Segment Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment information

SEGMENT INFORMATION

The determination of reportable segments is based on how the Company's chief operating decision maker, the Chief Executive Officer, 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: North American Insurance, Global Markets Insurance and Reinsurance. All product lines fall within these classifications.

The North American Insurance segment includes the Company’s direct specialty insurance operations in the United States, Bermuda and Canada, as well as the Company's claim administration services operation. This segment provides both direct property and specialty casualty insurance to North American domiciled accounts. The Global Markets Insurance segment includes the Company’s direct insurance operations in Europe and Asia Pacific, which includes offices in Australia, Hong Kong and Singapore. This segment provides both direct property and casualty insurance primarily to non-North American domiciled accounts. 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 of 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:

Year Ended December 31, 2014	North American  Insurance			Global Markets Insurance			Reinsurance			Total
Gross premiums written	$	1,716,288		$	280,543		$	938,594		$	2,935,425
Net premiums written	1,230,839			187,997			903,239			2,322,075
Net premiums earned	1,111,164			162,566			909,028			2,182,758
Net losses and loss expenses	(683,836		)	(61,057		)	(454,297		)	(1,199,190		)
Acquisition costs	(105,914		)	(18,222		)	(170,986		)	(295,122		)
General and administrative expenses	(219,665		)	(68,106		)	(77,965		)	(365,736		)
Underwriting income	101,749			15,181			205,780			322,710
Other insurance-related revenue	2,064			—			—			2,064
Other insurance-related expenses	(1,854		)	(6,724		)	—			(8,578		)
Segment income	101,959			8,457			205,780			316,196
Net investment income										176,874
Net realized investment gains										88,957
Amortization of intangible assets										(2,533		)
Interest expense										(57,755		)
Foreign exchange loss										(957		)
Income before income taxes										$	520,782
Loss and loss expense ratio	61.5		%	37.6		%	50.0		%	54.9		%
Acquisition cost ratio	9.5		%	11.2		%	18.8		%	13.5		%
General and administrative expense ratio	19.8		%	41.9		%	8.6		%	16.8		%
Expense ratio	29.3		%	53.1		%	27.4		%	30.3		%
Combined ratio	90.8		%	90.7		%	77.4		%	85.2		%

Year Ended December 31, 2013	North American  Insurance			Global Markets Insurance			Reinsurance			Total
Gross premiums written	$	1,572,355		$	232,555		$	933,754		$	2,738,664
Net premiums written	1,082,441			145,002			893,038			2,120,481
Net premiums earned	1,022,979			126,008			856,846			2,005,833
Net losses and loss expenses	(651,267		)	(50,395		)	(421,580		)	(1,123,242		)
Acquisition costs	(94,869		)	(10,051		)	(147,753		)	(252,673		)
General and administrative expenses	(209,042		)	(63,164		)	(80,079		)	(352,285		)
Underwriting income	67,801			2,398			207,434			277,633
Other insurance-related revenue	—			—			—			—
Other insurance-related expenses	—			—			—			—
Segment income	67,801			2,398			207,434			277,633
Net investment income										157,564
Net realized investment gains										59,525
Amortization of intangible assets										(2,533		)
Interest expense										(56,510		)
Foreign exchange loss										(8,019		)
Income before income taxes										$	427,660
Loss and loss expense ratio	63.7		%	40.0		%	49.2		%	56.0		%
Acquisition cost ratio	9.3		%	8.0		%	17.2		%	12.6		%
General and administrative expense ratio	20.4		%	50.1		%	9.3		%	17.6		%
Expense ratio	29.7		%	58.1		%	26.5		%	30.2		%
Combined ratio	93.4		%	98.1		%	75.7		%	86.2		%

Year Ended December 31, 2012	North American  Insurance			Global Markets Insurance			Reinsurance			Total
Gross premiums written	$	1,376,040		$	192,981		$	760,250		$	2,329,271
Net premiums written	964,199			125,577			748,047			1,837,823
Net premiums earned	892,721			115,660			740,517			1,748,898
Net losses and loss expenses	(608,762		)	(19,536		)	(510,966		)	(1,139,264		)
Acquisition costs	(77,701		)	(8,483		)	(119,538		)	(205,722		)
General and administrative expenses	(185,231		)	(48,365		)	(73,725		)	(307,321		)
Underwriting income	21,027			39,276			36,288			96,591
Other insurance-related revenue	—			—			—			—
Other insurance-related expenses	—			—			—			—
Segment income	21,027			39,276			36,288			96,591
Net investment income										167,141
Net realized investment gains										306,436
Amortization of intangible assets										(2,533		)
Interest expense										(55,405		)
Foreign exchange loss										(783		)
Income before income taxes										$	511,447
Loss and loss expense ratio	68.2		%	16.9		%	69.0		%	65.1		%
Acquisition cost ratio	8.7		%	7.3		%	16.1		%	11.8		%
General and administrative expense ratio	20.7		%	41.8		%	10.0		%	17.6		%
Expense ratio	29.4		%	49.1		%	26.1		%	29.4		%
Combined ratio	97.6		%	66.0		%	95.1		%	94.5		%

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

	Year Ended December 31,
	2014		2013		2012
United States	$	1,795,564	$	1,636,010	$	1,360,190
Bermuda	640,948		676,174		611,382
Europe	318,626		264,867		228,791
Asia Pacific	167,334		161,613		128,908
Canada	12,953		—		—
Total gross premiums written	$	2,935,425	$	2,738,664	$	2,329,271

Gross premiums written attributable to Switzerland were $67,564, $61,042 and $43,664 for the years ended December 31, 2014, 2013 and 2012, respectively.

The following table shows the Company’s net premiums earned by line of business for each segment for the years ended December 31, 2014, 2013 and 2012.

	Year Ended December 31,
	2014		2013		2012
North American Insurance:
General casualty	$	334,603	$	269,114	$	211,238
Professional liability	276,105		259,215		245,583
Healthcare	168,476		194,344		187,053
General property	126,646		141,896		137,002
Programs	119,756		107,870		88,180
Inland marine	43,666		25,939		10,612
Environmental	19,507		17,017		12,627
Other	22,405		7,584		426
Total	1,111,164		1,022,979		892,721
Global Markets Insurance:
Professional liability	57,176		45,967		43,621
General property	33,957		31,364		36,751
Aviation	22,342		9,521		—
Trade credit	17,623		14,099		9,471
General casualty	15,266		13,903		16,762
Healthcare	11,963		11,154		9,055
Other	4,239		—		—
Total	162,566		126,008		115,660
Reinsurance:
Property	411,968		336,009		273,167
Specialty	321,538		349,044		283,415
Casualty	175,522		171,793		183,935
Total	909,028		856,846		740,517
Total net premiums earned	$	2,182,758	$	2,005,833	$	1,748,898