Segment Information

The Company is organized into two operating segments: Insurance and Reinsurance. Subsequent to the transaction as described in Note 3, "Sale of Life Reinsurance Subsidiary," XLLR reinsures the majority of the Company's life reinsurance business through the Life Retro Arrangements. The Company no longer considers the Life Operations to be a separate operating segment and the results of the life run-off business are reported within “Corporate and Other.” The Company’s general investment and financing operations are also reflected in Corporate and Other. The run-off business subject to the Life Retro Arrangements was, prior to June 30, 2014, reported within the Company’s Life operations segment. Prior period information has been recast to reflect the current presentation.

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 the Company’s run-off life operations and certain structured products included in the Insurance and Reinsurance segments are held in separately identified portfolios. As such, net investment income from these assets is included in the contribution from the applicable segment or in Corporate and Other. The following tables summarize the segment results for the three and nine months ended September 30, 2014 and 2013:



Three Months Ended September 30, 2014 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	1,324,418		$	276,284		$	1,600,702		$	83,496		$	1,684,198
Net premiums written	956,185			258,061			1,214,246			19,739			1,233,985
Net premiums earned	1,018,416			435,257			1,453,673			19,739			1,473,412
Net losses and loss expenses	650,256			209,332			859,588			20,101			879,689
Acquisition costs	95,992			84,800			180,792			2,090			182,882
Operating expenses (2)	218,281			50,637			268,918			2,785			271,703
Underwriting profit (loss)	$	53,887		$	90,488		$	144,375		$	(5,237	)	$	139,138
Net investment income - excluding Life Funds Withheld Assets (3)							141,575			11,552			153,127
Net investment income - Life Funds Withheld Assets										56,474			56,474
Net results from structured products (4)	3,571			1,720			5,291			—			5,291
Net fee income and other (5)	(3,826		)	601			(3,225		)	167			(3,058		)
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							9,418			395			9,813
Net realized gains (losses) on investments - Life Funds Withheld Assets							—			(5,472		)	(5,472		)
Net realized and unrealized gains (losses) on derivative instruments							—			5,131			5,131
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(201,264		)	(201,264		)
Net income (loss) from investment fund affiliates and operating affiliates (6)							—			44,521			44,521
Exchange (gains) losses							—			(23,348		)	(23,348		)
Corporate operating expenses							—			55,322			55,322
Contribution from P&C and Corporate and Other							297,434			(125,707		)	171,727
Interest expense (7)										31,703			31,703
Non-controlling interests										37,583			37,583
Income tax expense										30,057			30,057
Net income (loss) attributable to ordinary shareholders													$	72,384
Ratios – P&C operations: (8)
Loss and loss expense ratio	63.8		%	48.1		%	59.1		%
Underwriting expense ratio	30.9		%	31.1		%	31.0		%
Combined ratio	94.7		%	79.2		%	90.1		%

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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 of the segments exclude Corporate operating expenses, shown separately.


(3)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.


(4)	The net results from structured products include net investment income and interest expense of $16.8 million and $11.1 million, respectively.


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


(6)	The Company generally 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.


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


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



Three Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	1,259,986		$	349,854		$	1,609,840		$	82,291		$	1,692,131
Net premiums written	993,659			333,720			1,327,379			74,683			1,402,062
Net premiums earned	1,104,012			446,617			1,550,629			74,683			1,625,312
Net losses and loss expenses	762,782			243,738			1,006,520			116,549			1,123,069
Acquisition costs	136,421			95,797			232,218			6,110			238,328
Operating expenses (2)	192,936			42,055			234,991			2,659			237,650
Underwriting profit (loss)	$	11,873		$	65,027		$	76,900		$	(50,635	)	$	26,265
Net investment income - excluding Life Funds Withheld Assets (3)							147,739			72,128			219,867
Net results from structured products (4)	4,104			2,359			6,463			—			6,463
Net fee income and other (5)	(2,187		)	597			(1,590		)	43			(1,547		)
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							(2,087		)	129			(1,958		)
Net realized and unrealized gains (losses) on derivative instruments							—			880			880
Net income (loss) from investment fund affiliates and operating affiliates 6)							—			29,669			29,669
Exchange (gains) losses							—			20,303			20,303
Corporate operating expenses							—			61,427			61,427
Contribution from P&C and Corporate and Other							227,425			(29,516		)	197,909
Interest expense (7)										26,342			26,342
Non-controlling interests										35,022			35,022
Income tax expense										897			897
Net income (loss) attributable to ordinary shareholders													$	135,648
Ratios – P&C operations: (8)
Loss and loss expense ratio	69.1		%	54.6		%	64.9		%
Underwriting expense ratio	29.8		%	30.8		%	30.1		%
Combined ratio	98.9		%	85.4		%	95.0		%

____________


(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 of the segments exclude Corporate operating expenses, shown separately.


