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 $9,709 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 primarily provides both direct property and casualty insurance 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.

The Company measures its segment profit or loss as underwriting income or loss plus other insurance-related income and expenses, which may include the net earnings from our claims administration services operations and other income or expense that is not directly related to our underwriting operations. Management measures results for each segment's underwriting income or loss 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 September 30, 2014	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	386,681		$	144,236		$	176,967		$	707,884
Net premiums written	321,713			87,820			159,209			568,742
Net premiums earned	224,764			94,013			222,960			541,737
Net losses and loss expenses	(153,010		)	(55,814		)	(127,266		)	(336,090		)
Acquisition costs	(31,131		)	(1,209		)	(40,063		)	(72,403		)
General and administrative expenses	(41,730		)	(27,993		)	(18,571		)	(88,294		)
Underwriting (loss) income	(1,107		)	8,997			37,060			44,950
Other insurance-related income	1,032			—			—			1,032
Other insurance-related expenses	(1,270		)	(5,305		)	—			(6,575		)
Segment (loss) income	$	(1,345	)	$	3,692		$	37,060		$	39,407
Net investment income										43,412
Net realized investment losses										(35,136		)
Amortization of intangible assets										(633		)
Interest expense										(14,325		)
Foreign exchange loss										(278		)
Income before income taxes										$	32,447

Loss and loss expense ratio	68.1		%	59.4		%	57.1		%	62.0		%
Acquisition cost ratio	13.9		%	1.3		%	18.0		%	13.4		%
General and administrative expense ratio	18.6		%	29.8		%	8.3		%	16.3		%
Expense ratio	32.5		%	31.1		%	26.3		%	29.7		%
Combined ratio	100.6		%	90.5		%	83.4		%	91.7		%



Three Months Ended September 30, 2013	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	308,709		$	132,881		$	139,303		$	580,893
Net premiums written	238,792			75,632			138,653			453,077
Net premiums earned	207,602			87,554			215,617			510,773
Net losses and loss expenses	(141,222		)	(31,094		)	(104,654		)	(276,970		)
Acquisition costs	(28,426		)	282			(36,970		)	(65,114		)
General and administrative expenses	(41,616		)	(26,450		)	(20,487		)	(88,553		)
Underwriting (loss) income	(3,662		)	30,292			53,506			80,136
Other insurance-related income	—			—			—			—
Other insurance-related expenses	—			—			—			—
Segment (loss) income	$	(3,662	)	$	30,292		$	53,506		$	80,136
Net investment income										39,271
Net realized investment gains										27,487
Amortization of intangible assets										(633		)
Interest expense										(14,094		)
Foreign exchange loss										(4,353		)
Income before income taxes										$	127,814

Loss and loss expense ratio	68.0		%	35.5		%	48.5		%	54.2		%
Acquisition cost ratio	13.7		%	(0.3		)%	17.1		%	12.7		%
General and administrative expense ratio	20.0		%	30.2		%	9.5		%	17.3		%
Expense ratio	33.7		%	29.9		%	26.6		%	30.0		%
Combined ratio	101.7		%	65.4		%	75.1		%	84.2		%



Nine Months Ended September 30, 2014	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	998,051		$	483,079		$	888,552		$	2,369,682
Net premiums written	746,403			285,450			862,427			1,894,280
Net premiums earned	651,480			271,557			686,232			1,609,269
Net losses and loss expenses	(440,491		)	(115,299		)	(370,441		)	(926,231		)
Acquisition costs	(88,311		)	(835		)	(125,258		)	(214,404		)
General and administrative expenses	(125,760		)	(82,164		)	(56,898		)	(264,822		)
Underwriting (loss) income	(3,082		)	73,259			133,635			203,812
Other insurance-related income	1,032			—			—			1,032
Other insurance-related expenses	(1,270		)	(5,305		)	—			(6,575		)
Segment (loss) income	$	(3,320	)	$	67,954		$	133,635		$	198,269
Net investment income										127,824
Net realized investment gains										104,286
Amortization of intangible assets										(1,900		)
Interest expense										(43,451		)
Foreign exchange loss										(978		)
Income before income taxes										$	384,050

Loss and loss expense ratio	67.6		%	42.5		%	54.0		%	57.6		%
Acquisition cost ratio	13.6		%	0.3		%	18.3		%	13.3		%
General and administrative expense ratio	19.3		%	30.3		%	8.3		%	16.5		%
Expense ratio	32.9		%	30.6		%	26.6		%	29.8		%
Combined ratio	100.5		%	73.1		%	80.6		%	87.4		%



Nine Months Ended September 30, 2013	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	872,024		$	453,990		$	857,160		$	2,183,174
Net premiums written	652,464			259,771			817,116			1,729,351
Net premiums earned	593,477			258,809			628,986			1,481,272
Net losses and loss expenses	(398,910		)	(90,997		)	(317,369		)	(807,276		)
Acquisition costs	(78,824		)	1,489			(109,081		)	(186,416		)
General and administrative expenses	(119,514		)	(75,374		)	(56,930		)	(251,818		)
Underwriting (loss) income	(3,771		)	93,927			145,606			235,762
Other insurance-related income	—			—			—			—
Other insurance-related expenses	—			—			—			—
Segment (loss) income	$	(3,771	)	$	93,927		$	145,606		$	235,762
Net investment income										110,294
Net realized investment losses										(8,074		)
Amortization of intangible assets										(1,900		)
Interest expense										(42,416		)
Foreign exchange loss										(7,361		)
Income before income taxes										$	286,305

Loss and loss expense ratio	67.2		%	35.2		%	50.5		%	54.5		%
Acquisition cost ratio	13.3		%	(0.6		)%	17.3		%	12.6		%
General and administrative expense ratio	20.1		%	29.1		%	9.1		%	17.0		%
Expense ratio	33.4		%	28.5		%	26.4		%	29.6		%
Combined ratio	100.6		%	63.7		%	76.9		%	84.1		%

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
United States	$	483,992	$	377,618	$	1,447,652	$	1,296,212
Bermuda	109,503		111,103		525,005		550,815
Europe	64,947		52,004		245,931		198,747
Asia Pacific	45,070		40,168		142,798		137,400
Canada	4,372		—		8,296		—
Total gross premiums written	$	707,884	$	580,893	$	2,369,682	$	2,183,174

Europe includes gross premiums written attributable to Switzerland of $11,130 and $10,509 for the three months ended September 30, 2014 and 2013, respectively and $65,684 and $57,183 for the nine months ended September 30, 2014 and 2013.