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We measure and evaluate performance of our operations using a number of financial measures, which include assessing performance against non-GAAP measures. These non-GAAP financial measures do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. These non-GAAP financial measures are derived from elements of our audited consolidated financial statements, and are consistent with financial measures used in the P&C insurance industry.

These measurements are generally used in the industry, and facilitate management’s comparisons to our historical operating results and to competitors’ operating results. They also provide users with greater transparency of supplemental information used by management in assessing results and in its operational decision-making. The following non-GAAP measures are used by management in assessing our performance. These non-GAAP measures are outlined and defined below:

Claims ratio Claims and adjustment expenses (excluding the impact of discounting) during a defined period expressed as a percentage of net earned premiums for the same period.
Combined ratio Claims and adjustment expenses (excluding the impact of discounting), commissions, operating expenses (net of other underwriting revenues), and premium taxes during a defined period expressed as a percentage of net earned premiums for the same period.
Expense ratio Underwriting expenses, including commissions, operating expenses (net of other underwriting revenues), and premium taxes during a defined period, expressed as a percentage of net earned premiums for the same period.
Gross written premiums (GWP) The total premiums from the sale of insurance during a specified period.
Minimum capital test (MCT) A regulatory formula defined by the Office of the Superintendent of Financial Institutions, that is a risk-based test of capital available relative to capital required.
Net written premiums (NWP) GWP less the cost of reinsurance coverage.
Policies in force (PIF) The number of insurance policies for which we are at risk at a specified date.
Return on equity (ROE) Net income after tax for the 12 months ended at a specified date divided by the average retained earnings over the same 12-month period.
Underwriting (loss) income Net earned premiums for a defined period less the sum of claims and adjustment expenses (excluding the impact of discounting), net commissions, operating expenses (net of other underwriting revenues), and premium taxes during the same period.