(3)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.


(4)	The net results from structured products include net investment income and interest expense of $18.1 million and $11.6 million, respectively.


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


(6)	The Company generally 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.


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


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



Nine Months Ended September 30, 2014 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	4,513,749		$	1,627,121		$	6,140,870		$	254,503		$	6,395,373
Net premiums written	3,080,432			1,486,680			4,567,112			154,568			4,721,680
Net premiums earned	3,014,846			1,289,431			4,304,277			154,568			4,458,845
Net losses and loss expenses	1,917,076			601,897			2,518,973			218,987			2,737,960
Acquisition costs	300,855			252,909			553,764			13,151			566,915
Operating expenses (2)	635,265			139,080			774,345			8,182			782,527
Underwriting profit (loss)	$	161,650		$	295,545		$	457,195		$	(85,752	)	$	371,443
Net investment income - excluding Life Funds Withheld Assets (3)							429,657			134,562			564,219
Net investment income - Life Funds Withheld Assets										75,639			75,639
Net results from structured products (4)	40,106			8,023			48,129			—			48,129
Net fee income and other (5)	(8,605		)	1,938			(6,667		)	257			(6,410		)
Loss on sale of life reinsurance subsidiary							—			666,423			666,423
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							105,589			4,297			109,886
Net realized gains (losses) on investments - Life Funds Withheld Assets							—			(13,619		)	(13,619		)
Net realized and unrealized gains (losses) on derivative instruments							—			18,540			18,540
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets							—			(218,810		)	(218,810		)
Net income (loss) from investment fund affiliates and operating affiliates (6)							—			169,530			169,530
Exchange (gains) losses							—			8,234			8,234
Corporate operating expenses							—			163,155			163,155
Contribution from P&C and Corporate and Other							$	1,033,903		$	(753,168	)	$	280,735
Interest expense (7)										96,147			96,147
Non-controlling interests										77,024			77,024
Income tax expense										58,724			58,724
Net income (loss) attributable to ordinary shareholders													$	48,840
Ratios – P&C operations: (8)
Loss and loss expense ratio	63.6		%	46.7		%	58.5		%
Underwriting expense ratio	31.0		%	30.4		%	30.9		%
Combined ratio	94.6		%	77.1		%	89.4		%

____________


(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 of the segments exclude Corporate operating expenses, shown separately.


(3)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.


(4)	The net results from structured products include net investment income and net interest expense of $52.5 million and $3.7 million, respectively. Net results from structured products includes a benefit of $28.7 million from a negotiated termination of one of the Company's larger structured indemnity contracts during the second quarter of 2014, producing a net interest expense credit.


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


(6)	The Company generally 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.


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


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



Nine Months Ended September 30, 2013 (U.S. dollars in thousands, except ratios)	Insurance			Reinsurance			Total P&C			Corporate and Other (1)			Total
Gross premiums written	$	4,230,161		$	1,728,765		$	5,958,926		$	236,563		$	6,195,489
Net premiums written	3,232,010			1,597,550			4,829,560			214,024			5,043,584
Net premiums earned	3,201,646			1,301,726			4,503,372			214,024			4,717,396
Net losses and loss expenses	2,134,622			652,588			2,787,210			344,269			3,131,479
Acquisition costs	405,075			267,930			673,005			17,468			690,473
Operating expenses (2)	571,447			122,098			693,545			7,460			701,005
Underwriting profit (loss)	$	90,502		$	259,110		$	349,612		$	(155,173	)	$	194,439
Net investment income - excluding Life Funds Withheld Assets (3)							448,596			214,408			663,004
Net investment income - Life Funds Withheld Assets										—			—
Net results from structured products (4)	11,821			5,871			17,692			—			17,692
Net fee income and other (5)	(5,481		)	1,749			(3,732		)	1,130			(2,602		)
Net realized gains (losses) on investments - excluding Life Funds Withheld Assets							72,860			2,659			75,519
Net realized and unrealized gains (losses) on derivative instruments							—			3,660			3,660
Net income (loss) from investment fund affiliates and operating affiliates (6)							—			172,256			172,256
Exchange (gains) losses							—			(24,463		)	(24,463		)
Corporate operating expenses							—			163,504			163,504
Contribution from P&C and Corporate and Other							$	885,028		$	99,899		$	984,927
Interest expense (7)										78,599			78,599
Non-controlling interests										73,944			73,944
Income tax expense										73,248			73,248
Net income (loss) attributable to ordinary shareholders													$	759,136
Ratios – P&C operations: (8)
Loss and loss expense ratio	66.7		%	50.1		%	61.9		%
Underwriting expense ratio	30.5		%	30.0		%	30.3		%
Combined ratio	97.2		%	80.1		%	92.2		%

