Retirement Plans (Tables)

12 Months Ended

Dec. 31, 2013

Weighted-Average Assumptions Used to Determine Benefit Obligations

Weighted-average assumptions used to determine benefit obligations:

	Pension Benefits		Other Postretirement  Benefits
	December 31,		December 31,
	2013	2012	2013	2012
Discount rate	4.70%-4.90%	3.90%-4.25%	4.60%-4.70%	3.90%-4.00%
Rate of compensation increase	4.25%	4.25%

Weighted - Average Assumptions Used to Determine Net Periodic Benefit Cost

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

	Pension Benefits			Other Postretirement Benefits
	Year Ended December 31,			Year Ended December 31,
	2013	2012	2011	2013	2012	2011
Discount rate	3.90%-4.25%	4.70%-4.90%	5.40%-5.75%	3.90%-4.00%	4.60%-4.80%	5.25%-5.50%
Expected long-term return on plan assets	7.75%	7.75%	7.50%
Rate of compensation increase	4.25%	4.75%	4.75%

Assumed Health Care Cost Trend Rates for Other Postretirement Benefits

Assumed health care cost trend rates for other postretirement benefits:

	Other Postretirement Benefits
	Year Ended December 31,
	2013			2012
Pre-65 health care cost trend rate assumed for next year		8.0	%		8.5	%
Post-65 health care cost trend rate assumed for next year		6.0	%		6.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		4.5	%		4.5	%
Year that the rate reaches the ultimate trend rate:
Pre-65		2021			2021
Post-65		2021			2021

One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	One Percentage Point
	Increase		Decrease
	(In millions)
Effect on postretirement benefit obligations	$	15	$	12
Effect on total of service and interest cost		2		1

Net Periodic Pension and Other Postretirement Benefit Costs

Net periodic pension and other postretirement benefit costs include the following components:

	Pension Benefits									Other Postretirement Benefits
	Year Ended December 31,									Year Ended December 31,
	2013			2012			2011			2013		2012			2011
	(In millions)
Service cost	$	26		$	24		$	18		$	6	$	5		$	4
Interest cost		51			55			56			9		10			10
Expected return on plan assets		(82	)		(76	)		(73	)		—		—			—
Amortization of unrecognized net loss (gain)		21			22			8			1		—			—
Amortization of unrecognized prior service cost		4			4			4			—		(1	)		(1	)
Net periodic benefit cost	$	20		$	29		$	13		$	16	$	14		$	13

Reconciliation of Benefit Obligations, Plan Assets and Funded Status of Pension and Postretirement Plans

The following provides a reconciliation of benefit obligations, plan assets and funded status of the pension and postretirement plans.

	Pension Benefits						Other Postretirement Benefits
	December 31,						December 31,
	2013			2012			2013			2012
	(In millions)
Change in benefit obligation:
Benefit obligation at January 1	$	1,265		$	1,183		$	230		$	212
Service cost		26			24			6			5
Interest cost		51			55			9			10
Plan participants’ contributions		—			—			5			5
Amendments		—			—			—			2
Actuarial (gain) loss		(98	)		66			(19	)		12
Benefits paid		(65	)		(63	)		(18	)		(18	)
Other		—			—			—			2
Benefit obligation at December 31		1,179			1,265			213			230
Change in plan assets:
Fair value of plan assets at January 1		1,078			998			—			—
Actual return on plan assets		90			112			—			—
Employer contributions		31			31			13			13
Plan participants’ contributions		—			—			5			5
Benefits paid from plan assets		(65	)		(63	)		(18	)		(18	)
Fair value of plan assets at December 31		1,134			1,078			—			—
Funded status	$	(45	)	$	(187	)	$	(213	)	$	(230	)
Amounts recognized in the balance sheets consist of:
Noncurrent assets	$	55		$	—		$	—		$	—
Current liabilities		—			—			(14	)		(14	)
Noncurrent liabilities		(100	)		(187	)		(199	)		(216	)
Net amount recognized	$	(45	)	$	(187	)	$	(213	)	$	(230	)
Net actuarial (gain) loss	$	(107	)	$	30		$	(19	)	$	12
Recognized actuarial gain (loss)		(21	)		(22	)		(1	)		—
Prior service cost		—			—			—			2
Recognized prior service cost		(4	)		(4	)		—			—
Total recognized in other comprehensive (income) loss	$	(132	)	$	4		$	(20	)	$	14
Total recognized net periodic benefit cost and other comprehensive (income) loss	$	(112	)	$	33		$	(4	)	$	28

Pension Plans with Accumulated Benefit Obligation in Excess of Plan Assets

Information for pension plans with an accumulated benefit obligation in excess of plan assets consisted of the following:

	Pension Benefits
	December 31,
	2013		2012
	(In millions)
Projected benefit obligation	$	682	$	1,265
Accumulated benefit obligation		615		1,189
Fair value of plan assets		582		1,078

Estimated Amounts to be Recognized from Accumulated Other Comprehensive Income into Net Periodic Benefit Cost

The table below presents the estimated amounts to be recognized from accumulated other comprehensive income into net periodic benefit cost during 2014.

