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Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2020

Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]

Components of Estimated Gain From Disposal of Chaucer Business

The following table summarizes the components of the estimated gain in 2018 related to the sale of the Chaucer business as of December 28, 2018. As discussed below the table, both the pre-tax gain and income tax expense were updated in 2019.

YEAR ENDED DECEMBER 31	2018
(in millions)
Initial consideration received from sale ⁽¹⁾	$	779.0
Adjustment⁽¹⁾		(17.0	)
Contingent proceeds ^{(1) (2)}		31.7
Total cash proceeds expected from sale of Chaucer Holdings Limited⁽¹⁾		793.7
Less:
Carrying value of Chaucer business ⁽³⁾		530.0
Transaction and other sale related costs ⁽⁴⁾		30.6
Net realized losses on securities, pension and currency translation obligations related to Chaucer business ⁽⁵⁾		58.7
Total pre-tax reductions		619.3
Pre-tax gain on sale		174.4
Income tax expense ⁽⁶⁾		42.5
Gain on sale	$	131.9

(1)

Initial consideration for Chaucer as determined in the purchase and sales agreement was $779 million. This amount, along with $28 million in cash proceeds received from the sale of the Irish entity on February 14, 2019, $13 million from the sale of the Australian entities on April 10, 2019, estimated contingent consideration of $31.7 million, and an $85 million pre-signing dividend from Chaucer that was received in the second quarter of 2018, resulted in expected total proceeds from the entire transaction of $936.7 million. These amounts were partially offset by $17.0 million paid to China Re to adjust the purchase price for amounts received by the Company from Chaucer prior to December 28, 2018.

(2)	Contingent proceeds, as reflected in the sales and purchase agreement, could have been up to $45 million and was determined based upon 2018 catastrophe losses. In 2018, the Company’s best estimate of contingent consideration was $31.7 million.

(3)	The carrying value of the Chaucer business reflects its U.S. GAAP book value at December 28, 2018, excluding $7.9 million of U.S.-related deferred tax assets that are no longer likely to be realized and therefore are reflected in the income tax expense category.

(4)

Transaction and other sale related costs primarily include brokerage, legal, actuarial, tax and other professional fees, employee retention costs, costs for the purchase of aggregate excess of loss catastrophe coverage in consideration of the contingent proceeds provision, along with certain other miscellaneous charges related to the execution of the transaction.

(5)

As part of the transaction, investments held by Chaucer were transferred to China Re resulting in the recognition of net realized investment losses that were previously reflected in accumulated other comprehensive income. Additionally, Chaucer’s deferred pension obligations and currency translation obligations previously recognized in accumulated other comprehensive income were recognized as losses associated with the transaction.

(6)	The income tax expense represents the current tax obligation on the sale and the derecognition of deferred tax assets that were no longer likely to be realized.

Schedule of Effects of Reinsurance

The following table provides the effects of reinsurance.

YEARS ENDED DECEMBER 31	2020				2019				2018
(in millions)
Premiums written:
Direct	$	5,131.4			$	5,090.8			$	4,816.0
Assumed		23.1				27.7				27.6
Ceded		(556.0	)			(536.8	)			(458.8	)
Net premiums written	$	4,598.5			$	4,581.7			$	4,384.8
Premiums earned:
Direct	$	5,063.8			$	4,953.3			$	4,673.6
Assumed		24.6				26.3				26.6
Ceded		(561.0	)			(505.1	)			(445.8	)
Net premiums earned	$	4,527.4			$	4,474.5			$	4,254.4
Percentage of assumed to net premiums earned		0.5		%		0.6		%		0.6		%
Losses and LAE:
Direct	$	3,200.5			$	3,223.3			$	2,986.2
Assumed		15.9				21.4				25.2
Ceded		(371.2	)			(379.2	)			(286.8	)
Net losses and LAE	$	2,845.2			$	2,865.5			$	2,724.6

Chaucer [Member]

Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]

Summary of Discontinued Chaucer Business

Year ended December 31, 2018

The following table summarizes the results of operations for Chaucer for 2018, reflecting the results of operations for the period in which THG owned the Chaucer U.K. entities, which concluded with their sale on December 28, 2018:

(in millions)
Revenues
Net premiums earned	$	850.0
Net investment income		54.9
Other income		7.5
		912.4
Losses and operating expenses
Losses and LAE		515.5
Amortization of deferred acquisition costs		252.5
Other expenses		115.0
		883.0
Income from Chaucer business before income taxes and other items (previously presented as Chaucer's operating income)		29.4
Other items:
Interest expense		(3.8	)
Net realized and unrealized investment losses		(1.3	)
Other income		0.4
Income from Chaucer business before income taxes		24.7
Income tax expense		(4.7	)
Income from Chaucer business, net of taxes	$	20.0

Schedule of Effects of Reinsurance

(in millions)
Premiums written:
Direct	$	625.3
Assumed		685.3
Ceded		(459.9	)
Net premiums written	$	850.7
Premiums earned:
Direct	$	611.9
Assumed		667.2
Ceded		(429.1	)
Net premiums earned	$	850.0
Losses and LAE:
Direct	$	362.2
Assumed		568.7
Ceded		(415.4	)
Net losses and LAE	$	515.5

Summary of Cash Flows Associated with the Discontinued Chaucer Business

Cash Flows

The sales of the Chaucer businesses were completed in 2019, therefore there were no material cash flows associated with the Chaucer business in 2020. The following table details the cash flows associated with the Chaucer business during the years indicated:

DECEMBER 31	2019			2018
(in millions)
Net cash provided by (used in) operating activities		3.5			(22.8	)
Net cash (used in) provided by investing activities		(6.8	)		131.1