Travelers 2003 Annual Report Download - page 142

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140
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. PENSION PLANS AND RETIREMENT BENEFITS, Continued
On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (2003
Medicare Act) was enacted. As permitted by FASB Staff Position No. FAS 106-1, Travelers has chosen to defer
recognition of the effects of the 2003 Medicare Act on its postretirement benefit plan. Travelers does not expect
that the 2003 Medicare Act will have a significant impact on the accumulated postretirement benefit obligation
or net postretirement benefit expense.
Components of Net Periodic Benefit Cost
The following table summarizes the components of net benefit expense recognized in the consolidated statement
of income for TPC’s plans for the period August 20, 2002 through December 31, 2002 and for the year ended
December 31, 2003.
Pension Plans
Postretirement
Benefit Plans
(in millions) 2003 2002 2003 2002
Service cost $ 27.6 $ 10.3 $ .2
$ .1
Interest cost on benefit obligation 36.9 12.5 .9 .3
Expected return on plan assets (38.8) (14.8) - -
Amortization of unrecognized:
Prior service cost (5.8) (2.1) - -
Net actuarial loss 5.1 .6 - -
Net benefit expense $ 25.0
$ 6.5 $ 1.1
$ .4
Plan assets
The percentage of the fair value of pension plan assets held by asset category is as follows:
(at December 31,) 2003 2002
Equity securities 60% 59%
Debt securities 40%
41%
Total 100% 100%
Travelers Pension Plan Investment Committee has established a target investment asset allocation of 60%
invested in an S&P 500 index fund and 40% in a Lehman Brothers Aggregate Bond Index fund. In establishing
this investment asset allocation for the plan, the Pension Plan Investment Committee took into account, among
other factors, the information provided to it by the plan’s actuary, information relating to the historical
investment returns of the S&P 500 and Lehman Brothers Aggregate Bond Index, asset diversification and market
conditions at the time each contribution to the plan was to be invested. The Pension Plan Investment Committee
periodically reviewed the plan’s investment performance and asset allocation during 2003, and has adhered to
that allocation.