U.S. corporate pension plan buyouts exceeded $1 billion in the second quarter of 2016, a LIMRA Secure Retirement Institute sales survey found.
It is the fifth consecutive quarter that sales have exceeded $1 billion, according to the survey. The second quarter’s total, $1.03 billion, compares with $1.1 billion reported in the first quarter and $3.8 billion in sales in the second quarter of 2015.
That decrease from the year-ago quarter was due to one “jumbo” deal in 2015, in which Kimberly-Clark Corp., Dallas, transferred a total of $2.5 billion in pension liabilities to Massachusetts Mutual Life Insurance Co. and Prudential Insurance Co. of America.
In the first half of 2016, a total of 131 U.S. corporate pension plans purchased group annuity contracts, up from 107 deals in the first six months of 2015.
“Pension buyout activity for the first six months of this year is higher than it has been in the last five years,” said Michael Ericson, analyst for LIMRA Secure Retirement Institute, in a news release. Continued low interest rates, higher Pension Benefit Guaranty Corp. premiums and new mortality tables have increased the incentive for corporate plan sponsors to transfer their liabilities to insurance companies, Mr. Ericson added.
The third-quarter survey likely will find a further increase in the total dollar amount of buyouts. Two days before the end of the second quarter on June 28, PPG Industries Inc., Pittsburgh, announced it had entered into an agreement to transfer a total of $1.6 billion in pension liabilities to MassMutual and MetLife.
Every quarter, the LIMRA Secure Retirement Institute surveys the 13 financial services companies that provide all the group annuity contracts for the U.S. for its Group Annuity Risk Transfer Survey.