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U.S. corporate pension buyouts hit $13.7 billion in 2016 — LIMRA survey

U.S. corporate pension plan buyouts reached $13.7 billion in 2016, the second-highest annual activity yet recorded, a LIMRA Secure Retirement Institute sales survey found.

The total for the year was 0.7% higher than the 2015 total of $13.6 billion. The highest-ever annual total was $36 billion in 2012, driven by General Motors Co. and Verizon Communications Inc.’s giant buyouts that year.

Fourth-quarter buyout activity in 2016 was $5.6 billion, down from $6 billion in the third quarter and even with the $5.6 billion in buyout activity in the fourth quarter of 2015.

“Buyout sales have strong seasonality, usually resulting in higher sales in the fourth quarter. However, 2016 proved to be an exception to this trend with fourth-quarter results slightly lower than the third-quarter sales,” said Matthew Drinkwater, assistant vice president at the LIMRA Secure Retirement Institute, in a news release announcing the survey results.

“In recent years, jumbo plan sales (more than $1 billion) tend to swing quarterly results. While there was only one jumbo sale in 2016, the institute continues to see broad growth across the industry and many of the sales came from smaller plans. Participating companies reported having sold more than 383 contracts in 2016,” Mr. Drinkwater said.

The fourth quarter was the seventh consecutive quarter that activity has exceeded $1 billion in group annuity purchases.

Fourth-quarter transactions included the purchase by United Technologies Corp., Farmington, Conn., of a group annuity contract from Prudential Insurance Co. of America to transfer about $1.8 billion in pension liabilities, and also the purchase by Owens-Illinois Inc., Perrysburg, Ohio, of an annuity contract, also from Prudential, to transfer about $200 million in pension liabilities.

In recent 10-K filings with the Securities and Exchange Commission, PepsiCo Inc., Purchase, N.Y., and AK Steel Corp., West Chester, Ohio, disclosed they had also purchased group annuity contracts from insurance companies to transfer liabilities in 2016, but the companies did not disclose when during the year the transactions took place, or the names of the insurance companies or the amounts of liabilities.