Reinsurance (Tables)

6 Months Ended

Jun. 30, 2022

The effect of all of our reinsurance agreements on premiums earned and losses incurred is shown in table 4.1 below.


Reinsurance
Table	4.1
		Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)		2022		2021		2022		2021
Premiums earned:
Direct		$	287,846	$	293,047	$	575,119	$	589,318
Assumed		2,121		2,480		4,247		4,891
Ceded (1)		(34,270)		(43,988)		(68,429)		(87,625)
Net premiums earned		$	255,697	$	251,539	$	510,937	$	506,584

Losses incurred:
Direct		$	(109,334)	$	37,983	$	(130,426)	$	86,054
Assumed		(154)		79		(361)		54
Ceded		10,430		(8,898)		12,415		(17,308)
Losses incurred, net		$	(99,058)	$	29,164	$	(118,372)	$	68,800

(1)Ceded premiums earned net of profit commission.

Schedule Of Quota Share Reinsurance Transactions

Table 4.2 below provides additional detail regarding our QSR Transactions.


Quota Share Reinsurance
Table	4.2

Quota Share Contract		Covered Policy Years	Quota Share %		Annual Loss Ratio to Exhaust Profit Commission (1)		Contractual Termination Date
2015 QSR		Prior to 2017	15.0	%	68.0	%	December 31, 2031
2019 QSR		2019	30.0	%	62.0	%	December 31, 2030
2020 QSR		2020	12.5	%	62.0	%	December 31, 2031
2020 QSR and 2021 QSR		2020	17.5	%	62.0	%	December 31, 2032
2020 QSR and 2021 QSR		2021	17.5	%	61.9	%	December 31, 2032
2021 QSR and 2022 QSR		2021	12.5	%	57.5	%	December 31, 2032
2021 QSR and 2022 QSR		2022	15.0	%	57.5	%	December 31, 2033
2022 QSR and 2023 QSR		2022	15.0	%	62.0	%	December 31, 2033
2022 QSR and 2023 QSR		2023	15.0	%	62.0	%	December 31, 2034
Credit Union QSR (2)		2020-2025	65.0	%	50.0	%	December 31, 2039

(1) We will receive a profit commission provided the annual loss ratio on policies covered under the transaction remains below this ratio.

(2) Eligible credit union business written before April 1, 2020 was covered by our 2019 and 2015 QSR Transactions.

Table 4.3 provides additional detail regarding optional termination dates and optional reductions to our quota share percentage which can, in each case, be elected by us for a fee. Under the optional reduction to the quota share percentage, we may reduce our quota share percentage from the original percentage shown in table 4.2 to the percentage shown in table 4.3.

Quota Share Reinsurance

Table

4.3

Quota Share Contract

Optional Termination Date (1)

Optional Quota Share % Reduction Date (2)

Optional Reduced Quota Share %

2015 QSR

December 31, 2022

2019 QSR

December 31, 2022

July 1, 2022

25% or 20%

2020 QSR

December 31, 2022

July 1, 2022

10.5% or 8%

2020 QSR and 2021 QSR, 2020 Policy year

December 31, 2022

July 1, 2022

14.5% or 12%

2020 QSR and 2021 QSR, 2021 Policy year

December 31, 2023

July 1, 2022

14.5% or 12%

2021 QSR and 2022 QSR. 2021 Policy Year

December 31, 2023

July 1, 2022

10.5% or 8%

2021 QSR and 2022 QSR, 2022 Policy Year

December 31, 2024

July 1, 2023

12.5% or 10%

2022 QSR and 2023 QSR, 2022 Policy Year

December 31, 2024

July 1, 2023

12.5% or 10%

2022 QSR and 2023 QSR, 2023 Policy Year

December 31, 2025

July 1, 2024

12.5% or 10%

(1) We can elect early termination of the QSR Transaction beginning on this date, and bi-annually thereafter.

(2) We can elect to reduce the quota share percentage beginning on this date, and bi-annually thereafter.

Effect of quota share reinsurance transactions on premiums earned and losses incurred

Table 4.4 below provides a summary of our QSR Transactions, for the three and six months ended June 30, 2022 and 2021.


Quota Share Reinsurance
Table	4.4
		Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)		2022		2021		2022		2021
Ceded premiums written and earned, net of profit commission		$	14,995	$	33,983	$	37,373	$	67,373
Ceded losses incurred		(10,430)		8,903		(12,415)		17,308
Ceding commissions (1)		12,762		12,991		25,034		26,058
Profit commission		48,814		30,978		87,794		62,922

(1) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.

Schedule of coverages and retention

Tables 4.5a and 4.5b provide a summary of our Home Re Transactions as of June 30, 2022 and December 31, 2021.

Excess of Loss Reinsurance - Home Re Transactions

4.5a

($ in thousands)

Issue Date

Policy In force Dates

Optional Call Date (1)

Legal Maturity

Initial First Layer Retention

Initial Excess of Loss Reinsurance Coverage

Home Re 2022-1, Ltd.

April 26, 2022

May 29, 2021 - December 31, 2021

April 25, 2028

12.5 years

$325,589

$473,575

Home Re 2021-2, Ltd.

August 3, 2021

January 1, 2021 - May 28, 2021

July 25, 2028

12.5 years

190,159

398,429

Home Re 2021-1, Ltd.

February 2, 2021

August 1, 2020 - December 31, 2020

January 25, 2028

12.5 years

211,159

398,848

Home Re 2020-1, Ltd.

October 29, 2020

January 1, 2020 - July 31, 2020

October 25, 2027

10 years

275,283

412,917

Home Re 2019-1, Ltd.

May 25, 2019

January 1, 2018 - March 31, 2019

May 25, 2026

10 years

185,730

315,739

Home Re 2018-1, Ltd.

October 30, 2018

July 1, 2016 - December 31, 2017

October 25, 2025

10 years

168,691

318,636

(1) We have the right to terminate the Home Re Transactions under certain circumstances and on any payment date on or after the respective Optional Call Date.



4.5b	Remaining First Layer Retention				Remaining Excess of Loss Reinsurance Coverage
($ in thousands)	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Home Re 2022-1, Ltd.	$	325,589	$	—	$	473,575	$	—
Home Re 2021-2, Ltd.	190,159		190,159		384,694		398,429
Home Re 2021-1, Ltd.	211,142		211,142		337,270		387,830
Home Re 2020-1, Ltd.	275,169		275,204		162,705		234,312
Home Re 2019-1, Ltd.	183,789		183,917		208,146		208,146
Home Re 2018-1, Ltd.	165,075		165,365		184,664		218,343

Schedule of total assets of Home Re

Table 4.6 presents the total assets of the Home Re Entities as of June 30, 2022 and December 31, 2021.


Home Re total assets
Table	4.6
(In thousands)
Home Re Entity		Total VIE Assets
June 30, 2022
Home Re 2022-1 Ltd.		$	473,575
Home Re 2021-2 Ltd.		391,130
Home Re 2021-1 Ltd.		345,131
Home Re 2020-1 Ltd.		174,006
Home Re 2019-1 Ltd.		208,146
Home Re 2018-1 Ltd.		193,106

December 31, 2021
Home Re 2021-2 Ltd.		$	398,429
Home Re 2021-1 Ltd.		398,848
Home Re 2020-1 Ltd.		251,387
Home Re 2019-1 Ltd.		208,146
Home Re 2018-1 Ltd.		218,343

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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