LIMRA Secure Retirement Institute

U.S. Single-Premium Pension Buy-Out Sales Surpass $4.7 Billion for the Second Consecutive Quarter

The 18th consecutive quarter of $1 billion+ sales.

WINDSOR, Conn., Aug. 27, 2019 — U.S. single-premium pension buy-out product sales surpassed $4.7 billion in the second quarter 2019, which is the 18th consecutive quarter of $1 billion+ sales. This also represents the second consecutive quarter of sales over $4.7 billion, according to the LIMRA Secure Retirement Institute (SRI) quarterly U.S. Group Annuity Risk Transfer Survey.

Second quarter buy-out sales were down 42%, compared with prior year results when a $6 billion contract was reported. Year-to-date, pension buy-out sales were $9.5 billion, down 2% from the first half of 2018.

“This quarter’s pension buy-out sales were the second highest reported in a second quarter since we have been tracking this market (second quarter 2018 sales hold the record),” said Mark Paracer, assistant research director, SRI. “We continue to see broad growth in the market. Our new research shows more plan sponsors are familiar with pension risk transfer options and 8 in 10 are at least somewhat interested in a pension risk transfer transaction.”

66% of companies reported increase in contracts sold

There were 112 new buy-out contracts sold in the second quarter bringing the year-to-date total to 190, compared with 158 contracts sold in the first half of 2018. Two thirds of the companies reported an increase in contracts sold, compared with prior year results.

  • Total assets of buy-out products increased to $140 billion, 13% higher than second quarter 2018 assets.
  • Single-Premium Buy-In Product Sales Breaks Record
  • The single-premium buy-in product sales had a record quarter. In the second quarter, buy-in sales were $880 million, the highest level recorded since SRI has been tracking these sales.

“The pension buy-in market is a small but growing market,” noted Paracer. “While there have been only 17 buy-in contracts issued in the U.S., this is the fifth consecutive quarter with at least one buy-in contract sold.”

Total group annuity risk transfer sales in the second quarter 2019 reached at $5.8 billion, 32% lower than sales in the second quarter 2018. In the first half of the year, total group annuity risk transfer sales were $10.8 billion, which is 7% higher than prior year results.

“We see tremendous opportunity in the pension risk transfer market. Over the past few decades, market conditions and regulatory changes have made it increasingly difficult for employers to offer defined benefit (DB) pension plans,” remarked Paracer. “Low interest rates, market volatility, increased longevity of plan participants, and rising Pension Benefit Guaranty Corp. (PBGC) premiums present major obstacles for plan sponsors who maintain DB plans. A group annuity product can relieve these employers of the liability and plan management of their DB plan.”

The pension buy-in market is a small but growing market. While there have been only 17 buy-in contracts issued in the U.S., this is the fifth consecutive quarter with at least one buy-in contract sold...

A group annuity risk transfer product, such as a pension buy-out product, allows an employer to transfer all or a portion of its pension liability to an insurer. In doing so, an employer can remove the liability from its balance sheet and reduce the volatility of the funded status.

Seventeen companies participated in this survey, representing 100% of the U.S. Pension Risk Transfer market. Breakouts of pension buy-out sales by quarter and pension buy-in sales by quarter since 2012 is available in the LIMRA Fact Tank.

 

 

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