Canadian Wheat Board, Winnipeg, Manitoba, purchased an annuity in a pension buy-in from Sun Life Assurance Co. of Canada, confirmed Andrea Carlson, vice president, corporate finance and strategy at CWB.
The C$150 million (US$147 million) annuity policy transfers all the investment and longevity risk to Sun Life from CWB's pension plan. The deal was concluded June 7.
“The driving force really was the fact that the CWB's mandate has changed … it's a different organization than it was in the past,” Ms. Carlson said in a telephone interview.
Last year, legislation was enacted that broke up the CWB as the sole buyer of the wheat and barley in Western Canada, making it a smaller organization competing in the open grain market that could not sustain the current pension plan, Ms. Carlson said. The buy-in was seen as a way to mitigate investment and solvency risk, she added.
The buy-in differs from large pension buyouts executed last year in the U.S. between Prudential Insurance Co. of America and Verizon Communications Inc. and General Motors Co., where the pension assets and liabilities were completely removed from corporate balance sheets. Under the buy-in, the CWB still will be the administrator of the plan and make the benefit payments, while the investment and longevity risks lie with Sun Life.
The transaction is the largest single-day purchase of inflation-linked annuities in Canada and the largest pension buy-in for Sun Life.
CWB's 2011-'12 annual report shows signs the company has been preparing for some of kind of pension risk transfer. The pension plan was frozen on July 31, 2012, and the annual report states the investment policy was changed in September to obtain an asset allocation of 97.5% bonds and 2.5% cash by the end of 2012. The plan was fully funded at the end of 2012.
Consultant Aon Hewitt and law firm Dentons Canada advised CWB.
