METLIFE INC | 2013 | FY | 3


18. Employee Benefit Plans
Pension and Other Postretirement Benefit Plans
The Subsidiaries sponsor and/or administer various U.S. qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. U.S. pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits that are primarily based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. At December 31, 2013, the majority of active participants were accruing benefits under the cash balance formula; however, 90% of the Subsidiaries’ obligations result from benefits calculated with the traditional formula. The U.S. non-qualified pension plans provide supplemental benefits in excess of limits applicable to a qualified plan. The non-U.S. pension plans generally provide benefits based upon either years of credited service and earnings preceding-retirement or points earned on job grades and other factors in years of service.
The Subsidiaries also provide certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Employees of the Subsidiaries who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for one of the Subsidiaries may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total costs of postretirement medical benefits. Employees hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits.
Obligations and Funded Status
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S. Plans (1)
 
Non-U.S. Plans
 
U.S. Plans
 
Non-U.S. Plans
 
December 31,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Change in benefit obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligations at January 1,
$
9,480

 
$
8,327

 
$
823

 
$
773

 
$
2,375

 
$
2,093

 
$
43

 
$
39

Service costs
236

 
224

 
67

 
75

 
20

 
21

 
2

 
1

Interest costs
389

 
406

 
14

 
17

 
92

 
103

 
2

 
2

Plan participants’ contributions

 

 

 

 
30

 
29

 

 

Net actuarial (gains) losses
(1,050
)
 
999

 
34

 
32

 
(551
)
 
261

 
(1
)
 
4

Acquisition, divestitures and curtailments

 

 
(19
)
 
(12
)
 

 

 
(3
)
 
(3
)
Change in benefits

 

 

 
(1
)
 

 

 

 

Benefits paid
(464
)
 
(476
)
 
(41
)
 
(41
)
 
(132
)
 
(132
)
 
(2
)
 
(2
)
Effect of foreign currency translation and other

 

 
(134
)
 
(20
)
 

 

 

 
2

Benefit obligations at December 31,
8,591

 
9,480

 
744

 
823

 
1,834

 
2,375

 
41

 
43

Change in plan assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at January 1,
7,879

 
7,108

 
224

 
185

 
1,320

 
1,240

 
15

 
13

Actual return on plan assets
(22
)
 
740

 
34

 
20

 
58

 
105

 
(1
)
 
2

Acquisition, divestitures and settlements

 

 
(19
)
 
(11
)
 

 

 
(3
)
 
(3
)
Plan participants’ contributions

 

 

 

 
30

 
29

 

 

Employer contributions
383

 
507

 
83

 
74

 
76

 
78

 
5

 
4

Benefits paid
(464
)
 
(476
)
 
(41
)
 
(41
)
 
(132
)
 
(132
)
 
(2
)
 
(2
)
Effect of foreign currency translation

 

 
(33
)
 
(3
)
 

 

 

 
1

Fair value of plan assets at December 31,
7,776

 
7,879

 
248

 
224

 
1,352

 
1,320

 
14

 
15

Over (under) funded status at December 31,
$
(815
)
 
$
(1,601
)
 
$
(496
)
 
$
(599
)
 
$
(482
)
 
$
(1,055
)
 
$
(27
)
 
$
(28
)
Amounts recognized in the consolidated balance sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other assets
$
223

 
$

 
$
7

 
$
6

 
$

 
$

 
$

 
$

Other liabilities
(1,038
)
 
(1,601
)
 
(503
)
 
(605
)
 
(482
)
 
(1,055
)
 
(27
)
 
(28
)
Net amount recognized
$
(815
)
 
$
(1,601
)
 
$
(496
)
 
$
(599
)
 
$
(482
)
 
$
(1,055
)
 
$
(27
)
 
$
(28
)
AOCI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial (gains) losses
$
2,274

