Retirement Benefits

The Company maintains qualified and non-qualified defined benefit pension plans for its U.S. and non-U.S. eligible employees. The Company’s policy for funding its tax qualified defined benefit retirement plans is to contribute amounts at least sufficient to meet the funding requirements set forth by U.S. law and the laws of the non-U.S. jurisdictions in which the Company offers defined benefit plans.

Combined U.S. and non-U.S. Plans

The weighted average actuarial assumptions utilized for the U.S. and significant non-U.S. defined benefit plans as of the end of the year are as follows:



	Pension Benefits				Postretirement Benefits
	2011		2010		2011		2010
Weighted average assumptions:
Discount rate (for expense)	5.59	%	6.00	%	5.81	%	6.27	%
Expected return on plan assets	8.19	%	8.18	%	—	%	—	%
Rate of compensation increase (for expense)	4.08	%	4.16	%	—	%	—	%
Discount rate (for benefit obligation)	4.91	%	5.59	%	5.05	%	5.84	%
Rate of compensation increase (for benefit obligation)	3.09	%	4.09	%	—	%	—	%

The Company uses actuaries from Mercer, a subsidiary of the Company, to perform valuations of its pension plans. The long-term rate of return assumption is selected for each plan based on the facts and circumstances that exist as of the measurement date, and the specific portfolio mix of each plan’s assets. The Company utilizes a model developed by the Mercer actuaries to assist in the setting of this assumption. The model takes into account several factors, including: actual and target portfolio allocation; investment, administrative and trading expenses incurred directly by the plan trust; historical portfolio performance; relevant forward-looking economic analysis; and expected returns, variances and correlations for different asset classes. These measures are used to determine probabilities using standard statistical techniques to calculate a range of expected returns on the portfolio. The Company generally does not adjust the rate of return assumption from year to year if, at the measurement date, it is within the best estimate range, defined as between the 25^th and 75^th percentile of the expected long-term annual returns in accordance with the “American Academy of Actuaries Pension Practice Council Note May 2001 Selecting and Documenting Investment Return Assumptions” and consistent with Actuarial Standards of Practice No. 27. Historical long-term average asset returns of each plan are also reviewed to determine whether they are consistent and reasonable compared with the best estimate range. The expected return on plan assets is determined by applying the assumed long-term rate of return to the market-related value of plan assets. This market-related value recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market value of assets. Since the market-related value of assets recognizes gains or losses over a five-year period, the future market-related value of the assets will be impacted as previously deferred gains or losses are recorded.

The target asset allocation for the U.S. Plan is 58% equities and equity alternatives and 42% fixed income. At the end of 2011, the actual allocation for the U.S. Plan was 58% equities and equity alternatives and 42% fixed income. The target asset allocation for the U.K. Plan, which comprises approximately 82% of non-U.S. Plan assets, is 58% equities and equity alternatives and 42% fixed income. At the end of 2011, the actual allocation for the U.K. Plan was 53% equities and equity alternatives and 47% fixed income. The assets of the Company's defined benefit plans are well-diversified and are managed in accordance with applicable laws and with the goal of maximizing the plans' real return within acceptable risk parameters. The Company uses threshold-based portfolio rebalancing to ensure the actual portfolio remains consistent with target asset allocation ranges.

The U.S. qualified plan holds eight million shares of the Company’s common stock which were contributed to the Plan by the Company. This represents approximately 7% of that plan’s assets. In addition, plan assets may be invested in funds managed by Mercer Investments.

The discount rate selected for each U.S. plan is based on a model bond portfolio with coupons and redemptions that closely match the expected liability cash flows from the plan. Discount rates for non-U.S. plans are based on appropriate bond indices such as the Markit iBoxx £ Corporates AA 15+ index in the U.K. Projected compensation increases reflect current expectations as to future levels of inflation.

