Note D – Reinsurance

The Insurance Subsidiaries cede portions of their gross premiums written to certain other insurers under excess of loss and quota share treaties and by facultative placements. Reinsurance treaties with other companies permit the recovery of a portion of related direct losses. Management determines the amount of net exposure it is willing to accept generally on a product line basis. Certain treaties covering fleet transportation risks include annual deductibles which must be exceeded before the Company can recover under the terms of the treaty. The Company retains a higher percentage of the direct premium in consideration of these deductible provisions. The Company remains liable to the extent the reinsuring companies are unable to meet their obligations under reinsurance contracts.

The Company also serves as an assuming reinsurer on treaties with direct writing insurance companies and, prior to June 30, 2015, under retrocessions from other reinsurers for catastrophic property coverages. Accordingly, for periods prior to that date, the occurrence of catastrophic events could have had a significant impact on the Company's operations. The Company also assumes reinsurance from direct writing insurance companies for casualty insurance coverages. In addition, the Insurance Subsidiaries participate in certain mandatory residual market pools which require insurance companies to provide coverages on assigned risks. The assigned risk pools allocate participation to all insurers based upon each insurer's portion of premium writings on a state or national level. Historically, the operation of these assigned risk pools have resulted in net losses allocated to the Company, although such losses have not been material in relation to the Company's operations.

The following table summarizes the impact of reinsurance ceded and assumed on the Company's net premiums written and earned for the most recent three years:

	Premiums Written									Premiums Earned
	2016			2015			2014			2016			2015			2014
Direct	$	395,625		$	366,668		$	343,200		$	394,679		$	370,499		$	342,656
Ceded on direct		(131,166	)		(128,338	)		(118,942	)		(129,926	)		(128,135	)		(117,973	)
Net direct		264,459			238,330			224,258			264,753			242,364			224,683

Assumed		7,379			16,885			39,188			11,344			21,533			38,219
Ceded on assumed		(86	)		(562	)		(1,275	)		(86	)		(562	)		(1,275	)
Net assumed		7,293			16,323			37,913			11,258			20,971			36,944

Net	$	271,752		$	254,653		$	262,171		$	276,011		$	263,335		$	261,627

Net losses and loss expenses incurred for 2016, 2015 and 2014 have been reduced by ceded reinsurance recoveries of approximately $108,656, $75,581 and $105,891, respectively. Ceded reinsurance premiums and loss recoveries for the purchase of catastrophe reinsurance coverage on the Company's net direct business were not material.

Net losses and loss expenses incurred for 2016, 2015 and 2014 include approximately $14,746, $13,492 and $20,288, respectively, relating to reinsurance assumed from non-affiliated insurance or reinsurance companies.

Components of reinsurance recoverable at December 31 are as follows:

	2016		2015
Case unpaid losses, net of valuation allowance	$	126,244	$	120,320
Incurred but not reported unpaid losses and loss expenses		123,819		90,578
Paid losses and loss expenses		1,760		2,452
Unearned premiums		3,201		2,538
	$	255,024	$	215,888