US-based Kimberly-Clark has signed purchase agreements with The Prudential Insurance Company of America and Massachusetts Mutual Life Insurance (MassMutual) for group annuity contracts.

Pension

Under the deal, the two insurers will take the payment responsibility for retirement pension benefits owed to around 21,000 Kimberly-Clark retirees in the US.

To support the deal, Kimberly-Clark intends to make a $400m to $475m contribution to its US pension plan.

Kimberly-Clark chief financial officer Mark Buthman said: "The group annuity contracts from Prudential and MassMutual, both highly rated insurance companies and experts in this field, provide excellent benefit security for our retirees, while further reducing non-core financial risk for Kimberly-Clark."

Beginning 1 June, Prudential, along with offering administrative services, will commence benefit payments to the affected retirees.

Each retiree’s benefit will be split evenly between Prudential and MassMutual, while Prudential will be the annuity administrator for the benefit payments.

Kimberly-Clark will reduce its pension projected benefit obligation by around $2.5bn, by transferring the obligations to the two insurers.

The company plans to recognize a non-cash pension settlement charge of $0.8bn after tax in the second quarter of 2015, as a result of the annuity purchases.


Image: Kimberly-Clark to purchase pension annuity contracts. Photo: courtesy of Stuart Miles/ FreeDigitalPhotos.net.