Segment reporting

The determination of the Company’s business segments is based on the manner in which management monitors the performance of its operations. The Company reports two operating segments – Property and Casualty Reinsurance and Catastrophe Risk Management. The Company has also identified a corporate function that includes net investment income on capital and certain general and administrative expenses related to corporate activities.

Effective January 1, 2014, the Company modified the presentation of its operating segments to allocate net investment income from float to the property and casualty reinsurance segment. The property and casualty reinsurance operations generate excess cash flows, or float, which the Company tracks in managing the business. The Company considers net investment income on float in evaluating the overall contribution of the property and casualty reinsurance segment. Prior period segment results have been adjusted to conform to this presentation.

The following is a summary of the Company’s operating segments results for the three and six months ended June 30, 2014 and 2013:



	Three months ended June 30, 2014
	Property and Casualty Reinsurance			Catastrophe Risk Management			Corporate			Total
Revenues	($ in thousands)
Gross premiums written	$	140,422		$	5,086		$	—		$	145,508
Gross premiums ceded	—			—			—			—
Net premiums written	140,422			5,086			—			145,508
Change in net unearned premium reserves	(62,934		)	(3,824		)	—			(66,758		)
Net premiums earned	77,488			1,262			—			78,750
Expenses
Loss and loss adjustment expenses incurred, net	44,409			—			—			44,409
Acquisition costs, net	29,507			76			—			29,583
General and administrative expenses	5,655			678			3,216			9,549
Total expenses	79,571			754			3,216			83,541
Net underwriting loss	(2,083		)	n/a			n/a			n/a
Net investment income	6,282			33			34,170			40,485
Other expenses	(1,020		)	—			—			(1,020		)
Income tax expense	—			—			(2,375		)	(2,375		)
Segment income including non-controlling interests	3,179			541			28,579			32,299
Segment income attributable to non-controlling interests	—			(338		)	(669		)	(1,007		)
Segment income	$	3,179		$	203		$	27,910		$	31,292

Property and Casualty Reinsurance - Underwriting Ratios:
Loss ratio (1)	57.3		%
Acquisition cost ratio (2)	38.1		%
Composite ratio (3)	95.4		%
General and administrative expense ratio (4)	7.3		%
Combined ratio (5)	102.7		%


(1)	Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.


(2)	Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.


(3)	Composite ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net and acquisition costs, net by net premiums earned.


(4)	General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.


(5)	Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.



	Three Months Ended June 30, 2013
	Property and Casualty Reinsurance			Catastrophe Risk Management			Corporate			Total
Revenues	($ in thousands)
Gross premiums written	$	94,644		$	3,571		$	—		$	98,215
Gross premiums ceded	—			—			—			—
Net premiums written	94,644			3,571			—			98,215
Change in net unearned premium reserves	(33,206		)	(2,722		)	—			(35,928		)
Net premiums earned	61,438			849			—			62,287
Expenses
Loss and loss adjustment expenses incurred, net	45,304			388			—			45,692
Acquisition costs, net	14,821			100			—			14,921
General and administrative expenses	4,710			987			1,520			7,217
Total expenses	64,835			1,475			1,520			67,830
Net underwriting loss	(3,397		)	n/a			n/a			n/a
Net investment income	2,530			359			29,937			32,826
Other expenses	(759		)	—			—			(759		)
Segment income (loss) including non-controlling interests	(1,626		)	(267		)	28,417			26,524
Segment income attributable to non-controlling interests	—			(80		)	(221		)	(301		)
Segment (loss) income	$	(1,626	)	$	(347	)	$	28,196		$	26,223

Property and Casualty Reinsurance - Underwriting Ratios:
Loss ratio (1)	73.7		%
Acquisition cost ratio (2)	24.1		%
Composite ratio (3)	97.8		%
General and administrative expense ratio (4)	7.7		%
Combined ratio (5)	105.5		%


(1)	Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.


(2)	Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.


(3)	Composite ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net and acquisition costs, net by net premiums earned.


