Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. ASSET OWNERS
August 06, 2012 01:00 AM

Moody's: Ford, Boeing among those ripe for picking annuitization

Barry B. Burr
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Updated Aug. 7

    Ford Motor Co., Boeing Co., Lockheed Martin Corp., Northrop Grumman Corp., and Exelis Inc. are among major companies that could be candidates for pension terminations modeled after General Motors Co.'s planned annuitization of its $33 billion U.S. salaried employees pension plan, according to a Moody's Investors Service report issued Monday.

    The companies “fit the profile” for an annuitization “and have large benefit obligations relative to their market capitalization,” said the report, “Pension Terminations: No Free Lunch.”

    GM, Detroit, plans to purchase a group annuity contract through Prudential for its 118,000 retirees in its $33 billion U.S. salaried defined benefit plan, reducing its pension obligations by $26 billion. GM has a total of $94 billion in U.S. pension assets and $107 billion in liabilities.

    “Assuming pension risk is a natural fit for life insurance companies and capacity is ample,” the report said. “If a U.S. market emerges for pension terminations, Prudential Financial and MetLife are well positioned to handle large transactions.”

    As of fiscal year 2011, Dearborn, Mich.-based Ford had $73.9 billion in projected benefit obligations, amounting to 136% of its market capitalization; Lockheed Martin, Bethesda, Md., $40.6 billion, 125%; Northrop Grumman, Falls Church, Va., $24.1 billion, 128%; Boeing, Chicago, $67.6 billion, 108%; and Exelis, McLean, Va., $5.7 billion, 244%, the report said.

    “We believe companies like GM managing large benefit obligations, which distract from the core business and weigh on the market perception, will be most likely to pursue a similar transaction,”according to the report.

    Companies have to fully fund their plans before they can seek annuitization, the Moody's report pointed out, noting that companies might need to close pension plans to new entrants, freeze plans, adopt liability-driven investing, and make large voluntary pension contributions or some combination of those steps to reach that position.

    Pension terminations modeled after GM's annuitization in most cases be neutral in terms of the companies' credit rating, the report said. “These transactions would reduce underfunded pension liabilities and remove volatility associated with pension assets and liabilities, but most likely at a substantial liquidity cost or increase in leverage.

    “The upfront liquidity costs or increase in leverage associated with a pension termination will be the key determinants of its credit impact. Such costs include bringing the plan up to fully funded status and the premium paid to an insurer to assume the plan risk.”

    Charles Bickers, Boeing spokesman, said, “There are no plans for us to go the same route (as GM) at this time.” Boeing already has taken a number of steps to mitigate pension costs, Mr. Bickers said, noting the company's “non-union plan was changed to defined contribution from defined benefit (in) 2009. We've actually had similar changes for a number of our unions (plans moving) from DB to DC. And looking at our asset investment strategy,” Boeing moved “to liability-driven investing beginning in 2007. That has given us a slightly higher asset balance vs. the previous (investment) strategy over the downturn we've experienced in the last few years.” Boeing plans to stick with its LDI strategy, Mr. Bickers added.

    Robert L. Shanks, Ford CFO, said in a webcast July 25, “In terms of annuitization, it is something that we have looked at as we were developing all of the strategies around our pension derisking; it isn't something that we thought at the time that we wanted to pursue.” It is “not something that is part of our plan, but I wouldn't necessarily take it off the table.”

    Spokeswomen Jennifer Allen of Lockheed Martin and Margaret Mitchell-Jones of Northrop Grumman could not be reached for comment, nor could Exelis media representatives.

    Related Articles
    GM offering lump sums to retirees
    Ford CFO: We won't take same road as GM on retiree obligations
    GM-Prudential annuity deal seen setting off race to gain piece of DB derisking …
    Identifying the best risk mitigation strategy for a corporate DB plan
    Boeing proposes ending DB plan for new employees
    Northrop Grumman makes $300 million pension contribution
    Exelis to freeze salaried employees pension plan in 2016
    Recommended for You
    FTX_Screen_i.jpg
    FTX bankruptcy ensnares Kraft, Och and other family offices
    ONLINE_180419851_AR_0_SWJHUISTXOVN.jpg
    Northern Trust plan universe returns -4.2% in Q3
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing