LIMRA Secure Retirement Institute: U.S. Single Premium Pension Buy-out Sales Nearly Double in the Fourth Quarter

WINDSOR, Conn., March 1, 2018—U.S. single premium pension buy-out product sales were $11.1 billion in the fourth quarter of 2017, a 96 percent increase compared with fourth quarter 2016 results. This is first time that fourth quarter buy-out sales have surpassed $10 billion in the last 5 years and the 11th consecutive quarter of sales over $1 billion, according to LIMRA Secure Retirement Institute’s quarterly U.S. Group Annuity Risk Transfer Survey.

In 2017, single premium buy-out product sales were $23 billion, 68 percent higher than 2016.

“Following record sales in the second and third quarters, single-premium buy-out sales marked the second highest fourth quarter sales total on record since 2003,” noted Eugene Noble, research analyst, LIMRA Secure Retirement Institute. “Total sales in 2017 reflected broad growth in the industry with 11 in 15 companies reporting double-digit growth in sales. With the exception of 2012 - when there were two significant jumbo deals (>$1 billion) - annual sales have never exceeded $23 billion since the Institute began tracking sales of these products.”

Total assets of buy-out products were over $114.3 billion in 2017, almost 16 percent higher than prior year. Survey participants reported 29,517 contracts sold as of Dec. 31, 2017.

“Institute research finds about 1 in 3 employer-sponsored pensions have a funding status of 80 percent or more. Facing increasing Pension Benefit Guarantee Corporation premiums, more employers are exploring the option to transfer their pension risk to an insurer,” said Noble. “As plans approach full funding, they become attractive candidates for pension risk transfers. The Institute expects funding ratios to improve as interest rates increase, leading more and more plan sponsors to consider buy-outs in the next few years.”

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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