WINDSOR, Conn., Nov. 19, 2015 — In the third quarter of 2015 U.S. group pension buy-out sales reached $3.2 billion, according to a LIMRA Secure Retirement Institute sales survey. Following second quarter sales of $3.8 billion, this marks the first time consecutive quarters experienced $3 billion in sales.
Traditionally, pension buy-out sales tend to spike in the fourth quarter with far less activity in the first three quarters. In 2015, however, pension buy-out sales have eclipsed $8 billion for the first nine months of the year. This represents a remarkable 415 percent increase over the $1.53 billion in sales for the first nine months of 2014. (See Chart)
“For the last five years the number of pension buy-out contracts sold in the first three quarters has steadily increased,” said Michael Ericson, research analyst for LIMRA Secure Retirement Institute. “We’ve seen 195 new contracts so far in 2015, compared to 159 contracts in the first nine months of 2014.”
While the trends show more small and medium sized companies seeking pension buy-outs, a single “jumbo” deal by a corporate giant can significantly influence sales. For a recent example, Kimberly-Clark’s pension conversion in June contributed to the $3.8 billion quarterly sales — a record for second quarter sales.
Years of low interest rates and increasing premiums charged by the Pension Benefit Guarantee Corporation has compelled more organizations to consider transferring their pension risk to a group annuity. To date, 13 financial services companies provide group annuity contracts for this market.
“Fourth quarter usually sees a large increase in pension buy-out sales,” said Ericson. “Based on our tracking, we think fourth quarter and full-year sales in 2015 will finish strong.”
LIMRA Secure Retirement Institute publishes the Group Annuity Risk Transfer Survey every quarter.