Pension Risk Transfer Digest
November 2024
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Business Stats
F&G's PRT business is growing significantly. See our sold premium, won deals and lives onboarded as of September 30, 2024.
Interest Rate Update
See how interest rates trended between July and September 2024, and what it means for PRT pricing.
Did You Know?
Premium, reserves and capital are important terms in the PRT industry. Do you know what they mean, and how they work together?
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Sign up for future emailsTotal sold premium:
Total number of won deals:
Total lives onboarded:
1 F&G internal PRT business data as of 9/30/2024. Number of total lives onboarded does not include beneficiaries.
Competitive pricing is a key component of product success. PRT pricing is correlated with changes in high-quality corporate bond yields (consistent with how pension plan liabilities are valued for funding, accounting, etc.) and changes daily based on yields available to the issuing PRT insurer. Rate increases and spread widening drive lower PRT cost — and vice versa.
Yields fell during this period, which translates to an approximately 4% higher nominal PRT transaction price. Any increase or decrease in PRT transaction pricing would be generally consistent with a similar increase or decrease in the pension plan liability, which is similarly determined with a high-quality bond type discount rate.
This chart covers July - Sept 2024 and shows how interest rates changed during that time period.
1 Information shown above is illustrative and not intended to represent F&G's actual PRT transaction pricing. Historical interest rates are not indicative of future rates.
2 Single effective rate based on U.S. Treasury yield curve and AA corporate bond spreads from sample PRT liability cash flows during the period of July 1, 2024 to September 30, 2024.
Did You Know?
Premium, reserves and capital are important terms to know. A company pays a premium to buy a group annuity. When a PRT provider takes on the pension benefits, insurance regulations require the provider have reserves and capital to fund and safeguard pensioner benefits.
Reserves and capital are not required components of ERISA pension funding, but are fundamental to regulated insurance products like pension risk transfer. They are an important way in which PRT insurers protect transferred pensioner benefits.
Defining premium, reserves and capital
Premium
DefinitionThe amount paid by the policyholder to purchase an annuity contract.
PurposeUsed by the insurer to generate future income streams and fund annuity benefits and insurer profit.
Role in PRT FundingInitial input that determines the amount of reserves and capital insurer needs to set aside.
Reserves
DefinitionThe insurer's liabilities, or the amount of money the insurer needs to set aside to meet future obligations, such as guaranteed annuity payments.
PurposeEnsures the insurer can pay out the annuity over time, based on assumptions like interest rates, mortality and expenses.
Role in PRT FundingCalculated based on the annuity premium collected and future expected payments.
Capital
DefinitionThe insurer's own funds that are held in addition to reserves. Capital serves as a buffer to absorb unexpected losses or adverse experiences.
PurposeRequired by regulators to ensure financial stability of the insurer protecting policyholders.
Role in PRT FundingRelated to the asset and liability risk profile of the annuity product.
How do insurance companies help protect policyholders?
Insurance companies are required by law to carry reserves and capital to ensure adequate funding of policyholder benefits. This added buffer helps PRT insurers reliably safeguard transferred pensioner benefits.
An insurance company's financial strength ratings reflect its ability to meet obligations to its policyholders. F&G's ratings demonstrate our financial strength and reliability as an insurer.
Illustration not to scale. Actual relationship between premium and capital can vary.
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Describe your role in PRT.
I coordinate and manage the sales process from initial bid inquiry all the way through commitment agreement execution if we are selected.
What brought you to F&G?
The opportunity to learn something new and be part of a growing team. The concept of PRT was new to me, which was exciting and interesting, and I was intrigued by being able to work in a space that handles large transactions.
Favorite aspect of PRT?
Seeing the large variety of deals that come across our inbox, from large multinational corporations to smaller local businesses. I also love working with the PRT team as it continues to grow. Everyone on the team, including our business partners, are great to work with and make the job that much more enjoyable.
How do you spend a typical Saturday?
I am usually up early and out the door with my dog Ranger for a long walk, followed by coffee with my wife. From there I love to spend time outside at the beach, the park or out on my motorcycle depending on the weather. In the winter we explore the many museums Cleveland has to offer and grab lunch at one of our favorite restaurants. We'll follow that up with an evening out at a sporting event, concert or cocktails and dinner.
Favorite book, podcast or show?
My favorite podcast right now is Dateline NBC. It's a classic that is enjoyable to watch or listen to, and helps on a long drive.
We'd Love to Hear From You!
More About Our Team
F&G’s PRT team is a seasoned group of professionals who specialize in business development, pricing, investments, operations, legal, finance and reinsurance.
Our team collaborates with F&G corporate staff and external PRT consultants and their clients throughout the year as we work to manage new and in-force PRT business activities.
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This material is intended for informational purposes only and is only intended for use by institutional plan sponsors and industry professionals.
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F&G is the marketing name for Fidelity & Guaranty Life Insurance Company issuing insurance in the United States outside of New York and, in New York only, Fidelity & Guaranty Life Insurance Company of New York. Each Fidelity & Guaranty Life company is solely responsible for its contractual commitments.
Guarantees are based on the claims paying ability of the issuing insurer, Fidelity & Guaranty Life Insurance Company, Des Moines, IA.
