AMSTERDAM, The Netherlands - AkzoNobel has agreed to transfer its obligations for monthly pension payments for current retirees in the United States to insurance company MetLife.

The annuity purchase is expected to reduce AkzoNobel’s U.S. pension obligations by approximately $655 million, or 65 percent, of the total U.S. pension plan. In recognition of the premium payable to MetLife, and in order to maintain its pre-transaction funded status, AkzoNobel has paid a contribution to the pension plan of $170 million.

“Part of our strategy is to de-risk pension liabilities over time,” explained AkzoNobel CFO Keith Nichols. “This transaction will improve the company’s financial health by reducing the risk of a significant unexpected business expense due to the volatile nature of maintaining a defined benefit pension. At the same time, this allows AkzoNobel to focus on its core businesses and serving its customers.”

The annuity purchase will cover around 9,400 U.S. retirees and beneficiaries who retired prior to October 2013. The payment administration for the pension benefits is expected to transfer to MetLife by the end of the first quarter of 2014.

During the fourth quarter of 2012 and the third quarter of 2013, AkzoNobel offered eligible former U.S. employees a lump sum payment option as a replacement for a future pension benefit under the pension plan. More than 5,700 former employees elected for the lump sum payment, which already reduced the total pension obligation by $180 million.

After the lump sum payment and annuity purchase, AkzoNobel’s U.S. pension obligations will have reduced by $835 million to approximately $355 million.