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 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 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 are primarily engaged in underwriting 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 and nine months ended September 30, 2014 and 2013 were as follows:


	Three Months Ended September 30, 2014
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	242,482		$	84,987		$	—		$	327,469
Net written premiums		172,484			55,933			—			228,417

Net earned premiums		182,051			63,316			—			245,367
Net losses and loss adjustment expenses		(108,425	)		(26,859	)		—			(135,284	)
Commission expenses		(22,705	)		(11,788	)		550			(33,943	)
Other operating expenses		(35,161	)		(15,227	)		—			(50,388	)
Other underwriting income (expense)		656			1			(550	)		107

Underwriting profit (loss)	$	16,416		$	9,443			—		$	25,859

Net investment income		13,971			1,849			19			15,839
Net realized gains (losses)		6,673			45			—			6,718
Interest expense		—			—			(3,388	)		(3,388	)
Other income		(1,100	)		2,329			—			1,229

Income (loss) before income taxes	$	35,960		$	13,666		$	(3,369	)	$	46,257

Income tax expense (benefit)		11,489			4,787			(1,244	)		15,032

Net income (loss)	$	24,471		$	8,879		$	(2,125	)	$	31,225

Identifiable assets	$	3,332,172		$	969,834		$	161,307		$	4,463,313

Losses and loss adjustment expenses ratio		59.6	%		42.4	%					55.1	%
Commission expense ratio		12.5	%		18.6	%					13.8	%
Other operating expense ratio ⁽²⁾		18.9	%		24.1	%					20.6	%

Combined ratio		91.0	%		85.1	%					89.5	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other operating expenses and Other underwriting income.


	Three Months Ended September 30, 2013
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	227,609		$	84,467		$	—		$	312,076
Net written premiums		149,290			47,266			—			196,556

Net earned premiums		162,962			50,933			—			213,895
Net losses and loss adjustment expenses		(95,315	)		(29,771	)		—			(125,086	)
Commission expenses		(20,039	)		(8,289	)		643			(27,685	)
Other operating expenses		(28,510	)		(10,546	)		—			(39,056	)
Other income (expense)		955			(522	)		(643	)		(210	)

Underwriting profit (loss)	$	20,053		$	1,805		$	—		$	21,858

Net investment income		12,285			1,807			2			14,094
Net realized gains (losses)		(1,890	)		(919	)		—			(2,809	)
Interest expense		—			—			(2,053	)		(2,053	)

Income (loss) before income taxes	$	30,448		$	2,693		$	(2,051	)	$	31,090

Income tax expense (benefit)		9,355			878			(429	)		9,804

Net income (loss)	$	21,093		$	1,815		$	(1,622	)	$	21,286

Identifiable assets	$	3,018,100		$	983,382		$	73,094		$	4,074,576

Losses and loss adjustment expenses ratio		58.5	%		58.5	%					58.5	%
Commission expense ratio		12.3	%		16.3	%					12.9	%
Other operating expense ratio ⁽²⁾		16.9	%		21.7	%					18.4	%

Combined ratio		87.7	%		96.5	%					89.8	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other operating expenses and Other income.


	Nine Months Ended September 30, 2014
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	798,009		$	301,045		$	—		$	1,099,054
Net written premiums		580,476			191,655			—			772,131

Net earned premiums		526,347			175,376			—			701,723
Net losses and loss adjustment expenses		(323,354	)		(87,217	)		—			(410,571	)
Commission expenses		(62,436	)		(30,989	)		1,605			(91,820	)
Other operating expenses		(102,963	)		(42,563	)		—			(145,526	)
Other underwriting income (expense)		2,082			20			(1,605	)		497

Underwriting profit (loss)	$	39,676		$	14,627		$	—		$	54,303

Net investment income		42,553			5,488			56			48,097
Net realized gains (losses)		12,368			(344	)		—			12,024
Interest expense		—			—			(11,559	)		(11,559	)
Other income		(1,119	)		10,692			—			9,573

Income (loss) before income taxes	$	93,478		$	30,463		$	(11,503	)	$	112,438

Income tax expense (benefit)		29,650			10,753			(4,019	)		36,384

Net income (loss)	$	63,828		$	19,710		$	(7,484	)	$	76,054

Identifiable assets	$	3,332,172		$	969,834		$	161,307		$	4,463,313

Losses and loss adjustment expenses ratio		61.4	%		49.7	%					58.5	%
Commission expense ratio		11.9	%		17.7	%					13.1	%
Other operating expense ratio ⁽²⁾		19.2	%		24.3	%					20.7	%

Combined ratio		92.5	%		91.7	%					92.3	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other operating expenses and Other underwriting income.


