US Pension Buyout Sales More Than Triple in Q3 to $15.8 Billion

The pension risk transfer market is poised for a record-breaking year in 2021.

US single premium buy-out sales soared in the third quarter to $15.8 billion, a 243% jump and more than three times the $4.6 billion recorded during the same period last year, according to a survey from the Secure Retirement Institute (SRI). It is the second highest quarter for sales since the fourth quarter of 2012.

Year-to-date group annuity risk transfer sales totaled $25.7 billion through the third quarter, up 116% compared with the first three quarters of 2020.

“As more companies enter the pension risk transfer [PRT] market— with Midland National in the first quarter and Fidelity & Guaranty Life in the third quarter—we expect PRT sales to continue to grow as they did this past quarter,” Mark Paracer, SRI’s assistant research director, said in a statement.

There were 118 buy-out contracts covering 157,000 pension participants sold during the quarter, an 11% increase from the 106 buy-out contracts sold during the third quarter of 2020. However, the 248 buy-out contracts sold year-to-date were down 3% from the 255 contracts sold during the same period in 2020.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Single premium buy-out assets increased 16% during the quarter to $181.9 billion, while total buy-in assets were up 213% from the year-ago period to $6.5 billion. The $188.4 billion in combined single premium assets is up 18% from the third quarter of 2020.

The third quarter saw two single premium buy-in contracts totaling $700 million, bring the year-to-date buy-in sales to $3.5 billion.

“It’s looking like 2021 will be another great year for the PRT market,” Paracer said.

“With buy-out and buy-in sales of $25 billion year-to-date, the annual record of $36 billion set in 2012 seems well within reach,” he said, noting that the fourth quarter is typically the strongest quarter for PRTs because many plan sponsors look to close out deals by year-end to remove pension liabilities from their balance sheets. “We expect that trend to continue.”

According to the most recent Milliman Pension Buyout Index, the average estimated retiree buyout cost as a percentage of accounting liability decreased slightly in October to 102.5% from 102.7%.

Related Stories:

GE Agrees to $1.7 Billion Buyout; BBC Pension Secures £3 Billion Longevity Swap

Rising Funded Levels, PBGC Premiums Spur Pension Buyout Record

Pension Buyouts a Relative Bargain, Says Mercer

Tags: , , , , , ,