Contabilidad Regulatoria: Las AFP Chilenas, 1993-2003

In firms subject to tariff regulations, the authorities have developed "regulatory" accounting methods, to identify accepted costs and possible supernormal lrates of return. These methods are also useful in industries free from price regulation, because information about the economic rate of return on assets may be useful for many other decisions, both private and public. This paper starts the development of a specific set of regulatory accounting methods for the Chilean industry of pension plan administrators (the managing firms, not the pension funds). The aim is to determine its effective rate of return, without a separate analysis for each firm. Heavy use is made of specific studies about certain aspects of this industry, performed by other authors. In the methodological area, it is found that the main adjustments to the accounting data are the addition of intangible assets related to commercial investments and the exclusion of assets that hide the performance of the main business. A new method is proposed to value one of the intangible assets. The main empirical finding is that the Chilean industry of pension plan administrators obtained, between 1993 and 1997(five years), an annual rate of return on assets before taxes between 9% and 27%, with an average of 18%. Starting in 1999 these rates rose, staying above 35% per annum, with an average until 2003 of 53% per annum ( five years). When comparing with the risk-adjusted rate of return (before taxes), and taking into account the size of this industry, it is found that from 1998 until 2003 the supernormal return averaged 0.10% of GDP per annum. The causes of this outcome and possible solutions are not the subject of this paper