Insurer Hartford Financial Services Group Inc. said on Monday it would transfer $1.6 billion, or 29 percent, of its pension liabilities to Prudential Financial Inc.
Hartford is the latest U.S. firm to transfer its pension obligations as rising interest rates and all-time high stock-market values give companies the perfect excuse to offload them.
On Friday, Accenture Plc said it would transfer $1.6 billion in pension obligations to insurers American International Group Inc. and MassMutual.
On their part, U.S. insurers are buying corporate pension plans at a record clip betting so that they can make more money from selling companies an annuity to cover the cost of the pension plans and then invest the proceeds in bonds and other securities.
Pension transfers totaling $13.7 billion were finalized last year, up 1 percent from 2015, according to LIMRA, an industry trade group. The figure is the second highest annual total ever recorded, LIMRA said.
Hartford said on Monday it would transfer pension benefits of about 16,000 former employees.
The company said it expected to recognize an after-tax pension settlement charge of about $485 million in the second quarter ending June 30.
The transaction would also lead to a reduction to stockholder’s equity of about $140 million, or 37 cents per diluted share, based on shares outstanding as of March 31, Hartford said.
(Reporting by Diptendu Lahiri in Bengaluru; Editing by Sriraj Kalluvila)
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