Group pension buyout sales reached US$8.5 billion in the United States last year, a LIMRA Secure Retirement Institute survey finds.
That’s a 120% increase over the 2013 total of US$3.8 billion.
“After many years of staying in the US$1-billion to $2-billion range, sales in the pension risk transfer buyout market have eclipsed US$3.5 billion for three consecutive years,” says Michael Ericson, analyst for LIMRA Secure Retirement Institute.
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Last year, the number of buyout contracts increased to 277, compared with 217 in 2013.
He says the actual number of contracts don’t tell the whole story because a few large contracts can significantly affect sales in the market. As a result of two large buyout deals in the fourth quarter, total assets topped $128 billion in 2014, the highest ever reported.
In the fourth quarter of 2014, Bristol-Myers Squibb and Motorola each transferred their group pension obligations to Prudential. The sales from these two “jumbo” deals represented more than half of the US$8.5 billion total for the year.
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Total buyout sales in 2014 were the third highest since LIMRA began tracking this statistic in 1986. Sales in 2012 hit a record when General Motors and Verizon offloaded their group pension obligations to Prudential, causing sales to spike to US$35.9 billion for the year. Sales in 2012 are seen as an anomaly because those two deals represented nearly all the sales that year.
“The growth in this market is also attracting new players,” Ericson adds. “Two new companies entered the market in 2014 bringing the total to 11 companies.”
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