AIG 2005 Annual Report Download - page 174

Notes to Consolidated Financial Statements Continued
twelve months ended December 31, 2005 and 2004, respec-
15. Employee Benefits
tively. These rates of return are an aggregation of expected
Continued
returns within each asset category. The return with respect to
The asset allocation percentage by major asset class for AIG’s each asset class considers both historical returns and the future
expectations for such returns.
U.S. plans at December 31, 2005 and 2004, and the target
allocation for 2006 follows: (h) Expected Cash Flows: With respect to AIG’s U.S. pension
plan, the actuarially prepared funding amount ranges from the
Allocation minimum amount AIG would be required to contribute to the
Target Actual Actual
2006 2005 2004 maximum amount that would be deductible for U.S. tax
purposes. This range is generally not determined until the
Asset class:
fourth quarter with respect to the contribution year. Contrib-
Equity securities 0-70% 59% 63%
uted amounts in excess of the minimum amounts are deemed
Debt securities 0-100 34 32
voluntary. Amounts in excess of the maximum amount would
Other 0-40 7 5
be subject to an excise tax and may not be deductible under
Total 100% 100% 100% the Internal Revenue Code. Supplemental and excess plans’
payments and postretirement plan payments are deductible
The asset allocation percentage by major asset class for AIG’s when paid.
non-U.S. plans at December 31, 2005 and 2004, and the AIG contributed $393 million during 2005 to its U.S. and
target allocation for 2006 follows: non-U.S. pension plans. The annual pension contribution for
2006 is expected to be approximately $70 million for U.S. and
Allocation non-U.S. plans.
Target Actual Actual
2006 2005 2004 The expected future benefit payments, net of participants’
Asset class: contributions with respect to the defined benefit pension plans
Equity securities 0-75% 46% 32% and other postretirement benefit plans, are as follows:
Debt securities 0-100 27 14
Other 0-100 27 54 Pension Postretirement
Total 100% 100% 100% Non-U.S. U.S. Non-U.S. U.S.
(in millions) Plans Plans Plans Plans
The ‘‘Other’’ includes alternative asset classes. 2006 $ 61 $102 $1 $16
Included in equity securities at December 31, 2005 and 2007 63 111 1 17
2008 68 119 1 17
2004 were 0.6 million and 1.2 million shares of AIG common
2009 76 128 1 18
stock, with values of $41.1 million and $79.3 million,
2010 73 137 1 18
respectively. 2011-2015 401 885 6 98
The investment strategy with respect to AIG’s pension plan
assets is to preserve capital and to seek investment returns with
a goal of fully funding the plan.
The expected rate of return with respect to AIG’s domestic
pension plan was 8.0 percent and 8.25 percent for the
122 AIG m Form 10-K