Annual Report 2001 - Chubb Group of Insurance Companies

(14) Employee BeneÑts The weighted average discount rate used in determining
the actuarial present value of the projected beneÑt
(a) The Corporation and its subsidiaries have several
obligation at December 31, 2001 and 2000 was 7 1 /4% and
non-contributory deÑned beneÑt pension plans covering
7 1 /2%, respectively, and the rate of increase in future
substantially all employees. Prior to 2001, beneÑts were
compensation levels was 4 1 /2% for both years. The exgenerally
based on an employee's years of service and
pected long term rate of return on assets was 9% for both
average compensation during the last Ñve years of emyears.
Plan assets are principally invested in publicly
ployment. EÅective January 1, 2001, the Corporation
traded stocks and bonds.
changed the formula for providing pension beneÑts from
the Ñnal average pay formula to a cash balance formula, (b) The Corporation and its subsidiaries provide certain
which credits employees semi-annually with an amount other postretirement benefits, principally health care and
equal to a percentage of eligible compensation based on life insurance, to retired employees and their beneficiaries
age and years of service as well as an interest credit based and covered dependents. Substantially all employees hired
on individual account balances. Employees hired prior to before January 1, 1999 may become eligible for these
2001 will generally be eligible to receive vested beneÑts benefits upon retirement if they meet minimum age and
based on the higher of the Ñnal average pay or cash years of service requirements. The expected cost of these
balance formulas. This change in the pension beneÑt benefits is accrued during the years that the employees
formula did not have a signiÑcant eÅect on the Corpora- render the necessary service.
tion's Ñnancial position or results of operations.
The Corporation does not fund these beneÑts in
The Corporation's policy is to make annual contribu- advance. BeneÑts are paid as covered expenses are intions
that meet the minimum funding requirements of curred. Health care coverage is contributory. Retiree
the Employee Retirement Income Security Act of 1974. contributions vary based upon a retiree's age, type of
Contributions are intended to provide not only for coverage and years of service with the Corporation. Life
beneÑts attributed to service to date but also for those insurance coverage is non-contributory.
expected to be earned in the future.
The components of net postretirement beneÑt cost
The components of net pension cost were as follows: were as follows:
Years Ended December 31 Years Ended December 31
2001 2000 1999 2001 2000 1999
(in millions)
(in millions)
Service cost of current period ÏÏÏÏ $ 28.6 $ 26.4 $ 22.2 Service cost of current period ÏÏÏÏÏÏ $ 5.0 $ 4.8 $ 4.5
Interest cost on projected
Interest cost on accumulated
benefit obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏ 43.9 40.2 37.6 beneÑt obligation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.2 8.7 8.6
Expected return on plan assets ÏÏÏÏ (53.5) (49.9) (44.5)
Net amortization and deferral ÏÏÏÏÏÏÏ (1.4) (1.5) (1.0)
Other gains ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5.0) (6.3) (2.5)
Net postretirement beneÑt cost ÏÏÏ $12.8 $12.0 $12.1
Net pension cost ÏÏÏÏÏÏÏÏÏÏ $ 14.0 $ 10.4 $ 12.8
The following table sets forth the plans' funded status
and amounts recognized in the balance sheets:
The components of the accumulated postretirement
beneÑt obligation were as follows:
December 31
December 31 2001 2000
2001 2000 (in millions)
(in millions)
Actuarial present value of projected beneÑt
Accumulated postretirement benefit obligation ÏÏÏÏÏ $137.0 $126.3
obligation for service rendered to date ÏÏÏÏÏÏÏ $665.2 $589.2 Unrecognized net gain from past experience
Plan assets at fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 538.8 594.1
diÅerent from that assumed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.7 35.6
Projected beneÑt obligation in excess of
Postretirement beneÑt liability included in
(less than) plan assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126.4 (4.9)
other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $168.7 $161.9
Unrecognized net gain from past experience
diÅerent from that assumed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.0 115.8
Unrecognized prior service costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (19.7) (10.9)
Unrecognized net asset at January 1, 1985,
being recognized principally over 19 years ÏÏÏÏÏ .6 2.1
Pension liability included in other liabilitiesÏÏÏÏÏ $111.3 $102.1
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