The components of the net periodic benefit cost for defined benefit and other post-retirement plans are as follows:



Combined U.S. and significant non-U.S. Plans	Pension									Postretirement
For the Years Ended December 31,	Benefits									Benefits
(In millions of dollars)	2011			2010			2009			2011			2010			2009
Service cost	$	226		$	197		$	188		$	5		$	4		$	5
Interest cost	609			578			551			13			14			17
Expected return on plan assets	(887		)	(815		)	(788		)	—			—			—
Amortization of prior service credit	(19		)	(21		)	(49		)	(13		)	(13		)	(13		)
Recognized actuarial loss (credit)	215			144			70			(4		)	—			1
Net periodic benefit cost	$	144		$	83		$	(28	)	$	1		$	5		$	10

Plan Assets

For the U.S. plan, investment allocation decisions are made by a fiduciary committee composed of senior executives appointed by the Company’s Chief Executive Officer. For the non-U.S. plans, investment allocation decisions are made by local fiduciaries, in consultation with the Company for the larger plans. Plan assets are invested in a manner consistent with the fiduciary standards set forth in all relevant laws relating to pensions and trusts in each country. Our primary investment objectives are (1) to achieve an investment return that, in combination with current and future contributions, will provide sufficient funds to pay benefits, and (2) to minimize the risk of large losses. Our investment allocations are designed to meet these objectives by broadly diversifying plan assets among numerous asset classes with differing expected returns, volatilities, and correlations.

The major categories of plan assets include equity securities, equity alternative investments, and fixed income securities. For the U.S. qualified plan, the category ranges are 53-63% for equities and equity alternatives, and 37-47% for fixed income. For the U.K. Plan, the category ranges are 55-61% for equities and equity alternatives, and 39-45% for fixed income. Asset allocation ranges are evaluated generally every three years. Asset allocation is monitored frequently and re-balancing actions are taken as appropriate.

Plan investments are exposed to stock market, interest rate, and credit risk. Concentrations of these risks are generally limited due to diversification by investment style within each asset class, diversification by investment manager, diversification by industry sectors and issuers, and the dispersion of investments across many geographic areas.

Unrecognized Actuarial Gains/Losses

In accordance with applicable accounting guidance, the funded status of the Company's pension plans are recorded in the consolidated balance sheets and provides for a delayed recognition of actuarial gains or losses arising from changes in the projected benefit obligation due to changes in the assumed discount rates, differences between the actual and expected value of plan assets and other assumption changes. The unrecognized pension plan actuarial gains or losses and prior service costs not yet recognized in net periodic pension cost are recognized in AOCI, net of tax. These gains and losses are amortized prospectively out of AOCI over a period that approximates the average remaining service period of active employees, or for plans in which substantially all the participants are inactive, over the remaining life expectancy of the inactive employees.

U.S. Plans

The following schedules provide information concerning the Company’s U.S. defined benefit pension plans and postretirement benefit plans:



December 31,	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,041		$	3,629		$	180		$	163
Service cost	83			76			3			3
Interest cost	231			227			8			10
Actuarial (gain) loss	352			270			(20		)	12
Medicare Part D subsidy	—			—			4			3
Benefits paid	(174		)	(161		)	(13		)	(11		)
Benefit obligation at end of year	$	4,533		$	4,041		$	162		$	180
Change in plan assets:
Fair value of plan assets at beginning of year	$	3,444		$	2,959		$	—		$	—
Actual return on plan assets	199			425			—			—
Employer contributions	24			221			9			8
Medicare Part D subsidy	—			—			4			3
Benefits paid	(174		)	(161		)	(13		)	(11		)
Fair value of plan assets at end of year	$	3,493		$	3,444		$	—		$	—
Funded status	$	(1,040	)	$	(597	)	$	(162	)	$	(180	)
Net liability recognized	$	(1,040	)	$	(597	)	$	(162	)	$	(180	)
Amounts recognized in the consolidated balance sheets:
Current liabilities	$	(124	)	$	(23	)	$	(9	)	$	(11	)
Noncurrent liabilities	(916		)	(574		)	(153		)	(169		)
	$	(1,040	)	$	(597	)	$	(162	)	$	(180	)
Amounts not yet recognized in net periodic cost and included in accumulated other comprehensive income:
Unrecognized prior service credit	$	39		$	55		$	13		$	26
Unrecognized net actuarial (loss) gain	(1,695		)	(1,327		)	12			(4		)
Total amounts included in accumulated other comprehensive income	$	(1,656	)	$	(1,272	)	$	25		$	22
Cumulative employer contributions in excess of net periodic cost	616			675			(187		)	(202		)
Net amount recognized in consolidated balance sheet	$	(1,040	)	$	(597	)	$	(162	)	$	(180	)
Accumulated benefit obligation at December 31	$	4,467		$	3,929		$	—		$	—



