NOTE 3. SEGMENT INFORMATION

We report our results of operations consistent with the manner in which our Chief Operating Decision Maker reviews the business to assess performance through our reporting segments: U.S. Insurance, International Insurance (“Int’l Insurance”), Global Reinsurance (“GlobalRe”) and Corporate.

We classify our business into three underwriting segments: U.S. Insurance, Int’l Insurance and GlobalRe. Both the U.S. Insurance and Int’l Insurance reporting segments are each comprised of three operating segments: Marine, P&C and Professional Liability. The underwriting results of the acquired business from BDM and ASCO are included in the Int’l Insurance reporting segment, with no new operating segments resulting from the acquisition.

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 measures of underwriting profitability. Underwriting Profit (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 Losses 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 segment. We do not allocate our assets by underwriting segment as we evaluate the underwriting results of these segments separately from the results of our investments portfolio.

Financial data by segment for the three and six months ended June 30, 2018 and 2017 was as follows:

	Three Months Ended June 30, 2018
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net Earned Premiums	$	179,746		$	92,071		$	59,198		$	—		$	331,015
Net Losses and LAE		(111,885	)		(52,304	)		(32,144	)		—			(196,333	)
Commission Expenses		(20,382	)		(19,863	)		(13,148	)		200			(53,193	)
Other Operating Expenses		(38,447	)		(23,299	)		(6,436	)		—			(68,182	)
Other Underwriting Income (Expense)		71			—			136			(200	)		7
Underwriting Profit (Loss)	$	9,103		$	(3,395	)	$	7,606		$	—		$	13,314
Net Investment Income											24,601			24,601
Total Net Realized and Unrealized Gains											3,116			3,116
Interest Expense											(3,864	)		(3,864	)
Other Income											2,621			2,621
Income (Loss) Before Income Taxes	$	9,103		$	(3,395	)	$	7,606		$	26,474		$	39,788
Income Tax Expense											(7,684	)		(7,684	)
Net Income													$	32,104
Losses and LAE Ratio		62.2	%		56.8	%		54.3	%					59.3	%
Commission Expense Ratio		11.3	%		21.6	%		22.2	%					16.1	%
Other Operating Expense Ratio ⁽²⁾		21.4	%		25.3	%		10.7	%					20.6	%
Combined Ratio		94.9	%		103.7	%		87.2	%					96.0	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other Operating Expenses and Other Underwriting Income (Expense).

	Three Months Ended June 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net Earned Premiums	$	167,087		$	82,100		$	44,648		$	—		$	293,835
Net Losses and LAE		(105,270	)		(44,095	)		(27,745	)		—			(177,110	)
Commission Expenses		(20,460	)		(19,001	)		(8,970	)		258			(48,173	)
Other Operating Expenses		(33,140	)		(22,506	)		(5,120	)		—			(60,766	)
Other Underwriting Income (Expense)		100			—			169			(258	)		11
Underwriting Profit (Loss)		8,317			(3,502	)		2,982		$	—			7,797
Net Investment Income											22,265			22,265
Total Net Realized and Unrealized Gains											1,694			1,694
Interest Expense											(3,861	)		(3,861	)
Other Loss											(422	)		(422	)
Income (Loss) Before Income Taxes	$	8,317		$	(3,502	)	$	2,982		$	19,676		$	27,473
Income Tax Expense											(6,971	)		(6,971	)
Net Income													$	20,502
Losses and LAE Ratio		63.0	%		53.7	%		62.1	%					60.3	%
Commission Expense Ratio		12.2	%		23.1	%		20.1	%					16.4	%
Other Operating Expense Ratio ⁽²⁾		19.8	%		27.5	%		11.1	%					20.6	%
Combined Ratio		95.0	%		104.3	%		93.3	%					97.3	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other Operating Expenses and Other Underwriting Income (Expense).

	Six Months Ended June 30, 2018
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net Earned Premiums	$	352,659		$	185,281		$	115,702		$	—		$	653,642
Net Losses and LAE		(222,307	)		(98,147	)		(62,024	)		—			(382,478	)
Commission Expenses		(41,243	)		(39,619	)		(26,916	)		433			(107,345	)
Other Operating Expenses		(75,438	)		(43,829	)		(11,841	)		—			(131,108	)
Other Underwriting Income (Expense)		169			—			274			(433	)		10
Underwriting Profit	$	13,840		$	3,686		$	15,195		$	—		$	32,721
Net Investment Income											48,303			48,303
Total Net Realized and Unrealized Gains											1,104			1,104
Interest Expense											(7,728	)		(7,728	)
Other Income											2,501			2,501
Income Before Income Taxes	$	13,840		$	3,686		$	15,195		$	44,179		$	76,901
Income Tax Expense											(13,919	)		(13,919	)
Net Income													$	62,982
Losses and LAE Ratio		63.0	%		53.0	%		53.6	%					58.5	%
Commission Expense Ratio		11.7	%		21.4	%		23.3	%					16.4	%
Other Operating Expense Ratio ⁽²⁾		21.4	%		23.6	%		10.0	%					20.1	%
Combined Ratio		96.1	%		98.0	%		86.9	%					95.0	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other Operating Expenses and Other Underwriting Income (Expense).