 
$
3,047

 
$
28

 
$
27

 
$
211

 
$
799

 
$
2

 
$
3

Prior service costs (credit)
18

 
24

 
2

 
2

 
1

 
(74
)
 
1

 
1

AOCI, before income tax
$
2,292

 
$
3,071

 
$
30

 
$
29

 
$
212

 
$
725

 
$
3

 
$
4

Accumulated benefit obligation
$
8,104

 
$
8,866

 
$
636

 
$
724

 
N/A

 
N/A

 
N/A

 
N/A

_____________
(1)
Includes non-qualified unfunded plans, for which the aggregate projected benefit obligation was $1.0 billion and $1.1 billion at December 31, 2013 and 2012, respectively.
The aggregate pension accumulated benefit obligation and aggregate fair value of plan assets for pension benefit plans with accumulated benefit obligations in excess of plan assets was as follows:
 
Pension Benefits
 
U.S. Plans
 
Non-U.S. Plans
 
December 31,
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Projected benefit obligations
$
1,037

 
$
1,323

 
$
644

 
$
690

Accumulated benefit obligations
$
927

 
$
1,166

 
$
579

 
$
651

Fair value of plan assets
$

 
$
157

 
$
167

 
$
144


Information for pension and other postretirement benefit plans with a projected benefit obligation in excess of plan assets were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S. Plans
 
Non-U.S. Plans
 
U.S. Plans
 
Non-U.S. Plans
 
December 31,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(In millions)
Projected benefit obligations
$
1,170

 
$
9,480

 
$
701

 
$
763

 
$
1,834

 
$
2,375

 
$
41

 
$
43

Fair value of plan assets
$
133

 
$
7,879

 
$
199

 
$
188

 
$
1,352

 
$
1,320

 
$
14

 
$
15


Net Periodic Benefit Costs
Net periodic benefit costs are determined using management estimates and actuarial assumptions to derive service costs, interest costs and expected return on plan assets for a particular year. Net periodic benefit costs also includes the applicable amortization of net actuarial gains (losses) and amortization of any prior service costs (credit).
The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates and mortality. Management, in consultation with its external consulting actuarial firms, determines these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data and expected benefit payout streams. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company’s consolidated financial statements and liquidity.
Net periodic pension costs and net periodic other postretirement benefit plan costs are comprised of the following:
Service Costs — Service costs are the increase in the projected (expected) PBO resulting from benefits payable to employees of the Subsidiaries on service rendered during the current year.
Interest Costs — Interest costs are the time value adjustment on the projected (expected) PBO at the end of each year.
Settlement and Curtailment Costs — The aggregate amount of net gains (losses) recognized in net periodic benefit costs due to settlements and curtailments. Settlements result from actions that relieve/eliminate the plan’s responsibility for benefit obligations or risks associated with the obligations or assets used for the settlement. Curtailments result from an event that significantly reduces/eliminates plan participants’ expected years of future services or benefit accruals.
Expected Return on Plan Assets — Expected return on plan assets is the assumed return earned by the accumulated pension and other postretirement fund assets in a particular year.
Amortization of Net Actuarial Gains (Losses) — Actuarial gains and losses result from differences between the actual experience and the expected experience on pension and other postretirement plan assets or projected (expected) PBO during a particular period. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the PBO or the fair value of plan assets, the excess is amortized into pension and other postretirement benefit costs over the expected service years of the employees.
Amortization of Prior Service Costs (Credit) — These costs relate to the recognition of increases or decreases in pension and other postretirement benefit obligation due to amendments in plans or initiation of new plans. These increases or decreases in obligation are recognized in AOCI at the time of the amendment. These costs are then amortized to pension and other postretirement benefit costs over the expected service years of the employees affected by the change.
The components of net periodic benefit costs and other changes in plan assets and benefit obligations recognized in OCI were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S. Plans
 
Non-U.S. Plans
 
U.S. Plans
 
Non-U.S. Plans
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
(In millions)
Net periodic benefit costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service costs
$
236

