Pension Plan Annuity Purchase Update

Pension Plan Annuity Purchase Update – Q3 2019

Dec 11, 2019 | Annuity Purchase, Industry Updates

Market Activity


Source: LIMRA Secure Retirement Institute

Total pension buyout sales surpassed $7.7 billion in the third quarter of 2019, an increase of 23% compared to the third quarter of 2018. A total of 111 buyout contracts were sold in Q3, bringing 2019 sales to 301 contracts, an increase of 20 compared to the first three quarters of 2018. Total 2019 sales are $16.7 billion, an increase of 4% compared to the first three quarters of 2018.

What we’re seeing

As usual, Q4 has been the busiest quarter of the year, with many plan sponsors trying to complete buyouts before the new year. While some insurers are facing capacity constraints, we continue to see multiple bidders for all sizes of deals and pricing remains competitive. For retiree only cases, pricing continues to average about 99% of the accounting liability[1], while plan termination cases average about 101%[2].

 

What we’re hearing

Insurers expect Q4 pension buyout sales to exceed $8 billion, which would bring total 2019 sales to $25 billion. This would be a slight decrease from the $26 billion  sold in 2018. However, the number of total contracts sold in 2019 is expected to exceed last year’s total, indicating the PRT market continues to grow.

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

[2] Based on plan demographics and the mix of deferred and in-pay annuities.

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