	Six Months Ended June 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Net Earned Premiums	$	331,091		$	166,186		$	82,689		$	—		$	579,966
Net Losses and LAE		(204,096	)		(94,800	)		(47,814	)		—			(346,710	)
Commission Expenses		(40,844	)		(38,234	)		(17,462	)		523			(96,017	)
Other Operating Expenses		(66,612	)		(42,299	)		(10,393	)		—			(119,304	)
Other Underwriting Income (Expense)		210			—			345			(523	)		32
Underwriting Profit (Loss)	$	19,749		$	(9,147	)	$	7,365		$	—		$	17,967
Net Investment Income											43,713			43,713
Total Net Realized and Unrealized Gains											1,650			1,650
Interest Expense											(7,722	)		(7,722	)
Other Income											625			625
Income (Loss) Before Income Taxes	$	19,749		$	(9,147	)	$	7,365		$	38,266		$	56,233
Income Tax Expense											(14,621	)		(14,621	)
Net Income													$	41,612
Losses and LAE Ratio		61.6	%		57.0	%		57.8	%					59.8	%
Commission Expense Ratio		12.3	%		23.0	%		21.1	%					16.6	%
Other Operating Expense Ratio ⁽²⁾		20.1	%		25.5	%		12.2	%					20.5	%
Combined Ratio		94.0	%		105.5	%		91.1	%					96.9	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

Includes Other Operating Expenses and Other Underwriting Income (Expense).

Revenue by operating segment for the three and six months ended June 30, 2018 and 2017 was as follows:

	Three Months Ended June 30, 2018									Three Months Ended June 30, 2017									% 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	$	38,830	$	(16,918	)	$	21,912	$	21,177	$	41,687	$	(19,451	)	$	22,236	$	21,812		(6.9	%)		(13.0	%)		(1.5	%)		(2.9	%)
P&C		217,984		(54,835	)		163,149		132,630		187,492		(51,147	)		136,345		121,226		16.3	%		7.2	%		19.7	%		9.4	%
Professional Liability		31,664		(4,391	)		27,273		25,939		28,007		(3,259	)		24,748		24,049		13.1	%		34.7	%		10.2	%		7.9	%
Total	$	288,478	$	(76,144	)	$	212,334	$	179,746	$	257,186	$	(73,857	)	$	183,329	$	167,087		12.2	%		3.1	%		15.8	%		7.6	%

Int'l Insurance
Marine	$	40,714	$	(11,523	)	$	29,191	$	37,197	$	49,597	$	(12,536	)	$	37,061	$	39,525		(17.9	%)		(8.1	%)		(21.2	%)		(5.9	%)
P&C		46,579		(17,705	)		28,874		23,715		46,663		(20,362	)		26,301		23,337		(0.2	%)		(13.1	%)		9.8	%		1.6	%
Professional Liability		45,230		(10,654	)		34,576		31,159		34,933		(10,911	)		24,022		19,238		29.5	%		(2.4	%)		43.9	%		62.0	%
Total	$	132,523	$	(39,882	)	$	92,641	$	92,071	$	131,193	$	(43,809	)	$	87,384	$	82,100		1.0	%		(9.0	%)		6.0	%		12.1	%

GlobalRe	$	76,235	$	(1,918	)	$	74,317	$	59,198	$	63,800	$	(1,231	)	$	62,569	$	44,648		19.5	%		55.8	%		18.8	%		32.6	%

Total	$	497,236	$	(117,944	)	$	379,292	$	331,015	$	452,179	$	(118,897	)	$	333,282	$	293,835		10.0	%		(0.8	%)		13.8	%		12.7	%

	Six Months Ended June 30, 2018									Six Months Ended June 30, 2017									% 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	$	80,554	$	(34,398	)	$	46,156	$	42,269	$	82,637	$	(36,971	)	$	45,666	$	44,506		(2.5	%)		(7.0	%)		1.1	%		(5.0	%)
P&C		386,177		(99,747	)		286,430		260,220		358,126		(89,345	)		268,781		240,349		7.8	%		11.6	%		6.6	%		8.3	%
Professional Liability		61,675		(8,580	)		53,095		50,170		54,028		(9,028	)		45,000		46,236		14.2	%		(5.0	%)		18.0	%		8.5	%
Total	$	528,406	$	(142,725	)	$	385,681	$	352,659	$	494,791	$	(135,344	)	$	359,447	$	331,091		6.8	%		5.5	%		7.3	%		6.5	%

Int'l Insurance
Marine	$	97,192	$	(19,577	)	$	77,615	$	76,476	$	118,430	$	(23,462	)	$	94,968	$	77,020		(17.9	%)		(16.6	%)		(18.3	%)		(0.7	%)
P&C		80,539		(31,372	)		49,167		45,484		87,031		(50,008	)		37,023		45,517		(7.5	%)		(37.3	%)		32.8	%		(0.1	%)
Professional Liability		82,664		(17,821	)		64,843		63,321		67,592		(16,932	)		50,660		43,649		22.3	%		5.3	%		28.0	%		45.1	%
Total	$	260,395	$	(68,770	)	$	191,625	$	185,281	$	273,053	$	(90,402	)	$	182,651	$	166,186		(4.6	%)		(23.9	%)		4.9	%		11.5	%

GlobalRe	$	203,659	$	(8,411	)	$	195,248	$	115,702	$	134,640	$	(6,293	)	$	128,347	$	82,689		51.3	%		33.7	%		52.1	%		39.9	%

Total	$	992,460	$	(219,906	)	$	772,554	$	653,642	$	902,484	$	(232,039	)	$	670,445	$	579,966		10.0	%		(5.2	%)		15.2	%		12.7	%