Note 2.

Segment Information

During the first quarter of 2015, we realigned our reporting segments from Insurance Companies, Lloyd’s Operations and Corporate to U.S. Insurance, International Insurance (“Int’l Insurance”), Global Reinsurance (“GlobalRe”) and Corporate. The new segment presentation reflects an increase in the level of importance that the Chief Operating Decision Maker now places on the results of the underlying operating segments when aggregated and reported in alignment with the products and services offered to the marketplace versus when aggregated and reported in alignment with our legal entity structure. Over the past few years, we have been monitoring the growth and stability of our reinsurance business and in 2015 determined that reinsurance has become a stable and significant component of our Company. We are also increasing our focus on additional international insurance markets by establishing underwriting offices in Continental Europe. The offices were fully operational during our January renewal season. We considered these changes in conjunction with operating and reportable segments.

Our previously reported segments were consistent with our legal entity structure; however, our new reporting segments are now primarily reflective of where our business is written. We reclassified our international business from our previously reported Lloyd’s Operations segment to the Int’l Insurance segment. We also reclassified our non-Lloyd’s business written internationally (primarily business written by the U.K. Branch) into this segment and have excluded Assumed Reinsurance. Our new GlobalRe segment was previously reported within our U.S. Insurance and Lloyd’s Operations segments as Assumed Reinsurance. Our U.S. Insurance segment now excludes the U.K. Branch and Assumed Reinsurance. Our Corporate segment now includes investment income (loss), interest income (loss), foreign exchange gain (loss) and income tax benefit (expense), which are not allocated to the U.S. Insurance, Int’l Insurance and GlobalRe segments (together “underwriting segments”). We do not allocate assets under the new reporting segments, as it is impracticable to do so.

As noted above, we classify our business into three underwriting segments (U.S. Insurance, Int’l Insurance and GlobalRe) and a Corporate Segment. Both the U.S. Insurance and Int’l Insurance reporting segments are each comprised of three operating segments: Marine, Professional Liability and P&C. These operating segments have been aggregated into the aforementioned reporting segments based upon the criteria specified in Accounting Standards Codification 280, Segment Reporting. Consistent with the guidance, these operating segments; (a) engage in business activities from which they may earn revenues and incur expenses, (b) are regularly reviewed by our management to assess the performance of the segments and make decisions about resources to be allocated to the segments and (c) have discrete financial information.

We evaluate the performance of each of the underwriting segments based on underwriting results. Underwriting results are measured based on underwriting profit or loss and the related combined ratio, which are both non-GAAP measures of underwriting profitability. Underwriting profit or loss is calculated from net earned premiums less the sum of net losses and loss adjustment expenses (“LAE”), commission expenses, other operating expenses, and other underwriting income (expense). The combined ratio is derived by dividing the sum of net loss and LAE, commission expenses, other operating expenses and other underwriting income (expense) by net earned premiums. A combined ratio of less than 100% indicates an underwriting profit and greater than 100% indicates an underwriting loss. Our underwriting performance is evaluated separately from the rest of our operations. The performance of our investment portfolios, our liquidity and capital resource needs, our foreign currency exposure and our tax planning strategies are evaluated on a consolidated basis within our Corporate reporting segment.

The accounting policies used to prepare the segment reporting data for our reporting segments are the same as those described in Note 1 and Note 3 of our Annual Report on Form 10-K for the year ended December 31, 2014. In addition, 2014 data presented in this Quarterly Report has been recast to align with the new segment reporting described above.

Financial data by segment for the three months ended March 31, 2015 and 2014 were as follows:


	Three Months Ended March 31, 2015
amounts in thousands	U.S. Insurance			Int’l Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	199,327		$	122,427		$	74,706		$	—		$	396,460
Ceded written premiums		(68,730	)		(34,256	)		(4,516	)		—			(107,502	)

Net written premiums		130,597			88,171			70,190			—			288,958
Net earned premiums		131,091			65,525			39,516			—			236,132
Net losses and LAE		(77,799	)		(29,691	)		(22,708	)		—			(130,198	)
Commission expenses		(14,345	)		(11,413	)		(7,298	)		151			(32,905	)
Other operating expenses		(33,688	)		(17,009	)		(4,212	)		—			(54,909	)
Other underwriting income (expense)		196			—			10			(151	)		55


Underwriting profit (loss)	$	5,455		$	7,412		$	5,308		$	—		$	18,175

Net investment income											16,253			16,253
Net realized gains (losses)											5,596			5,596
Interest expense											(3,855	)		(3,855	)
Other income											2,187			2,187