(4)	General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.


(5)	Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.



	Six months ended June 30, 2014
	Property and Casualty Reinsurance			Catastrophe Risk Management			Corporate			Total
Revenues	($ in thousands)
Gross premiums written	$	222,564		$	10,531		$	—		$	233,095
Gross premiums ceded	—			—			—			—
Net premiums written	222,564			10,531			—			233,095
Change in net unearned premium reserves	(72,775		)	(8,308		)	—			(81,083		)
Net premiums earned	149,789			2,223			—			152,012
Expenses
Loss and loss adjustment expenses incurred, net	90,668			—			—			90,668
Acquisition costs, net	54,906			108			—			55,014
General and administrative expenses	11,464			1,512			6,598			19,574
Total expenses	157,038			1,620			6,598			165,256
Net underwriting loss	(7,249		)	n/a			n/a			n/a
Net investment income	13,595			62			76,863			90,520
Other expenses	(1,807		)	—			—			(1,807		)
Income tax expense	—			—			(2,375		)	(2,375		)
Segment income including non-controlling interests	4,539			665			67,890			73,094
Segment income attributable to non-controlling interests	—			(529		)	(1,494		)	(2,023		)
Segment income	$	4,539		$	136		$	66,396		$	71,071

Property and Casualty Reinsurance - Underwriting Ratios:
Loss ratio (1)	60.5		%
Acquisition cost ratio (2)	36.7		%
Composite ratio (3)	97.2		%
General and administrative expense ratio (4)	7.7		%
Combined ratio (5)	104.9		%


(1)	Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.


(2)	Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.


(3)	Composite ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net and acquisition costs, net by net premiums earned.


(4)	General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.


(5)	Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.



	Six months ended June 30, 2013
	Property and Casualty Reinsurance			Catastrophe Risk Management			Corporate			Total
Revenues	($ in thousands)
Gross premiums written	$	187,515		$	6,720		$	—		$	194,235
Gross premiums ceded	(9,975		)	—			—			(9,975		)
Net premiums written	177,540			6,720			—			184,260
Change in net unearned premium reserves	(83,459		)	(4,973		)	—			(88,432		)
Net premiums earned	94,081			1,747			—			95,828
Expenses
Loss and loss adjustment expenses incurred, net	63,942			388			—			64,330
Acquisition costs, net	27,811			183			—			27,994
General and administrative expenses	9,526			1,772			2,927			14,225
Total expenses	101,279			2,343			2,927			106,549
Net underwriting loss	(7,198		)	n/a			n/a			n/a
Net investment income	8,056			1,122			105,009			114,187
Other expenses	(1,429		)	—			—			(1,429		)
Segment income (loss) including non-controlling interests	(571		)	526			102,082			102,037
Segment income attributable to non-controlling interests	—			(595		)	(789		)	(1,384		)
Segment (loss) income	$	(571	)	$	(69	)	$	101,293		$	100,653

Property and Casualty Reinsurance - Underwriting Ratios:
Loss ratio (1)	68.0		%
Acquisition cost ratio (2)	29.6		%
Composite ratio (3)	97.6		%
General and administrative expense ratio (4)	10.1		%
Combined ratio (5)	107.7		%


(1)	Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.


(2)	Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.


(3)	Composite ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net and acquisition costs, net by net premiums earned.


(4)	General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.


(5)	Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.

For the three months ended June 30, 2014, three contracts each contributed greater than 10.0% of total gross premiums written. These three contracts contributed 20.5%, 11.6% and 10.0%, respectively, of total gross premiums written for the three months ended June 30, 2014. For the three months ended June 30, 2013, five contracts each contributed greater than 10% of total gross premiums written. These five contracts contributed 22.7%, 17.0%, 14.6%, 14.1% and 14.0%, respectively, of total gross premiums written for the three months ended June 30, 2013.

