Segment Reporting

The Company conducts its operations through two segments: the investment management segment and the investment bank segment. These activities are conducted primarily in the United States and substantially all of its revenues are generated domestically. The performance measure for these segments is Economic Income (Loss), which management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels. Expenses not directly associated with specific segments are allocated based on the most relevant measures applicable, including headcount, square footage and other factors.

In general, Economic Income (Loss) (which is attributable to Cowen Inc.) is a pre-tax measure that (i) eliminates the impact of consolidation for Consolidated Funds and excludes (ii) goodwill and intangible impairment (iii) certain other transaction-related adjustments and/or reorganization expenses (iv) certain costs associated with debt and (v) preferred stock dividends. Economic Operating Income (Loss) represents Economic Income (Loss) before depreciation and amortization expenses. In addition, Economic Income (Loss) revenues include investment income that represents the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of associated investment related expenses. For US GAAP purposes, these items are included in each of their respective line items. Economic Income (Loss) revenues also include management fees, incentive income and investment income earned through the Company's investment as a general partner in certain real estate entities and the Company's investment in the activist business and certain investment funds. For US GAAP purposes, all of these items, are recorded in other income (loss). Economic Income (Loss) recognizes incentive fees during periods when the fees are not yet crystallized for US GAAP reporting. In addition, Economic Income (Loss) expenses are reduced by reimbursement from affiliates, which for US GAAP purposes is presented gross as part of revenue.

As further stated below, one major difference between Economic Income (Loss) and US GAAP net income (loss) is that Economic Income (Loss) presents the segments' results of operations without the impact resulting from the full consolidation of any of the Consolidated Funds. The consolidation of these investment funds' results include the pro rata share of the income or loss attributable to other owners of such entities which is reflected in net income (loss) attributable to redeemable non-controlling interest in consolidated subsidiaries in the accompanying consolidated statements of operations. This pro rata share has no effect on the overall financial performance for the investment management segment, as ultimately, this income or loss is not income or loss for the investment management segment itself. Included in Economic Income (Loss) is the actual pro rata share of the income or loss attributable to the Company as an investor in such entities, which is relevant in management making operating decisions and evaluating financial performance.

The following tables set forth operating results for the Company's investment management and investment bank segments and related adjustments necessary to reconcile the Company's Economic Income (Loss) measure to arrive at the Company's consolidated US GAAP net income (loss):



	Year Ended December 31, 2018
									Adjustments
	Investment Management			Investment Bank		Total Economic Income (Loss)			Funds Consolidation			Other Adjustments				US GAAP Net Income (Loss)
	(dollars in thousands)
Revenues
Investment banking	$	—		$	329,061	$	329,061		$	—		$	28,161		(a)	$	357,222
Brokerage	—			452,299		452,299			—			(38,717		)	(b)	413,582
Management fees	46,017			3,158		49,175			(2,513		)	(17,004		)	(c)	29,658
Incentive income (loss)	23,747			—		23,747			(52		)	(20,578		)	(c)(a)	3,117
Investment income (loss)	37,642			18,704		56,346			—			(56,346		)	(d)(e)	—
Interest and dividends	—			—		—			—			108,009			(d)	108,009
Reimbursement from affiliates	—			—		—			(269		)	1,307			(f)	1,038
Aircraft lease revenue	—			—		—			—			1,852			(e)	1,852
Reinsurance premiums	—			—		—			—			38,096			(g)	38,096
Other revenue	(2,143		)	975		(1,168		)	—			5,672			(g)	4,504
Consolidated Funds revenues	—			—		—			9,838			—				9,838
Total revenues	105,263			804,197		909,460			7,004			50,452				966,916
Interest expense	11,396			11,617		23,013			—			81,103			(d)	104,116
Total net revenues	93,867			792,580		886,447			7,004			(30,651		)		862,800
Expenses
Non interest expense	83,943			718,078		802,021			—			76,970			(d)(h)(i)	878,991
Consolidated Funds expenses	—			—		—			8,615			—				8,615
Total expenses	83,943			718,078		802,021			8,615			76,970				887,606
Total other income (loss)	—			—		—			35,494			88,248			(d)(k)(j)	123,742
Income taxes expense / (benefit)	—			—		—			—			15,719			(h)	15,719
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	8,292			—		8,292			33,883			(1,777		)		40,398
Income (Loss) attributable to Cowen Inc.	$	1,632		$	74,502	$	76,134		$	—		$	(33,315	)		$	42,819
Less: Preferred stock dividends						6,792										6,792
Income (Loss) attributable to Cowen Inc. common stockholders						69,342										$	36,027
Add back: Depreciation and amortization expense						11,583
Economic Operating Income (Loss) attributable to Cowen Inc. common stockholders						$	80,925