December 31,	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011			2010
Reconciliation of unrecognized prior service credit:
Amount disclosed as of prior year-end	$	55		$	73		$	26		$	39
Recognized as component of net periodic benefit credit	(16		)	(18		)	(13		)	(13		)
Amount at end of year	$	39		$	55		$	13		$	26



December 31,	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011			2010
Reconciliation of unrecognized net actuarial gain (loss):
Amount disclosed as of prior year-end	$	(1,327	)	$	(1,258	)	$	(4	)	$	9
Recognized as component of net periodic benefit cost	100			71			(4		)	—
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Liability experience	(352		)	(269		)	20			(13		)
Asset experience	(116		)	129			—			—
Total gain (loss) recognized as change in plan assets and benefit obligations	(468		)	(140		)	20			(13		)
Amount at end of year	$	(1,695	)	$	(1,327	)	$	12		$	(4	)



For the Years Ended December 31,	U.S. Pension Benefits						U.S. Postretirement Benefits
(In millions of dollars)	2011		2010		2009		2011			2010		2009
Total recognized in net periodic benefit cost and other comprehensive loss (income)	$	467	$	148	$	42	$	(9	)	$	26	$	(7	)

Estimated amounts that will be amortized from accumulated other comprehensive income in the next fiscal year:



	U.S. Pension Benefits			U.S. Postretirement Benefits
(In millions of dollars)	2012			2012
Prior service credit	$	(16	)	$	(12	)
Net actuarial loss (gain)	146			(1		)
Projected cost (credit)	$	130		$	(13	)

The weighted average actuarial assumptions utilized in determining the above amounts for the U.S. defined benefit and other U.S. postretirement plans as of the end of the year are as follows:



	U.S. Pension Benefits				U.S. Postretirement Benefits
	2011		2010		2011		2010
Weighted average assumptions:
Discount rate (for expense)	5.90	%	6.35	%	5.95	%	6.30	%
Expected return on plan assets	8.75	%	8.75	%	—		—
Rate of compensation increase (for expense)	3.90	%	3.90	%	—		—
Discount rate (for benefit obligation)	5.15	%	5.90	%	5.10	%	6.00	%
Rate of compensation increase (for benefit obligation)	2.00	%	3.90	%	—		—

The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $4.5 billion, $4.5 billion and $3.5 billion, respectively, as of December 31, 2011 and $4.0 billion, $3.9 billion and $3.4 billion, respectively, as of December 31, 2010.

The projected benefit obligation for U.S. pension plans with projected benefit obligations in excess of plan assets was $4.5 billion and $3.5 billion, respectively, as of December 31, 2011 and $4.0 billion and $3.4 billion, respectively, as of December 31, 2010.

The components of the net periodic benefit cost for the U.S. defined benefit and other postretirement benefit plans are as follows:



U.S. Plans only	Pension									Postretirement
For the Years Ended December 31,	Benefits									Benefits
(In millions of dollars)	2011			2010			2009			2011			2010			2009
Service cost	$	83		$	76		$	76		$	3		$	3		$	4
Interest cost	231			227			219			8			10			12
Expected return on plan assets	(315		)	(295		)	(293		)	—			—			—
Amortization of prior service credit	(16		)	(18		)	(47		)	(13		)	(13		)	(13		)
Recognized actuarial loss (credit)	100			71			52			(4		)	—			1
Net periodic benefit cost (credit)	$	83		$	61		$	7		$	(6	)	$	—		$	4

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 became law. The net periodic benefit cost shown above for 2011, 2010 and 2009, respectively, includes the subsidy.

