Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

9. Segment Information

The Company’s primary business operations include insurance products and services provided through four operating segments. These operating segments include the Company’s principal insurance operations conducted through the Commercial Lines, Personal Lines, and Chaucer segments and the Other Property and Casualty segment. Commercial Lines includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial coverages, such as specialty program business, inland marine, surety and other bonds, professional liability and management liability. Personal Lines includes personal automobile, homeowners and other personal coverages. Chaucer includes property, marine and aviation, energy, U.K. motor, and casualty and other coverages (which includes international liability, specialist coverages, and syndicate participations). The Other Property and Casualty segment consists of: 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 its debt separately from the earnings of its operating segments. This consists of interest expense on the Company’s senior debentures, junior debentures, subordinated notes, advances under the Company’s collateralized borrowing program with the Federal Home Loan Bank of Boston, letter of credit facility, and capital securities.

Management evaluates the results of the aforementioned segments on a pre-tax basis. Segment income (loss) excludes certain items which are included in net income (loss), such as income taxes and net realized investment gains and losses, including gains and losses from certain derivative instruments. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, segment income (loss) excludes net gains and losses on disposals of businesses, 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 segment income (loss) may be significant components in understanding and assessing the Company’s financial performance, management believes that the presentation of segment income (loss) 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, segment income (loss) should not be construed as a substitute for net income (loss) determined in accordance with U.S. GAAP.

Summarized below is financial information with respect to business segments:

	Three Months Ended September 30,								Nine Months Ended September 30,
(in millions)	2012				2011				2012				2011
Segment revenues:
Commercial Lines		$	498.9			$	449.4			$	1,461.9			$	1,336.6
Personal Lines			391.6				389.9				1,168.8				1,164.8
Chaucer			259.2				257.5				762.7				257.5
Other Property and Casualty			4.6				4.2				13.3				15.6
Total			1,154.3				1,101.0				3,406.7				2,774.5
Intersegment revenues			(1.6	)			(1.2	)			(4.7	)			(3.7	)
Total segment revenues			1,152.7				1,099.8				3,402.0				2,770.8
Net realized investment gains			5.0				8.2				4.7				24.9
Total revenues		$	1,157.7			$	1,108.0			$	3,406.7			$	2,795.7
Segment income (loss) before income taxes:
Commercial Lines:
GAAP underwriting loss		$	(27.8	)		$	(57.1	)		$	(75.0	)		$	(133.2	)
Net investment income			35.6				34.0				106.3				101.6
Other income			0.3				0.6				1.3				2.0
Commercial Lines segment income (loss)			8.1				(22.5	)			32.6				(29.6	)
Personal Lines:
GAAP underwriting loss			(8.4	)			(29.1	)			(14.6	)			(69.7	)
Net investment income			21.6				22.7				64.5				68.5
Other income			1.5				1.4				4.6				3.7
Personal Lines segment income (loss)			14.7				(5.0	)			54.5				2.5
Chaucer:
GAAP underwriting income			30.7				12.1				64.6				12.1
Net investment income			10.2				8.6				29.8				8.6
Other income (expenses)			1.1				(0.8	)			2.9				(0.8	)
Chaucer segment income			42.0				19.9				97.3				19.9
Other Property and Casualty:
GAAP underwriting income (loss)			(1.1	)			-				(2.3	)			0.1
Net investment income			1.7				2.5				5.7				10.5
Other net expenses			(2.5	)			(3.1	)			(8.2	)			(9.1	)
Other Property and Casualty segment income (loss)			(1.9	)			(0.6	)			(4.8	)			1.5
Total			62.9				(8.2	)			179.6				(5.7	)
Interest expense			(14.6	)			(17.4	)			(46.7	)			(38.6	)
Segment income (loss) before income taxes			48.3				(25.6	)			132.9				(44.3	)
Adjustments to segment income (loss):
Net realized investment gains			5.0				8.2				4.7				24.9
Net loss from retirement of debt			-				(0.1	)			-				(2.3	)
Net costs related to acquired businesses			0.2				(1.9	)			(2.2	)			(15.7	)
Loss on derivative instruments			-				(6.6	)			-				(11.3	)
Net foreign exchange gains (losses)			(0.3	)			6.7				(0.3	)			6.7
Income (loss) before income taxes		$	53.2			$	(19.3	)		$	135.1			$	(42.0	)

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

(in millions)	September 30, 2012			December 31, 2011
U.S. Companies		$	8,799.6		$	8,471.6
Chaucer			4,400.7			4,005.8
Discontinued operations			129.8			121.2
Total		$	13,330.1		$	12,598.6

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