Newsletter - April 3, 2020

Dear RTAPP’ Participants,

 

The RTAPP pension committee held a meeting on March 31, 2020. We would like to share the following information with you based on the data collected by the retiree representatives of this committee with whom we are in contact in order to keep you as informed as possible of the current situation.

 

• The financial return of the RTAPP assets was 12.8% in 2019. While high, this return is lower than the benchmark portfolio return, which is 15.7%. This difference is due to the reporting lag between private investment returns and the benchmark portfolio returns, as well as the real estate investment returns. The real estate investment returns are under review by fund administrators at this time.

 

• Net of payouts, plan assets totaled C$4.216 billion at the end of 2019

 

• As of December 31, 2019, the RTAPP showed a capitalization rate of 130.1%. This ratio was 125% at the end of 2018.

 

• The solvency ratio was 104.3% as of December 31, 2019. This is an increase from the end of 2018 when the fund showed a solvency of 102%.

 

• Obviously, the effect of the downturn in the financial markets caused by the COVID-19 pandemic on the value of the assets of our fund may be cause for concern, and quite legitimate. However, we want to reassure you; at the end of March 2020, preliminary figures put the decline in RTAPP assets at around 5% despite the stock market downturn of 20-25% at that date. While the 5% drop is significant, changes made to the investment policy over the past few years, which were aimed at de-risking our holdings by cutting by half our reliance on stocks and hedging against fluctuating interest rates, have offered partial protection from the current financial crisis. The fund administrators regularly review the investment policy according to the pandemic situation.

 

• In parallel with the fall in the value of the fund's assets caused by the downturn in the markets in the first quarter of 2020, strong demand for bonds and the Bank of Canada's monetary policy have lowered interest rates to levels never seen before. The fund administrator estimates that the capitalization and solvency ratios have probably dropped by 10-15% as of March 31, 2020. Thus, it is reasonable to believe that the capitalization of the fund would be around 115-120%, which should not cause concern about the fund’s ability to pay benefits to RTAPP beneficiaries. It should be noted that the RTAPP’s capitalization rate has already temporarily reached much lower values during the 2009-2013 period, without affecting the fund’s ability to pay the benefits.

 

• Similarly, it is estimated that at the end of March, the solvency ratio could also have decreased by 10-15%, which would bring it around 89-94%. It should be noted that this ratio is particularly significant in the event of company bankruptcy and that there does not seem to be any reason to worry now about Rio Tinto's financial health.

 

• It should be noted that the figures given are preliminary and vary from day to day given the current volatility of the markets and the rapidly changing reality in the face of the current pandemic.

 

We make it a point to obtain as much information as possible from the managers of our pension funds, so that we can send it to you as soon as possible.

 

Continue to take care of yourself!

 

 

Danièle Beaudoin, President

 

Denis Bernard, Vice-President Strategy and Development