Pension Risk Transfer Premiums Reach $14.6 Billion in Q1

The rise in pension risk transfer transactions in the U.S. shows no sign of stopping. In the first quarter of this year, single-premium PRT sales reached $14.6 billion across 146 contracts, according to insurance research organization LIMRA, which published the data Thursday in its U.S. group annuity risk transfer sales survey.

The value of Q1 transactions exceeded those in the first quarter of 2023 by 130%, and the number of contracts sold rose 26%, the survey found. The contracts sold in the first quarter covered 200,000 corporate pension plan participants.

“Demand for PRT solutions continues as favorable economic conditions spur plan sponsors to de-risk their pension obligations,” said Keith Golembiewski, head of LIMRA Annuity Research, in a press release. “While there were a few jumbo deals driving the remarkable premium growth, the number of contracts sold was the highest first-quarter results seen since LIMRA has been tracking sales, signaling broad plan sponsor interest.”

Single-premium buy-outs—i.e., where the plan sponsor transfers the plan to an insurer—reached $14.2 billion in the first quarter, across 144 contracts. LIMRA recorded only two buy-in transactions—i.e., where the sponsor continues to run the plan, but the insurer holds the risk—valued at $435.6 million collectively.

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In a separate report, Legal & General Retirement America, the PRT wing of U.K. asset manager Legal & General, also recorded an estimated $15 billion in pension risk transfer premiums closed in the first quarter.

LIMRA’s Golembiewski wrote that his organization expects the PRT momentum to continue throughout this year. A number of large transactions have already occurred, such as oil giant Shell’s $4.9 billion PRT with Prudential Financial, power company Entergy’s $1.2 billion transaction with MetLife, and telecom provider Verizon’s $5.9 billion pension transfer with Prudential and RGA Reinsurance.

As higher interest rates have elevated many plans’ funded status, and in some cases created a funding surplus in corporate pension plans, increasingly plan sponsors are considering moving their pension liabilities from their balance sheet and offloading them to an annuity provider.

According to data from consultancy Milliman, nearly half of the largest 100 U.S. corporate defined benefit plans are in a funding surplus, and none of them have a funded status of less than 75%.