WASHINGTON--The Pension Benefit Guaranty Corp. on Thursday took over and terminated Kemper Insurance Cos.' underfunded pension plan, the biggest insurer-sponsored pension plan ever assumed by the PBGC.
Kemper's retirement plan has promised $1.05 billion in benefits to its nearly 12,000 participants--mostly retirees and former employees of operating unit Lumbermens Mutual Casualty Co.--but has just $515 million in assets.
The PBGC estimates it will be liable for about $529 million of the $540 million funding shortfall. That easily eclipses what had been its biggest loss from the takeover of an insurer-sponsored pension plan. In 2002, the PBGC took over failed insurer Reliance Insurance Co.'s pension plan, which was underfunded by about $124 million.
In the case of Kemper, the federal agency stepped in because the company will not be able to pay benefits when due, said PBGC Executive Director Bradley Belt. The financially troubled insurer stopped writing new and renewal business last year amid several ratings downgrades and deteriorating financial results; it now is running off business.
A spokeswoman for Long Grove, Ill.-based Kemper said the PBGC's action should not be interpreted as implying any difficulties with its solvent runoff plan. "We believe the PBGC action will not affect our ability to continue executing our runoff plan," she said.
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