Note 15. Benefit Plans

Pension Plans – The Company has several non-contributory defined benefit plans for eligible employees. Benefits for certain plans are determined annually based on a specified percentage of annual earnings (based on the participant's age or years of service) and a specified interest rate (which is established annually for all participants) applied to accrued balances. The benefits for another plan which covers salaried employees are based on formulas which include, among others, years of service and average pay. The Company's funding policy is to make contributions in accordance with applicable governmental regulatory requirements.

Other Postretirement Benefit Plans – The Company has several postretirement benefit plans covering eligible employees and retirees. Participants generally become eligible after reaching age 55 with required years of service. Actual requirements for coverage vary by plan. Benefits for retirees who were covered by bargaining units vary by each unit and contract. Benefits for certain retirees are in the form of a Company health care account.

Benefits for retirees reaching age 65 are generally integrated with Medicare. Other retirees, based on plan provisions, must use Medicare as their primary coverage, with the Company reimbursing a portion of the unpaid amount; or are reimbursed for the Medicare Part B premium or have no Company coverage. The benefits provided by the Company are basically health and, for certain retirees, life insurance type benefits.

In November of 2010, CNA changed a postretirement benefit that resulted in a plan amendment. The effect of this change was a reduction to the accumulated postretirement benefit obligation of $60 million at December 31, 2010.

The Company funds certain of these benefit plans, and accrues postretirement benefits during the active service of those employees who would become eligible for such benefits when they retire. The Company uses December 31 as the measurement date for its plans.

Weighted-average assumptions used to determine benefit obligations:


	Pension Benefits						Other Postretirement Benefits
December 31	2011		2010		2009		2011			2010			2009

Discount rate		4.5%		5.3%		5.7%		4.3	%		5.0	%		5.6	%
Expected long term rate of return on plan assets		7.5% to 8.0%		7.5% to 8.0%		7.5% to 8.0%		5.3	%		4.6	%		5.4	%
Rate of compensation increase		4.0% to 5.5%		4.0% to 5.5%		3.0% to 5.5%

Weighted-average assumptions used to determine net periodic benefit cost:


	Pension Benefits						Other Postretirement Benefits
Year Ended December 31	2011		2010		2009		2011			2010			2009

Discount rate		5.3%		5.7%		6.3%		5.0	%		5.6	%		6.3	%
Expected long term rate of return on plan assets		7.5% to 8.0%		7.5% to 8.0%		7.5% to 8.0%		4.6	%		5.4	%		5.4	%
Rate of compensation increase		4.0% to 5.5%		4.0% to 5.5%		3.0% to 5.8%

The expected long term rate of return for plan assets is determined based on widely-accepted capital market principles, long term return analysis for global fixed income and equity markets as well as the active total return oriented portfolio management style. Long term trends are evaluated relative to market factors such as inflation, interest rates and fiscal and monetary policies, in order to assess the capital market assumptions as applied to the plan. Consideration of diversification needs and rebalancing is maintained.

Assumed health care cost trend rates:

December 31

2011

2010

2009

Health care cost trend rate assumed for next year

4.0% to 8.5%

4.0% to 9.0%

Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)

4.0% to 5.0%

4.0% to 5.0%

Year that the rate reaches the ultimate trend rate

2012-2020

2011-2020

2010-2019

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. An increase or decrease in the assumed health care cost trend rate of 1% in each year would not have a significant impact on the Company's service and interest cost as of December 31, 2011. An increase of 1% in each year would increase the Company's accumulated postretirement benefit obligation as of December 31, 2011 by $2 million and a decrease of 1% in each year would decrease the Company's accumulated postretirement benefit obligation as of December 31, 2011 by $5 million.