The assumed health care cost trend rate for Medicare eligibles is approximately 8.1% in 2011, gradually declining to 4.5% in 2028, and the rate for non-Medicare eligibles is 8% in 2011, gradually declining to 4.5% in 2028. Assumed health care cost trend rates have a small effect on the amounts reported for the U.S. health care plans because the Company caps its share of health care trend at 5%. A one percentage point change in assumed health care cost trend rates would have the following effects:



(In millions of dollars)	1 Percentage Point Increase		1 Percentage Point Decrease
Effect on total of service and interest cost components	$	—	$	(1	)
Effect on postretirement benefit obligation	$	1	$	(16	)

Estimated Future Contributions

On January 3, 2012, the Company contributed $100 million to its U.S. qualified plan. The Company expects to fund approximately $24 million for its U.S. plans for the remainder of 2012. The Company’s policy for funding its tax-qualified defined benefit retirement plans is to contribute amounts at least sufficient to meet the funding requirements set forth in the U.S. and applicable foreign law. There currently is no ERISA funding requirement for the U.S. qualified plan for 2012.

Non-U.S. Plans

The following schedules provide information concerning the Company’s non-U.S. defined benefit pension plans and non-U.S. postretirement benefit plans



December 31,	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	6,802		$	6,354		$	83		$	70
Service cost	143			121			2			1
Interest cost	378			351			5			4
Employee contributions	14			16			—			—
Actuarial loss	575			430			5			11
Plan amendments	(3		)	—			—			—
Effect of settlement	(7		)	(17		)	—			—
Effect of curtailment	(1		)	(2		)	—			—
Special termination benefits	—			1			—			—
Benefits paid	(266		)	(244		)	(4		)	(3		)
Foreign currency changes	66			(208		)	—			—
Newly disclosed plans	16			—			—			—
Benefit obligation at end of year	$	7,717		$	6,802		$	91		$	83
Change in plan assets:
Fair value of plan assets at beginning of year	$	6,741		$	6,183		$	—		$	—
Actual return on plan assets	311			765			—			—
Effect of settlement	(6		)	(17		)	—			—
Company contributions	320			237			4			3
Employee contributions	14			16			—			—
Benefits paid	(266		)	(244		)	(4		)	(3		)
Foreign currency changes	82			(202		)	—			—
Newly disclosed plans	12			—			—			—
Other	(2		)	3			—			—
Fair value of plan assets at end of year	$	7,206		$	6,741		$	—		$	—
Funded status	$	(511	)	$	(61	)	$	(91	)	$	(83	)
Net liability recognized	$	(511	)	$	(61	)	$	(91	)	$	(83	)
Amounts recognized in the consolidated balance sheets:
Non-current assets	$	39		$	265		$	—		$	—
Current liabilities	(106		)	(8		)	(4		)	(4		)
Non-current liabilities	(444		)	(318		)	(87		)	(79		)
	$	(511	)	$	(61	)	$	(91	)	$	(83	)
Amounts not yet recognized in net periodic cost and included in accumulated other comprehensive income:
Unrecognized prior service credit	$	23		$	23		$	1		$	1
Unrecognized net actuarial loss	(3,038		)	(2,305		)	(19		)	(14		)
Total amounts included in AOCI	$	(3,015	)	$	(2,282	)	$	(18	)	$	(13	)
Cumulative employer contributions in excess of net periodic cost	2,504			2,221			(73		)	(70		)
Net amount recognized in consolidated balance sheet	$	(511	)	$	(61	)	$	(91	)	$	(83	)
Accumulated benefit obligation at December 31	$	7,246		$	6,313		$	—		$	—



December 31,	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011		2010
Reconciliation of prior service credit (cost):
Amount disclosed as of prior year-end	$	23		$	24		$	1	$	1
Recognized as component of net periodic benefit credit	3			(2		)	—		—
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Plan amendments	(3		)	—			—		—
Exchange rate adjustments	—			1			—		—
Amount at end of year	$	23		$	23		$	1	$	1



December 31,	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2011			2010
Reconciliation of net actuarial loss:
Amount disclosed as of prior year-end	$	(2,305	)	$	(2,268	)	$	(14	)	$	(4	)
Recognized as component of net periodic benefit cost	115			73			—			—
Effect of settlement	—			5			—			—
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Liability experience	(575		)	(430		)	(5		)	(10		)
Asset experience	(261		)	244			—			—
Effect of curtailment	(1		)	2			—			—
Total amount recognized as change in plan assets and benefit obligations	(837		)	(184		)	(5		)	(10		)
Exchange rate adjustments	(11		)	69			—			—
Amount at end of year	$	(3,038	)	$	(2,305	)	$	(19	)	$	(14	)



