Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information

18. Segment Information

We operate primarily in two industries, property casualty insurance and life insurance. We regularly review our reporting segments to make decisions about allocating resources and assessing performance:

· Commercial lines property casualty insurance

· Personal lines property casualty insurance

· Excess and surplus lines property casualty insurance

· Life insurance

· Investment operations

In the fourth quarter of 2011, we refined our allocation process of property casualty loss expenses. The new allocation estimate for adjusting and other expenses was based on claim count as compared with our previous allocation, which was based on claim dollar amount. As a result of this one-time refinement, adjusting and other expenses incurred increased $23 million for the personal lines segment and decreased $23 million for the commercial lines segment with various impacts to their respective lines of business.

We revised our reportable segments during 2010 to establish a separate reportable segment for excess and surplus lines, allowing readers to view this business in a manner similar to the way we manage it internally when making operating decisions. This segment includes results of The Cincinnati Specialty Underwriters Insurance Company and CSU Producer Resources.

We report as Other the non-investment operations of the parent company and its non-insurer subsidiary, CFC Investment Company. Also included in 2009 results for this segment are the operations of a former subsidiary, CinFin Capital Management.

Revenues come primarily from unaffiliated customers:

· All four insurance segments record revenues from insurance premiums earned. Life insurance segment revenues also include separate account investment management fees.

· Fee revenues for the commercial and personal insurance segments primarily represent installment fees.

· Our investment operations’ revenues are pretax net investment income plus realized investment gains and losses.

· Other revenues are primarily finance/lease income.

Income or loss before income taxes for each segment is reported based on the nature of that business area’s operations:

· Income before income taxes for the insurance segments is defined as underwriting income or loss.

o For commercial lines, personal lines and excess and surplus insurance segments, we calculate underwriting income or loss by recording premiums earned and fee revenue minus loss and loss expenses and underwriting expenses incurred.

o For the life insurance segment, we calculate underwriting income or loss by recording premiums earned and separate account investment management fees, minus contract holders’ benefits and expenses incurred, plus investment interest credited to contract holders.

· Income before income taxes for the investment operations segment is net investment income plus realized investment gains and losses for investments of the entire company, minus investment interest credited to contract holders of the life insurance segment.

· Loss before income taxes for the Other category is primarily due to interest expense from debt of the parent company and operating expenses of our headquarters.

Identifiable assets are used by each segment in its operations. We do not separately report the identifiable assets for the commercial, personal or excess and surplus lines segments because we do not use that measure to analyze the segments. We include all investment assets, regardless of ownership, in the investment operations segment.

This table summarizes segment information:

	Years ended December 31,
(In millions)	2011			2010			2009
Revenues:
Commercial lines insurance
Commercial casualty	$	711		$	693		$	712
Commercial property		497			489			485
Commercial auto		394			384			394
Workers' compensation		318			311			326
Specialty packages		138			149			147
Surety and executive risk		103			95			104
Machinery and equipment		36			33			31
Commercial lines insurance premiums		2,197			2,154			2,199
Fee revenue		3			2			2
Total commercial lines insurance		2,200			2,156			2,201
Personal lines insurance
Personal auto		368			337			319
Homeowner		294			289			276
Other personal lines		100			95			90
Personal lines insurance premiums		762			721			685
Fee revenue		1			2			1
Total personal lines insurance		763			723			686
Excess and surplus lines insurance		70			49			27
Life insurance		167			159			143
Investment operations		595			677			837
Other		8			8			9
Total	$	3,803		$	3,772		$	3,903
Income (loss) before income taxes:
Insurance underwriting results:
Commercial lines insurance	$	(101	)	$	15		$	(33	)
Personal lines insurance		(181	)		(54	)		(80	)
Excess and surplus lines insurance		6			(8	)		(15	)
Life insurance		(3	)		7			2
Investment operations		514			598			768
Other		(59	)		(57	)		(60	)
Total	$	176		$	501		$	582
Identifiable assets:		December 31,			December 31,
		2011			2010
Property casualty insurance	$	2,298		$	2,008
Life insurance		1,244			1,214
Investment operations		11,883			11,543
Other		243			330
Total	$	15,668		$	15,095