trending Market Intelligence /marketintelligence/en/news-insights/trending/bn_pzsxziwhf2i_5vadg8w2 content esgSubNav
In This List

MetLife exec: Insurers could 'easily' acquire $50B in pension obligations in '18

Blog

The Big Picture 2022 Insurance Industry Outlook

Podcast

Next in Tech | Episode 37: Insurance impacts on technology and vice versa

Case Study

A Prestigious Global Business School Gains a Competitive Edge

Video

S&P Capital IQ Pro | Unrivaled Sector Coverage


MetLife exec: Insurers could 'easily' acquire $50B in pension obligations in '18

As companies, municipalities and others look to off-load their pension risk, life insurers are increasingly looking to pick up the tab, for the right price.

Some insurers are easing into the $3 trillion market, while others are aggressively pursuing large tranches of pension risk. Wayne Daniel, head of U.S. pensions for MetLife Inc., in an interview noted that single premium buyout sales across the industry were $23 billion in 2017. According to LIMRA, that was up sharply from $13.7 billion in such sales in the previous year.

MetLife recently acquired about $6 billion in pension obligations under a pension risk transfer agreement with FedEx Corp., signaling that the insurer is far from done pursuing more pension deals. Given broad interest by the industry, Daniel believes that life insurers could "quite easily" acquire $30 billion to $50 billion of obligations this year.

In a 2017 poll conducted by the company, 57% of respondents said they will use an annuity buyout in combination with a lump sum, up from 46% in 2015. The study surveyed 129 defined-benefit plans; about 60% of those plans reported assets of $500 million or more.

The study also showed that 51% of plan sponsors are more likely to select an insurer that allows the premium for the annuity to be paid with assets-in-kind.

Questions about MetLife's missing annuitants and reserving issues that have plagued the insurance giant arose alongside a discussion of pension risk transfers at a recent S&P Global Ratings insurance conference. Daniel in reply reiterated MetLife President and CEO Steven Kandarian's response that the company is improving its processes to locate retirees by including additional mailings, phone calls and the use of third-party firms.

"We're happy to employ any technique and to ensure that we've got the correct information to pay out all of the benefits that are due," Daniel said.

Life insurance companies are properly equipped to engage in the pension risk transfer market given that retirement planning and payouts are a core part of their industry, New York Life Insurance Co. Chairman and CEO Ted Mathas said on a panel at the conference.

"If you think about it, it doesn't make a lot of sense that a company that makes cars also sells life insurance," Mathas said. "Life insurers are well-suited in general."

For New York Life, the pension risk transfer market is a way to diversify its portfolio, Mathas explained, as it offers the company a way to apply its income annuity expertise in a new way.

Daniel Houston, chairman, president and CEO of Principal Financial Group Inc., said his company is entering the market with small tranches of between $5 million to $500 million. He said the key for insurers is to not be completely dependent on the business to generate profits.

"From our perspective, we see it as an opportunity and return good for our shareholders," Houston said.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.