The Company recognizes the funded status of its defined benefit plans in its Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation of the Company’s defined benefit plans. The Company provides information for its overfunded plan separate from its underfunded plan.

Prior to 2005, THG provided retirement benefits to substantially all of its employees under defined benefit pension plans. These plans were based on a defined benefit cash balance formula, whereby the Company annually provided an allocation to each covered employee based on a percentage of that employee’s eligible salary, similar to a defined contribution plan arrangement. In addition to the cash balance allocation, certain employees who had met specified age and service requirements as of December 31, 1994 were eligible for a grandfathered benefit based primarily on each employee’s years of service and compensation during their highest five consecutive plan years of employment. The Company’s policy for the plans is to fund at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (“ERISA”).

As of January 1, 2005, the defined benefit pension plans were frozen, and since that date no further cash balance allocations have been credited to participants. Participants’ accounts are credited with interest daily, based upon the General Agreement of Trades and Tariffs rate (the 30-year Treasury Bond interest rate). As of December 31, 2023, based on current estimates of plan liabilities and other assumptions, the assets of the qualified defined benefit pension plan exceeded the projected benefit obligation by approximately $14.6 million.

In order to measure the expense associated with these plans, management must make various estimates and assumptions, including discount rates used to value liabilities, assumed rates of return on plan assets, employee turnover rates and anticipated mortality rates, for example. The estimates used by management are based on the Company’s historical experience, as well as current facts and circumstances. In addition, the Company uses outside actuaries to assist in measuring the expense and liability associated with these plans.

The Company measures the funded status of its plans as of the date of its year-end statement of financial position. The Company utilizes a measurement date of December 31st to determine its benefit obligations, consistent with the date of its Consolidated Balance Sheets.

Weighted average assumptions used to determine pension benefit obligations are as follows:


DECEMBER 31	2023			2022			2021
Discount rate - qualified plan		5.75	%		6.00	%		3.25	%
Discount rate - non-qualified plan		5.875	%		6.00	%		3.25	%
Cash balance interest crediting rate		3.00	%		3.00	%		3.00	%

The Company utilizes a measurement date of January 1st to determine its periodic pension costs. Weighted average assumptions used to determine net periodic pension costs for the defined benefit plans are as follows:


YEARS ENDED DECEMBER 31	2023			2022			2021
Qualified plan
Discount rate		6.00	%		3.25	%		3.00	%
Expected return on plan assets		6.25	%		3.75	%		3.75	%
Cash balance interest crediting rate		3.00	%		3.00	%		3.00	%
Non-qualified plan
Discount rate		6.00	%		3.25	%		2.88	%

The expected rates of return were determined using historical mean returns for each asset class, adjusted for certain factors believed to have an impact on future returns. These returns are generally weighted to the plan’s actual asset allocation, and are net of administrative expenses. For the qualified defined benefit plan, the 2023 expected return on plan assets of 6.25% reflects long-term expectations and increased based upon long-term market expectations and expense management efforts. The Company reviews and updates, at least annually, its expected return on plan assets based on changes in the actual assets held by the plan and market conditions.

For the qualified defined benefit plan, a target allocation approach is utilized, which focuses on creating a mix of assets that will generate modest growth from equity securities while minimizing volatility from changes in the markets and economic environment. Various factors are taken into consideration in determining the appropriate asset mix, such as census data, actuarial valuation information and capital market assumptions. Target allocations are reviewed and updated at least annually. Changes are made periodically.

The following table provides its year-end 2023 target allocations and actual invested asset allocations at December 31, 2023 and 2022.


DECEMBER 31	2023 TARGET LEVELS			2023			2022
Fixed income securities:
Fixed maturities		88	%		88	%		88	%
Money market funds		2	%		2	%		2	%
Total fixed income securities		90	%		90	%		90	%
Equity securities		10	%		10	%		10	%
Total plan assets		100	%		100	%		100	%

The following table presents, for each hierarchy level, the qualified defined benefit plan’s investment assets that are measured at fair value at December 31, 2023 and 2022. Refer to Note 4 – “Fair Value” for a description of the different levels in the Fair Value Hierarchy.


DECEMBER 31	2023								2022
(in millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Fixed income securities:
Fixed maturities	$	34.6	$	22.3	$	—	$	12.3	$	42.7	$	28.3	$	—	$	14.4
Money market mutual funds		6.3		6.3		—		—		6.5		6.5		—		—
Total investments at fair value	$	40.9	$	28.6	$	—	$	12.3	$	49.2	$	34.8	$	—	$	14.4

Securities classified as Level 1 at December 31, 2023 and 2022 include actively traded mutual funds and U.S. Treasury bonds, which are valued at quoted market prices. Securities classified as Level 3 at December 31, 2023 and 2022 include assets held in a fixed account of an insurance company, redeemable at contract value. The fair value of the investment is estimated using a comparable public market financial institution derived fair value curve that uses non-observable inputs for market liquidity and unique credit characteristics of its underlying securities.

