Pension Plan Annuity Purchase Update

Pension Plan Annuity Purchase Update – Q4 2019

by | Mar 9, 2020 | Annuity Purchase, Industry Updates

Market Activity

Source: LIMRA Secure Retirement Institute

Total pension buyout sales surpassed $11.3 billion in the fourth quarter of 2019, an increase of 6% compared to the fourth quarter of 2018 and the highest quarterly total since Q4 2012. Total 2019 sales reached $28 billion, an increase of 5% from 2018 totals. A record-breaking total of 501 buyout contracts were sold in 2019, 2% higher than 2018 results.

What we’re seeing

The first quarter of 2020 has been full of plan termination buyouts, as plan sponsors and consultants timed the termination process to avoid the busy fourth quarter in the buyout market in the hope of getting better annuity pricing. This strategy was rewarded, as pricing has been 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 2020 to be another strong year, and many of them have increased sales goals as a result. In addition, a new insurer is likely to enter the market later this Spring, targeting both retiree only and plan termination cases in the $25 to $250M range. This will further increase competition and will bring the total number of insurers in the marketplace to 17.

[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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