Annuity buy-outs booming

By Andrew Rickard | March 03 2016 01:44PM

A report from the LIMRA Secure Retirement Institute shows that companies in the US are keen to remove pension liabilities from their books.

LIMRA’s most recent quarterly survey found that group annuity risk transfer sales in the United States reached $5.8 billion in Q4 last year. While this is about 19% lower than the same period last year, this discrepancy is due to the sale of a jumbo contract (defined as larger than $1 billion). For the whole of 2015, group annuity risk transfer sales were up by 54%, totalling $14.4 billion.

LIMRA notes that in 2015 buy-out products accounted for more than 95% of the total group annuity risk transfer market, totaling $13.6 billion, which is 61% higher than the levels reported in 2014. On the other hand, the survey found that single-premium buy-in product sales came to just $7.2 million. This represents a 95% decline from 2014. To date, LIMRA points out that there have only been five single-premium buy-in contracts sold.

“This year we saw broad growth across the industry and many of the sales came from smaller plans. Companies reported selling more than 300 separate contracts under $100 million,” says Michael Ericson, an analyst at the LIMRA Secure Retirement Institute.  “With PBGC premium increases, market volatility and continued low interest rates, employers are becoming more interested in transferring their pension risk to an insurer. The Institute expects this trend to accelerate in the next few years.”

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