Net periodic benefit cost components:


	Pension Benefits									Other Postretirement Benefits
Year Ended December 31	2011			2010			2009			2011			2010			2009
(In millions)

Service cost	$	24		$	26		$	26		$	2		$	2		$	2
Interest cost		164			168			171			6			11			13
Expected return on plan assets		(188	)		(176	)		(156	)		(3	)		(4	)		(2	)
Amortization of unrecognized net (gain) loss		29			28			30			1			2			(15	)
Amortization of unrecognized prior service benefit											(27	)		(24	)		(8	)
Regulatory asset (increase) decrease								(1	)		4			5			5
Net periodic benefit cost	$	29		$	46		$	70		$	(17	)	$	(8	)	$	(5	)

The following provides a reconciliation of benefit obligations:


	Pension Benefits						Other Postretirement Benefits
	2011			2010			2011			2010
(In millions)

Change in benefit obligation:

Benefit obligation at January 1	$	3,146		$	3,029		$	159		$	221
Service cost		24			26			2			2
Interest cost		164			168			6			11
Plan participants' contributions								7			7
Amendments								(11	)		(60	)
Actuarial (gain) loss		295			104			(15	)		(3	)
Benefits paid from plan assets		(182	)		(180	)		(17	)		(18	)
Foreign exchange					(1	)					(1	)
Reduction of benefit obligations due to disposition of subsidiary		(54	)					(13	)
Benefit obligation at December 31		3,393			3,146			118			159

Change in plan assets:

Fair value of plan assets at January 1		2,468			2,303			73			73
Actual return on plan assets		90			256			11			3
Company contributions		113			90			8			8
Plan participants' contributions								7			7
Benefits paid from plan assets		(182	)		(180	)		(17	)		(18	)
Foreign exchange					(1	)
Reduction of plan assets due to disposition of subsidiary		(54	)
Fair value of plan assets at December 31		2,435			2,468			82			73
Funded status	$	(958	)	$	(678	)	$	(36	)	$	(86	)


Amounts recognized in the Consolidated Balance Sheets consist of:

Other assets				$	7		$	28		$	22
Other liabilities	$	(958	)		(685	)		(64	)		(108	)
Net amount recognized	$	(958	)	$	(678	)	$	(36	)	$	(86	)


	Pension Benefits				Other Postretirement Benefits
	2011		2010		2011			2010
(In millions)

Amounts recognized in Accumulated other comprehensive income (loss), not yet recognized in net periodic (benefit) cost:

Prior service cost (credit)	$	3	$	3	$	(166	)	$	(181	)
Net actuarial loss		1,174		819		20			45
Net amount recognized	$	1,177	$	822	$	(146	)	$	(136	)


Information for plans with projected and accumulated benefit obligations in excess of plan assets:

Projected benefit obligation	$	3,328	$	3,034
Accumulated benefit obligation		3,218		2,925	$	64		$	108
Fair value of plan assets		2,370		2,349

The accumulated benefit obligation for all defined benefit pension plans was $3.3 billion and $3.0 billion at December 31, 2011 and 2010.

The Company employs a total return approach whereby a mix of equity and fixed maturity securities are used to maximize the long term return of plan assets for a prudent level of risk and to manage cash flows according to plan requirements. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established after careful consideration of the plan liabilities, plan funded status and corporate financial conditions. The investment portfolio contains a diversified blend of fixed maturity, equity and short term securities. Alternative investments, including limited partnerships, are used to enhance risk adjusted long term returns while improving portfolio diversification. At December 31, 2011, the Company had committed $30 million to future capital calls from various third party limited partnership investments in exchange for an ownership interest in the related partnerships. Investment risk is monitored through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.

The table below presents the estimated amounts to be recognized from Accumulated other comprehensive income into net periodic cost (benefit) during 2012.


	Pension Benefits		Other Postretirement Benefits
(In millions)

Amortization of net actuarial loss	$	47
Amortization of prior service credit				$ (25)
Total estimated amounts to be recognized	$	47		$ (25)

The table below presents the estimated future minimum benefit payments at December 31, 2011.


Expected future benefit payments	Pension Benefits		Other Postretirement Benefits
(In millions)

2012	$	203	$	11
2013		208		10
2014		212		10
2015		217		10
2016		224		9
Thereafter		1,175		41
	$	2,239	$	91

In 2012, it is expected that contributions of approximately $107 million will be made to pension plans and $7 million to postretirement health care and life insurance benefit plans.

Pension plan assets measured at fair value on a recurring basis are summarized below.


