6. Property and Casualty Insurance Activity (Tables)

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Schedule of Earned Premiums

Premiums written, ceded and earned are as follows:

	Direct			Assumed		Ceded			Net
Six months ended June 30, 2014
Premiums written	$	36,597,945		$	16,302	$	(21,527,803	)	$	15,086,444
Change in unearned premiums		(4,872,810	)		6,351		2,135,699			(2,730,760	)
Premiums earned	$	31,725,135		$	22,653	$	(19,392,104	)	$	12,355,684
Six months ended June 30, 2013
Premiums written	$	28,725,957		$	20,047	$	(17,781,254	)	$	10,964,750
Change in unearned premiums		(3,452,133	)		28,569		1,758,311			(1,665,253	)
Premiums earned	$	25,273,824		$	48,616	$	(16,022,943	)	$	9,299,497
Three months ended June 30, 2014
Premiums written	$	20,250,500		$	8,655	$	(11,757,974	)	$	8,501,181
Change in unearned premiums		(3,739,282	)		3,697		1,663,777			(2,071,808	)
Premiums earned	$	16,511,218		$	12,352	$	(10,094,197	)	$	6,429,373
Three months ended June 30, 2013
Premiums written	$	15,881,121		$	10,232	$	(9,897,589	)	$	5,993,764
Change in unearned premiums		(2,873,166	)		1,128		1,554,556			(1,317,482	)
Premiums earned	$	13,007,955		$	11,360	$	(8,343,033	)	$	4,676,282

Schedule of Loss and Loss Adjustment Expenses

The following table provides a reconciliation of the beginning and ending balances for unpaid losses and loss adjustment expense (“LAE”) reserves:

	Six months ended
	June 30,
	2014			2013
Balance at beginning of period	$	34,503,229		$	30,485,532
Less reinsurance recoverables		(17,363,975	)		(18,419,694	)
Net balance, beginning of period		17,139,254			12,065,838
Incurred related to:
Current year		6,975,731			5,175,229
Prior years		357,162			536,209
Total incurred		7,332,893			5,711,438
Paid related to:
Current year		2,691,199			1,416,181
Prior years		3,132,536			2,675,112
Total paid		5,823,735			4,091,293
Net balance at end of period		18,648,412			13,685,983
Add reinsurance recoverables		21,055,876			14,671,485
Balance at end of period	$	39,704,288		$	28,357,468

Schedule of line of business

The treaties are annual, except for personal lines described below, and provide for the following material terms:

	Treaty Year
	July 1, 2014	July 1, 2013	July 1, 2012
	to	to	to
Line of Busines	June 30, 2015	June 30, 2014	June 30, 2013
Personal Lines:
Homeowners, dwelling fire and canine legal liability
Quota share treaty:
Percent ceded	55%	75%	75%
Risk retained	$        360,000	$       300,000	$       250,000
Losses per occurrence subject to quota share reinsurance coverage	$        800,000	$    1,200,000	$    1,000,000
Excess of loss coverage in excess of quota share coverage	$     3,200,000	$    1,700,000	$    1,900,000
	in excess of	in excess of	in excess of
	$        800,000	$    1,200,000	$    1,000,000
Total reinsurance coverage per occurrence	$     3,640,000	$    2,600,000	$    2,650,000
Losses per occurrence subject to reinsurance coverage	$     4,000,000	$    2,900,000	$    2,900,000
Expiration date	June 30, 2015	June 30, 2015	June 30, 2013
Personal Umbrella
Quota share treaty:
Percent ceded - first million dollars of coverage	90%	90%	90%
Percent ceded - excess of one million dollars of coverage	100%	100%	100%
Total reinsurance coverage per occurrence	$     2,900,000	$    1,900,000	$    1,900,000
Losses per occurrence subject to quota share reinsurance coverage	$     3,000,000	$    2,000,000	$    2,000,000
Expiration date	June 30, 2015	June 30, 2014	June 30, 2013
Commercial Lines:
General liability commercial policies, except for commercial auto
Quota share treaty:
Percent ceded (terminated effective July 1, 2014)	None	25%	40%
Risk retained	$        400,000	$       300,000	$       300,000
Losses per occurrence subject to quota share reinsurance coverage	None	$       400,000	$       500,000
Excess of loss coverage in excess of quota share coverage	$     3,600,000	$    2,500,000	$    2,400,000
	in excess of	in excess of	in excess of
	$        400,000	$       400,000	$       500,000
Total reinsurance coverage per occurrence	$     3,600,000	$    2,600,000	$    2,600,000
Losses per occurrence subject to reinsurance coverage	$     4,000,000	$    2,900,000	$    2,900,000
Commercial Auto:
Excess of loss coverage in excess of risk retained	$     1,700,000	$    1,700,000	$    1,750,000
	in excess of	in excess of	in excess of
	$        300,000	$       300,000	$       250,000
Catastrophe Reinsurance:
Initial loss subject to personal lines quota share treaty	$     4,000,000	$    4,000,000	$    3,000,000
Risk retained per catastrophe occurrence (1)	$     1,800,000	$    1,000,000	$       750,000
Catastrophe loss coverage in excess of quota share coverage (2) (3)	$ 137,000,000	$  86,000,000	$  70,000,000

(1) Plus losses in excess of catastrophe coverage.

(2) Effective July 1, 2014, the Company’s catastrophe treaty also covers losses caused by severe winter weather during any consecutive 28 day period.

(3) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts.

Schedule of Single maximum risks under treaties

The single maximum risks per occurrence to which the Company is subject under the treaties that expired on June 30, 2014 and the new treaties effective July 1, 2014 are as follows:

	July 1, 2014 - June 30, 2015		July 1, 2013 - June 30, 2014
Treaty	Extent of Loss	Risk Retained	Extent of Loss	Risk Retained
Personal Lines	Initial $800,000	$360,000	Initial $1,200,000	$300,000
	$800,000 - $4,000,000	None(1)	$1,200,000 - $2,900,000	None(1)
	Over $4,000,000	100%	Over $2,900,000	100%
Personal Umbrella	Initial $1,000,000	$100,000	Initial $1,000,000	$100,000
	$1,000,000 - $3,000,000	None(1)	$1,000,000 - $2,000,000	None(1)
	Over $3,000,000	100%	Over $2,000,000	100%
Commercial Lines	Initial $400,000	$400,000	Initial $400,000	$300,000
	$400,000 - $4,000,000	None(1)	$400,000 - $2,900,000	None(1)
	Over $4,000,000	100%	Over $2,900,000	100%
Commercial Auto	Initial $300,000	$300,000	Initial $300,000	$300,000
	$300,000 - $2,000,000	None(1)	$300,000 - $2,000,000	None(1)
	Over $2,000,000	100%	Over $2,000,000	100%
Catastrophe (2)	Initial $4,000,000	$1,800,000	Initial $4,000,000	$1,000,000
	$4,000,000 - $141,000,000	None	$4,000,000 - $90,000,000	None
	Over $141,000,000	100%	Over $90,000,000	100%

(1) Covered by excess of loss treaties.

(2) Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts.

Schedule of Ceding Commission Revenue

Ceding commissions earned consists of the following:

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Provisional ceding commissions earned	$	3,629,871	$	2,502,845		$	7,006,747	$	4,895,709
Contingent ceding commissions earned		76,178		(168,414	)		80,585		(267,567	)
	$	3,706,049	$	2,334,431		$	7,087,332	$	4,628,142