Note 20. Reinsurance

12 Months Ended

Dec. 31, 2012

Notes

Note 20. Reinsurance

Note 20.          Reinsurance

            Standard Security Life, Madison National Life and Independence American reinsure portions of certain business in order to limit the assumption of disproportionate risks. Standard Security Life, Madison National Life and Independence American retain varying amounts of individual life or group life insurance. Amounts not retained are ceded to other companies on an automatic or facultative basis.  In addition, Standard Security Life, Madison National Life and Independence American participate in various coinsurance treaties on a quota share or excess basis. Standard Security Life, Madison National Life and Independence American are contingently liable with respect to reinsurance in the unlikely event that the assuming reinsurers are unable to meet their obligations.  The ceding of reinsurance does not discharge the primary liability of the original insurer to the insured.

The effect of reinsurance on life insurance in-force, benefits to policyholders and premiums earned is as follows (in thousands):

									PERCENTAGE
				ASSUMED		CEDED			OF AMOUNT
		GROSS		FROM OTHER		TO OTHER		NET	ASSUMED
		AMOUNT		COMPANIES		COMPANIES		AMOUNT	TO NET
Life Insurance In-Force:
December 31, 2012	$	11,293,128	$	213,041	$	6,004,459	$	5,501,710	3.9%
December 31, 2011	$	11,322,537	$	236,650	$	6,207,385	$	5,351,802	4.4%
December 31, 2010	$	11,253,298	$	291,467	$	5,797,444	$	5,747,321	5.1%

Benefits to Policyholders:
December 31, 2012	$	286,859	$	53,966	$	111,937	$	228,888	23.6%
December 31, 2011	$	272,128	$	53,929	$	101,994	$	224,063	24.1%
December 31, 2010	$	307,988	$	65,624	$	132,936	$	240,676	27.3%

Premiums Earned:
December 31, 2012
Health	$	400,076	$	60,232	$	140,653	$	319,655	18.8%
Life and annuity		47,790		7,538		18,916		36,412	20.7%
	$	447,866	$	67,770	$	159,569	$	356,067	19.0%
December 31, 2011
Health	$	377,294	$	51,703	$	130,451	$	298,546	17.3%
Life and annuity		48,881		7,663		18,676		37,868	20.2%
	$	426,175	$	59,366	$	149,127	$	336,414	17.6%
December 31, 2010
Health	$	394,446	$	55,036	$	159,896	$	289,586	19.0%
Life and annuity		48,280		8,712		20,432		36,560	23.8%
	$	442,726	$	63,748	$	180,328	$	326,146	19.5%

Included in Gross Amount in 2010 are $8,452,000 of premiums written through AMIC subsidiaries prior to its consolidation in 2010. Included in Ceded to Other Companies in 2010 are $5,867,000 of Premiums Earned and $3,020,000 of Benefits to Policyholders for business ceded to Independence American, a subsidiary of AMIC prior to its consolidation in 2010.

Effective January 26, 2012, Standard Security Life entered into a coinsurance agreement with an unaffiliated reinsurer to cede group annuity reserves. In accordance with the agreement, Standard Security Life transferred $143,537,000 of cash in the first quarter of 2012 and recorded a corresponding amount as due from reinsurers. The Company received final approval from the New York State Insurance Department to convert the transfer from a coinsurance to an assumption agreement which contractually relieves Standard Security Life of liability with regards to the policies. During the third quarter of 2012, a significant portion of the reserves were assumed. In anticipation of such agreement, the Company wrote-off $4,568,000 of deferred acquisition costs on December 31, 2011.