Segment Reporting Disclosures

3 Months Ended

Mar. 31, 2012

Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]

Segment Reporting Disclosures

Segment Reporting Disclosures

The Company operates in three segments of the specialty insurance marketplace: the Excess and Surplus Lines, the Specialty Admitted and the London markets. The Company considers many factors, including the nature of its insurance products, production sources, distribution strategies and regulatory environment in determining how to aggregate operating segments.

All investing activities related to our insurance operations are included in the Investing segment. For purposes of segment reporting, the Other Insurance (Discontinued Lines) segment includes lines of business that have been discontinued in conjunction with acquisitions. The Company’s non-insurance operations primarily consist of controlling interests in various industrial and service businesses. For purposes of segment reporting, the Company’s non-insurance operations are not considered to be a reportable operating segment.

Segment profit or loss for each of the Company’s operating segments is measured by underwriting profit or loss. The property and casualty insurance industry commonly defines underwriting profit or loss as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. Underwriting profit or loss does not replace operating income or net income computed in accordance with U.S. GAAP as a measure of profitability. Underwriting profit or loss provides a basis for management to evaluate the Company’s underwriting performance. Segment profit for the Investing segment is measured by net investment income and net realized investment gains or losses.

For management reporting purposes, the Company allocates assets to its underwriting, investing and non-insurance operations. Underwriting assets are all assets not specifically allocated to the Investing segment or to the Company’s non-insurance operations. Underwriting assets are not allocated to the Excess and Surplus Lines, Specialty Admitted, London Insurance Market or Other Insurance (Discontinued Lines) segments since the Company does not manage its assets by operating segment. Invested assets related to our insurance operations are allocated to the Investing segment since these assets are available for payment of losses and expenses for all operating segments. The Company does not allocate capital expenditures for long-lived assets to any of its operating segments for management reporting purposes.

a) The following tables summarize the Company’s segment disclosures.

Three Months Ended March 31, 2012
(dollars in thousands)	Excess and Surplus Lines			Specialty Admitted			London Insurance Market			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	222,929		$	148,122		$	277,566		$	1			$	—	$	648,618
Net written premiums	192,913			140,552			247,700			1				—		581,166
Earned premiums	199,378			133,475			196,742			1				—		529,596
Losses and loss adjustment expenses:
Current accident year	(128,067		)	(92,693		)	(131,746		)	—				—		(352,506		)
Prior accident years	30,587			4,326			21,465			7,607				—		63,985
Underwriting, acquisition and insurance expenses:
Prospective adoption of ASU 2010-26(1)	(8,487		)	(5,764		)	(6,037		)	—				—		(20,288		)
All other expenses	(85,857		)	(57,266		)	(75,003		)	(283		)		—		(218,409		)
Underwriting profit (loss)	7,554			(17,922		)	5,421			7,325				—		2,378
Net investment income	—			—			—			—				79,794		79,794
Net realized investment gains	—			—			—			—				11,909		11,909
Other revenues (insurance)	—			10,448			4,383			—				—		14,831
Other expenses (insurance)	—			(11,201		)	(974		)	—				—		(12,175		)
Segment profit (loss)	$	7,554		$	(18,675	)	$	8,830		$	7,325			$	91,703	$	96,737
Other revenues (non-insurance)																97,005
Other expenses (non-insurance)																(88,229		)
Amortization of intangible assets																(8,804		)
Interest expense																(22,167		)
Income before income taxes																$	74,542
U.S. GAAP combined ratio(2)	96		%	113		%	97		%	NM			(3)			100		%

Three Months Ended March 31, 2011
(dollars in thousands)	Excess and Surplus Lines			Specialty Admitted			London Insurance Market			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	201,371		$	134,321		$	255,001		$	90			$	—	$	590,783
Net written premiums	175,537			127,239			216,139			97				—		519,012
Earned premiums	181,057			122,476			159,483			95				—		463,111
Losses and loss adjustment expenses:
Current accident year	(122,507		)	(78,470		)	(187,876		)	—				—		(388,853		)
Prior accident years	56,792			198			12,634			4,901				—		74,525
Underwriting, acquisition and insurance expenses	(85,920		)	(49,473		)	(66,725		)	(232		)		—		(202,350		)
Underwriting profit (loss)	29,422			(5,269		)	(82,484		)	4,764				—		(53,567		)
Net investment income	—			—			—			—				70,099		70,099
Net realized investment gains	—			—			—			—				11,240		11,240
Other revenues (insurance)	—			9,186			—			—				—		9,186
Other expenses (insurance)	—			(11,740		)	(8		)	—				—		(11,748		)
Segment profit (loss)	$	29,422		$	(7,823	)	$	(82,492	)	$	4,764			$	81,339	$	25,210
Other revenues (non-insurance)																67,958
Other expenses (non-insurance)																(56,747		)
Amortization of intangible assets																(6,008		)
Interest expense																(18,962		)
Income before income taxes																$	11,451
U.S. GAAP combined ratio(2)	84		%	104		%	152		%	NM			(3)			112		%

(1) Effective January 1, 2012, the Company prospectively adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts. At December 31, 2011, deferred policy acquisition costs included approximately $43 million of costs that no longer met the criteria for deferral as of January 1, 2012 and will be recognized into income primarily over the first nine months of 2012, consistent with policy terms. The three months ended March 31, 2012 included $20.3 million of underwriting, acquisition and insurance expenses that were deferred as of December 31, 2011 and no longer met the criteria for deferral as of January 1, 2012.

(2) The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.

(3) NM – Ratio is not meaningful.

b) The following table reconciles segment assets to the Company’s consolidated balance sheets.

(dollars in thousands)	March 31, 2012		December 31, 2011
Segment Assets:
Investing	$	8,795,416	$	8,692,391
Underwriting	2,427,176		2,209,431
Total Segment Assets	$	11,222,592	$	10,901,822
Non-insurance operations	636,692		630,281
Total Assets	$	11,859,284	$	11,532,103