Air Canada is seeking finance ministry approval to form its own life insurance company as a gateway to the annuities market and a hedge against looming pension payouts. An Air Canada passenger jet lands at Halifax Stanfield International Airport in Halifax on Monday, Jan. 21, 2013. THE CANADIAN PRESS/Andrew Vaughan
August 17, 2018 - 2:35 PM
MONTREAL - Air Canada is seeking finance ministry approval to form its own life insurance company as a gateway to the annuities market and a hedge against looming pension payouts.
A spokesperson says the airline aims to shore up pension risks by buying annuities from Canadian insurers and reinsuring the fixed payments through an insurance subsidiary.
The Montreal-based carrier plans to purchase the annuities over several years, starting in 2019.
The country's largest airline currently doles out $725 million in annual pension payouts. That number is projected to grow to more than $900 million in a decade.
Air Canada says the national market is too small to bear such big annuities purchases.
The airline's defined benefit pension plans cover nearly 53,000 employees — roughly half of whom are retired — and carry a solvency surplus of $2.6 billion.
Companies in the story: (TSX:AC)
News from © The Canadian Press, 2018