For the six months ended June 30, 2014, two contracts each contributed greater than 10.0% of total gross premiums written. These two contracts contributed 20.0% and 12.8%, respectively, of total gross premiums written for the six months ended June 30, 2014. For the six months ended June 30, 2013, three contracts each contributed greater than 10% of total gross premiums written. These three contracts contributed 18.0%, 18.0% and 11.5%, respectively, of total gross premiums written for the six months ended June 30, 2013.

The following table provides a breakdown of the Company’s gross premiums written by line of business for the

three and six months ended June 30, 2014 and 2013:



	For the three months ended
	June 30, 2014				June 30, 2013
	($ in thousands)
Property	$	74,505	51.2	%	$	27,888	28.4	%
Casualty	65,343		44.9	%	49,388		50.3	%
Specialty	574		0.4	%	17,368		17.7	%
Total property and casualty reinsurance	140,422		96.5	%	94,644		96.4	%
Catastrophe risk management	5,086		3.5	%	3,571		3.6	%
	$	145,508	100.0	%	$	98,215	100.0	%



	For the six months ended
	June 30, 2014				June 30, 2013
	($ in thousands)
Property	$	81,386	34.9	%	$	28,238	14.5	%
Casualty	115,766		49.7	%	101,595		52.3	%
Specialty	25,412		10.9	%	57,682		29.7	%
Total property and casualty reinsurance	222,564		95.5	%	187,515		96.5	%
Catastrophe risk management	10,531		4.5	%	6,720		3.5	%
	$	233,095	100.0	%	$	194,235	100.0	%

The following table provides a breakdown of the Company’s gross premiums written by prospective and retroactive reinsurance contracts for the three and six months ended June 30, 2014 and 2013:



	For the three months ended								For the six months ended
	June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
	($ in thousands)
Prospective	$	144,934	99.6	%	$	75,915	77.3	%	$	230,419	98.9	%	$	171,935	88.5	%
Retroactive	574		0.4	%	22,300		22.7	%	2,676		1.1	%	22,300		11.5	%
	$	145,508	100.0	%	$	98,215	100.0	%	$	233,095	100.0	%	$	194,235	100.0	%

The Company records the gross premium written and earned at the inception of the contract for retroactive reinsurance contracts.

Substantially all of the Company's business is sourced through reinsurance brokers. The following table provides a breakdown of the Company's gross premiums written from brokers for the six months ended June 30, 2014 and 2013:



	2014				2013
	($ in thousands)
Willis Re	$	57,047	24.5	%	$	13,421		6.9	%
Advocate Reinsurance Partners, LLC	53,004		22.7	%	27,647			14.2	%
Stonehill Reinsurance Partners, LLC	46,659		20.0	%	—			—	%
Aon Benfield - a division of Aon plc	16,793		7.2	%	81,357			41.9	%
Guy Carpenter & Company, LLC	15,074		6.5	%	(11,057		)	(5.7	)%
TigerRisk Partners LLC	14,496		6.2	%	9,531			4.9	%
BMS Intermediaries	—		—	%	10,019			5.2	%
Other brokers	2,984		1.3	%	7,097			3.7	%
Total broker placed	206,057		88.4	%	138,015			71.1	%
Direct placements	27,038		11.6	%	56,220			28.9	%
	$	233,095	100.0	%	$	194,235		100.0	%

The following table provides a breakdown of the Company’s gross premiums written by domicile of the ceding companies for the three and six months June 30, 2014 and 2013:



	For the three months ended								For the six months ended
	June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
	($ in thousands)
United States	$	144,657	99.4	%	$	93,992	95.7	%	$	202,734	87.0	%	$	143,650	74.0	%
United Kingdom	575		0.4	%	—		—	%	25,413		10.9	%	—		—	%
Bermuda	276		0.2	%	4,223		4.3	%	4,948		2.1	%	49,185		25.3	%
Other	—		—	%	—		—	%	—		—	%	1,400		0.7	%
	$	145,508	100.0	%	$	98,215	100.0	%	$	233,095	100.0	%	$	194,235	100.0	%