Single-Premium Pension Buy-Out Sales Total Healthy $4.5B In 1Q

The total U.S. single premium buy-out sales totaled $4.5 billion in the first quarter, down 6% from the sales record set in the first quarter 2019, according to the Secure Retirement Institute U.S. Group Annuity Risk Transfer Sales Survey.

This represents the second-highest first-quarter sales results (record was set in first quarter 2019) and only the second time first quarter sales have exceeded $4 billion.

“First quarter 2020 represents the second-highest sales results we have seen during the first three months of the year since we began tracking the pension risk transfer market,” said Mark Paracer, assistant research director, SRI. “Until last year, first quarter buy-out sales had never surpassed $2 billion in the first quarter.”

In the first quarter, there were 77 contracts sold in the first quarter 2020, level with first quarter 2019 results. These contracts covered 60,046 participants.

There were no single premium buy-in sales reported in the first quarter. There were 59 terminal funding contracts equaling $115 million, down 45% from first quarter 2019 sales. The overall group annuity transfer sales were $4.6 billion for the quarter, 8% lower than prior year.

Single premium buy-out assets reached $153.8 billion in the first quarter, up 11%. Single premium buy-in assets were $2.8 billion, surging 173% from prior year. Combined, single premium assets were $156.6 billion in the first quarter, 12% higher than first quarter 2019 results.

“The economic impact of the COVID-19 pandemic should slow down the volume of pension risk transfer deals in the short term as funding levels have fallen sharply since year-end 2019,” noted Paracer. “Additionally, the uncertain timing of the recovery may give some employers reason to pause. However, the costs of the PBGC premiums and administration costs will continue to drive companies toward pension risk transfer deals. Based on what we’re hearing from carriers, we may see the volume pick up again later this year.”

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.