REINSURANCE

The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three months ended March 31, 2017 and 2016 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 and quota share agreements and inter-company reinsurance programs with Employers Mutual are reported as “affiliated” balances.



	Three months ended March 31, 2017
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	96,752		$	—		$	96,752
Assumed from nonaffiliates	919			33,505			34,424
Assumed from affiliates	124,800			—			124,800
Ceded to nonaffiliates	(8,133		)	(2,024		)	(10,157		)
Ceded to affiliates	(99,731		)	(1,213		)	(100,944		)
Net premiums written	$	114,607		$	30,268		$	144,875

Premiums earned
Direct	$	95,898		$	—		$	95,898
Assumed from nonaffiliates	1,015			34,689			35,704
Assumed from affiliates	122,097			—			122,097
Ceded to nonaffiliates	(6,484		)	(2,637		)	(9,121		)
Ceded to affiliates	(98,878		)	(1,213		)	(100,091		)
Net premiums earned	$	113,648		$	30,839		$	144,487

Losses and settlement expenses incurred
Direct	$	62,761		$	—		$	62,761
Assumed from nonaffiliates	752			21,240			21,992
Assumed from affiliates	76,742			364			77,106
Ceded to nonaffiliates	(1,401		)	(830		)	(2,231		)
Ceded to affiliates	(63,334		)	(9		)	(63,343		)
Net losses and settlement expenses incurred	$	75,520		$	20,765		$	96,285



	Three months ended March 31, 2016
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	94,986		$	—		$	94,986
Assumed from nonaffiliates	957			34,259			35,216
Assumed from affiliates	118,846			—			118,846
Ceded to nonaffiliates	(5,381		)	(1,980		)	(7,361		)
Ceded to affiliates	(98,141		)	(1,270		)	(99,411		)
Net premiums written	$	111,267		$	31,009		$	142,276

Premiums earned
Direct	$	92,836		$	—		$	92,836
Assumed from nonaffiliates	1,027			34,716			35,743
Assumed from affiliates	118,262			—			118,262
Ceded to nonaffiliates	(5,688		)	(1,155		)	(6,843		)
Ceded to affiliates	(95,991		)	(1,270		)	(97,261		)
Net premiums earned	$	110,446		$	32,291		$	142,737

Losses and settlement expenses incurred
Direct	$	41,054		$	—		$	41,054
Assumed from nonaffiliates	721			23,202			23,923
Assumed from affiliates	61,454			388			61,842
Ceded to nonaffiliates	(77		)	(907		)	(984		)
Ceded to affiliates	(41,054		)	328			(40,726		)
Net losses and settlement expenses incurred	$	62,098		$	23,011		$	85,109

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 1) reinsurance business that is ceded to other insurance companies in connection with “fronting” activities initiated by Employers Mutual, and 2) amounts ceded to purchase additional reinsurance protection from external parties for the assumed reinsurance business.

•

“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 and amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program. For the reinsurance subsidiary this line represents amounts ceded to Employers Mutual under the terms of the inter-company reinsurance program.