The average funded status of pension plans sponsored by insurers slipped badly in 2008, but the funding shortfall is not yet a major concern, Fitch Ratings said in a report.
Plans sponsored by 37 insurers were, on average, 73.4% funded at the end of 2008, down from 95.8% in 2007, the report said.
That decline is largely because of the fall in the equities markets, which walloped the value of pension plan assets. For example, at the end of 2008, plans sponsored by the insurers held $65.8 billion in assets, down 18% from a year earlier, according to the study.
Despite the decline in funding levels, Fitch said it does not view the underfunded status of insurers' plans “as a material industry concern at this time.”
Expected cash contributions insurers will have to make to help shore up their plans will not pose a significant liquidity issue, Fitch said. The required cash contributions, which Fitch estimates will be at least $2.1 billion this year, amount to less than 0.46% of the insurers' equity.
Funding levels of the insurers' plans varied considerably. At the high end, the plans of Prudential Financial Inc., Newark, N.J., were, on average, 120% funded, followed by Pacific Life, Newport Beach, Calif., whose plans were 105% funded.
On the other hand, according to Fitch, Santa Ana, Calif.-based First American Corp.'s pension program was 36% funded, followed by National Life Group, Montpelier, Vt., at 49%.
Jerry Geisel is editor-at-large at Business Insurance, a sister publication of Pensions & Investments