Note D – Reinsurance

The insurance subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product line basis. Certain treaties covering fleet transportation risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.

The Company also serves as an assuming reinsurer on treaties with direct writing insurance companies as well as under retrocessions from other reinsurers for catastrophic property coverages. Accordingly, the occurrence of catastrophic events can have a significant impact on the Company's operations. The Company also assumes reinsurance from direct writing insurance companies for casualty insurance coverages. In addition, the insurance subsidiaries participate in certain mandatory residual market pools which require insurance companies to provide coverages on assigned risks. The assigned risk pools allocate participation to all insurers based upon each insurer's portion of premium writings on a state or national level. Historically, the operation of these assigned risk pools have resulted in net losses allocated to the Company although such losses have not been material in relation to the Company's operations.

The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premium written and earned for the most recent three years:

	Premiums Written									Premiums Earned
	2011			2010			2009			2011			2010			2009
Direct	$	274,101		$	249,699		$	209,129		$	270,002		$	245,912		$	200,341
Ceded on direct		(84,130	)		(75,907	)		(58,643	)		(83,580	)		(71,869	)		(59,330	)
Net direct		189,971			173,792			150,486			186,422			174,043			141,011

Assumed		60,425			46,103			41,030			60,061			41,945			41,777
Ceded on assumed		(1,913	)		(1,250	)		(1,488	)		(1,913	)		(1,250	)		(1,488	)
Net assumed		58,512			44,853			39,542			58,148			40,695			40,289

Net	$	248,483		$	218,645		$	190,028		$	244,570		$	214,738		$	181,300

Net losses and loss expenses incurred for 2011, 2010 and 2009 have been reduced by ceded reinsurance recoveries of approximately $56,600, $17,581, and $22,025, respectively. Ceded reinsurance premiums and loss recoveries for the purchase of catastrophe reinsurance coverage on the Company's net direct business were not material.

Net losses and loss expenses incurred for 2011, 2010 and 2009 include approximately $88,934, $38,318, and $17,070, respectively, relating to reinsurance assumed from non-affiliated insurance or reinsurance companies.

Components of reinsurance recoverable at December 31 are as follows:

	2011		2010
Case unpaid losses, net of valuation allowance	$	72,914	$	59,520
Incurred but not reported unpaid losses and loss expenses		56,262		63,967
Paid losses and loss expenses		3,043		3,741
Unearned premiums		6,185		-
	$	138,404	$	127,228