Single-Premium Pension Buy-Out Sales Top 3Q Sales Record

Courtesy of LIMRA

U.S. single-premium pension buy-out product sales exceeded $7.7 billion in the third quarter 2019, 23% higher than sales in the third quarter of 2018.

This represents the 19th consecutive quarter of $1 billion+ sales, according to the Secure Retirement Institute (formerly LIMRA SRI) quarterly U.S. Group Annuity Risk Transfer Survey.

Year-to-date pension buy-out sales were $16.7 billion, more than 4% higher than the first nine months of 2018.

“This quarter marked the highest third-quarter sales for pension buy-out products since we have been tracking this market (in 1986),” said Mark Paracer, assistant research director, SRI. “While there was a substantial contract reported this quarter, we also saw a high number of mid-sized contracts that drove the overall growth. New SRI research shows 4 in 10 plan sponsors are very interested in a pension risk transfer transaction, so we expect the buy-out market to continue to expand.”

There were 111 new buy-out contracts sold in the third quarter bringing the year-to-date total to 301 compared with 281 contracts sold in the first nine months of 2018. Half of the companies reported an increase in contracts sold. The number of contracts sold has increased each of the past 6 years and is on pace for a 7th in 2019.

Total assets of buy-out products increased to $143 billion, 14% higher than third quarter 2018 assets.

While there were no single-premium buy-in product sales in the third quarter, buy-in sales were $888 million, year-to-date. This is the highest level recorded since SRI has been tracking these sales.

Total group annuity risk transfer sales in the third quarter 2019 reached at $7.9 billion, 22% higher than sales in the third quarter 2018. For the first three quarters of 2019, total group annuity risk transfer sales were $18.1 billion, which is 9% higher than prior year 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.