October 2, 2017 / 11:40 AM / a year ago

UPDATE 1-International Paper unloads $1.3 bln in pension liabilities

(Adds details on transaction, background)

Oct 2 (Reuters) - International Paper Co, a fiber-based packaging, pulp and paper producer, said on Monday it would transfer $1.3 billion in pension obligations to No. 2 U.S. life insurer Prudential Financial.

International Paper expects to take a pretax non-cash pension settlement charge of about $400 million in the fourth quarter. The deal will close Oct. 3.

Prudential will assume responsibility for pension benefits of around 45,000 former International Paper employees at the end of 2017, International Paper said. reut.rs/2xKJflj

U.S. insurers have been buying corporate pension plans at a record clip as rising interest rates and all-time high stock-market values give companies an opportunity to offload them.

Calculating 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, insurers are competing to persuade corporate America to sell them their pensions.

Pension transfers of $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.

The average corporate pension fund was 83 percent funded in May, according to Mercer Investment Consulting.

In June, consulting and outsourcing services provider Accenture Plc transferred $1.6 billion in pension obligations to insurers American International Group Inc and MassMutual. (Reporting By Aparajita Saxena in Bengaluru; Editing by Savio D'Souza, Bernard Orr)

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