WINDSOR, Conn., Nov. 30, 2021 — U.S. single premium buy-out sales totaled $15.8 billion in the third quarter, up 243% from third quarter 2020 sales of $4.6 billion, according to the Secure Retirement Institute® (SRI®) U.S. Group Annuity Risk Transfer Sales Survey. This marks the second highest quarter for sales since fourth quarter 2012.
“As more companies to enter the pension risk transfer (PRT) market — with Midland National in the first quarter and Fidelity & Guaranty Life in the third quarter — we expect PRT sales to continue to grow as they did this past quarter,” said Mark Paracer, assistant research director, SRI.
In the third quarter, there were two single premium buy-in contracts totaling $700 million. Year-to-date buy-in sales were $3.5 billion.
The overall group annuity risk transfer sales year-to-date were $25.7 billion through the third quarter of 2021, a 116% increase, compared with the first three quarters of 2020.
There were 118 buy-out contracts sold in the third quarter, 11% higher than the 106 buy-out contracts sold in third quarter 2020. Year-to-date there were 248 buy-out contracts sold, down 3% from the 255 contracts sold during the same period in 2020. The 118 single premium buy-out contracts covered 157,000 pension participants.
Total single premium buy-out assets increased 16% in the third quarter to $181.9 billion. Total buy-in assets were $6.5 billion in the third quarter, 213% higher than prior year. Together the $188.4 billion in single premium assets are up 18% compared with third quarter 2020 assets.
“It’s looking like 2021 will be another great year for the PRT market,” noted Paracer. “With buy-out and buy-in sales of $25 billion year-to-date, the annual record of $36 billion set in 2012 seems well within reach. The fourth quarter is historically the strongest quarter for PRT as many plan sponsors look to close out deals by year-end to remove their pension liability from balance sheets so they can start the year off fresh. We expect that trend to continue.”
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.