AIG 2015 Annual Report Download - page 326

ITEM 8 / NOTE 20. EMPLOYEE BENEFITS
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The following table presents the weighted average assumptions used to determine the net periodic benefit costs:
Pension Postretirement
At December 31, U.S. Plans Non-U.S. Plans*U.S. Plans Non-U.S. Plans*
2015
Discount rate 3.94 % 2.33 % 3.77 % 4.04 %
Rate of compensation increase 3.40 % 2.89 % N/A 3.29 %
Expected return on assets 7.25 % 3.33 % N/A N/A
2014
Discount rate 4.83 % 2.77 % 4.59 % 4.77 %
Rate of compensation increase 3.50 % 2.89 % N/A 3.34 %
Expected return on assets 7.25 % 2.93 % N/A N/A
2013
Discount rate 3.93 % 2.62 % 3.67 % 3.45 %
Rate of compensation increase 4.00 % 2.86 % N/A 3.55 %
Expected return on assets 7.25 % 2.60 % N/A N/A
* The non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of the subsidiaries providing such benefits.
Discount Rate Methodology
The projected benefit cash flows under the U.S. AIG Retirement Plan were discounted using the spot rates derived from the
Mercer US Pension Discount Yield Curve at December 31, 2015 and 2014, which resulted in a single discount rate that would
produce the same liability at the respective measurement dates. The discount rates were 4.32 percent at December 31, 2015
and 3.95 percent at December 31, 2014. The methodology was consistently applied for the respective years in determining the
discount rates for the other U.S. plans.
In general, the discount rates for non-U.S. pension plans were developed based on the duration of liabilities on a plan by plan
basis and were selected by reference to high quality corporate bonds in developed markets or local government bonds where
developed markets are not as robust or are nonexistent.
The projected benefit obligation for Japan represents approximately 50 percent and 47 percent of the total projected benefit
obligations for our non-U.S. pension plans at December 31, 2015 and 2014, respectively. The weighted average discount rate
of 0.99 percent at December 31, 2015 was selected by reference to the Mercer Yield Curve (Japan) based on the duration of
the plans’ liabilities. The weighted average discount rate of 1.22 percent at December 31, 2014 for Japan was selected by
reference to the AA rated corporate bonds reported by Rating and Investment Information, Inc. based on the duration of the
plans’ liabilities.
Plan Assets
The investment strategy with respect to assets relating to our U.S. and non-U.S. pension plans is designed to achieve
investment returns that will provide for the benefit obligations of the plans over the long term, limit the risk of short-term funding
shortfalls and maintain liquidity sufficient to address cash needs. Accordingly, the asset allocation strategy is designed to
maximize the investment rate of return while managing various risk factors, including but not limited to, volatility relative to the
benefit obligations, diversification and concentration, and the risk and rewards profile applicable to each asset class.
There were no shares of AIG Common Stock included in the U.S. and non-U.S. pension plans assets at December 31, 2015 or
2014.