Segment Information

6 Months Ended

Jun. 30, 2014

Segment Information [Abstract]

Segment Information

8. Segment Information

The Company’s primary business operations include insurance products and services provided through four operating segments. The domestic operating segments are Commercial Lines, Personal Lines and Other, and the Company’s international operating segment is Chaucer. Commercial Lines includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial coverages, such as specialty program business, inland marine, management and professional liability and surety. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes marine and aviation, energy, property, U.K. motor, and casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations). Included in Other are Opus Investment Management, Inc., which markets investment management services to institutions, pension funds and other organizations; earnings on holding company assets; and, a voluntary pools business which is in run-off. The separate financial information is presented consistent with the way results are regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company reports interest expense related to debt separately from the earnings of its operating segments. This consists of interest on the Company’s senior debentures, subordinated debentures, collateralized borrowings with the Federal Home Loan Bank of Boston, and letter of credit facility. Management evaluates the results of the aforementioned segments based on operating income (loss) before taxes which also excludes interest expense on debt. Operating income (loss) before taxes excludes certain items which are included in net income (loss), such as net realized investment gains and losses (including gains and losses on certain derivative instruments). Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income (loss) before taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, extraordinary items, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income (loss) before taxes may be important components in understanding and assessing the Company’s overall financial performance, management believes that the presentation of operating income (loss) before taxes enhances an investor’s understanding of the Company’s results of operations by highlighting net income (loss) attributable to the core operations of the business. However, operating income (loss) before taxes should not be construed as a substitute for income (loss) before income taxes and operating income (loss) should not be construed as a substitute for net income (loss).

Summarized below is financial information with respect to the Company’s business segments.

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(in millions)		2014		2013		2014		2013
Operating revenues:
Commercial Lines	$	556.9	$	523.7	$	1,108.9	$	1,038.4
Personal Lines		371.4		388.9		742.4		780.0
Chaucer		320.6		253.5		635.1		517.4
Other		1.9		2.8		3.9		5.3
Total		1,250.8		1,168.9		2,490.3		2,341.1
Net realized investment gains		22.2		13.7		26.6		21.8
Total revenues	$	1,273.0	$	1,182.6	$	2,516.9	$	2,362.9
Operating income (loss) before income taxes:
Commercial Lines:
GAAP underwriting gain (loss)	$	7.3	$	(9.5)	$	(14.0)	$	(12.6)
Net investment income		37.2		36.0		74.5		72.1
Other expense		(0.3)		(0.3)		(0.2)		(0.3)
Commercial Lines operating income		44.2		26.2		60.3		59.2
Personal Lines:
GAAP underwriting income (loss)		3.6		(0.3)		5.7		9.8
Net investment income		18.0		19.1		35.9		38.1
Other income		1.1		1.1		2.7		2.5
Personal Lines operating income		22.7		19.9		44.3		50.4
Chaucer:
GAAP underwriting income		24.3		24.7		60.8		57.7
Net investment income		10.7		10.7		21.2		21.2
Other income (expense)		3.1		1.5		5.3		(1.1)
Chaucer operating income		38.1		36.9		87.3		77.8
Other:
GAAP underwriting loss		(0.9)		(1.0)		(1.4)		(2.1)
Net investment income		1.1		2.1		2.4		3.8
Other net expenses		(3.0)		(3.0)		(5.7)		(5.8)
Other operating loss		(2.8)		(1.9)		(4.7)		(4.1)
Operating income before interest expense and income taxes		102.2		81.1		187.2		183.3
Interest on debt		(16.3)		(17.4)		(32.6)		(32.1)
Operating income before income taxes		85.9		63.7		154.6		151.2
Non-operating income items:
Net realized investment gains		22.2		13.7		26.6		21.8
Net loss from repayment of debt		-		(11.3)		-		(19.1)
Net (costs) benefit related to acquired businesses		(0.2)		(0.2)		(1.1)		0.2
Net foreign exchange (losses) gains		(0.2)		-		(0.3)		0.7
Income before income taxes	$	107.7	$	65.9	$	179.8	$	154.8

The Company recognized $5.1 million in net foreign currency transaction gains in the Statements of Income during the three months ended June 30, 2014 compared to $5.6 million in net foreign currency losses during the three months ended June 30, 2013. The Company recognized $5.8 million in net foreign currency transaction gains in the Statements of Income during the six months ended June 30, 2014 compared to $7.7 million in net foreign currency losses during the six months ended June 30, 2013.  

The following table provides identifiable assets for the Company’s business segments and discontinued operations:

	June 30,		December 31,
	2014		2013
(in millions)	Identifiable Assets
U.S. Companies	$	9,176.9	$	8,962.6
Chaucer		4,672.9		4,301.2
Discontinued operations		115.0		114.9
Total	$	13,964.8	$	13,378.7

The Company reviews the assets of its U.S. Companies collectively and does not allocate them between the Commercial Lines, Personal Lines and Other segments.