For the Years Ended December 31,	Non-U.S. Pension Benefits						Non-U.S. Postretirement Benefits
(In millions of dollars)	2011		2010		2009		2011		2010		2009
Total recognized in net periodic benefit cost and other comprehensive loss	$	792	$	66	$	519	$	12	$	15	$	3

Estimated amounts that will be amortized from accumulated other comprehensive income in the next fiscal year:



	Non-U.S. Pension Benefits			Non-U.S. Postretirement Benefits
(In millions of dollars)	2012			2012
Prior service credit	$	3		$	—
Net actuarial loss	(116		)	(1		)
Projected cost	$	(113	)	$	(1	)



December 31,	Non-U.S. Pension Benefits				Non-U.S. Postretirement Benefits
(In millions of dollars)	2011		2010		2011		2010
Weighted average assumptions:
Discount rate (for expense)	5.41	%	5.80	%	5.51	%	6.20	%
Expected return on plan assets	7.91	%	7.90	%	—	%	—	%
Rate of compensation increase (for expense)	4.19	%	4.30	%	—	%	—	%
Discount rate (for benefit obligation)	4.77	%	5.40	%	4.95	%	5.50	%
Rate of compensation increase (for benefit obligation)	3.73	%	4.20	%	—	%	—	%

The non-U.S. defined benefit plans do not have any direct ownership of the Company’s common stock.

The pension plan in the United Kingdom holds a limited partnership interest in the Trident III private equity fund valued at $169 million at December 31, 2011.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-U.S. pension plans with accumulated benefit obligations in excess of plan assets were $1.4 billion, $1.3 billion and $1.0 billion, respectively, as of December 31, 2011 and $1.2 billion, $1.1 billion and $0.9 billion, respectively, as of December 31, 2010.

The projected benefit obligation and fair value of plan assets for non-U.S. pension plans with projected benefit obligations in excess of plan assets was $7.6 billion and $7.0 billion, respectively, as of December 31, 2011 and $1.3 billion and $1.0 billion, respectively, as of December 31, 2010.

The components of the net periodic benefit cost for the non-U.S. defined benefit and other postretirement benefit plans and the curtailment, settlement and termination expenses are as follows:



For the Years Ended December 31,	Non-U.S. Pension Benefits									Non-U.S. Postretirement Benefits
(In millions of dollars)	2011			2010			2009			2011		2010		2009
Service cost	$	143		$	121		$	112		$	2	$	1	$	1
Interest cost	378			351			332			5		4		5
Expected return on plan assets	(572		)	(520		)	(495		)	—		—		—
Amortization of prior service cost	(3		)	(3		)	(2		)	—		—		—
Recognized actuarial loss	115			73			18			—		—		—
Net periodic benefit cost (credit)	61			22			(35		)	7		5		6
Settlement (credit)/loss	—			5			1			—		—		—
Curtailment (credit)/loss	—			—			—			—		—		—
Special termination benefits	—			1			—			—		—		—
Total cost (credit)	$	61		$	28		$	(34	)	$	7	$	5	$	6

The assumed health care cost trend rate was approximately 6.7% in 2011, gradually declining to 4.9% in 2025. Assumed health care cost trend rates can have a significant effect on the amounts reported for the non-U.S. health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:



(In millions of dollars)	1 Percentage Point Increase		1 Percentage Point Decrease
Effect on total of service and interest cost components	$	1	$	—
Effect on postretirement benefit obligation	$	10	$	(8	)

Estimated Future Contributions

The Company expects to fund approximately $395 million to its non-U.S. pension plans in 2012. Funding requirements for non-U.S. plans vary by country. Contribution rates are determined by the local actuaries based on local funding practices and requirements. Funding amounts may be influenced by future asset performance, the level of discount rates and other variables impacting the assets and/or liabilities of the plan. In addition, amounts funded in the future, to the extent not due under regulatory requirements, may be affected by alternative uses of the Company’s cash flows, including dividends, investments and share repurchases.

