Reinsurance

3 Months Ended

Jun. 30, 2021

We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following tables provide (i) a disaggregation of our reinsurance recoverable balance by financial strength rating and (ii) an aging analysis of our past due reinsurance recoverable balances as of June 30, 2021, and December 31, 2020:


	June 30, 2021
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++	$	40,382	$	14	$	40,396
A+	357,328		2,554		359,882
A	105,600		87		105,687
A-	2,054		—		2,054
B++	135		244		379
B+	—		—		—
Total rated reinsurers	$	505,499	$	2,899	$	508,398

Non-rated reinsurers
Federal and state pools	$	86,512	$	—	$	86,512
Other than federal and state pools	3,474		274		3,748
Total non-rated reinsurers	$	89,986	$	274	$	90,260

Total reinsurance recoverable, gross	$	595,485	$	3,173	$	598,658
Less: allowance for credit losses1					(1,777)
Total reinsurance recoverable, net					$	596,881


	December 31, 2020
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++	$	37,464	$	102	$	37,566
A+	354,846		2,452		357,298
A	105,652		415		106,067
A-	2,139		—		2,139
B++	56		324		380
B+	—		—		—
Total rated reinsurers	$	500,157	$	3,293	$	503,450

Non-rated reinsurers
Federal and state pools	$	82,575	$	—	$	82,575
Other than federal and state pools	2,676		568		3,244
Total non-rated reinsurers	$	85,251	$	568	$	85,819

Total reinsurance recoverable, gross	$	585,408	$	3,861	$	589,269
Less: allowance for credit losses1					(1,777)
Total reinsurance recoverable, net					$	587,492

1Represents our current expectation of credit losses on total current and past due reinsurance recoverables, and is not identifiable by reinsurer.

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2020 Annual Report.

The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:


($ in thousands)	Quarter ended June 30,			Six Months ended June 30,
	2021		2020	2021		2020
Balance at beginning of period	$	1,840	1,502	$	1,777	4,400
Cumulative effect adjustment1	—		—	—		(2,903)
Balance at beginning of period, as adjusted	$	1,840	1,502	$	1,777	1,497
Current period provision for expected credit losses	(63)		894	—		899

Write-offs charged against the allowance for credit losses	—		—	—		—
Recoveries	—		—	—		—
Allowance for credit losses, end of period	$	1,777	2,396	$	1,777	2,396

1Represents the impact of our adoption of ASU 2016-13, Financial Instruments - Credit Losses.

The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2020 Annual Report.


	Quarter ended June 30,			Six Months ended June 30,
($ in thousands)	2021		2020	2021		2020
Premiums written:
Direct	$	954,770	834,643	$	1,863,544	1,581,074
Assumed	4,872		6,410	10,405		12,453
Ceded	(126,437)		(116,301)	(242,566)		(221,448)
Net	$	833,205	724,752	$	1,631,383	1,372,079
Premiums earned:
Direct	$	853,456	733,647	$	1,690,825	1,488,538
Assumed	4,411		6,055	10,087		12,228
Ceded	(117,349)		(109,031)	(235,434)		(218,392)
Net	$	740,518	630,671	$	1,465,478	1,282,374
Loss and loss expenses incurred:
Direct	$	460,073	451,013	$	901,580	876,808
Assumed	3,217		4,300	6,664		9,198
Ceded	(41,667)		(51,364)	(73,220)		(81,733)
Net	$	421,623	403,949	$	835,024	804,273

Direct premiums written ("DPW") increased $120.1 million, or 14%, in Second Quarter 2021 compared to Second Quarter 2020. The increase included three percentage points from the COVID-19-related $19.7 million premium credit to our personal and commercial automobile policyholders in Second Quarter 2020. This premium credit to customers with in-force polices was equivalent to 15% of their April and May 2020 premiums.

Additionally, DPW increased $282.5 million, or 18%, in Six Months 2021 compared to Six Months 2020 resulted from (i) overall renewal pure price increases, (ii) new business growth, and (iii) strong retention. This increase also included seven percentage points from the $75.0 million return audit and endorsement premium accrual that was recorded in the first quarter of 2020 and the premium credit mentioned above. This accrual reflected lower exposure levels, which determine the premium we charge, attributable to the economic impacts of the COVID-19 pandemic and the anticipated decline in sales and payroll exposures on the general liability and workers compensation lines of business.

Ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our flood premiums, losses, and loss expenses, were as follows:


Ceded to NFIP	Quarter ended June 30,			Six Months ended June 30,
($ in thousands)	2021		2020	2021		2020
Ceded premiums written	$	(75,081)	(74,187)	$	(140,823)	(136,274)
Ceded premiums earned	(66,833)		(67,369)	(134,352)		(134,230)
Ceded loss and loss expenses incurred	(18,941)		(12,991)	(21,148)		(18,087)