Article December 6, 2021

Pension plan annuity purchase update – Q3 2021

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Market activity

Group annuity risk transfer sales ($ millions)

Source: LIMRA Secure Retirement Institute

 

Pension buyout sales had their strongest quarter since 2013 in Q3 2021, totalling $15.8B in the quarter, an increase of 243% compared to Q3 2020 sales. This record number brings year-to-date sales to $21.8B, which is nearly twice the total through three quarters last year. 118 buyout contracts were sold in Q3 2021 compared to 106 in Q3 2020. With another strong Q4 expected, pension buyout sales in 2021 should total $35B to $40B.

What we're seeing

After the record setting Q3, the fourth quarter has remained very busy as well. The steady stream of buyouts continued throughout October and November, with deals finally slowing down in December. Some insurers have hit capacity constraints due to the volume of cases, but this has not impacted annuity pricing, which remains very competitive. For retiree only cases, pricing continues to average 97% of the economic liability¹, while plan termination cases which include in-pay and deferred annuities average approximately 100%².

What we're hearing

Following the acquisition by MassMututal back in May, Great American has decided to step away from the PRT market as of January 1, 2022, which will remove a player from the smaller end of the market and bring the total number of insurers in the PRT market back down to 18. However, given PRT sales continue to increase year over year, we expect more insurers to continue to enter the market going forward and pricing to remain competitive.

 

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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