ZAIC2012-1 - Zurich Producer Compensation

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ANNUAL STATEMENT FOR THE YEAR 2012 OF THE ZURICH AMERICAN INSURANCE COMPANY Zurich Insurance plc - Ireland (4,794) (1,575) Zuerich Versicherungs-Aktienga (10,147) (10,091) Zurich Management Services (18,445) (83,736) Zurich F&I Reinsurance, Ltd. (26,254) 64,301 Zurich Insurance (Taiw an) Ltd. (32,772) (21,381) Zurich Insurance Plc. Head Office (64,674) 0 ZIC GRI Region - Latin America (139,788) 0 Zurich Insurance Company- Global Corporate in Europe (152,065) (258,434) Ziurich Insurance Plc Branch in France (154,280) (77,028) Zurich Financial Services Australia Ltd. (237,978) (73,806) Zurich Realty Inc. (272,607) 1,012,671 Centre Insurance Company (1,006,729) (1,006,729) Vehicle Dealer Solutions, Inc. (1,316,125) (831,394) ZNA Services LLC (6,176,882) (4,776,232) All Other Non-Pooled Affiliates 50,818 28,992 Total Non- Pooled Affiliates $ 77,607,569 $ 40,556,257 Total Pooled and Non-Pooled $ 129,733,475 $ 3,471,333 Reconciliation to Financial Statements Receivable from parent, subsidiaries and affiliates $ 187,274,289 $ 95,583,016 Payable to parent, subsidiaries and affiliates (57,540,814) (92,111,683) Balance due to parent, subsidiaries and affiliates $ 129,733,475 $ 3,471,333 The Company's policy is to settle inter-company balances 45 days after the close of each quarter. December 31, 2012 December 31, 2011 E. The Company has made no guarantees or undertakings for the benefit of an affiliate which may result in a material contingent exposure of the Company's or any affiliated insurer's assets. F-G. See A-C above. H. The Company does not own any shares of an upstream intermediate or ultimate parent, either directly or indirectly via a downstream subsidiary, controlled or affiliated company. I. The Company does not have any individual subsidiaries which exceed 10% of its admitted assets. J. The Company did not recognize any impairment write-down for investments in its subsidiaries during the year. K. The Company does not own a foreign insurance subsidiary. L. The Company does not own an investment in a downstream non-insurance holding company. 11. DEBT None 12. RETIREMENT PLANS, DEFERRED COMPENSATION, POSTEMPLOYMENT BENEFITS AND COMPENSATED ABSENCES AND OTHER POSTRETIREMENT BENEFIT PLANS A. Defined Benefit Plans – Pension Plans The Company sponsors two noncontributory qualified defined benefit pension plans covering substantially all of its employees. The Company also sponsors three additional nonqualified defined benefit pension plans covering certain highly compensated employees. Additionally, the Company sponsors a welfare plan that provides certain other health care benefits to substantially all retired employees, their covered dependents and beneficiaries. During the year the Company amended the terms of the post retirement medical plan. The amendment, effective January 1, 2012, stipulates that the pension plan will no longer offer post-65 retiree medical coverage and retiree life insurance to active employees under the plan, whose retirement date is after January 1, 2012; unless the employee has at least 5 years of service and is over 55 years at January 1, 2012. The changes to the plan do not impact existing retirees or current active employees who retired before January 1, 2012 and met all other eligibility requirements. The impact of the change was recognized in the accompanying tables for 2011 as a component of unrecognized net actuarial gain / (loss). During the year the Company also amended the plan provisions for the two qualified defined benefit pension plans to provide a temporary window for terminated vested participants to cash out of the plans by receiving a one-time lump sum payment equal to the present value of their benefits under the plans. Once the terminated vested participants receive their lump sum payments under the limited time plan amendment, the plans would legally not be required to accrue any future benefits to the terminated vested employees nor would be required to pay additional benefits. As such, the Company offered 7,983 terminated vested employees an opportunity to elect a