American Express 2010 Annual Report Download - page 110

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Asset Allocation and Fair Value
The Benefit Plans Investment Committee (BPIC) is appointed
by the Compensation and Benefits Committee of the Company’s
Board of Directors and has the responsibility of reviewing and
approving the investment policies related to plan assets for the
Company’s defined benefit pension plans; evaluating the
performance of the investments in accordance with the
investment policy; reviewing the investment objectives, risk
characteristics, expenses and historical performance; and
selecting, removing and evaluating the investment managers.
The BPIC typically meets quarterly to review the performance
of the various investment managers and service providers as well
as other investment related matters. The Company’s significant
defined benefit pension plans have investment policies, which
prescribe targets for the amount of assets that can be invested in
a security class in order to mitigate the detrimental impact of
adverse or unexpected results with respect to any individual
security class on the overall portfolio. The portfolios are
diversified by asset type, risk characteristics and
concentration of investments. Refer to Note 3 for a discussion
related to valuation techniques used to measure fair value,
including a description of the three-level fair value hierarchy
of inputs.
The following tables summarize the target allocation and categorization of all defined benefit pension plan assets measured at fair value
on a recurring basis by GAAP’s valuation hierarchy:
As of December 31, 2010:
(Millions, except percentages)
Target
Allocation
2011 Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
U.S. equity securities 15% $ 331 $ 331 $ — $ —
International equity securities
(a)
30% 704 704 — —
U.S. fixed income securities 30% 522 — 522 —
International fixed income securities
(a)
15% 318 — 318 —
Balanced funds 5% 65 — 65 —
Cash —11 11 ——
Other
(b)
5% 101 — — 101
Total 100% $ 2,052 $ 1,046 $ 905 $ 101
(a) A significant portion of international investments are in U.K. companies and U.K. government and agency securities.
(b) Consists of investments in private equity and real estate funds measured at reported net asset value.
As of December 31, 2009:
(Millions, except percentages)
Target
Allocation
2010 Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
U.S. equity securities 15% $ 334 $ 334 $ — $ —
International equity securities
(a)
30% 626 626 — —
U.S. fixed income securities 30% 553 — 553 —
International fixed income securities
(a)
15% 301 — 301 —
Balanced funds 5% 62 — 62 —
Cash —15 15 — —
Other
(b)
5% 98 — — 98
Total 100% $ 1,989 $ 975 $ 916 $ 98
(a) A significant portion of international investments are in U.K. companies and U.K. government and agency securities.
(b) Consists of investments in private equity, real estate and hedge funds measured at reported net asset value.
108
AMERICAN EXPRESS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS