Corporate pension plan buyouts top $11 billion in Q4 – LIMRA

U.S. corporate pension plan buyout sales totaled $11.3 billion in the fourth quarter, a LIMRA Secure Retirement Institute sales survey found.

The amount for the quarter was 5% higher than the same period in 2018. For the year, buyout sales totaled $28 billion, up 2% from the 2018 total.

The first three quarters saw $4.8 billion, $4.2 billion and $7.7 billion, respectively, in buyout sales. Traditionally, the fourth quarter of any year has seen the most activity.

The total for 2019 is the largest since 2012, when megadeals by General Motors Co., Detroit, and Verizon Communications Inc., New York, made up the majority of the total $36 billion in buyout sales.

While there were no megadeals that remotely compared to those by GM or Verizon, LIMRA reported a record-breaking 501 buyout contracts for 2019.

LIMRA also reported a total of $970 million in buy-in product sales for the fourth quarter, a new record for the U.S. market. The total was zero in the third quarter.

LIMRA had reported a total of $880 million in buy-in product sales for the second quarter, mostly due to Bethesda, Md.-based Lockheed Martin's purchase of an $810 million buy-in contract from Athene Annuity and Life Co.

The survey noted there have only been a total of 20 buy-in contracts ever issued in the U.S. Buy-in contracts are significantly more common in the U.K., but five of the past six quarters have seen at least one U.S. buy-in contract sold, according to the study.

"We expect sales to continue to grow in 2020. The rising operational costs and increased market volatility are favorable for pension risk transfer transactions as plan sponsors look for opportunities to derisk their defined benefit plans," said Mark Paracer, assistant research director of LIMRA Secure Retirement Institute, in a news release announcing study results.

Buyout transactions announced in the fourth quarter included Deerfield, Ill.-based Baxter International Inc.'s purchase of a group annuity contract from Prudential Insurance Co. of America to transfer $2.4 billion in U.S. pension plan liabilities, and West Chester, Ohio-based AK Steel Holding Corp.'s purchase of a contract from Massachusetts Mutual Life Insurance Co. to transfer about $615 million in U.S. pension plan liabilities.

LIMRA surveyed the 17 financial services companies that provide all the group annuity contracts for U.S. corporate pension plans.