Surges observed in pension risk transfers in Q2

Annuity researcher notes activity can be seen spread out throughout the year

Surges observed in pension risk transfers in Q2

A new report has revealed pension risk transfer (PRT) sales in the second quarter in the US reached a total of $16.2 billion, up 31% year over year, a new record high for the quarter.

According to LIMRA, the financial services association that conducted the US Group Annuity Risk Transfer Sales Survey, the first six months of the year has seen PRT sales of $22.5 billion, up 28% compared to the same period in 2022. LIMRA has also forecasted this to continue through the rest of 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 US PRT market could approach record sales set in 2022,” said Mark Paracer, assistant director for LIMRA annuity research.

PRT adviser Aon last week reported a record 289 PRT transactions, totaling $22.4 billion, in the first half of the year. The largest transaction was worth $8 billion from AT&T, which covered 100,000 participants.

The Department of Labor is considering changes to the standards plan sponsors must use when selecting an annuity provider as the department is required to issue a report to offer recommendations to the Congress by the end of the year.

According to Aon, plan terminations make up half of the deals, followed by lift-outs and buy-ins.

Single-premium buyout sales were $14.6 billion, up 18% compared to 2022. Year-to-date, buyout sales increased by 40% to $20.9 billion.

Buyout contracts increased by 16% compared to the second quarter of 2022. The number of buyout contracts completed increased by 30% compared to the preceding year.

Single premium buy-in contracts completed amounted to $1.6 billion in the second quarter.

Single premium buyout assets increased by 24% compared to the previous year, and single premium buy-in assets increased by 6% compared to the second quarter of 2023, reaching $7 billion. Assets from both single premium buyouts and buy-ins totaled $258 billion in the second quarter, up 24% year over year.

“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,” said Paracer.