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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2023

The effect of all of our reinsurance transactions on our consolidated statement of operations is shown in table 4.1 below.


Reinsurance
Table	4.1
		Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)		2023		2022		2023		2022
Premiums earned:
Direct		$	287,640	$	289,072	$	858,310	$	864,191
Assumed		3,801		2,254		9,635		6,501
Ceded - quota share reinsurance (1)		(32,693)		(19,348)		(90,012)		(56,721)
Ceded - excess-of-loss reinsurance		(17,471)		(19,867)		(51,830)		(50,923)
Total ceded		(50,164)		(39,215)		(141,842)		(107,644)
Net premiums earned		$	241,277	$	252,111	$	726,103	$	763,048

Losses incurred:
Direct		$	6,627	$	(112,435)	$	2,044	$	(242,861)
Assumed		20		21		(7)		(340)
Ceded - quota share reinsurance		(6,724)		7,360		(13,359)		19,775
Losses incurred, net		$	(77)	$	(105,054)	$	(11,322)	$	(223,426)

Other Reinsurance Impacts:
Profit commission on quota share reinsurance (1)		$	30,698	$	47,255	$	97,218	$	135,049
Ceding commission on quota share reinsurance		12,678		13,321		37,446		38,355

(1)Ceded premiums earned are shown 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
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
2023 QSR		2023	10.0	%	58.5	%	December 31, 2034
Credit Union QSR		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.

Table 4.3 provides additional details 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

Covered Policy Years

Optional Termination Date (1)

Optional Quota Share % Reduction Date (2)

Optional Reduced Quota Share %

2020 QSR

2020

December 31, 2023

January 1, 2024

10.5% or 8%

2020 QSR and 2021 QSR

2020

December 31, 2023

January 1, 2024

14.5% or 12%

2020 QSR and 2021 QSR

2021

December 31, 2023

January 1, 2024

14.5% or 12%

2021 QSR and 2022 QSR

2021

December 31, 2023

January 1, 2024

10.5% or 8%

2021 QSR and 2022 QSR

2022

December 31, 2024

January 1, 2024

12.5% or 10%

2022 QSR and 2023 QSR

2022

December 31, 2024

January 1, 2024

12.5% or 10%

2022 QSR and 2023 QSR

2023

December 31, 2025

July 1, 2024

12.5% or 10%

2023 QSR

2023

December 31, 2025

July 1, 2024

8% or 7%

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

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

Schedule of coverages and retention

Table 4.4a provides a summary of our XOL Transactions as of September 30, 2023.

Excess of Loss Reinsurance

Table 4.4a

($ in thousands)

Issue Date

Policy In force Dates

Optional Call Date (1)

Legal Maturity

Initial First Layer Retention

Initial Excess of Loss Reinsurance Coverage

2023 Traditional XOL (2)

April 1, 2023

January 1, 2023 - December 29, 2023

January 1, 2031

10 years

TBD

2022 Traditional XOL

April 1, 2022

January 1, 2022 - December 30, 2022

January 1, 2030

10 years

$82,523

$142,642

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, including an optional call feature that provides us the right to terminate if the outstanding principal balance of the related insurance-linked notes falls below 10% of the initial principal balance of the related insurance-linked notes, and on any payment date on or after the respective Optional Call Date. We can elect early termination of the Traditional XOL Transactions beginning on this date, and quarterly thereafter.

(2) The 2023 Traditional XOL Transaction provides up to $116 million of reinsurance coverage on eligible NIW in 2023.

Table 4.4b provides a summary of the remaining first layer retention and remaining excess of loss reinsurance coverage on our XOL Transactions as of September 30, 2023 and December 31, 2022.



Table 4.4b	Remaining First Layer Retention				Remaining Excess of Loss Reinsurance Coverage
($ in thousands)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022

2022 Traditional XOL	$	82,463	$	82,517	$	142,642	$	142,642
Home Re 2022-1, Ltd.	325,104		325,576		445,461		473,575
Home Re 2021-2, Ltd.	189,610		190,097		281,919		352,084
Home Re 2021-1, Ltd.	210,858		211,102		209,311		277,053
Home Re 2020-1, Ltd.	274,968		275,051		53,023		113,247
Home Re 2019-1, Ltd.	182,791		183,540		208,146		208,146
Home Re 2018-1, Ltd.	164,385		164,849		84,819		140,993

Schedule of total assets of Home Re

Table 4.5 presents the total assets of the Home Re Entities as of September 30, 2023 and December 31, 2022.


Home Re total assets
Table	4.5
(In thousands)		Total VIE Assets
Home Re Entity		September 30, 2023		December 31, 2022

Home Re 2022-1 Ltd.		$	454,943	$	473,575
Home Re 2021-2 Ltd.		282,328		357,340
Home Re 2021-1 Ltd.		209,384		285,039
Home Re 2020-1 Ltd.		58,371		119,159
Home Re 2019-1 Ltd.		208,146		208,146
Home Re 2018-1 Ltd.		89,405		146,822

- 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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