Note 3. Segment Information

The Company classifies its business into two underwriting segments consisting of the Insurance Companies segment (“Insurance Companies”) and the Lloyd’s Operations segment (“Lloyd’s Operations”), which are separately managed by division and aggregated into each underwriting segment, and a Corporate segment (“Corporate”). Segment data for each of the two underwriting segments include allocations of the operating expenses of the wholly-owned underwriting management companies and the Parent Company’s operating expenses and related income tax amounts. The Corporate segment consists of the Parent Company’s investment income, interest expense and the related tax effect.

The Company evaluates the performance of each underwriting segment based on its underwriting and GAAP results. The Insurance Companies’ and the Lloyd’s Operations’ results are measured by taking into account net earned premiums, net losses and loss adjustment expenses (“LAE”), commission expenses, other operating expenses and other income (expense). Each segment maintains its own investments on which it earns income and realizes capital gains or losses. The Company’s underwriting performance is evaluated separately from the performance of its investment portfolios.

The Insurance Companies consist of Navigators Insurance Company, including its U.K. Branch, and its wholly-owned subsidiary, Navigators Specialty Insurance Company (“Navigators Specialty”). They are primarily engaged in underwriting marine insurance and related lines of business, specialty insurance lines of business, including contractors general liability insurance, commercial umbrella and primary and excess casualty businesses, specialty assumed reinsurance business, and professional liability insurance. Navigators Specialty underwrites specialty and professional liability insurance on an excess and surplus lines basis. Navigators Specialty is 100% reinsured by Navigators Insurance Company.

The Lloyd’s Operations primarily underwrite marine and related lines of business along with offshore energy, professional liability insurance and construction coverages for onshore energy business at Lloyd’s through Syndicate 1221. The Lloyd’s Operations includes NUAL, a Lloyd’s underwriting agency which manages Syndicate 1221.

Navigators Management Company, Inc. (“NMC”) is a wholly-owned underwriting management company that produces, manages and underwrites insurance and reinsurance, and provides corporate services for the Company. The operating results for NMC are allocated to both the Insurance Companies and Lloyd’s Operations as appropriate.

The Insurance Companies’ and the Lloyd’s Operations’ underwriting results are measured based on underwriting profit or loss and the related combined ratio, which are both non-GAAP measures of underwriting profitability. Underwriting profit or loss is calculated from net earned premiums, less the sum of net losses and LAE, commission expenses, other operating expenses and other income (expense). The combined ratio is derived by dividing the sum of net losses and LAE, commission expenses, other operating expenses and other income (expense) by net earned premiums. A combined ratio of less than 100% indicates an underwriting profit and greater than 100% indicates an underwriting loss.

Financial data by segment for the years ended December 31, 2013, 2012, and 2011 were as follows:


	Year Ended December 31, 2013
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate⁽¹⁾			Total
Gross written premiums	$	1,002,275		$	368,242		$	—		$	1,370,517
Net written premiums		680,008			207,914			—			887,922
Net earned premiums		639,338			202,601			—			841,939
Net losses and loss adjustment expenses		(415,413	)		(103,548	)		—			(518,961	)
Commission expenses		(81,132	)		(34,710	)		2,348			(113,494	)
Other operating expenses		(119,920	)		(44,514	)		—			(164,434	)
Other income (expense)		2,764			(1,588	)		(2,348	)		(1,172	)

Underwriting profit (loss)	$	25,637		$	18,241		$	—		$	43,878
Net investment income		49,083			7,160			8			56,251
Net realized gains (losses)		20,600			(58	)		4			20,546
Call premium on Senior Notes		—			—			(17,895	)		(17,895	)
Interest expense		—			—			(10,507	)		(10,507	)

Income (loss) before income taxes	$	95,320		$	25,343		$	(28,390	)	$	92,273
Income tax expense (benefit)		29,965			8,728			(9,886	)		28,807

Net income (loss)	$	65,355		$	16,615		$	(18,504	)	$	63,466

Identifiable assets	$	3,077,437		$	930,567		$	161,448		$	4,169,452

Losses and loss adjustment expenses ratio		65.0	%		51.1	%					61.6	%
Commission expense ratio		12.7	%		17.1	%					13.5	%
Other operating expense ratio ⁽²⁾		18.3	%		22.8	%					19.7	%

Combined ratio		96.0	%		91.0	%					94.8	%

(1)	- Includes Corporate segment intercompany eliminations.

(2)	- Includes Other operating expenses and Other income.


