Pension Plan Annuity Purchase Update

Pension Plan Annuity Purchase Update – Q4 2018

Apr 10, 2019 | Annuity Purchase, Industry Updates

Market Activity


Source: LIMRA Secure Retirement Institute

Total pension buyout sales once again increased in 2018. Q4 sales totaled nearly $10.5 billion which brings total 2018 sales to $26.4 billion, compared to $23 billion in 2017. While Q3 and Q4 sales were comparable to last year, the $6 billion FedEx transaction in Q2 proved to be the difference maker in another record setting year.

What we’re seeing

Pricing remains competitive for both retiree carveouts and plan terminations. For retiree only cases, pricing continues to average about 99% of the accounting liability[1], while plan termination cases average about 101%. Regardless of premium size, plan sponsors can expect competitive bidding. However, retiree-only cases around $30M-$50M are especially competitive with the potential for up to 10 interested bidders.

What we’re hearing

“We expect continued growth in 2019 due to the following: erratic stock market, higher premiums imposed by the PBGC, longevity of plan participants, companies anxious to improve balance sheets, and expectation that interest rates will rise” said Jason Hitch, AVP at Great American. “We also think that buy-ins may gain additional traction over the next couple years.”

 

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

 

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