Despite a brief slowdown in pension risk transfer (PRT) transactions at the beginning of the COVID-19 pandemic, new poll results from MetLife indicate that PRT activity will remain robust for the foreseeable future. MetLife’s new 2021 Pension Risk Transfer Poll, released today, found the vast majority (93%) of plan sponsors with de-risking goals intend to completely divest all of their company’s defined benefit (DB) pension plan liabilities at some point in the future, up from 76% in 2019.
“The PRT pipeline remains very active, and we anticipate this will continue in the near future and beyond, with 2021 potentially being another record year for the industry,” said Melissa Moore, senior vice president and head of Annuities at MetLife. “In fact, the Poll found that recent well-publicized annuity buyout transactions secured by major, Fortune 500® corporations1 may be driving interest in these solutions, with 93% of plan sponsors reporting that these deals are increasing the likelihood that they will consider an annuity buyout.”
The Poll found that among those plan sponsors who plan to fully divest their DB plan liabilities at some point in the future, 32% have DB plan assets of $1 billion or more, 35% have assets in the $500-$999 million range, and 33% have assets in the $100-$499 million range.
Catalysts for Pension Risk Transfer
The 2021 PRT Poll found nine in ten (91%) plan sponsors are weighing their DB plan’s value against the risks to which it exposes their organization.
According to the Poll, when asked about the primary catalysts for initiating a pension risk transfer to an insurer, plan sponsors cited interest rates (61%), market volatility (47%), an increase of the volume of a plan’s retirees (37%) and favorable annuity buyout market pricing (35%).
The ongoing COVID-pandemic does not appear to be negatively impacting plan sponsor desire to move forward with a pension risk transfer. Nearly half (47%) of plan sponsors reported that there had been no change to their de-risking plans due to the pandemic, with 42% stating that COVID-19 has actually increased or accelerated the likelihood they would transact. Only 11% of plan sponsors say that the pandemic has decreased or delayed the likelihood of entering into a transaction – down from 19% last year.
Considerations When Selecting an Insurer
The findings of the Poll also highlight the importance of stability and financial strength in the eyes of plan sponsors. When asked to rank the most important consideration when selecting an insurer for an annuity buyout transaction, 33% of plan sponsors selected financial strength of the insurer as the most important. This was followed by the price/cost of the annuity buyout transaction (23%), brand/reputation (22%) and administrative experience of the insurer (18%).
“It’s important for plan sponsors to look for a strong partner when pursuing a pension risk transfer,” said Moore. “Plan sponsors should look to partner with an insurer that has been in the business a long time, has demonstrated the ability to seamlessly onboard large blocks of participants, and has proven that they can weather volatile economic environments and still remain strong.”
A Century of Pensions Expertise
MetLife, through Metropolitan Life Insurance Company and Metropolitan Tower Life Insurance Company, is a market leader in the pension risk transfer industry, managing benefit payments of approximately $3 billion a year for about 780,000 annuitants.
In 2021, MetLife is celebrating the 100th anniversary of being the first insurer, through Metropolitan Life Insurance Company, to develop and offer a group annuity contract to fund a DB pension plan, paving the way for today’s PRT activity.
About the Poll
The MetLife 2021 Pension Risk Transfer Poll was fielded between July 12 and July 20, 2021. MetLife commissioned MMR Research Associates, Inc.2 to conduct the online survey. There were 253 defined benefit (DB) plan sponsors who participated in the survey, including nearly seven in 10 (68%) who reported DB plan assets of $500 million or more. Only those plan sponsors with de-risking plans involving pension risk transfer were able to participate in the research. To read the full MetLife 2021 Pension Risk Transfer Poll report, visit http://www.metlife.com/prtpoll2021.
MetLife, Inc. (NYSE: MET), through its subsidiaries and affiliates (“MetLife”), is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management to help its individual and institutional customers navigate their changing world. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. For more information, visit www.metlife.com.
1 FORTUNE 500® is a registered trademark of the FORTUNE magazine division of Time Inc.
2 MMR Research Associates, Inc. is not affiliated with MetLife.
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