The Economic Pulse

U.S. Single-Premium Pension Buy-Out Sales Total $2.3 Billion in Q2 2020

Falling Nearly 50 Percent, COVID-19 has clearly had a negative impact on the economy

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WINDSOR, Conn., Sept. 2, 2020 —The U.S. single premium buy-out sales totaled $2.3 billion in the second quarter, down 46% from second quarter 2019, according to the Secure Retirement Institute® (SRI®) U.S. Group Annuity Risk Transfer Sales Survey. This represents the lowest quarter for sales since the first quarter of 2018.

“The effect of COVID-19 on the economy has clearly had a negative impact on pension risk transfer sales, both in terms of volume and dollars,” said Mark Paracer, assistant research director, SRI. “Fluctuating funding levels and the uncertain timing of the recovery have given employers reason to pause.

While we believe social distancing and work-from-home transitions have also contributed to the sales decline, we expect increasing PBGC premiums and other administration costs will drive employers to seek PRT deals in the future.”

There were 72 contracts sold in the second quarter 2020, down 35% from the 112 contracts sold in the second quarter of 2019. These contracts covered 25,509 participants. Year-to-date buy-out sales totaled $6.7 billion, down 25% compared with the $8.9 billion recorded in the first half of 2019. The total number of buy-out contracts sold were 149 in the first half of 2020, down 23% from prior year. There were no single premium buy-in sales reported in the second quarter.

Group Annuity Sales: $2.4 Billion

The effect of COVID-19 on the economy has clearly had a negative impact on pension risk transfer sales, both in terms of volume and dollars...

The overall group annuity risk transfer sales were $2.4 billion for the quarter, 54% lower than prior year.

Single premium buy-out assets reached $155.3 billion in the second quarter, up 10% from second quarter 2019. Single premium buy-in assets were $1.9 billion, 1% higher than second quarter 2019 results. Combined, single premium assets were $157.2 billion in the second quarter, a 10% increase from second quarter 2019 results.

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 2015 are available in the LIMRA Fact Tank.

 

 

 

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The Secure Retirement Institute® (SRI®) provides comprehensive, unbiased research and education about all aspects of the retirement industry to improve retirement readiness and promote retirement security. For information on the Secure Retirement Institute, visit: www.limra.com/sri.