Segment Information

The Company is organized into two operating segments: Insurance and Reinsurance. The Company’s general investment, financing operations and run-off life operations are reflected in Corporate and Other.

On May 30, 2014, the Company completed the sale of 100% of the common shares of its wholly owned subsidiary, XL Life Reinsurance (SAC) Ltd (“XLLR”), to GreyCastle Holdings Ltd. As a result of the transaction, XLLR reinsures the majority of the Company's life reinsurance business via 100% quota share reinsurance. This transaction covers a substantial portion of the Company’s life reinsurance reserves. Due to the Company's conclusion that it no longer considers the run-off life operations, sometimes referred to herein as "Life Operations," to be a separate operating segment as a result of this transaction, the Company determined to recast the consolidated financial statements to reflect the revised segments.

The Company evaluates the performance of both the Insurance and Reinsurance segments based on underwriting profit. Other items of revenue and expenditure of the Company are not evaluated at the segment level. In addition, the Company does not allocate investment assets used to support its Property and Casualty (“P&C”) operations to the individual segments, except as noted below. Investment assets related to certain structured products included in the Insurance and Reinsurance segments are held in separately identified portfolios and, as such, net investment income from these assets is included in the contribution from the applicable segment. Investment assets related to the run-off life operations are held in separately identifiable portfolios and, as such, net investment income from these assets is included in Corporate and Other.

The following tables summarize the segment results for the indicated years ended:



Year Ended December 31, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	5,523,181		$	1,893,611		$	7,416,792		$	324,343		$	7,741,135
Net premiums written	4,154,093			1,749,889			5,903,982			295,422			6,199,404
Net premiums earned	4,267,677			1,746,422			6,014,099			295,422			6,309,521
Net losses and loss expenses	2,829,999			901,465			3,731,464			465,702			4,197,166
Acquisition costs	529,270			353,388			882,658			26,665			909,323
Operating expenses (2)	782,677			166,238			948,915			8,926			957,841
Underwriting profit (loss)	$	125,731		$	325,331		$	451,062		$	(205,871	)	$	245,191
Net investment income							599,144			286,645			885,789
Net results from structured products (3)	15,562			8,229			23,791			—			23,791
Net fee income and other (4)	(9,317		)	2,320			(6,997		)	1,305			(5,692		)
Net realized gains (losses) on investments							85,792			1,985			87,777
Net realized & unrealized gains (losses) on derivative instruments							—			7,798			7,798
Net income (loss) from investment fund affiliates and operating affiliates (5)							—			258,195			258,195
Exchange (gains) losses							—			(28,243		)	(28,243		)
Corporate operating expenses							—			209,454			209,454
Contribution from P&C and Corporate and Other							$	1,152,792		$	168,846		$	1,321,638
Interest expense (6)										107,486			107,486
Non-controlling interests										76,731			76,731
Income tax expense										77,505			77,505
Net income (loss) attributable to ordinary shareholders													$	1,059,916
Ratios – P&C operations: (7)
Loss and loss expense ratio	66.3		%	51.6		%	62.0		%
Underwriting expense ratio	30.8		%	29.8		%	30.5		%
Combined ratio	97.1		%	81.4		%	92.5		%

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(1)	Corporate and Other includes other items of our revenue and expenditure that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.


(2)	Operating expenses exclude Corporate operating expenses, shown separately.


(3)	The net results from P&C structured products include net investment income and interest expense of $71.9 million and $48.0 million, respectively.


(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.


(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.


(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.


(7)	Ratios are based on net premiums earned from P&C operations.



Year Ended December 31, 2012 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	5,166,973		$	2,008,157		$	7,175,130		$	355,753		$	7,530,883
Net premiums written	4,072,511			1,884,508			5,957,019			324,432			6,281,451
Net premiums earned	3,924,636			1,841,342			5,765,978			324,459			6,090,437
Net losses and loss expenses	2,691,056			1,074,426			3,765,482			486,195			4,251,677
Acquisition costs	504,227			368,172			872,399			41,093			913,492
Operating expenses (2)	754,308			157,657			911,965			9,335			921,300
Underwriting profit (loss)	$	(24,955	)	$	241,087		$	216,132		$	(212,164	)	$	3,968
Net investment income							641,237			299,443			940,680
Net results from structured products (3)	20,978			(15,721		)	5,257			—			5,257
Net fee income and other (4)	850			2,492			3,342			426			3,768
Net realized gains (losses) on investments							35,101			(21,003		)	14,098
Net realized & unrealized gains (losses) on derivative instruments							—			5,221			5,221
Net income (loss) from investment fund affiliates and operating affiliates (5)							—			112,391			112,391
Exchange (gains) losses							—			10,545			10,545
Corporate operating expenses							—			204,502			204,502
Contribution from P&C and Corporate and Other							$	901,069		$	(30,733	)	$	870,336
Interest expense (6)										105,925			105,925
Non-controlling interests										79,255			79,255
Income tax expense										34,028			34,028
Net income (loss) attributable to ordinary shareholders													$	651,128
Ratios – P&C operations: (7)
Loss and loss expense ratio	68.6		%	58.4		%	65.3		%
Underwriting expense ratio	32.0		%	28.5		%	31.0		%
Combined ratio	100.6		%	86.9		%	96.3		%

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(1)	Corporate and Other includes other items of our revenue and expenditure that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.


(2)	Operating expenses exclude Corporate operating expenses, shown separately.


(3)	The net results from P&C structured products include net investment income and interest expense of $71.7 million and $66.3 million, respectively.


(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.


(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.


(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.


(7)	Ratios are based on net premiums earned from P&C operations.



