REINSURANCE

The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three months ended March 31, 2015 and 2014 is presented below. The classification of the assumed and ceded reinsurance amounts between affiliates and nonaffiliates is based on the participants in the underlying reinsurance agreements, and is intended to provide an understanding of the actual source of the reinsurance activities. This presentation differs from the classifications used in the consolidated financial statements, where all amounts flowing through the pooling, quota share and excess of loss agreements with Employers Mutual are reported as “affiliated” balances.



	Three months ended March 31, 2015
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	88,760		$	—		$	88,760
Assumed from nonaffiliates	971			37,977			38,948
Assumed from affiliates	113,145			—			113,145
Ceded to nonaffiliates	(5,320		)	(881		)	(6,201		)
Ceded to affiliates	(88,760		)	(2,968		)	(91,728		)
Net premiums written	$	108,796		$	34,128		$	142,924

Premiums earned
Direct	$	89,852		$	—		$	89,852
Assumed from nonaffiliates	1,033			35,871			36,904
Assumed from affiliates	112,761			—			112,761
Ceded to nonaffiliates	(5,589		)	(2,377		)	(7,966		)
Ceded to affiliates	(89,852		)	(2,968		)	(92,820		)
Net premiums earned	$	108,205		$	30,526		$	138,731

Losses and settlement expenses incurred
Direct	$	35,437		$	—		$	35,437
Assumed from nonaffiliates	546			20,900			21,446
Assumed from affiliates	55,898			243			56,141
Ceded to nonaffiliates	231			(1,926		)	(1,695		)
Ceded to affiliates	(35,437		)	(107		)	(35,544		)
Net losses and settlement expenses incurred	$	56,675		$	19,110		$	75,785



	Three months ended March 31, 2014
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	90,040		$	—		$	90,040
Assumed from nonaffiliates	788			39,514			40,302
Assumed from affiliates	107,048			—			107,048
Ceded to nonaffiliates	(5,322		)	(3,762		)	(9,084		)
Ceded to affiliates	(90,041		)	(2,860		)	(92,901		)
Net premiums written	$	102,513		$	32,892		$	135,405

Premiums earned
Direct	$	91,075		$	—		$	91,075
Assumed from nonaffiliates	844			38,950			39,794
Assumed from affiliates	105,881			—			105,881
Ceded to nonaffiliates	(5,478		)	(4,257		)	(9,735		)
Ceded to affiliates	(91,075		)	(2,860		)	(93,935		)
Net premiums earned	$	101,247		$	31,833		$	133,080

Losses and settlement expenses incurred
Direct	$	48,010		$	—		$	48,010
Assumed from nonaffiliates	602			24,400			25,002
Assumed from affiliates	68,172			291			68,463
Ceded to nonaffiliates	(1,048		)	(3,467		)	(4,515		)
Ceded to affiliates	(48,010		)	19			(47,991		)
Net losses and settlement expenses incurred	$	67,726		$	21,243		$	88,969

Individual lines in the above tables are defined as follows:


•	“Direct” represents business produced by the property and casualty insurance subsidiaries.

•

“Assumed from nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of involuntary business assumed by the pool participants pursuant to state law. For the reinsurance subsidiary, this line represents the reinsurance business assumed through the quota share agreement (including “fronting” activities initiated by Employers Mutual) and the business assumed outside the quota share agreement.

•

“Assumed from affiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of all the pool members’ direct business. The amounts reported under the caption “Losses and settlement expenses incurred” also include claim-related services provided by Employers Mutual that are allocated to the property and casualty insurance subsidiaries and the reinsurance subsidiary.

•

“Ceded to nonaffiliates” for the property and casualty insurance subsidiaries represents their aggregate 30 percent pool participation percentage of 1) the amounts ceded to nonaffiliated reinsurance companies in accordance with the terms of the reinsurance agreements providing protection to the pool and each of its participants, and 2) the amounts ceded on a mandatory basis to state organizations in connection with various programs. For the reinsurance subsidiary, this line includes reinsurance business that is ceded to other insurance companies in connection with “fronting” activities initiated by Employers Mutual.


•	“Ceded to affiliates” for the property and casualty insurance subsidiaries represents the cession of their direct business to Employers Mutual under the terms of the pooling agreement. For the reinsurance subsidiary this line represents amounts ceded to Employers Mutual under the terms of the excess of loss reinsurance agreement.