REINSURANCE

The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three and six months ended June 30, 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 June 30, 2015
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	92,027		$	—		$	92,027
Assumed from nonaffiliates	1,147			34,890			36,037
Assumed from affiliates	125,416			—			125,416
Ceded to nonaffiliates	(5,752		)	(825		)	(6,577		)
Ceded to affiliates	(92,027		)	(2,725		)	(94,752		)
Net premiums written	$	120,811		$	31,340		$	152,151

Premiums earned
Direct	$	91,506		$	—		$	91,506
Assumed from nonaffiliates	1,059			37,324			38,383
Assumed from affiliates	116,141			—			116,141
Ceded to nonaffiliates	(5,946		)	(1,248		)	(7,194		)
Ceded to affiliates	(91,506		)	(2,725		)	(94,231		)
Net premiums earned	$	111,254		$	33,351		$	144,605

Losses and settlement expenses incurred
Direct	$	60,186		$	—		$	60,186
Assumed from nonaffiliates	677			20,464			21,141
Assumed from affiliates	83,602			226			83,828
Ceded to nonaffiliates	(1,462		)	(1,262		)	(2,724		)
Ceded to affiliates	(60,186		)	(112		)	(60,298		)
Net losses and settlement expenses incurred	$	82,817		$	19,316		$	102,133



	Three months ended June 30, 2014
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	90,851		$	—		$	90,851
Assumed from nonaffiliates	993			32,506			33,499
Assumed from affiliates	118,286			—			118,286
Ceded to nonaffiliates	(6,815		)	(3,636		)	(10,451		)
Ceded to affiliates	(90,851		)	(2,310		)	(93,161		)
Net premiums written	$	112,464		$	26,560		$	139,024

Premiums earned
Direct	$	93,286		$	—		$	93,286
Assumed from nonaffiliates	891			36,695			37,586
Assumed from affiliates	109,397			—			109,397
Ceded to nonaffiliates	(6,771		)	(3,950		)	(10,721		)
Ceded to affiliates	(93,286		)	(2,310		)	(95,596		)
Net premiums earned	$	103,517		$	30,435		$	133,952

Losses and settlement expenses incurred
Direct	$	75,417		$	—		$	75,417
Assumed from nonaffiliates	484			27,583			28,067
Assumed from affiliates	87,330			246			87,576
Ceded to nonaffiliates	(7,027		)	(2,792		)	(9,819		)
Ceded to affiliates	(75,417		)	22			(75,395		)
Net losses and settlement expenses incurred	$	80,787		$	25,059		$	105,846




	Six months ended June 30, 2015
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	180,787		$	—		$	180,787
Assumed from nonaffiliates	2,118			72,867			74,985
Assumed from affiliates	238,561			—			238,561
Ceded to nonaffiliates	(11,072		)	(1,706		)	(12,778		)
Ceded to affiliates	(180,787		)	(5,693		)	(186,480		)
Net premiums written	$	229,607		$	65,468		$	295,075

Premiums earned
Direct	$	181,358		$	—		$	181,358
Assumed from nonaffiliates	2,092			73,195			75,287
Assumed from affiliates	228,902			—			228,902
Ceded to nonaffiliates	(11,535		)	(3,625		)	(15,160		)
Ceded to affiliates	(181,358		)	(5,693		)	(187,051		)
Net premiums earned	$	219,459		$	63,877		$	283,336

Losses and settlement expenses incurred
Direct	$	95,623		$	—		$	95,623
Assumed from nonaffiliates	1,223			41,364			42,587
Assumed from affiliates	139,500			469			139,969
Ceded to nonaffiliates	(1,231		)	(3,188		)	(4,419		)
Ceded to affiliates	(95,623		)	(219		)	(95,842		)
Net losses and settlement expenses incurred	$	139,492		$	38,426		$	177,918




	Six months ended June 30, 2014
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	180,892		$	—		$	180,892
Assumed from nonaffiliates	1,780			72,020			73,800
Assumed from affiliates	225,334			—			225,334
Ceded to nonaffiliates	(12,137		)	(7,398		)	(19,535		)
Ceded to affiliates	(180,892		)	(5,170		)	(186,062		)
Net premiums written	$	214,977		$	59,452		$	274,429

Premiums earned
Direct	$	184,361		$	—		$	184,361
Assumed from nonaffiliates	1,735			75,645			77,380
Assumed from affiliates	215,278			—			215,278
Ceded to nonaffiliates	(12,249		)	(8,207		)	(20,456		)
Ceded to affiliates	(184,361		)	(5,170		)	(189,531		)
Net premiums earned	$	204,764		$	62,268		$	267,032

Losses and settlement expenses incurred
Direct	$	123,427		$	—		$	123,427
Assumed from nonaffiliates	1,086			51,983			53,069
Assumed from affiliates	155,502			537			156,039
Ceded to nonaffiliates	(8,075		)	(6,259		)	(14,334		)
Ceded to affiliates	(123,427		)	41			(123,386		)
Net losses and settlement expenses incurred	$	148,513		$	46,302		$	194,815

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.