REINSURANCE

The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three and six months ended June 30, 2018 and 2017 is presented below. The classification of the assumed and ceded reinsurance amounts between affiliates and nonaffiliates is based on the participants in the underlying reinsurance agreements, and is intended to provide an understanding of the actual source of the reinsurance activities. This presentation differs from the classifications used in the consolidated financial statements, where all amounts flowing through the pooling and quota share agreements and inter-company reinsurance programs with Employers Mutual are reported as “affiliated” balances.



	Three months ended June 30, 2018
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	98,579		$	—		$	98,579
Assumed from nonaffiliates	1,284			39,232			40,516
Assumed from affiliates	140,850			—			140,850
Ceded to nonaffiliates	(7,953		)	(6,009		)	(13,962		)
Ceded to affiliates	(101,559		)	(1,312		)	(102,871		)
Net premiums written	$	131,201		$	31,911		$	163,112

Premiums earned
Direct	$	99,011		$	—		$	99,011
Assumed from nonaffiliates	1,300			40,357			41,657
Assumed from affiliates	131,768			—			131,768
Ceded to nonaffiliates	(8,593		)	(2,594		)	(11,187		)
Ceded to affiliates	(101,991		)	(1,312		)	(103,303		)
Net premiums earned	$	121,495		$	36,451		$	157,946

Losses and settlement expenses incurred
Direct	$	62,069		$	—		$	62,069
Assumed from nonaffiliates	770			27,053			27,823
Assumed from affiliates	95,713			239			95,952
Ceded to nonaffiliates	(1,911		)	(2,165		)	(4,076		)
Ceded to affiliates	(62,386		)	(291		)	(62,677		)
Net losses and settlement expenses incurred	$	94,255		$	24,836		$	119,091



	Three months ended June 30, 2017
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	93,392		$	—		$	93,392
Assumed from nonaffiliates	1,290			35,596			36,886
Assumed from affiliates	136,726			—			136,726
Ceded to nonaffiliates	(8,444		)	(5,830		)	(14,274		)
Ceded to affiliates	(96,373		)	(1,212		)	(97,585		)
Net premiums written	$	126,591		$	28,554		$	155,145

Premiums earned
Direct	$	95,376		$	—		$	95,376
Assumed from nonaffiliates	1,130			37,411			38,541
Assumed from affiliates	125,179			—			125,179
Ceded to nonaffiliates	(7,142		)	(2,549		)	(9,691		)
Ceded to affiliates	(98,356		)	(1,212		)	(99,568		)
Net premiums earned	$	116,187		$	33,650		$	149,837

Losses and settlement expenses incurred
Direct	$	72,811		$	—		$	72,811
Assumed from nonaffiliates	693			26,177			26,870
Assumed from affiliates	100,380			301			100,681
Ceded to nonaffiliates	(3,564		)	(757		)	(4,321		)
Ceded to affiliates	(88,812		)	(1		)	(88,813		)
Net losses and settlement expenses incurred	$	81,508		$	25,720		$	107,228



	Six months ended June 30, 2018
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	198,623		$	—		$	198,623
Assumed from nonaffiliates	2,302			80,353			82,655
Assumed from affiliates	271,051			—			271,051
Ceded to nonaffiliates	(15,923		)	(8,014		)	(23,937		)
Ceded to affiliates	(204,583		)	(2,625		)	(207,208		)
Net premiums written	$	251,470		$	69,714		$	321,184

Premiums earned
Direct	$	194,756		$	—		$	194,756
Assumed from nonaffiliates	2,302			81,449			83,751
Assumed from affiliates	260,916			—			260,916
Ceded to nonaffiliates	(17,131		)	(5,219		)	(22,350		)
Ceded to affiliates	(200,716		)	(2,625		)	(203,341		)
Net premiums earned	$	240,127		$	73,605		$	313,732

Losses and settlement expenses incurred
Direct	$	114,356		$	—		$	114,356
Assumed from nonaffiliates	1,762			53,468			55,230
Assumed from affiliates	181,680			597			182,277
Ceded to nonaffiliates	(4,902		)	(2,564		)	(7,466		)
Ceded to affiliates	(115,140		)	462			(114,678		)
Net losses and settlement expenses incurred	$	177,756		$	51,963		$	229,719



	Six months ended June 30, 2017
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	190,144		$	—		$	190,144
Assumed from nonaffiliates	2,209			69,101			71,310
Assumed from affiliates	261,526			—			261,526
Ceded to nonaffiliates	(16,577		)	(7,854		)	(24,431		)
Ceded to affiliates	(196,104		)	(2,425		)	(198,529		)
Net premiums written	$	241,198		$	58,822		$	300,020

Premiums earned
Direct	$	191,274		$	—		$	191,274
Assumed from nonaffiliates	2,145			72,100			74,245
Assumed from affiliates	247,276			—			247,276
Ceded to nonaffiliates	(13,626		)	(5,186		)	(18,812		)
Ceded to affiliates	(197,234		)	(2,425		)	(199,659		)
Net premiums earned	$	229,835		$	64,489		$	294,324

Losses and settlement expenses incurred
Direct	$	135,572		$	—		$	135,572
Assumed from nonaffiliates	1,445			47,417			48,862
Assumed from affiliates	177,122			665			177,787
Ceded to nonaffiliates	(4,965		)	(1,587		)	(6,552		)
Ceded to affiliates	(152,146		)	(10		)	(152,156		)
Net losses and settlement expenses incurred	$	157,028		$	46,485		$	203,513

Individual lines in the above tables are defined as follows:


•	“Direct” represents business produced by the property and casualty insurance subsidiaries.

•

“Assumed from nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of involuntary business assumed by the pool participants pursuant to state law. For the reinsurance subsidiary, this line represents the reinsurance business assumed through the quota share agreement (including “fronting” activities initiated by Employers Mutual) and the business assumed outside the quota share agreement.

•

“Assumed from affiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of all the pool members’ direct business. The amounts reported under the caption “Losses and settlement expenses incurred” also include claim-related services provided by Employers Mutual that are allocated to the property and casualty insurance subsidiaries and the reinsurance subsidiary.

•

“Ceded to nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of 1) the amounts ceded to nonaffiliated reinsurance companies in accordance with the terms of the reinsurance agreements providing protection to the pool and each of its participants, and 2) the amounts ceded on a mandatory basis to state organizations in connection with various programs. For the reinsurance subsidiary, this line includes 1) reinsurance business that is ceded to other insurance companies in connection with “fronting” activities initiated by Employers Mutual, and 2) amounts ceded to purchase additional reinsurance protection in peak exposure territories from external parties.

•

“Ceded to affiliates” for the property and casualty insurance subsidiaries represents the cession of their direct business to Employers Mutual under the terms of the pooling agreement and amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program. For the reinsurance subsidiary this line represents amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program.