The number of U.S. pension risk transfer transactions reached an all-time high in 2023, with 850 transactions completed, a LIMRA survey found.
The number of transactions for the year represented a 25% jump from the previous year, according to the survey.
For the fourth quarter, 296 transactions were completed, which was an all-time high for the number of transactions in a single quarter.
Total dollar volume was also significant in the fourth quarter, at $12.7 billion, up 53% from the year-over-year quarter.
“Fourth quarter PRT sales historically tend to be elevated and we saw this again in 2023. Plan sponsors often want to close the deal before the end of the year to remove some of the pension risk off their books,” said Keith Golembiewski, senior director, strategic initiatives at LIMRA, in a March 28 news release.
The total volume for 2023 was $45.8 billion, which fell below the record of $48.2 billion set in 2022. That record high in 2022 was set primarily due to a single transaction. International Business Machines, 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 in September of that year.
“Strong economic conditions have encouraged more plan sponsors to think about derisking their pension liability," he said. "We continue to see a record-level number of deals, suggesting broader awareness and interest in these contracts. LIMRA expects this trajectory to continue with 2024 PRT sales results similar to the results seen 2022 and 2023.”
Single premium buyout sales totaled $12.5 billion in the fourth quarter, while there were no buy-in contracts sold during the period. 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.
In all of 2023, there were eight buy-in contracts sold. The total volume of buy-in contracts for the year was $6.9 billion, which was lowered to $3.9 billion after two contracts were converted to buyouts.
LIMRA surveyed the 21 financial services companies that provide all the group annuity contracts for U.S. corporate pension plans.
