Industry Segments

6 Months Ended

Jun. 30, 2011

Industry Segments

Industry Segments

(16) Industry Segments

The Company's operations are presently conducted in five segments of the insurance business: specialty, regional, alternative markets, reinsurance and international.

Our specialty segment underwrites complex and sophisticated third-party liability risks, principally within the excess and surplus lines. The primary lines of business are premises operations, professional liability, commercial automobile, products liability and property lines. The companies within the segment are divided along the different customer bases and product lines that they serve. The specialty units deliver their products through a variety of distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

Our regional segment provides commercial insurance products to customers primarily in 45 states. Key clients of this segment are small-to-mid-sized businesses and state and local governmental entities. The regional subsidiaries are organized geographically, which provides them with the flexibility to adapt to local market conditions, while enjoying the superior administrative capabilities and financial strength of the Company. The regional operations are organized geographically based on markets served.

Our alternative markets operations specialize in developing, insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include employers, employer groups, insurers, and alternative market funds seeking less costly, more efficient ways to manage exposure to risks. In addition to providing insurance, the alternative markets segment also provides a wide variety of fee-based services, including consulting and administrative services.

Our reinsurance operations specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis. The principal reinsurance units are facultative reinsurance, which writes individual certificates and program facultative business, treaty reinsurance, which functions as a traditional reinsurer in specialty and standard reinsurance lines, and Lloyd's reinsurance, which writes property and casualty reinsurance through Lloyd's.

Our international segment offers personal and commercial property casualty insurance in South America; commercial property casualty insurance in the United Kingdom and Continental Europe; and reinsurance in Australia, Southeast Asia and Canada.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Income tax expense and benefits are calculated based upon the Company's overall effective tax rate.

Summary financial information about the Company's operating segments is presented in the following table. Income before income taxes by segment consists of revenues, less expenses, related to the respective segment's operations, including allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.

	Revenues
(Dollars in thousands)	Earned Premiums		Investment Income and Funds		Other		Total		Pre-Tax Income (Loss)			Net Income (Loss)
For the three months ended June 30, 2011:
Specialty	$	349,943	$	51,144	$	691	$	401,778	$	77,564		$	56,013
Regional		266,764		21,853		1,149		289,766		(15,579	)		(7,735	)
Alternative markets		148,999		35,386		23,196		207,581		41,579			30,898
Reinsurance		105,836		26,311		—		132,147		25,361			19,362
International		145,702		11,393		—		157,095		11,511			6,966
Corporate, other and eliminations (1)		—		2,985		56,707		59,692		(52,999	)		(36,758	)
Net investment gains		—		—		22,890		22,890		22,890			14,336
Consolidated	$	1,017,244	$	149,072	$	104,633	$	1,270,949	$	110,327		$	83,082
For the three months ended June 30, 2010:
Specialty	$	316,513	$	42,979	$	820	$	360,312	$	75,177		$	54,138
Regional		266,629		19,641		739		287,009		25,505			18,989
Alternative markets		155,227		29,675		18,834		203,736		45,571			33,262
Reinsurance		105,632		26,838		—		132,470		30,157			22,894
International		104,127		9,286		—		113,413		6,586			1,761
Corporate, other and eliminations (1)		—		1,312		53,282		54,594		(48,708	)		(28,286	)
Net investment gains		—		—		11,534		11,534		11,534			7,449
Consolidated	$	948,128	$	129,731	$	85,209	$	1,163,068	$	145,822		$	110,207
For the six months ended June 30, 2011:
Specialty	$	680,150	$	101,430	$	1,401	$	782,981	$	167,933		$	120,304
Regional		528,281		43,360		2,170		573,811		9,319			10,823
Alternative markets		297,336		70,141		43,641		411,118		83,209			61,794
Reinsurance		211,314		53,589		—		264,903		50,723			38,859
International		282,660		21,951		—		304,611		14,026			9,051
Corporate, other and eliminations (1)		—		4,727		110,975		115,702		(106,565	)		(74,388	)
Net investment gains		—		—		52,174		52,174		52,174			33,126
Consolidated	$	1,999,741	$	295,198	$	210,361	$	2,505,300	$	270,819		$	199,569
For the six months ended June 30, 2010:
Specialty	$	629,466	$	92,213	$	1,618	$	723,297	$	150,847		$	109,291
Regional		530,298		42,582		1,666		574,546		67,469			49,046
Alternative markets		310,012		62,522		38,597		411,131		96,556			70,383
Reinsurance		205,190		55,431		—		260,621		64,577			48,732
International		203,723		16,383		—		220,106		6,959			5,414
Corporate, other and eliminations (1)		—		4,161		105,307		109,468		(97,440	)		(65,341	)
Net investment gains		—		—		17,446		17,446		17,446			11,292
Consolidated	$	1,878,689	$	273,292	$	164,634	$	2,316,615	$	306,414		$	228,817

Identifiable assets by segment are as follows:

(Dollars in thousands)	June 30, 2011		December 31, 2010
Specialty	$	6,036,066	$	5,854,256
Regional		2,637,212		2,616,238
Alternative markets		3,946,019		3,801,597
Reinsurance		2,967,140		2,972,988
International		1,493,235		1,391,604
Corporate, other and eliminations (1)		1,115,452		891,864
Consolidated	$	18,195,124	$	17,528,547

(1) Corporate, other and eliminations represent corporate revenues and expenses, net investment gains and losses and other items that are not allocated to business segments.

Net premiums earned by major line of business are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	2011		2010		2011		2010
Specialty
Premises operations	$	110,651	$	99,819	$	211,961	$	187,759
Property		60,718		49,143		115,112		99,922
Professional liability		55,497		48,442		109,009		95,037
Commercial automobile		34,168		32,647		65,615		68,628
Products liability		23,500		24,449		46,902		63,236
Other		65,409		62,013		131,551		114,884
Total specialty		349,943		316,513		680,150		629,466
Regional
Commercial multiple peril		97,123		97,043		193,830		193,113
Commercial automobile		72,355		75,672		144,484		151,637
Workers' compensation		54,902		53,707		108,469		106,678
Other		42,384		40,207		81,498		78,870
Total regional		266,764		266,629		528,281		530,298
Alternative Markets
Primary workers' compensation		65,421		65,054		129,596		127,972
Excess workers' compensation		43,169		57,723		86,902		116,051
Other		40,409		32,450		80,838		65,989
Total alternative markets		148,999		155,227		297,336		310,012
Reinsurance
Casualty		75,926		76,222		152,612		148,145
Property		29,910		29,410		58,702		57,045
Total reinsurance		105,836		105,632		211,314		205,190
International
Professional liability		21,591		19,624		44,893		43,771
Property		35,943		17,086		67,586		28,812
Reinsurance		21,622		16,020		42,449		30,900
Automobile		17,028		17,293		34,997		34,683
Workers' compensation		18,258		13,482		35,596		27,051
Other liability		14,156		10,989		25,462		20,046
Other		17,104		9,633		31,677		18,460
Total international		145,702		104,127		282,660		203,723
Total	$	1,017,244	$	948,128	$	1,999,741	$	1,878,689