15.	Pension Benefits and Savings Plans

Argo Group US sponsors a qualified defined benefit plan and non-qualified unfunded supplemental defined benefit plans, all of which were curtailed effective February 2004. The following tables set forth the change in plan assets and the change in projected benefit obligation, as of December 31 with respect to these plans. The assets and liabilities of the plans were measured as of December 31 of the respective years presented.

(in millions)	2015			2014
Change in plan assets
Fair value of plan assets at beginning of year	$	19.2		$	20.2
Actual return on plan assets		(0.1	)		1.0
Employer contributions		0.2			0.2
Settlements and benefits paid		(1.8	)		(2.2	)
Fair value of plan assets at end of year	$	17.5		$	19.2

(in millions)	2015			2014
Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	25.8		$	22.6
Interest cost		0.8			1.0
Actuarial loss (gain)		(1.6	)		4.3
Settlements and benefits paid		(1.9	)		(2.1	)
Projected benefit obligation at end of year	$	23.1		$	25.8

As of December 31, 2015 and 2014, the qualified pension plan was underfunded by $3.4 million and $4.4 million, respectively. The non-qualified pension plans were unfunded by $2.3 million $2.2 million at December 31, 2015 and 2014, respectively. Underfunded and unfunded amounts are included in “Other liabilities” in our Consolidated Balance Sheets.

Assumptions used to determine benefit obligations at December 31 were as follows:

	2015		2014
Weighted average discount rate		3.48%		3.37%
Expected rate of increase in future compensation levels	n/a		n/a

Assumptions used to determine net periodic benefit cost follows:

	For the Years Ended December 31,
	2015		2014		2013
Weighted average discount rate		3.55%		4.39%		3.63%
Expected return on plan assets		6.00%		6.00%		6.00%
Expected rate of increase in future compensation levels	n/a		n/a		n/a

In 2015, 2014, and 2013, the expected return on plan assets was ascertained using multiple factors that include market conditions, duration of the fixed maturity portion of the portfolio and long-term return forecasts provided by several asset management companies.

Net periodic benefit costs were $0.1 million, $0.5 million and $0.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. We estimate that $0.4 million of unrecognized actuarial loss will be amortized from accumulated other comprehensive gain into net periodic benefit cost during 2016. Over the next five years, we expect our annual payments under the pensions plan not to exceed $2.5 million per year.

The projected benefit obligation for the non-qualified unfunded supplemental defined benefit plans, with accumulated benefit obligations in excess of plan assets, was $2.3 and $2.2 million at December 31, 2015 and 2014, respectively. The fair value of plan assets for these plans was zero for these same periods. The accumulated benefit obligation for all defined benefit plans is equal to the projected benefit obligation for each of the years presented.

Our investment policy for the qualified plan requires the investments be prudently selected and properly diversified so as to minimize the risk of large losses in accordance with applicable laws including the Employee Retirement Income Security Act of 1974. The overall investment strategy is to achieve a balance of long-term growth of capital and current income, taking into account the need for liquidity to pay benefits as they come due. Periodic shifts in the asset allocation may be made based on the assessment of current and prospective market conditions.

The investment policy for the qualified plan contains asset allocation guidelines with target allocations that remain effective until such time as the investment policy is revised. At December 31, 2015, the target allocations were 65% fixed maturity investments, short-term investments, and cash; and 35% equity investments. The target asset allocation percentages were selected based on risk diversification needs, expected distribution patterns and asset manager recommendations. The actual asset allocation as of December 31, 2015 was 62% fixed maturity investments, short-term investments and cash; and 38% equity investments, of which 21.3% and 16.7% were allocated between U.S. and international equities, respectively. These allocations were in compliance with the investment policy that allows the investment manager based on its judgment and market conditions to deviate from the target allocations.

Following is a description of the valuation techniques used to measure the plan’s assets at fair value.

Mutual funds: Fair value is determined using observable, market-based inputs on the valuation date (Level 1). For the years ended December 31, 2015 and 2014, assets with a fair value of $17.4 million and $18.8 million, respectively, were valued using Level 1 fair value measurements.

Short-term investment fund: Fair value is determined based on the net asset values provided by the plan trustee (Level 2). For the years ended December 31, 2015 and 2014, assets with a fair value of $0.1 million and $0.4 million, respectively, were valued using Level 2 fair value measurements.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while it is believed the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Based on the current funding status of the pension plan, effects of the curtailment and expected changes in pension plan asset values and pension obligations, we do not believe any significant funding of the pension plan will be required during the year ending December 31, 2016.

Substantially all of our employees are either eligible or mandated by applicable laws to participate in employee savings plans. Under these plans, a percentage of the employee’s pay may be or is mandated based on applicable laws to be contributed to various savings alternatives. The plans also call for our contributions under several formulae. Charges to income related to our contributions were $6.3 million, $7.1 million and $6.8 million in 2015, 2014 and 2013, respectively.