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 business segment’s underwriting performance.

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.

Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, casualty reinsurance and specialty 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 business segment, see Part I, Item 1, “Business — Business Segments — Reinsurance” in the Company’s 2018 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 2018 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 March 31, 2019 and 2018:



	Three Months Ended March 31, 2019
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	538.4		$	475.4		$	1,013.8
Net written premiums	395.6			222.0			617.6
Gross earned premiums	336.5			480.5			817.0
Net earned premiums	276.9			233.7			510.6
Underwriting Expenses
Losses and loss adjustment expenses	165.8			146.0			311.8
Amortization of deferred policy acquisition costs	62.6			25.6			88.2
General and administrative expenses	27.2			59.0			86.2
Underwriting income	$	21.3		$	3.1		24.4
Corporate expenses							(11.9		)
Non-operating expenses ⁽¹⁾							(39.2		)
Net investment income							51.5
Realized and unrealized investment gains							42.0
Realized and unrealized investment losses							(6.2		)
Change in fair value of loan notes issued by variable interest entities							(1.5		)
Change in fair value of derivatives							(53.3		)
Interest expense on long term debt							(5.5		)
Net realized and unrealized foreign exchange gains							5.1
Other income							1.7
Other expenses							(0.9		)
Income before tax							$	6.2

Net reserves for loss and loss adjustment expenses	$	2,871.5		$	2,005.9		$	4,877.4
Ratios
Loss ratio	59.9		%	62.5		%	61.1		%
Policy acquisition expense ratio	22.6			11.0			17.3
General and administrative expense ratio	9.8			25.2			26.9			⁽²⁾
Expense ratio	32.4			36.2			44.2
Combined ratio	92.3		%	98.7		%	105.3		%


⁽¹⁾	Non-operating expenses includes $6.1 million of expenses related to the Company’s operating effectiveness and efficiency program (the “Effectiveness and Efficiency Program”) and $29.8 million of fees related to or triggered by the Merger.


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



	Three Months Ended March 31, 2018
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	623.5		$	493.3		$	1,116.8
Net written premiums	425.0			210.5			635.5
Gross earned premiums	375.0			467.6			842.6
Net earned premiums	282.5			251.0			533.5
Underwriting Expenses
Losses and loss adjustment expenses	166.9			143.3			310.2
Amortization of deferred policy acquisition costs	55.9			34.9			90.8
General and administrative expenses	31.6			63.6			95.2
Underwriting income	$	28.1		$	9.2		37.3
Corporate expenses							(13.7		)
Non-operating expenses⁽¹⁾							(12.1		)
Net investment income							47.3
Realized and unrealized investment gains							100.6
Realized and unrealized investment losses							(138.3		)
Change in fair value of loan notes issued by variable interest entities							1.0
Change in fair value of derivatives							23.5
Interest expense on long term debt							(7.4		)
Net realized and unrealized foreign exchange (losses)							(4.7		)
Other income							2.1
Other expenses							(1.2		)
Income before tax							$	34.4

Net reserves for loss and loss adjustment expenses	$	2,823.6		$	2,244.5		$	5,068.1
Ratios
Loss ratio	59.1		%	57.1		%	58.1		%
Policy acquisition expense ratio	19.8			13.9			17.0
General and administrative expense ratio	11.2			25.3			22.7			⁽²⁾
Expense ratio	31.0			39.2			39.7
Combined ratio	90.1		%	96.3		%	97.8		%


⁽¹⁾	Non-operating expenses includes $11.8 million of expenses related to the Company’s Effectiveness and Efficiency Program.


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