Group pension buy-out sales more than double

Group pension buy-out sales more than doubled from 2013 to 2014, reaching $8.5 billion last year. That’s a 120% increase from the 2013 total of $3.8 billion.

Two major deals were responsible for more than half of last year’s sales when pharmaceutical company Bristol-Meyers Squibb and telecommunications company Motorola both transferred their group pension obligations to Prudential, says Michael Ericson, an analyst at the LIMRA Secure Retirement Institute. Total assets topped $128 billion last year — the highest-ever reported — due to these sales that occurred in the fourth quarter.

In 2012, General Motors and Verizon transferred their group pension obligations to Prudential, which resulted in $35.9 billion in sales for that year. “Those two deals represented nearly all the sales that year,” according to LIMRA.

“While a DB pension plan adds equity to a company, years of low interest rates and increasing Pension Benefit Guarantee Corporation premiums have encouraged more companies to consider transferring their risk to an insurer by purchasing a group annuity,” says LIMRA, which released the findings of its survey Thursday.

The number of buy-out contracts grew to 277 last year, up from 217 in 2013. The total buy-out sales in 2014 were the third-highest since LIMRA started tracking this data in 1986. The LIMRA Secure Retirement Institute conducts a group annuity risk transfer survey each quarter.

Pension buy-out sales have surpassed $3.5 billion for the third straight year, Ericson says. “The growth in this market is also attracting new players,” he says. “Two new companies entered the market in 2014 bringing the total to 11 companies.”

Source: Employee Benefit News