The effect of reinsurance on premiums written and earned, and losses and settlement expenses incurred, for the three months and nine months ended September 30, 2012 and 2011 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 a better understanding of the actual source of the reinsurance activities. This presentation differs from the classification used in the consolidated financial statements, where "affiliated balances" represent the net amount of all transactions flowing through the pooling and quota share agreements with Employers Mutual.

	Three months ended September 30, 2012
	Property and
	casualty
	insurance			Reinsurance			Total
Premiums written
Direct	$	107,128,385		$	-		$	107,128,385
Assumed from nonaffiliates		667,712			42,867,793			43,535,505
Assumed from affiliates		118,248,220			-			118,248,220
Ceded to nonaffiliates		(7,055,681	)		(508,871	)		(7,564,552	)
Ceded to affiliates		(107,128,385	)		(4,235,892	)		(111,364,277	)
Net premiums written	$	111,860,251		$	38,123,030		$	149,983,281

Premiums earned
Direct	$	84,547,817		$	-		$	84,547,817
Assumed from nonaffiliates		578,239			36,033,984			36,612,223
Assumed from affiliates		96,432,201			-			96,432,201
Ceded to nonaffiliates		(5,950,717	)		(1,313,028	)		(7,263,745	)
Ceded to affiliates		(84,547,817	)		(4,235,892	)		(88,783,709	)
Net premiums earned	$	91,059,723		$	30,485,064		$	121,544,787

Losses and settlement expenses incurred
Direct	$	43,128,073		$	-		$	43,128,073
Assumed from nonaffiliates		518,821			24,086,891			24,605,712
Assumed from affiliates		56,806,810			231,755			57,038,565
Ceded to nonaffiliates		(1,165,115	)		(1,338,008	)		(2,503,123	)
Ceded to affiliates		(43,128,073	)		183,487			(42,944,586	)
Net losses and settlement expenses incurred	$	56,160,516		$	23,164,125		$	79,324,641

	Three months ended September 30, 2011
	Property and
	casualty
	insurance			Reinsurance			Total
Premiums written
Direct	$	96,286,937		$	-		$	96,286,937
Assumed from nonaffiliates		578,928			32,363,185			32,942,113
Assumed from affiliates		109,194,449			-			109,194,449
Ceded to nonaffiliates		(7,473,697	)		(3,669,773	)		(11,143,470	)
Ceded to affiliates		(96,286,937	)		(2,869,341	)		(99,156,278	)
Net premiums written	$	102,299,680		$	25,824,071		$	128,123,751

Premiums earned
Direct	$	74,330,476		$	-		$	74,330,476
Assumed from nonaffiliates		474,357			31,692,494			32,166,851
Assumed from affiliates		88,073,825			-			88,073,825
Ceded to nonaffiliates		(6,252,425	)		(3,702,653	)		(9,955,078	)
Ceded to affiliates		(74,330,476	)		(2,869,341	)		(77,199,817	)
Net premiums earned	$	82,295,757		$	25,120,500		$	107,416,257

Losses and settlement expenses incurred
Direct	$	59,667,253		$	-		$	59,667,253
Assumed from nonaffiliates		427,383			26,609,406			27,036,789
Assumed from affiliates		76,633,840			218,689			76,852,529
Ceded to nonaffiliates		(6,531,312	)		(4,595,308	)		(11,126,620	)
Ceded to affiliates		(59,667,253	)		(1,402,021	)		(61,069,274	)
Net losses and settlement expenses incurred	$	70,529,911		$	20,830,766		$	91,360,677

	Nine months ended September 30, 2012
	Property and
	casualty
	insurance			Reinsurance			Total
Premiums written
Direct	$	272,372,079		$	-		$	272,372,079
Assumed from nonaffiliates (1)		1,655,504			92,513,300			94,168,804
Assumed from affiliates		309,781,430			-			309,781,430
Ceded to nonaffiliates		(17,170,688	)		(1,394,989	)		(18,565,677	)
Ceded to affiliates (1)		(272,372,079	)		(9,111,831	)		(281,483,910	)
Net premiums written	$	294,266,246		$	82,006,480		$	376,272,726

Premiums earned
Direct	$	242,803,733		$	-		$	242,803,733
Assumed from nonaffiliates		1,537,248			91,395,310			92,932,558
Assumed from affiliates		279,542,128			-			279,542,128
Ceded to nonaffiliates		(17,162,978	)		(4,624,874	)		(21,787,852	)
Ceded to affiliates		(242,803,733	)		(9,111,831	)		(251,915,564	)
Net premiums earned	$	263,916,398		$	77,658,605		$	341,575,003

Losses and settlement expenses incurred
Direct	$	144,326,923		$	-		$	144,326,923
Assumed from nonaffiliates		1,225,178			57,923,059			59,148,237
Assumed from affiliates		182,457,292			651,939			183,109,231
Ceded to nonaffiliates		(4,883,317	)		(4,943,552	)		(9,826,869	)
Ceded to affiliates		(144,326,923	)		534,282			(143,792,641	)
Net losses and settlement expenses incurred	$	178,799,153		$	54,165,728		$	232,964,881

	Nine months ended September 30, 2011
	Property and
	casualty
	insurance			Reinsurance			Total
Premiums written
Direct	$	236,464,970		$	-		$	236,464,970
Assumed from nonaffiliates (2)		1,149,037			88,108,827			89,257,864
Assumed from affiliates		282,462,185			-			282,462,185
Ceded to nonaffiliates		(19,777,316	)		(12,241,458	)		(32,018,774	)
Ceded to affiliates (2)		(236,464,970	)		(7,586,737	)		(244,051,707	)
Net premiums written	$	263,833,906		$	68,280,632		$	332,114,538

Premiums earned
Direct	$	208,935,272		$	-		$	208,935,272
Assumed from nonaffiliates		1,101,953			86,765,065			87,867,018
Assumed from affiliates		255,503,378			-			255,503,378
Ceded to nonaffiliates		(18,617,074	)		(12,531,985	)		(31,149,059	)
Ceded to affiliates		(208,935,272	)		(7,586,737	)		(216,522,009	)
Net premiums earned	$	237,988,257		$	66,646,343		$	304,634,600

Losses and settlement expenses incurred
Direct	$	194,629,900		$	-		$	194,629,900
Assumed from nonaffiliates		1,212,075			98,483,897			99,695,972
Assumed from affiliates		206,238,698			559,036			206,797,734
Ceded to nonaffiliates		(13,133,654	)		(13,421,015	)		(26,554,669	)
Ceded to affiliates		(194,629,900	)		(13,437,993	)		(208,067,893	)
Net losses and settlement expenses incurred	$	194,317,119		$	72,183,925		$	266,501,044

(1)

The "Reinsurance" and "Total" amounts include a $3,405,866 negative portfolio adjustment related to the January 1, 2012 cancellation of a large pro rata account. Ten percent of this amount ($340,587) is included in the corresponding "ceded to affiliates" amounts in accordance with the terms of the excess of loss reinsurance agreement with Employers Mutual.

(2)

The "Reinsurance" and "Total" amounts include $1,022,885 associated with a portfolio adjustment related to the January 1, 2011 increase in participation in the Mutual Reinsurance Bureau underwriting association (MRB). Ten percent of this amount ($102,288) is included in the corresponding "ceded to affiliates" amounts in accordance with the terms of the excess of loss reinsurance agreement with Employers Mutual.