AIG 2015 Annual Report Download - page 327

ITEM 8 / NOTE 20. EMPLOYEE BENEFITS

327
U.S. Pension Plan
The assets of the qualified plan are monitored by the investment committee and actively managed by the investment
managers, and involves allocating the plan’s assets among approved asset classes within ranges as permitted by the strategic
allocation. The long-term strategic asset allocation historically has been reviewed and revised approximately every three years.
Beginning in 2016, the investment strategy will focus on de-risking the Plan via regular monitoring. This will be implemented
through liability driven investing and the adoption of the glide path approach, where the glide path defines the target allocation
for the “Return-Seeking” portion of the portfolio (i.e., growth assets) based on the funded ratio. Under this approach, the
allocation to growth assets is reduced and the allocation to liability-hedging assets is increased as the Plan’s funded ratio
increases in accordance with the defined glide path.
The following table presents the asset allocation percentage by major asset class for the U.S. qualified plan and the
target allocation for 2016 based on the plan’s funded status at December 31, 2015:
Target Actual Actual
At December 31, 2016 2015 2014
Asset class:
Equity securities 35 % 35 %55 %
Fixed maturity securities 45 % 41 %28 %
Other investments 20 % 24 %17 %
Tot al 100 % 100 %100 %
For both 2015 and 2014, the expected long-term rate of return for the plan was 7.25 percent. The expected rate of return is an
aggregation of expected returns within each asset class category, weighted for the investment mix of the assets. The
combination of the expected asset return and any contributions made by us are expected to maintain the plan’s ability to meet
all required benefit obligations. The expected asset return for each asset class was developed based on an approach that
considers key fundamental drivers of the asset class returns in addition to historical returns, current market conditions, asset
volatility and the expectations for future market returns.
Non-U.S. Pension Plans
The assets of the non-U.S. pension plans are held in various trusts in multiple countries and are invested primarily in equities
and fixed maturity securities to maximize the long-term return on assets for a given level of risk.
The following table presents the asset allocation percentage by major asset class for Non-U.S. pension plans and the
target allocation:
Target Actual Actual
At December 31, 2016 2015 2014
Asset class:
Equity securities 32 % 45 %50 %
Fixed maturity securities 48 % 35 %35 %
Other investments 18 % 13 %8%
Cash and cash equivalents 2 % 7 % 7%
Tot al 100 % 100 %100 %
The assets of AIG’s Japan pension plans represent approximately 54 percent and 55 percent of total non-U.S. assets at
December 31, 2015 and 2014 respectively. The expected long term rate of return was 1.71 percent and 1.24 percent, for 2015
and 2014, respectively, and is evaluated by the Japanese Pension Investment Committee on a quarterly and annual basis
along with various investment managers, and is revised to achieve the optimal allocation to meet targeted funding levels if
necessary. In addition, the funding policy is revised in accordance with local regulation every five years.