Income before income taxes	$	5,455		$	7,412		$	5,308		$	20,181		$	38,356
Income tax (expense) benefit											(12,427	)		(12,427	)

Net income (loss)													$	25,929


Losses and LAE ratio		59.3	%		45.3	%		57.5	%					55.1	%
Commission expense ratio		10.9	%		17.4	%		18.5	%					13.9	%
Other operating expense ratio ⁽²⁾		25.6	%		26.0	%		10.6	%					23.3	%

Combined ratio		95.8	%		88.7	%		86.6	%					92.3	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income.


	Three Months Ended March 31, 2014
amounts in thousands	U.S. Insurance			Int’l Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	198,348		$	119,192		$	105,250		$	—		$	422,790
Ceded written premiums		(65,066	)		(42,582	)		(3,292	)		—			(110,940	)
Net written premiums		133,282			76,610			101,958			—			311,850

Net earned premiums		115,190			62,054			48,028			—			225,272
Net losses and LAE		(72,964	)		(31,220	)		(30,883	)		—			(135,067	)
Commission expenses		(9,509	)		(8,855	)		(7,872	)		509			(25,727	)
Other operating expenses		(27,993	)		(15,059	)		(4,094	)		—			(47,146	)
Other underwriting income (expense)		513			6			145			(509	)		155


Underwriting profit (loss)	$	5,237		$	6,926		$	5,324		$	—		$	17,487

Net investment income											16,610			16,610
Net realized gains (losses)											833			833
Interest expense											(3,852	)		(3,852	)
Other income											10,244			10,244

Income before income taxes	$	5,237		$	6,926		$	5,324		$	23,835		$	41,322
Income tax (expense) benefit											(13,354	)		(13,354	)

Net income (loss)													$	27,968


Losses and LAE ratio		63.3	%		50.3	%		64.3	%					60.0	%
Commission expense ratio		8.3	%		14.3	%		16.4	%					11.4	%
Other operating expense ratio ⁽²⁾		23.9	%		24.2	%		8.2	%					20.8	%

Combined ratio		95.5	%		88.8	%		88.9	%					92.2	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other operating expenses and Other underwriting income.

Revenue by operating segment for the three months ended March 31, 2015 and 2014 was as follows:


	Q1 2015									Q1 2014									% Change
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums		Gross written premiums			Ceded written premiums			Net written premiums			Net earned premiums
U.S. Insurance
Marine	$	40,835	$	(16,286	)	$	24,549	$	23,924	$	43,025	$	(9,170	)	$	33,855	$	27,986		-5.1	%		77.6	%		-27.5	%		-14.5	%
P&C		134,146		(39,558	)		94,588		90,735		125,119		(46,156	)		78,963		64,931		7.2	%		-14.3	%		19.8	%		39.7	%
Professional Liability		24,346		(12,886	)		11,460		16,432		30,204		(9,740	)		20,464		22,273		-19.4	%		32.3	%		-44.0	%		-26.2	%

Total		199,327		(68,730	)		130,597		131,091		198,348		(65,066	)		133,282		115,190		0.5	%		5.6	%		-2.0	%		13.8	%

Int’l Insurance
Marine	$	67,410	$	(10,822	)	$	56,588	$	37,792	$	61,982	$	(12,394	)	$	49,588	$	38,044		8.8	%		-12.7	%		14.1	%		-0.7	%
P&C		32,950		(16,129	)		16,821		16,034		42,250		(24,464	)		17,786		16,441		-22.0	%		-34.1	%		-5.4	%		-2.5	%
Professional Liability		22,067		(7,305	)		14,762		11,699		14,960		(5,724	)		9,236		7,569		47.5	%		27.6	%		59.8	%		54.6	%

Total		122,427		(34,256	)		88,171		65,525		119,192		(42,582	)		76,610		62,054		2.7	%		-19.6	%		15.1	%		5.6	%

GlobalRe	$	74,706	$	(4,516	)	$	70,190	$	39,516	$	105,250	$	(3,292	)	$	101,958	$	48,028		-29.0	%		37.2	%		-31.2	%		-17.7	%

Total	$	396,460	$	(107,502	)	$	288,958	$	236,132	$	422,790	$	(110,940	)	$	311,850	$	225,272		-6.2	%		-3.1	%		-7.3	%		4.8	%