Philips uses global risk model
Philips, the Dutch electronics giant, has developed a ‘global risk reward model’ which will monitor the risk exposure at its pension funds.
Philips, which announced a four-fold rise in annual profits to E2.8bn, has pension obligations in over 40 countries.
“Depending on the investment policies of the respective pension funds and the size of their pension assets compared to their pension obligations, developments in financial markets may have significant effects on funded statuses and pension cost,” the Amsterdam-based multinational said in its annual review.
Philips said it will use the global risk reward model, which covers around 95%
of its total pension exposure, “to analyse the sensitivities to changes in equity market valuations and interest rates, and the determination of optimal combinations of expected risks and returns for the respective pension funds”.
The move comes shortly after it emerged that Lars Dijkstra, head of investments at Philips’ E13bn Dutch pension scheme, is to leave.
Dijkstra’s departure follows the company’s decision last year to restructure its Dutch pensions management arm, previously called Schootse Poort.
The company reported a fall in pension costs in 2004, following an E312m increase the year before. Total pension costs fell by E158m to E284m in 2004, which was mainly related to new pension agreements in the Netherlands.
The product divisions spent E172m on pensions, while the remaining E112m was absorbed at corporate level. Net post-retirement benefit costs amounted to E39m.
Looking ahead, Philips said it expected total pensions and post-retirement benefit costs in 2005 to fall by E20m.