Estimated Future Benefit Payments

The Plan’s estimated future benefit payments for its pension and postretirement benefits (without reduction for Medicare subsidy receipts) at December 31, 2011 are as follows:



December 31,	Pension Benefits				Postretirement Benefits
(In millions of dollars)	U.S.		Non-U.S.		U.S.		Non-U.S.
2012	$	197	$	247	$	11	$	4
2013	$	207	$	253	$	12	$	4
2014	$	218	$	267	$	12	$	4
2015	$	230	$	283	$	12	$	4
2016	$	242	$	301	$	12	$	4
2017-2021	$	1,395	$	1,786	$	61	$	25

Defined Benefit Plans Fair Value Disclosures

In December 2008 the FASB issued guidance for Employers’ Disclosures About Pension and Other Post Retirement Benefit Plan Assets. The guidance requires fair value plan asset disclosures for an employer’s defined benefit pension and postretirement plans similar to the guidance on Fair Value Measurements as well as (a) how investment allocation decisions are made, (b) the major categories of plan assets, and (c) significant concentrations of risk within plan assets.

The U.S. and non-U.S. plan investments are classified into Level 1, which refers to securities valued using quoted prices from active markets for identical assets; Level 2, which refers to securities not traded on an active market but for which observable market inputs are readily available; and Level 3, which refers to securities valued based on significant unobservable inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth, by level within the fair value hierarchy, a summary of the U.S. and non-U.S. plans investments measured at fair value on a recurring basis at December 31, 2011 and 2010.



	Fair Value Measurements at December 31, 2011
Assets (In millions of dollars)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Common/Collective trusts	$	10	$	4,837	$	—	$	4,847
Corporate obligations	—		1,792		1		1,793
Corporate stocks	1,716		15		8		1,739
Private equity/Partnerships	—		1		779		780
Government securities	10		368		—		378
Real estate	14		4		319		337
Short-term investment funds	288		42		—		330
Company common stock	253		—		—		253
Other investments	1		34		202		237
Insurance group annuity contracts	—		—		20		20
Swaps	—		5		—		5
Total investments	$	2,292	$	7,098	$	1,329	$	10,719



	Fair Value Measurements at December 31, 2010
Assets (In millions of dollars)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Common/Collective trusts	$	—	$	4,471	$	—	$	4,471
Corporate obligations	—		1,103		8		1,111
Corporate stocks	1,939		1		1		1,941
Private equity/Partnerships	—		1		746		747
Government securities	—		547		—		547
Real estate	3		5		293		301
Short-term investment funds	561		49		—		610
Company common stock	219		—		—		219
Other investments	3		8		177		188
Insurance group annuity contracts	—		—		20		20
Swaps	—		9		—		9
Total investments	$	2,725	$	6,194	$	1,245	$	10,164

There were no transfers between Level 1 and Level 2 assets during 2011 or 2010.

The tables below set forth a summary of changes in the fair value of the plans’ Level 3 assets for the years ended December 31, 2011 and December 31, 2010:



Assets (In millions)	Fair Value, January 1, 2011		Purchases		Sales			Unrealized Gain/ (Loss)			Realized Gain/ (Loss)			Exchange Rate Impact			Transfers in/(out) and Other			Fair Value, December 31, 2011
Private equity/Partnerships	$	746	$	119	$	(80	)	$	(83	)	$	70		$	7		$	—		$	779
Real estate	293		—		—			22			(1		)	5			—			319
Other investments	177		32		(13		)	6			2			(2		)	—			202
Insurance group annuity contracts	20		151		(150		)	8			(9		)	—			—			20
Corporate stocks	1		8		—			(1		)	—			—			—			8
Corporate obligations	8		1		(8		)	2			(1		)	—			(1		)	1
Total assets	$	1,245	$	311	$	(251	)	$	(46	)	$	61		$	10		$	(1	)	$	1,329



Assets (In millions)	Fair Value, January 1, 2010		Purchases		Sales			Unrealized Gain/ (Loss)			Realized Gain/ (Loss)			Exchange Rate Impact			Transfers in/(out) and Other			Fair Value, December 31, 2010
Private equity/Partnerships	$	637	$	138	$	(54	)	$	15		$	22		$	(12	)	$	—		$	746
Real estate	269		—		—			34			—			(10		)	—			293
Other investments	180		19		(16		)	3			1			(14		)	4			177
Insurance group annuity contracts	17		141		(140		)	2			—			—			—			20
Corporate stocks	11		1		(4		)	(3		)	1			—			(5		)	1
Corporate obligations	5		2		(2		)	3			(1		)	—			1			8
Government securities	3		—		(3		)	—			—			—			—			—
Total assets	$	1,122	$	301	$	(219	)	$	54		$	23		$	(36	)	$	—		$	1,245

The following is a description of the valuation methodologies used for assets measured at fair value:

Company common stock: Valued at the closing price reported on the New York Stock Exchange.

