FDX FedEx Corp

By Leslie Scism 

MetLife Inc. has reached an agreement with FedEx Corp. to take responsibility for about $6 billion of pension payments to approximately 41,000 retirees and beneficiaries, one of the biggest risk-transfer deals for U.S. life insurers in recent years.

The transaction is smaller than Prudential Financial Inc.'s groundbreaking $25 billion transaction in 2012 to oversee pensions for 110,000 General Motors Co. retirees. It also is smaller than a $8.4 billion transaction that same year in which Prudential began paying pensions of 41,000 Verizon Communications retirees.

But it is larger than most since 2012. Pension-risk-transfer deals generally have been below $5 billion in pension obligations since GM and Verizon, according to benefits experts.

The new transaction follows recent disclosures of mistakes made by MetLife's pension-risk transfer business. It has said it failed in past years to properly search for 13,500 people in private-sector pension plans for whom it owed payments, some from as far back as the 1990s.

The insurer had reduced its reserves for pension obligations at the time, thus improperly boosting profits in years past. In detailing its fourth-quarter 2017 earnings, MetLife said it had bolstered its reserves by $510 million pretax to bring them up to the level that it says will now correctly reflect what it owes.

MetLife executives have said the company is working to locate all the people owed money and to pay them interest.

Some analysts have asked whether the disclosures would affect the company's ability to strike new deals. In a research note Tuesday, Wells Fargo Securities analyst Sean Dargan said the FedEx transaction is "a vote of confidence" and a sign that the insurer "can move on" from the bad publicity.

In the new MetLife transaction, FedEx will purchase a group annuity contract from a MetLife unit, and the insurer will assume responsibility for making benefit payments to the retirees or their beneficiaries, the insurer said. The transaction won't change the amount of the monthly benefit for any person.

MetLife manages pension payments for more than 600,000 retirees. The company issued its first group annuity contract in 1921 to fund a traditional pension plan.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

May 08, 2018 18:54 ET (22:54 GMT)

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