LIMRA Secure Retirement Institute: U.S. Single Premium Pension Buy-out Sales Exceeds $1.3 Billion in the First Quarter 2018

WINDSOR, Connecticut, May 23 -- LIMRA issued the following news release:

U.S. single premium pension buy-out product sales exceeded $1.3 billion in the first quarter 2018, dropping 3 percent from first quarter 2017. This is the 12th consecutive quarter of sales over $1 billion, according to the LIMRA Secure Retirement Institute (LIMRA SRI) quarterly U.S. Group Annuity Risk Transfer Survey.

"For the third year in a row, first quarter sales exceeded $1 billion," noted Eugene Noble, research analyst, LIMRA SRI. "There have been some major PRT deals announced recently that were not reflected in first quarter results. We expect to see these sales reported in the coming months."

Total assets of buy-out products were over $114.7 billion in the first quarter, almost 16 percent higher than the prior year. Survey participants reported 125 new contracts in the first quarter of 2018.

"For the past 20 years, the number of U.S. employers sponsoring defined benefit plans has declined," noted Noble. "Low interest rates, stock market volatility, increased longevity and rising Pension Benefit Guaranty Corporation premiums contribute to the growing plan sponsor interest in pension risk transfer."

LIMRA SRI notes the recently passed Tax Cuts and Jobs Act of 2017 may encourage more plan sponsors to purchase group annuity contracts. The tax measure cuts the corporate tax rate from 35 percent to 21 percent, effective in tax year 2018. The new law may incent some corporations to make tax-deductible contributions as late as mid-October into their defined contribution (DB) plans for the 2017 tax year, while the 35 percent tax rate is still in effect. In addition, the new tax law enables multinational companies to repatriate profits that have not been taxed in the U.S. from 1987 to the present from overseas subsidiaries at a one-time tax rate of 15.5 percent.

"We expect some companies will take advantage of these measures to improve the funding status of their DB plans, putting them into contention for PRT activity," said Noble.

LIMRA SRI projects the pension risk market to exceed $23 billion in 2018.

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.

Fifteen companies, representing 100 percent of the U.S. market, participated in this survey. A breakout of pension buy-out sales by quarter since 2012 is available in the LIMRA Data Bank.