US Pension Buyout Sales More Than Triple in Q3 to $15.8 Billion

US single premium buy-out sales soared in the third quarter to $15.8 billion, a 243% jump and more than three times the $4.6 billion recorded during the same period last year, according to a survey from the Secure Retirement Institute (SRI). It is the second highest quarter for sales since the fourth quarter of 2012.

Year-to-date group annuity risk transfer sales totaled $25.7 billion through the third quarter, up 116% compared with the first three quarters of 2020.

“As more companies enter the pension risk transfer [PRT] market— with Midland National in the first quarter and Fidelity & Guaranty Life in the third quarter—we expect PRT sales to continue to grow as they did this past quarter,” Mark Paracer, SRI’s assistant research director, said in a statement.

There were 118 buy-out contracts covering 157,000 pension participants sold during the quarter, an 11% increase from the 106 buy-out contracts sold during the third quarter of 2020. However, the 248 buy-out contracts sold year-to-date were down 3% from the 255 contracts sold during the same period in 2020.

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Single premium buy-out assets increased 16% during the quarter to $181.9 billion, while total buy-in assets were up 213% from the year-ago period to $6.5 billion. The $188.4 billion in combined single premium assets is up 18% from the third quarter of 2020.

The third quarter saw two single premium buy-in contracts totaling $700 million, bring the year-to-date buy-in sales to $3.5 billion.

“It’s looking like 2021 will be another great year for the PRT market,” Paracer said.

“With buy-out and buy-in sales of $25 billion year-to-date, the annual record of $36 billion set in 2012 seems well within reach,” he said, noting that the fourth quarter is typically the strongest quarter for PRTs because many plan sponsors look to close out deals by year-end to remove pension liabilities from their balance sheets. “We expect that trend to continue.”

According to the most recent Milliman Pension Buyout Index, the average estimated retiree buyout cost as a percentage of accounting liability decreased slightly in October to 102.5% from 102.7%.

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Tags: buy-out sales, Group Annuity Risk Transfer Sales Survey, Mark Paracer, Pension Risk Transfer, PRT, Secure Retirement Institute, single premium

Boston Mayor Michelle Wu has signed into law an ordinance to divest the city from the fossil fuel, tobacco, and private prison industries by the end of 2025. The ordinance prohibits using public funds to invest in the stocks, securities, or other obligations of any company that derives more than 15% of its revenue from those industries.

Under the new law, fossil fuel investments are defined as investments in any company that derives more than 15% of its revenue from the combustion, distribution, extraction, manufacture, or sale of fossil fuels, including coal, oil and gas, or fossil fuel products. It also includes electric distribution companies with corporate affiliates that derive revenue from fossil fuels.

The ordinance also requires the issuance of a report to track the city’s investments, including plans to improve its holdings 120 days after the law’s passage. In 2014, Wu presided over a Boston City Council hearing that examined the potential effects of fossil fuel divestment and its relation to the city’s economy. She also provided testimony at the state in support of city/state divestment from fossil fuels.

Boston is among an increasing number of municipalities, universities, and private foundations that have announced plans to divest from fossil fuels. In late October, ahead of the 2021 United Nations Climate Change Conference, better known as COP26, Auckland, New Zealand; Copenhagen, Denmark; Glasgow, Scotland; Paris; Rio de Janeiro; and Seattle announced commitments to divest from fossil fuel companies and increase investments to make cities more sustainable. Also last month, Baltimore Mayor Brandon Scott signed a bill that requires the city’s three pension funds to divest from the fossil fuel industry.

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Those are in addition to divestment commitments made last year by Berlin; Bristol, England; Cape Town, South Africa; Durban, South Africa; London; Los Angeles; Milan; New Orleans; New York City; Oslo; Norway; Pittsburgh; and Vancouver, Canada.

“Cities are at the forefront of tackling the climate emergency and there is real momentum to move investments away from fossil fuels and toward climate solutions,” London Mayor Sadiq Khan, who is chair-elect of C40 Cities, a network of mayors working to confront climate change, said in a statement. “I will continue to encourage more cities to join the movement, and urge national governments and private finance institutions to mobilize more finance to invest directly in cities to support a green and fair recovery.”