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 the NICE Group 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 nine months ended September 30, 2018 and 2017 was as follows:

	Three Months Ended September 30, 2018
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	280,183		$	117,376		$	58,384		$	—		$	455,943
Ceded written premiums		(72,615	)		(29,020	)		(1,896	)		—			(103,531	)
Net written premiums	$	207,568		$	88,356		$	56,488		$	—		$	352,412
Retention Ratio		74.1	%		75.3	%		96.8	%		—			77.3	%
Net Earned Premiums	$	188,504		$	95,226		$	63,308		$	—		$	347,038
Net Losses and LAE		(141,182	)		(60,275	)		(39,443	)		—			(240,900	)
Commission Expenses		(22,247	)		(22,547	)		(13,282	)		77			(57,999	)
Other Operating Expenses		(36,826	)		(24,441	)		(6,317	)		—			(67,584	)
Other Underwriting Income (Expense)		65			945			20			(77	)		953
Underwriting Profit (Loss)	$	(11,686	)	$	(11,092	)	$	4,286		$	—		$	(18,492	)
Net Investment Income											25,651			25,651
Total Net Realized and Unrealized Gains											2,563			2,563
Interest Expense											(3,891	)		(3,891	)
Other Income											771			771
Merger Transaction Costs											(2,439	)		(2,439	)
Income (Loss) Before Income Taxes	$	(11,686	)	$	(11,092	)	$	4,286		$	22,655		$	4,163
Income Tax Benefit											462			462
Net Income													$	4,625
Losses and LAE Ratio		74.9	%		63.3	%		62.3	%					69.4	%
Commission Expense Ratio		11.8	%		23.7	%		21.0	%					16.7	%
Other Operating Expense Ratio ⁽²⁾		19.5	%		24.6	%		9.9	%					19.2	%
Combined Ratio		106.2	%		111.6	%		93.2	%					105.3	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

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

	Three Months Ended September 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	235,052		$	113,601		$	53,385		$	—		$	402,038
Ceded written premiums		(64,328	)		(38,966	)		(2,728	)		—			(106,022	)
Net written premiums	$	170,724		$	74,635		$	50,657		$	—		$	296,016
Retention Ratio		72.6	%		65.7	%		94.9	%		—			73.6	%
Net Earned Premiums	$	169,150		$	84,407		$	47,798		$	—		$	301,355
Net Losses and LAE		(135,340	)		(81,713	)		(59,118	)		—			(276,171	)
Commission Expenses		(18,286	)		(16,201	)		(11,233	)		211			(45,509	)
Other Operating Expenses		(25,375	)		(16,388	)		(4,010	)		—			(45,773	)
Other Underwriting Income (Expense)		125			—			94			(211	)		8
Underwriting Loss	$	(9,726	)	$	(29,895	)	$	(26,469	)	$	—		$	(66,090	)
Net Investment Income											22,598			22,598
Total Net Realized and Unrealized Gains											4,218			4,218
Interest Expense											(3,862	)		(3,862	)
Other Loss											(1,707	)		(1,707	)
Income (Loss) Before Income Taxes	$	(9,726	)	$	(29,895	)	$	(26,469	)	$	21,247		$	(44,843	)
Income Tax Benefit											16,864			16,864
Net Loss													$	(27,979	)
Losses and LAE Ratio		80.0	%		96.8	%		123.7	%					91.6	%
Commission Expense Ratio		10.8	%		19.2	%		23.5	%					15.1	%
Other Operating Expense Ratio ⁽²⁾		14.9	%		19.4	%		8.2	%					15.2	%
Combined Ratio		105.7	%		135.4	%		155.4	%					121.9	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

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

	Nine Months Ended September 30, 2018
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	808,589		$	377,771		$	262,043		$	—		$	1,448,403
Ceded written premiums		(215,340	)		(97,790	)		(10,307	)		—			(323,437	)
Net written premiums	$	593,249		$	279,981		$	251,736		$	—		$	1,124,966
Retention Ratio		73.4	%		74.1	%		96.1	%		—			77.7	%
Net Earned Premiums	$	541,163		$	280,507		$	179,010		$	—		$	1,000,680
Net Losses and LAE		(363,489	)		(158,422	)		(101,467	)		—			(623,378	)
Commission Expenses		(63,490	)		(62,166	)		(40,198	)		510			(165,344	)
Other Operating Expenses		(112,264	)		(68,270	)		(18,158	)		—			(198,692	)
Other Underwriting Income (Expense)		234			945			294			(510	)		963
Underwriting Profit (Loss)	$	2,154		$	(7,406	)	$	19,481		$	—		$	14,229
Net Investment Income											73,954			73,954
Total Net Realized and Unrealized Gains											3,667			3,667
Interest Expense											(11,619	)		(11,619	)
Other Income											3,272			3,272
Merger Transaction Costs											(2,439	)		(2,439	)
Income (Loss) Before Income Taxes	$	2,154		$	(7,406	)	$	19,481		$	66,835		$	81,064
Income Tax Expense											(13,457	)		(13,457	)
Net Income													$	67,607
Losses and LAE Ratio		67.2	%		56.5	%		56.7	%					62.3	%
Commission Expense Ratio		11.7	%		22.2	%		22.5	%					16.5	%
Other Operating Expense Ratio ⁽²⁾		20.7	%		23.9	%		9.9	%					19.8	%
Combined Ratio		99.6	%		102.6	%		89.1	%					98.6	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

