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Kimberly-Clark buys annuities to cover pension risks

Kimberly-Clark buys annuities to cover pension risks

Kimberly-Clark Corp. is buying two group annuity contracts to provide pension benefits to about 21,000 retirees, the Dallas-based paper goods manufacturer announced Monday.

In the latest corporate move to reduce pension liability risks, Kimberly-Clark said it will transfer about $2.5 billion in pension plan obligations to Prudential Insurance Co. of America and Massachusetts Mutual Life Insurance Co.

“The group annuity contracts from Prudential and MassMutual, both highly-rated insurance companies and experts in this field, provide excellent benefit security for our retirees, while further reducing noncore financial risk for Kimberly-Clark,” Mark Buthman, Kimberly-Clark's chief financial officer, said in a statement.

Kimberly-Cark said the annuity purchase will be funded with assets of the company's U.S. pension plan. Kimberly-Clark said it expects to make a $400 million to $475 million contribution to the plan to support the transaction, which will cover 21,000 individuals who were retired as of Dec. 1, 2014.

The transaction is the second so-called de-risking action Kimberly-Clark has taken in recent years to reduce the size of the plan.

In 2012, the company offered about 10,000 former employees who were eligible but not yet receiving benefits the opportunity to convert their future annuity to a lump-sum benefit, of which just over one-third accepted the offer.

At year-end 2014, Kimberly-Clark had $4.43 billion in liabilities and $3.76 billion in assets in its U.S. pension plans, according to its latest 10-K report.

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