Reinsurance

The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and losses and loss expenses incurred. For more information concerning reinsurance, refer to Note 8. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” in our 2011 Annual Report.



	Quarter ended September 30,					Nine Months ended September 30,
($ in thousands)	2012			2011		2012		2011
Premiums written:
Direct	$	520,943		453,768		1,504,429		1,324,705
Assumed	17,976			22,575		44,712		29,765
Ceded	(88,401		)	(79,511	)	(252,888	)	(221,300	)
Net	$	450,518		396,832		1,296,253		1,133,170
Premiums earned:
Direct	$	474,055		425,231		1,389,373		1,257,087
Assumed	18,595			7,626		49,683		18,866
Ceded	(86,425		)	(73,894	)	(261,790	)	(210,067	)
Net	$	406,225		358,963		1,177,266		1,065,886
Losses and loss expenses incurred:
Direct	$	327,883		638,219		881,537		1,204,586
Assumed	13,970			5,977		35,039		13,549
Ceded	(69,602		)	(338,238	)	(103,516	)	(388,416	)
Net	$	272,251		305,958		813,060		829,719

Direct premium written ("DPW") increases in both Third Quarter and Nine Months 2012 were attributable to our newly acquired E&S business, higher new business, and higher renewal premiums reflecting increases in renewal pure price in our standard insurance operations.

Direct premium earned increases in Third Quarter and Nine Months 2012 were consistent with the fluctuation in DPW for the twelve-month period ended September 30, 2012 as compared to the twelve-month period ended September 30, 2011.

Assumed premiums written for Third Quarter 2012 decreased compared to the same period last year as E&S business, which was previously written through a reinsurance agreement, is now written by one of our ten insurance subsidiaries ("Insurance Subsidiaries"). A fronting arrangement was in place during the second half of 2011 to write E&S business that we acquired through the purchase of a renewal book of business in August 2011. Assumed E&S premiums from this renewal book continued until April 2012, when our recently-acquired Insurance Subsidiary, MUSIC, became the direct writer of this business. Increases in assumed premiums earned in Third Quarter and Nine Months 2012 compared to the prior year periods were driven by the E&S premiums.

Direct losses and loss expenses incurred were significantly impacted by decreases in flood losses that are ceded under the NFIP program, as well as decreases in catastrophe losses of $57.9 million, to $9.6 million, in Third Quarter 2012 and $65.7 million, to $46.7 million, in Nine Months 2012, compared to the prior year periods. Flood losses decreased absent the significant flooding that was experienced in 2011 as a result of Tropical Storm Lee and, to a lesser extent, Hurricane Irene. As the flood losses are fully ceded under the NFIP program, the reduction in the direct losses and loss expenses drive the corresponding decrease in our ceded losses. The ceded premiums and losses related to our involvement with the NFIP, in which all of our Flood premiums, losses, and loss expenses are ceded to the NFIP, are as follows:



National Flood Insurance Program	Quarter ended September 30,					Nine Months ended September 30,
($ in thousands)	2012			2011		2012		2011
Ceded premiums written	$	(58,923	)	(55,198	)	(171,172	)	(158,777	)
Ceded premiums earned	(53,222		)	(50,256	)	(157,895	)	(147,111	)
Ceded losses and loss expenses incurred	$	(32,702	)	(301,725	)	(24,534	)	(331,604	)