Reinsurance

6 Months Ended

Jun. 30, 2011

Reinsurance [Abstract]

Reinsurance

(5) Reinsurance

In the normal course of business, our insurance companies cede a portion of their premium to domestic and foreign reinsurers through treaty and facultative reinsurance agreements. Although ceding for reinsurance purposes does not discharge the direct insurer from liability to its policyholder, our insurance companies participate in such agreements in order to limit their loss exposure, protect them against catastrophic loss and diversify their business. The following tables present the effect of such reinsurance transactions on our premium, loss and loss adjustment expense and policy acquisition costs.

	Six months ended June 30,						Three months ended June 30,
	2011			2010			2011			2010
Direct written premium	$	1,169,442		$	1,131,637		$	661,301		$	622,445
Reinsurance assumed		221,848			182,437			80,781			69,133
Reinsurance ceded		(242,533	)		(269,021	)		(132,209	)		(144,776	)
Net written premium	$	1,148,757		$	1,045,053		$	609,873		$	546,802
Direct earned premium	$	1,153,511		$	1,139,036		$	578,703		$	567,074
Reinsurance assumed		158,494			141,148			79,113			71,908
Reinsurance ceded		(279,274	)		(264,212	)		(133,565	)		(132,597	)
Net earned premium	$	1,032,731		$	1,015,972		$	524,251		$	506,385
Direct loss and loss adjustment expense	$	786,652		$	718,869		$	343,898		$	357,918
Reinsurance assumed		142,205			105,789			68,298			52,954
Reinsurance ceded		(246,989	)		(199,151	)		(77,914	)		(111,886	)
Net loss and loss adjustment expense	$	681,868		$	625,507		$	334,282		$	298,986
Policy acquisition costs	$	223,847		$	218,958		$	112,489		$	109,853
Ceding commissions		(55,986	)		(57,628	)		(28,006	)		(28,221	)
Net policy acquisition costs	$	167,861		$	161,330		$	84,483		$	81,632

The table below shows the components of our reinsurance recoverables in our consolidated balance sheets.

	June 30,			December 31,
	2011			2010
Reinsurance recoverable on paid losses	$	63,103		$	75,262
Reinsurance recoverable on outstanding losses		487,294			452,882
Reinsurance recoverable on incurred but not reported losses		555,705			481,204
Reserve for uncollectible reinsurance		(2,247	)		(2,493	)
Total reinsurance recoverables	$	1,103,855		$	1,006,855

At each quarter end, we review our financial exposure to the reinsurance market based on our individual reinsurance recoverable balances as of the prior quarter-end. We take actions to collect outstanding balances or to mitigate our exposure to possible loss, including offsetting past due amounts against letters of credit and other payables. There was no material change in recoverables on paid losses that were outstanding for over 90 days as of June 30, 2011 compared to December 31, 2010. We have a reserve for potentially uncollectible amounts as follows:

	Six months ended June 30,
	2011			2010
Balance at beginning of year	$	2,493		$	2,945
Provision expense (recovery)		(246	)		—
Balance at June 30	$	2,247		$	2,945

If we collect cash from or resolve a dispute with the reinsurer, we reduce the allowance account. While we believe the reserve is adequate based on information currently available, market conditions may change or additional information might be obtained that may require us to change the reserve in the future.

Reinsurers not authorized by the respective states of domicile of our U.S. domiciled insurance companies are required to collateralize reinsurance obligations due to us. The table below shows the amounts of letters of credit and cash deposits held by us as collateral, plus other credits available for potential offset at June 30, 2011 and December 31, 2010.

	June 30,		December 31,
	2011		2010
Payables to reinsurers	$	266,374	$	243,990
Letters of credit		137,859		145,914
Cash deposits		92,996		81,966
Total credits	$	497,229	$	471,870

The tables below show the calculation of net reserves, net unearned premium and net deferred policy acquisition costs.

	June 30,			December 31,
	2011			2010
Loss and loss adjustment expense payable	$	3,655,944		$	3,471,858
Reinsurance recoverable on outstanding losses		(487,294	)		(452,882	)
Reinsurance recoverable on incurred but not reported losses		(555,705	)		(481,204	)
Net reserves	$	2,612,945		$	2,537,772
Unearned premium	$	1,110,638		$	1,045,877
Ceded unearned premium		(242,599	)		(278,663	)
Net unearned premium	$	868,039		$	767,214
Deferred policy acquisition costs	$	229,248		$	212,786
Deferred ceding commissions		(67,015	)		(72,565	)
Net deferred policy acquisition costs	$	162,233		$	140,221