Segment Information

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Segment Information

12. SEGMENT INFORMATION

The Company’s primary business operations include insurance products and services provided through four operating segments: Core Commercial, Specialty, Personal Lines and Other. Core Commercial includes commercial multiple peril, commercial automobile, workers’ compensation, and other commercial coverages provided to small and mid-sized businesses. Specialty includes four divisions of business: Professional and Executive Lines, Specialty Property and Casualty (“Specialty P&C”), Marine, and Surety and Other. Specialty P&C includes coverages such as program business, which provides commercial insurance to markets with specialized coverage or risk management needs related to groups of similar businesses, specialty industrial and commercial property, excess and surplus lines and specialty general liability coverage. Personal Lines includes personal automobile, homeowners and other personal coverages. Included in the Other segment are Opus Investment Management, Inc., which markets investment management services to institutions, pension funds and other organizations; earnings on holding company assets; holding company and other expenses, including certain costs associated with retirement benefits due to the Company’s former life insurance employees and agents; run-off voluntary assumed property and casualty pools and run-off direct asbestos and environmental, and product liability businesses. 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 debt separately from the earnings of its operating segments. For 2023, this consisted of interest on the Company’s senior and subordinated debentures.

Management evaluates the results of its segments based on operating income before income taxes, excluding interest expense on debt. Operating income before income taxes excludes certain items which are included in net income, such as net realized and unrealized investment gains and losses. Such gains and losses are excluded since they are determined by interest rates, financial markets and the timing of sales. Also, operating income before income taxes excludes net gains and losses on disposals of businesses, gains and losses related to the repayment of debt, discontinued operations, costs to acquire businesses, restructuring costs, the cumulative effect of accounting changes and certain other items. Although the items excluded from operating income before interest expense and income taxes may be important components in understanding and assessing the Company’s overall financial performance, management believes that the presentation of operating income before interest expense and income taxes enhances an investor’s understanding of the Company’s results of operations by highlighting net income attributable to the core operations of the business. However, operating income before income taxes should not be construed as a substitute for income before income taxes or income from continuing operations and operating income should not be construed as a substitute for net income.

Summarized below is financial information with respect to the Company’s business segments.

YEARS ENDED DECEMBER 31	2023			2022			2021
(in millions)
Operating revenues:
Core Commercial	$	2,216.8		$	2,090.7		$	1,960.7
Specialty		1,351.7			1,256.5			1,099.2
Personal Lines		2,442.1			2,213.7			2,028.5
Other		15.4			14.2			16.4
Total		6,026.0			5,575.1			5,104.8
Net realized and unrealized investment gains (losses)		(32.5	)		(106.5	)		123.0
Total revenues	$	5,993.5		$	5,468.6		$	5,227.8
Operating income (loss) before interest expense and income taxes:
Core Commercial:
Underwriting income (loss)	$	16.6		$	(28.7	)	$	(7.5	)
Net investment income		151.8			136.2			146.5
Other expense		(1.2	)		(0.6	)		(1.0	)
Core Commercial operating income		167.2			106.9			138.0
Specialty:
Underwriting income		172.9			124.7			69.4
Net investment income		71.1			62.1			62.9
Other expense		(0.5	)		(0.8	)		(0.4	)
Specialty operating income		243.5			186.0			131.9
Personal Lines:
Underwriting income (loss)		(411.6	)		(104.2	)		65.1
Net investment income		96.8			86.8			89.4
Other income		10.5			8.6			4.0
Personal Lines operating income (loss)		(304.3	)		(8.8	)		158.5
Other:
Underwriting loss		(2.3	)		(1.2	)		(1.0	)
Net investment income		12.4			11.2			11.9
Other expense		(10.9	)		(9.0	)		(7.0	)
Other operating income (loss)		(0.8	)		1.0			3.9
Operating income before interest expense and income taxes		105.6			285.1			432.3
Interest on debt		(34.1	)		(34.1	)		(34.0	)
Operating income before income taxes		71.5			251.0			398.3
Non-operating income (loss) items:
Net realized and unrealized investment gains (losses)		(32.5	)		(106.5	)		123.0
Other non-operating items		2.1			(0.5	)		—
Income from continuing operations before income taxes	$	41.1		$	144.0		$	521.3

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

DECEMBER 31	2023		2022
(in millions)	Identifiable Assets
Property and Casualty	$	14,526.0	$	13,911.0
Assets of discontinued businesses		86.6		84.1
Total	$	14,612.6	$	13,995.1

The Company reviews the assets of its insurance subsidiaries collectively and does not allocate them among the Core Commercial, Specialty, Personal Lines and Other segments.

Discontinued accident and health and life businesses

During 1999, the Company exited its accident and health insurance business, consisting of its Employee Benefit Services business, its Affinity Group Underwriters business and its accident and health assumed reinsurance pool business. Prior to 1999, these businesses comprised substantially all of the former Corporate Risk Management Services segment. On January 2, 2009, Hanover Insurance directly assumed a portion of the accident and health business and the remainder of the discontinued First Allmerica Financial Life Insurance Company (“FAFLIC”) accident and health business was reinsured by Hanover Insurance in connection with the sale of FAFLIC to Commonwealth Annuity.

At December 31, 2023 and 2022, the portion of the discontinued accident and health business that was directly assumed had assets of $84.4 million and $82.2 million, respectively, consisting primarily of invested assets, and liabilities of $83.5 million and $80.9 million, respectively, consisting primarily of policy liabilities. At December 31, 2023 and 2022, the assets and liabilities of this business, as well as those of the reinsured portion of the accident and health business are classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets.

Discontinued accident and health and life operations for the years ended December 31, 2023 and 2021, resulted in income, net of taxes, of $0.6 million and $1.6 million, respectively. For the year ended December 31, 2022, this business resulted in losses, net of taxes, of $0.8 million. For the years ended December 31, 2023 and 2021, income tax related to this business resulted in a liability of $0.2 million and $0.4 million, respectively, while income tax related to this business resulted in a benefit of $0.2 million for the year ended December 31, 2022. Results from discontinued accident and health and life operations for 2022 and 2021 and for balances at December 31, 2022 reflect the implementation of ASU 2018-12, effective January 1, 2023. See Item O. “New Accounting Pronouncements” in Note 1 - “Summary of Significant Accounting Policies.”