Year Ended December 31, 2011 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	4,824,665		$	2,073,619		$	6,898,284		$	394,555		$	7,292,839
Net premiums written	3,707,664			1,725,724			5,433,388			362,362			5,795,750
Net premiums earned	3,663,727			1,663,385			5,327,112			363,018			5,690,130
Net losses and loss expenses	2,951,413			1,126,978			4,078,391			535,074			4,613,465
Acquisition costs	461,965			324,128			786,093			40,318			826,411
Operating expenses (2)	683,814			176,167			859,981			9,311			869,292
Underwriting profit (loss)	$	(433,465	)	$	36,112		$	(397,353	)	$	(221,685	)	$	(619,038	)
Net investment income							745,138			318,061			1,063,199
Net results from structured products (3)	10,976			12,053			23,029			—			23,029
Net fee income and other (4)	(16,370		)	3,903			(12,467		)	219			(12,248		)
Net realized gains (losses) on investments							(98,360		)	(89,999		)	(188,359		)
Net realized & unrealized gains (losses) on derivative instruments							—			(10,738		)	(10,738		)
Net income (loss) from investment fund affiliates and operating affiliates (5)							—			103,039			103,039
Exchange (gains) losses							—			(40,640		)	(40,640		)
Corporate operating expenses							—			160,596			160,596
Contribution from P&C and Corporate and Other							$	259,987		$	(21,059	)	$	238,928
Interest expense (6)										154,084			154,084
Non-controlling interests										70,877			70,877
Impairment of goodwill										429,020			429,020
Income tax expense										59,707			59,707
Net income (loss) attributable to ordinary shareholders													$	(474,760	)
Ratios – P&C operations: (7)
Loss and loss expense ratio	80.6		%	67.8		%	76.6		%
Underwriting expense ratio	31.2		%	30.0		%	30.9		%
Combined ratio	111.8		%	97.8		%	107.5		%

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(1)	Corporate and Other includes other items of our revenue and expenditure that are not evaluated at the segment level for reporting purposes, as well as the Company's run-off life operations.


(2)	Operating expenses exclude Corporate operating expenses, shown separately.


(3)	The net results from P&C structured products include net investment income and interest expense of $74.6 million and $51.5 million, respectively.


(4)	Net fee income and other includes operating expenses from the Company's loss prevention consulting services business.


(5)	The Company records the income related to the alternative funds and to the private investment and operating fund affiliates on a one-month and three-month lag, respectively.


(6)	Interest expense excludes interest expense related to deposit liabilities recorded in the Insurance and Reinsurance segments.


(7)	Ratios are based on net premiums earned from P&C operations.

The following tables summarize the Company’s net premiums earned by line of business:



Year Ended December 31, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	1,370,196	$	206,169	$	—	$	1,576,365
Casualty	1,389,851		312,156		—		1,702,007
Property catastrophe	—		492,568		—		492,568
Property	544,278		561,105		—		1,105,383
Marine, energy, aviation and satellite	—		94,797		—		94,797
Specialty	732,042		—		—		732,042
Other (1)	231,310		79,627		—		310,937
Total P&C Operations	$	4,267,677	$	1,746,422	$	—	$	6,014,099
Corporate and Other:
Run-off Life operations - Annuity	—		—		122,715		122,715
Run-off Life operations - Other Life	—		—		172,707		172,707
Total Corporate and Other	$	—	$	—	$	295,422	$	295,422
Total	$	4,267,677	$	1,746,422	$	295,422	$	6,309,521
Year Ended December 31, 2012
P&C Operations:
Professional	$	1,350,319	$	213,324	$	—	$	1,563,643
Casualty	1,165,753		311,166		—		1,476,919
Property catastrophe	—		463,975		—		463,975
Property	489,739		613,291		—		1,103,030
Marine, energy, aviation and satellite	—		147,362		—		147,362
Specialty	708,568		—		—		708,568
Other (1)	210,257		92,224		—		302,481
Total P&C Operations	$	3,924,636	$	1,841,342	$	—	$	5,765,978
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	126,912	$	126,912
Run-off Life operations - Other Life	—		—		197,547		197,547
Total Corporate and Other	$	—	$	—	$	324,459	$	324,459
Total	$	3,924,636	$	1,841,342	$	324,459	$	6,090,437
Year Ended December 31, 2011
P&C Operations:
Professional	$	1,287,231	$	213,949	$	—	$	1,501,180
Casualty	998,326		256,853		—		1,255,179
Property catastrophe	—		387,523		—		387,523
Property	464,576		587,611		—		1,052,187
Marine, energy, aviation and satellite	—		130,855		—		130,855
Specialty	702,604		—		—		702,604
Other (1)	210,990		86,594		—		297,584
Total P&C Operations	$	3,663,727	$	1,663,385	$	—	$	5,327,112
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	132,232	$	132,232
Run-off Life operations - Other Life	—		—		230,786		230,786
Total Corporate and Other	$	—	$	—	$	363,018	$	363,018
Total	$	3,663,727	$	1,663,385	$	363,018	$	5,690,130

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(1)	Other within the Insurance segment includes: excess and surplus, programs, surety, structured indemnity and certain discontinued lines. Other within the Reinsurance segment includes: whole account contracts, surety and other lines.

The following table shows an analysis of the Company’s net premiums written by geographical location of subsidiary where the premium is written for the years ended December 31:



(U.S. dollars in thousands)	2013		2012		2011
P&C Operations:
Bermuda	$	658,041	$	644,566	$	572,825
United States	2,650,916		2,626,855		2,320,274
Europe	2,111,065		2,202,209		2,065,197
Other	483,960		483,389		475,092
Total P&C operations	$	5,903,982	$	5,957,019	$	5,433,388
Run-off life operations:
Bermuda	$	117,948	$	129,997	$	149,466
Europe	177,474		194,435		212,896
Total run-off life operations	$	295,422	$	324,432	$	362,362