Rental expense for the Company's operations was approximately $38,179,000, $33,003,000 and $29,936,000 for 2012, 2011 and 2010, respectively. Future minimum lease payments, without provision for sublease income, are $38,671,000 in 2013, $33,893,000 in 2014 and $242,311,000 thereafter.
Beginning in 2005, the property casualty insurance market became more competitive and insurance rates decreased across most business lines. Increased competition and the impact of the economic downturn also put pressure on policy terms and conditions. While prices increased in 2012, loss costs are also increasing and current market price levels for certain lines of business remain below the prices required for the Company to achieve its long-term return objectives. With its investments in new businesses, the Company believes it is well-positioned to take advantage of new opportunities. Price changes are reflected in the Company’s results over time as premiums are earned.
The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Management believes the estimates and assumptions it makes in the reserving process provide the best estimate of the ultimate cost of settling claims and related expenses with respect to insured events which have occurred; however, different assumptions and variables could lead to significantly different reserve estimates.
Approximately $1.4 billion, or 16%, of the Company’s net loss reserves as of December 31, 2012 relate to the Reinsurance segment. There is a higher degree of uncertainty and greater variability regarding estimates of assumed loss reserves because those estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is extended. Management considers the impact of delayed reporting in its selection of assumed loss development factors.
Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of December 31, 2012 and 2011:
Reserves for excess and assumed workers’ compensation business are net of an aggregate net discount of $867 million and $892 million as of December 31, 2012 and 2011, respectively.
For the year ended December 31, 2012, estimates for claims occurring in prior years decreased by $103 million. The favorable reserve development in 2012 was primarily attributable to accident years 2008 through 2010. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.
Specialty - The majority of the favorable reserve development for the Specialty segment during 2012 and 2011 was associated with excess and surplus (“E&S”) casualty business. E&S insurers are free from rate and form regulation and generally charge higher rates for business than those that are charged in the “standard” market. Beginning in 2002, the E&S business began to experience improved claim frequency (i.e., a lower number of reported claims per unit of exposure). One reason for the lower number of claims was the Company’s introduction of more restrictive policy language which included additional exclusions that eliminated claims that would have previously been covered. In addition, as standard carriers tightened their underwriting criteria, the Company benefited from an influx of accounts from the standard market to the E&S market during these years. The more restrictive policy language and the influx of standard market business resulted in an improved risk profile within the E&S business and a reduction in loss costs that was not expected at the time loss reserves were initially established. In addition, loss severity trends for E&S casualty business have been lower than we had initially expected for the 2005 to 2009 period. We began to recognize these trends in 2007 and have continued to reduce our estimates of ultimate claim costs since then as the magnitude of the frequency trends has become more evident. The favorable reserve development in 2012 was primarily attributable to accident years 2007 through 2010.
Regional - Favorable reserve development for the Regional segment related to workers' compensation business and the liability portion of commercial multi-peril business, partially offset by modest adverse development on commercial automobile business. The favorable development for commercial multi-peril business related primarily to the 2008 and 2009 accident years and resulted mainly from lower loss emergence on known case reserves relative to historical levels. The adverse development on commercial automobile was related to commercial transportation business written by our Regional companies for accident years 2010 and 2011.
Reinsurance - The favorable development for the Reinsurance segment was related to the Company's minority participation in a Lloyd’s syndicate. The favorable development was concentrated in underwriting years 2008 through 2011 and resulted from lower than expected reported losses.
recorded. Estimated assumed premiums receivable were approximately $73 million and $64 million at December 31, 2012 and 2011, respectively. The assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies during the underwriting and negotiation of agreements, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.
The following table provides a summary of fixed maturity securities in an unrealized loss position as of December 31, 2012:
Common Stocks - At December 31, 2012, the Company owned three common stocks in an unrealized loss position with an aggregate fair value of $47 million and an aggregate unrealized loss of $1 million. The Company does not consider these common stocks to be OTTI.
