BLUE BELL, PA — Unisys Corporation (NYSE: UIS), a global information technology company, recently finalized agreements to transfer certain pension obligations to F&G Annuities & Life, Inc. The deal, completed on March 28th, involves the purchase of group annuity contracts totaling nearly $200 million, using assets from one of Unisys’s U.S. qualified pension plans.
This strategic pension risk transfer will see F&G’s insurance subsidiaries—Fidelity & Guaranty Life Insurance Company and Fidelity & Guaranty Life Insurance Company of New York—take over responsibility for pension benefits for approximately 3,800 retirees and beneficiaries. These are individuals receiving monthly benefits below specific thresholds. Importantly, the transition is designed to be seamless for those affected, with no changes to the amount, timing, or form of their monthly pension payments.
The decision by Unisys to offload these pension obligations comes amid broader trends in corporate America, where companies are increasingly looking to mitigate the financial and operational risks associated with managing large pension schemes. By transferring these obligations to an insurer, Unisys aims to reduce its pension-related liabilities and volatility on its balance sheet, while ensuring that retirees and beneficiaries continue to receive their benefits as promised.
However, the transaction is not without its costs. Unisys anticipates incurring a one-time, non-cash, pre-tax settlement charge of approximately $129 million in the first quarter as a result of this action. This charge reflects the costs associated with securing the group annuity contracts and effectively transferring the pension obligations. It’s crucial to note that since the purchase is made directly by the pension trust, Unisys’s cash position will remain unaffected, highlighting a strategic approach to managing its financial resources while addressing long-term pension liabilities.
Pension risk transfers such as this one are becoming an increasingly popular strategy for companies looking to manage the long-term costs and risks of their defined benefit pension plans. For insurers like F&G, these deals represent a growing business opportunity, allowing them to leverage their expertise in managing long-term liabilities and investments. From a regulatory perspective, these transactions are closely monitored to ensure that the interests of retirees and beneficiaries are protected, and that insurers have the necessary financial strength to meet these long-term obligations.
For industry watchers, the implications of such deals extend beyond the immediate financial impact on the companies involved. They signal a broader shift in how corporations are approaching the challenge of pension management in an era of longer lifespans, uncertain economic conditions, and evolving regulatory landscapes. As more companies seek to de-risk their pension plans through similar transactions, the market for pension risk transfers is expected to grow, potentially reshaping the retirement planning and insurance sectors in the process.
Moreover, for retirees and beneficiaries, these transactions underscore the changing nature of pension security. While the primary goal of pension risk transfers is to ensure the continuity of benefits, they also highlight the importance of the financial health and regulatory oversight of the insurance companies assuming these obligations. As the market for pension risk transfers evolves, the interplay between corporate strategy, regulatory frameworks, and the financial stability of insurers will be critical in shaping the future of retirement benefits.
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