Prudential closes jumbo pension risk transfer transaction with Shell

The financial services giant is taking on $4.9 billion in pension obligations covering more than 20,000 retirees.

Prudential Financial unveiled its first significant transaction in the pension sector this year. Through its subsidiary, Prudential Insurance Co. of America, the financial services giant has completed a pension risk transfer deal with Shell, taking on $4.9 billion in pension obligations.

The agreement, which affects approximately 21,500 US retirees of Shell, marks a notable shift in responsibility for their pension benefit payments to Prudential.

“Prudential is honored to help continue meeting the retirement security needs of Shell’s retirees,” Alexandra Hyten, head of Institutional Retirement Strategies at Prudential said. “We are confident that our commitment to flawless execution — from the transaction itself to participant onboarding and service delivery — will serve Shell retirees well, protecting the lifetime income they’ve worked hard to earn.”

Prudential’s first major deal of 2024 comes on the heels of new data reflecting low retirement confidence among American workers. According to a study by PGIM,Prudential’s global investment management business, US workers’ sentiment on their ability to afford retirement has been stuck at “below average” levels since 2022.

Prudential took a leading position in the US pension risk transfer market with significant buyouts in 2012 that included deals with General Motors and Verizon. With its pension and actuarial expertise, coupled with formidable investment capabilities and deep financial resources, it has landed seven of the 10 largest U.S. pension risk transfers on record.

The transaction with Shell also reflects the broader trends observed in the group benefits space, which saw a surge in pension risk transfers in the third quarter. According to data from Limra, the number of pension-risk transfer contracts sold increased by 39% compared to the same period in 2022, reaching an all-time high.

However, the total premium for pension risk transfers was down 60%, from $10.6 billion in the third quarter of 2022, indicating a complex and evolving market landscape.