2008-04-11_REPORT - M1980244 - Laserfiche WebLink

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LIBERTY MUTUAL HOLDING COMPANY INC. Notes to Consolidated Financial Statements (dollars in millions, except per share amounts) (unaudited) the occurrence of certain events, including an acceleration of the Notes, and may not be enforced by the holders of the Series A Notes or the Series B Notes. The RCC is for the benefit of holders of the specified series of LMGI's indebtedness Initially LMGI's 7.50% senior notes due 2036). (5) BENEFIT PLANS The net benefit costs for the years ended December 31, 2007, 2006, and 2005 include the following components: Yeazs ended December 31, Pension Benefits Supplemental Pension Postretitement Benefits * Benefits 2007 2006 2005 2007 2006 2005 2007 2006 2005 Components of net periodic benefit costs Service costs $148 $ 154 $ 127 $8 $ 10 $ 9 $19 $19 $ 14 Interest costs Expected return on plan assets Settlement charge Amortization of unrecognized: 213 184 173 (231) (199) (201) - (2) - 13 13 13 31 - - - (1) 28 27 (2) (1) Net loss 36 59 18 4 8 6 - - (1) Prior service cost 4 1 3 3 2 2 (3) (3) (3) Net transition (assets) obligation (5) (6) (5) - - - 9 9 10 Net periodic benefit costs $165 $ 191 $115 $28 $ 33 $30 $55 $51 $46 * The Company sponsors supplemental retirement plans to provide pension benefits above the levels provided by the pension plans without regard to the statutory earnings limitations of qualified defined benefit pension plans. The supplemental plans are unfunded. The 2007 benefit costs include provisions for the Ohio Casualty benefit plans assumed on August 24, 2007. (6) COMMITMENTS AND CONTINGENT LIABILITIES Various lawsuits against the Company have arisen in the normal course of business. Contingent liabilities arising from litigation, income taxes, and other matters are not considered material in relation to the financial position of the Company. The Company has been in various insurance coverage disputes with Armstrong World Industries ("Armstrong' for over twenty years relating to asbestos liabilities and insurance covering the period of 1973 to 1981. In July 2004, the Company prevailed in a favorable arbitration ruling before an appellate panel regarding Armstrong's available insurance coverage. Amtstrong has filed, in the United States District Court for the Eastern District of Pennsylvania, a motion to vacate the 2004 appellate arbitration award that was favorable to the Company. The Company has filed across-motion seeking to confirm the award. Both motions have been briefed and remain pending at this time. Armstrong also filed a Chapter 11 Bankruptcy petition in the United States Bankruptcy Court for the District of Delaware in December 2000. A plan of reorganization was confirmed in August 2006, and Armstrong Eomtally emerged from bankruptcy as of October 2, 2006. A declaratory judgment action, filed against the Company by Armstrong in 2002, is also pending in the United States District Court for the L'astern District of Pennsyvania. In that action, Armstrong is seeking coverage for asbestos claims under insurance policies issued to it during the period of 1973 to 1981, including, but not limited to, damages and a declaration regarding the availability, applicability, and scope of alleged non-product coverage not subject to the aggregate limits of the policies. Armstrong contends that a significant portion of its asbestos liability arises from operations that would entitle Armsttong to insurance coverage under the disputed policies without regard to the aggregate limit of Lability. The Pennsylvania coverage action is currently in the initial pleading stages and, while it has been inactive by agreement of the parties since 2002, the court recently reactivated the case at a Rule 16 Scheduling Conference on October 22, 2007. The Company intends to vigorously defend its position in all pending coverage litigation, including any argument that coverage issues were finally determined in the bankruptcy proceedings. Management believes that the ultimate liability, if any, to Armstrong will not be resolved for at least one yeaz and very likely may not be known For several years. In the opinion of management, the outcome of these pending matters is difficult to predict and an adverse outcome could have a material adverse effect on the Company's business, financial condition, and results of operations. At December 31, 2007, the Company had unfunded capital commitments to private equity, commercial mortgages, and energy investments of $2,305. At December 31, 2007, the Company had commitments to purchase various mortgage-backed securities settling in 2008, at a cost of $29 with a fair value of $29, which are included as fixed maturities in the consolidated balance sheets.