Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information — Our Personal Lines segment writes insurance for personal autos and recreational vehicles. Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses in the business auto, for-hire transportation, contractor, for-hire specialty, and tow markets. Our other indemnity businesses manage our run-off businesses, including the run-off of our professional liability insurance for community banks. Our service businesses provide insurance-related services, including processing Commercial Auto Insurance Procedures/Plans (“CAIP”) business and serving as an agent for homeowners, general liability, and workers’ compensation insurance through our programs with unaffiliated insurance companies. All segment revenues are generated from external customers.

Following are the operating results for the respective periods:

	Three Months Ended June 30,										Six Months Ended June 30,
	2014					2013					2014					2013
(millions)	Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)
Personal Lines
Agency	$	2,242.3	$	142.9		$	2,151.5	$	131.5		$	4,445.5	$	321.5		$	4,258.7	$	306.4
Direct	1,824.0		115.7			1,685.4		126.0			3,586.2		186.7			3,327.0		253.2
Total Personal Lines1	4,066.3		258.6			3,836.9		257.5			8,031.7		508.2			7,585.7		559.6
Commercial Lines	447.2		78.4			440.1		32.1			884.1		119.3			870.5		47.4
Other indemnity	0		(4.7		)	0		(3.8		)	0		(5.4		)	.1		(3.5		)
Total underwriting operations	4,513.5		332.3			4,277.0		285.8			8,915.8		622.1			8,456.3		603.5
Fees and other revenues2	74.4		NA			70.9		NA			147.2		NA			139.3		NA
Service businesses	14.0		1.1			10.6		.2			23.8		1.2			19.0		0
Investments3	139.6		133.6			235.1		230.7			362.3		352.2			416.2		406.9
Interest expense	NA		(29.6		)	NA		(30.4		)	NA		(56.3		)	NA		(61.0		)
Consolidated total	$	4,741.5	$	437.4		$	4,593.6	$	486.3		$	9,449.1	$	919.2		$	9,030.8	$	949.4

¹Personal auto insurance accounted for 92% of the total Personal Lines segment net premiums earned in both the second quarter and first six months of 2014, compared to 91% for the same periods last year; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

²Pretax profit (loss) for fees and other revenues are allocated to operating segments.

³Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

NA = Not Applicable

Our management uses underwriting margin and combined ratio as primary measures of underwriting profitability. Underwriting profitability is calculated by subtracting losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses from the total of net premiums earned and fees and other revenues. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from underwriting operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations for the respective periods:

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	Under-writing Margin		Combined Ratio	Under-writing Margin		Combined Ratio	Under-writing Margin		Combined Ratio	Under-writing Margin		Combined Ratio
Personal Lines
Agency	6.4	%	93.6	6.1	%	93.9	7.2	%	92.8	7.2	%	92.8
Direct	6.3		93.7	7.5		92.5	5.2		94.8	7.6		92.4
Total Personal Lines	6.4		93.6	6.7		93.3	6.3		93.7	7.4		92.6
Commercial Lines	17.5		82.5	7.3		92.7	13.5		86.5	5.4		94.6
Other indemnity1	NM		NM	NM		NM	NM		NM	NM		NM
Total underwriting operations	7.4		92.6	6.7		93.3	7.0		93.0	7.1		92.9

¹Underwriting margins and combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the variability of loss costs in, such businesses.