Segment Information

3 Months Ended

Mar. 31, 2014

Segment Information

Note 2. 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 in to 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 Insurance Companies consist of NIC, including its U.K. Branch, and its wholly-owned subsidiary, NSIC. 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. NSIC underwrites specialty and professional liability insurance on an excess and surplus lines basis.

The Lloyd’s Operations primarily underwrite marine and related lines of business along with offshore energy, construction coverages for onshore energy business, specialty assumed reinsurance, and professional liability insurance at Lloyd’s through Syndicate 1221.

The Company evaluates the performance of each underwriting segment based on its underwriting and GAAP results. 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 loss adjustment expenses (“LAE”), commission expenses, other operating expenses and other underwriting income (expense). The combined ratio is derived by dividing the sum of net losses and LAE, commission expenses, other operating expenses and other underwriting 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. 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.

Financial data by segment for the three months ended March 31, 2014 and 2013 were as follows:

	Three Month Ended March 31, 2014
In thousands	Insurance Companies			Lloyd’s Operations			Corporate (1)			Total
Gross written premiums	$	311,798		$	110,992		$	—		$	422,790
Net written premiums		233,951			77,899			—			311,850
Net earned premiums		165,884			59,388			—			225,272
Net losses and loss adjustment expenses		(106,427	)		(28,640	)		—			(135,067	)
Commission expenses		(16,710	)		(9,526	)		509			(25,727	)
Other operating expenses		(33,361	)		(13,785	)		—			(47,146	)
Other underwriting income (expense)		658			6			(509	)		155
Underwriting profit (loss)	$	10,044		$	7,443		$	—		$	17,487
Net investment income		14,777			1,815			18			16,610
Net realized gains (losses)		1,237			(404	)		—			833
Interest expense		—			—			(3,852	)		(3,852	)
Other income		49			10,195			—			10,244
Income (loss) before income taxes	$	26,107		$	19,049		$	(3,834	)	$	41,322
Income tax expense (benefit)		8,112			6,638			(1,396	)		13,354
Net income (loss)	$	17,995		$	12,411		$	(2,438	)	$	27,968
Identifiable assets	$	3,203,763		$	941,426		$	154,616		$	4,299,805
Losses and loss adjustment expenses ratio		64.2	%		48.2	%					60.0	%
Commission expense ratio		10.1	%		16.0	%					11.4	%
Other operating expense ratio (2)		19.6	%		23.3	%					20.8	%
Combined ratio		93.9	%		87.5	%					92.2	%

(1) - Includes Corporate segment intercompany eliminations.

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

	Three Month Ended March 31, 2013
In thousands	Insurance Companies			Lloyd’s Operations			Corporate (1)			Total
Gross written premiums	$	301,628		$	91,594		$	—		$	393,222
Net written premiums		216,319			53,133			—			269,452
Net earned premiums		154,331			47,997			—			202,328
Net losses and loss adjustment expenses		(106,985	)		(24,357	)		—			(131,342	)
Commission expenses		(18,517	)		(8,621	)		583			(26,555	)
Other operating expenses		(29,343	)		(11,531	)		—			(40,874	)
Other income (expense)		659			542			(583	)		618
Underwriting profit (loss)	$	145		$	4,030		$	—		$	4,175
Net investment income		11,951			1,702			4			13,657
Net realized gains (losses)		4,792			(20	)		—			4,772
Interest expense		—			—			(2,051	)		(2,051	)
Income (loss) before income taxes	$	16,888		$	5,712		$	(2,047	)	$	20,553
Income tax expense (benefit)		5,404			2,046			(807	)		6,643
Net income (loss)	$	11,484		$	3,666		$	(1,240	)	$	13,910
Identifiable assets	$	3,087,308		$	936,471		$	47,266		$	4,071,045
Losses and loss adjustment expenses ratio		69.3	%		50.7	%					64.9	%
Commission expense ratio		12.0	%		18.0	%					13.1	%
Other operating expense ratio (2)		18.6	%		22.9	%					19.9	%
Combined ratio		99.9	%		91.6	%					97.9	%

(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 three months ended March 31, 2014 and 2013:

In thousands
Gross Written Premiums:	Three Months
Insurance Companies:	2014		2013
Marine	$	52,233	$	50,847
Property Casualty		229,356		218,964
Professional Liability		30,209		31,817
		311,798		301,628
Lloyd’s Operations:
Marine		62,957		53,644
Property Casualty		33,079		25,058
Professional Liability		14,956		12,892
		110,992		91,594
Total	$	422,790	$	393,222
Net Written Premiums:	Three Months
Insurance Companies:	2014		2013
Marine	$	41,124	$	41,141
Property Casualty		172,361		149,951
Professional Liability		20,466		25,227
		233,951		216,319
Lloyd’s Operations:
Marine		52,131		39,558
Property Casualty		16,534		7,312
Professional Liability		9,234		6,263
		77,899		53,133
Total	$	311,850	$	269,452
Net Earned Premiums:	Three Months
Insurance Companies:	2014		2013
Marine	$	32,760	$	36,725
Property Casualty		110,826		92,718
Professional Liability		22,298		24,888
		165,884		154,331
Lloyd’s Operations:
Marine		38,887		34,045
Property Casualty		12,958		7,879
Professional Liability		7,543		6,073
		59,388		47,997
Total	$	225,272	$	202,328

The Insurance Companies net earned premiums include $11.6 million and $10.1 million of net earned premiums from the U.K. Branch for the three months ended March 31, 2014 and 2013, respectively.