	Year Ended December 31, 2017
								Adjustments
	Investment Management			Investment Bank		Total Economic Income (Loss)		Funds Consolidation			Other Adjustments				US GAAP Net Income (Loss)
	(dollars in thousands)
Revenues
Investment banking	$	—		$	223,614	$	223,614	$	—		$	—			$	223,614
Brokerage	38			312,742		312,780		—			(19,170		)	(b)	293,610
Management fees	52,239			3,148		55,387		(2,593		)	(19,549		)	(c)	33,245
Incentive income (loss)	26,028			—		26,028		(1,739		)	(18,906		)	(c)	5,383
Investment income (loss)	31,447			13,695		45,142		—			(45,142		)	(d)(e)	—
Interest and dividends	—			—		—		—			49,440			(d)	49,440
Reimbursement from affiliates	—			—		—		(297		)	3,157			(f)	2,860
Aircraft lease revenue	—			—		—		—			3,751			(e)	3,751
Reinsurance premiums	—			—		—		—			30,996			(g)	30,996
Other revenue	1,575			1,656		3,231		—			5,330			(g)	8,561
Consolidated Funds revenues	—			—		—		7,321			—				7,321
Total revenues	111,327			554,855		666,182		2,692			(10,093		)		658,781
Interest expense	14,268			4,620		18,888		—			42,061			(d)	60,949
Total net revenues	97,059			550,235		647,294		2,692			(52,154		)		597,832
Expenses
Non interest expense	92,567			532,820		625,387		(199		)	58,935			(d)(h)(i)	684,123
Consolidated Funds expenses	—			—		—		12,526			—				12,526
Total expenses	92,567			532,820		625,387		12,327			58,935				696,649
Total other income (loss)	—			—		—		31,073			74,706			(d)(j)(k)	105,779
Income taxes expense / (benefit)	—			—		—		—			44,053			(h)	44,053
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	6,072			—		6,072		21,438			(3,719		)		23,791
Income (Loss) attributable to Cowen Inc.	$	(1,580	)	$	17,415	$	15,835	$	—		$	(76,717	)		$	(60,882	)
Less: Preferred stock dividends						6,792									6,792
Income (Loss) attributable to Cowen Inc. common stockholders						9,043									$	(67,674	)
Add back: Depreciation and amortization expense						11,558
Economic Operating Income (Loss) attributable to Cowen Inc. common stockholders						$	20,601



	Year Ended December 31, 2016
										Adjustments
	Alternative Investment			Broker-Dealer			Total Economic Income (Loss)			Funds Consolidation			Other Adjustments				US GAAP Net Income (Loss)
	(dollars in thousands)
Revenues
Investment banking	$	—		$	133,279		$	133,279		$	—		$	—			$	133,279
Brokerage	—			207,040			207,040			—			(7,860		)	(b)	199,180
Management fees	64,086			3,162			67,248			(1,665		)	(24,971		)	(c)	40,612
Incentive income (loss)	26,274			—			26,274			(714		)	(17,226		)	(c)	8,334
Investment income (loss)	3,015			1,008			4,023			—			(4,023		)	(d)	—
Interest and dividends	—			—			—			—			14,732			(d)	14,732
Reimbursement from affiliates	—			—			—			(303		)	10,807			(f)	10,504
Aircraft lease revenue	—			—			—			—			4,161			(e)	4,161
Reinsurance premiums	—			—			—			—			32,459			(g)	32,459
Other revenue	29,202			565			29,767			—			(7,412		)	(d)	22,355
Consolidated Funds revenues	—			—			—			5,949			—				5,949
Total revenues	122,577			345,054			467,631			3,267			667				471,565
Interest expense	12,827			4,363			17,190			—			12,118			(d)	29,308
Total net revenues	109,750			340,691			450,441			3,267			(11,451		)		442,257
Expenses
Non interest expense	102,163			369,188			471,351			(429		)	37,824			(d)(h)(i)	508,746
Consolidated Funds expenses	—			—			—			9,064			—				9,064
Total expenses	102,163			369,188			471,351			8,635			37,824				517,810
Total other income (loss)	—			—			—			8,532			35,534			(d)	44,066
Income taxes expense / (benefit)	—			—			—			—			(19,092		)	(h)	(19,092		)
Income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries and investment funds	7,821			—			7,821			3,164			(4,103		)		6,882
Income (Loss) attributable to Cowen Inc.	$	(234	)	$	(28,497	)	$	(28,731	)	$	—		$	9,454			$	(19,277	)
Less: Preferred stock dividends							6,792										6,792
Income (Loss) attributable to Cowen Inc. common stockholders							(35,523		)								$	(26,069	)
Add back: Depreciation and amortization expense							11,009
Economic Operating Income (Loss) attributable to Cowen Inc. common stockholders							$	(24,514	)

The following is a summary of the adjustments made to US GAAP net income (loss) for the segment to arrive at

Economic Income (Loss):

Funds Consolidation: The impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP net income (loss) included elimination of incentive income and management fees earned from the Consolidated Funds and addition of investment fund expenses excluding management fees paid, investment fund revenues and investment income (loss).

Other Adjustments:

(a) Economic Income (Loss) presents underwriting expenses net of investment banking revenues, expenses reimbursed

from clients within their respective expense category and records income from uncrystallized incentive fees.

(b) Economic Income (Loss) brokerage revenues included net securities borrowed and securities loaned activities.

(c) Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents and (ii) our proportionate share

of management and incentive fees of certain real estate operating entities, the healthcare royalty business and the activist business.

(d) Economic Income (Loss) recognizes Company income from proprietary trading (including interest and dividends).

(e) Aircraft lease revenue is shown net of expenses in investment income for Economic Income (Loss).

(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of

revenues under US GAAP.

(g) Economic Income (Loss) recognizes underwriting income from the Company's insurance related activities, net of

expenses, within other revenue.

(h) Economic Income (Loss) excludes income taxes and acquisition related adjustments as management does not consider

these items when evaluating the performance of the segment.

(i) Economic Income (Loss) recognizes the Company's proportionate share of expenses, for certain real estate

operating entities and the activist business, for which the investments are recorded under the equity method of accounting for investments.

(j) Economic Income (Loss) excludes gain/(loss) on debt extinguishment.

(k) Economic Income (Loss) excludes the bargain purchase gain which resulted from the Convergex Group acquisition.

For the years ended December 31, 2018 and 2017, there was no one investment fund or other customer which represented more than 10% of the Company's total revenues.