Company: NOC
Filing Date: 2025-01-30
Form Type: 10-K
Source: 0001133421-25-000006
Chunk: 105

Company: NORTHROP GRUMMAN CORP /DE/
Filing Date: 2025-01-30
Form: 10-K
Item: Item 7
Chunk 105
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 the measurement date including the plan’s target asset allocation, historical plan asset returns and third-party projection models of expected long-term returns for each of the plans’ strategic asset classes. In addition to the data points themselves, we consider trends in the data points, including changes from the prior measurement date. The EROA assumptions we use for pension benefits are consistent with those used for OPB plans; however, we reduce the EROA for OPB plans to allow for the impact of tax on investment earnings, as certain Voluntary Employee Beneficiary Association trusts are taxable.

During 2024, the Investment Committee of the company’s benefit plans reviewed the plans’ major asset class allocations and approved an update to increase the target fixed-income asset allocation from 43% to 45%. The actual asset allocation as of December 31, 2024 was approximately 41% fixed-income, 29% public equities, 23% alternatives, 6% private credit and 1% cash. At this time, the Investment Committee is not planning any significant changes to that mix. For further information on plan asset investments, see Note 12 to the consolidated financial statements.

While historical market returns are not necessarily predictive of future market returns, given our long history of plan performance supported by the stability in our investment mix, investment managers, and active asset management, we believe our actual historical performance is a reasonable metric to consider when developing our EROA. Our average annual rate of return from 1976 to 2024 was approximately 10.5 percent and our 20-year and 30-year rolling average rates of return were approximately 7.5 percent and 8.9 percent, respectively, each determined on an arithmetic basis and net of expenses. Our 2024 return on plan assets, net of expenses, was approximately 4.7 percent.

Consistent with our past practice, we obtained long-term capital market forecasting models from several third parties and, using our target asset allocation, developed an expected rate of return on plan assets from each model. We 

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NORTHROP GRUMMAN CORPORATION                        

considered not only the specific returns projected by those third-party models, but also changes in the models year-to-year when developing our EROA.

For determining 2024 FAS expense, we assumed an expected long-term rate of return on pension plan assets of 7.5 percent and an expected long-term rate of return on OPB plan assets of 7.12 percent. For 2025