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Pension Funds

ConocoPhillips enters into annuity buyout with Prudential

ConocoPhillips Co., Houston, purchased a group annuity contract during the second quarter from Prudential Insurance Co. of America to transfer about $700 million in U.S. pension plan liabilities, the company disclosed in a 10-Q filing with the Securities and Exchange Commission on Tuesday.

The purchase was funded directly from plan assets, the filing said. The annuity purchase affects about 6,700 retirees and beneficiaries who began receiving benefits before Jan. 1, a notice on the company's human resources website said. Prudential will assume payment responsibility on Dec. 1.

The company also announced it contributed about $130 million to its U.S. pension plans in the first six months of 2018 and plans to contribute a total of about $170 million to the plans for 2018. In its 10-K filing in February, ConocoPhillips had announced it planned to contribute about $80 million to the U.S. plans in 2018. In 2017, the company contributed $755 million to its U.S. plans.

ConocoPhillips had $2.54 billion in U.S. plan assets as of Dec. 31 and pension obligations of $3.24 billion, for a funding ratio of 78.4%, up from the 60.9% a year earlier. Meanwhile, the company had $3.65 billion in non-U.S. plan assets as of Dec. 31, with pension obligations of $3.85 billion, for a funding ratio of 94.8%, up from 89.1% at the end of 2016.

The company's discount rate used to determine benefit obligations for U.S. plans as of Dec. 31 was 3.55% vs. 3.95% a year earlier. Its discount rate used for non-U.S. plans, meanwhile, was 2.8% as of Dec. 31, compared to 3% as of the same period the year prior.

The target allocations for plan assets are 50% debt securities, 43% equity securities, 6% real estate and 1% other, the 10-K said.

Spokesman Daren Beaudo referred questions to ConocoPhillips' website.