Conning: U.S. Corporate Pension Funding Levels Improved in 2018, but Hurdles Loom
June 25, 2019
Conning’s “Annual Corporate Pension Review – 2018” Finds that Lower Plan Liabilities Offset Reduced Assets, but Rising PBGC Premiums and Market Volatility Will Likely Promote Further Plan De-Risking
HARTFORD, CT and NEW YORK, NY – June 24, 2019 –Leading global investment management firm Conning reports that overall U.S. corporate defined benefit (DB) pension plans improved their plan funding status in 2018, but continued increases in federal pension insurance premiums and heightened market volatility will likely drive more plan sponsors to seek de-risking strategies.
Conning’s “Annual Corporate Pension Review – 2018” studies the financial health of the U.S. corporate DB industry through the analysis of the plans of 3,000 of the largest U.S. corporations. The report features data gathered from a sample universe of 658 plans that provided data from 2014 through 2018.
Total pension liabilities decreased more than pension assets on average for the companies in the sample universe, the report noted. The key driver in the 8% annual average decrease in liabilities in 2018 was an increase in the discount rate used to calculate them, which helped offset the 6.4% decrease in plan assets.
“Increases in Pension Benefit Guaranty Corp. (PBGC) premiums remain a concern,” said Sean Kurian, FSA, CAIA and Head of Institutional Solutions for Conning. “Also, the return of volatility to equity markets in 2018, particularly in the fourth quarter, reminded sponsors with significant exposure to equities of the close inverse relationship between equity markets and unfunded plan liabilities.”
The concerns, Kurian noted, may further promote de-risking efforts, such as the implementation of liability-driven investment (LDI) strategies, lump-sum payments to qualified members and pension risk-transfer transactions.
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Conning (www.conning.com) is a leading investment management firm with approximately $141 billion in global assets under management as of March 31, 2019.* With a long history of serving the insurance industry, Conning supports institutional investors, including pension plans, with investment solutions and asset management offerings, risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.
*As of March 31, 2019, represents the combined global assets under management for the affiliated firms under Conning Holdings Limited, Cathay Securities Investment Trust Co., Ltd. (“SITE”) and Global Evolution Fondsmæglerselskab A/S and its group of companies (the “Global Evolution Companies”). The Global Evolution Companies are affiliates of Conning. SITE reports internally into Conning Asia Pacific Limited, but is a separate legal entity under Cathay Financial Holding Co., Ltd. which is the ultimate controlling parent of all Conning controlled entities.
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