 
$
224

 
$
187

 
$
67

 
$
75

 
$
64

 
$
20

 
$
21

 
$
16

 
$
2

 
$
1

 
$
1

Interest costs
389

 
406

 
404

 
14

 
17

 
16

 
92

 
103

 
106

 
2

 
2

 
2

Settlement and curtailment costs

 

 

 
(2
)
 

 

 

 

 

 
1

 
1

 
1

Expected return on plan assets
(483
)
 
(484
)
 
(448
)
 
(6
)
 
(6
)
 
(6
)
 
(75
)
 
(77
)
 
(76
)
 
(1
)
 
(1
)
 
(1
)
Amortization of net actuarial (gains) losses
228

 
195

 
194

 

 

 

 
55

 
57

 
43

 

 

 

Amortization of prior service costs (credit)
6

 
6

 
4

 

 

 

 
(75
)
 
(104
)
 
(108
)
 

 

 

Total net periodic benefit costs (credit)
376

 
347

 
341

 
73

 
86

 
74

 
17

 

 
(19
)
 
4

 
3

 
3

Other changes in plan assets and benefit obligations recognized in OCI:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net actuarial (gains) losses
(545
)
 
744

 
575

 
1

 
18

 
34

 
(533
)
 
234

 
262

 
1

 
2

 
5

Prior service costs (credit)

 

 
17

 

 
(1
)
 

 

 

 

 

 
(1
)
 

Amortization of net actuarial gains (losses)
(228
)
 
(195
)
 
(194
)
 

 

 

 
(55
)
 
(57
)
 
(43
)
 
(2
)
 

 

Amortization of prior service (costs) credit
(6
)
 
(6
)
 
(4
)
 

 

 

 
75

 
104

 
108

 

 

 

Total recognized in OCI
(779
)
 
543

 
394

 
1

 
17

 
34

 
(513
)
 
281

 
327

 
(1
)
 
1

 
5

Total recognized in net periodic benefit costs and OCI
$
(403
)
 
$
890

 
$
735

 
$
74

 
$
103

 
$
108

 
$
(496
)
 
$
281

 
$
308

 
$
3

 
$
4

 
$
8


For the year ended December 31, 2013, included within OCI were other changes in plan assets and benefit obligations associated with pension benefits of ($779) million for the U.S. plans and $1 million for the non-U.S. plans and other postretirement benefits of ($513) million for the U.S. plans and ($1) million for the non-U.S. plans for an aggregate increase in OCI of $1.3 billion before income tax and $838 million, net of income tax.
The estimated net actuarial (gains) losses and prior service costs (credit) for the U.S. pension plans and the U.S. defined benefit other postretirement benefit plans that will be amortized from AOCI into net periodic benefit costs over the next year are $151 million and $5 million, and $6 million and ($1) million, respectively.
Assumptions
Assumptions used in determining benefit obligations were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S. Plans
 
Non-U.S. Plans (1) 
 
U.S. Plans
 
Non-U.S. Plans (1)
December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
Weighted average discount rate
5.15%
 
1.94%
 
5.15%
 
6.47%
Rate of compensation increase
3.50
%
-
7.50%
 
2.00
%
-
5.50%
 
N/A
 
N/A
December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Weighted average discount rate
4.20%
 
1.98%
 
4.20%
 
4.94%
Rate of compensation increase
3.50
%
-
7.50%
 
2.01
%
-
5.50%
 
N/A
 
N/A
______________
(1)
Reflects those assumptions that were most appropriate for the local economic environments of each of the Subsidiaries providing such benefits.
Assumptions used in determining net periodic benefit costs were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S. Plans
 
Non-U.S. Plans (1) 
 
U.S. Plans
 
Non-U.S. Plans (1)
Year Ended December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
Weighted average discount rate
4.20%
 
