Iowa defends Athene pension risk transfer deal in Lockheed Martin lawsuit

Iowa Attorney General Brenna Bird submitted a brief Wednesday in support of Lockheed Martin Corp. in a lawsuit over its choice of Athene Annuity and Life Co. in a pension risk transfer deal.

The brief, joined by attorneys general in nine additional states, equates the lawsuit claims as an attack on the efficacy of the state-based insurance regulation system.

Plaintiffs allege that Lockheed selected Athene as its annuity provider “in violation of their strict fiduciary responsibilities" and that "Athene was not the safest available option.” Lockheed, which filed a motion to dismiss, made two separate deals with Athene:

On Aug. 3, 2021, Lockheed transferred $4.9 billion in pension obligations and plan assets for 18,000 beneficiaries. On June 27, 2022, it transferred another $4.3 billion in obligations for 13,600 beneficiaries.

"Denying the Motion to Dismiss here allows a case to proceed on the basis that Iowa—or other States—are not doing their job in ensuring that insurance companies domiciled in those States are acting responsibly," the Bird brief reads.

After a Maryland district court judge denied Lockheed's motion to dismiss in March, the company appealed to the U.S. Court of Appeals for the 4th Circuit. Several PRT lawsuits are proceeding through different courts, with split rulings creating a murky legal precedent.

Athene, domiciled in Iowa, shared the following statement:

“The amicus brief filed by the Iowa Attorney General and nine other state Attorney Generals confirms what independent experts have long recognized: pension risk transfers are safe, and Athene is a highly secure annuity provider with a fortress balance sheet of $35 billion in regulatory capital and strong credit ratings supporting every obligation. We believe that the courts that already dismissed similar cases got it right.”

Very attractive market

Pension risk transfers are attractive to insurance companies because they allow insurers to acquire a large, stable pool of assets that they can invest to generate returns, using their expertise in long-term asset management and risk mitigation.

PRT deals allow companies to offload their costly pension obligations. Regulators have mostly blessed PRT deals, although the National Association of Insurance Commissioners is working to strengthen accounting of the assets backing related offshore reinsurance arrangements.

"Pension risk transfers are a safe tool that are fully regulated by adept and well-equipped state regulators," the Bird brief reads. "Not a single pensioner has lost a single penny from a pension risk transfer transaction in decades."

In March 2024, a class-action lawsuit, Konya v. Lockheed Martin Corp., was filed by some plan participants. Like similar PRT lawsuits, plaintiffs allege that Lockheed Martin breached its fiduciary duty under the Employee Retirement Income Security Act by not choosing the "safest available" annuity provider and prioritizing cost savings over retiree security.

ERISA is a federal law that sets minimum standards for most private-sector retirement and health plans. Plaintiffs claim that ERISA requires plan sponsors to select "the safest possible annuity" when making pension risk transfer deals.

$220 billion of assets

The brief notes that Athene fully funds its pension obligations in excess of 100%, in line with Iowa’s requirements, something ERISA plan sponsors are not required to do.

"Athene has approximately $220 billion of assets available across its organization to pay $200 billion of [its] liabilities, conservatively valued," the Bird brief reads. "As a generalized illustration, that means that the first level of formal regulatory intervention would occur if Athene experienced $15 billion of losses on its investment portfolio, leaving it with $205 billion of assets, which would still be enough to cover its liabilities."

Other attorneys general signing on to the Bird brief hail from the states of Texas, Arkansas, Oklahoma, Idaho, Alabama, Indiana, Montana, Louisiana, and Nebraska.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.