Retirement Plans

9 Months Ended

Sep. 30, 2011

Retirement Plans

Retirement Plans

NOTE 9. Retirement Plans

OneBeacon sponsors qualified and non-qualified, non-contributory, defined benefit pension plans covering substantially all employees who were employed as of December 31, 2001 and remain actively employed with OneBeacon. Current plans include a OneBeacon qualified pension plan (the “Qualified Plan”) and a OneBeacon non-qualified pension plan (the “Non-qualified Plan”) (collectively the “Plans”). OneBeacon’s Plans were frozen and curtailed in the fourth quarter of 2002.

The components of net periodic benefit cost for the three and nine months ended September 30, 2011 and 2010 were as follows:

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	($ in millions)
Service cost	$	0.2		$	0.2		$	0.6		$	0.6
Interest cost	1.3			1.6			3.9			4.6
Expected return on plan assets	(1.9		)	(1.8		)	(5.7		)	(5.6		)
Amortization of unrecognized loss	0.1			0.1			0.3			0.5
Net periodic pension (income) cost before settlement and special termination benefits expense	(0.3		)	0.1			(0.9		)	0.1
Settlement expense	—			0.2			—			0.2
Special termination benefits expense (1)	0.2			1.3			0.6			1.7
Net periodic benefit (income) cost	$	(0.1	)	$	1.6		$	(0.3	)	$	2.0

(1) Special termination benefits represent additional payments made from the Qualified Plan to certain vested participants when their employment was terminated due to a reduction in force.

OneBeacon does not expect to make a contribution to its Qualified Plan in 2011. OneBeacon anticipates contributing $2.4 million to the Non-qualified Plan in 2011, for which OneBeacon has assets held in a rabbi trust. As of September 30, 2011, $1.8 million in contributions have been made to the Non-qualified Plan.

As a result of the Commercial Lines Transaction and Personal Lines Transaction, the Plan experienced a partial plan settlement which required re-measurement of the remaining accumulated plan benefits in accordance with ASC 715. OneBeacon’s discount rate assumption used to account for the Qualified Plan reflects the rate at which the benefit obligation could effectively be settled. Based on consideration of published yields for high quality long-term corporate bonds, U.S. Treasuries, insurance company annuity contract pricings, and cash flow matching analysis utilizing the Citigroup Pension Discount Curve and Liability Index, the discount rate utilized for the revaluation of the Qualified Plan obligations was 4.75% as compared to 5.50% at December 31, 2009. As a result of the partial settlement and re-measurement, the Company recognized a loss of $0.2 million through pre-tax income and a pre-tax loss of $0.5 million through other comprehensive income in the three and nine months ended September 30, 2010. At the time of settlement, the remaining Qualified Plan liabilities, which were primarily attributable to Qualified Plan participants who were actively employed by OneBeacon was approximately $88.4 million.