Verizon contributes $1.7 billion to pension fund in Q4
By Robert Steyer | January 22, 2013 4:25 pm
Verizon Communications Inc. contributed $1.7 billion to the company's defined benefit pension plan during the fourth quarter of 2012, bringing the full-year contribution total to $3.5 billion, Francis J. Shammo, executive vice president and chief financial officer, said Tuesday.
In remarks to securities analysts during a fourth-quarter earnings conference call, Mr. Shammo said the contributions were “in line” with what he had predicted during a third-quarter earnings conference call with analysts.
Mr. Shammo also said Tuesday that Verizon in December closed its annuitization deal with Prudential Insurance, purchasing a group annuity contract to transfer $7.5 billion of management retiree pension benefit obligations.
“This transaction was part of an overall pension derisking strategy, which will reduce our exposure to funding and income statement volatility caused by changes in investment returns, discount rates and longevity risks,” Mr. Shammo told analysts, according to a transcript of the conference call. “This transaction also provides us with additional financial flexibility.”
Mr. Shammo also told analysts: “We do not expect any cash funding requirement for qualified pensions in 2013, and based on our current plan assumptions, we expect contribution requirements in future years to be lower as a result of this transaction.”
For the quarter ended Dec. 31, Mr. Shammo said Verizon incurred “several significant non-operational” charges.
The largest was a pretax charge of $7.2 billion, “related primarily to non-cash year-end 'mark-to-market' adjustment of pension and other post-employment benefit liabilities,” Mr. Shammo said. “This charge is due primarily to changes in the discount rate and other actuarial assumptions, as well as the annuitization of various pension liabilities during the quarter.”
The company also incurred pretax charges of $1.4 billion due to early retirement of debt “and other restructuring activities,” Mr. Shammo told analysts.