Segment Information

12 Months Ended

Dec. 31, 2018

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 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.

We evaluate our written premiums on a gross, ceded, and net basis. Additionally, we evaluate the retention ratio related to our written premiums, which represents the amount of written premium retained by the Company after ceding to reinsurers and is derived by dividing Net Written Premiums by Gross Written Premiums.

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.

The following tables set forth the financial data by segment for the years ended December 31, 2018, 2017 and 2016:

	Year Ended December 31, 2018
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	1,083,116		$	530,710		$	299,135		$	—		$	1,912,961
Ceded written premiums		(283,025	)		(147,402	)		(11,449	)		—			(441,876	)
Net written premiums		800,091			383,308			287,686			—			1,471,085
Retention Ratio		73.9	%		72.2	%		96.2	%		—			76.9	%

Net Earned Premiums	$	737,646		$	380,503		$	245,074		$	—		$	1,363,223
Net Losses and LAE		(485,960	)		(252,268	)		(155,551	)		—			(893,779	)
Commission Expenses		(85,127	)		(80,526	)		(55,056	)		565			(220,144	)
Other Operating Expenses		(142,333	)		(93,882	)		(25,009	)		—			(261,224	)
Other Underwriting Income (Expense)		354			2,206			316			(565	)		2,311
Underwriting Profit (Loss)	$	24,580		$	(43,967	)	$	9,774		$	—		$	(9,613	)
Net Investment Income											103,113			103,113
Total Net Realized and Unrealized Losses											(30,348	)		(30,348	)
Interest Expense											(15,485	)		(15,485	)
Other Income											4,858			4,858
Merger Transaction Costs											(3,950	)		(3,950	)
Income (Loss) Before Income Taxes	$	24,580		$	(43,967	)	$	9,774		$	58,188		$	48,575
Income Tax Expense											(14,336	)		(14,336	)
Net Income													$	34,239
Losses and LAE ratio		65.9	%		66.3	%		63.5	%					65.6	%
Commission Expense Ratio		11.5	%		21.2	%		22.5	%					16.1	%
Other Operating Expense Ratio ⁽²⁾		19.3	%		24.1	%		10.0	%					19.0	%
Combined Ratio		96.7	%		111.6	%		96.0	%					100.7	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income.

	Year Ended December 31, 2017
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	988,293		$	501,130		$	223,842		$	—		$	1,713,265
Ceded written premiums		(266,993	)		(165,278	)		(9,664	)		—			(441,935	)
Net written premiums		721,300			335,852			214,178			—			1,271,330
Retention Ratio		73.0	%		67.0	%		95.7	%		—			74.2	%

Net Earned Premiums	$	674,665		$	333,792		$	177,963		$	—		$	1,186,420
Net Losses and LAE		(443,353	)		(229,601	)		(133,311	)		—			(806,265	)
Commission Expenses		(77,729	)		(68,824	)		(39,136	)		958			(184,731	)
Other Operating Expenses		(128,905	)		(83,464	)		(20,861	)		—			(233,230	)
Other Underwriting Income (Expense)		461			—			565			(958	)		68
Underwriting Profit (Loss)	$	25,139		$	(48,097	)	$	(14,780	)	$	—		$	(37,738	)
Net Investment Income											89,293			89,293
Total Net Realized and Unrealized Gains											43,009			43,009
Interest Expense											(15,447	)		(15,447	)
Other Loss											(4,311	)		(4,311	)
Income (Loss) Before Income Taxes	$	25,139		$	(48,097	)	$	(14,780	)	$	112,544		$	74,806
Income Tax Expense											(34,312	)		(34,312	)
Net Income													$	40,494
Losses and LAE ratio		65.7	%		68.8	%		74.9	%					68.0	%
Commission Expense Ratio		11.5	%		20.6	%		22.0	%					15.6	%
Other Operating Expense Ratio ⁽²⁾		19.1	%		25.0	%		11.4	%					19.6	%
Combined Ratio		96.3	%		114.4	%		108.3	%					103.2	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income.

