Segment Reporting

The Company has two reporting business segments: Insurance and Reinsurance. The Company has determined its reportable segments, Aspen Insurance and Aspen Reinsurance, by taking into account the manner in which management makes operating decisions and assesses operating performance. 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 segment’s underwriting performance.

Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, casualty reinsurance and specialty insurance and reinsurance. 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 segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” above.

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 segment, see Part I, Item 1 “Business — Business Segments — Insurance” above.

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 twelve months ended December 31, 2017, 2016 and 2015:



	Twelve Months Ended December 31, 2017
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	1,548.5		$	1,812.4		$	3,360.9
Net written premiums	1,250.0			962.5			2,212.5
Gross earned premiums	1,451.8			1,757.4			3,209.2
Net earned premiums	1,206.1			1,100.5			2,306.6
Underwriting Expenses
Losses and loss adjustment expenses	1,116.4			878.3			1,994.7
Amortization of deferred policy acquisition costs	235.5			165.0			400.5
General and administrative expenses	157.3			253.9			411.2
Underwriting (loss)	(303.1		)	(196.7		)	(499.8		)
Corporate expenses							(58.3		)
Non-operating expenses							(32.7		)
Net investment income							189.0
Realized and unrealized investment gains							148.9
Realized and unrealized investment losses							(28.4		)
Change in fair value of loan notes issued by variable interest entities							21.2
Change in fair value of derivatives							27.7
Interest expense on long term debt							(29.5		)
Net realized and unrealized foreign exchange (losses)							(23.9		)
Other income							8.9
Other expenses							(4.9		)
Income before tax							(281.8		)
Income tax credit							15.4
Net income							$	(266.4	)

Net reserves for loss and loss adjustment expenses	$	2,917.1		$	2,317.2		$	5,234.3
Ratios
Loss ratio	92.6		%	79.8		%	86.5		%
Policy acquisition expense ratio	19.5			15.0			17.4
General and administrative expense ratio⁽¹⁾	13.0			23.1			21.8
Expense ratio	32.5			38.1			39.2
Combined ratio	125.1		%	117.9		%	125.7		%

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⁽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.



	Twelve Months Ended December 31, 2016
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	1,413.2		$	1,733.8		$	3,147.0
Net written premiums	1,269.2			1,324.5			2,593.7
Gross earned premiums	1,317.9			1,768.4			3,086.3
Net earned premiums	1,181.9			1,455.4			2,637.3
Underwriting Expenses
Losses and loss adjustment expenses	657.9			918.2			1,576.1
Amortization of deferred policy acquisition costs	226.4			302.5			528.9
General and administrative expenses	178.2			228.4			406.6
Underwriting income	119.4			6.3			125.7
Corporate expenses							(73.8		)
Non-operating expenses ⁽¹⁾							(9.7		)
Net investment income							187.1
Realized and unrealized investment gains							108.4
Realized and unrealized investment losses							(63.2		)
Change in fair value of loan notes issued by variable interest entities							(17.1		)
Change in fair value of derivatives							(24.6		)
Interest expense on long term debt							(29.5		)
Net realized and unrealized foreign exchange gains							1.8
Other income							5.7
Other expenses							(1.3		)
Income before tax							209.5
Income tax expense							(6.1		)
Net income							$	203.4

Net reserves for loss and loss adjustment expenses	$	2,462.1		$	2,297.1		$	4,759.2
Ratios
Loss ratio	55.7		%	63.1		%	59.8		%
Policy acquisition expense ratio	19.2			20.8			20.1
General and administrative expense ratio ⁽²⁾	15.1			15.7			18.6
Expense ratio	34.3			36.5			38.7
Combined ratio	90.0		%	99.6		%	98.5		%

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⁽¹⁾	Non-operating expenses includes amortization of intangibles acquired from the acquisition of AgriLogic.


⁽²⁾	The general and administrative expense ratio in the total column includes corporate and non-operating expenses.



	Twelve Months Ended December 31, 2015
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	1,248.9		$	1,748.4		$	2,997.3
Net written premiums	1,153.5			1,492.7			2,646.2
Gross earned premiums	1,153.5			1,703.3			2,856.8
Net earned premiums	1,072.6			1,400.7			2,473.3
Underwriting Expenses
Losses and loss adjustment expenses	491.6			874.6			1,366.2
Amortization of deferred policy acquisition costs	224.7			258.9			483.6
General and administrative expenses	146.5			213.6			360.1
Underwriting income	209.8			53.6			263.4
Corporate expenses							(63.9		)
Net investment income							185.5
Realized and unrealized investment gains							94.5
Realized and unrealized investment losses							(77.5		)
Change in fair value of loan notes issued by variable interest entities							(19.8		)
Change in fair value of derivatives							6.8
Interest expense on long term debt							(29.5		)
Net realized and unrealized foreign exchange (losses)							(21.4		)
Other income							0.1
Other expenses							(0.7		)
Income before tax							337.5
Income tax expense							(14.4		)
Net income							$	323.1

Net reserves for loss and loss adjustment expenses	$	2,409.5		$	2,173.9		$	4,583.4
Ratios
Loss ratio	45.8		%	62.4		%	55.2		%
Policy acquisition expense ratio	20.9			18.5			19.6
General and administrative expense ratio⁽¹⁾	13.7			15.2			17.1
Expense ratio	34.6			33.7			36.7
Combined ratio	80.4		%	96.1		%	91.9		%

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

Geographical Areas. The following summary presents the Company’s gross written premiums based on the location of the insured risk.



	For the Twelve Months Ended
	December 31, 2017		December 31, 2016		December 31, 2015
	($ in millions)
Australia/Asia	$	167.3	$	140.5	$	140.0
Caribbean	17.6		14.3		20.3
Europe	94.5		109.7		113.6
United Kingdom	258.3		231.4		223.6
United States & Canada⁽¹⁾	1,729.3		1,597.0		1,479.5
Worldwide excluding United States ⁽²⁾	88.1		90.7		107.2
Worldwide including United States⁽³⁾	868.6		837.2		793.6
Others	137.2		126.2		119.5
Total	$	3,360.9	$	3,147.0	$	2,997.3

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⁽¹⁾	“United States and Canada” comprises individual policies that insure risks specifically in the United States and/or Canada, but not elsewhere.


⁽²⁾	“Worldwide excluding the United States” comprises individual policies that insure risks wherever they may be across the world but specifically excludes the United States.


⁽³⁾	“Worldwide including the United States” comprises individual policies that insure risks wherever they may be across the world but specifically includes the United States.