Year-Over-Year Single Premium Buy-Out Sales Up 119% In 2Q

By Staff Reports

U.S. single premium buy-out sales totaled $5 billion in the second quarter, up 119% from second quarter 2020, according to the Secure Retirement Institute® (SRI®) U.S. Group Annuity Risk Transfer Sales Survey.

In the first half of 2021, buy-out sales were $6 billion, down 11% from prior year results.

“As we expected, pension risk transfer (PRT) activity rebounded in the second quarter, with 87 buy-out contracts sold. This represents the second highest second quarter results in terms of dollars and numbers of contracts sold on record,” said Mark Paracer, assistant research director, SRI. “We are projecting PRT sales to be in the $25-$30 billion range, which would align with 2020 results.”

In the second quarter, there were no single premium buy-in contracts sold. Year to date, buy-in sales total $2.8 billion.

The overall group annuity risk transfer sales were $ 9.0 billion in the first half of 2021, a 30% increase compared with first half 2020 sales. The 87 single premium buy-out contracts covered 81,000 pension participants.

Total single premium buy-out assets increased 9% in the second quarter to $169.4 billion. Total buy-in assets were $5.9 billion in the second quarter, more than 214% higher than prior year. Together the $175.4 billion in single premium assets are up 11% compared with second quarter 2020 assets.

“As the economy continues to recover with strong market returns, we expect to see more employers explore their de-risking options to mitigate their pension liability,” noted Paracer. “The third quarter is already shaping up to be very strong with significant PRT deal announcements from HP, Lockheed Martin and Pactiv.”

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.