Former hedge fund exec’s Empire Report keeps tabs on New York

BOSTON (Reuters) – Former hedge fund executive JP Miller launched an app on Monday for his startup news site Empire Report that is modeled on the Drudge Report and chronicles New York, its politicians, financiers and celebrities.

Sanofi exploring bid for Actelion amid J&J talks: Bloomberg

(Reuters) – Sanofi is considering a bid for Swiss biotech company Actelion , rivaling an offer made by U.S. healthcare company Johnson & Johnson , Bloomberg reported.

UTC CEO says keeping Indiana plant open ‘good deal’

WASHINGTON (Reuters) – United Technologies Corp’s chief executive told CNBC the company got a “good deal” with President-elect Donald Trump that allowed it to shift most jobs at two Indiana plants to Mexico.

UPDATE 1-Sanofi exploring bid for Actelion amid J&J talks – Bloomberg

Dec 5 (Reuters) – Sanofi is considering a bid for
Swiss biotech company Actelion, rivaling an offer made
by U.S. healthcare company Johnson & Johnson, Bloomberg
reported.

Why pension annuity sales keep rising despite rock bottom rates

In a few weeks we will know for sure, but based on what has occurred so far it seems that 2016 will be the fourth year in a row in which Canadian pension funds have established a new record for the amount of annuities they’ve purchased.

Such purchases represent a one-stop, one-time solution to problems faced by defined benefit pension plan sponsors. In short such a purchase — which comes with an associated fee — solves the fund’s investment risk (that the fund will be able generate a high-enough return to meet the associated liabilities) as well as its longevity risk (that the retirees will live longer than they are actuarially supposed to.)

Instead those risks now fall to the insurance company, which has agreed to take on the responsibilities.

According to information prepared by LIMRA, aresearch and development organization that provides companies with retirement, insurance and distribution analysis,” and the consulting firm Mercer, 2013 was the year that saw an big uptick in purchasing annuities: in that year $2.218 billion worth of annuities was purchased — or more than twice what was purchased in 2012.

In 2014 the trend continued with $2.46 billion of purchases, a pattern that repeated itself in 2015 when $2.567 billion of such purchases was made. According to Mercer, $1.5 billion of annuities were purchased over the first nine months of 2016.

Brent Simmons, senior managing director, of defined benefit solutions, at Sun Life Financial Canada said that the 2016 numbers differ from those posted in 2015: last year about 100 annuity purchases were made by plan sponsors whereas in 2016 the corresponding number is about 80.

Accordingly the average annuity purchase size is larger in 2016 than 2015, noted Simmons, who also expects the total value of business to be at least about the same as last year.

“It’s safer to have converted to a fixed-life annuity,” said Gregory Wyatt, the president of Langley B.C.-based Wyatt Insurance Corporation. “Once that decision has been taken, its safer for the pension plan and for the individual members.”

Safety or not, it’s not immediately obvious why in a very low and falling interest rate environment, that pension funds would be keen to pile into purchasing annuities. In other words, why not wait until interest rates rise — a move that all else being equal would reduce the cost of an annuity — and then buy?

Manuel Monteiro, a partner at Mercer thinks he has the answer. He argues that most of this increased volume has been driven by ongoing plans “who are offloading DB liabilities as part of their risk management strategy.” And that’s a different group of buyers compared with the past where, he said, “most annuities were purchased from plans that were being terminated.”

And the new buyers tend to share another characteristic: many of these plans are either closed to new members or frozen to new accruals. By his estimate about $600 billion of assets are sitting in Canadian plans that are closed or frozen. The country’s trusteed pension fund business is home to about $1.6 trillion in assets.

In Monteiro’s view, the two main factors holding back these plans from reducing risk is the low level of interest rates and the fact that many of them are not fully funded. “If interest rates continue to increase and the funded position of plans improves, I expect the volume of annuities to increase substantially from current levels,” he said.

Financial Post
bcritchley@postmedia.com

UPDATE 2-United Airlines mechanics ratify new contract

NEW YORK, Dec 5 (Reuters) – Union mechanics at United
Continental Holdings Inc on Monday ratified a six-year
joint collective bargaining agreement with the airline, marking
the end to several years…