Observable data - If independent pricing is not available, the Company prices the securities directly. Prices are based on observable market data where available, including current trading levels for similar securities and non-binding quotations from brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes obtained from brokers. Since these securities were priced based on observable data, they were classified as Level 2.
Premiums. Gross premiums written were $5,780 million in 2012, an increase of 14% from $5,077 million in 2011. The growth was due to a combination of rate increases and increased exposures, including expansion into new geographic and product markets. Approximately 78.3% of policies expiring in 2012 were renewed, compared with a 80.1% renewal retention rate for policies expiring in 2011. The average rate (i.e., average premium adjusted for change in exposures) for policies that renewed in 2012 increased 6.4%. Audit premiums were $89 million in 2012 compared with $53 million in 2011 primarily due to higher audit premiums for the Regional and Alternative Markets segments.
Regional gross premiums increased 6% to $1,219 million in 2012 from $1,149 million in 2011. Gross premiums increased $43 million (10%) for commercial multiple peril, $17 million (8%) for workers’ compensation and $6 million (2%) for commercial automobile.
Alternative Markets gross premiums increased 17% to $971 million in 2012 from $827 million in 2011. Excluding assigned risk plans, which are fully reinsured, gross premiums increased 13% to $765 million in 2012 from $678 million in 2011. Gross premiums increased $90 million (31%) for primary workers’ compensation and $29 million (23%) for accident and health products. Gross premiums decreased $25 million (16%) for excess workers' compensation, $2 million (3%) for other liability and $4 million (7%) for other lines.
Reinsurance gross premiums increased 12% to $509 million in 2012 from $453 million in 2011. Gross premiums increased $43 million (31%) for property business and $13 million (4%) for casualty business.
Net Investment Income. Following is a summary of net investment income for the years ended December 31, 2012 and 2011:
Change in Valuation Allowance, Net of Other-Than-Temporary Impairments. For loans where the Company determines it is probable that the contractual terms will not be met, an analysis is performed and a valuation reserve is established, if necessary, with a charge to earnings. The cost of securities is adjusted where appropriate to include a provision for a decline in value that is considered to be other-than-temporary. In 2012, the valuation allowance for mortgage loans decreased by $14 million. Other-than-temporary impairments were $5 million in 2012 compared with $0.4 million in 2011.
Specialty - The loss ratio of 62.8% in 2012 was 3.4 points higher than the loss ratio of 59.4% in 2011. Catastrophe losses were $18 million in 2012 compared with $17 million in 2011, a decrease of 0.1 loss ratio points. Favorable prior year reserve development was $42 million in 2012 compared with $102 million in 2011, a difference of 4.5 loss ratio points. The loss ratio excluding catastrophe losses and prior year reserve development decreased 1.0 points to 64.3% in 2012 from 65.3% in 2011.
Alternative Markets - The loss ratio of 71.4% in 2012 was 0.9 points lower than the loss ratio of 72.3% in 2011. Favorable prior year reserve development was $4 million in 2012 compared with $3 million in 2011, a difference of 0.1 loss ratio points. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.6 points to 71.9% in 2012 from 72.5% in 2011.
Reinsurance - The loss ratio of 60.5% in 2012 was 1.1 points lower than the loss ratio of 61.6% in 2011. Catastrophe losses were $21 million in 2012 compared to $24 million in 2011, a decrease of 1.0 loss ratio points. Favorable prior year reserve development was $34 million in 2012 compared with $25 million in 2011, a difference of 1.9 loss ratio points. The loss ratio excluding catastrophe losses and prior year reserve development increased 1.8 points to 63.5% in 2012 from 61.7% in 2011.
International - The loss ratio of 62.9% in 2012 was 2.4 points higher than the loss ratio of 60.5% in 2011. There were $16 million in catastrophe losses in 2012 compared with $25 million in 2011, a decrease of 2.1 loss ratio points. Favorable prior year reserve development was $3 million in 2012 and $12 million in 2011, a difference of 1.7 loss ratio points. The loss ratio excluding catastrophe losses and prior year reserve development increased 2.8 points to 61.2% in 2012 from 58.4% in 2011 due to higher property losses.
Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Underwriting expenses increased 11% compared with an increase in net premiums written of 12%. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) was 34.1% in 2012 and 34.6% in 2011.
Net foreign currency gains result from transactions denominated in a currency other than the operating unit’s functional currency.
Interest Expense. Interest expense was $126 million in 2012 compared with $113 million in 2011 due to the issuance of $350 million of 4.625% senior notes in March 2012.
credits are realized, would be payable on such undistributed earnings and would be reflected in the tax provision for the year in which these earnings are no longer intended to be permanently reinvested in the foreign subsidiary.
Results of Operations for the Years Ended December 31, 2011 and 2010
Following is a summary of gross and net premiums written, net premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of net premiums earned), expense ratios (underwriting expenses expressed as a percentage of net premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended December 31, 2011 and 2010. The GAAP combined ratio represents a measure of underwriting profitability, excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.
Premiums. Gross premiums written were $5,077 million in 2011, an increase of 15% from $4,416 million in 2010. The increase in gross premiums written was primarily due to growth in our Specialty and International business segments as a result of expansion into new geographic and product markets. Approximately 80% of policies expiring in 2011 were renewed, compared with a 77% renewal retention rate for policies expiring in 2010. The average rate (i.e., average premium adjusted for change in exposures) for policies that renewed in 2011 increased by approximately 2.3%. Audit premiums were $53 million in 2011 compared with $18 million in 2010.
Reinsurance gross premiums increased 7% to $453 million in 2011 from $425 million in 2010. Gross premiums increased 9% to $314 million for casualty business and 1% to $139 million for property business.
Net Investment Income. Following is a summary of net investment income for 2011 and 2010:
Net investment income decreased 1% to $526 million in 2011 from $531 million in 2010. The decrease in investment income was due to a decrease in income from arbitrage trading activities, partially offset by income from investment funds (which are reported on a one quarter lag). Average invested assets, at cost (including cash and cash equivalents) were $13.6 billion in 2011 and $13.4 billion in 2010.
Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were derived from aviation-related businesses that provide services to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. Revenues from wholly-owned investees increased to $249 million in 2011 from $214 million in 2010, primarily as a result of higher aircraft sales.
Specialty - The loss ratio of 59.4% in 2011 was 1.1 points higher than the loss ratio of 58.3% in 2010. Catastrophe losses were $17 million, or 1.2 loss ratio points, in 2011 compared with none in 2010. Favorable prior year reserve development was $102 million in 2011 compared with $99 million in 2010, a difference of 0.6 loss ratio points. The loss ratio excluding catastrophe losses and favorable prior year reserve development decreased 0.7 points to 65.3% in 2011 from 66.0% in 2010.
Reinsurance - The loss ratio of 61.6% in 2011 was 9.1 points higher than the loss ratio of 52.5% in 2010. Catastrophe losses were $24 million in 2011 compared $4 million in 2010, an increase of 4.7 loss ratio points. Favorable prior year reserve development was $25 million in 2011 compared with $26 million in 2010, a difference of 0.5 loss ratio points. The loss ratio excluding catastrophe losses and favorable prior year reserve development increased 3.9 points to 61.7% in 2011 from 57.8% in 2010 due to higher non-catastrophe property losses.
Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) was 34.6% in 2011 compared with 34.4% in 2010 due to increases in internal underwriting costs, largely offset by an increase in earned premiums.
Net foreign currency gains and losses result from transactions denominated in a currency other than the operating unit’s functional currency.
The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The average duration of the investment portfolio was 3.4 years and 3.6 years at December 31, 2012 and 2011, respectively. The Company’s investment portfolio and investment-related assets as of December 31, 2012 were as follows:
The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in order to mitigate the impact of an interest rate rise on the fair value of the portfolio. Similarly, in a period in which management expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason to expect these gains to continue in future periods.
At December 31, 2012, investments in foreign fixed maturity securities were as follows:
(1) Supranational represents investments in the North American Development Bank and European Investment Bank.
