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APM – November 2008

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APM - PPA through 11-28-2008

November 2008 was the worst month of the year for the funded status of defined benefit pension plans, as measured by the Aftermath Pension Index, shown above for August 2006 through the end of November 2008. Casual appraisals have felt that November eased off from the battering pensions took during October, perhaps because the equity markets did not fall quite as badly: for instance, the S&P 500 stock index fell only 72.51 during November, as contrasted with the 197.61 freefall during October. Unfortunately, whereas pension asset investment losses during October were partially offset by decreases in pension obligations arising from increases in corporate bond interest rates, November was not so kind: falling interest rates increased pension obligations, adding to November’s investment losses. As measured by Moody’s Aaa bonds, interest rates dropped 0.87% during November, more than reversing October’s increase of 0.53%. The net results: whereas the counter-balance of rising interest rates against severe investment losses dropped the APM by 3.77 for October, milder investment losses with falling interest rates combined for a decrease of 9.93 in the APM for November.

Further details on APM methodology are provided in the APM document.

(Remember, as I’ve previously disclaimed, posts such as this represent efforts of my favorite pastime. My formal work does not involve any of this, and none of it represents any position or comment that should in any way be attributed to my employer. Likewise, as always, it represents general personal impressions and should not be treated or used as formal professional advice.)

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Written by macheide

2 December 2008 at 5:27 am

Posted in άctuary

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