Capital One 2010 Annual Report Download - page 174

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED STATEMENTS
154
To develop the expected long-term rate of return on plan assets assumption, consideration was given to the current level of expected
returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset
classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset
class was then weighted based on the target asset allocation to develop the expected long-term rate of return on the plan assets
assumption for the portfolio.
Assumed health care trend rates have a significant effect on the amounts reported for the other postretirement benefit plans. A one-
percentage point change in assumed health care cost trend rates would have the following effects:
Year ended December 31,
2010 2009
1% Increase 1% Decrease 1% Increase 1% Decrease
Effect on year-end postretirement benefit obligation ........... $ 6 $ (5) $ 6 $ (5)
Effect on total service and interest cost components ........... 0 0 1 (1)
Plan Assets
The qualified defined benefit pension plan asset allocations as of the annual measurement dates are as follows:
December 31,
2010 2009
Common collective trusts(1) ................................................................. 73.9% 69.4
%
Money market fund ........................................................................ 3.2 30.1
Limited partnerships ....................................................................... 0.0 0.5
Corporate bonds (S&P rating of A or higher) ................................................. 0.8 0.0
Corporate bonds (S&P rating of lower than A) ............................................... 1.7 0.0
Government securities ..................................................................... 20.1 0.0
Mortgage backed securities ................................................................. 0.3 0.0
Total ..................................................................................... 100.0% 100.0
%
________________________
(1) Common collective trusts include domestic and international equity securities.
The investment guidelines provide the following asset allocation targets and ranges: domestic equity target of 50% and allowable
range of 45% to 55%, international equity target of 20% and allowable range of 15% to 25%, and fixed income securities target of
30% and allowable range of 25% to 40%.
Plan assets are invested using a total return investment approach whereby a mix of equity securities and debt securities are used to
preserve asset values, diversify risk and enhance our ability to achieve our long-term investment return benchmark. Investment
strategies and asset allocations are based on careful consideration of plan liabilities, the plan’s funded status and our financial
condition. Investment performance and asset allocation are measured and monitored on a quarterly basis.
Plan assets are managed in a balanced portfolio comprised of three major components: a domestic equity portion, an international
equity portion and a domestic fixed income portion. The expected role of plan equity investments is to maximize the long-term real
growth of fund assets, while the role of fixed income investments is to generate current income, provide for more stable periodic
returns and provide some protection against a prolonged decline in the market value of fund equity investments.
Fair Values Measurement
For information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation
methods we utilize, see “Note 1—Summary of Significant Accounting Policies” and “Note 19—Fair Value of Financial Instruments.”