Segment Information

12 Months Ended

Dec. 31, 2016

Segment Information disclosure

Segment Information disclosure [Text Block]

2. SEGMENT INFORMATION

The accounting policies used to prepare the segment reporting data for the Company’s three reportable business segments are the same as those described in the Summary of Significant Accounting Policies in note 1.

Except as described below for certain legal entities, the Company allocates its invested assets and the related net investment income to its reportable business segments.  Pre-tax net investment income is allocated based upon an investable funds concept, which takes into account liabilities (net of non-invested assets) and appropriate capital considerations for each segment. For investable funds, a benchmark investment yield is developed that reflects the estimated duration of the loss reserves’ future cash flows, the interest rate environment at the time the losses were incurred and A+ rated corporate debt instrument yields.  For capital, a benchmark investment yield is developed that reflects the average yield on the total investment portfolio.  The benchmark investment yields are applied to each segment’s investable funds and capital, respectively, to produce a total notional investment income by segment.  The Company’s actual net investment income is allocated to each segment in proportion to the respective segment’s notional investment income to total notional investment income.  There are certain legal entities within the Company that are dedicated to specific reportable business segments.  The invested assets and related net investment income from these legal entities are reported in the applicable business segment and are not allocated among the other business segments.

The cost of the Company’s catastrophe treaty program is included in the Company’s ceded premiums and is allocated among reportable business segments based on an estimate of actual market reinsurance pricing using expected losses calculated by the Company’s catastrophe model, adjusted for any experience adjustments.

The following tables summarize the components of the Company’s revenues, income, net written premiums and total assets by reportable business segments.

(for the year ended December 31, in millions)	Business Insurance		Bond & Specialty Insurance		Personal Insurance		Total Reportable Segments
2016
Premiums	$	13,855	$	2,260	$	8,419	$	24,534
Net investment income	1,701		239		362		2,302
Fee income	442		—		16		458
Other revenues	168		21		63		252
Total segment revenues (1)	$	16,166	$	2,520	$	8,860	$	27,546
Amortization and depreciation	$	2,783	$	491	$	1,530	$	4,804
Income tax expense	656		309		192		1,157
Segment income (1)	1,982		712		517		3,211
2015
Premiums	$	13,698	$	2,267	$	7,909	$	23,874
Net investment income	1,757		254		368		2,379
Fee income	445		—		15		460
Other revenues	17		22		54		93
Total segment revenues (1)	$	15,917	$	2,543	$	8,346	$	26,806
Amortization and depreciation	$	2,725	$	501	$	1,470	$	4,696
Income tax expense	744		283		416		1,443
Segment income (1)	2,077		683		932		3,692
2014
Premiums	$	13,515	$	2,275	$	7,923	$	23,713
Net investment income	2,072		293		422		2,787
Fee income	438		—		12		450
Other revenues	34		20		91		145
Total segment revenues (1)	$	16,059	$	2,588	$	8,448	$	27,095
Amortization and depreciation	$	2,714	$	521	$	1,503	$	4,738
Income tax expense	795		348		369		1,512
Segment income (1)	2,297		760		841		3,898

(1) Segment revenues for reportable business segments exclude net realized investment gains. Segment income for reportable business segments equals net income excluding the after-tax impact of net realized investment gains.

Net written premiums by market were as follows:

(for the year ended December 31, in millions)	2016		2015		2014
Business Insurance:
Domestic:
Select Accounts	$	2,729	$	2,716	$	2,707
Middle Market	7,379		7,186		6,973
National Accounts	1,058		1,048		1,047
National Property and Other	1,779		1,791		1,757
Total Domestic	12,945		12,741		12,484
International	955		1,033		1,193
Total Business Insurance	13,900		13,774		13,677
Bond & Specialty Insurance:
Domestic:
Management Liability	1,342		1,326		1,339
Surety	757		755		764
Total Domestic	2,099		2,081		2,103
International	172		192		191
Total Bond & Specialty Insurance	2,271		2,273		2,294
Personal Insurance:
Domestic:
Agency:
Automobile	4,103		3,534		3,260
Homeowners and Other	3,772		3,687		3,718
Total Agency	7,875		7,221		6,978
Direct-to-Consumer	309		236		187
Total Domestic	8,184		7,457		7,165
International	603		617		768
Total Personal Insurance	8,787		8,074		7,933
Total consolidated net written premiums	$	24,958	$	24,121	$	23,904

Business Segment Reconciliations

(for the year ended December 31, in millions)	2016			2015			2014
Revenue reconciliation
Earned premiums
Business Insurance:
Domestic:
Workers’ compensation	$	3,969		$	3,867		$	3,711
Commercial automobile	2,010			1,922			1,900
Commercial property	1,769			1,766			1,747
General liability	1,977			1,898			1,834
Commercial multi-peril	3,148			3,133			3,071
Other	31			39			42
Total Domestic	12,904			12,625			12,305
International	951			1,073			1,210
Total Business Insurance	13,855			13,698			13,515
Bond & Specialty Insurance:
Domestic:
Fidelity and surety	962			954			936
General liability	946			955			963
Other	180			176			177
Total Domestic	2,088			2,085			2,076
International	172			182			199
Total Bond & Specialty Insurance	2,260			2,267			2,275
Personal Insurance:
Domestic
Automobile	4,013			3,512			3,316
Homeowners and Other	3,813			3,756			3,809
Total Domestic	7,826			7,268			7,125
International	593			641			798
Total Personal Insurance	8,419			7,909			7,923
Total earned premiums	24,534			23,874			23,713
Net investment income	2,302			2,379			2,787
Fee income	458			460			450
Other revenues	252			93			145
Total segment revenues	27,546			26,806			27,095
Other revenues	11			6			—
Net realized investment gains	68			3			79
Total revenues	$	27,625		$	26,815		$	27,174
Income reconciliation, net of tax
Total segment income	$	3,211		$	3,692		$	3,898
Interest Expense and Other (1)	(244		)	(255		)	(257		)
Core income	2,967			3,437			3,641
Net realized investment gains	47			2			51
Net income	$	3,014		$	3,439		$	3,692

(1) The primary component of Interest Expense and Other was after-tax interest expense of $236 million, $242 million and $240 million in 2016, 2015 and 2014, respectively.

(at December 31, in millions)	2016		2015
Asset reconciliation:
Business Insurance	$	75,730	$	75,915
Bond & Specialty Insurance	8,726		8,820
Personal Insurance	15,426		15,065
Total assets for reportable segments	99,882		99,800
Other assets (1)	363		384
Total consolidated assets	$	100,245	$	100,184

(1) The primary components of other assets at December 31, 2016 and 2015 were other intangible assets and deferred taxes.

Enterprise-Wide Disclosures

The Company does not have revenue from transactions with a single customer amounting to 10 percent or more of its revenues.

The following table presents revenues of the Company’s operations based on location:

(for the year ended December 31, in millions)	2016		2015		2014
U.S.	$	25,904	$	25,127	$	25,103
Non-U.S.:
Canada	1,154		1,202		1,474
Other Non-U.S.	567		486		597
Total Non-U.S.	1,721		1,688		2,071
Total revenues	$	27,625	$	26,815	$	27,174