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Archive for March 2009

Elephants’ Pensions Fatter II

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frranked2008As I observed in yesterday’s aftermath post, the pension plans of the largest corporations with the largest pension funds are generally better funded than pension plans of smaller corporations with smaller pension plans. Whereas yesterday’s post illustrated that trend by grouping large companies versus smaller companies and charting them against aggregate assets, today’s chart looks at the funded ratio of the global pension plans of each and every S&P 500 pension sponsor, then simply plots those against the rank of the company in terms of pension assets as of the close of the 2008 fiscal year, from the largest pension sponsors at the far left of this chart to the smallest at the far right.

Were we expecting to see a more obvious decline, left to right? That’s not there, per se. But closer inspection of this chart does show the same trend as yesterday’s chart.

Let’s start by observing one somewhat remarkable thing that shows through on this chart – how very many of the companies have pension plans with a funded ratio between 70% and 75%, through the middle of the yellow zone on this chart. From nearly the largest through the smallest, the large number of companies at that level almost draw their own line across the chart, without necessitating having me do so. See that line, and the trend discussed in yesterday’s post emerges via the divergences from that line.

First, with the exception of Exxon and Caterpillar – the two “elephants” actually below the yellow zone – that yellow zone is empty at the far left edge of the chart, within the region enclosed by a red rectangle. And the thing is, since the companies within that red rectangle in the aggregate hold well over half of the pension assets for the entire S&P 500, those elephants drive the calculation of the aggregate funded ratio for the entire universe, since the aggregate funded ratio is essentially a weighted average, as if the entire universe of companies pooled everything into one gigantic single pension fund. That’s where yesterday’s graph – charted on the basis of aggregate assets – versus today’s – charted on simple ranking – better illustrates how the size of the pension fund, together with the higher funded ratios typical among the elephants, drives most of the results we were seeing yesterday.

But it’s not just the weight the elephants are throwing around. Look at the green band of the chart, left to right – the number of companies in that band tends to decrease as we reach the right side, the companies with smaller pension plans. In other words, even when we’ve left the elephants behind, we’re still seeing results that exhibit the trend we presented yesterday: lower funded ratios for the smaller pension plans.

And I’m still aiming toward getting around to an examination of why we’re seeing these results. Later.

(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

20 March 2009 at 9:54 am

Posted in άctuary

Elephants’ Pensions Fatter

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frsized2008The pension plans of the largest corporations with the largest pension funds are generally better funded than pension plans of smaller corporations with smaller pension plans. As illustrated by this chart of funded ratios for the S&P 500 as of the close of fiscal years ending in 2008.

The 22 elephants with pension assets in excess of $10 billion per corporation stake out the leftmost green square, comprising more than half of the S&P 500’s pension assets, measured along the chart’s x axis. In the aggregate, the funded ratio of global pension plans for those elephants was 81.2% at the end of 2008, above the overall S&P 500’s aggregate pension ratio of 79.1%, indicated on this chart by the higher heavy dotted line.

Almost three times as many beasts staked out the blue region, indicating corporations with pension assets between $3 billion and $10 billion per corporation. For those companies, the aggregate funded ratio of global pension plans was 79.2%, almost exactly equal to the S&P 500’s overall pension funded ratio.

The purple region then indicates the 87 corporations with pension funds of $1-3 billion each, with an aggregate funded ratio of 76.0%. The brown region indicates 53 companies with pension funds of $0.5-1 billion each, with an aggregate funded ratio of 68.9%. And the red region indicates 111 companies with pension funds less than $0.5 billion, with an aggregate funded ratio of 67.2%.

Several off-the-cuff observations –

  • Research Universe Will Affect the Results . . . Slightly. Various studies of these results are typically published by actuarial consulting firms, banks and rating agencies, and others. Each of those outfits typically uses a different research universe for its study – one firm using only the 100 largest pension sponsors; several using the S&P 500; and at least one purporting to use the S&P Composite 1500. As this chart indicates, research based on the 100 largest “elephants” can be expected to report higher pension funded status figures than the reports that use the S&P 500 set, i.e., several ticks above the 79.1% aggregate funded ratio indicated by the heavy dotted line. Even so, while stretching out to the S&P Composite 1500 or beyond will drag the pension funded ratio lower than the S&P 500 results, the pension funds for the additional companies are so small that the effect is diminished relative to the overall aggregate, yielding a funded ratio for the larger set that should be only slightly below the 79.1% S&P 500 level.
  • Median Results Mean Something! For the full S&P 500, in contrast to the aggregate funded ratio of 79.1%, the median funded ratio corporation by corporation was 72.3%, indicated on this chart by the lower, lighter dotted line. While the 79.1% number tends to get most of the press, that number essentially acts as though the companies with well funded plans could easily and would willingly share their pension surpluses (or lesser deficits) with the companies that have less well-funded plans. Which of course is not the case. Note that here, the research universe can make a huge difference: the median pension funded ratio for the top 100 pension sponsors is around 80%, essentially ignoring that well over a third of the S&P 500 plan sponsors have pension funds that may be facing legal restrictions and significantly higher pension costs and contributions due to severe underfunding.

And why are the elephants’ pension funds fatter than those of the smaller beasts? I’ll get around to that interesting “why” in a subsequent post.

