLUTIONS

When you choose to transfer your pension risk with Prudential, you're choosing a partner. We work tirelessly to understand the unique nature of your pension, participants and priorities in relation to your balance sheet and core business.

What distinguishes Prudential is our consultative approach—we aren’t selling products, we’re actually working closely with you to provide a service. We can help architect the unique combination of solutions and timing to protect and deliver the promised benefits within the context of fiduciary and regulatory requirements, and within the context of your core business.

Our pension risk solutions include the following strategies:

 

Traditional Buy-out


Plans sponsors are able to completely transfer pension risk for covered liabilities to Prudential with our flagship General Account offering, Prudential Traditional Buy-out.

Providing the strength of Prudential's guarantee directly to participants for the life of their benefits, Traditional Buy-out also allows plan sponsors to:

  • Transfer risk, including investment, longevity, and benefit-option risk;
  • Unburden themselves of administrative, actuarial, and investment management expenses
  • Eliminate Pension Benefit Guaranty Corporation premiums for participants whose benefits are fully purchased
  • Remove pension liabilities from their balance sheets

 Learn More About Traditional Buy-out. PDF file opens a New Window 

 

Portfolio Protected Buy-out

If you are a sponsor of a well-funded plan in the U.S. who seeks to settle liabilities and diminish plan volatility, you should consider Portfolio Protected Buy-out. This separate account annuity combines the strength of Prudential's guarantee with an insulated asset portfolio, and is designed to accomplish several key objectives, including:

  • Fully transferring risk, including investment, longevity and benefit-option risk;
  • Completely removing administrative, actuarial and investment management expenses;
  • Eliminating Pension Benefit Guaranty Corporation premiums for participants whose benefits are fully guaranteed;
  • Triggering settlement accounting, removing pension liabilities from the sponsor's balance sheet; and
  • Providing an enhanced level of transaction security.

Learn More About Portfolio Protected Buy-out. PDF file opens a New Window

 

Portfolio Protected Buy-in

Designed for sponsors of underfunded plans who seek to transfer risk without triggering a settlement, Prudential's Portfolio Protected Buy-in is one of the first buy-in solutions for U.S. pension plans.

This innovation allows plan sponsors to purchase a bulk annuity and hold it as a liability matching asset of the plan. It enables pension plans to transfer risk today without the charges that naturally arise with the settlement of plan liabilities. This strategy offers several additional advantages for underfunded plan sponsors, including:

  • Maintaining funded status;
  • Holding contributions steady; and
  • Minimizing accounting and funding volatility.

A key feature of Prudential's Portfolio Protected Buy-in is convertibility. Our Buy-in contract can be converted to Prudential's Portfolio Protected Buy-out, enabling plan sponsors to take a phased approach to risk reduction on the schedule of their choice.

Learn More  About Portfolio Protected Buy-in. PDF file opens a New Window

 

Longevity Insurance and Reinsurance

Market volatility and regulatory reform have created significant new challenges for pension plan sponsors around the globe. What’s more, increasing life expectancy trends are having a significant financial impact today, as pension plans are required to fund their expected liabilities. These trends are making longevity risk an immediate and critical issue for plan sponsors worldwide.

Over the past decade, many pension plan sponsors have recognized their exposure to longevity risk, and in response, some U.K. and Canadian plan sponsors have proactively transferred their longevity risk to the insurance community.

 

LONGEVITY REINSURANCE PROVIDES ENHANCED PENSION SECURITY

More and more pension funds are now using longevity risk transfer to create certainty around their future obligations, enabling them to better manage their assets against a known liability. In fact, many insurers are now turning to Prudential for longevity risk transfer solutions that enable them to manage capital more efficiently, and balance out their exposure to longevity risk overall.

With Prudential’s longevity risk transfer solutions, longevity risk is transferred from insurance companies (the cedants) to Prudential (the reinsurer) in exchange for longevity reinsurance premiums. Prudential's longevity risk transfer strategies deliver the flexibility international insurers need while providing additional security for their clients.

United Kingdom: A Vibrant PRT Market

Illustrates in British pounds the amount of pension risk transfer transactions occurring in U.K. annually since 2007. Following table provides more details.

Annual PRT transaction activity in U.K. since 2007 in billions.
  2007 2008 2009 2010 2011 2012 2013 2014
Buy-in/buy-out £2.9 £8.0 £3.7 £5.2 £5.3 £4.5 £7.6 £13.2
Longevity swaps 0 0 £4.1 £3.0 £7.1 £2.2 £8.8 £25.4

Source: Hymans Robertson, “Buy-outs, buy-ins and longevity hedging,” Q4 2014. In billions.

Offering exceptional financial strength and balance sheet capacity—as well as the ability to balance longevity and mortality risk within its business—Prudential provides a compelling solution. Prudential’s longevity reinsurance helps insurers mitigate risk and create certainty by limiting the liability associated with greater-than-expected payments due to increasing life expectancy.

 

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