December 31, 2011	Level 1		Level 2		Level 3		Total
(In millions)

Fixed maturity securities:
Corporate and other bonds			$	377	$	10	$	387
States, municipalities and political subdivisions				104				104
Asset-backed				276				276
Total fixed maturity securities	$	-		757		10		767
Equity securities		386		75		5		466
Short term investments		77		35				112
Fixed income mutual funds		98						98
Limited partnerships:
Hedge funds				533		344		877
Private equity						84		84
Total limited partnerships	$	-		533		428		961
Other assets				21				21
Investment contracts with insurance company						10		10
Total	$	561	$	1,421	$	453	$	2,435


December 31, 2010

Fixed maturity securities:
Corporate and other bonds			$	305	$	10	$	315
States, municipalities and political subdivisions				92				92
Asset-backed				230		10		240
Total fixed maturity securities	$	-		627		20		647
Equity securities		452		77		6		535
Short term investments		114		7				121
Fixed income mutual funds		84						84
Limited partnerships:
Hedge funds				563		417		980
Private equity						76		76
Total limited partnerships	$	-		563		493		1,056
Other assets		1		15				16
Investment contracts with insurance company						9		9
Total	$	651	$	1,289	$	528	$	2,468

The limited partnership investments are recorded at fair value, which represents the plans' share of the net asset value of each partnership, as determined by the General Partner. Level 2 includes limited partnership investments which can be redeemed at net asset value in 90 days or less. Level 3 includes limited partnership investments with withdrawal provisions greater than 90 days, or for which withdrawals are not permitted until the termination of the partnership. Within hedge fund strategies, approximately 54% are equity related, 35% pursue a multi-strategy approach, 10% are focused on distressed investments and 1% are fixed income related at December 31, 2011.

The fair value of the guaranteed investment contracts is an estimate of the amount that would be received in an orderly sale to a market participant at the measurement date. The amount the plan would receive from the contract holder if the contracts were terminated is the primary input and is unobservable. The guaranteed investment contracts are therefore classified as Level 3 investments.

For a discussion of the valuation methodologies used to measure fixed maturity securities, equities and short term investments, see Note 4.

The tables below present reconciliations for all pension plan assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010:


2011	Balance at January 1,			Actual Return on Assets Still Held at December 31,				Actual Return on Assets Sold during the Year Ended December 31,			Net Purchases, Sales, and Settlements				Net Transfers In (Out) of Level 3			Balance at December 31,
(In millions)
Fixed maturity securities:
Corporate and other bonds		$	10																$	10
Asset-backed			10									$	(10	)
Total fixed maturity securities			20		$	-			$	-			(10	)		$	-			10
Equity securities			6			(1	)													5
Limited partnerships:
Hedge funds			417			5				5			(83	)						344
Private equity			76			10							(2	)						84
Total limited partnerships			493			15				5			(85	)		$	-			428
Investment contracts with insurance company			9			1														10
Total		$	528		$	15			$	5		$	(95	)		$	-		$	453

2010

Fixed maturity securities:
Corporate and other bonds												$	10						$	10
Asset-backed		$	57						$	6			(53	)						10
Total fixed maturity securities			57		$	-				6			(43	)		$	-			20
Equity securities			5			1														6
Limited partnerships:
Hedge funds			360			67				1			(11	)						417
Private equity			72			8							(4	)						76
Total limited partnerships			432			75				1			(15	)		$	-			493
Investment contracts with insurance company			9																	9
Total		$	503		$	76			$	7		$	(58	)		$	-		$	528

Other postretirement benefits plan assets measured at fair value on a recurring basis are summarized below.


December 31, 2011	Level 1		Level 2		Level 3		Total
(In millions)

Fixed maturity securities:
Corporate and other bonds			$	20			$	20
States, municipalities and political subdivisions				35				35
Asset-backed				20				20
Total fixed maturity securities	$	-		75	$	-		75
Short term investments		3						3
Fixed income mutual funds		4						4
Total	$	7	$	75	$	-	$	82


December 31, 2010

Fixed maturity securities:
Corporate and other bonds			$	18			$	18
States, municipalities and political subdivisions				33				33
Asset-backed				8				8
U.S. Treasury and obligations of government - sponsored enterprises	$	8						8
Total fixed maturity securities		8		59	$	-		67
Equity securities		3						3
Short term investments		3						3
Total	$	14	$	59	$	-	$	73

The table below presents reconciliations for all Other postretirement benefit plan assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2010. There were no Level 3 assets at December 31, 2011.


