Unlocking Shareholder Value Through Pension Risk Transfers - Technical Document
A Framework for Corporate Pension Plan Sponsors
A majority of large US corporates are on an exit trajectory from the business of providing and investing for defined benefit (DB) pension plans. The potential flows involved are very large and are receiving a lot of attention from banks, insurers and asset managers as these flows represent both an opportunity and a threat to current business models. We estimate that overall single employer-sponsored corporate DB pension plan liabilities total in the region of $2 TN on a US GAAP basis.
This technical document that corresponds to a shorter executive summary sets out an integrated model which we suggest investors should use to evaluate the impact of potential defined benefit pension risk transfer actions by US companies.
We apply our detailed framework to show that significant value can be unlocked for shareholders if high quality US corporates transfer pension risk off of their balance sheets. We also discuss the principal means to achieving this while focusing on the interests of shareholders – not debt-holders, whose interests can vary.
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Michael Moloney, Partner in the Americas Insurance Practice
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