Single Premium Buy-Out Sales Drop 77% In 1Q, LIMRA SRI Reports

WINDSOR, Conn., June 10, 2021—Following strong fourth quarter 2020 sales results, U.S. single premium buy-out sales totaled $1 billion in the first quarter, down 77% from first quarter 2020, according to the Secure Retirement Institute U.S. Group Annuity Risk Transfer Sales Survey.

“Pension risk transfer activity slowed significantly in the first quarter, with just 42 single premium buy-out contracts reported, compared with 77 buy-out contracts recorded in first quarter 2020,” said Mark Paracer, assistant research director, SRI. “Despite the sluggish start, we expect volume to pick up as the year unfolds and are projecting PRT sales to be in the $25-$30 billion range.”

In the first quarter, there was one single premium buy-in contract for $2.8 billion. This was the largest buy-in transaction on record. In comparison, there were three buy-in contracts in 2020 totaling $1.8 billion.

The 43 single premium buy-out and buy-in contracts combined covered 50,624 pension participants.

The overall group annuity risk transfer sales were $4.0 billion for the quarter, 13% below first quarter 2020 results.

Total single premium buy-out assets increased 8% to $166.5 billion, and total buy-in assets were $6.2 billion, 124% higher than prior year. Collectively, the $172.7 billion in single premium assets, 10% higher over last year.

“As the PRT market continues to mature, we are likely to see more innovation from the insurers seeking to provide solutions to plan sponsors interested in mitigating their pension liability,” noted Paracer. “We anticipate seeing more use of reinsurance, buy-ins and use of separate accounts. We also expect to see more complex deals that include both the retirees and active participants.”

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.

Eighteen 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.