Segment Information

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company has four reportable segments: the Excess and Surplus Lines segment, the Specialty Admitted Insurance segment, the Casualty Reinsurance segment, and the Corporate and Other segment. Segment profit (loss) is measured by underwriting profit (loss), which is generally defined as net earned premiums less loss and loss adjustment expenses and other operating expenses of the operating segments. Fee income of the Excess and Surplus Lines segment is included in that segment’s underwriting profit. Fee income of $3.9 million and $2.1 million was included in underwriting profit for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, fee income of $12.0 million and $7.2 million, respectively, was included in underwriting profit. Segment results are reported prior to the effects of intercompany reinsurance agreements among the Company’s insurance subsidiaries.

The following table summarizes the Company’s segment results:

	Excess and Surplus Lines		Specialty Admitted Insurance		Casualty Reinsurance			Corporate and Other		Total
	(in thousands)
Three Months Ended September 30, 2017
Gross written premiums	$	140,425	$	84,838	$	113,088		$	—	$	338,351
Net earned premiums	123,606		19,324		59,186			—		202,116
Underwriting profit (loss) of insurance segments	9,946		851		(2,933		)	—		7,864
Net investment income	3,727		626		8,590			1,937		14,880
Interest expense	—		—		—			2,304		2,304
Segment revenues	131,033		19,992		67,860			1,981		220,866
Segment goodwill	181,831		—		—			—		181,831
Segment assets	821,668		405,209		1,372,234			122,541		2,721,652
Three Months Ended September 30, 2016
Gross written premiums	$	99,882	$	56,119	$	104,165		$	—	$	260,166
Net earned premiums	81,672		13,204		38,273			—		133,149
Underwriting profit of insurance segments	12,408		702		133			—		13,243
Net investment income	5,236		647		7,085			2,829		15,797
Interest expense	—		—		—			2,079		2,079
Segment revenues	88,671		13,890		44,808			3,996		151,365
Segment goodwill	181,831		—		—			—		181,831
Segment assets	728,231		261,063		1,258,522			100,095		2,347,911
Nine Months Ended September 30, 2017
Gross written premiums	$	387,424	$	234,073	$	222,508		$	—	$	844,005
Net earned premiums	334,723		53,337		152,820			—		540,880
Underwriting profit (loss) of insurance segments	30,475		2,246		(3,863		)	—		28,858
Net investment income	10,751		1,893		23,100			9,583		45,327
Interest expense	—		—		—			6,651		6,651
Segment revenues	357,607		55,351		176,580			10,124		599,662
Segment goodwill	181,831		—		—			—		181,831
Segment assets	821,668		405,209		1,372,234			122,541		2,721,652
Nine Months Ended September 30, 2016
Gross written premiums	$	279,417	$	119,007	$	165,484		$	—	$	563,908
Net earned premiums	217,742		36,816		114,276			—		368,834
Underwriting profit of insurance segments	31,395		1,302		673			—		33,370
Net investment income	13,601		1,898		20,248			2,875		38,622
Interest expense	—		—		—			6,294		6,294
Segment revenues	239,401		39,266		134,420			4,118		417,205
Segment goodwill	181,831		—		—			—		181,831
Segment assets	728,231		261,063		1,258,522			100,095		2,347,911

The following table reconciles the underwriting profit (loss) of the operating segments by individual segment to consolidated income before taxes:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in thousands)
Underwriting profit (loss) of the insurance segments:
Excess and Surplus Lines	$	9,946		$	12,408		$	30,475		$	31,395
Specialty Admitted Insurance	851			702			2,246			1,302
Casualty Reinsurance	(2,933		)	133			(3,863		)	673
Total underwriting profit of insurance segments	7,864			13,243			28,858			33,370
Other operating expenses of the Corporate and Other segment	(6,507		)	(4,870		)	(19,063		)	(15,597		)
Underwriting profit	1,357			8,373			9,795			17,773
Net investment income	14,880			15,797			45,327			38,622
Net realized investment (losses) gains	(171		)	210			1,183			2,376
Amortization of intangible assets	(149		)	(149		)	(447		)	(447		)
Other income and expenses	(24		)	123			(81		)	175
Interest expense	(2,304		)	(2,079		)	(6,651		)	(6,294		)
Income before taxes	$	13,589		$	22,275		$	49,126		$	52,205

Underwriting profit (loss) for the three and nine months ended September 30, 2017 reflects $10.0 million of catastrophe losses from Hurricanes Harvey, Irma, and Maria. The Excess and Surplus Lines segment includes $7.3 million of such losses primarily related to property losses in Florida. The Casualty Reinsurance segment includes $2.7 million of losses primarily related to nonstandard auto losses in Texas.

The correction of a contingent commission accrual and related commission expense increased underwriting expenses of the Casualty Reinsurance segment by $0 and $2.0 million in the three and nine months ended September 30, 2017, respectively. In addition, the correction of an expense reimbursement accrual for the Excess and Surplus Lines segment reduced underwriting expenses by $1.3 million and $0 for the three and nine months ended September 30, 2017, respectively. There was also a third quarter adjustment to increase the investment income of the Casualty Reinsurance segment by $480,000 for the three months ended September 30, 2017. Investment income for the Casualty Reinsurance segment had been understated for the three months ended June 30, 2017.