Corporate pension buyouts reach $26 billion in Q3 — LIMRA survey

U.S. corporate pension plan buyout sales totaled $26.1 billion in the quarter ended Sept. 30, the highest volume for a third quarter, a LIMRA survey found.

It also brings the year-to-date volume of buyout sales to $41 billion, breaking the previous annual record of $36 billion in 2012 in just the first three quarters of the year. LIMRA projects the total volume for 2022 will exceed $50 billion.

The third quarter was highlighted by the second-largest U.S. pension buyout transaction in history, when International Business Machines Corp., Armonk, N.Y., purchased group annuity contracts from Prudential Insurance Co. of America and Metropolitan Life Insurance Co. to transfer a total of $16 billion in U.S. defined benefit plan liabilities.

"While several jumbo deals drove record sales, there were also a record number of contracts sold in the third quarter, signaling widespread industry growth," said Mark Paracer, assistant research director, LIMRA annuity research, in a news release Wednesday. "Greater plan sponsor awareness and desire to derisk their pension liabilities, rising interest rates and escalating costs to maintain plans are likely driving market expansion in the U.S. We expect these factors to continue to propel the U.S. market into 2023."

There were a total of 145 pension buyout contracts sold in the third quarter, according to the news release. In the nine months ended Sept. 30, LIMRA has recorded 362 buyout contracts sold.

LIMRA also said there were no buy-in contracts completed during the third quarter or the second quarter. During the first quarter, there had been four buy-in contracts totaling $2.7 billion. Pension buy-in transactions, in which an insurer reimburses the company for benefit payments the plan will make to its retirees and beneficiaries, are very common in the U.K., but rare in the U.S.

LIMRA surveyed the 19 financial services companies that provide all the group annuity contracts for U.S. corporate pension plans.