Operating Segment Information

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Operating Segment Information

12. OPERATING SEGMENT INFORMATION

The segments of our insurance operations include casualty, property and surety. The casualty portion of our business consists largely of commercial excess, personal umbrella, general liability, transportation and management liability coverages, as well as package business and other specialty coverages, such as professional liability and workers’ compensation for office-based professionals. We also assume a limited amount of hard-to-place risks through a quota share reinsurance agreement. The casualty business is subject to the risk of estimating losses and related loss reserves because the ultimate settlement of a casualty claim may take several years to fully develop. The casualty segment is also subject to inflation risk and may be affected by evolving legislation and court decisions that define the extent of coverage and the amount of compensation due for injuries or losses.

Our property segment is comprised primarily of commercial fire, hurricane, earthquake, difference in conditions and marine coverages. We also offer homeowners’ coverages in Hawaii. Property insurance results are subject to the variability introduced by perils such as earthquakes, fires, hurricanes and other storms. Our major catastrophe exposure is to losses caused by earthquakes, primarily on the West Coast, and windstorms affecting commercial properties in coastal regions of the United States. We limit our net aggregate exposure to a catastrophic event by minimizing the total policy limits written in a particular region, purchasing reinsurance and maintaining policy terms and conditions throughout insurance cycles. We also use computer-assisted modeling techniques to provide estimates that help the Company carefully manage the concentration of risks exposed to catastrophic events.

The surety segment specializes in writing small to medium-sized contract surety coverages, including payment and performance bonds. We offer a variety of commercial surety bonds for medium to large-sized businesses across a broad spectrum of industries, including the financial, healthcare, as well as onshore and offshore energy, petrochemical and refining industries. We also offer a variety of transactional bonds including, but not limited to license and permit, notary and court bonds. Often, our surety coverages involve a statutory requirement for bonds. While these bonds typically maintain a relatively low loss ratio, losses may fluctuate due to

adverse economic conditions affecting the financial viability of our insureds. The contract surety product guarantees commercial contractors’ contractual obligations for a specific construction project. Generally, losses occur due to the deterioration of a contractor’s financial condition. This line has historically produced marginally higher loss ratios than other surety lines during economic downturns.

Net investment income consists of the interest and dividend income streams from our investments in fixed income and equity securities. Interest and general corporate expenses include the cost of debt, other director and shareholder relations costs and other compensation-related expenses incurred for the benefit of the corporation, but not attributable to the operations of our insurance segments. Investee earnings represent our 23 percent share in earnings of Prime Holdings Insurance Services, Inc., a privately held insurance company which specializes in hard-to-place risks. Additionally, we owned 40 percent of Maui Jim, a privately held company which operates in the sunglass and optical goods industries, which we sold in 2022. See note 13 for more information on the sale. Our investment in Maui Jim was carried at the holding company, as it was unrelated to our core insurance operations.

The following table summarizes our segment data based on the internal structure and reporting of information as it is used by management. The net earnings of each segment are before taxes and include revenues (if applicable), direct product or segment costs (such as commissions and claims costs), as well as allocated costs from various support departments. Assets are not managed at the segment level and therefore are not allocated to segments.

REVENUES

(in thousands)	2023		2022		2021
Casualty	$	758,346	$	711,832	$	633,639
Property		401,530		307,886		231,837
Surety		134,430		124,718		115,427
Net premiums earned	$	1,294,306	$	1,144,436	$	980,903
Net investment income		120,383		86,078		68,862
Net realized gains		32,518		588,515		64,222
Net unrealized gains (losses) on equity securities		64,787		(121,037)		65,258
Total	$	1,511,994	$	1,697,992	$	1,179,245

INSURANCE EXPENSES

(in thousands)	2023		2022		2021
Loss and settlement expenses:
Casualty	$	418,032	$	381,436	$	311,627
Property		172,062		120,745		129,924
Surety		14,319		12,195		15,051
Total loss and settlement expenses	$	604,413	$	514,376	$	456,602
Policy acquisition costs:
Casualty	$	221,589	$	204,397	$	179,354
Property		116,344		95,203		72,008
Surety		80,392		70,032		66,106
Total policy acquisition costs	$	418,325	$	369,632	$	317,468
Other insurance expenses:
Casualty	$	59,246	$	52,210	$	47,139
Property		26,808		19,416		18,605
Surety		12,329		10,586		11,163
Total other insurance expenses	$	98,383	$	82,212	$	76,907
Total	$	1,121,121	$	966,220	$	850,977

NET EARNINGS

(in thousands)	2023		2022		2021
Casualty	$	59,479	$	73,789	$	95,519
Property		86,316		72,522		11,300
Surety		27,390		31,905		23,107
Net underwriting income	$	173,185	$	178,216	$	129,926
Net investment income		120,383		86,078		68,862
Net realized gains		32,518		588,515		64,222
Net unrealized gains (losses) on equity securities		64,787		(121,037)		65,258
Interest on debt		(7,301)		(8,047)		(7,677)
General corporate expense		(15,917)		(12,900)		(13,330)
Equity in earnings of unconsolidated investees		9,610		9,853		37,060
Total earnings before incomes taxes	$	377,265	$	720,678	$	344,321
Income tax expense		72,654		137,267		64,967
Net earnings	$	304,611	$	583,411	$	279,354

The following table further summarizes revenues by major product type within each segment:

NET PREMIUMS EARNED

	Year ended December 31,
(in thousands)	2023		2022		2021
CASUALTY
Commercial excess and personal umbrella	$	286,178	$	253,921	$	219,437
Commercial transportation		103,719		96,992		83,352
General liability		103,066		100,374		90,853
Professional services		99,596		95,187		88,855
Small commercial		72,920		67,673		64,660
Executive products		24,687		26,606		21,873
Other casualty		68,180		71,079		64,609
Total	$	758,346	$	711,832	$	633,639
PROPERTY
Commercial property	$	244,798	$	163,078	$	107,941
Marine		129,428		113,208		97,745
Other property		27,304		31,600		26,151
Total	$	401,530	$	307,886	$	231,837
SURETY
Commercial	$	49,707	$	47,652	$	43,738
Transactional		47,983		45,826		43,982
Contract		36,740		31,240		27,707
Total	$	134,430	$	124,718	$	115,427
Grand total	$	1,294,306	$	1,144,436	$	980,903