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Reinsurance (Tables) | 9 Months Ended
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Sep. 30, 2019
Reinsurance Disclosures [Abstract] |
Effect of reinsurance agreement | The effect of all of our reinsurance agreements on premiums earned and losses incurred is shown in table 4.1 below.
Reinsurance
Table | 4.1 |  |  |  |  |  |  |  |
|  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 294,909 |  |  | $ | 275,044 |  |  | $ | 861,705 |  |  | $ | 808,531 |
Assumed |  | 1,388 |  |  | 709 |  |  | 3,275 |  |  | 936 |
Ceded |  | (28,440 | ) |  | (25,327 | ) |  | (100,260 | ) |  | (79,970 | )
Net premiums earned |  | $ | 267,857 |  |  | $ | 250,426 |  |  | $ | 764,720 |  |  | $ | 729,497 |
Losses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | 36,755 |  |  | $ | (2,081 | ) |  | $ | 102,835 |  |  | $ | 12,642 |
Assumed |  | (34 | ) |  | 55 |  |  | (110 | ) |  | 45 |
Ceded |  | (2,736 | ) |  | 508 |  |  | (7,841 | ) |  | (3,810 | )
Losses incurred, net |  | $ | 33,985 |  |  | $ | (1,518 | ) |  | $ | 94,884 |  |  | $ | 8,877 |
Effect of quota share reinsurance agreements on premiums earned and losses incurred | Table 4.2 below presents a summary of our quota share reinsurance agreements for the three and nine months ended September 30, 2019 and 2018.
Quota Share Reinsurance
Table | 4.2 |  |  |  |  |  |  |  |
|  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(In thousands) |  | 2019 |  | 2018 |  | 2019 |  | 2018
Ceded premiums written and earned, net of profit commission (1) |  | $ | 23,032 |  |  | $ | 25,248 |  |  | $ | 87,721 |  |  | $ | 79,716 |
Ceded losses incurred |  | 2,729 |  |  | (522 | ) |  | 7,845 |  |  | 3,531 |
Ceding commissions (2) |  | 11,042 |  |  | 12,983 |  |  | 37,807 |  |  | 38,268 |
Profit commission |  | 32,177 |  |  | 39,664 |  |  | 108,079 |  |  | 111,622 |
(1) | Premiums are ceded on an earned and received basis as defined in the agreements. The nine months ended September 30, 2019 include the $6.8 million termination fee discussed in “2015 QSR Transaction” above.
(2) | Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.
Schedule of coverages and retention | The proceeds of the ILNs, which were deposited into reinsurance trusts for the benefit of MGIC, will be the source of reinsurance claim payments to MGIC and principal repayments on the ILNs.
Excess of Loss Reinsurance
Table | 4.3 |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  | As of September 30, 2019
Home Re Entity (Issue Date) |  | Policy Inforce Dates |  | Termination Option Date (1) |  | Remaining First Layer Retention |  | Remaining Excess of Loss Reinsurance Coverages
Home Re 2018-1 Ltd. (Oct. - 2018) |  | July 1, 2016 - December 31, 2017 |  | October 25, 2025 |  | $ | 168,112 |  |  | $ | 288,852 |
Home Re 2019-1 Ltd. (May - 2019) |  | January 1, 2018 - March 31, 2019 |  | May 25, 2026 |  | 185,714 |  |  | 315,739 |
Total |  |  |  |  |  | $ | 353,826 |  |  | $ | 604,591 |
(1) We have the right to terminate the excess-of-loss reinsurance agreements under certain circumstances and on any payment date on or after the respective termination option date.
Schedule of total assets of Home Re | Table 4.4 presents the total assets of the Home Re Entities as of September 30, 2019 and December 31, 2018.
Home Re total assets
Table | 4.4 |  |
(In thousands) |  |
Home Re Entity (Issue date) |  | Total VIE Assets
September 30, 2019 |  |
Home Re 2018-01 Ltd. (Oct - 2018) |  | $ | 299,655 |
Home Re 2019-01 Ltd. (May - 2019) |  | $ | 315,739 |
December 31, 2018 |  |
Home Re 2018-01 Ltd. (Oct - 2018) |  | $ | 318,636 |

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- Definition Tabular disclosure of the effects of reinsurance, for example, but not limited to, disclosure of direct, assumed, and ceded insurance. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 + Details
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- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=118582676&loc=SL6759159-111685 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5747-111685 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=118582676&loc=SL6228884-111685 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5710-111685 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5728-111685 + Details
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