Pension Plan Annuity Purchase Update

Pension Plan Annuity Purchase Update – Q3 2018

Jan 15, 2019 | Annuity Purchase, Industry Updates

Market Activity


Source: LIMRA Secure Retirement Institute

Through the first three quarters of 2018, pension buy-out sales continue on a record-breaking pace. Q3 sales totaled $6.3 billion which brings year to date sales to $15.9 billion, compared to $11.9 at this time last year. If Q4 sales match last year, total 2018 sales will exceed $27 billion.

What we’re seeing

While Q2 sales were largely driven by the $6 billion FedEx transaction, Q3 sales were comprised primarily of small and medium sized deals. With the increased number of transactions and sales totals similar to Q3 2017, insurers were very busy but didn’t hit quite the same capacity constraints as the prior year. As a result, pricing remained competitive. For both retiree only cases and plan terminations, we saw pricing at 99% of the accounting liability[1] on average.

What we’re hearing

“Our outlook for the pension risk transfer market in 2019 is that the market will continue to be quite robust,” said Dan Smith, National Sales Director at Mutual of Omaha. “We expect that lift-outs and plan terminations alike will continue at a significant pace, and we are expecting to write more pension risk transfer business in 2019 than we did in 2018. We also expect that relatively new entrants to the market will be very competitive and the PRT market space will be very competitive in 2019.”

 

[1] Measured using FTSE curve and best estimate of underlying mortality.

 

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