	Year Ended December 31, 2016
	U.S.			Int'l
amounts in thousands	Insurance			Insurance			GlobalRe			Corporate ⁽¹⁾			Total
Gross written premiums	$	919,395		$	484,471		$	165,045		$	—		$	1,568,911
Ceded written premiums		(235,827	)		(138,504	)		(8,356	)		—			(382,687	)
Net written premiums		683,568			345,967			156,689			—			1,186,224
Retention Ratio		74.3	%		71.4	%		94.9	%		—			75.6	%

Net Earned Premiums	$	629,308		$	307,416		$	163,621		$	—		$	1,100,345
Net Losses and LAE		(397,860	)		(178,284	)		(89,304	)		—			(665,448	)
Commission Expenses		(70,812	)		(61,703	)		(34,008	)		1,478			(165,045	)
Other Operating Expenses		(128,108	)		(86,395	)		(19,593	)		—			(234,096	)
Other Underwriting Income (Expense)		1,092			—			522			(1,478	)		136
Underwriting Profit (Loss)	$	33,620		$	(18,966	)	$	21,238		$	—		$	35,892
Net Investment Income											79,451			79,451
Total Net Realized and Unrealized Gains											9,036			9,036
Interest Expense											(15,435	)		(15,435	)
Other Income											8,565			8,565
Income (Loss) Before Income Taxes	$	33,620		$	(18,966	)	$	21,238		$	81,617		$	117,509
Income Tax Expense											(34,783	)		(34,783	)
Net Income													$	82,726
Losses and LAE ratio		63.2	%		58.0	%		54.6	%					60.5	%
Commission Expense Ratio		11.3	%		20.1	%		20.8	%					15.0	%
Other Operating Expense Ratio ⁽²⁾		20.2	%		28.1	%		11.6	%					21.2	%
Combined Ratio		94.7	%		106.2	%		87.0	%					96.7	%

(1) - Includes Corporate segment intercompany eliminations.

(2) - Includes Other Operating Expenses and Other Underwriting Income.

The following tables provide additional financial data by operating segment for the years ended December 31, 2018, 2017 and 2016:

	Year Ended December 31, 2018
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums
U.S. Insurance
Marine	$	148,485	$	(64,097	)	$	84,388	$	84,774
P&C		803,759		(199,307	)		604,452		549,136
Professional Liability		130,872		(19,621	)		111,251		103,736
Total	$	1,083,116	$	(283,025	)	$	800,091	$	737,646
Int'l Insurance
Marine	$	181,053	$	(44,356	)	$	136,697	$	151,296
P&C		171,502		(64,176	)		107,326		105,144
Professional Liability		178,155		(38,870	)		139,285		124,063
Total	$	530,710	$	(147,402	)	$	383,308	$	380,503
GlobalRe	$	299,135	$	(11,449	)	$	287,686	$	245,074
Total	$	1,912,961	$	(441,876	)	$	1,471,085	$	1,363,223

	Year Ended December 31, 2017
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums
U.S. Insurance
Marine	$	156,171	$	(72,431	)	$	83,740	$	86,605
P&C		713,539		(173,501	)		540,038		495,260
Professional Liability		118,583		(21,061	)		97,522		92,800
Total	$	988,293	$	(266,993	)	$	721,300	$	674,665
Int'l Insurance
Marine	$	198,241	$	(42,018	)	$	156,223	$	152,396
P&C		159,123		(85,298	)		73,825		88,517
Professional Liability		143,766		(37,962	)		105,804		92,879
Total	$	501,130	$	(165,278	)	$	335,852	$	333,792
GlobalRe	$	223,842	$	(9,664	)	$	214,178	$	177,963
Total	$	1,713,265	$	(441,935	)	$	1,271,330	$	1,186,420

	Year Ended December 31, 2016
amounts in thousands	Gross written premiums		Ceded written premiums			Net written premiums		Net earned premiums
U.S. Insurance
Marine	$	169,405	$	(70,858	)	$	98,547	$	100,132
P&C		631,562		(135,888	)		495,674		453,673
Professional Liability		118,428		(29,081	)		89,347		75,503
Total	$	919,395	$	(235,827	)	$	683,568	$	629,308
Int'l Insurance
Marine	$	183,228	$	(40,092	)	$	143,136	$	141,593
P&C		181,094		(69,606	)		111,488		89,455
Professional Liability		120,149		(28,806	)		91,343		76,368
Total	$	484,471	$	(138,504	)	$	345,967	$	307,416
GlobalRe	$	165,045	$	(8,356	)	$	156,689	$	163,621
Total	$	1,568,911	$	(382,687	)	$	1,186,224	$	1,100,345

The following is a summary of our Company's Gross Written Premiums allocated based on the location of the insured's head office:

	Years Ended December 31,
amounts in thousands	2018		2017		2016
United States	$	1,373,346	$	1,203,695	$	1,101,337
Worldwide (Excluding the United States)		539,615		509,570		467,574
Total	$	1,912,961	$	1,713,265	$	1,568,911

Our Company distributes our insurance products through international, national, regional and retail insurance brokers. For the year ended December 31, 2018, business produced within our U.S. Insurance, Int’l Insurance and GlobalRe reporting segments through the broker Marsh & McLennan Companies Inc. represented just over 10% of consolidated gross premiums written.

The assets of our Company are reviewed in total by management for purposes of decision making.