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Archive for December 11th, 2008

Private Preoccupation

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The whizbang new dashboard WordPress forced upon me word that “FYE 9/30/08 Unfunded ABO” was the 1000th post under aftermath. Or the 1111101000th post for those of you who keep track in binary.

As random as that threshold is, I’m going to take the opportunity to take a wee break from blogging. And during that break, to focus on taking one entire line of aftermath private: my άctuary category.

As I’ve previously disclaimed, any aftermath posts of an actuarial nature reflect the fact that I was born an actuary long before I took a job to work as one, that I am an actuary 24/7 even when asleep, that I will still be an actuary long after I’ve met that moment of the force of mortality. And that I have always taken great pains to draw very rigid lines between my actuarial work and my actuarial hobby. That nothing I have ever written here pertains to my work, and vice versa.

Alas, distinctions clear to an actuary tend to make everyone else yawn until their pension plans go belly up, then suddenly everything gets painted gray and all the lines disappear until people start believing “actuarial error” is a meaningful term just because it exists in the tax code. I’ve not had trouble yet, actuaries don’t tempt fate they can easily enough control.

As obviously as a commutation function, I’ll of course continue to eat, breath, dream actuarial reality. And so too, I will continue to write and post further aftermath άctuary articles. Just, like I will now re-designate all my past aftermath άctuary post, all such future traffic will be private, password-protected.

I don’t mind sharing any and all of those private posts with anyone in the same way I might chat about my non-work-related actuarial obsessions in the hot tub with the rare individual who wouldn’t run away screaming at the mere thought. To submit an application for access to the password, merely explain in your own words and with lines clear enough to make an actuary’s brain smile: the distinction between SFAS 87 versus IRC 412.

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Written by macheide

11 December 2008 at 5:50 pm

Posted in globserver

FYE 9/30/08 Unfunded ABO

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FYE 9/30/08 Underfunded ABOFor S&P 500 companies with fiscal years ending September 30, the aggregate pension assets and accumulated benefit obligation (ABO) for global defined benefit pension plans for which the ABO exceeds plan assets returned by the end of 2008 to about the same levels that had been reported at the end of 2006, after dipping for 2007. For those companies and pension plans, this chart shows ABO (highest line, in red), pension fund assets (middle line, in blue), and the net underfunded ABO (lowest line, in orange), for fiscal years ending 2004 through 2008.

Pension funded status based on assets and projected benefit obligations for all plans, including those with surplus assets – the principal measure of pension funded status reported in plan sponsors’ financial statements – is certainly a relevant measure, for one thing driving a direct decrease or increase in shareholder equity. But as discussed in a previous post, that measure of funded status lumps pension plans with surplus assets together with pension plans that have deficits, whereas in practice pension plan sponsors can combine surpluses with deficits only by jumping through complicated hoops (e.g., formally merging separate plans) that are seldom actually pursued.

As frequently discussed in aftermath posts in this category, these numbers include foreign pension plans, which tend to be funded at lower levels than qualified pension plans in the U.S. These numbers also include non-qualified supplemental executive retirement programs (SERPs), almost always completely unfunded due to tax disincentives. Thus, even if every single domestic qualified plan were to have surplus assets, this chart would still register non-zero amounts for the companies’ underfunded foreign plans and unfunded SERPs.

As has been anticipated since very early in 2008, this measure bounces off its 2007 floors, with the aggregate net unfunded ABO for this subset of companies returning to the 2007 level of about $3.0 billion after dipping to about $2.3 billion. Since the worst pension fund investment results for 2008 have emerged since the end of the fiscal year for this subset, and since that negative investment experience has not been offset by liability declines arising from interest rate changes as much as for this subset, for the full S&P 500 universe – the lion’s share of which has fiscal years ending December 31 – will likely register a steeper bounce for 2008.