Common stocks, preferred stocks, convertible equity securities and rights/warrants (included in Corporate stocks): Valued at the closing price reported on the primary exchange.

Corporate bonds (included in corporate obligations): The fair value of corporate bonds is estimated using recently executed transactions, market price quotations (where observable) and bond spreads. The spread data used are for the same maturity as the bond. If the spread data does not reference the issuer, then data that references a comparable issuer are used. When observable price quotations are not available, fair value is determined based on cash flow models.

Commercial paper (included in corporate obligations): The fair value of commercial paper is estimated using observable market data such as maturity date, issue date, credit rating, current commercial paper rates and settlement date.

Commercial mortgage-backed and asset-backed securities (included in corporate obligations): Fair value is determined using discounted cash flow models. Observable inputs are based on trade and quote activity of bonds with similar features including issuer vintage, purpose of underlying loan (first or second lien), prepayment speeds and credit ratings. The discount rate is the combination of the appropriate rate from the benchmark yield curve and the discount margin based on quoted prices.

Common/Collective trusts: Valued at the quoted market prices of the underlying investments at year end.

U.S. government bonds (included in government securities): The fair value of U.S. government bonds is estimated by pricing models that utilize observable market data including quotes, spreads and data points for yield curves.

U.S. agency securities (included in government securities): U.S. agency securities are comprised of two main categories consisting of agency issued debt and mortgage pass-throughs. Agency issued debt securities are valued by benchmarking market-derived prices to quoted market prices and trade data for identical or comparable securities. Mortgage pass-throughs include certain “To-be-announced” (TBA) securities and mortgage pass-through pools. TBA securities are generally valued using quoted market prices or are benchmarked thereto. Fair value of mortgage pass-through pools are model driven with respect to spreads of the comparable TBA security.

Private equity/Partnerships: The fair value of investments in partnership interests is valued by the general partner. The valuations are based on various factors depending on the investment type, including the cost of the securities, financial data and projections, option valuation models, operating and regulatory issues and other such factors as the General Partner may deem relevant. Investments are valued in the accompanying financial statements based on the Plan’s beneficial interest in the underlying net assets of the partnership as determined by the partnership agreement.

Insurance group annuity contracts: The fair values for these investments are based on the current market value of the aggregate accumulated contributions plus interest earned.

Swap assets and liabilities: Fair values for interest rate swaps, equity index swaps and inflation swaps are estimated using a discounted cash flow pricing model. These models use observable market data such as contractual fixed rate, broker quotes, spot equity price or index value and dividend data. The fair values of credit default swaps are estimated using an income approach model which determines expected cash flows based on default probabilities from the issuer specific credit spread curve and credit loss recovery rates, both of which are dependent on market quotes.

Real estate investment trusts: Valued at the closing price reported on an exchange.

Short-term investment funds: Primarily high-grade money market instruments valued at net asset value at year-end.

Real estate: Valued by investment managers generally using proprietary pricing models.

Registered investment companies: Valued at the closing price reported on the primary exchange.

Defined Contribution Plans

The Company maintains certain defined contribution plans for its employees, including the Marsh & McLennan Companies, Inc. 401(k) Savings & Investment Plan (“401(k)”), that are qualified under U.S. tax laws. Under these plans, eligible employees may contribute a percentage of their base salary, subject to certain limitations. For the 401(k), the Company matches a fixed portion of the employees’ contributions and may also make additional discretionary contributions. The 401(k) contains an Employee Stock Ownership Plan under U.S. tax law. Approximately $366 million of the 401(k)’s assets at December 31, 2011 and $334 million at December 31, 2010 were invested in the Company’s common stock. If a participant does not choose an investment direction for his or her future company matching contributions, they are automatically invested in a BlackRock Lifepath Portfolio that most closely matches the participant’s expected retirement year. The cost of these defined contribution plans related to continuing operations was $48 million in both 2011 and 2010, and $52 million for 2009.