Travelers 2003 Annual Report Download - page 141
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139
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. PENSION PLANS AND RETIREMENT BENEFITS, Continued
The accumulated benefit obligation for Travelers defined benefit pension plans was $573.7 and $476.0 million
at December 31, 2003 and 2002, respectively.
For pension plans with an accumulated benefit obligation in excess of plan assets, the aggregate projected
benefit obligation and the aggregate accumulated benefit obligation were each $27.6 million at December 31,
2003 and were $521.0 million and $476.0 million, respectively, at December 31, 2002.
The pretax minimum liability included in other comprehensive income decreased by $95.3 million from
December 31, 2002 to December 31, 2003.
Travelers does not have a best estimate of contributions expected to be paid to the qualified pension plan during
the next fiscal year at this time. However, the maximum tax deductible contribution to the qualified pension
plan for 2004 is currently estimated to be $40.0 million, which may be contributed on or before September 15,
2005.
Assumptions and Health Care Cost Trend Rate Sensitivity
(
at and for the
y
ear ended December 31,
)
2003 2002
Assumptions used to determine benefit obligations
Discount rate 6.25% 6.75%
Future com
p
ensation increase rate 4.00% 4.50%
Assumptions used to determine net periodic benefit cost (1)
Discount rate 6.75% 7.00%
Ex
p
ected lon
g
-term rate of return on assets 8.00% 8.00%
Assumed health care cost trend rates
Followin
g
y
ea
r
10.0% 10.0%
Rate to which the cost trend rate is assumed to decline
(
ultimate trend rate
)
5.0% 5.0
Year that the rate reaches the ultimate trend rate 2009 2008
(1) August 20, 2002 is the beginning of the year for 2002 as TPC-sponsored plans began on that date.
In choosing the expected long-term rate of return, Travelers Pension Plan Investment Committee considered the
historical returns of the S&P 500 Index and the Lehman Aggregate Index in conjunction with today’s economic
and financial market conditions.
As an indicator of sensitivity, increasing the assumed health care cost trend rate by 1% would have increased the
accumulated postretirement benefit obligation by $.8 million at December 31, 2003 and 2002 and the aggregate
of the service and interest cost components of net postretirement benefit expense by less than $.1 million for
2003 and 2002. Decreasing the assumed health care cost trend rate by 1% would have decreased the
accumulated postretirement benefit obligation at December 31, 2003 and 2002 by $.8 million and $.7 million,
respectively, and the aggregate of the service and interest cost components of net postretirement benefit expense
by less than $.1 million for 2003 and 2002.