WINDSOR, Conn., Aug. 27, 2018– U.S. single premium pension buy-out product sales surpassed $8.2 billion in the second quarter 2018, more than doubling the sales totals in the second quarter 2017. This is the 13th consecutive quarter of sales over $1 billion and the highest second-quarter results on record for the past 15 years, according to the LIMRA Secure Retirement Institute (LIMRA SRI) quarterly U.S. Group Annuity Risk Transfer Survey.
“Several large pension risk buy-out contracts — announced since the beginning of the year — were reported in the second quarter, driving the overall growth,” noted Eugene Noble, research analyst, LIMRA SRI. “We expected more activity in the pension risk transfer market as plan sponsors take advantage of the ability to make tax-deductible contributions at a higher rate before the new rates kick in as a result of the tax reform law.”
Year-to-date, buy-out sales were $9.6 billion, 76 percent higher than prior year.
Total assets of buy-out products were over $121 billion in the second quarter, almost 23 percent higher than the prior year. Survey participants reported 108 new contracts in the second quarter of 2018.
“While market growth in previous quarters has been from small- to medium-sized plans, this quarter the majority of the growth came from large plan transfers,” said Noble. “Recent LIMRA SRI research shows that large plan sponsors are more familiar and have growing interest in pension risk transfers.”
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 Fact Tank.
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