Sponsors of defined-benefit pension plans purchased US$8.2billion of single premium pension buy-out annuities in the secondquarter of 2018, the most active second quarter for the pension risk transfer products over the past 15years, according to the LIMRA Secure Retirement Institute'squarterly U.S. Group Annuity Risk Transfer Survey.

It was also the second most active quarter since 2012. InDecember of 2017, plan sponsors purchased $11.1 billion in risktransfer annuities.

Year to date, total sales are $9.6 billion. LIMRA expects salesin 2018 to eclipse $23 billion.

LIMRA's survey shows 108 new contracts posted in the secondquarter. The annuity purchases represent $121 billion in pensionobligations.

Several large buyout contracts that were announced at thebeginning of the year but were reported in the second quarter drovethe second quarter's growth, said Eugene Noble, a research analystat LIMRA, in a press release.

“We expected more activity in the pension risk transfer marketas plan sponsors take advantage of the ability to maketax-deductible contributions at a higher rate before the new rates kick in as a result of the tax reformlaw,” added Noble.

In May, FedEx announced a $6 billion risk transferdeal, the largest single purchase since 2012, when General Motorstransacted a $26 billion purchase and Verizon a $7.5 billionpurchase.

FedEx's annuity purchase accounted for about 20 percent of itsU.S. pension obligations and transferred about 41,000 pensioners,or 15 percent of participants in U.S.-based pensions, from itsbooks.

Analysts at Russell Investments said that reduction in headcountwill lower FedEx's flat-rate premiums to the Pension Benefit Guaranty Corp.(PBGC) by $3 million per year.

The FedEx deal was also notable because it was transacted withMetLife. Prior to the deal, the so-called “jumbo” risk transfermarket had been dominated by Prudential, which had transacted thefour largest single annuity purchases. The FedEx deal is the thirdlargest transfer behind the GM and Verizon purchases.

Analysis from BlackRock shows that about 30 percent of pensionsponsors with at least 1,000 participants had participated in someform of risk transfer activity between 2011 and 2016.

Most of the activity in 2014 and 2015 was accounted for bylump-sum payments to retirees after new mortality tables wereincorporated into calculating future liabilities.

De-risking activity in 2017 was dominated by annuity buyoutpurchases that targeted small portions of retirees that were set tobecome more expensive after PBGC premium increases took effect,according to BlackRock.

Nearly three-quarters of sponsors surveyed in BlackRock's 2018Global Pension Survey said they are in the process of de-riskingpension liabilities, with 40 percent indicating a desire totransfer risk.

Annuity buyouts totaled $23 billion in 2017—a notable amountgiven the absence of jumbo buy-outs.

The $8.2 billion in sales in the second quarter is expected tobe followed by an active third quarter, as sponsors have untilSeptember 15 to write off annuity purchases at the previouscorporate tax rate.

While the trend of corporations' overall interest in de-riskingpension obligations is indisputable, relatively few plans have beenfully terminated. BlackRock's analysis of Form 5500 filings between2011 and 2016 shows less than 6 percent of 3,000 plans with atleast 1,000 participants were terminated in that period.

From: BenefitsPro