For the 19th consecutive quarter, U.S. single-premium pension buyout product sales have hit the $1 billion plus mark, according to the Secure Retirement Institute (SRI) quarterly U.S. Group Annuity Risk Transfer Survey.
Sales exceeded $7.7 billion in the third quarter 2019, 23% higher than sales in the third quarter of 2018. Also, year-to-date pension buy-out sales were $16.7 billion, more than 4% higher than the first nine months of 2018, the survey found.
Mark Paracer, SRI assistant research director, said this quarter was the highest third-quarter sales for pension buy-out products since 1986 when SRI began tracking this market.
“While there was a substantial contract reported this quarter, we also saw a high number of mid-sized contracts that drove the overall growth. New SRI research shows four in 10 plan sponsors are very interested in a pension risk transfer transaction, so we expect the buy-out market to continue to expand,” he said.
The number of contracts sold has increased each of the past six years and is on pace for a seventh in 2019. The survey showed a total of 111 new buy-out contracts sold in the third quarter bringing the year-to-date total to 301 compared with 281 contracts sold in the first nine months of 2018. Half of the companies reported an increase in contracts sold.
Total assets of buy-out products increased to $143 billion, 14% higher than third quarter 2018 assets.
Also reaching record level in the third quarter were buy-in sales at $888 million, year-to-date, SRI said. Single-premium buy-in product sales in the third quarter did not budge.
Total group annuity risk transfer sales also rose in the third quarter 2019, reaching $7.9 billion, 22% higher than sales in the third quarter 2018. For the first three quarters of 2019, total group annuity risk transfer sales were $18.1 billion, which is nine percent higher than prior year results.
SRI explained that a group annuity risk transfer product, such as a pension buy-out product, allows an employer to transfer all or a portion of its pension liability to an insurer. In doing so, an employer can remove the liability from its balance sheet and reduce the volatility of the funded status.
The survey included 17 companies, which represented 100% of the U.S. pension risk transfer market.