Segment Reporting

The Company has two reporting business segments: Insurance and Reinsurance. In addition to the way the Company manages its business, the Company has considered similarities in economic characteristics, products, customers, distribution, the regulatory environment of the Company’s business segments and quantitative thresholds to determine the Company’s reportable segments. Segment profit or loss for each of the Company’s business segments is measured by underwriting profit or loss. Underwriting profit is the excess of net earned premiums over the sum of losses and loss expenses, amortization of deferred policy acquisition costs and general and administrative expenses. Underwriting profit or loss provides a basis for management to evaluate the business segment’s underwriting performance.

Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance (risk excess, pro rata and facultative), casualty reinsurance (U.S. treaty, international treaty and global facultative) and specialty insurance and reinsurance (credit and surety, mortgage reinsurance and insurance, agriculture insurance and reinsurance, marine, aviation, terrorism, engineering, cyber and other specialty lines). ACM forms part of our property catastrophe reinsurance line of business as it focuses primarily on property catastrophe business through the use of alternative capital. For a more detailed description of this business segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” in the Company’s 2016 Annual Report on Form 10-K filed with the SEC.

Insurance Segment. The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance. For a more detailed description of this business segment, see Part I, Item 1 “Business — Business Segments — Insurance” in the Company’s 2016 Annual Report on Form 10-K filed with the SEC.

Non-underwriting Disclosures. The Company has provided additional disclosures for corporate and other (non-operating) income and expenses. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the Group, certain strategic and non-recurring costs, changes in fair value of derivatives and changes in fair value of the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses, and income taxes, none of which are allocated to the business segments. Corporate expenses are not allocated to the Company’s business segments as they typically do not fluctuate with the levels of premiums written and are not directly related to the Company’s business segment operations. The Company does not allocate its assets by business segment as it evaluates underwriting results of each business segment separately from the results of the Company’s investment portfolio.

The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the three months ended June 30, 2017 and 2016:



	Three Months Ended June 30, 2017
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	335.6		$	486.5		$	822.1
Net written premiums	285.5			293.2			578.7
Gross earned premiums	320.6			429.1			749.7
Net earned premiums	272.7			289.3			562.0
Underwriting Expenses
Losses and loss adjustment expenses	152.6			193.5			346.1
Amortization of deferred policy acquisition costs	53.4			42.9			96.3
General and administrative expenses	40.7			65.7			106.4
Underwriting income	$	26.0		$	(12.8	)	13.2
Corporate expenses							(11.4		)
Non-operating expenses							(2.1		)
Net investment income							47.4
Realized and unrealized investment gains							49.0
Realized and unrealized investment losses							(7.0		)
Change in fair value of loan notes issued by variable interest entities							(3.3		)
Change in fair value of derivatives							17.6
Interest expense on long term debt							(7.4		)
Net realized and unrealized foreign exchange losses							(20.6		)
Other income							3.6
Other expenses							(2.0		)
Income before tax							$	77.0

Net reserves for loss and loss adjustment expenses	$	2,445.0		$	2,347.0		$	4,792.0
Ratios
Loss ratio	56.0		%	66.9		%	61.6		%
Policy acquisition expense ratio	19.6			14.8			17.1
General and administrative expense ratio	14.9			22.7			21.3			⁽¹⁾
Expense ratio	34.5			37.5			38.4
Combined ratio	90.5		%	104.4		%	100.0		%


⁽¹⁾	The general and administrative expense ratio in the total column includes corporate and non-operating expenses.



	Three Months Ended June 30, 2016
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	332.6		$	469.1		$	801.7
Net written premiums	306.8			418.0			724.8
Gross earned premiums	329.8			454.7			784.5
Net earned premiums	299.4			381.4			680.8
Underwriting Expenses
Losses and loss adjustment expenses	181.1			261.1			442.2
Amortization of deferred policy acquisition costs	50.7			76.0			126.7
General and administrative expenses	39.1			57.2			96.3
Underwriting income/(loss)	$	28.5		$	(12.9	)	15.6
Corporate expenses							(20.1		)
Net investment income							48.0
Realized and unrealized investment gains							45.1
Realized and unrealized investment losses							(8.3		)
Change in fair value of loan notes issued by variable interest entities							0.5
Change in fair value of derivatives							(0.4		)
Interest expense on long term debt							(7.4		)
Net realized and unrealized foreign exchange losses							(5.3		)
Other income							(0.5		)
Other expenses							(1.0		)
Income before tax							$	66.2

