Pension Risk Transfers Continue to Surge in Q2

Pension risk transfer sales in the U.S. reached a total of $16.2 billion in the second quarter, a 31% surge from Q2 2022 and a new record for the quarter, according to the U.S. Group Annuity Risk Transfer Sales Survey conducted by the financial services association LIMRA.  

For the first six months of the year, PRT sales amounted to $22.5 billion, a 28% increase when compared to the same timeframe in 2022 and a pace LIMRA forecasts to continue through the year 

“Record sales in the first half of the year, combined with carriers signaling expectations for a busy second half of 2023, suggest the U.S. PRT market could approach record sales set in 2022,” Mark Paracer, assistant director for LIMRA annuity research, said in a statement.  

The results track with other data reported last week by Aon, the largest PRT adviser, which saw a record 289 PRT transactions totaling $22.4 billion in the first half of the year. The largest deal in the first half was AT&T’s $8 billion transfer, the third largest transaction in PRT history, according to Aon, which covered 100,000 participants. The second-largest transfer was $2 billion from an unnamed sponsor, with two others, also unnamed, at $1 billion each. 

The Department of Labor is currently reviewing and considering changes to the standards plan sponsors must use when selecting an annuity provider for a pension risk transfer. The DOL is required to issue a report to Congress by the end of the year offering recommendations for an update to the standards. 

Plan terminations, in which beneficiaries typically receive either an annuity or a lump sum, composed half of the deals, Aon reported. Lift-outs (in which a sponsor ships a portion of its plan to an insurer) was the next largest area, with buy-ins (the sponsor continues to administer the plan, but the insurer assumes longevity and investment risk) in third place.  

Single-premium buyout sales, in which the insurer takes on the financial and administrative responsibility of the plan, were 18% higher in the second quarter, at $14.6 billion, than in 2022. Year-to-date, buyout sales have experienced a 40% leap, totaling $20.9 billion. 

The second quarter saw 165 buyout contracts, marking a 16% rise from the second quarter of 2022. To date, the number of buyout contracts completed was 281, a 30% increase compared to the preceding year, according to LIMRA. 

In this year’s Q2, four single premium buy-in contracts (in which the sponsor continues to administer the plan, but the insurer assumes longevity) were sold, amounting to $1.6 billion. These figures mirror the results for the YTD period, as no buy-in contracts were finalized in the first quarter. 

Single-premium buyout assets grew by 24% from the previous year to $251 billion. Additionally, single-premium buy-in assets reached $7 billion, a 6% increase compared with the second quarter of 2023. The assets from both single-premium buyouts and buy-ins totaled $258 billion in the second quarter, growing 24% when compared with the same period in 2022. 

“The robust growth in contracts in the first half of the year is also a newer trend,” said Paracer. “In past years, much of the business occurred in the fourth quarter. More recently we are seeing the activity spread out throughout the year, as market expansion has led to more competitive pricing and increased plan sponsor interest.”