SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2012

SEGMENT INFORMATION

13. SEGMENT INFORMATION

The Company’s primary business operations include insurance products and services provided through four operating segments. These operating segments are 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, 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). 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 on the Company’s senior debentures, junior debentures, subordinated notes, collateralized borrowings with the Federal Home Loan Bank of Boston, and letter of credit facility. Management evaluates the results of the aforementioned segments on a pre-tax basis and excludes interest expense on debt. 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 the Company’s business segments. Amounts reflect activity of Chaucer since the July 1, 2011 acquisition date.

FOR THE YEARS ENDED DECEMBER 31	2012			2011			2010
(in millions)
Segment revenues:
Commercial Lines	$	1,966.2		$	1,798.9		$	1,522.3
Personal Lines		1,560.0			1,555.9			1,583.8
Chaucer		1,030.0			534.1			—
Other Property and Casualty		17.4			19.8			21.0
Total		4,573.6			3,908.7			3,127.1
Intersegment revenues		(6.5	)		(5.2	)		(4.6	)
Total segment revenues		4,567.1			3,903.5			3,122.5
Net realized investment gains		23.6			28.1			29.7
Total revenues	$	4,590.7		$	3,931.6		$	3,152.2
Segment income (loss) before income taxes:
Commercial Lines:
GAAP underwriting loss	$	(224.2	)	$	(123.0	)	$	(25.4	)
Net investment income		142.4			136.5			129.9
Other income		1.5			2.8			1.9
Commercial Lines segment income (loss)		(80.3	)		16.3			106.4
Personal Lines:
GAAP underwriting income (loss)		(67.3	)		(72.6	)		0.9
Net investment income		86.5			92.1			102.9
Other income		6.3			3.6			8.5
Personal Lines segment income		25.5			23.1			112.3
Chaucer:
GAAP underwriting income		93.5			11.9			—
Net investment income		40.2			16.9			—
Other income		3.1			4.1			—
Chaucer segment income		136.8			32.9			—
Other Property and Casualty:
GAAP underwriting income (loss)		(3.5	)		(0.3	)		0.8
Net investment income		7.2			12.7			14.4
Other net expenses		(10.6	)		(12.9	)		(11.7	)
Other Property and Casualty segment income (loss)		(6.9	)		(0.5	)		3.5
Total		75.1			71.8			222.2
Interest on debt		(61.9	)		(55.0	)		(44.3	)
Segment income before income taxes		13.2			16.8			177.9
Adjustments to segment income:
Net realized investment gains		23.6			28.1			29.7
Net loss from retirement of debt		(5.1	)		(2.3	)		(2.0	)
Net costs related to acquired businesses		(2.6	)		(16.4	)		—
Loss on derivative instruments		—			(11.3	)		—
Net foreign exchange gains (losses)		(0.4	)		6.7			—
Income before income taxes	$	28.7		$	21.6		$	205.6

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

DECEMBER 31	2012		2011
(in millions)	Identifiable Assets
U.S. Companies	$	8,909.6	$	8,471.6
Chaucer		4,444.8		4,005.8
Discontinued operations		130.5		121.2
Total	$	13,484.9	$	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.

Geographic Concentrations

Prior to the acquisition of Chaucer, the Company’s revenues were generated exclusively in the U.S. Revenues attributable to foreign countries are a result of the Chaucer acquisition. The following table presents gross written premium (“GWP”) based on the location of the risk:

FOR THE YEAR ENDED DECEMBER 31	2012		2011
	% of Total GWP
United States		76%		87%
United Kingdom		6		4
Worldwide and other		18		9
Total		100%		100%

The worldwide and other category includes insured risks that move across multiple geographic areas, including the U.S. and U.K., due to their mobile nature or insured risks that are fixed in locations that span more than one geographic area, and risks located in a single country outside the U.S. and U.K. These contracts include, for example, marine and aviation, hull, satellite, offshore energy exploration and production risks that can move across multiple geographic areas and assumed risks where the cedant insures risks in two or more geographic zones. These risks may include U.S. and U.K. insured risks.

Long-lived assets located outside the U.S. were not material for the year ended December 31, 2012 or 2011. The Company does not have revenue from transactions with a single agent or broker amounting to 10 percent or more of its consolidated revenue.