1.98%
 
4.20%
 
5.01%
Weighted average expected rate of return on plan assets
6.25%
 
2.07%
 
5.76%
 
7.25%
Rate of compensation increase
3.50
%
-
7.50%
 
1.50
%
-
5.50%
 
N/A
 
N/A
Year Ended December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Weighted average discount rate
4.95%
 
2.35%
 
4.95%
 
5.78%
Weighted average expected rate of return on plan assets
7.00%
 
3.35%
 
6.26%
 
6.54%
Rate of compensation increase
3.50
%
-
7.50%
 
2.00
%
-
4.00%
 
N/A
 
N/A
Year Ended December 31, 2011:
 
 
 
 
 
 
 
 
 
 
 
Weighted average discount rate
5.80%
 
2.40%
 
5.80%
 
6.34%
Weighted average expected rate of return on plan assets
7.25%
 
3.19%
 
7.25%
 
7.01%
Rate of compensation increase
3.50
%
-
7.50%
 
3.00
%
-
5.50%
 
N/A
 
N/A
______________
(1)
Reflects those assumptions that were most appropriate for the local economic environments of each of the Subsidiaries providing such benefits.
The weighted average discount rate for the U.S. plans is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due.
The weighted average discount rate for non-U.S. pension plans is based on the duration of liabilities on a country by country basis. The rate was selected by reference to high quality corporate bonds in developed markets or local government bonds where markets were less robust or nonexistent.
The weighted average expected rate of return on plan assets for the U.S. plans is based on anticipated performance of the various asset sectors in which the plans invest, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the Subsidiaries’ long-term expectations on the performance of the markets. While the precise expected rate of return derived using this approach will fluctuate from year to year, the policy of most of the Subsidiaries’ is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate.
The weighted average expected long-term rate of return for the non-U.S. pension plans is an aggregation of each country’s expected rate of return within each asset class. For each country, the rate of return with respect to each asset class was developed based on a building block approach that considers historical returns, current market conditions, asset volatility and the expectations for future market returns. While the assessment of the expected rate of return is long-term and not expected to change annually, significant changes in investment strategy or economic conditions may warrant such a change. The expected rate of return within each asset class, together with any contributions made, are expected to maintain the plans’ ability to meet all required benefit obligations.
The weighted average expected rate of return on plan assets for use in that plan’s valuation in 2014 is currently anticipated to be 6.24% for U.S. pension benefits and 5.64% for U.S. other postretirement benefits. The weighted average expected rate of return on plan assets for use in that plan’s valuation in 2014 is currently anticipated to be 3.01% for non-U.S. pension benefits and 7.25% for non-U.S. other postretirement benefits.
The assumed healthcare costs trend rates used in measuring the APBO and net periodic benefit costs were as follows:
 
December 31,
 
2013
 
2012
Pre-and Post-Medicare eligible claims
6.4% in 2014, gradually decreasing each year until 2094 reaching the ultimate rate of 4.4% for Pre-Medicare and 4.6% for Post-Medicare.
 
7.8% in 2013, gradually decreasing each year until 2094 reaching the ultimate rate of 4.4% for Pre-Medicare and 4.6% for Post-Medicare.

Assumed healthcare costs trend rates may have a significant effect on the amounts reported for healthcare plans. A 1% change in assumed healthcare costs trend rates would have the following effects as of December 31, 2013:
 
U.S. Plans
 
Non-U.S. Plans
 
One Percent
Increase
 
One Percent
Decrease
 
One Percent
Increase
 
One Percent
Decrease
 
(In millions)
Effect on total of service and interest costs components
$
16

 
$
(13
)
 
$

 
$

Effect of accumulated postretirement benefit obligations
$
235

 
$
(193
)
 
$
1

 
$
(1
)
Plan Assets
The pension and other postretirement benefit plan assets are categorized into a three-level fair value hierarchy, as defined in Note 10, based upon the significant input with the lowest level in its valuation. The following summarizes the types of assets included within the three-level fair value hierarchy presented below.
Level 1
 
This category includes separate accounts that are invested in fixed maturity securities, equity securities, derivative assets and short-term investments which have unadjusted quoted market prices in active markets for identical assets and liabilities.
 
