9.	Reinsurance

The Company cedes risk to unrelated reinsurers on a pro rata (“quota share”) and excess of loss basis in the ordinary course of business to limit its net loss exposure on insurance contracts. Reinsurance ceded arrangements do not discharge the Company of primary liability. Moreover, reinsurers may fail to pay the Company due to a lack of reinsurer liquidity, perceived improper underwriting, and losses for risks that are excluded from reinsurance coverage and other similar factors, all of which could adversely affect the Company’s financial results.

The Company had the following reinsurance balances as of December 31, 2016 and 2015:


(Dollars in thousands)	December 31, 2016			December 31, 2015
Reinsurance receivables, net	$	143,774		$	115,594
Collateral securing reinsurance receivables		(13,865	)		(6,445	)

Reinsurance receivables, net of collateral	$	129,909		$	109,149

Allowance for uncollectible reinsurance receivables	$	8,040		$	9,675
Prepaid reinsurance premiums		42,583			44,363

The reinsurance receivables above are net of a purchase accounting adjustment related to discounting acquired loss reserves to their present value and applying a risk margin to the discounted reserves. This adjustment was $2.0 million and $3.0 million at December 31, 2016 and 2015, respectively.

As of December 31, 2016, the Company had one aggregate unsecured reinsurance receivable that exceeded 3% of shareholders’ equity from the following reinsurer. Unsecured reinsurance receivables include amounts receivable for paid and unpaid losses and loss adjustment expenses, less amounts secured by collateral.


(Dollars in thousands)	Reinsurance Receivables		A.M. Best Ratings (As of December 31, 2016)
Munich Re America Corporation	$	51,178		A+

The effect of reinsurance on premiums written and earned is as follows:


(Dollars in thousands)	Written			Earned
For the year ended December 31, 2016:
Direct business	$	468,046		$	466,750
Reinsurance assumed		97,799			98,267
Reinsurance ceded (1)		(94,905	)		(96,552	)

Net premiums	$	470,940		$	468,465

For the year ended December 31, 2015:
Direct business	$	458,185		$	452,441
Reinsurance assumed		132,048			144,554
Reinsurance ceded (2)		(88,989	)		(92,852	)

Net premiums	$	501,244		$	504,143

For the year ended December 31, 2014:
Direct business	$	229,978		$	228,652
Reinsurance assumed		61,275			58,414
Reinsurance ceded		(18,072	)		(18,547	)

Net premiums	$	273,181		$	268,519

(1)

Includes ceded written premiums and ceded earned premiums of $35.3 million and $43.2 million, respectively, to American Bankers Insurance Company.

(2)

Includes ceded written premiums and ceded earned premiums of $55.8 million and $59.5 million, respectively, to American Bankers Insurance Company.