US Pension Buy-Out Sales Double in 2014

By Andrew Rickard | March 10 2015 09:36AM

In the United States, there were $8.5 billion of group pension buy-out sales last year. This is 120% higher than the $3.8 billion recorded in 2013.

Survey results from LIMRA Secure Retirement Institute show that the number of buy-out contracts only increased by 28%, up to 277 contracts compared to the 217 reported in the previous year.

Michael Ericson, an analyst for the LIMRA Secure Retirement Institute, notes that a few large contracts can significantly affect sales in the market. In the last quarter of 2014 Bristol-Meyers Squibb and Motorola each transferred their group pension obligations to Prudential. LIMRA points out that the sales from these two large transactions represented more than half of the buy-out total for the year and pushed annual total assets above $128 billion, which is the highest ever reported.

“After many years of staying in the $1 to $2 billion range, sales in the pension risk transfer buy-out market have eclipsed $3.5 billion for three consecutive years,” comments Ericson. “The growth in this market is also attracting new players. Two new companies entered the market in 2014 bringing the total to 11 companies.”

LIMRA says that, given persistently low interest rates and higher Pension Benefit Guarantee Corporation premiums, more American companies are likely to consider transferring their risk to an insurer by purchasing a group annuity.