Discount Rate (IFRS / US-GAAP) Aon Eurozone Yield Curve

Transcription

1 Development of Discount Rates for Sample Populations Last Updated 3/31/2019 (further information on following page) 3/31/ / 1.6 / 1.8 % 12.7 / 19.2 / 26.7 years 12/31/ / 1.8 / 1.9 % 12.6 / 19.3 / 27.1 years 12/31/2017 old: 1.5 / 1.7 / 1.8 % 12.7 / 19.4 / 27.2 years new: 1.6 / 1.9 / 2.1 % 12.4 / 18.8 / 26.3 years Mrz 16 Jun 16 Sep 16 Dez 16 Mrz 17 Jun 17 Sep 17 Dez 17 Mrz 18 Jun 18 Sep 18 Dez 18 Mrz 19 Jun 19 young population mixed population mature/retiree population 12/31/ / 2.0 / 2.2 % 12.4 / 18.8 / 26.3 years 1

2 Details on Development of Discount Rates From 3/31/2018 on our discount rate recommendation is based on a standardized yield curve for the entire Eurozone, the Eurozone Yield Curve. Discount rate recommendations based on previously used methods in Germany will continue to be updated regularly in the future (the previous standard method will henceforth be referred to as subindex method ). The graph on page 1 shows historical and current discount rates for the valuation of pension liabilities according to IFRS and US-GAAP for three sample populations (young population consisting of active and deferred members, mixed population (actives, deferreds and retirees), mature or retiree population). The discount rates are based on sample cash flows of those three sample populations for a typical German pension plan which provides benefits in form of annuities at retirement, disability and death where 60% of the member`s (disability) benefit are payable to the spouse following the member`s death. The Eurozone Yield Curve is developed based on pricing and yield information for AA corporate bonds denominated in Euros as provided by Markit iboxx, i.e. corporate bonds with an average rating of AA from the three large rating agencies (Moody's, S&P and Fitch). This curve is obtained by adding a credit spread curve based on Cairns model to a swap curve. The model parameters are fit by minimizing the weighted sum of square differences between the bond prices deduced from the fitted curve and their market prices. In the graph as of 12/31/2017: The extrapolation of the Eurozone Yieldcurve is made as of September 2018 new based on AA rated government bonds instead of swap rates. In the graph the discount rates calculated like this are displayed retrospectively as of 12/31/2017 The discount rates recommendations may not be suitable for non-standard pension plans (e.g. with lump sum payments) or for very young or very mature populations. 2

3 DBO/PBO change discount rate Liability Change (DBO/PBO) (change in percent since prior year-end) 40% 30% 20% 12/31/2015: 15.2% 12/31/2017 (old): 1.6% 3/31/2019: 12/31/2018: 7.7% 10% 0% -10% -20% -30% 12/31/2017 (new): -2.2% 12/31/2018: 12/31/2017: -1.5% -40% Mrz 16 Jun 16 Sep 16 Dez 16 Mrz 17 Jun 17 Sep 17 Dez 17 Mrz 18 Jun 18 Sep 18 Dez 18 Mrz 19 Jun 19 DBO/PBO change discount rate development 3

4 Details on Liability Change The graph on page 3 shows the changes (in percent) to the DBO/PBO for a sample mixed population due to movements in the discount rate. The bars depict the DBO/PBO percentage the prior year-end (12/31). The DBO/PBO is calculated for the same sample cash flow which is used for determining the discount rate for the sample mixed population (details see page 2). The actual DBO/PBO changes for a specific plan due to movements in the discount rate may differ from the values shown in the graph. The difference can be caused by various reasons, such as a non-standard plan design (e.g. with lump sum payments) or a younger/more mature plan population. 4

5 Cash Flow for Mixed Population and Yield Curve (Valuation date 3/31/2019) Cash flow Eurozone Yield Curve 5