Real Estate. Real estate is directly owned property held for investment. At December 31, 2012, real estate consists of one office building in operation, three office buildings under development and a long-term ground lease.
Equity. The Company repurchased 3,428,175 shares, 5,218,097 shares and 17,017,479 shares of its common stock in 2012, 2011 and 2010, respectively. The aggregate cost of the repurchases was $128 million in 2012, $157 million in 2011 and $449 million in 2010. At December 31, 2012, total common stockholders’ equity was $4.3 billion, common shares outstanding were 136,017,732, and stockholders’ equity per outstanding share was $31.66.
We have audited the accompanying consolidated balance sheets of W. R. Berkley Corporation and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2013 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Audit premiums are recognized when they are reliably determinable. The change in accruals for earned but unbilled audit premiums increased net premiums written and premiums earned by $7 million and $1 million in 2012 and 2011, respectively, and decreased net premiums written and premiums earned by $7 million in 2010.
Fixed maturity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of stockholders' equity. Fixed maturity securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Investment income from fixed maturity securities is recognized based on the constant effective yield method. Premiums and discounts on mortgage-backed securities are adjusted for the effects of actual and anticipated prepayments on a retrospective basis.
Loans receivable represent commercial real estate mortgage loans and bank loans and are carried at amortized cost. The Company monitors the performance of its loans receivable and establishes an allowance for loan losses for loans where the Company determines it is probable that the contractual terms will not be met, with a corresponding charge to earnings. For loans that are evaluated individually and deemed to be impaired, the Company establishes a specific allowance based on a discounted cash flow analysis and comparable cost and sales methodologies, if appropriate. Individual loans that are not considered impaired and smaller-balance homogeneous loans are evaluated collectively and a general allowance is established if it is considered probable that a loss has been incurred.
Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.
Acquisition costs associated with the successful acquisition of new and renewed insurance and reinsurance contracts are deferred and amortized ratably over the terms of the related contracts. Ceding commissions received on reinsurance contracts are netted against acquisition costs and are recognized ratably over the life of the contract. Deferred policy acquisition costs are presented net of unearned ceding commissions. Deferred policy acquisition costs are reviewed to determine if they are recoverable from future income and, if not, are charged to expense. The recoverability of deferred policy acquisition costs is evaluated separately by each of our operating companies for each of their major lines of business. Future investment income is taken into account in measuring the recoverability of deferred policy acquisition costs.
Interest payments were $119 million, $111 million and $103 million in 2012, 2011 and 2010, respectively. Income taxes paid were $133 million, $48 million and $123 million in 2012, 2011 and 2010, respectively. Other non-cash items include acquisitions and dispositions, unrealized investment gains and losses and pension expense. (See Note 2, Note 10 and Note 25 of Notes to Consolidated Financial Statements.)
A summary of the impact of the adoption of this new guidance is shown below:
Information has been restated as a result of the adoption of this new guidance throughout these consolidated financial statements and notes, where applicable, related to 2011 and 2010.
In June 2011, the FASB issued guidance relating to the presentation of the components of net income and other comprehensive income. The Company's adoption of the updated guidance effective January 1, 2012 resulted in a change in the presentation of the Company's consolidated financial statements but did not have any impact on the Company's results of operations, financial position or liquidity.
In 2011, the Company acquired a business that owned an office building in London for $251 million in cash and an inactive insurance company for $23 million in cash. Approximately $2 million of the aggregate purchase price for these acquisitions was allocated to intangible assets. The following table summarizes the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition:
At December 31, 2012 and 2011, investments in fixed maturity securities were as follows:
Gross unrealized losses for mortgage-backed securities include $3,037,000 and $7,668,000, as of December 31, 2012 and 2011, respectively, related to the non-credit portion of OTTI recognized in other comprehensive income.
At December 31, 2012 and 2011, the fair value and carrying value of the arbitrage trading account were $329 million and $397 million, respectively. The primary focus of the trading account is merger arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general financial market conditions.
