Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information [Abstract]

Segment Information

9. 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 inland marine, specialty program business, management and professional liability and surety. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes marine and aviation, property, energy, casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations), and U.K. motor business prior to June 30, 2015. Effective June 30, 2015, the Company transferred its U.K. motor business to an unaffiliated party. 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 discontinued voluntary pools business. 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 before taxes, which also excludes interest expense on debt. Operating income before taxes excludes certain items which are included in net income, such as net realized investment gains and losses. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income before taxes excludes net gains and losses on disposals of business assets, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income before taxes may be important components in understanding and assessing the Company’s overall financial performance, management believes that the presentation of operating income before taxes enhances an investor’s understanding of the Company’s results of operations by highlighting net income attributable to the core operations of the business. However, operating income before taxes should not be construed as a substitute for income before income taxes and operating income should not be construed as a substitute for net income.

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

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in millions)		2016		2015		2016		2015
Operating revenues:
Commercial Lines	$	628.4	$	601.2	$	1,857.2	$	1,786.7
Personal Lines		391.5		379.7		1,154.8		1,131.4
Chaucer		215.0		242.7		667.9		875.5
Other		2.1		1.9		5.9		5.7
Total		1,237.0		1,225.5		3,685.8		3,799.3
Net realized investment gains		4.2		8.0		5.0		30.0
Total revenues	$	1,241.2	$	1,233.5	$	3,690.8	$	3,829.3
Operating income (loss) before interest expense and income taxes:
Commercial Lines:
Underwriting income	$	3.6	$	8.3	$	12.4	$	10.9
Net investment income		39.0		38.7		117.5		116.7
Other (expenses) income		(0.1)		0.1		(0.7)		(1.1)
Commercial Lines operating income		42.5		47.1		129.2		126.5
Personal Lines:
Underwriting income		23.3		17.9		81.2		34.3
Net investment income		17.1		18.0		51.6		54.2
Other income		1.3		1.3		3.4		3.1
Personal Lines operating income		41.7		37.2		136.2		91.6
Chaucer:
Underwriting income		37.8		29.6		53.8		92.7
Net investment income		10.3		10.5		32.3		34.8
Other income		0.3		1.1		1.5		4.9
Chaucer operating income		48.4		41.2		87.6		132.4
Other:
Underwriting loss		(0.8)		(0.9)		(2.1)		(2.3)
Net investment income		1.4		1.1		3.8		3.4
Other net expenses		(3.4)		(3.1)		(9.8)		(9.1)
Other operating loss		(2.8)		(2.9)		(8.1)		(8.0)
Operating income before interest expense and income taxes		129.8		122.6		344.9		342.5
Interest on debt		(12.5)		(14.8)		(42.8)		(45.9)
Operating income before income taxes		117.3		107.8		302.1		296.6
Non-operating income items:
Net realized investment gains		4.2		8.0		5.0		30.0
Net gain on disposal of U.K. motor business		0.1		-		1.3		37.7
Net loss from repayment of debt		-		(5.6)		(86.1)		(24.1)
Other non-operating items		2.5		0.2		2.8		(0.2)
Income before income taxes	$	124.1	$	110.4	$	225.1	$	340.0

The Company recognized approximately $7 million and $3 million in net foreign currency transaction losses in the Statements of Income during the three months ended September 30, 2016 and 2015, respectively. The Company recognized approximately $28 million in net foreign currency transaction losses and approximately $12 million in net foreign currency transaction gains in the Statements of Income during the nine months ended September 30, 2016 and 2015, respectively.

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

	September 30, 2016		December 31, 2015
(in millions)	Identifiable Assets
U.S. Companies	$	10,124.7	$	9,616.0
Chaucer		4,155.0		4,082.2
Discontinued operations		84.0		83.0
Total	$	14,363.7	$	13,781.2

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.