Note 8. Reinsurance

12 Months Ended

Dec. 31, 2015

Notes

Note 8. Reinsurance

Note 8.                        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 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, 2015
Accident and health	$	513,814	$	28,822	$	126,613	$	416,023
Life and annuity		46,699		4,330		23,078		27,951
Property and liability		35,812		-		252		35,560
	$	596,325	$	33,152	$	149,943	$	479,534
December 31, 2014
Accident and health	$	482,511	$	52,063	$	116,163	$	418,411
Life and annuity		44,407		6,128		20,214		30,321
Property and liability		30,477		-		161		30,316
	$	557,395	$	58,191	$	136,538	$	479,048
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
Insurance benefits, claims and reserves:
December 31, 2015	$	365,634	$	24,956	$	83,412	$	307,178
December 31, 2014	$	276,634	$	50,441	$	1,040	$	326,035
December 31, 2013	$	374,865	$	82,337	$	102,412	$	354,790

On July 31, 2015, Madison National Life and Standard Security Life together entered into a coinsurance and sale agreement with an unaffiliated reinsurer, National Guardian Life Insurance Company (“NGL”), to: (i) cede substantially all of their individual life and annuity policy blocks currently in run-off; and (ii) sell the related infrastructure associated with the administration of such policies. The Company transferred $207,964,000 of cash to NGL, net of the aggregate consideration of $42,000,000 for the coinsurance and sale transaction. As a result of this transaction, the Company: (i) recorded $234,740,000 of estimated amounts due from reinsurers; (ii) recorded a $31,192,000 decrease in deferred acquisition costs associated with the ceded policies; (iii) recorded a $9,866,000 decrease in policy loans; (iv) recorded $7,686,000 of estimated costs of reinsurance (included in other assets) which will be amortized over the life of the underlying reinsured contracts; and (v) recognized a $5,053,000 pre-tax gain (included in other income) on the sale of the assets associated with the administration of the ceded policies, net of disposal costs.

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. During 2014, a large portion of the reserves were transferred to the reinsurer in accordance with the terms of an assumption agreement.