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Reinsurance
 6 Months Ended
Jun. 30, 2013
Reinsurance [Abstract]  
Reinsurance

(5) Reinsurance

 

In the normal course of business, our insurance companies cede a portion of their premium to reinsurers through treaty and facultative reinsurance agreements. Although reinsurance 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 losses 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, 
  2013 2012 2013 2012 
Direct written premium$ 1,294,681 $ 1,222,766 $ 713,110 $ 677,996 
Reinsurance assumed  234,967   251,476   96,333   113,557 
Reinsurance ceded  (321,430)   (273,750)   (180,409)   (149,465) 
 Net written premium$ 1,208,218 $ 1,200,492 $ 629,034 $ 642,088 
              
Direct earned premium$ 1,237,629 $ 1,193,537 $ 621,224 $ 602,354 
Reinsurance assumed  171,308   168,882   86,036   86,544 
Reinsurance ceded  (286,395)   (249,947)   (145,904)   (123,567) 
 Net earned premium$ 1,122,542 $ 1,112,472 $ 561,356 $ 565,331 
              
Direct loss and loss adjustment expense$ 693,480 $ 727,921 $ 335,968 $ 362,529 
Reinsurance assumed  110,708   61,035   71,017   24,326 
Reinsurance ceded  (132,017)   (123,203)   (67,511)   (50,030) 
 Net loss and loss adjustment expense $ 672,171 $ 665,753 $ 339,474 $ 336,825 

   Six months ended June 30, Three months ended June 30, 
  2013 2012 2013 2012 
Policy acquisition costs$ 204,031 $ 198,156 $ 103,745 $ 102,421 
Ceding commissions  (66,286)   (54,222)   (32,949)   (27,931) 
 Net policy acquisition costs$ 137,745 $ 143,934 $ 70,796 $ 74,490 

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

  June 30, December 31, 
  2013 2012 
Reinsurance recoverable on paid losses $84,272 $54,675 
Reinsurance recoverable on outstanding losses  457,227  479,026 
Reinsurance recoverable on incurred but not reported losses  546,436  539,021 
Reserve for uncollectible reinsurance  (1,500)  (1,500) 
 Total reinsurance recoverables $1,086,435 $1,071,222 

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 available to us as collateral, plus other potential offsets at June 30, 2013 and December 31, 2012.

  June 30, December 31, 
  2013 2012 
Payables to reinsurers$208,483 $190,228 
Letters of credit 87,033  89,832 
Cash  89,469  116,597 
 Total credits$384,985 $396,657 

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

  June 30, December 31, 
  2013 2012 
        
Loss and loss adjustment expense payable $3,814,684 $3,767,850 
Reinsurance recoverable on outstanding losses  (457,227)  (479,026) 
Reinsurance recoverable on incurred but not reported losses  (546,436)  (539,021) 
 Net reserves $2,811,021 $2,749,803 
        
Unearned premium $1,189,520 $1,069,956 
Ceded unearned premium  (291,939)  (256,988) 
 Net unearned premium $897,581 $812,968 
        
       
Deferred policy acquisition costs $202,322 $191,960 
Deferred ceding commissions  (82,119)  (74,609) 
 Net deferred policy acquisition costs $120,203 $117,351