Segment Reporting

The Company is organized into two business segments, namely Aspen Re and Aspen Insurance. The Company has determined its reportable segments, Aspen Re (“Reinsurance”) and Aspen Insurance (“Insurance”), 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 reinsurance. Aspen Capital Markets focuses on developing alternative reinsurance structures to leverage the Company’s existing underwriting franchise, increase its operational flexibility in the capital markets and provide investors direct access to its underwriting expertise. Aspen Capital Markets leverages the Company’s underwriting and analytical expertise and earns management and performance fees from third-party investors primarily through the management of ILS funds and other offerings. For a more detailed description of this business segment, refer to Item 4, “Information on the Company — Business Overview — Aspen 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, refer to Item 4 “Information on the Company — Business Overview — Aspen Insurance” above.

Non-underwriting Disclosures. The Company provides 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 Aspen Group, certain strategic and other costs, changes in fair value of derivatives or the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses, asset impairments and income taxes, none of which are allocated to the business segments. These 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 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.

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, 2019, 2018 and 2017:



	Twelve Months Ended December 31, 2019
	Reinsurance			Insurance			Total
	($ in millions)
Underwriting Revenues
Gross written premiums	$	1,485.5		$	1,956.9		$	3,442.4
Net written premiums	1,251.1			1,176.8			2,427.9
Gross earned premiums	1,494.9			1,927.5			3,422.4
Net earned premiums	1,255.2			1,038.1			2,293.3
Underwriting Expenses
Losses and loss adjustment expenses	917.9			761.8			1,679.7
Amortization of deferred policy acquisition costs	264.9			147.8			412.7
General and administrative expenses	111.7			229.8			341.5
Underwriting (loss)	(39.3		)	(101.3		)	(140.6		)
Corporate expenses							(54.5		)
Non-operating expenses							(125.6		)	⁽¹⁾
Net investment income							197.3
Realized and unrealized investment gains							97.1
Realized and unrealized investment losses							(10.9		)
Realized loss on debt extinguishment							(5.5		)
Change in fair value of loan notes issued by variable interest entities							(3.1		)
Change in fair value of derivatives							(144.2		)
Interest expense on long term debt							(20.2		)
Net realized and unrealized foreign exchange (losses)							(11.8		)
Other income							4.9
Other expenses							(1.7		)
(Loss) before tax							(218.8		)
Income tax (expense)							(22.9		)
Net (loss)							$	(241.7	)

Net reserves for loss and loss adjustment expenses	$	2,605.9		$	2,026.1		$	4,632.0
Ratios
Loss ratio	73.1		%	73.4		%	73.2		%
Policy acquisition expense ratio	21.1			14.2			18.0
General and administrative expense ratio	8.9			22.1			22.7			⁽²⁾
Expense ratio	30.0			36.3			40.7
Combined ratio	103.1		%	109.7		%	113.9		%

_______________


⁽¹⁾	Non-operating expenses includes $103.4 million of costs related to the Merger, severance, retention and other costs, and $22.2 million of expenses related to the Company’s operating effectiveness and efficiency program, which includes $12.3 million of impairment charges related to lease assets as a result of sub-leasing certain office space.


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



	Twelve Months Ended December 31, 2018
	Reinsurance			Insurance			Total
	( $ in millions)
Underwriting Revenues
Gross written premiums	$	1,495.7		$	1,951.2		$	3,446.9
Net written premiums	1,182.9			899.1			2,082.0
Gross earned premiums	1,593.9			1,940.5			3,534.4
Net earned premiums	1,256.4			958.3			2,214.7
Underwriting Expenses
Losses and loss adjustment expenses	927.0			646.0			1,573.0
Amortization of deferred policy acquisition costs	260.9			110.7			371.6
General and administrative expenses	118.5			239.2			357.7
Underwriting (loss)	(50.0		)	(37.6		)	(87.6		)
Corporate expenses							(56.8		)
Non-operating expenses							(77.2		)	⁽¹⁾
Net investment income							198.2
Realized and unrealized investment gains							110.0
Realized and unrealized investment losses							(174.7		)
Realized loss on debt extinguishment							(8.6		)
Change in fair value of loan notes issued by variable interest entities							(4.4		)
Change in fair value of derivatives							(31.8		)
Interest expense on long term debt							(25.9		)
Net realized and unrealized foreign exchange (losses)							(3.5		)
Other income							9.0
Other expenses							(2.7		)
(Loss) before tax							(156.0		)
Income tax benefit							10.2
Net (loss)							$	(145.8	)

Net reserves for loss and loss adjustment expenses	$	2,843.6		$	2,153.0		$	4,996.6
Ratios
Loss ratio	73.8		%	67.4		%	71.0		%
Policy acquisition expense ratio	20.8			11.6			16.8
General and administrative expense ratio	9.4			25.0			22.2			⁽²⁾
Expense ratio	30.2			36.6			39.0
Combined ratio	104.0		%	104.0		%	110.0		%

________________


⁽¹⁾	Non-operating expenses includes $37.5 million of expenses related to Company’s operating effectiveness and efficiency program, $39.0 million of advisor fees related to the Merger and $11.3 million of retention costs, partially offset by the write back of a $14.1 million buy-out provision.


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



	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		)	⁽¹⁾
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		)
(Loss) before tax							(281.8		)
Income tax benefit							15.4
Net (loss)							$	(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	13.0			23.1			21.8			⁽²⁾
Expense ratio	32.5			38.1			39.2
Combined ratio	125.1		%	117.9		%	125.7		%

_______________


⁽¹⁾	Non-operating expenses includes $15.2 million of expenses related to the Company’s operating effectiveness and efficiency program.


⁽²⁾	The general and administrative expense ratio in the total column includes corporate and non-operating 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, 2019, 2018 and 2017.



	For the Twelve Months Ended
	December 31, 2019		December 31, 2018		December 31, 2017
	($ in millions)
Australia/Asia	$	215.9	$	175.9	$	167.3
Caribbean	9.3		7.7		17.6
Europe	82.8		92.6		94.5
United Kingdom	295.7		290.1		258.3
United States & Canada⁽¹⁾	2,003.9		1,875.9		1,729.3
Worldwide excluding United States ⁽²⁾	63.0		70.1		88.1
Worldwide including United States⁽³⁾	614.9		775.8		868.6
Others	156.9		158.8		137.2
Total	$	3,442.4	$	3,446.9	$	3,360.9

______________


⁽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.