REINSURANCE

The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three months ended March 31, 2019 and 2018 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, 2019
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	105,233		$	—		$	105,233
Assumed from nonaffiliates	965			48,735			49,700
Assumed from affiliates	134,343			—			134,343
Ceded to nonaffiliates	(6,812		)	(1,973		)	(8,785		)
Ceded to affiliates	(108,213		)	(1,313		)	(109,526		)
Net premiums written	$	125,516		$	45,449		$	170,965

Premiums earned
Direct	$	101,267		$	—		$	101,267
Assumed from nonaffiliates	1,038			46,248			47,286
Assumed from affiliates	134,354			—			134,354
Ceded to nonaffiliates	(7,640		)	(2,405		)	(10,045		)
Ceded to affiliates	(104,247		)	(1,313		)	(105,560		)
Net premiums earned	$	124,772		$	42,530		$	167,302

Losses and settlement expenses incurred
Direct	$	60,935		$	—		$	60,935
Assumed from nonaffiliates	987			31,049			32,036
Assumed from affiliates	77,778			255			78,033
Ceded to nonaffiliates	(1,258		)	(1,582		)	(2,840		)
Ceded to affiliates	(61,462		)	(1,733		)	(63,195		)
Net losses and settlement expenses incurred	$	76,980		$	27,989		$	104,969



	Three months ended March 31, 2018
($ in thousands)	Property and casualty insurance			Reinsurance			Total
Premiums written
Direct	$	100,044		$	—		$	100,044
Assumed from nonaffiliates	1,018			41,121			42,139
Assumed from affiliates	130,201			—			130,201
Ceded to nonaffiliates	(7,970		)	(2,005		)	(9,975		)
Ceded to affiliates	(103,024		)	(1,313		)	(104,337		)
Net premiums written	$	120,269		$	37,803		$	158,072

Premiums earned
Direct	$	95,745		$	—		$	95,745
Assumed from nonaffiliates	1,002			41,092			42,094
Assumed from affiliates	129,148			—			129,148
Ceded to nonaffiliates	(8,538		)	(2,625		)	(11,163		)
Ceded to affiliates	(98,725		)	(1,313		)	(100,038		)
Net premiums earned	$	118,632		$	37,154		$	155,786

Losses and settlement expenses incurred
Direct	$	52,287		$	—		$	52,287
Assumed from nonaffiliates	992			26,415			27,407
Assumed from affiliates	85,967			358			86,325
Ceded to nonaffiliates	(2,991		)	(399		)	(3,390		)
Ceded to affiliates	(52,754		)	753			(52,001		)
Net losses and settlement expenses incurred	$	83,501		$	27,127		$	110,628

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 in connection with the purchase of additional reinsurance protection in peak exposure territories from external parties.

•

“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.