LIMRA: Pension buyout sales hit $13.7 billion in Q4

U.S. corporate pension plan buyout sales totaled $13.7 billion in the fourth quarter, a LIMRA Secure Retirement Institute sales survey found.

The amount for the quarter was 21% higher than the same period in 2019, which saw $11.3 billion in buyout volume.

For the year, buyout sales totaled $25 billion, down 10.7% from 2019, which saw $28 billion in buyout sales.

"After a quick start to the year, pension risk transfer sales slowed in the second and third quarters as employers addressed the impact of COVID-19 on their businesses," said Mark Paracer, assistant research director of the Secure Retirement Institute, in a news release announcing the survey results. "This disruption was temporary and sales picked up by year-end. Low interest rates, market volatility and rising administration costs continue to challenge defined benefit plan sponsors and drive them towards derisking opportunities like pension risk transfer. We expect this trend to continue in 2021."

Notable buyout transactions in the fourth quarter included General Electric Co., Boston, which purchased a group annuity contract from Athene Annuity & Life Co. to transfer $1.7 billion in pension liabilities; and Kellogg Co., Battle Creek, Mich., which transferred $470 million in pension liabilities through the purchase of a contract from an undisclosed insurer.

LIMRA also said there were two buy-in contracts totaling $1.6 billion in the fourth quarter, a new high mark for U.S. buy-in sales.

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.

The survey did not identify which firms purchased the buy-in contracts, but Lockheed Martin Corp., Bethesda, Md., disclosed in a Jan. 26 SEC filing that it had completed pension buyout and pension buy-in transactions totaling $2.2 billion in December through the purchase of two group annuity contracts from insurance companies.

The defense and aerospace company did not disclose the name of the insurer from which it purchased the buy-in contract.

It was Lockheed Martin's second buy-in contract. In December 2018, the company purchased an $810 million group annuity contract from Athene Annuity & Life Co.

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