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Segment Information
 9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Segment Information Segment Information
The Company has four reportable segments: personal insurance, commercial insurance, specialty insurance and investment operations. The reportable insurance segments are business units managed separately because of the differences in the type of customers they serve, the products they provide or services they offer. The insurance segments market a broad line of property and casualty insurance products throughout the United States through independent insurance agencies, which include retail agents and wholesale brokers. The investment operations segment, managed by Stateco, provides investment services.
Effective January 1, 2017, the Company completed the transition of its internal decision-making process to a product management structure. Under this structure, the Company’s principal operating decision makers assess performance based on the underwriting results of individual products. The products within each insurance segment, were as follows:
•Personal Insurance Segment - personal auto, homeowners, farm & ranch and other personal
•
Commercial Insurance Segment - commercial auto, small commercial package, middle market commercial, workers’ compensation and other commercial
•Specialty Insurance Segment - E&S property, E&S casualty and programs
Effective September 30, 2017, the farm & ranch product moved from the personal insurance segment to the commercial insurance segment as a result of product management changes that occurred during the third quarter of 2017. Prior reporting periods have been restated to conform to the new presentation.
The Company evaluates the performance of its insurance segments using industry financial measurements based on Statutory Accounting Practices (“SAP”), which include loss and loss adjustment expense ratios, underwriting expense ratios, combined ratios, statutory underwriting gain (loss), net premiums earned and net written premiums. One of the most significant differences between SAP and GAAP is that SAP requires all underwriting expenses to be expensed immediately and not deferred and amortized over the same period the premium is earned.
The investment operations segment is evaluated based on investment returns of assets managed by Stateco. Asset information by segment is not reported for the insurance segments because the Company does not produce such information internally.
The following table sets forth financial information regarding the Company’s reportable segments for the three and nine months ended September 30, 2017 and 2016:
($ millions)
Three months ended September 30
 
Nine months ended September 30
 
2017
 
2016
 
2017
 
2016
Revenue from external sources:
 
 
 
 
 
 
 
Insurance segments
 
 
 
 
 
 
 
Personal insurance
$
144.1

 
$
144.5

 
$
430.3

 
$
433.8

Commercial insurance
114.3

 
116.0

 
341.8

 
356.3

Specialty insurance
60.6

 
65.3

 
184.3

 
178.0

Total insurance segments
319.0

 
325.8

 
956.4

 
968.1

Investment operations segment
 
 
 
 
 
 
 
Net investment income
18.7

 
17.6

 
56.5

 
54.1

Net realized capital gains
20.2

 
8.8

 
43.8

 
16.6

Total investment operations segment
38.9

 
26.4

 
100.3

 
70.7

All other
0.5

 
0.6

 
1.7

 
1.7

Total revenue from external sources
358.4

 
352.8

 
1,058.4

 
1,040.5

Intersegment revenue
1.6

 
1.5

 
3.0

 
4.4

Total revenue
360.0

 
354.3

 
1,061.4

 
1,044.9

Reconciling items:
 
 
 
 
 
 
 
Eliminate intersegment revenue
(1.6
)
 
(1.5
)
 
(3.0
)
 
(4.4
)
Total consolidated revenues
$
358.4

 
$
352.8

 
$
1,058.4

 
$
1,040.5

Segment (loss) income before federal income tax:
 
 
 
 
 
 
 
Insurance segments SAP underwriting (loss) gain
 
 
 
 
 
 
 
Personal insurance
$
(7.4
)
 
$
1.9

 
$
(31.7
)
 
$
(21.7
)
Commercial insurance
1.3

 
(17.6
)
 
(7.0
)
 
(33.7
)
Specialty insurance
(39.1
)
 
(3.3
)
 
(52.5
)
 
(28.3
)
Total insurance segments loss
(45.2
)
 
(19.0
)
 
(91.2
)
 
(83.7
)
Investment operations segment
 
 
 
 
 
 
 
Net investment income
18.7

 
17.6

 
56.5

 
54.1

Net realized capital gains
20.2

 
8.8

 
43.8

 
16.6

Total investment operations segment
38.9

 
26.4

 
100.3

 
70.7

All other
0.1

 
0.1

 
0.2

 
0.3

Total segment (loss) income before tax expense
(6.2
)
 
7.5

 
9.3

 
(12.7
)
Reconciling items:
 
 
 
 
 
 
 
GAAP expense adjustments
(2.8
)
 
2.4

 
(6.8
)
 
5.8

Interest expense on corporate debt
(1.5
)
 
(1.4
)
 
(4.4
)
 
(4.1
)
Corporate expenses
(0.7
)
 
(1.1
)
 
(2.6
)
 
(2.9
)
Total reconciling items
(5.0
)
 
(0.1
)
 
(13.8
)
 
(1.2
)
Total consolidated (loss) income before federal income tax expense
$
(11.2
)
 
$
7.4

 
$
(4.5
)
 
$
(13.9
)
 
 
 
 
 
 
 
 

Investable assets attributable to the Company’s investment operations segment totaled $2,773.4 million and $2,663.7 million at September 30, 2017, and December 31, 2016, respectively.
Subsequent Event
During the third quarter of 2017, management undertook a review of strategic alternatives for the Company’s excess and surplus lines business, which constitutes all of the business, along with programs which was previously placed into run-off, within its specialty insurance segment, to determine whether or not this business was core to the Company's ongoing business strategy.
As a result of this review, management determined this business was not core to the Company’s strategy and decided to begin exiting the excess and surplus lines business either through a series of renewal right transactions or by placing lines of business into run-off. The impact of this decision on future results will result in the elimination of the specialty insurance segment and its related underwriting results from the State Auto Group. The timing of this cannot be quantified at this time.