The surge in volume reflected the completion of the second-biggest U.S. transaction of all time, which accounted for nearly a third of total deal volume alone. During the third quarter, International Business Machines, Armonk, N.Y., purchased group annuity contracts from Prudential and Metropolitan Life Insurance to transfer a total of $16 billion in U.S. pension plan liabilities. The purchases, which closed Sept. 13, transferred the benefit-paying responsibility for about 100,000 retirees and beneficiaries covered by the IBM Personal Pension Plan.
There were also eight other "jumbo" transactions of more than $1 billion each, including transactions completed by Alcoa, Pittsburgh, and Lockheed Martin, Bethesda, Md.
"We saw yet another record-breaking year in the U.S. PRT market, signaling the growing strength and resiliency of the market," said Sheena McEwen, vice president, head of distribution at LGRA, in a news release Monday. "As the market has evolved, we've seen volumes continue to rise and more transactions being announced publicly – which is helping to broaden knowledge and understanding of PRT as a key risk mitigation strategy for (U.S.) insurers. Momentum from 2022 has carried over into 2023 and we are anticipating another busy (first half of the year) with several transactions over $1 billion already in the pipeline."
The vast majority of U.S. PRT volume consists of buyouts, in which assets and liabilities are transferred to insurers. Pension buy-ins, in which an annuity contract insures liabilities that are kept in-house by a plan sponsor, are far more frequent in the U.K.
In the U.K., Legal & General Retirement Institutional estimated £26 billion ($31 billion) was secured with insurers in 2022. The estimate would represent the fourth-largest year on record, according to LGRI.
The report notes that £12 billion in volume took place in the first half of 2022, while £14 billion in deals were completed in the second half of the year. Because liabilities fell so sharply in the second half of the year due to rising interest rates, LGRI said that amount in the second half would have been much larger had the deals been completed in the first half of the year.
There were five U.K. transactions of £1 billion or more in 2022, including WH Smith Pension Trust, Swindon, England, completing a £1 billion buy-in with insurer Standard Life.