Market insight from year-end 2019 SFCRs: Sample of life insurers based in Luxembourg
Market insight from year-end 2019 SFCRs: A sample of life insurers based in Luxembourg
In June, the actuarial firm Barnett Waddingham published the report, "FTSE100: Banking Sector Leads the Way in Diminishing DB Deficits." Barnett Waddingham, a partnering consultancy with Milliman in the U.K. through the joint venture MBW International, has been studying the corporate defined benefit (DB) pension plan market closely for several years, conducting surveys of the companies in the U.K. with the largest plans. The report produced by the firm yields some insight into the corporate pension funding status for plans in the U.K. and is comparable to the Milliman Pension Funding Study (Milliman 100), which covers the 100 largest U.S. corporate plan sponsors.
The new Barnett Waddingham report examines pension plan data from companies in the Financial Times Stock Exchange (FTSE) listing of the 100 London Stock Exchange companies with highest market capitalizations. The companies involved are similar in many ways to those in the Milliman 100, and it's interesting to look at some of the numbers side by side. Average funding levels for the FTSE100, for example, are reported as being 96% in 2017, which is a rise from 91% in 2016. By comparison, the Milliman 100 funded ratio settled at 86.0% in 2017, an improvement from the year-end 2016 funded ratio of 81.1%. At the same time, the average discount rate for the FTSE100 companies fell from 2.7% in 2016 to 2.5% in 2017. The average discount rate for the Milliman 100 companies was 3.97% in 2016 and 3.60% in 2017.
The FTSE100 report also looks at trends in inflation rates, life expectancy, asset allocation, and benefit payments, drilling down into issues such as currency movements and their impact on pension plan funding levels. Most of these areas are also examined in Milliman's annual Corporate Pension Funding Study and its regular updates.
In addition to the FTSE100 survey, Barnett Waddingham produces country specific surveys, which look at the impact of DB pension plans in the U.K. subsidiaries of multinational corporations with head-quarters elsewhere. The most recent analysis looks at the impact of DB pension plans for U.S. multinationals with U.K. subsidiaries. This survey shows that DB pension plans in the U.K. may be having a disproportionally large impact on the performance of U.S. parent companies – for the multinationals analyzed in the survey, U.K. subsidiaries accounted for only 4% of global revenue, but around 29% of the global DB pension obligation and 31% of the global pension plan contributions.
All of these recent Barnett Waddingham reports provide awareness of the broader global world of pension plans and sponsors, augmenting in many useful ways the picture presented in our Milliman 100 reports.