XML 65 R14.htm IDEA: XBRL DOCUMENT v3.2.0.727
Reinsurance
 6 Months Ended
Jun. 30, 2015
Reinsurance [Abstract]  
Reinsurance

(6) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic losses and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

Six months ended June 30,Three months ended June 30,
2015201420152014
Direct written premium$1,617,584$1,369,751$900,536$749,239
Reinsurance assumed186,305209,70077,21783,490
Reinsurance ceded(368,840)(342,255)(211,620)(185,715)
Net written premium$1,435,049$1,237,196$766,133$647,014
Direct earned premium$1,445,719$1,288,995$742,135$651,682
Reinsurance assumed144,001152,34172,83376,318
Reinsurance ceded(347,317)(306,476)(173,128)(155,752)
Net earned premium$1,242,403$1,134,860$641,840$572,248
Direct loss and loss adjustment expense$937,382$743,616$478,656$383,987
Reinsurance assumed38,93063,27411,71421,472
Reinsurance ceded(215,845)(140,247)(95,065)(69,562)
Net loss and loss adjustment expense $760,467$666,643$395,305$335,897

Policy acquisition costs$238,995$215,210$123,925$110,565
Ceding commissions(85,325)(73,199)(45,466)(37,595)
Net policy acquisition costs$153,670$142,011$78,459$72,970

The table below shows the components of our reinsurance recoverables in our consolidated balance sheets.

June 30,December 31,
20152014
Reinsurance recoverable on paid losses $92,897$99,937
Reinsurance recoverable on outstanding losses 439,252443,059
Reinsurance recoverable on incurred but not reported losses 634,562627,404
Reserve for uncollectible reinsurance (1,500)(1,500)
Total reinsurance recoverables $1,165,211$1,168,900

At each quarter end, we review our financial exposure to the reinsurance market based on our individual reinsurance recoverable balances as of the prior quarter end. We take actions to collect outstanding balances or to mitigate our exposure to possible uncollectible amounts. We had a $1.5 million reserve for potentially uncollectible amounts at June 30, 2015. Reinsurance recoverables related to our settlement of Spanish surety bond claims totaled $78.1 million at June 30, 2015, including $40.8 million on paid losses. Our reinsurers have paid our reinsurance claims in full on a timely basis, with the exception of a small number of reinsurers that are currently in run-off and disputing balances owed us. Recoverables from these run-off reinsurers totaled $41.6 million, including $38.3 million on paid losses, at June 30, 2015 (at quarter-end foreign currency exchange rate). No payments have been received from these reinsurers despite their participation in contracts on essentially the same terms of our other reinsurers. We are vigorously pursuing collection of these recoverables, including through arbitration where necessary, and believe these amounts are fully recoverable. Accordingly, we have not recorded a reserve for uncollectibility related to these amounts. While we believe our current reserve is adequate based on information currently available, market conditions may change or additional information might be obtained that may require us to change the reserve in the future.