Fair Value Measurements

Fair Value Hierarchy

The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy as defined by the FASB. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy, for disclosure purposes, is determined based on the lowest level input that is significant to the fair value measurement. Assets and liabilities recorded in the consolidated balance sheets at fair value are categorized based on the inputs in the valuation techniques as follows:


Level 1.	Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market (examples include active exchange-traded equity securities and exchange-traded money market mutual funds).

Assets and liabilities measured using Level 1 inputs include exchange-traded equity securities, exchange-traded mutual funds and money market funds.


Level 2.	Assets and liabilities whose values are based on the following:


a)	Quoted prices for similar assets or liabilities in active markets;


b)	Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);


c)	Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including interest rate and currency swaps); and


d)	Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full asset or liability (for example, certain mortgage loans).

The Company does not have any assets or liabilities that are measured using Level 2 inputs.


Level 3.	Assets and liabilities whose values are based on prices, or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

Liabilities measured using Level 3 inputs include liabilities for contingent purchase consideration.

Valuation Techniques

Equity Securities, Money Market Funds and Mutual Funds – Level 1

Investments for which market quotations are readily available are valued at the sale price on their principal exchange or, for certain markets, official closing bid price. Money market funds are valued using a valuation technique that results in price per share at $1.00.

Contingent Purchase Consideration Liability – Level 3

Purchase consideration for some acquisitions made by the Company includes contingent consideration arrangements. These arrangements typically provide for the payment of additional consideration if earnings or revenue targets are met over periods from two to four years. The fair value of the contingent purchase consideration liability is estimated as the present value of future cash flows to be paid, based on projections of revenue and earnings and related targets of the acquired entities.

The following fair value hierarchy table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017.



	Identical Assets (Level 1)				Observable Inputs (Level 2)				Unobservable Inputs (Level 3)				Total
(In millions)	03/31/18		12/31/17		03/31/18		12/31/17		03/31/18		12/31/17		03/31/18		12/31/17
Assets:
Financial instruments owned:
Exchange traded equity securities^(a)	$	73	$	81	$	—	$	—	$	—	$	—	$	73	$	81
Mutual funds^(a)	146		158		—		—		—		—		146		158
Money market funds^(b)	27		143		—		—		—		—		27		143
Total assets measured at fair value	$	246	$	382	$	—	$	—	$	—	$	—	$	246	$	382
Fiduciary Assets:
Money market funds	$	36	$	111	$	—	$	—	$	—	$	—	$	36	$	111
Total fiduciary assets measured at fair value	$	36	$	111	$	—	$	—	$	—	$	—	$	36	$	111
Liabilities:
Contingent purchase consideration liability^(c)	$	—	$	—	$	—	$	—	$	161	$	189	$	161	$	189
Total liabilities measured at fair value	$	—	$	—	$	—	$	—	$	161	$	189	$	161	$	189

^(a)Included in other assets in the consolidated balance sheets.

^(b) Included in cash and cash equivalents in the consolidated balance sheets.

^(c) Included in accounts payable and accrued liabilities and other liabilities in the consolidated balance sheets.

During the three-month period ended March 31, 2018, there were no assets or liabilities that were transferred between any of the levels.

The table below sets forth a summary of the changes in fair value of the Company’s Level 3 liabilities as of March 31, 2018 and 2017 that represent contingent consideration related to acquisitions:



	Three Months Ended March 31,
(In millions)	2018			2017
Balance at beginning of period,	$	189		$	241
Additions	6			34
Payments	(40		)	(12		)
Revaluation Impact	5			(16		)
Other ^(a)	1			—
Balance at March 31,	$	161		$	247

^(a)Primarily reflects the impact of foreign exchange.

The fair value of the contingent purchase consideration liability is based on projections of revenue and EBITDA for the acquired entities in relation to the established targets and is reassessed on a quarterly basis. As set forth in the table above, based on the Company's ongoing assessment of the fair value of contingent consideration, the Company recorded a net increase in the estimated fair value of such liabilities for prior-period acquisitions of $5 million in the three-month period ended March 31, 2018. A 5% increase in the above mentioned projections would increase the liability by approximately $19 million. A 5% decrease in the above mentioned projections would decrease the liability by approximately $20 million.

Long-Term Investments

The Company holds investments in certain private equity investments, public companies and private companies that are accounted for using the equity method of accounting. The carrying value of these investments was $424 million and $405 million at March 31, 2018 and December 31, 2017, respectively.

Investments Accounted For Using the Equity Method of Accounting

Private Equity Investments

The Company's investments in private equity funds were $74 million and $76 million at March 31, 2018 and December 31, 2017, respectively. The carrying values of these private equity investments approximate fair value. The underlying private equity funds follow investment company accounting, where investments within the fund are carried at fair value. The Company records in earnings, investment gains/losses for its proportionate share of the change in fair value of the funds. These investments are included in other assets in the consolidated balance sheets.

Investments in Public and Private Companies

Alexander Forbes: The Company owns approximately 33% of the common stock of Alexander Forbes, a South African company listed on the Johannesburg Stock Exchange, which it purchased in 2014 for 7.50 South African Rand per share. As of March 31, 2018, the carrying value of the Company’s investment in Alexander Forbes was approximately $286 million. As of March 31, 2018, the market value of the approximately 443 million shares of Alexander Forbes owned by the Company, based on the March 31, 2018 closing share price of 7.20 South African Rand per share, was approximately $269 million. The Company considered several factors in assessing its investment in Alexander Forbes, including its financial position, the near- and long-term prospects of Alexander Forbes and the broader South African economy and capital markets, the length of time and extent to which the market value was below cost and the Company’s intent and ability to retain the investment for a sufficient period of time to allow for anticipated recovery in market value. During the first quarter of 2018, the Alexander Forbes average opening and closing stock price was approximately 6.95 Rand (approximately 93% of the original purchase price) and ranged from a low of 6.31 Rand (in early February) to a high of 7.34 Rand (in late March) (approximately 84% to 98% of the purchase price). Based on its assessment of the factors discussed above, the Company determined the investment was not impaired.

The Company’s investment in Alexander Forbes and its other equity investments in private insurance and consulting companies are accounted for using the equity method of accounting, the results of which are included in revenue in the consolidated statements of income and the carrying value of which is included in other assets in the consolidated balance sheets. The Company records its share of income or loss on its equity method investments on a one quarter lag basis.

Other Investments

At March 31, 2018 the Company held certain equity investments with readily determinable market values of $89 million. During the first three months of 2018, the Company recorded an investment loss of $8 million, which reflects the decrease in the market value of these investments as compared to December 31, 2017. The Company also holds investments without readily determinable market values of $59 million at March 31, 2018.