Net reserves for loss and loss adjustment expenses	$	2,474.6		$	2,296.5		$	4,771.1
Ratios
Loss ratio	60.5		%	68.5		%	65.0		%
Policy acquisition expense ratio	16.9			19.9			18.6
General and administrative expense ratio	13.1			15.0			17.1			⁽¹⁾
Expense ratio	30.0			34.9			35.7
Combined ratio	90.5		%	103.4		%	100.7		%


⁽¹⁾	The general and administrative expense ratio in the total column includes corporate expenses.



	Six Months Ended June 30, 2017
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	900.9		$	919.2		$	1,820.1
Net written premiums	733.7			531.2			1,264.9
Gross earned premiums	648.2			852.8			1,501.0
Net earned premiums	550.2			592.9			1,143.1
Underwriting Expenses
Losses and loss adjustment expenses	295.7			378.6			674.3
Amortization of deferred policy acquisition costs	112.9			97.1			210.0
General and administrative expenses	84.6			127.5			212.1
Underwriting income	$	57.0		$	(10.3	)	46.7
Corporate expenses							(24.8		)
Non-operating expenses							(4.3		)
Net investment income							95.1
Realized and unrealized investment gains							100.2
Realized and unrealized investment losses							(12.0		)
Change in fair value of loan notes issued by variable interest entities							(6.2		)
Change in fair value of derivatives							20.7
Interest expense on long term debt							(14.8		)
Net realized and unrealized foreign exchange losses							(29.5		)
Other income							7.2
Other expense							(2.0		)
Income before tax							$	176.3

Net reserves for loss and loss adjustment expenses	$	2,445.0		$	2,347.0		$	4,792.0
Ratios
Loss ratio	53.7		%	63.9		%	59.0		%
Policy acquisition expense ratio	20.5			16.4			18.4
General and administrative expense ratio	15.4			21.5			21.1			⁽¹⁾
Expense ratio	35.9			37.9			39.5
Combined ratio	89.6		%	101.8		%	98.5		%


⁽¹⁾	The general and administrative expense ratio in the total column includes corporate and non-operating expenses.



	Six Months Ended June 30, 2016
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	850.2		$	927.2		$	1,777.4
Net written premiums	756.3			768.2			1,524.5
Gross earned premiums	636.6			900.3			1,536.9
Net earned premiums	579.7			764.2			1,343.9
Underwriting Expenses
Losses and loss adjustment expenses	315.6			484.0			799.6
Amortization of deferred policy acquisition costs	110.1			146.8			256.9
General and administrative expenses	83.2			115.8			199.0
Underwriting income	$	70.8		$	17.6		88.4
Corporate expenses							(37.2		)
Net investment income							97.5
Realized and unrealized investment gains							110.7
Realized and unrealized investment losses							(28.9		)
Change in fair value of loan notes issued by variable interest entities							(3.9		)
Change in fair value of derivatives							(7.6		)
Interest expense on long term debt							(14.8		)
Net realized and unrealized foreign exchange losses							(21.0		)
Other income							0.9
Other expenses							(1.0		)
Income before tax							$	183.1

Net reserves for loss and loss adjustment expenses	$	2,474.6		$	2,296.5		$	4,771.1
Ratios
Loss ratio	54.4		%	63.3		%	59.5		%
Policy acquisition expense ratio	19.0			19.2			19.1
General and administrative expense ratio	14.4			15.2			17.6			⁽¹⁾
Expense ratio	33.4			34.4			36.7
Combined ratio	87.8		%	97.7		%	96.2		%


⁽¹⁾	The general and administrative expense ratio in the total column includes corporate expenses.

The Company uses underwriting ratios as measures of performance. The loss ratio is the ratio of losses and loss adjustment expenses to net earned premiums. The policy acquisition expense ratio is the ratio of amortization of deferred policy acquisition costs to net earned premiums. The general and administrative expense ratio is the ratio of general, administrative and corporate expenses to net earned premiums. The combined ratio is the sum of the loss ratio, the policy acquisition expense ratio and the general and administrative expense ratio.