Group annuity sales in Canada topped out at a record high of $4.6 billion in 2018, beating 2017’s sales of $3.7 billion, according to the latest data from Sun Life Financial.
This represents an acceleration in the market, which had been on the rise, with 2014’s sales hitting $2.5 billion. Strong sales in the last quarter of 2018 stood out, according to the insurer, which noted close to $2 billion worth of annuity sales were closed even as pension plan funding levels dropped by about 10 per cent off the back of unfavourable market conditions.
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“Even though solvency funding dipped significantly in the last quarter, many plan sponsors had already transitioned into annuity-ready asset mixes and proceeded to implement their risk management strategy,” said Brent Simmons, senior managing director and head of defined benefit solutions at Sun Life, in a press release. “The decline in the markets was a timely reminder for plan sponsors that it’s better to manage their long-term risks rather than trying to predict where markets will go.”
Many plans had shifted their asset mixes to be more friendly to an annuity purchase, scaling down on equity holdings and making portfolios more duration matched, according to Sun Life. As a result, the market downturn was less likely to derail a planned annuity purchase.
Further, the report found the number of large deals is growing. While the number of deals worth more than $100 million reached nine in 2017, that number almost doubled in 2018, to 17.
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