The Plan also holds investments measured at fair value using NAV based on the value of the underlying investments, which is determined independently by the investment manager and have not been included in the table above. These include cash, investments in commingled pools and investment-grade fixed income securities held in a custom fund, and other commingled pools that primarily invest in publicly traded common stocks. The daily NAV, which is not published as a quoted market price for these investments, is used as the basis for transactions. Redemption of these funds is not subject to restriction. The fair values of these investments are as follows:

The table below provides a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


YEARS ENDED DECEMBER 31	2023			2022
(in millions)
Balance at beginning of period	$	14.4		$	16.0
Less: Assets transferred to Level 1 investments		(2.5	)		(2.0	)
Return on plan assets related to assets still held		0.4			0.4
Balance at end of year	$	12.3		$	14.4

The Company recognizes the current funded status of its plans in its Consolidated Balance Sheets. Changes in the funded status of the plans are reflected as components of either net income or accumulated other comprehensive income (loss). The components of accumulated other comprehensive income (loss) are reflected as a net actuarial gain or loss.

The following table reflects the benefit obligations, fair value of plan assets and funded status of the plans at December 31, 2023 and 2022.


DECEMBER 31	Qualified Pension Plan						Non-Qualified Pension Plan
(in millions)	2023			2022			2023			2022
Change in benefit obligation:
Benefit obligation, beginning of period (1)	$	361.7		$	458.6		$	24.5		$	31.0
Interest cost		20.5			14.3			1.4			1.0
Actuarial gains		(1.6	)		(78.0	)		(0.5	)		(4.5	)
Benefits paid		(32.2	)		(33.2	)		(2.8	)		(3.0	)
Benefit obligation, end of year (1)		348.4			361.7			22.6			24.5
Change in plan assets:
Fair value of plan assets, beginning of period		371.5			478.0			—			—
Actual return on plan assets		23.7			(73.3	)		—			—
Contributions		—			—			2.8			3.0
Benefits paid		(32.2	)		(33.2	)		(2.8	)		(3.0	)
Fair value of plan assets, end of year		363.0			371.5			—			—
Funded status of the plans	$	14.6		$	9.8		$	(22.6	)	$	(24.5	)

Actuarial gains related to the change in the benefit obligation for the Company’s qualified benefit plan were $1.6 million for the year ended December 31, 2023, compared to $78.0 million for the year ended December 31, 2022. Actuarial gains related to the change in the benefit obligation for the Company’s non-qualified benefit plan were $0.5 million for the year ended December 31, 2023, compared to $4.5 million for the year ended December 31, 2022. For both plans, the actuarial gains in 2022 primarily reflect increases in the discount rate due to increases in corporate bond interest rates.

The components of total net periodic pension (benefit) cost are as follows:


YEARS ENDED DECEMBER 31	2023			2022			2021
(in millions)
Interest cost	$	21.9		$	15.3		$	14.9
Expected return on plan assets		(22.1	)		(17.2	)		(18.4	)
Recognized net actuarial loss		7.8			5.2			3.2
Net periodic pension (benefit) cost	$	7.6		$	3.3		$	(0.3	)

The unrecognized net actuarial gains or losses which exceed 10% of the greater of the projected benefit obligations or the fair value of plan assets are amortized as a component of net periodic pension cost over the next five years.

In accordance with ERISA guidelines, the Company is not required to fund its qualified benefit plan in 2024. The Company expects to contribute $2.7 million to its non-qualified pension plan to fund 2024 benefit payments.


YEARS ENDED DECEMBER 31	2024		2025		2026		2027		2028		2029-2033
(in millions)
Qualified pension plan	$	36.7	$	35.0	$	33.6	$	32.9	$	30.9	$	131.7
Non-qualified pension plan	$	2.7	$	2.6	$	2.5	$	2.4	$	2.3	$	9.4

The benefit payments are based on the same assumptions used to measure the Company’s benefit obligations at the end of 2023. Benefit payments related to the qualified plan will be made from plan assets held in trust and not included with Company assets, whereas those payments related to the non-qualified plan will be provided for by the Company.

In addition to the defined benefit plans, THG provides a qualified defined contribution 401(k) plan for all of its employees, whereby the Company matches employee elective 401(k) contributions, up to a maximum of 6% of eligible compensation in 2023, 2022 and 2021. The Company’s expense for this matching provision was $27.6 million, $26.4 million and $25.2 million for 2023, 2022 and 2021, respectively. In addition to this matching provision, the Company can elect to make an annual contribution to employees’ accounts.