Navistar International Corp. has announced that Navistar Canada ULC, its wholly owned subsidiary, has purchased group annuity contracts from RBC Life Insurance Co. and iA Financial Group that transfer approximately $268 million in obligations, and related assets, of defined benefit pension plans in Canada to these two Canadian insurers.
The transactions are aligned with Navistar’s strategic priority to strengthen its balance sheet by lowering risk volatility in its pension plan obligations.
Under the agreements, the two Canadian insurers will issue annuities covering the responsibility for pension benefits owed to approximately 1,750 Navistar pensioners and beneficiaries, which represents the majority of Navistar’s pension plan members in Canada, and will begin administering all benefits to these members beginning on May 1. Pension benefits for plan participants will not change.
Following the transactions, benefits for plan participants are now protected under Assuris, the life insurance compensation association designated under the Insurance Companies Act of Canada, versus prior protection under the Canadian Pension Benefits Guarantee Fund. Plan participants have been sent information packages containing further details.
“We’re pleased to partner with RBC Insurance and iA Financial Group to secure pension benefits for our Canadian retirees and their beneficiaries,” said Walter G. Borst, executive vice president and CFO of Navistar International. “These transactions continue our objective to de-risk the balance sheet and manage future pension obligations, while retirees and their beneficiaries will receive equivalent pension benefits from highly rated insurance companies, who have strong expertise in long-term management of retirement benefits.”
Navistar expects to recognize a non-cash pension settlement charge of approximately $142 million in its fiscal first quarter of 2019 financial results that will be excluded in its non-GAAP results.