 
Level 2
 
This category includes certain separate accounts that are primarily invested in liquid and readily marketable securities. The estimated fair value of such separate account is based upon reported NAV provided by fund managers and this value represents the amount at which transfers into and out of the respective separate account are effected. These separate accounts provide reasonable levels of price transparency and can be corroborated through observable market data.
 
 
 
 
Certain separate accounts are invested in investment partnerships designated as hedge funds. The values for these separate accounts is determined monthly based on the NAV of the underlying hedge fund investment. Additionally, such hedge funds generally contain lock out or other waiting period provisions for redemption requests to be filled. While the reporting and redemption restrictions may limit the frequency of trading activity in separate accounts invested in hedge funds, the reported NAV, and thus the referenced value of the separate account, provides a reasonable level of price transparency that can be corroborated through observable market data.
 
 
 
 
Directly held investments are primarily invested in U.S. and foreign government and corporate securities.
 
 
Level 3
 
This category includes separate accounts that are invested in fixed maturity securities, equity securities, derivative assets and other investments that provide little or no price transparency due to the infrequency with which the underlying assets trade and generally require additional time to liquidate in an orderly manner. Accordingly, the values for separate accounts invested in these alternative asset classes are based on inputs that cannot be readily derived from or corroborated by observable market data.
U.S. Plans
The U.S. Subsidiaries provide employees with benefits under various Employee Retirement Income Security Act of 1974 (“ERISA”) benefit plans. These include qualified pension plans, postretirement medical plans and certain retiree life insurance coverage. The assets of the U.S. Subsidiaries’ qualified pension plans are held in insurance group annuity contracts, and the vast majority of the assets of the postretirement medical plan and backing the retiree life coverage are held in insurance contracts. All of these contracts are issued by Company insurance affiliates, and the assets under the contracts are held in insurance separate accounts that have been established by the Company. The underlying assets of the separate accounts are principally comprised of cash and cash equivalents, short-term investments, fixed maturity and equity securities, derivatives, real estate, private equity investments and hedge fund investments.
The insurance contract provider engages investment management firms (“Managers”) to serve as sub-advisors for the separate accounts based on the specific investment needs and requests identified by the plan fiduciary. These Managers have portfolio management discretion over the purchasing and selling of securities and other investment assets pursuant to the respective investment management agreements and guidelines established for each insurance separate account. The assets of the qualified pension plans and postretirement medical plans (the “Invested Plans”) are well diversified across multiple asset categories and across a number of different Managers, with the intent of minimizing risk concentrations within any given asset category or with any given Manager.
The Invested Plans, other than those held in participant directed investment accounts, are managed in accordance with investment policies consistent with the longer-term nature of related benefit obligations and within prudent risk parameters. Specifically, investment policies are oriented toward (i) maximizing the Invested Plan’s funded status; (ii) minimizing the volatility of the Invested Plan’s funded status; (iii) generating asset returns that exceed liability increases; and (iv) targeting rates of return in excess of a custom benchmark and industry standards over appropriate reference time periods. These goals are expected to be met through identifying appropriate and diversified asset classes and allocations, ensuring adequate liquidity to pay benefits and expenses when due and controlling the costs of administering and managing the Invested Plan’s investments. Independent investment consultants are periodically used to evaluate the investment risk of Invested Plan’s assets relative to liabilities, analyze the economic and portfolio impact of various asset allocations and management strategies and to recommend asset allocations.
Derivative contracts may be used to reduce investment risk, to manage duration and to replicate the risk/return profile of an asset or asset class. Derivatives may not be used to leverage a portfolio in any manner, such as to magnify exposure to an asset, asset class, interest rates or any other financial variable. Derivatives are also prohibited for use in creating exposures to securities, currencies, indices or any other financial variable that is otherwise restricted.
The table below summarizes the actual weighted average allocation of the fair value of total plan assets by asset class at December 31 for the years indicated and the approved target allocation by major asset class at December 31, 2013 for the Invested Plans:
 
