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84
AsofDecember31,2015and2014,theOPEBtrustinvestmentsmeasuredatfairvaluewereasfollows:
December31,2015 Asset
Allocation
Level1 Level2 Level3 Total
(Inmillions)
Cashandshorttermsecurities
$ —
$ 25
$ —
$ 25
6%
Equityinvestment
Domestic 219
—
—
219
50%
International 1
3
—
4
1%
Fixedincome
U.S.treasuries —
42
—
42
10%
Governmentbonds —
114
—
114
26%
Corporatebonds —
27
—
27
6%
Highyielddebt —
1
—
1
—%
Mortgagebackedsecurities(non
government) —
3
—
3
1%
Alternatives
Hedgefunds —
1
—
1
—%
Realestatefunds —
—
2
2
—%
Total(1)
$ 220
$ 216
$ 2
$ 438
100%
(1)Excludes$(7)millionasofDecember31,2015ofreceivables,payables,taxesandaccruedincomeassociatedwithfinancialinstruments
reflectedwithinthefairvaluetable.
December31,2014 Asset
Allocation
Level1 Level2 Level3 Total
(Inmillions)
Cashandshorttermsecurities
$ —
$ 41
$ —
$ 41
9%
Equityinvestment
Domestic 230
—
—
230
48%
International 3
3
—
6
1%
Fixedincome
U.S.treasuries —
41
—
41
9%
Governmentbonds —
110
—
110
23%
Corporatebonds —
32
—
32
7%
Highyielddebt —
2
—
2
—%
Mortgagebackedsecurities(non
government)—
3
—
3
1%
Alternatives
Hedgefunds —
5
—
5
1%
Realestatefunds —
—
3
3
1%
Total(1)
$ 233
$ 237
$ 3
$ 473
100%
(1)Excludes$(9)millionasofDecember31,2014,ofreceivables,payables,taxesandaccruedincomeassociatedwithfinancialinstruments
reflectedwithinthefairvaluetable.
85
ThefollowingtableprovidesareconciliationofchangesinthefairvalueofOPEBtrustinvestmentsclassifiedasLevel3inthefair
valuehierarchyduring2015and2014:
RealEstate
Funds
BalanceasofJanuary1,2014
$
5
Transfersout
(2
)
BalanceasofDecember31,2014
$
3
Transfersout
(1
)
BalanceasofDecember31,2015
$
2
FirstEnergyfollowsatotalreturninvestmentapproachusingamixofequities,fixedincomeandotheravailableinvestmentswhile
takingintoaccountthepensionplanliabilitiestooptimizethelongtermreturnonplanassetsforaprudentlevelofrisk.Risktolerance
isestablishedthroughcarefulconsiderationofplanliabilities,planfundedstatusandcorporatefinancialcondition.Theinvestment
portfoliocontainsadiversifiedblendofequityandfixedincomeinvestments.EquityinvestmentsarediversifiedacrossU.S.andnon
U.S.stocks,aswellasgrowth,value,andsmallandlargecapitalizationfunds.Otherassetssuchasrealestateandprivateequityare
usedtoenhancelongtermreturnswhileimprovingportfoliodiversification.Derivativesmaybeusedtogainmarketexposureinan
efficientandtimelymannerhowever,derivativesarenotusedtoleveragetheportfoliobeyondthemarketvalueoftheunderlying
investments.Investmentriskismeasuredandmonitoredonacontinuingbasisthroughperiodicinvestmentportfolioreviews,annual
liabilitymeasurementsandperiodicasset/liabilitystudies.
FirstEnergy’stargetassetallocationsforitspensionandOPEBtrustportfoliosfor2015and2014areshowninthefollowingtable:
TargetAssetAllocations
2015
2014
Equities
38
%
42
%
Fixedincome
30
%
32
%
Absolutereturnstrategies
8
%
14
%
Realestate
10
%
5
%
Alternativeinvestments
8
%
1
%
Cash
6
%
6
%
100
%
100
%
Assumedhealthcarecosttrendrateshaveasignificanteffectontheamountsreportedforthehealthcareplans.Aone
percentagepointchangeinassumedhealthcarecosttrendrateswouldhavethefollowingeffects:
1Percentage
PointIncrease
1Percentage
PointDecrease
(Inmillions)
Effectontotalofserviceandinterestcost
$
1
$
(1
)
Effectonaccumulatedbenefitobligation
$
26
$
(23
)
Takingintoaccountestimatedemployeefutureservice,FirstEnergyexpectstomakethefollowingbenefitpaymentsfromplanassets
andotherpayments,netofparticipantcontributions:
OPEB
Pension
Benefit
Payments
Subsidy
Receipts
(Inmillions)
2016
$
484
$
54
$
(3
)
2017
505
54
(3
)
2018
522
54
(3
)
2019
533
54
(3
)
2020
551
54
(3
)
Years20212025
2,946
259
(9
)