“Preparing Assets for Pension Risk Transfer” presents the essentials of asset positioning for plans that pursue a termination, and also examines the growing practice of assets-in-kind (AIK) transfers, drawing upon the results of a recent Penbridge survey of U.S. insurers.
“Proper asset positioning is crucial if the PRT transfer process is to be efficient, with minimal asset liability management risk and cost,” said Steve Keating, co-founder and principal of Penbridge Advisors, Stamford, Connecticut. “In particular, assets-in-kind transfers—which are a direct transfer of asset ownership from the plan to the insurer—can make a lot of sense for large plans.”
The AIK survey, Assets-In-Kind Practices of PRT Providers, found little consensus as to how AIK transfers should be valued. According to Penbridge, no valuation method received the support of more than two of the six survey participants, which included American General, MassMutual, MetLife, New York Life, Pacific Life and Prudential.
“Although three survey respondents completed AIK transfers for pension buyouts last year, the lack of market consensus around valuation protocol is indicative of AIK’s newness in the U.S.,” said Robert Goldbloom, co-founder and principal of Penbridge Advisors. “Nevertheless, the industry appears to be embracing assets-in-kind transfers as a means to handle large transactions more efficiently,” he noted.
The survey, the first in the pension buyout space to focus on AIK, also covered other issues such as which asset classes would be acceptable and what would be the minimum transaction size for AIK to be considered.
Penbridge Advisors provides pension plans with unbiased information and advisory services on the U.S. pension risk transfer market and products.
The AIK white paper and survey can be downloaded here.