OneAmerica is back in the pension risk transfer business.
Its American United Life Insurance Co. announced Tuesday the completion of its first pension liability settlement in 20 years.
"We looked at our existing capabilities, and we looked at the marketplace, and made what was a pretty clear decision to get back into the pension risk transfer business," explained Blaine Reber, OneAmerica's field VP of Pension Risk Transfer.
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Reber said he expects more activity in the pension transfer market in the next year than has been seen in the past five.
According to a recent survey by the LIMRA Secure Retirement Institute, 80 percent of employers who offer defined benefit retirement plans say they are interested in pension risk transfer products.
In part, that's because rising Pension Benefit Guaranty Corporation premiums will make sponsors' defined benefit liabilities more expensive. What's more, new mortality tables may increase pension liabilities by as much as 5 to 8 percent, according to Reber.
Those additional costs to plan sponsors haven't taken effect this year, but Reber expects them to fully take hold in 2015.
"Sponsors looking to transfer their pension risk are going to want to address the issue now. Doing so after those increases take hold will make it more expensive to transfer the risk."
OneAmerica, of course, hopes to land some of that business.
On top of its capacity to underwrite the transfers, the companies of OneAmerica already administer about 200 defined benefit plans; AUL has $16 billion of defined contribution assets under administration as well.
While Reber declined to name its inaugural client-sponsor, he did describe the plan as "well-funded" and said it represented an "attractive breadth," given that it included both retirees already drawing benefits and workers still compiling benefits, making OneAmerica's administration capabilities a selling-point.
If Reber's prediction holds true, and the next year sees heightened activity in the pension risk transfer market, OneAmerica's renewed line of business will have the chance to grow quickly and compete against other underwriters with a foothold in the market.
"Ratings and capital are the barrier to entry in this market," said Reber.
On the ratings score, AUL boasts an A+ from A.M. Best, the second highest of 16 underwriters, and a AA- from Standard & Poor's, the fourth highest of 22.
Dietrich & Associates was the transfer agent for the sponsor in the deal. "We're pleased to be a part of OneAmerica's re-entrance," Geoff Dietrich, managing director, said in a statement.
"Their financial strength combined with proven expertise in plan administration make them a strong contender in this emerging market," Dietrich said.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
