Pension Index Increases Again in December

January 7, 2014 (PLANSPONSOR.com) – The Towers Watson Pension Index increased for the fourth consecutive month in December 2013, reaching a five-year high.

The December 2013 capital market results were mildly favorable and the 1.4% increase for the month moved the index value to 78.2, a 25.5% increase for 2013 and the largest annual increase in the five-year history of the index.

The index tracks the performance of a hypothetical pension plan invested in a portfolio with 60% equity and 40% fixed income. This portfolio recorded a 1.2% return for December and 17.2% for the full year.

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The index also tracks two alternative investment portfolios with different mixes of equity and fixed income. The first, at 20% fixed income, returned 24.2% for 2013. The second, at 60% fixed income, returned 10.6% for the year.

Pension liabilities, as defined in the index, typically measure yields based on high quality corporate bonds as of the measurement date. The index’s methodology matches the corporate yields to projected cash flows, with the benchmark discount rate determined at 4.89%. This reflects an increase of six basis points for December 2013 and 93 basis points for 2013 overall.

According to Towers Watson, similar to bond prices, values for pension obligations tend to move in the opposite direction of interest rates. The Towers Watson liability index, based on projected benefit obligations, declined 0.4% in December 2013. The large increase in discount rates resulted in a reduction in liability value of 7.8% for the year.

The pension index also tracks a second version of the 60% fixed income portfolio that incorporates longer duration fixed-income investments. That portfolio returned 0.4% for December 2013. It also lags behind the shorter duration portfolios over the trailing 12-month period, with the performance shortfall attributable to increases in long-bond yields over these periods.

More information on the December index results can be found here.

Kim Becomes New York Life Vice Chairman

January 7, 2014 (PLANSPONSOR.com) – New York Life announced that John Y. Kim has been elected as a vice chairman of the company.

Kim, who will now oversee the company’s technology function in addition to his current responsibilities, will also continue as president of New York Life’s Investments Group, which includes the investment management, annuities and retirement plan recordkeeping businesses, as well as chief investment officer of New York Life Insurance Company.

“In recognition of this newly expanded role and the leadership, drive and commitment to our mission John has demonstrated since joining the company in 2008, he has been named vice chairman of the company,” says Ted Mathas, chairman and CEO of the New York-based New York Life. “With John’s broad and deep experience and judgment we know he will continue making important contributions in the position of vice chairman.” Kim will continue to report Mathas.

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Kim became chairman of New York Life Investments in January 2011 (see “Kim Named as Chairman of NY Life Investments”). He joined New York Life in 2008, after 25 years as a successful business executive with deep knowledge of investment management and strong operational skills running numerous businesses.

Prior to joining New York Life, Kim served as president of Prudential Retirement, where he led its defined benefit, defined contribution and guaranteed products businesses. Before that, he was president of CIGNA Retirement and Investment Services. Kim also spent 17 years with Aetna Life & Casualty, where he rose to the position of president and CEO of Aeltus Investment Management, as well as CIO of Aetna Life Insurance and Annuity Company. Kim is a graduate of the University of Michigan and holds an M.B.A. from the University of Connecticut.

New York Life Insurance Company is a mutual life insurance company in the United States. Its companies offer life insurance, retirement income, investments and long-term care insurance services.

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