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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2024

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)		2024		2023		2024		2023
Premiums earned:
Direct		$	284,435	$	287,640	$	851,819	$	858,310
Assumed		3,625		3,801		10,444		9,635
Ceded:
Ceded - quota share reinsurance (1)		(27,785)		(32,693)		(83,143)		(90,012)
Ceded - excess-of-loss reinsurance		(16,935)		(17,471)		(49,608)		(51,830)
Total ceded		(44,720)		(50,164)		(132,751)		(141,842)
Net premiums earned		$	243,340	$	241,277	$	729,512	$	726,103

Losses incurred:
Direct		$	(5,899)	$	6,627	$	(9,116)	$	2,044
Assumed		30		20		13		(7)
Ceded - quota share reinsurance		(3,973)		(6,724)		(14,456)		(13,359)
Losses incurred, net		$	(9,842)	$	(77)	$	(23,559)	$	(11,322)

Other Reinsurance Impacts:
Profit commission on quota share reinsurance (1)		$	28,620	$	30,698	$	80,505	$	97,218
Ceding commission on quota share reinsurance		11,281		12,678		32,730		37,446

(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 and 2021 QSR		2021	17.5	%	61.9	%	December 31, 2032	(2)
2021 QSR and 2022 QSR		2021	12.5	%	57.5	%	December 31, 2032	(2)
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
2024 QSR		2024	30.0	%	56.0	%	'December 31, 2035
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.

(2) We have elected to terminate our 2021 QSR transaction effective December 31, 2024.

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 and 2021 QSR

2021

December 31, 2024

(3)

N/A

2021 QSR and 2022 QSR

2021

December 31, 2024

(3)

N/A

2021 QSR and 2022 QSR

2022

December 31, 2024

January 1, 2025

12.5% or 10%

2022 QSR and 2023 QSR

2022

December 31, 2024

January 1, 2025

12.5% or 10%

2022 QSR and 2023 QSR

2023

December 31, 2025

January 1, 2025

12.5% or 10%

2023 QSR

2023

December 31, 2025

January 1, 2025

8% or 7%

2024 QSR

2024

December 31, 2027

23% or 15%

(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.

(3) We have elected to terminate our 2021 QSR transaction effective December 31, 2024, and we expect to incur an early termination fee in the fourth quarter of approximately $8 million.

Schedule of coverages and retention

Table 4.4a, 4.4b, and 4.4c provide a summary of our XOL Transactions as of September 30, 2024 and December 31, 2023. Tables 4.4b and 4.4c exclude the 2024 Traditional XOL which is still in its fill up period.

Excess of Loss Reinsurance

Table 4.4a

Issue Date

Policy In force Dates

Optional Call Date (1)

Legal Maturity

2024 Traditional XOL (2)

April 1, 2024

January 1, 2024 - December 31, 2024

January 1, 2030

10 years

2023 Traditional XOL

April 1, 2023

January 1, 2023 - December 29, 2023

January 1, 2031

10 years

2022 Traditional XOL

April 1, 2022

January 1, 2022 - December 30, 2022

January 1, 2030

10 years

Home Re 2023-1, Ltd.

October 23, 2023

June 1, 2022 - August 31, 2023

October 25, 2028

10 years

Home Re 2022-1, Ltd.

April 26, 2022

May 29, 2021 - December 31, 2021

April 25, 2028

12.5 years

Home Re 2021-2, Ltd.

August 3, 2021

January 1, 2021 - May 28, 2021

July 25, 2028

12.5 years

Home Re 2021-1, Ltd.

February 2, 2021

August 1, 2020 - December 31, 2020

January 25, 2028

12.5 years

Home Re 2019-1, Ltd.

May 25, 2019

January 1, 2018 - March 31, 2019

May 25, 2026

10 years

(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 2024 Traditional XOL Transaction provides up to $187 million of reinsurance coverage on eligible NIW in 2024.


Excess of Loss Reinsurance
Table 4.4b			Remaining First Layer Retention
($ in thousands)	Initial First Layer Retention		September 30, 2024		December 31, 2023

2023 Traditional XOL	$	70,578	$	70,516	$	70,578
2022 Traditional XOL	82,523		81,653		82,346
Home Re 2023-1, Ltd.	272,961		272,633		272,961
Home Re 2022-1, Ltd.	325,589		323,269		325,001
Home Re 2021-2, Ltd.	190,159		188,803		189,403
Home Re 2021-1, Ltd.	211,159		210,303		210,831
Home Re 2019-1, Ltd.	185,730		182,220		182,722


Table 4.4c							Remaining Excess of Loss Reinsurance Coverage (1)
($ in thousands)	Initial Excess of Loss Reinsurance Coverage (1)		Initial Funding Percentage (2)		Funding Percentage at 9/30/2024 (2)		September 30, 2024		December 31, 2023

2023 Traditional XOL	$	96,942	N/A		N/A		$	92,768	$	96,942
2022 Traditional XOL	142,642		N/A		N/A		129,315		142,642
Home Re 2023-1, Ltd.	330,277		97	%	97	%	316,783		330,277
Home Re 2022-1, Ltd.	473,575		100	%	100	%	330,904		420,731
Home Re 2021-2, Ltd. (3)	398,429		100	%	82	%	145,737		173,960
Home Re 2021-1, Ltd.	398,848		100	%	100	%	110,373		117,982
Home Re 2019-1, Ltd. (3)	315,739		100	%	10	%	21,039		21,039

(1)The initial and remaining excess of loss reinsurance coverage is reduced by the applicable funding percentage.

(2)The funding percentage represents the aggregate outstanding note balances divided by the aggregate ending coverage amounts.

(3)The funding percentage on the 2021-2 and 2019-1 were reduced from 100% after the tender offers were conducted in the fourth quarter of 2023.

Schedule of total assets of Home Re

Table 4.5 presents the total assets of the Home Re Entities as of September 30, 2024 and December 31, 2023.


Home Re total assets
Table	4.5
(In thousands)		Total VIE Assets
Home Re Entity		September 30, 2024		December 31, 2023

Home Re 2023-1 Ltd.		$	322,780	$	330,277
Home Re 2022-1 Ltd.		340,486		427,279
Home Re 2021-2 Ltd.		150,540		174,431
Home Re 2021-1 Ltd.		117,315		118,043
Home Re 2019-1 Ltd.		21,039		21,039

- 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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