George Palms, president of Legal & General Retirement America, and David Lipovics, senior vice president, head of institutional markets at RGA, explain how their collaboration is bringing unique solutions to the US pension risk transfer market

How has the US pension risk transfer (PRT) market performed so far this year?

The US PRT market finished strong in 2023 with $46bn in premium transferred, the second largest total on record after 2022's $52bn. It was also a momentous year in terms of total market volume and number of transactions. That momentum continued into 2024 where we saw the largest Q1 on record at $14.6bn, significantly higher than the previous record of $6.3bn in 2023¹.

The driving force behind the strong market volumes continues to be jumbo transactions, with two closing in Q1 for a combined $11bn. US corporate defined benefit pension plan funding levels also continue to remain high, with an average funded status of 108.8% at the end of May according to LGIM America's Pension Solutions Monitor. With funded status elevated, we would expect demand for pension de-risking to remain high as plans may be in a good position to transact.

What is your outlook for the US PRT market for the remainder of the year?

We predict the first half of 2024 will finish at over $25bn, which is higher than the $22bn we saw in H1 2023. It's too early to give a full year estimate, but as we mentioned above, jumbo deals are driving market volume so the total annual volume this year will largely depend on the number and size of jumbo transactions that close. At this time, we expect at least thee more transactions around $1bn to close this year.

How do LGRA and RGA work together to add value to the market?

As demand in the US pension risk transfer market continues to grow, the need for innovative solutions to meet the evolving needs of pension plan sponsors is also increasing. More plan sponsors are coming to market, many of which are completing second or third tranches of lift-outs, and they need the support of insurers that can handle larger transactions and larger benefits. That segment of the market sees less competition than other areas, as the transactions are typically more complex and require more effort and expertise from insurers. We are excited that our innovative split transaction approach is providing additional capacity and competitiveness to the larger end of the market.

Additionally, what differentiates this arrangement from others in the market is that LGRA and RGA have leveraged their longstanding relationship and similar cultures to proactively coordinate all aspects of the solution in advance of bidding on an opportunity. This advanced coordination provides consultants and sponsors with a smooth and efficient transaction, so, even though two insurers support the transaction, the process for participants, sponsors, and intermediaries is as seamless as working with a single insurer.

What strengths do LGRA and RGA bring to the US PRT market when partnering together?

Our collaboration combines the financial strength of two S&P Global AA-rated insurers and benefits from LGRA's experience in the market as a direct insurer known for customer service excellence and RGA's longevity expertise as a leading global life and health reinsurer.

LGRA has written more than $10bn in total premium and over 100 transactions since entering the US PRT market in 2015. In this split transaction solution, LGRA is the lead administrator and fully responsible for the service and administration of all participants transferred as part of the transaction. This means all participants receive the world-class customer service that LGRA has become known for over the last nine years, including over 160,000 annuitants serviced on a monthly basis. As of 31 December 2023, LGRA's Net Promoter Score (NPS) was 81, and its call center rating was 4.9 out of 5 stars. Additionally, all LGRA's administrative functions are performed in-house within the US, allowing our teams to be highly responsive to the unique needs of our clients and annuitants.

RGA has written over $3.4bn in total PRT premiums, which has helped protect the retirement benefits of over 115,000 annuitants. As the only global reinsurance company primarily focused on life- and health-related solutions, RGA is recognised for its deep technical expertise in risk and capital management, innovative solutions, and dedication to client service. RGA's commitment to the PRT market is underscored by its consistent AA- rating and substantial track record of providing support to global mortality and PRT markets².