Legal & General Group wins $4 Billion Deal for TRW Pension Liabilities

Thursday, Nov 27, 2014

Legal & General Group Plc (LGEN), the biggest manager of U.K. pension assets, will take over $4 billion in liabilities to retirees of car-parts supplier TRW Automotive Holdings Corp. (TRW)

The deal is part of TRW’s plan to “permanently abate” a significant portion of pension liabilities in the U.K., as well as some in the U.S. and Canada, the Livonia, Michigan-based company said yesterday in a regulatory filing. The transaction and other efforts to wind down pension obligations will lead to a pretax charge of $875 million to $925 million, TRW said.

ZF Friedrichshafen AG agreed in September to buy the supplier in an all-cash transaction valued at $11.7 billion. The combined company will be the second-largest maker of auto parts in the world, giving it the size to push back against pricing demands from car manufacturers.

TRW will contribute an additional $225 million to $250 million to the pension plans this quarter, according to the filing. Most of the transaction with Legal & General will be funded by assets already backing the obligations.

Climbing stocks have helped increase the assets companies hold to back pension liabilities and made closeouts of the plans more cost-effective. During the past three years, Prudential Financial Inc., the second-largest U.S. life insurer, agreed to take on obligations from companies including Verizon Communications Inc. and General Motors Co.

The transfers can limit liabilities for companies with large pension obligations while increasing assets managed by insurers that already handle risks tied to life expectancies. More deals are probably on the horizon, according to MetLife Inc., the largest U.S. life insurer.

Private companies could cede about $800 billion to the industry over the next decade or longer, Bill Wheeler, MetLife’s head of the Americas, told investors in June.

“There’s going to be a lot of business coming our way and we’re already starting to see it,” he said. “The growth in pension-plan closeouts has increased.”


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