Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

12.    Segment Information

We are primarily engaged in underwriting property and casualty insurance and reinsurance. We have four ongoing reporting segments: Excess and Surplus Lines, Commercial Specialty, International Specialty and Syndicate 1200. Additionally, we have a Run-off Lines segment for certain products that we no longer write.

We consider many factors, including the nature of each segment’s insurance and reinsurance products, production sources, distribution strategies and the regulatory environment, in determining how to aggregate reporting segments.

In evaluating the operating performance of our segments, we focus on core underwriting and investing results before the consideration of realized gains or losses from the sales of investments. Realized investment gains (losses) are reported as a component of the Corporate and Other segment, as decisions regarding the acquisition and disposal of securities reside with the investment function and are not under the control of the individual business segments. Identifiable assets by segment are those assets used in the operation of each segment.

Revenue and income (loss) before income taxes for each segment for the three and nine months ended September 30, 2012 and 2011 were as follows:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(in millions)	2012		2011			2012		2011
Revenue:
Earned premiums
Excess and Surplus Lines	$	100.8	$	99.5		$	295.5	$	305.8
Commercial Specialty		78.6		82.9			241.8		233.7
International Specialty		33.4		21.3			90.8		76.0
Syndicate 1200		90.8		67.3			242.3		188.2
Run-off Lines		0.7		(0.1	)		1.4		0.3
Total earned premiums		304.3		270.9			871.8		804.0
Net investment income
Excess and Surplus Lines		12.5		13.4			38.5		42.8
Commercial Specialty		6.7		6.6			20.6		21.0
International Specialty		3.1		2.4			10.0		8.1
Syndicate 1200		3.8		4.3			11.4		13.3
Run-off Lines		2.8		3.1			9.8		10.4
Corporate and Other		0.0		0.2			0.0		0.7
Total net investment income		28.9		30.0			90.3		96.3
Fee income, net		3.0		1.4			4.8		1.8
Net realized investment gains		8.3		3.9			18.7		37.7
Total revenue	$	344.5	$	306.2		$	985.6	$	939.8

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2012			2011			2012			2011
Income (loss) before income taxes
Excess and Surplus Lines	$	15.1		$	21.1		$	56.3		$	41.6
Commercial Specialty		(2.7	)		(1.2	)		(11.8	)		(7.3	)
International Specialty		6.6			(13.1	)		22.0			(63.9	)
Syndicate 1200		11.8			(4.7	)		18.0			(49.0	)
Run-off Lines		(2.5	)		(5.8	)		(1.5	)		(2.0	)
Total segment income (loss) before taxes		28.3			(3.7	)		83.0			(80.6	)
Corporate and Other		(18.9	)		(4.2	)		(30.9	)		(27.1	)
Net realized investment gains		8.3			3.9			18.7			37.7
Total income (loss) before income taxes	$	17.7		$	(4.0	)	$	70.8		$	(70.0	)

“Earned premiums” and “Total revenue” for the three and nine months ended September 30, 2011 in the above table will not agree to our quarterly report on Form 10-Q filed in 2011. At December 31, 2011, derivative accounting was applied to two reinsurance contracts. The expense for these contracts is now reflected in “Other reinsurance-related expenses” in the Consolidated Statements of Income (Loss). In the previously filed Quarterly Report, the expense was reflected as a reduction to earned premiums. See Note 10, “Derivative Instruments,” for additional information on these transactions.

The table below presents the split of earned premiums by geographic location for the three and nine months ended September 30, 2012 and 2011. For this disclosure, we determine geographic location by the country of domicile of our subsidiaries that write the business and not by the location of insureds or reinsureds from whom the business was generated.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2012		2011		2012		2011
Bermuda	$	32.6	$	21.2	$	83.5	$	76.3
Brazil		6.7		0.0		18.4		0.0
Malta		0.0		0.0		0.1		0.0
United Kingdom		84.9		67.3		231.1		188.2
United States		180.1		182.4		538.7		539.5
Total earned premiums	$	304.3	$	270.9	$	871.8	$	804.0

The following table represents identifiable assets as of September 30, 2012 and December 31, 2011:

	September 30,		December 31,
(in millions)	2012		2011
Excess and Surplus Lines	$	2,250.9	$	2,271.1
Commercial Specialty		1,307.3		1,285.4
International Specialty		736.7		694.7
Syndicate 1200		1,578.5		1,544.5
Run-off Lines		547.7		523.7
Corporate and Other		228.7		58.9
Total	$	6,649.8	$	6,378.3

Included in Corporate and Other at September 30, 2012 is $121.1 million in short-term investments and $18.2 million in cash from the issuance of senior unsecured fixed rate notes.

Included in total assets at September 30, 2012 and December 31, 2011 are $440.9 million and $548.2 million, respectively, in assets associated with trade capital providers.