Travelers 2004 Annual Report Download - page 191

THE ST. PAUL TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. PENSION PLANS, RETIREMENT BENEFITS AND SAVINGS PLANS, Continued
April 1, 2004 and a reduction of $2 million in net periodic postretirement benefit cost for the year ended
December 31, 2004. See note 1.
Components of Net Periodic Benefit Cost
The following table summarizes the components of net benefit expense recognized in the consolidated
statement of income for the benefit plans for the years ended December 31, 2004 and 2003 and for the period
August 20, 2002 through December 31, 2002.
Pension Plans
Postretirement Benefit
Plans
(in millions) 2004 2003 2002 2004 2003 2002
Service cost ............................................. $50 $28 $10 $3$— $—
Interest cost on benefit obligation ............................ 90 37 13 14 1—
Expected return on plan assets .............................. (119) (39) (15) (1) ——
Amortization of unrecognized:
Prior service cost ..................................... (5) (6) (2) ———
Net actuarial loss ..................................... 951———
Net benefit expense ............................... $25 $25 $ 7 $16 $1$—
The Company’s share of expenses related to these plans for the period January 1, 2002 to August 20, 2002
was not significant.
Plan Assets
The percentage of the fair value of pension plan assets held by asset category is as follows:
(at December 31,) 2004 2003
Equity securities ................................................................. 66% 60%
Debt securities .................................................................. 30% 40%
Cash .......................................................................... 2% —
Other .......................................................................... 2% —
Total ...................................................................... 100% 100%
Pension plan assets are invested for the exclusive benefit of the plan participants and beneficiaries and are
intended, over time, to satisfy the benefit obligations under the plan. Risk tolerance is established through
consideration of plan liabilities, plan funded status, and corporate financial condition. The asset mix guidelines
have been established and are reviewed quarterly. These guidelines are intended to serve as tools to facilitate the
investment of plan assets to maximize long-term total return and the ongoing oversight of the plan’s investment
performance. The investment portfolio contains a diversified mix of equity and fixed-income investments. Equity
investments are diversified across U.S. and non-U.S. stocks. Other assets such as partnerships and real estate are
used to enhance long-term returns while improving portfolio diversification. Investment risk is measured and
monitored on an ongoing basis through daily and monthly investment portfolio review, annual liability
measurements, and periodic asset/liability studies.
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