Pension
 
Postretirement Medical
 
Postretirement Life
 
Target
 
Actual Allocation
 
Target
 
Actual Allocation
 
Target
 
Actual Allocation
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Asset Class:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities (1)
75
%
 
64
%
 
69
%
 
70
%
 
52
%
 
63
%
 
%
 
%
 
%
Equity securities (2)
12
%
 
23
%
 
21
%
 
30
%
 
47
%
 
37
%
 
%
 
%
 
%
Alternative securities (3)
13
%
 
13
%
 
10
%
 
%
 
1
%
 
%
 
100
%
 
100
%
 
100
%
Total assets
 
 
100
%
 
100
%
 
 
 
100
%
 
100
%
 
 
 
100
%
 
100
%
______________
(1)
Fixed maturity securities include primarily ABS, collateralized mortgage obligations, corporate, federal agency, foreign bonds, mortgage-backed securities, municipals, preferred stocks and U.S. government bonds.
(2)
Equity securities primarily include common stock of U.S. companies.
(3)
Alternative securities primarily include derivative assets, money market securities, short-term investments and other investments. Postretirement life’s target and actual allocation of plan assets are all in short-term investments.
The pension and postretirement plan assets measured at estimated fair value on a recurring basis were determined as described in “— Plan Assets.” These estimated fair values and their corresponding placement in the fair value hierarchy are summarized as follows:
 
December 31, 2013
 
Pension Benefits
 
Other Postretirement Benefits
 
Fair Value Hierarchy
 
 
 
Fair Value Hierarchy
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
$

 
$
2,073

 
$
59

 
$
2,132

 
$

 
$
170

 
$
1

 
$
171

U.S. government bonds
924

 
166

 

 
1,090

 
135

 
5

 

 
140

Foreign bonds

 
718

 
11

 
729

 

 
63

 

 
63

Federal agencies

 
292

 

 
292

 

 
33

 

 
33

Municipals

 
219

 

 
219

 

 
15

 

 
15

Other (1)

 
490

 
19

 
509

 

 
54

 

 
54

Total fixed maturity securities
924

 
3,958

 
89

 
4,971

 
135

 
340

 
1

 
476

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - domestic
1,133

 
22

 
148

 
1,303

 
328

 

 

 
328

Common stock - foreign
460

 

 

 
460

 
102

 

 

 
102

Total equity securities
1,593

 
22

 
148

 
1,763

 
430

 

 

 
430

Other investments

 

 
600

 
600

 

 

 

 

Short-term investments
53

 
309

 

 
362

 

 
439

 

 
439

Money market securities
1

 
12

 

 
13

 
4

 

 

 
4

Derivative assets
17

 
15

 
35

 
67

 

 
3

 

 
3

Total assets
$
2,588

 
$
4,316

 
$
872

 
$
7,776

 
$
569

 
$
782

 
$
1

 
$
1,352

 
December 31, 2012
 
Pension Benefits
 
Other Postretirement Benefits
 
Fair Value Hierarchy
 
 
 
Fair Value Hierarchy
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
$

 
$
2,260

 
$
19

 
$
2,279

 
$

 
$
165

 
$
4

 
$
169

U.S. government bonds
1,153

 
160

 

 
1,313

 
175

 
3

 

 
178

Foreign bonds

 
761

 
8

 
769

 

 
51

 

 
51

Federal agencies
1

 
335

 

 
336

 

 
26

 

 
26

Municipals

 
258

 

 
258

 

 
70

 
1

 
71

Other (1)

 
490

 
7

 
497

 

