24. Segments

The Company currently operates four business segments, Small Commercial Business; Specialty Risk and Extended Warranty; Specialty Program and Personal Lines Reinsurance (began in 2010 with the investment in ACAC). The “Corporate & Other” segment represents the activities of the holding company as well as a portion of service and fee revenue. In determining total assets (excluding cash and invested assets) by segment, the Company identifies those assets that are attributable to a particular segment such as deferred acquisition cost, reinsurance recoverable, goodwill, intangible assets and prepaid reinsurance while the remaining assets are allocated based on net written premium by segment. In determining cash and invested assets by segment, the Company matches certain identifiable liabilities such as unearned premium and loss and loss adjustment expense reserves by segment. The remaining cash and invested assets are then allocated based on net written premium by segment. Investment income and realized gains (losses) are determined by calculating an overall annual return on cash and invested assets and applying that overall return to the cash and invested assets by segment. Ceding commission revenue is allocated to each segment based on that segment’s proportionate share of the Company’s overall acquisition costs. Interest expense is allocated based on net written premium by segment. Income taxes are allocated on a pro rata basis based on the Company’s effective tax rate. Additionally, management reviews the performance of underwriting income in assessing the performance of and making decisions regarding the allocation of resources to the segments. Underwriting income excludes, primarily, service and fee revenue, investment income and other revenues, other expenses, interest expense and income taxes. Management believes that providing this information in this manner is essential to providing Company’s shareholders with an understanding of the Company’s business and operating performance.

The Company’s Specialty Risk and Extended Warranty segment derived over ten percent of gross written premium from one broker in 2011 and was approximately $237,000. In both 2011 and 2010, the Specialty Program segment derived over ten percent of gross written premium from one program and was approximately $66,000 and $59,000, respectively.

The following tables summarize business segments as follows for 2011, 2010 and 2009:


(Amounts in Thousands)	Small Commercial Business			Specialty Risk and Extended Warranty			Specialty Program			Personal Lines Reinsurance			Corporate and Other			Total
Year ended December 31, 2011:
Gross premium written	$	609,822		$	1,056,511		$	381,541		$	102,598			—		$	2,150,472
Net premium written		355,721			615,563			202,715			102,598			—			1,276,597
Change in unearned premium		(35,455	)		(168,798	)		(31,340	)		(4,143	)		—			(239,736	)
Net earned premium		320,266			446,765			171,375			98,455			—			1,036,861
Ceding commission – primarily related party		62,093			57,648			34,212			—			—			153,953
Loss and loss adjustment expense		(201,921	)		(297,501	)		(114,685	)		(64,226	)		—			(678,333	)
Acquisition costs and other underwriting expenses		(148,041	)		(137,442	)		(81,568	)		(31,353	)		—			(398,404	)
		(349,962	)		(434,943	)		(196,253	)		(95,579	)		—			(1,076,737	)
Underwriting income		32,397			69,470			9,334			2,876			—			114,077
Service, fee and other revenues		20,887			67,312			17			—			20,444			108,660
Investment income and realized gain (loss)		23,385			22,708			10,104			2,086			—			58,283
Other expenses		(25,000	)		(43,354	)		(15,143	)		(3,114	)		—			(86,611	)
Interest expense		(4,641	)		(8,049	)		(2,811	)		(578	)		—			(16,079	)
Foreign currency loss		—			(2,418	)		—			—			—			(2,418	)
Gain on life settlement contracts		13,535			23,472			8,199			1,686			—			46,892
Acquisition gain on purchase		5,850			—			—			—			—			5,850
Provision for income taxes		(11,897	)		(23,135	)		(1,738	)		(530	)		(5,072	)		(42,372	)
Equity in earnings of unconsolidated subsidiaries – related party		—			—			—			—			7,871			7,871
Non-controlling interest		(6,846	)		(11,873	)		(4,147	)		(853	)		—			(23,719	)
Net income attributable to AmTrust Financial Services, Inc.	$	47,670		$	94,133		$	3,815		$	1,573		$	23,243		$	170,434