	Nine Months Ended September 30, 2013
	Insurance			Lloyd’s
In thousands	Companies			Operations			Corporate ⁽¹⁾			Total
Gross written premiums	$	757,802		$	279,624		$	—		$	1,037,426
Net written premiums		508,989			155,488			—			664,477

Net earned premiums		473,840			148,197			—			622,037
Net losses and loss adjustment expenses		(308,968	)		(78,608	)		—			(387,576	)
Commission expenses		(59,129	)		(25,245	)		1,743			(82,631	)
Other operating expenses		(87,682	)		(32,926	)		—			(120,608	)
Other income (expense)		2,303			(1,067	)		(1,743	)		(507	)

Underwriting profit (loss)	$	20,364		$	10,351		$	—		$	30,715

Net investment income		36,751			5,237			9			41,997
Net realized gains (losses)		6,001			(697	)		4			5,308
Interest expense		—			—			(6,156	)		(6,156	)

Income (loss) before income taxes	$	63,116		$	14,891		$	(6,143	)	$	71,864

Income tax expense (benefit)		19,554			5,120			(1,943	)		22,731

Net income (loss)	$	43,562		$	9,771		$	(4,200	)	$	49,133

Identifiable assets	$	3,018,100		$	983,382		$	73,094		$	4,074,576

Losses and loss adjustment expenses ratio		65.2	%		53.0	%					62.3	%
Commission expense ratio		12.5	%		17.0	%					13.3	%
Other operating expense ratio ⁽²⁾		18.0	%		23.0	%					19.5	%

Combined ratio		95.7	%		93.0	%					95.1	%

(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 and nine months ended September 30, 2014 and 2013:


	Three Months ended Sept. 30,							Nine Months ended Sept. 30,
In thousands	2014		2013		Change			2014		2013		Change
Gross Written Premiums:
Insurance Companies:
Marine	$	38,726	$	38,912		-0.5	%	$	139,078	$	132,836		4.7	%
Property Casualty		174,868		156,228		11.9	%		572,821		527,287		8.6	%
Professional Liability		28,888		32,469		-11.0	%		86,110		97,679		-11.8	%

		242,482		227,609		6.5	%		798,009		757,802		5.3	%
Lloyd’s Operations:
Marine		38,568		36,009		7.1	%		147,530		135,546		8.8	%
Property Casualty		31,172		35,869		-13.1	%		101,413		102,144		-0.7	%
Professional Liability		15,247		12,589		21.1	%		52,102		41,934		24.2	%

		84,987		84,467		0.6	%		301,045		279,624		7.7	%

Total	$	327,469	$	312,076		4.9	%	$	1,099,054	$	1,037,426		5.9	%


	Three Months ended Sept. 30,							Nine Months ended Sept. 30,
	2014		2013		Change			2014		2013		Change
Net Written Premiums:
Insurance Companies:
Marine	$	24,166	$	26,437		-8.6	%	$	100,647	$	94,944		6.0	%
Property Casualty		126,665		97,553		29.8	%		418,659		338,215		23.8	%
Professional Liability		21,653		25,300		-14.4	%		61,170		75,830		-19.3	%

		172,484		149,290		15.5	%		580,476		508,989		14.0	%
Lloyd’s Operations:
Marine		32,245		26,795		20.3	%		113,938		100,413		13.5	%
Property Casualty		13,758		13,761		0.0	%		44,684		33,254		34.4	%
Professional Liability		9,930		6,710		48.0	%		33,033		21,821		51.4	%

		55,933		47,266		18.3	%		191,655		155,488		23.3	%

Total	$	228,417	$	196,556		16.2	%	$	772,131	$	664,477		16.2	%


	Three Months ended Sept. 30,							Nine Months ended Sept. 30,
	2014		2013		Change			2014		2013		Change
Net Earned Premiums:
Insurance Companies:
Marine	$	31,123	$	31,490		-1.2	%	$	95,635	$	100,013		-4.4	%
Property Casualty		129,547		105,759		22.5	%		365,068		297,954		22.5	%
Professional Liability		21,381		25,713		-16.8	%		65,644		75,873		-13.5	%

		182,051		162,962		11.7	%		526,347		473,840		11.1	%
Lloyd’s Operations:
Marine		39,368		34,264		14.9	%		110,468		102,932		7.3	%
Property Casualty		12,980		10,472		23.9	%		37,401		26,913		39.0	%
Professional Liability		10,968		6,197		77.0	%		27,507		18,352		49.9	%

		63,316		50,933		24.3	%		175,376		148,197		18.3	%

Total	$	245,367	$	213,895		14.7	%	$	701,723	$	622,037		12.8	%

The Insurance Companies net earned premiums include $8.9 million and $13.9 million of net earned premiums from the U.K. Branch for the three months ended September 30, 2014 and 2013, respectively, and $31.0 million and $36.7 million of net earned premiums from the U.K. Branch for the nine months ended September 30, 2014 and 2013, respectively.