Note 7. Reinsurance

12 Months Ended

Dec. 31, 2013

Notes

Note 7. Reinsurance

Note 7.                        Reinsurance

            The Insurance Group reinsures portions of certain business in order to limit the assumption of disproportionate risks. Amounts not retained are ceded to other companies on an automatic or facultative basis.  In addition, the Insurance Group participates in various coinsurance treaties on a quota share or excess basis. The Company is 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 effects of reinsurance on premiums earned and insurance benefits, claims and reserves are shown below for the periods indicated (in thousands). Accident and health products and property and liability products (primarily the new pet insurance line) consist of short-duration contracts. Life and annuity products consist of long-duration contracts.

				ASSUMED		CEDED
		GROSS		FROM OTHER		TO OTHER		NET
		AMOUNT		COMPANIES		COMPANIES		AMOUNT
Premiums Earned:
December 31, 2013
Accident and health	$	461,336	$	85,627	$	102,053	$	444,910
Life and annuity		46,416		6,654		20,820		32,250
Property and liability		18,845		-		14		18,831
	$	526,597	$	92,281	$	122,887	$	495,991
December 31, 2012
Accident and health	$	396,805	$	60,232	$	140,653	$	316,384
Life and annuity		47,790		7,538		18,916		36,412
Property and liability		3,271		-		-		3,271
	$	447,866	$	67,770	$	159,569	$	356,067
December 31, 2011
Accident and health	$	377,294	$	51,703	$	130,451	$	298,546
Life and annuity		48,881		7,663		18,676		37,868
	$	426,175	$	59,366	$	149,127	$	336,414
Insurance benefits, claims and reserves:
December 31, 2013	$	374,865	$	82,337	$	102,412	$	354,790
December 31, 2012	$	301,734	$	56,405	$	113,348	$	244,791
December 31, 2011	$	296,902	$	45,008	$	103,048	$	238,862

Effective May 31, 2013, Madison National Life entered into a coinsurance agreement with an unaffiliated reinsurer, Guggenheim Life and Annuity Company, to cede approximately $218,633,000 of life and annuity reserves and, in accordance with its terms, transferred net cash and other assets, with an aggregate value of $215,137,000, to the reinsurer during the second quarter of 2013. As a result of this transaction, the Company: (i) recorded estimated amounts due from reinsurers of $218,296,000; (ii) recorded $6,643,000 of estimated deferred expenses (included in other assets) which will be amortized over the life of the underlying reinsured contracts; and (iii) wrote-off $9,307,000 of deferred acquisition costs associated with this block of policies. The write-off was more than offset by gains realized by the Company in the transaction, most of which resulted from the required sale and transfer of invested assets.

Effective January 26, 2012, Standard Security Life entered into a coinsurance agreement with an unaffiliated reinsurer, First Security Benefit Life Insurance and Annuity Company of New York, 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.