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SEC Filings

8-K
ALTRIA GROUP, INC. filed this Form 8-K on 02/01/2018
Entire Document
 

Altria Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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The fair values of Altria Group, Inc.’s pension plan assets by asset category at December 31, 2017 and 2016 were as follows:
 
2017
 
2016
(in millions)
Level 1

 
Level 2

 
Level 3

 
Total

 
Level 1

 
Level 2

 
Level 3

 
Total

U.S. and foreign government securities or
their agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$

 
$
588

 
$

 
$
588

 
$

 
$
444

 
$

 
$
444

U.S. municipal bonds

 
81

 

 
81

 

 
102

 

 
102

Foreign government and agencies

 
150

 

 
150

 

 
185

 

 
185

Corporate debt instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Above investment grade

 
1,789

 

 
1,789

 

 
1,735

 

 
1,735

Below investment grade and no rating

 
511

 

 
511

 

 
602

 

 
602

Common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International equities
1,396

 

 

 
1,396

 
1,076

 

 

 
1,076

U.S. equities
831

 

 

 
831

 
760

 

 

 
760

Other, net
120

 
74

 

 
194

 
142

 
33

 
13

 
188

 
$
2,347

 
$
3,193

 
$

 
$
5,540

 
$
1,978

 
$
3,101

 
$
13

 
$
5,092

Investments measured at NAV as a practical expedient for fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common/collective trusts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. large cap
 
 
 
 
 
 
2,014

 
 
 
 
 
 
 
1,940

U.S. small cap
 
 
 
 
 
 
361

 
 
 
 
 
 
 
363

International developed markets
 
 
 
 
 
 
100

 
 
 
 
 
 
 
80

Fair value of plan assets, net
 
 
 
 
 
 
$
8,015

 
 
 
 
 
 
 
$
7,475

Level 3 holdings and transactions were immaterial to total plan assets at December 31, 2017 and 2016.

For a description of the fair value hierarchy and the three levels of inputs used to measure fair value, see Note 2. Summary of Significant Accounting Policies.
Following is a description of the valuation methodologies used for investments measured at fair value.
U.S. and Foreign Government Securities: U.S. and foreign government securities consist of investments in Treasury Nominal Bonds and Inflation Protected Securities and municipal securities. Government securities are valued at a price that is based on a compilation of primarily observable market information, such as broker quotes. Matrix pricing, yield curves and indices are used when broker quotes are not available.
Corporate Debt Instruments: Corporate debt instruments are valued at a price that is based on a compilation of primarily observable market information, such as broker quotes. Matrix pricing, yield curves and indices are used when broker quotes are not available.
Common Stock: Common stocks are valued based on the price of the security as listed on an open active exchange on last trade date.
Common/Collective Trusts: Common/collective trusts consist of funds that are intended to mirror indices such as Standard & Poor’s 500 Index, Russell Small Cap Completeness Index and MSCI EAFE Index. They are
 
valued on the basis of the relative interest of each participating investor in the fair value of the underlying assets of each of the respective common/collective trusts. The underlying assets are valued based on the net asset value (“NAV”), which is provided by the investment account manager as a practical expedient to estimate fair value. These investments are not classified by level but are disclosed to permit reconciliation to the fair value of plan assets.
Postretirement Plan Assets: Altria Group, Inc. has established a long-term investment strategy for its postretirement plan assets using a target asset allocation between equity securities and fixed income investments of 55%/45%. The expected rate of return on plan assets is 7.8% for determining Altria Group, Inc.’s postretirement net periodic benefit cost for 2018. At December 31, 2017, postretirement plan assets totaled $270 million. Approximately $150 million was invested in domestic and international common/collective trusts. The underlying assets of each of the respective common/collective trusts are valued based on the NAV, which is provided by the investment account manager as a practical expedient to estimate fair value. Additionally, approximately $120 million was held in an interest bearing cash account, which is classified in Level 1 of the fair value hierarchy, pending full implementation of the investment strategy in early January 2018.
Cash Flows: Altria Group, Inc. makes contributions to the pension plans to the extent that the contributions are tax


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