The following table summarizes all securities in an unrealized loss position at December 31, 2012 and 2011 by the length of time those securities have been continuously in an unrealized loss position.
Common Stocks - At December 31, 2012, there were three common stocks in an unrealized loss position with an aggregate fair value of $47 million and an aggregate unrealized loss of $1 million. The Company does not consider any of these securities to be OTTI.
There were no transfers between Levels 1 and 2 for the years ended December 31, 2012 and 2011.
to discounting was derived from the Company’s loss payout experience. For non-proportional business, reserves for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. At December 31, 2012, the discount rates by year ranged from 2.1% to 6.5% with a weighted average discount rate of 4.2%. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of Insurance of the State of Delaware of 2.2%. The aggregate net discount, after reflecting the effects of ceded reinsurance, was $867 million, $892 million and $898 million at December 31, 2012, 2011 and 2010, respectively.
The National Association of Insurance Commissioners (“NAIC”) has risk-based capital (“RBC”) requirements that require insurance companies to calculate and report information under a risk-based formula which measures statutory capital and surplus needs based on a regulatory definition of risk in a company’s mix of products and its balance sheet. As of December 31, 2012, the RBC Total Adjusted Capital of the Company's U.S. insurance companies was 459% of the RBC Authorized Control Level and 230% of the RBC Company Action Level. The total adjusted capital of each of the Company’s U.S. insurance subsidiaries exceeded the minimum required RBC levels. The use of the permitted practice described above does not impact RBC calculations.
Treasury shares have been excluded from average outstanding shares from the date of acquisition. The difference in calculating basic and diluted net income per share is attributable entirely to the dilutive effect of stock-based compensation plans.
The Company is a savings and loan holding company, subject to the oversight of the Federal Reserve. As a savings and loan holding company, the Company may be subject to restrictions on dividends to stockholders. The amount of such dividends paid is also dependent upon other factors such as the receipt of dividends from our subsidiaries, our results of operations, cash flow, financial condition and business needs, the capital and surplus requirements of our subsidiaries, and applicable insurance regulations that limit the amount of dividends that may be paid by our regulated insurance subsidiaries.
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2012 and 2011:
The Company's subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company's estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations. However, adverse outcomes are possible and could negatively impact the Company's financial condition and results of operations.
Upon vesting, shares of the Company’s common stock equal to the number of vested RSUs are issued or deferred to a later date, depending on the terms of the specific award agreement. As of December 31, 2012, 3,618,344 shares related to vested RSUs had been deferred.
The Company and its subsidiaries have profit sharing plans in which substantially all employees participate. The plans provide for minimum annual contributions of 5% of eligible compensation; contributions above the minimum are discretionary and vary with each participating subsidiary’s profitability. Employees become eligible to participate in the profit sharing plans on the first day of the month following the first full three months in which they are employed. The plans provide that 40% of the contributions vest immediately and that the remaining 60% vest at varying percentages based upon years of service. The Company’s foreign subsidiaries provide pension benefits in accordance with local regulations. Profit sharing expense was $31 million, $27 million, and $29 million in 2012, 2011 and 2010, respectively.
The following table summarizes the LTIP expense for the three years ended December 31, 2012:
The estimated prior service cost and net actuarial loss that will be amortized from accumulated other comprehensive income into periodic benefit cost during 2013 are $3,023,000 and $8,142,000, respectively.
Our Specialty lines companies underwrite risks within the excess and surplus lines market and on an admitted basis. The risks are highly complex, often unique exposures that typically fall outside the underwriting guidelines of the standard insurance market or are best served by specialized knowledge of a particular industry. The Specialty lines of business include premises operations, commercial automobile, property, products liability and professional liability lines. The customers in this segment are highly diverse. Business is conducted through 22 operating units, each delivering their products through a variety of distribution channels, depending on the customer base and particular risks insured.
Corporate, other and eliminations represent corporate revenues and expenses, net investment gains and losses and other items that are not allocated to business segments.