lump sum payment option that was previously not available to them. Of those offered, 2,937 participants, or 37.1% chose to exercise the option and withdrew approximately $94.2 million in lump sum payments from the plans during October and November of 2012. The significant reduction in the defined benefit pension obligation for these plans was considered a settlement of the Company’s pension liability as the transaction eliminates all future legal obligation towards the terminated vested employees in terms of providing future pension benefits. As a result, the Company re-measured the defined benefit obligation and the related pension assets using assumptions as of November 30, 2012, and the Company recognized a net settlement loss of $11.8 million. 14.10
ANNUAL STATEMENT FOR THE YEAR 2012 OF THE ZURICH AMERICAN INSURANCE COMPANY A combined summary of assets, obligations and assumptions of the Pension and Other Postretirement benefit plans as of December 31, 2012 and December 31, 2011 as follows: Pension Benefits 2012 2011 Post Retirement Benefits 2012 2011 (1) Change in benefit obligations: a. Benefit obligation at the beginning of the year $ 1,252,820,985 $ 1,105,562,016 $ 55,798,245 $ 63,286,243 b. Service cost 45,785,393 40,946,027 136,978 1,128,012 c. Interest cost 54,296,301 57,282,331 1,958,623 2,653,852 d. Contribution by plan participants - - 5,229,733 5,192,026 e. Actuarial (gain) / loss 87,359,616 104,243,451 (551,926) (3,484,843) f. Medicare Part D reimbursement - - - - g. Benefits paid (66,621,688) (55,212,840) (10,318,714) (10,338,320) h. Plan amendments - - - (2,137,264) i. Curtailments, settlements etc. (112,565,371) - - (501,461) j. Benefit obligation at end of year $ 1,261,075,236 $ 1,252,820,985 $ 52,252,939 $ 55,798,245 (2) Change in plan assets a. Fair value of assets at the beginning of the year $ 1,109,330,987 $ 912,845,910 $ - $ - b. Actual return on plan assets 112,628,075 187,848,155 - - c. Medicare Part D reimbursement - - (867,565) (572,553) d. Employer contributions 53,294,211 63,849,762 5,956,546 5,718,847 e. Plan Participants contributions - - 5,229,733 5,192,026 f. Benefits paid (84,855,750) (51,912,840) (10,318,714) (10,338,320) g. Business combinations, divestitures and settlements (73,210,322) - - - h. Administrative Expenses (2,840,000) (3,300,000) - - i. Fair value of plan assets at the end of the year $ 1,114,347,201 $ 1,109,330,987 $ - $ - (3) Funded status a. Unamortized prior service cost $ (976,290) $ (337,491) $ 5,661,418 $ 6,527,775 b. Unrecognized net actuarial gain / (loss) (204,708,267) (227,770,677) 17,752,087 19,076,557 c. Remaining net obligation at initial date of adoption (7,279,171) (8,189,067) - - d. Prepaid asset (accrued liabilities) 66,235,693 92,807,237 (75,666,444) (81,402,577) e. Funded status $ (146,728,035) $ (143,489,998) $ (52,252,939) $ (55,798,245) (4) Accumulated benefit obligation $ 1,192,270,396 $ 1,197,656,033 $ - $ - (5) Benefit obligation for non-vested employees a. Projected Benefit Obligation $ 19,865,568 $ 24,256,086 $ - $ 229,097 b. Accumulated Benefit Obligation $ 12,028,026 $ 14,420,615 $ N/A $ N/A (6) Components of net periodic benefit costs a. Service cost $ 45,785,393 $ 40,946,027 $ 136,978 $ 1,128,012 b. Interest cost 54,296,301 57,282,331 1,958,623 2,653,852 c. Expected return on plan assets (46,047,087) (55,867,266) - - d. Amortization of unrecognized transition (asset) / liability 909,896 909,896 - - e. Amounts of recognized (gains) / losses 13,763,699 18,529,354 (1,876,396) (1,495,105) f. Amount of prior service cost recognized (638,799) (638,799) (866,357) (986,923) g. Amount of gain or loss recognized due to settlement or curtailment 11,796,352 - - (501,461) h. Total net periodic benefit cost $ 79,865,755 $ 61,161,543 $ (647,152) $ 798,375 (7) During 2012, the Company recognized an additional minimum pension liability of $26,644,513. Accordingly, the Company recognized a change in additional minimum pension liability of $6,196,651 as a debit against unassigned funds. 14.11
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ZAIC2012-1 - Zurich Producer Compensation

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