The Prudential Insurance Company of America has received a group annuity contract from J. C. Penney Company, which covers around 43,000 retirees and their beneficiaries.


Under the deal, Prudential will settle a substantial portion of J. C. Penney’s retiree pension benefit obligations.

The deal, combined with a lump sum payment offering, is expected to reduce J. C. Penney’s pension liabilities worth $5bn, ranging between 25% to 35%.

Prudential Retirement pensions and structured solutions business actuary and senior vice-president Peggy McDonald said: "Prudential worked with JCPenney and its advisors to construct an innovative contract and flexible sizing structure for the transaction, which will allow the company to transfer a significant portion of its pension obligations and assets while ensuring the remaining plan will maintain its overfunded status.

"Prudential’s insurance, pension, actuarial expertise and investment capabilities as well as financial strength uniquely position us to execute these large complex transactions, which help companies manage or reduce the pension risk on their balance sheets while providing lifetime income to their retirees."

The deal is expected to complete by the end of this year.

Royal Philips US subsidiary has signed agreements to buy group annuity contracts from Prudential Insurance Company of America, Banner Life Insurance, and American United Life Insurance.

The deal is expected to reduce Philips’ pension liabilities by around $1.1bn.

Image: J. C. Penney is buying a group annuity contract from Prudential Insurance. Photo: courtesy of David Castillo Dominici/