____________


(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 of the segments exclude Corporate operating expenses, shown separately.


(3)	Net investment income - excluding Life Funds Withheld Assets does not include net investment income related to the net results from structured products.


(4)	The net results from structured products include net investment income and interest expense of $53.9 million and $36.2 million, respectively.


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


(6)	The Company generally 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.


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


(8)	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 for the three months ended September 30, 2014 and 2013:



Three Months Ended September 30, 2014 (U.S. dollars in thousands)	Insurance		Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	269,275	$	45,221	$	—	$	314,496
Casualty	358,505		66,638		—		425,143
Property catastrophe	—		103,813		—		103,813
Property	139,663		155,415		—		295,078
Marine, energy, aviation and satellite	—		30,511		—		30,511
Specialty	186,360		—		—		186,360
Other (1)	64,613		33,659		—		98,272
Total P&C Operations	$	1,018,416	$	435,257	$	—	$	1,453,673
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	2	$	2
Run-off Life operations - Other Life	—		—		19,737		19,737
Total Corporate and Other	$	—	$	—	$	19,739	$	19,739
Total	$	1,018,416	$	435,257	$	19,739	$	1,473,412

Three Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	360,551	$	56,581	$	—	$	417,132
Casualty	362,886		76,899		—		439,785
Property catastrophe	—		120,418		—		120,418
Property	136,008		146,608		—		282,616
Marine, energy, aviation and satellite	—		23,000		—		23,000
Specialty	180,795		—		—		180,795
Other (1)	63,772		23,111		—		86,883
Total P&C Operations	$	1,104,012	$	446,617	$	—	$	1,550,629
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	30,608	$	30,608
Run-off Life operations - Other Life	—		—		44,075		44,075
Total Corporate and Other	$	—	$	—	$	74,683	$	74,683
Total	$	1,104,012	$	446,617	$	74,683	$	1,625,312

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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, accident and health and other lines.

The following tables summarize the Company’s net premiums earned by line of business for the nine months ended September 30, 2014:



Nine Months Ended September 30, 2014 (U.S. dollars in thousands)	Insurance		Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	812,211	$	139,564	$	—	$	951,775
Casualty	1,061,499		226,288		—		1,287,787
Property catastrophe	—		324,812		—		324,812
Property	422,270		432,991		—		855,261
Marine, energy, aviation and satellite	—		75,090		—		75,090
Specialty	543,217		—		—		543,217
Other (1)	175,649		90,686		—		266,335
Total P&C Operations	$	3,014,846	$	1,289,431	$	—	$	4,304,277
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	53,364	$	53,364
Run-off Life operations - Other Life	—		—		101,204		101,204
Total Corporate and Other	$	—	$	—	$	154,568	$	154,568
Total	$	3,014,846	$	1,289,431	$	154,568	$	4,458,845

Nine Months Ended September 30, 2013 (U.S. dollars in thousands)	Insurance		Reinsurance		Corporate and Other		Total
P&C Operations:
Professional	$	1,061,201	$	152,995	$	—	$	1,214,196
Casualty	1,028,741		230,424		—		1,259,165
Property catastrophe	—		363,421		—		363,421
Property	395,547		420,378		—		815,925
Marine, energy, aviation and satellite	—		75,428		—		75,428
Specialty	544,891		—		—		544,891
Other (1)	171,266		59,080		—		230,346
Total P&C Operations	$	3,201,646	$	1,301,726	$	—	$	4,503,372
Corporate and Other:
Run-off Life operations - Annuity	$	—	$	—	$	90,379	$	90,379
Run-off Life operations - Other Life	—		—		123,645		123,645
Total Corporate and Other	$	—	$	—	$	214,024	$	214,024
Total	$	3,201,646	$	1,301,726	$	214,024	$	4,717,396

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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, accident and health and other lines.