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

	Nine Months Ended September 30, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	729,843		$	386,654		$	188,025		$	—		$	1,304,522
Ceded written premiums		(199,672	)		(129,368	)		(9,021	)		—			(338,061	)
Net written premiums	$	530,171		$	257,286		$	179,004		$	—		$	966,461
Retention Ratio		72.6	%		66.5	%		95.2	%		—			74.1	%
Net Earned Premiums	$	500,241		$	250,593		$	130,487		$	—		$	881,321
Net Losses and LAE		(339,436	)		(176,513	)		(106,932	)		—			(622,881	)
Commission Expenses		(59,130	)		(54,435	)		(28,695	)		734			(141,526	)
Other Operating Expenses		(91,987	)		(58,687	)		(14,403	)		—			(165,077	)
Other Underwriting Income (Expense)		335			—			439			(734	)		40
Underwriting Profit (Loss)	$	10,023		$	(39,042	)	$	(19,104	)	$	—		$	(48,123	)
Net Investment Income											66,311			66,311
Total Net Realized and Unrealized Gains											5,868			5,868
Interest Expense											(11,584	)		(11,584	)
Other Loss											(1,082	)		(1,082	)
Income (Loss) Before Income Taxes	$	10,023		$	(39,042	)	$	(19,104	)	$	59,513		$	11,390
Income Tax Benefit											2,243			2,243
Net Income													$	13,633
Losses and LAE Ratio		67.9	%		70.4	%		81.9	%					70.7	%
Commission Expense Ratio		11.8	%		21.7	%		22.0	%					16.1	%
Other Operating Expense Ratio ⁽²⁾		18.3	%		23.5	%		10.7	%					18.7	%
Combined Ratio		98.0	%		115.6	%		114.6	%					105.5	%

(1) -

Includes Corporate segment intercompany eliminations.

(2) -

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

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

	Three Months Ended September 30, 2018									Three Months Ended September 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	$	31,681	$	(14,442	)	$	17,239	$	20,401	$	36,403	$	(18,859	)	$	17,544	$	20,129		(13.0	%)		(23.4	%)		(1.7	%)		1.4	%
P&C		212,911		(52,993	)		159,918		141,650		166,097		(39,952	)		126,145		125,931		28.2	%		32.6	%		26.8	%		12.5	%
Professional Liability		35,591		(5,180	)		30,411		26,453		32,552		(5,517	)		27,035		23,090		9.3	%		(6.1	%)		12.5	%		14.6	%
Total	$	280,183	$	(72,615	)	$	207,568	$	188,504	$	235,052	$	(64,328	)	$	170,724	$	169,150		19.2	%		12.9	%		21.6	%		11.4	%
Int'l Insurance
Marine	$	32,486	$	(4,965	)	$	27,521	$	38,866	$	41,689	$	(9,948	)	$	31,741	$	39,038		(22.1	%)		(50.1	%)		(13.3	%)		(0.4	%)
P&C		41,898		(13,727	)		28,171		29,616		37,415		(19,772	)		17,643		21,775		12.0	%		(30.6	%)		59.7	%		36.0	%
Professional Liability		42,992		(10,328	)		32,664		26,744		34,497		(9,246	)		25,251		23,594		24.6	%		11.7	%		29.4	%		13.3	%
Total	$	117,376	$	(29,020	)	$	88,356	$	95,226	$	113,601	$	(38,966	)	$	74,635	$	84,407		3.3	%		(25.5	%)		18.4	%		12.8	%
GlobalRe	$	58,384	$	(1,896	)	$	56,488	$	63,308	$	53,385	$	(2,728	)	$	50,657	$	47,798		9.4	%		(30.5	%)		11.5	%		32.4	%
Total	$	455,943	$	(103,531	)	$	352,412	$	347,038	$	402,038	$	(106,022	)	$	296,016	$	301,355		13.4	%		(2.3	%)		19.1	%		15.2	%

	Nine Months Ended September 30, 2018									Nine Months Ended September 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	$	112,235	$	(48,840	)	$	63,395	$	62,670	$	119,040	$	(55,830	)	$	63,210	$	64,635		(5.7	%)		(12.5	%)		0.3	%		(3.0	%)
P&C		599,088		(152,740	)		446,348		401,870		524,223		(129,297	)		394,926		366,280		14.3	%		18.1	%		13.0	%		9.7	%
Professional Liability		97,266		(13,760	)		83,506		76,623		86,580		(14,545	)		72,035		69,326		12.3	%		(5.4	%)		15.9	%		10.5	%
Total	$	808,589	$	(215,340	)	$	593,249	$	541,163	$	729,843	$	(199,672	)	$	530,171	$	500,241		10.8	%		7.8	%		11.9	%		8.2	%
Int'l Insurance
Marine	$	129,678	$	(24,542	)	$	105,136	$	115,342	$	160,119	$	(33,410	)	$	126,709	$	116,058		(19.0	%)		(26.5	%)		(17.0	%)		(0.6	%)
P&C		122,437		(45,099	)		77,338		75,100		124,446		(69,780	)		54,666		67,292		(1.6	%)		(35.4	%)		41.5	%		11.6	%
Professional Liability		125,656		(28,149	)		97,507		90,065		102,089		(26,178	)		75,911		67,243		23.1	%		7.5	%		28.4	%		33.9	%
Total	$	377,771	$	(97,790	)	$	279,981	$	280,507	$	386,654	$	(129,368	)	$	257,286	$	250,593		(2.3	%)		(24.4	%)		8.8	%		11.9	%
GlobalRe	$	262,043	$	(10,307	)	$	251,736	$	179,010	$	188,025	$	(9,021	)	$	179,004	$	130,487		39.4	%		14.3	%		40.6	%		37.2	%
Total	$	1,448,403	$	(323,437	)	$	1,124,966	$	1,000,680	$	1,304,522	$	(338,061	)	$	966,461	$	881,321		11.0	%		(4.3	%)		16.4	%		13.5	%