Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

14. SEGMENT INFORMATION

     The determination of reportable segments is based on how senior management monitors the Company's underwriting operations. Management monitors the performance of its direct underwriting operations based on the geographic location of the Company's offices, the markets and customers served and the type of accounts written. The Company is currently organized into three operating segments: U.S. insurance, international insurance and reinsurance. All product lines fall within these classifications.

     The U.S. insurance segment includes the Company's direct specialty insurance operations in the United States. This segment provides both direct property and specialty casualty insurance primarily to non-Fortune 1000 North American domiciled accounts. The international insurance segment includes the Company's direct insurance operations in Bermuda, Europe, Singapore and Hong Kong. This segment provides both direct property and casualty insurance primarily to Fortune 1000 North American domiciled accounts and mid-sized to large non-North American domiciled accounts. The reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverages written by insurance companies. The Company presently writes reinsurance on both a treaty and a facultative basis, targeting several niche reinsurance markets.

     Responsibility and accountability for the results of underwriting operations are assigned by major line of business within each segment. Because the Company does not manage its assets by segment, investment income, interest expense and total assets are not allocated to individual reportable segments. General and administrative expenses are allocated to segments based on various factors, including staff count and each segment's proportional share of gross premiums written.

     Management measures results for each segment on the basis of the "loss and loss expense ratio," "acquisition cost ratio," "general and administrative expense ratio" and the "combined ratio." The "loss and loss expense ratio" is derived by dividing net losses and loss expenses by net premiums earned. The "acquisition cost ratio" is derived by dividing acquisition costs by net premiums earned. The "general and administrative expense ratio" is derived by dividing general and administrative expenses by net premiums earned. The "combined ratio" is the sum of the "loss and loss expense ratio," the "acquisition cost ratio" and the "general and administrative expense ratio."

     The following tables provide a summary of the segment results:

				International
Three months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	226,738		$	178,593		$	114,267		$	519,598
Net premiums written		172,887			108,985			113,931			395,803
Net premiums earned		145,857			79,956			129,494			355,307
Other income		—			—			—			—
Net losses and loss expenses		(92,595	)		(72,082	)		(71,136	)		(235,813	)
Acquisition costs		(18,876	)		747			(24,842	)		(42,971	)
General and administrative expenses		(31,253	)		(20,653	)		(15,295	)		(67,201	)
Underwriting income (loss)		3,133			(12,032	)		18,221			9,322
Net investment income											52,368
Net realized investment gains											58,878
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(766	)
Interest expense											(13,745	)
Foreign exchange loss											(1,184	)
Income before income taxes										$	104,873
Loss and loss expense ratio		63.5	%		90.2	%		54.9	%		66.4	%
Acquisition cost ratio		12.9	%		(0.9	%)		19.2	%		12.1	%
General and administrative expense ratio		21.4	%		25.8	%		11.8	%		18.9	%
Combined ratio		97.8	%		115.1	%		85.9	%		97.4	%

				International
Three months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	189,663		$	167,601		$	136,583		$	493,847
Net premiums written		135,238			98,509			136,048			369,795
Net premiums earned		125,659			89,427			123,838			338,924
Other income		616			—			—			616
Net losses and loss expenses		(69,198	)		(64,580	)		(54,944	)		(188,722	)
Acquisition costs		(15,854	)		66			(22,150	)		(37,938	)
General and administrative expenses		(30,683	)		(22,657	)		(14,749	)		(68,089	)
Underwriting income		10,540			2,256			31,995			44,791
Net investment income											65,594
Net realized investment gains											94,933
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(891	)
Interest expense											(9,531	)
Foreign exchange loss											(559	)
Income before income taxes										$	194,337
Loss and loss expense ratio		55.1	%		72.2	%		44.4	%		55.7	%
Acquisition cost ratio		12.6	%		(0.1	%)		17.9	%		11.2	%
General and administrative expense ratio		24.4	%		25.3	%		11.9	%		20.1	%
Combined ratio		92.1	%		97.4	%		74.2	%		87.0	%

				International
Six months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	410,040		$	289,918		$	380,328		$	1,080,286
Net premiums written		312,789			183,895			379,990			876,674
Net premiums earned		281,338			156,246			252,599			690,183
Other income		—			—			—			—
Net losses and loss expenses		(208,426	)		(143,266	)		(188,573	)		(540,265	)
Acquisition costs		(36,978	)		2,603			(46,678	)		(81,053	)
General and administrative expenses		(62,052	)		(41,381	)		(31,724	)		(135,157	)
Underwriting loss		(26,118	)		(25,798	)		(14,376	)		(66,292	)
Net investment income											102,576
Net realized investment gains											109,254
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(1,533	)
Interest expense											(27,487	)
Foreign exchange loss											(742	)
Income before income taxes										$	115,776
Loss and loss expense ratio		74.1	%		91.7	%		74.7	%		78.3	%
Acquisition cost ratio		13.1	%		(1.7	%)		18.5	%		11.7	%
General and administrative expense ratio		22.1	%		26.5	%		12.6	%		19.6	%
Combined ratio		109.3	%		116.5	%		105.8	%		109.6	%

				International
Six months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	351,748		$	289,023		$	357,239		$	998,010
Net premiums written		266,793			179,590			356,704			803,087
Net premiums earned		254,864			176,470			245,914			677,248
Other income		913			—			—			913
Net losses and loss expenses		(167,623	)		(122,029	)		(131,224	)		(420,876	)
Acquisition costs		(32,814	)		—			(45,908	)		(78,722	)
General and administrative expenses		(57,797	)		(44,502	)		(29,253	)		(131,552	)
Underwriting (loss) income		(2,457	)		9,939			39,529			47,011
Net investment income											134,496
Net realized investment gains											172,420
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(1,783	)
Interest expense											(19,059	)
Foreign exchange loss											(1,635	)
Income before income taxes										$	331,282
Loss and loss expense ratio		65.8	%		69.1	%		53.4	%		62.1	%
Acquisition cost ratio		12.9	%		0.0	%		18.7	%		11.6	%
General and administrative expense ratio		22.7	%		25.2	%		11.9	%		19.4	%
Combined ratio		101.4	%		94.3	%		84.0	%		93.1	%

     The following table shows an analysis of the Company's net premiums written by geographic location of the Company's subsidiaries. All inter-company premiums have been eliminated.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
United States	$	215,343	$	192,980	$	478,574	$	438,260
Bermuda		125,452		131,119		271,783		258,901
Europe		40,663		38,550		92,539		90,710
Singapore		10,331		5,912		25,567		9,603
Hong Kong		4,014		1,234		8,211		5,613
Total net premiums written	$	395,803	$	369,795	$	876,674	$	803,087