(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

11 December 2008 at 5:40 pm

Posted in άctuary

Auto Neurotic

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OK. About this Auto Industry Financing and Restructuring Act. Help me understand, please.

I don’t want to own a GM car.

If I were Oprah, GM cars would not be what I give away. You couldn’t pay me to own a GM car, because then I’d only have to go through the trouble of trying to unload it on a car-buying public that doesn’t want a used GM car anymore than it wants a new GM car.

And even if I were to have a moment of insanity and want to sacrifice my better judgment to buy a GM car for the supposed patriotic good of the country, I couldn’t get myself a loan to do so, despite my good name and sterling credit, because the credit markets suck due to all the irresponsible consumers and greedy bankers and regulators looking the other way as we drove our nation’s metaphorical GM-made car into the ditch. And because Congress found it easier to give the Administration near-dictatorial authority to bail out the greedy bankers instead of helping the irresponsible consumers get the credit they’d need to borrow money to purchase the GM cars they don’t want anyway, GM can claim that it’s not their fault, that they have an excuse for failing to sell me the car that I don’t want to and can’t afford to buy.

So because I don’t want to buy a GM car, and because I couldn’t borrow the money to buy a GM car even if I did want a GM car, and because I’m not a bank eligible for a government handout, GM is in trouble.

So you’re going to take my money and give it to GM anyway, giving GM the cash as if I had gone ahead and bought the car I don’t want. Because the country can’t afford to be without what GM does best: make more cars that I don’t want.

So, what happens to the GM car I didn’t buy, the non-sale of which put GM in the red, that you’ve now paid GM for anyway? I pay GM to get nothing because I don’t want to pay them to get a GM car?

If you’re going to give them my money, at least give me something for it. Just, don’t give me a GM car. Please.

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Written by macheide

11 December 2008 at 3:39 pm

Posted in whatev

office fire

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with a group of co-workers and other people assembled in large room on first floor of group of old office buildings on west side of lower main street royersford. rumor passing around was that they could not control th fire on th roof of our two adjoining office buildings just north of th building we had been brought to, that soon we would be evacuated. i drew off to th side to dress to go help battle th flames, was unsure if my brother would be joining me, knowing neither i nor he nor anyone there to be well equipped or trained to handle a fire this ferocious, yet still myself ready to volunteer

throughout th higher floors of th buildings, officials were taking steps to secure th vacated offices, fearing that employees or others might take th opportunity of th real likelihood that all would soon be destroyed by fire to use some of th business papers and checks for personal gain. i was showed several checks that had been sent in by customers to make payments, as examples of checks that could easily have been illegally signed over to an employee or any looter passing through th empty offices, then later claimed to have been destroyed. i wondered aloud why those sample checks were then put back on th desks instead of being brought with us for proper processing

it occurred to me that i might be able to get some good photographs of th roof fire from th glass windows of th top floor of th modern office complex that had just been built on th back west side of th older buildings. but th fire had blown th windows out of th rectangular glass section jutting out into th high sky, and th gusty wind was blowing in, so i stayed as close as possible to th center of th cleared conference area, low to th floor, my acrophobia kicking in very strong. but from my low safe spot in th middle of th conference area i could see no flames back where i expected to see them on th roofs of th older buildings, so still staying low and well back from th windows, i edged further into th room, hoping to get a better angle. only then realizing that th fire had also been destroying some of th lower floors of this newer building, weakening its structure, so that my moving out toward th far wall shifted th weight in th building enough to make it start to lean quite steeply. i had to hang onto th very short fabric of th office carpeting with my fingernails to avoid slipping against th far wall, which i knew would make th building topple

i told others who joined me to help out, i said “i had to hold onto th carpeting with my fingernails.” they didn’t believe me and walked casually around in th conference area discussing how best to attack th fire, eventually shifting th weight of th building enough to again make it lean, as i’d warned them it was in danger of doing

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Written by macheide

11 December 2008 at 4:04 am

Posted in oneirra