Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

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 lines of business fall within these classifications.

The U.S. insurance segment includes the Company’s direct specialty insurance operations in the United States and Canada, as well as the Company's claim administration services operations. The Company acquired the remaining interest in a claims administration services company it did not own in May 2014 and recorded goodwill of $9,385 related to the transaction. The U.S. insurance segment provides both direct property and specialty casualty insurance primarily to non-Fortune 1000 North American domiciled accounts, as well as third-party claims administration services. The international insurance segment includes the Company’s direct insurance operations in Bermuda, Europe, and Asia Pacific, which includes offices in Australia, Hong Kong and Singapore. This segment provides both direct property and casualty insurance primarily to Fortune 1000 North American domiciled accounts from the Bermuda office and direct property and specialty casualty insurance to non-North American domiciled accounts from the European and Asia Pacific offices. The reinsurance segment includes the Company’s reinsurance operations in the United States, Bermuda, Europe and Singapore. This segment provides 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”, “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 expense ratio is the sum of the acquisition cost ratio and the general and administrative expense ratio. 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:

Three Months Ended June 30, 2014	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	341,426		$	204,478		$	214,501		$	760,405
Net premiums written	221,950			122,171			209,803			553,924
Net premiums earned	214,593			89,205			233,449			537,247
Net losses and loss expenses	(145,485		)	(35,920		)	(133,450		)	(314,855		)
Acquisition costs	(29,677		)	(575		)	(44,027		)	(74,279		)
General and administrative expenses	(46,593		)	(29,411		)	(20,184		)	(96,188		)
Underwriting (loss) income	(7,162		)	23,299			35,788			51,925
Net investment income										36,793
Net realized investment gains										85,217
Amortization of intangible assets										(634		)
Interest expense										(14,592		)
Foreign exchange loss										(651		)
Income before income taxes										$	158,058
Loss and loss expense ratio	67.8		%	40.3		%	57.2		%	58.6		%
Acquisition cost ratio	13.8		%	0.6		%	18.9		%	13.8		%
General and administrative expense ratio	21.7		%	33.0		%	8.6		%	17.9		%
Expense ratio	35.5		%	33.6		%	27.5		%	31.7		%
Combined ratio	103.3		%	73.9		%	84.7		%	90.3		%

Three Months Ended June 30, 2013	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	307,297		$	192,593		$	265,310		$	765,200
Net premiums written	221,419			106,394			253,409			581,222
Net premiums earned	197,436			87,041			222,794			507,271
Net losses and loss expenses	(124,364		)	(30,968		)	(119,796		)	(275,128		)
Acquisition costs	(27,270		)	358			(37,705		)	(64,617		)
General and administrative expenses	(38,302		)	(24,135		)	(18,148		)	(80,585		)
Underwriting income	7,500			32,296			47,145			86,941
Net investment income										37,635
Net realized investment losses										(115,198		)
Amortization of intangible assets										(634		)
Interest expense										(14,188		)
Foreign exchange loss										(490		)
Loss before income taxes										$	(5,934	)
Loss and loss expense ratio	63.0		%	35.6		%	53.8		%	54.2		%
Acquisition cost ratio	13.8		%	(0.4		)%	16.9		%	12.7		%
General and administrative expense ratio	19.4		%	27.7		%	8.1		%	15.9		%
Expense ratio	33.2		%	27.3		%	25.0		%	28.6		%
Combined ratio	96.2		%	62.9		%	78.8		%	82.8		%

Six Months Ended June 30, 2014	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	611,371		$	338,842		$	711,585		$	1,661,798
Net premiums written	424,690			197,630			703,218			1,325,538
Net premiums earned	426,716			177,544			463,272			1,067,532
Net losses and loss expenses	(287,480		)	(59,486		)	(243,175		)	(590,141		)
Acquisition costs	(57,180		)	374			(85,195		)	(142,001		)
General and administrative expenses	(84,030		)	(54,171		)	(38,327		)	(176,528		)
Underwriting (loss) income	(1,974		)	64,261			96,575			158,862
Net investment income										84,412
Net realized investment gains										139,422
Amortization of intangible assets										(1,267		)
Interest expense										(29,126		)
Foreign exchange loss										(700		)
Income before income taxes										$	351,603
Loss and loss expense ratio	67.4		%	33.5		%	52.5		%	55.3		%
Acquisition cost ratio	13.4		%	(0.2		)%	18.4		%	13.3		%
General and administrative expense ratio	19.7		%	30.5		%	8.3		%	16.5		%
Expense ratio	33.1		%	30.3		%	26.7		%	29.8		%
Combined ratio	100.5		%	63.8		%	79.2		%	85.1		%

Six Months Ended June 30, 2013	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	563,315		$	321,109		$	717,857		$	1,602,281
Net premiums written	413,672			184,139			678,463			1,276,274
Net premiums earned	385,875			171,255			413,369			970,499
Net losses and loss expenses	(257,688		)	(59,903		)	(212,715		)	(530,306		)
Acquisition costs	(50,398		)	1,207			(72,111		)	(121,302		)
General and administrative expenses	(77,898		)	(48,924		)	(36,443		)	(163,265		)
Underwriting (loss) income	(109		)	63,635			92,100			155,626
Net investment income										71,023
Net realized investment losses										(35,561		)
Amortization of intangible assets										(1,267		)
Interest expense										(28,322		)
Foreign exchange loss										(3,008		)
Income before income taxes										$	158,491
Loss and loss expense ratio	66.8		%	35.0		%	51.5		%	54.6		%
Acquisition cost ratio	13.1		%	(0.7		)%	17.4		%	12.5		%
General and administrative expense ratio	20.2		%	28.6		%	8.8		%	16.8		%
Expense ratio	33.3		%	27.9		%	26.2		%	29.3		%
Combined ratio	100.1		%	62.9		%	77.7		%	83.9		%

The following table shows an analysis of the Company’s gross premiums written by geographic location of the Company’s subsidiaries and branches. All intercompany premiums have been eliminated.

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2014		2013		2014		2013
United States	$	442,549	$	440,151	$	963,321	$	918,594
Bermuda	185,872		211,040		415,503		439,712
Europe	77,985		60,234		181,321		146,743
Singapore	45,375		48,918		87,316		87,031
Hong Kong	3,756		4,857		8,639		10,201
Canada	3,094		—		3,924		—
Australia	1,774		—		1,774		—
Total gross premiums written	$	760,405	$	765,200	$	1,661,798	$	1,602,281

Europe includes gross premiums written attributable to Switzerland of $10,261 and $5,868 for the three months ended June 30, 2014 and 2013, respectively and $54,554 and $46,674 for the six months ended June 30, 2014 and 2013.