2010	Balance at January 1,	Actual Return on Assets Still Held at December 31,	Actual Return on Assets Sold during the Year Ended December 31,	Net Purchases, Sales, and Settlements	Net Transfers In (Out) of Level 3	Balance at December 31,
(In millions)

Limited partnerships	$ 16		$ 1	$ (17)
Total	$ 16	$ -	$ 1	$ (17)	$ -	$ -

Savings Plans – The Company and its subsidiaries have several contributory savings plans which allow employees to make regular contributions based upon a percentage of their salaries. Matching contributions are made up to specified percentages of employees' contributions. The contributions by the Company and its subsidiaries to these plans amounted to $100 million, $104 million and $98 million for the years ended December 31, 2011, 2010 and 2009.

Stock Option Plans – In 2005, shareholders approved the amended and restated Loews Corporation 2000 Stock Option Plan (the "Loews Plan"). The aggregate number of shares of Loews common stock for which options or SARs may be granted under the Loews Plan is 12,000,000 shares, and the maximum number of shares of Loews common stock with respect to which options or SARs may be granted to any individual in any calendar year is 1,200,000 shares. The exercise price per share may not be less than the fair market value of the common stock on the date of grant. Generally, options and SARs vest ratably over a four-year period and expire in ten years.

A summary of the stock option and SAR transactions for the Loews Plan follows:


	2011					2010
	Number of Awards			Weighted Average Exercise Price		Number of Awards			Weighted Average Exercise Price

Awards outstanding, January 1		6,104,501		$	33.082		5,657,996		$	31.242
Granted		910,200			39.957		962,850			36.544
Exercised		(370,789	)		25.502		(500,658	)		19.860
Canceled		(19,303	)		34.692		(15,687	)		35.055
Awards outstanding, December 31		6,624,609			34.447		6,104,501			33.082


Awards exercisable, December 31		4,599,587		$	33.405		3,965,726		$	31.501

The following table summarizes information about the Company's stock options and SARs outstanding in connection with the Loews Plan at December 31, 2011:

Awards Outstanding

Awards Exercisable

Range of exercise prices

Number of
Shares

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

Number of
Shares

Weighted
Average
Exercise
Price

$10.01-20.00

803,728

1.2

17.868

803,728

17.868

20.01-30.00

1,199,098

5.2

24.631

897,641

24.394

30.01-40.00

2,690,208

6.7

36.003

1,506,551

35.418

40.01-50.00

1,720,825

6.5

44.559

1,180,917

45.108

50.01-60.00

210,750

5.1

51.080

210,750

51.080

In 2011, the Company awarded SARs totaling 910,200 shares. In accordance with the Loews Plan, the Company has the ability to settle SARs in shares or cash and has the intention to settle in shares. The SARs balance at December 31, 2011 was 5,112,179 shares. There were 1,813,211 shares and 2,500,784 shares available for grant as of December 31, 2011 and 2010.

The weighted average remaining contractual terms of awards outstanding and exercisable as of December 31, 2011, were 5.6 years and 4.5 years. The aggregate intrinsic values of awards outstanding and exercisable at December 31, 2011 were $37 million and $31 million. The total intrinsic value of awards exercised was $6 million, $9 million and $8 million for the years ended 2011, 2010 and 2009. The total fair value of shares vested was $11 million, $12 million and $10 million for the years ended 2011, 2010 and 2009.

The Company recorded stock-based compensation expense of $10 million, $11 million and $13 million related to the Loews Plan for the years ended December 31, 2011, 2010 and 2009. The related income tax benefits recognized were $4 million, $4 million and $4 million. At December 31, 2011, the compensation cost related to nonvested awards not yet recognized was $12 million, and the weighted average period over which it is expected to be recognized is 2.3 years.

The fair value of granted options and SARs for the Loews Plan were estimated at the grant date using the Black-Scholes pricing model with the following assumptions and results:


Year Ended December 31	2011			2010			2009

Expected dividend yield		0.6	%		0.7	%		0.9	%
Expected volatility		24.1	%		24.7	%		47.4	%
Weighted average risk-free interest rate		1.7	%		2.0	%		1.9	%
Expected holding period (in years)		5.0			5.0			5.0
Weighted average fair value of awards	$	8.92		$	8.57		$	10.77