Funding falls at Philips, KLM pension funds despite positive returns
NETHERLANDS - The €14.3bn pension fund of electronics giant Philips and KLM's pension funds for ground staff and cabin staff saw their coverage ratios drop despite positive returns during the second quarter.
All of the schemes attributed their worsening financial positions to falling long-term interest rates, the criterion for discounting liabilities.
The funding of the Philips scheme fell by 4 percentage points to 99%, whereas it generated 0.6% on investments, taking its first-half result to 4.1%.
It said its 71% liability-matching portfolio of mainly fixed income returned 1.9%, an outperformance of 0.9%, due to a lower exposure to Southern European countries than its benchmark.
The pension fund's 29% return portfolio - consisting of asset classes such as equity, property and commodities - generated a 2.5% loss, which the scheme attributed mainly to falling global equity markets.
Following the drop of its funding ratio, the Philips scheme had to draw up a recovery plan aimed at improving its coverage to the required minimum of 104% within three years.
KLM's €5.7bn pension fund for ground staff also reported returns of 0.6% and 6.1% during the second quarter and first six months, respectively.
However, its funding fell from 110% to 105.1% during the second quarter.
The scheme said its fixed income, equity and property investments returned 3%, -4.7% and 1.2%, respectively, with its interest and equity hedge contributing 1.1% and 0.4% to its quarterly result.
KLM's €1.8bn pension fund for cabin staff said it generated quarterly and first-half returns of 1.6% and 7.1%, respectively.
Its funding dropped from 107.6% to 101.9% over the second quarter.