Note 4 – Reinsurance

A summary of our quota share reinsurance agreements, excluding captive agreements, appears below.

	Six months ended June 30,
	2015		2014
	(In thousands)

Ceded premiums written, net of profit commission	$	58,055	$	44,689

Ceded premiums earned, net of profit commission		47,567		40,594

Ceded losses incurred		6,060		5,658

Ceding commissions (1)		21,803		17,877

Ceded unearned premiums		57,842		39,946

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

As of June 30, 2015 and December 31, 2014, we have accrued a profit commission receivable of $142.5 million and $91.5 million, respectively. This receivable may further increase through the term of the agreement, but the ultimate amount of the profit commission will depend on the ultimate level of premiums earned net of ceding commissions and losses incurred under the agreement. A commutation of our existing reinsurance agreement would result in any unearned premium being returned to us, a related return of ceding commission to the reinsurers and an adjustment to the profit commission. Profit commissions are recorded as a reduction to our ceded premiums. We do not expect a commutation to materially affect our results from operations. The anticipated restructuring of the agreement will effectively commute our existing agreement and any profit commission would be paid to us upon such commutation. Recoverables under the existing agreement are supported by trust funds or letters of credit.

In the past, MGIC also obtained captive reinsurance. In a captive reinsurance arrangement, the reinsurer is affiliated with the lender for whom MGIC provides mortgage insurance. As part of our settlement with the Consumer Financial Protection Bureau (“CFPB”) in 2013 and with the Minnesota Department of Commerce (the “MN Department”) in June 2015, discussed in Note 5 – “Litigation and Contingencies”, MGIC has agreed to not enter into any new captive reinsurance agreement or reinsure any new loans under any existing captive reinsurance agreement for a period of ten years subsequent to the respective settlements. In accordance with the CFPB settlement, all of our active captive arrangements were placed into run-off. In addition, at the time PMIERs become effective on December 31, 2015 the GSEs will not approve any future reinsurance or risk sharing transaction with a mortgage enterprise or an affiliate of a mortgage enterprise.

Captive agreements were generally written on an annual book of business and each captive reinsurer is required to maintain a separate trust account to support its combined reinsured risk on all annual books. MGIC is the sole beneficiary of the trusts, and the trust accounts are made up of capital deposits by the captive reinsurers, premium deposits by MGIC, and investment income earned. These amounts are held in the trust account and are available to pay reinsured losses. The reinsurance recoverable on loss reserves related to captive agreements was $38 million at June 30, 2015 which was supported by $163 million of trust assets, while at December 31, 2014, the reinsurance recoverable on loss reserves related to captive agreements was $45 million, which was supported by $198 million of trust assets.