Deferred Policy Acquisition Costs

9 Months Ended

Sep. 30, 2012

Deferred Policy Acquisition Costs [Abstract]

Deferred Policy Acquisition Costs [Text Block]

DEFERRED POLICY ACQUISITION COSTS

Policy acquisition costs consist primarily of commissions, premium taxes, and underwriting and agency expenses incurred related to successful efforts to acquire a new or renewal insurance contract, net of ceding commission income. Policy acquisition costs are deferred and expensed as the related premiums are earned.

As described in Note 4, "Recently Issued Accounting Standards," the Company adopted ASU 2010-26 effective January 1, 2012 on a prospective basis. The new standard affects the timing of recognition of policy acquisition costs. Costs associated with unsuccessful efforts or costs that cannot be tied directly to a successful policy acquisition are expensed as incurred, as opposed to being deferred and amortized as the premium is earned. In periods of growth, the standard will result in an acceleration of expense recognition. In periods of contraction, the opposite will occur. The application of the new standard resulted in capitalized acquisition costs of $5.8 million for the three months ended September 30, 2012 ($16.4 million year to date) compared with $6.7 million of acquisition costs that would have been capitalized for the three months ended September 30, 2012 ($19.3 million year to date) if the Company had not adopted the new standard. As a result, the Company recorded $0.9 million more in expense for the three months ended September 30, 2012 ($2.9 million year to date) than it would have had it not adopted the new standard.

The components of deferred policy acquisition costs and the related amortization expense for the three and nine months ended September 30, 2012 and September 30, 2011, respectively, is comprised as follows:



(in thousands)	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Beginning balance, net	7,634		10,389		8,116		13,952
Additions	5,804		5,865		16,422		20,041
Amortization	(5,399	)	(6,915	)	(16,499	)	(24,654	)
Balance at September 30, net	8,039		9,339		8,039		9,339

- Definition

Disclosure of accounting policy for capitalizing costs incurred to write or acquire insurance contracts, the basis for and methodology for capitalizing such costs, the accounting for such deferred acquisition costs (DAC) when modifications or internal replacements of related insurance contracts occur and the effect on results of operations, and the methodology and amount of amortization. This disclosure addresses the nature, type, and amount of capitalized costs incurred to write or acquire insurance contracts.

+ References+ Details