(Amounts in Thousands)	Small Commercial Business			Specialty Risk and Extended Warranty			Specialty Program			Personal Lines Reinsurance			Corporate and Other			Total
Year ended December 31, 2010:
Gross premium written	$	465,951		$	748,525		$	264,051		$	82,295			—		$	1,560,822
Net premium written		243,146			362,100			139,685			82,295			—			827,226
Change in unearned premium		9,296			(58,517	)		568			(32,914	)		—			(81,567	)
Net earned premium		252,442			303,583			140,253			49,381			—			745,659
Ceding commission – primarily related party		66,282			48,015			23,964			—			—			138,261
Loss and loss adjustment expense		(154,442	)		(191,149	)		(94,261	)		(31,629	)		—			(471,481	)
Acquisition costs and other underwriting expenses		(128,142	)		(98,547	)		(60,071	)		(16,049	)		—			(302,809	)
		(282,584	)		(289,696	)		(154,332	)		(47,678	)		—			(774,290	)
Underwriting income		36,140			61,902			9,885			1,703			—			109,630
Service, fee and other revenues		19,696			29,729			—			—			12,642			62,067
Investment income and realized gain (loss)		21,951			20,339			11,616			2,564			—			56,470
Other expenses		(17,966	)		(24,443	)		(10,397	)		(3,597	)		—			(56,403	)
Interest expense		(4,110	)		(5,591	)		(2,378	)		(823	)		—			(12,902	)
Foreign currency gain		—			684			—			—			—			684
Gain on life settlement contracts		3,776			5,138			2,185			756			—			11,855
Provision for income taxes		(16,331	)		(24,091	)		(2995	)		(166	)		(3,470	)		(47,053	)
Equity in earnings of unconsolidated subsidiaries – related party		—			—			—			—			24,044			24,044
Non-controlling interest		(1,887	)		(2,569	)		(1,093	)		(378	)		—			(5,927	)
Net income attributable to AmTrust Financial Services, Inc.	$	41,269		$	61,098		$	6,823		$	59		$	33,216		$	142,465


(Amounts in Thousands)	Small Commercial Business			Specialty Risk and Extended Warranty			Specialty Program			Corporate and Other			Total
Year ended December 31, 2009:
Gross premium written	$	469,627		$	461,338		$	267,981		$	—		$	1,198,946
Net premium written		255,496			245,604			142,326			—			643,426
Change in unearned premium		(16,525	)		(55,378	)		2,359			—			(69,544	)
Net earned premium		238,971			190,226			144,685			—			573,882
Ceding commission – primarily related party		59,415			25,909			28,607			—			113,931
Loss and loss adjustment expense		(137,525	)		(98,797	)		(91,449	)		—			(327,771	)
Acquisition costs and other underwriting expenses		(119,734	)		(55,551	)		(68,994	)		—			(244,279	)
		(257,259	)		(154,348	)		(160,443	)		—			(572,050	)
Underwriting income		41,127			61,787			12,849			—			115,763
Service and fee revenues		12,323			9,841			—			8,526			30,690
Investment income, realized gain (loss) and loss on managed assets		9,880			6,731			5,097			—			21,708
Other expenses		(9,073	)		(8,114	)		(5,045	)		—			(22,232	)
Interest expense		(6,890	)		(6,162	)		(3,832	)		—			(16,884	)
Foreign currency gain		—			2,459			—			—			2,459
Provision for income taxes		(9,891	)		(13,894	)		(1,894	)		(1,780	)		(27,459	)
Equity in earnings of unconsolidated subsidiaries – related party		—			—			—			(822	)		(822	)
Net income	$	37,476		$	52,648		$	7,175		$	5,924		$	103,223


(Amounts in Thousands)	Small Commercial Business		Specialty Risk and Extended Warranty		Specialty Program		Personal Lines Reinsurance		Corporate and other		Total
As of December 31, 2011:
Fixed assets	$	17,767	$	30,811	$	10,762	$	2,213	$	—	$	61,553
Goodwill and intangible assets		123,976		167,782		22,858		—		—		314,616
Total assets		2,151,924		2,483,923		913,141		133,566		—		5,682,554
As of December 31, 2010:
Fixed assets	$	9,839	$	13,386	$	5,694	$	1,970	$	—	$	30,889
Goodwill and intangible assets		87,001		95,737		15,088		—		—		197,826
Total assets		1,581,946		1,716,980		741,835		141,692		—		4,182,453