	Year Ended December 31, 2012
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate⁽¹⁾			Total
Gross written premiums	$	921,325		$	365,140		$	—		$	1,286,465
Net written premiums		622,956			210,699			—			833,655
Net earned premiums		571,439			210,525			—			781,964
Net losses and loss adjustment expenses		(417,082	)		(80,351	)		—			(497,433	)
Commission expenses		(81,370	)		(42,449	)		2,349			(121,470	)
Other operating expenses		(113,625	)		(45,454	)		—			(159,079	)
Other income (expense)		3,790			47			(2,349	)		1,488

Underwriting profit (loss)	$	(36,848	)	$	42,318		$	—		$	5,470
Net investment income		46,549			7,551			148			54,248
Net realized gains (losses)		36,468			3,555			193			40,216
Interest expense		—			—			(8,198	)		(8,198	)

Income (loss) before income taxes	$	46,169		$	53,424		$	(7,857	)	$	91,736
Income tax expense (benefit)		12,686			18,620			(3,332	)		27,974

Net income (loss)	$	33,483		$	34,804		$	(4,525	)	$	63,762

Identifiable assets	$	3,036,489		$	928,448		$	42,733		$	4,007,670

Losses and loss adjustment expenses ratio		73.0	%		38.2	%					63.6	%
Commission expense ratio		14.2	%		20.2	%					15.5	%
Other operating expense ratio ⁽²⁾		19.2	%		21.5	%					20.2	%

Combined ratio		106.4	%		79.9	%					99.3	%

(1)	- Includes Corporate segment intercompany eliminations.

(2)	- Includes Other operating expenses and Other income.


	Year Ended December 31, 2011
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate⁽¹⁾			Total
Gross written premiums	$	788,419		$	319,797		$	—		$	1,108,216
Net written premiums		542,391			211,407			—			753,798
Net earned premiums		472,463			219,182			—			691,645
Net losses and loss adjustment expenses		(341,625	)		(135,372	)		—			(476,997	)
Commission expenses		(64,165	)		(48,341	)		2,069			(110,437	)
Other operating expenses		(101,517	)		(36,512	)		—			(138,029	)
Other income (expense)		3,955			(657	)		(2,069	)		1,229

Underwriting profit (loss)	$	(30,889	)	$	(1,700	)	$	—		$	(32,589	)
Net investment income		54,164			8,955			381			63,500
Net realized gains (losses)		12,151			(2,354	)		214			10,011
Interest expense		—			—			(8,188	)		(8,188	)

Income (loss) before income taxes	$	35,426		$	4,901		$	(7,593	)	$	32,734
Income tax expense (benefit)		8,271			1,523			(2,657	)		7,137

Net income (loss)	$	27,155		$	3,378		$	(4,936	)	$	25,597

Identifiable assets	$	2,768,930		$	865,230		$	35,847		$	3,670,007

Losses and loss adjustment expenses ratio		72.3	%		61.8	%					69.0	%
Commission expense ratio		13.6	%		22.1	%					16.0	%
Other operating expense ratio ⁽²⁾		20.6	%		16.9	%					19.7	%

Combined ratio		106.5	%		100.8	%					104.7	%

(1)	- Includes Corporate segment intercompany eliminations.

(2)	- Includes Other operating expenses and Other income.

The following tables provide additional financial data by segment for the years ended December 31, 2013, 2012 and 2011:


	Year Ended December 31, 2013
	Insurance		Lloyd’s
In thousands	Companies		Operations		Total
Gross written premiums:
Marine	$	171,822	$	181,046	$	352,868
Property casualty		700,087		129,522		829,609
Professional liability		130,366		57,674		188,040

Total	$	1,002,275	$	368,242	$	1,370,517

Net written premiums:
Marine	$	119,837	$	134,627	$	254,464
Property casualty		462,942		42,334		505,276
Professional liability		97,229		30,953		128,182

Total	$	680,008	$	207,914	$	887,922

Net earned premiums:
Marine	$	129,276	$	138,690	$	267,966
Property casualty		409,480		37,722		447,202
Professional liability		100,582		26,189		126,771

Total	$	639,338	$	202,601	$	841,939


	Year Ended December 31, 2012
	Insurance		Lloyd’s
In thousands	Companies		Operations		Total
Gross written premiums:
Marine	$	200,095	$	194,423	$	394,518
Property casualty		590,741		127,028		717,769
Professional liability		130,489		43,689		174,178

Total	$	921,325	$	365,140	$	1,286,465

Net written premiums:
Marine	$	133,210	$	143,600	$	276,810
Property casualty		390,168		43,824		433,992
Professional liability		99,578		23,275		122,853

Total	$	622,956	$	210,699	$	833,655

Net earned premiums:
Marine	$	142,181	$	136,898	$	279,079
Property casualty		332,782		52,951		385,733
Professional liability		96,476		20,676		117,152

Total	$	571,439	$	210,525	$	781,964


	Year Ended December 31, 2011
	Insurance		Lloyd’s
In thousands	Companies		Operations		Total
Gross written premiums:
Marine	$	228,500	$	167,562	$	396,062
Property casualty		445,287		115,138		560,425
Professional liability		114,632		37,097		151,729

Total	$	788,419	$	319,797	$	1,108,216

Net written premiums:
Marine	$	170,642	$	137,206	$	307,848
Property casualty		293,758		56,249		350,007
Professional liability		77,991		17,952		95,943

Total	$	542,391	$	211,407	$	753,798

Net earned premiums:
Marine	$	169,018	$	145,659	$	314,677
Property casualty		231,297		55,903		287,200
Professional liability		72,148		17,620		89,768

Total	$	472,463	$	219,182	$	691,645

The Insurance Companies net earned premiums include $44.6 million, $63.9 million and $88.3 million of net earned premiums from the U.K. Branch for 2013, 2012 and 2011, respectively.