	Pension Benefits		Other Postretirement Benefits
	(In millions)
Amortization of actuarial (gain) loss	$	9	$	(1	)
Amortization of prior service cost		3		—
Total estimated amounts to be recognized	$	12	$	(1	)

Expected Future Minimum Benefit Payments

Lorillard projects expected future minimum benefit payments as follows.

Expected future benefit payments	Pension Benefits		Other Postretirement Benefit Plans		Less Medicare Drug Subsidy		Net
	(In millions)
2014	$	69	$	15	$	1	$	83
2015		71		16		1		86
2016		73		16		1		88
2017		74		16		1		89
2018		76		17		1		92
2019 – 2023		404		83		2		485
	$	767	$	163	$	7	$	923

Pension Plans Asset Allocations

The pension plans asset allocations were:

	Asset Allocation as  of 12/31/13		Asset Allocation as  of 12/31/12
	(%)		(%)
Asset Class
U.S. Equity		9.4		10.6
Global ex U.S. Equity		9.6		8.0
Global ex Emerging Markets Equity		4.7		3.8
Emerging Markets Equity		3.9		3.7
Absolute Return Hedge Funds		16.6		13.9
Equity Hedge Funds		13.6		11.4
Private Equity		4.5		4.7
Private Real Assets		2.9		2.2
Public Real Assets		2.0		2.3
Fixed Income		29.5		37.3
Cash Equivalents		3.3		2.1
Total		100.0		100.0

Plan Assets Using Fair Value Hierarchy

Plan assets using the fair value hierarchy as of December 31, 2013 were as follows:

	Total			Level 1		Level 2			Level 3
	(In millions)
Asset Class:
U.S. Equity:
Securities	$	111		$	15	$	—		$	96
Overlay derivatives liabilities		(5	)		—		(5	)		—
Global ex U.S. Equity		109			—		109			—
Global ex Emerging Markets Equity		53			—		31			22
Emerging Markets Equity:
Securities		28			—		28			—
Overlay derivatives assets		17			—		17			—
Absolute Return Hedge Funds		188			—		58			130
Equity Hedge Funds		155			—		74			81
Private Equity		51			—		—			51
Private Real Assets		33			—		—			33
Public Real Assets		22			—		22			—
Fixed Income:
Securities		346			—		284			62
Overlay derivatives liabilities		(12	)		—		(12	)		—
Cash Equivalents		38			—		38			—
Total	$	1,134		$	15	$	644		$	475

Plan assets using the fair value hierarchy as of December 31, 2012 were as follows:

	Total			Level 1		Level 2			Level 3
	(In millions)
Asset Class:
U.S. Equity:
Securities	$	122		$	49	$	—		$	73
Overlay derivatives liabilities		(8	)		—		(8	)		—
Global ex U.S. Equity:
Securities		93			—		93			—
Overlay derivatives liabilities		(6	)		—		(6	)		—
Global ex Emerging Markets Equity		41			—		25			16
Emerging Markets Equity:
Securities		43			—		43			—
Overlay derivatives liabilities		(3	)		—		(3	)		—
Absolute Return Hedge Funds		150			—		40			110
Equity Hedge Funds		123			—		62			61
Private Equity		51			—		—			51
Private Real Assets		24			—		—			24
Public Real Assets		23			—		14			9
Fixed Income:
Securities		375			241		69			65
Overlay derivatives assets		27			—		27			—
Cash Equivalents		23			—		23			—
Total	$	1,078		$	290	$	379		$	409

Reconciliation of Level Three Assets

The following table presents a reconciliation of Level 3 assets held during the year ended December 31, 2013. For the year ended December 31, 2013, there were no significant transfers between levels 1, 2 and 3.

	January 1, 2013 Balance		Realized Gains/ (Losses)			Unrealized Gains/ (Losses)			Purchases		Sales			Net Transfers Into/(Out  of) Level 3		December  31, 2013 Balance
US Equity	$	73	$	(1	)	$	23		$	9	$	(8	)	$	—	$	96
Global ex Emerging Markets Equity		16		—			6			—		—			—		22
Absolute Return Hedge Funds		110		2			16			12		(10	)		—		130
Equity Hedge Funds		61		—			11			25		(16	)		—		81
Private Equity		51		3			5			6		(14	)		—		51
Private Real Assets		24		2			4			11		(8	)		—		33
Public Real Assets		9		(1	)		1			—		(9	)		—		—
Fixed Income		65		—			(3	)		—		—			—		62

The following table presents a reconciliation of Level 3 assets held during the year ended December 31, 2012. For the year ended December 31, 2012, there were no significant transfers between levels 1, 2 and 3.

	January 1, 2012 Balance		Realized Gains/ (Losses)		Unrealized Gains/ (Losses)		Purchases		Sales			Net Transfers Into/(Out  of) Level 3			December  31, 2012 Balance
US Equity	$	66	$	—	$	12	$	—	$	(5	)	$	—		$	73
Global ex Emerging Markets Equity		—		—		1		15		—			—			16
Absolute Return Hedge Funds		80		2		7		29		(8	)		—			110
Equity Hedge Funds		50		—		2		13		(4	)		—			61
Private Equity		47		1		5		9		(10	)		(1	)		51
Private Real Assets		16		1		1		10		(4	)		—			24
Public Real Assets		9		—		—		—		—			—			9
Fixed Income		—		—		—		65		—			—			65