LISLE, Ill., Feb. 21, 2019 /PRNewswire/ -- Navistar International Corporation (NYSE: NAV) today announced that Navistar Canada ULC, its wholly owned subsidiary, on behalf of its pension plans, has purchased group annuity contracts from RBC Life Insurance Company (RBC Insurance) and iA Financial Group that transfer approximately $268 million ($333 million CAD) 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, 2019. 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 Chief Financial Officer, Navistar International Corp. "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."
As a result of the transactions, which were funded by existing plan assets and required no cash contributions to Navistar Canada's pension plans, Navistar reduced its pension plan benefit obligations by approximately 8 percent. Navistar expects to recognize a non-cash pension settlement charge of approximately $142 million ($104 million after-tax) in its fiscal first quarter of 2019 financial results that will be excluded in its non-GAAP results. Going forward, the transactions reduce Navistar's non-operating financial risk and administrative costs.
Morneau Shepell, a leading consulting firm with expertise in pension risk, advised Navistar on the transactions.
About Navistar Navistar International Corporation (NYSE: NAV) is a holding company whose subsidiaries and affiliates produce International® brand commercial trucks, proprietary diesel engines, and IC Bus® brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services. Additional information is available at www.Navistar.com.
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