 
55

 
3

 
58

Total fixed maturity securities
1,154

 
4,264

 
34

 
5,452

 
175

 
370

 
8

 
553

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - domestic
1,092

 
38

 
137

 
1,267

 
249

 
1

 

 
250

Common stock - foreign
362

 

 

 
362

 
83

 

 

 
83

Total equity securities
1,454

 
38

 
137

 
1,629

 
332

 
1

 

 
333

Other investments

 
117

 
447

 
564

 

 

 

 

Short-term investments

 
214

 

 
214

 

 
432

 

 
432

Money market securities
2

 
10

 

 
12

 
1

 

 

 
1

Derivative assets

 
7

 
1

 
8

 

 
1

 

 
1

Total assets
$
2,610

 
$
4,650

 
$
619

 
$
7,879

 
$
508

 
$
804

 
$
8

 
$
1,320

______________
(1)
Other primarily includes mortgage-backed securities, collateralized mortgage obligations and ABS.
A rollforward of all pension and other postretirement benefit plan assets measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs was as follows:
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Pension Benefits
 
Fixed Maturity
Securities:
 
Equity
Securities:
 
 
 
 
 
Corporate
 
Foreign
Bonds
 
Other (1)
 
Common
Stock -
Domestic
 
Other
Investments
 
Derivative
Assets
 
(In millions)
Year Ended December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1,
$
19

 
$
8

 
$
7

 
$
137

 
$
447

 
$
1

Realized gains (losses)

 

 

 
(1
)
 

 
(3
)
Unrealized gains (losses)
(2
)
 
1

 

 
9

 
59

 
(18
)
Purchases, sales, issuances and settlements, net
19

 
(3
)
 
11

 
3

 
(62
)
 
55

Transfers into and/or out of Level 3
23

 
5

 
1

 

 
156

 

Balance at December 31,
$
59

 
$
11

 
$
19

 
$
148

 
$
600

 
$
35

 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Other Postretirement Benefits
 
Fixed Maturity
Securities:
 
Corporate
 
Municipals
 
Other (1)
 
(In millions)
Year Ended December 31, 2013:
 
 
 
 
 
Balance at January 1,
$
4

 
$
1

 
$
3

Realized gains (losses)

 

 
(3
)
Unrealized gains (losses)

 

 
4

Purchases, sales, issuances and settlements, net
(3
)
 
(1
)
 
(4
)
Transfers into and/or out of Level 3

 

 

Balance at December 31,
$
1

 
$

 
$

 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Pension Benefits
 
Fixed Maturity
Securities:
 
Equity
Securities:
 
 
 
 
 
Corporate
 
Foreign
Bonds
 
Other (1)
 
Common
Stock -
Domestic
 
Other
Investments
 
Derivative
Assets
 
(In millions)
Year Ended December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1,
$
32

 
$
5

 
$
2

 
$
206

 
$
531

 
$
4

Realized gains (losses)

 

 

 
(27
)
 
55

 
6

Unrealized gains (losses)
(1
)
 
8

 

 
10

 
(36
)
 
(7
)
Purchases, sales, issuances and settlements, net
(12
)
 
(5
)
 
5

 
(52
)
 
(103
)
 
(2
)
Transfers into and/or out of Level 3

 

 

 

 

 

Balance at December 31,
$
19

 
$
8

 
$
7

 
$
137

 
$
447

 
$
1

 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Other Postretirement Benefits
 
Fixed Maturity
Securities:
 
 
 
Corporate
 
Municipals
 
Other (1)
 
Derivative
Assets
 
(In millions)
Year Ended December 31, 2012:
 
 
 
 
 
 
 
Balance at January 1,
$
4

 
$
1

 
$
5

 
$
1

Realized gains (losses)

 

 
(2
)
 
2

Unrealized gains (losses)

 

 
2

 
(2
)
Purchases, sales, issuances and settlements, net

 

 
(2
)
 