(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

19 March 2009 at 5:20 pm

Posted in άctuary

2008 PBO FR 79% for S&P 500

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frpbosp5001999-20081For the S&P 500 as of 12/31/2008, the aggregate funded ratio of global defined benefit pension plans as of the end of fiscal years ending during 2008 was 79.0%, down drastically from 104.0% as of the close of the 2007 fiscal years, as measured on the basis of the ratio of market value of pension plan assets to projected benefit obligations.

We have yet to see whether 2009 will make this recent decline as severe as the 2001-2002 decline, although January and February certainly did nothing to stop the bleeding.

More details on funded status and other observations gleaned from corporate financial reports forthcoming soon.

(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

16 March 2009 at 5:31 pm

Posted in άctuary

subterranean sanctuary

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aware without being told that we had reached th final day before everything was to fall apart, i collected th papers for th major piece i was writing, as if that piece might still be worth preserving through th period we were all about to go through. i went up to say farewell to my writing prof, he understood and agreed that i had to leave immediately

after a long period of oppression, our people were to be hunted down and tortured and gassed

i decided that my best chance of escaping th genocide would be to dig a hole for myself in th basement of one of th top government officials. sure enough, i found a place where i could dig under th staircase leading down into th basement, although i worried about how it might affect me hiding in my hole for th years i knew i would need to avoid detection

th four children of th government official came into th basement to play, and th youngest one – about 2 years old – immediately sensed my presence under th stairs and came over to me, curious. i managed to befriend th child in a way so that when she told her siblings and parents and others of me, they thought of me as her imaginary friend under th stairs. even so, i worried that as she grew older they might realize th truth of her tales and find my secret hole. so since i needed a hiding place that might see me through years of hiding, i moved my efforts to th other side of th basement, where it was pitch black even when th lights were on

when i arrived at th dark side of th basement, soldiers were leaving a patrol, having sensed a danger from something they picked up upon rounding up th class i’d been in. one of th last two soldiers passed me without noticing my presence, but i knew th final soldier would trip over me, so in th dense darkness i attacked him and broke his neck. but i left him in a way so that when his body was found, th other soldiers thought he had just been careless, so they still did not come back looking for me

in that corner of th basement i then dug myself a large room below th basement, large enough to live in comfortably for th years i had to hide. because nobody suspected that any of my people had survived, i was able to venture above ground out in public more than i had thought i might – i had had visions of being in a much smaller hole for much much longer with no breaks. i picked up things to eat and other necessities during my excursions aboveground, so spent my solitary time in my subterranean sanctuary in relative comfort

Bumper Sticker [www.internetbumperstickers.com/] - oneirra

Written by macheide

16 March 2009 at 4:04 am

Posted in oneirra

forgotten necessities

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preparing to travel to a milliman tech session. i was mildly surprised that it would be in dallas again, was about to make a snide comment about th trieb mafia, it turned out that th meeting was to be up in minnesota, i shrugged and let th comment hang in th air anyway

meeting materials that needed to be brought were being shared among th various prospective attendees to bring, instead of being shipped there by th meeting organizers. i had two boxes assigned to me, was having difficulty getting everything into those boxes, although we did know it should fit if carefully arranged. i noticed my teeth and glasses sitting on th desk among th items being packed and made a mental note not to lose those in th clutter

rich berger sat in th seat next to me and struck up an intense business discussion with me. others eavesdropped nearby until it was time to head to th meeting rooms. as we headed inside, i poked at th ground with my umbrella, intrigued by holes where others had poked earlier – there was a large hollow area below th patio terrace, in threat of dropping into a sinkhole

as we clustered through th winding hallways toward th meeting room, i realized i had forgotten my teeth and glasses. it was too late to return to where i had last seen them, so i could only hope that they would be held for me in a lost & found. i then realized that i had forgotten my teeth and glasses because i had forgotten th two boxes i was supposed to have brought, together with anything else i was supposed to have. but now we were rushing through th halls like a train in a tunnel, and i simply figured i would go with what i had

Bumper Sticker [www.internetbumperstickers.com/] - oneirra

Written by macheide

11 March 2009 at 4:04 am

Posted in oneirra

scorpion sting

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only after it had been placed in my left hand did i realize i had been given a scorpion. before i could drop th creature, it had stung my hand several times. but although a creeping numbness eventually paralyzed as much as half of my hand, my work was not hindered

Bumper Sticker [www.internetbumperstickers.com/] - oneirra

Written by macheide

9 March 2009 at 4:04 am

Posted in oneirra

2008 Pension Data Nearly Complete

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With GM finally releasing its bad-news annual financial statement for 2008, almost all 2008 GAAP data that has been publicly disclosed for pension plans is now available.

I collect as much if not more than anyone else out there, businesses and governmental agencies included. But since my pension information spreadsheet is as much a hobby as stamp collecting used to be for me, it will take a bit of time for me to catch up with this past week’s deluge. I’ll start with PBO funded ratio – a tick or two below 80% instead of the tick or two above that I had anticipated – and move step by step through other available data elements: pension cost; asset allocations; assumptions; and so on.

(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

5 March 2009 at 8:18 am

Posted in άctuary