3Q Single Premium Pension Buy-Out Sales More Than Triple Last Year, SRI Reports

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.

Nineteen 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.