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 September 30, 2017 and 2016:



	Three Months Ended September 30, 2017
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	431.5		$	421.0		$	852.5
Net written premiums	363.6			243.8			607.4
Gross earned premiums	464.0			449.3			913.3
Net earned premiums	382.0			270.5			652.5
Underwriting Expenses
Losses and loss adjustment expenses	502.2			274.0			776.2
Amortization of deferred policy acquisition costs	61.5			43.9			105.4
General and administrative expenses	32.8			59.4			92.2
Underwriting loss	$	(214.5	)	$	(106.8	)	(321.3		)
Corporate expenses							(13.5		)
Non-operating expenses							(5.2		)
Net investment income							46.4
Realized and unrealized investment gains							29.9
Realized and unrealized investment losses							(12.4		)
Change in fair value of loan notes issued by variable interest entities							9.8
Change in fair value of derivatives							4.5
Interest expense on long term debt							(7.4		)
Net realized and unrealized foreign exchange gains							8.4
Net other expense							(2.2		)
Loss before tax							$	(263.0	)

Net reserves for loss and loss adjustment expenses	$	2,865.8		$	2,255.3		$	5,121.1
Ratios
Loss ratio	131.5		%	101.3		%	119.0		%
Policy acquisition expense ratio	16.1			16.2			16.2
General and administrative expense ratio	8.6			22.0			17.0			⁽¹⁾
Expense ratio	24.7			38.2			33.2
Combined ratio	156.2		%	139.5		%	152.2		%


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



	Three Months Ended September 30, 2016
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	365.9		$	397.6		$	763.5
Net written premiums	314.5			323.9			638.4
Gross earned premiums	364.3			445.5			809.8
Net earned premiums	316.3			364.7			681.0
Underwriting Expenses
Losses and loss adjustment expenses	178.7			210.5			389.2
Amortization of deferred policy acquisition costs	53.0			77.9			130.9
General and administrative expenses	47.4			57.9			105.3
Underwriting income	$	37.2		$	18.4		55.6
Corporate expenses							(13.4		)
Non-operating expenses							(6.3		)
Net investment income							46.4
Realized and unrealized investment gains							26.7
Realized and unrealized investment losses							(5.2		)
Change in fair value of loan notes issued by variable interest entities							(9.8		)
Change in fair value of derivatives							0.6
Interest expense on long term debt							(7.3		)
Net realized and unrealized foreign exchange gains							10.8
Net other income							2.4
Income before tax							$	100.5

Net reserves for loss and loss adjustment expenses	$	2,495.4		$	2,331.4		$	4,826.8
Ratios
Loss ratio	56.5		%	57.7		%	57.2		%
Policy acquisition expense ratio	16.8			21.4			19.2
General and administrative expense ratio	15.0			15.9			18.4			⁽¹⁾
Expense ratio	31.8			37.3			37.6
Combined ratio	88.3		%	95.0		%	94.8		%


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



	Nine Months Ended September 30, 2017
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	1,332.4		$	1,340.2		$	2,672.6
Net written premiums	1,097.3			775.0			1,872.3
Gross earned premiums	1,112.2			1,302.1			2,414.3
Net earned premiums	932.2			863.4			1,795.6
Underwriting Expenses
Losses and loss adjustment expenses	797.9			652.6			1,450.5
Amortization of deferred policy acquisition costs	174.4			141.0			315.4
General and administrative expenses	117.4			186.9			304.3
Underwriting loss	$	(157.5	)	$	(117.1	)	(274.6		)
Corporate expenses							(38.3		)
Non-operating expenses							(9.5		)
Net investment income							141.5
Realized and unrealized investment gains							130.1
Realized and unrealized investment losses							(24.4		)
Change in fair value of loan notes issued by variable interest entities							3.6
Change in fair value of derivatives							25.2
Interest expense on long term debt							(22.2		)
Net realized and unrealized foreign exchange losses							(21.1		)
Other income							5.0
Other expense							(2.0		)
Loss before tax							$	(86.7	)

Net reserves for loss and loss adjustment expenses	$	2,865.8		$	2,255.3		$	5,121.1
Ratios
Loss ratio	85.6		%	75.6		%	80.8		%
Policy acquisition expense ratio	18.7			16.3			17.6
General and administrative expense ratio	12.6			21.6			19.6			⁽¹⁾
Expense ratio	31.3			37.9			37.2
Combined ratio	116.9		%	113.5		%	118.0		%


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



	Nine Months Ended September 30, 2016
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	1,216.1		$	1,324.8		$	2,540.9
Net written premiums	1,070.8			1,092.1			2,162.9
Gross earned premiums	1,000.9			1,345.8			2,346.7
Net earned premiums	896.0			1,128.9			2,024.9
Underwriting Expenses
Losses and loss adjustment expenses	494.3			694.5			1,188.8
Amortization of deferred policy acquisition costs	163.1			224.7			387.8
General and administrative expenses	130.6			173.7			304.3
Underwriting income	$	108.0		$	36.0		144.0
Corporate expenses							(50.6		)
Non-operating expenses							(6.3		)
Net investment income							143.9
Realized and unrealized investment gains							137.4
Realized and unrealized investment losses							(34.1		)
Change in fair value of loan notes issued by variable interest entities							(13.7		)
Change in fair value of derivatives							(7.0		)
Interest expense on long term debt							(22.1		)
Net realized and unrealized foreign exchange losses							(10.2		)
Other income							2.4
Other expenses							(0.1		)
Income before tax							$	283.6

Net reserves for loss and loss adjustment expenses	$	2,495.4		$	2,331.4		$	4,826.8
Ratios
Loss ratio	55.2		%	61.5		%	58.7		%
Policy acquisition expense ratio	18.2			19.9			19.2
General and administrative expense ratio	14.6			15.4			17.8			⁽¹⁾
Expense ratio	32.8			35.3			37.0
Combined ratio	88.0		%	96.8		%	95.7		%


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