(1
)
Transfers into and/or out of Level 3

 

 

 

Balance at December 31,
$
4

 
$
1

 
$
3

 
$

 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Pension Benefits
 
Fixed Maturity
Securities:
 
Equity
Securities:
 
 
 
 
 
Corporate
 
Foreign
Bonds
 
Other (1)
 
Common
Stock -
Domestic
 
Other
Investments
 
Derivative
Assets
 
(In millions)
Year Ended December 31, 2011:
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1,
$
49

 
$
4

 
$
2

 
$
240

 
$
471

 
$

Realized gains (losses)

 

 
(1
)
 
(59
)
 
85

 
2

Unrealized gains (losses)
(4
)
 
(1
)
 
1

 
118

 
45

 
4

Purchases, sales, issuances and settlements, net
(13
)
 
2

 
(1
)
 
(93
)
 
(70
)
 
(2
)
Transfers into and/or out of Level 3

 

 
1

 

 

 

Balance at December 31,
$
32

 
$
5

 
$
2

 
$
206

 
$
531

 
$
4

 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Other Postretirement Benefits
 
Fixed Maturity
Securities:
 
 
 
Corporate
 
Municipals
 
Other (1)
 
Derivative
Assets
 
(In millions)
Year Ended December 31, 2011:
 
 
 
 
 
 
 
Balance at January 1,
$
4

 
$
1

 
$
6

 
$

Realized gains (losses)

 

 
(1
)
 

Unrealized gains (losses)

 

 
1

 
1

Purchases, sales, issuances and settlements, net

 

 
(1
)
 

Transfers into and/or out of Level 3

 

 

 

Balance at December 31,
$
4

 
$
1

 
$
5

 
$
1

______________
(1)
Other includes ABS and collateralized mortgage obligations.
Non-U.S. Plans
Pension benefits are provided utilizing either a traditional formula or cash balance formula, similar to the U.S. plans. The investment objectives are also similar, subject to local regulations. Generally, these international pension plans invest directly in high quality equity and fixed maturity securities. The assets of the non-U.S. pension plans are comprised of short-term investments, equity and fixed maturity securities, real estate and hedge fund investments.
The assets of the non-U.S. pension plans, other than those held in participant directed investment accounts, are managed in accordance with investment policies consistent with the longer-term nature of related benefit obligations and within prudent risk parameters and consistent with the policies, goals and derivative instrument risk management guidelines described above for the U.S. plans.
The table below summarizes the actual weighted average allocation of the fair value of total plan assets by asset class at December 31 for the years indicated and the approved target allocation by major asset class at December 31, 2013 for the plans:
 
Pension
 
Other Postretirement
 
 
 
Actual Allocation
 
 
 
Actual Allocation
 
Target
 
2013
 
2012
 
Target
 
2013
 
2012
Asset Class:
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities (1)
76
%
 
50
%
 
54
%
 
100
%
 
100
%
 
100
%
Equity securities (2)
17
%
 
33
%
 
24
%
 
%
 
%
 
%
Alternative securities (3)
7
%
 
17
%
 
22
%
 
%
 
%
 
%
Total assets
 
 
100
%
 
100
%
 
 
 
100
%
 
100
%
______________
(1)
Fixed maturity securities include corporate and foreign bonds.
(2)
Equity securities primarily include common stock of non-U.S. companies.
(3)
Alternative securities include derivative assets, real estate, short-term investments, and other investments.
The pension and postretirement plan assets measured at estimated fair value on a recurring basis were determined as described in “— Plan Assets.” These estimated fair values and their corresponding placement in the fair value hierarchy are summarized as follows:
 
December 31, 2013
 
Pension Benefits
 
Other Postretirement Benefits
 
Fair Value Hierarchy
 
 
 
Fair Value Hierarchy
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
$

 
$
27

 
$

 
$
27

 
$

 
$

 
$

 
$

Foreign bonds