Segments Information

12 Months Ended

Dec. 31, 2012

Segments Information

(14)  Segments Information

The principal business of the Corporation is the sale of property and casualty insurance. The profitability of the property and casualty insurance business depends on the results of both underwriting operations and investments, which are viewed as two distinct operations. The underwriting operations are managed and evaluated separately from the investment function.

The P&C Group underwrites most lines of property and casualty insurance. Underwriting operations consist of four separate business units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed. The personal segment targets the personal insurance market. The personal classes include automobile, homeowners and other personal coverages. The commercial segment includes those classes of business that are generally available in broad markets and are of a more commodity nature. Commercial classes include multiple peril, casualty, workers’ compensation and property and marine. The specialty segment includes those classes of business that are available in more limited markets since they require specialized underwriting and claim settlement. Specialty classes include professional liability coverages and surety. The reinsurance assumed business is in runoff following the transfer of the ongoing business to a reinsurance company in 2005.

Corporate and other includes investment income earned on corporate invested assets, corporate expenses and the results of the Corporation’s non-insurance subsidiaries.

Performance of the property and casualty underwriting segments is measured based on statutory underwriting results. Statutory underwriting profit is arrived at by reducing premiums earned by losses and loss expenses incurred and statutory underwriting expenses incurred. Under statutory accounting principles applicable to property and casualty insurance companies, policy acquisition and other underwriting expenses are recognized immediately, not at the time premiums are earned.

Management uses underwriting results determined in accordance with GAAP to assess the overall performance of the underwriting operations. Underwriting income determined in accordance with GAAP is defined as premiums earned less losses and loss expenses incurred and GAAP underwriting expenses incurred. To convert statutory underwriting results to a GAAP basis, certain policy acquisition expenses are deferred and amortized over the period in which the related premiums are earned.

Investment income performance is measured based on investment income net of investment expenses, excluding realized investment gains and losses.

Distinct investment portfolios are not maintained for each underwriting segment. Property and casualty invested assets are available for payment of losses and expenses for all classes of business. Therefore, such assets and the related investment income are not allocated to underwriting segments.

Revenues, income before income tax and assets of each operating segment were as follows:

	Years Ended December 31
	2012			2011			2010
	(in millions)
Revenues
Property and casualty insurance
Premiums earned
Personal insurance	$	4,024		$	3,917		$	3,768
Commercial insurance		5,144			4,945			4,647
Specialty insurance		2,666			2,769			2,787
Total insurance		11,834			11,631			11,202
Reinsurance assumed		4			13			13
		11,838			11,644			11,215
Investment income		1,518			1,598			1,590
Total property and casualty insurance		13,356			13,242			12,805
Corporate and other		46			55			88
Realized investment gains, net		193			288			426
Total revenues	$	13,595		$	13,585		$	13,319
Income (loss) before income tax
Property and casualty insurance
Underwriting
Personal insurance	$	192		$	47		$	303
Commercial insurance		44			1			347
Specialty insurance		262			427			512
Total insurance		498			475			1,162
Reinsurance assumed		47			36			30
		545			511			1,192
Increase in deferred policy acquisition costs		3			63			30
Underwriting income		548			574			1,222
Investment income		1,482			1,562			1,558
Other income		10			21			2
Total property and casualty insurance		2,040			2,157			2,782
Corporate and other		(237	)		(246	)		(220	)
Realized investment gains, net		193			288			426
Total income before income tax	$	1,996		$	2,199		$	2,988

	December 31
	2012			2011			2010
	(in millions)
Assets
Property and casualty insurance	$	49,441		$	48,017		$	47,565
Corporate and other		2,830			2,513			2,483
Adjustments and eliminations		(87	)		(85	)		(72	)
Total assets	$	52,184		$	50,445		$	49,976

The international business of the property and casualty insurance segment is conducted primarily through subsidiaries that operate solely outside of the United States. Their assets and liabilities are located principally in the countries where the insurance risks are written. International business is also written by branch offices of a domestic subsidiary.

Revenues of the P&C Group by geographic area were as follows:

	Years Ended December 31
	2012		2011		2010
	(in millions)
Revenues
United States	$	9,996	$	9,831	$	9,748
International		3,360		3,411		3,057
Total	$	13,356	$	13,242	$	12,805