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Reinsurance | 3 Months Ended
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Jun. 30, 2021
Reinsurance Disclosures [Abstract] |
Reinsurance | Reinsurance We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following tables provide (i) a disaggregation of our reinsurance recoverable balance by financial strength rating and (ii) an aging analysis of our past due reinsurance recoverable balances as of June 30, 2021, and December 31, 2020:
|  | June 30, 2021
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 40,382 |  |  | $ | 14 |  |  | $ | 40,396 |
A+ |  | 357,328 |  |  | 2,554 |  |  | 359,882 |
A |  | 105,600 |  |  | 87 |  |  | 105,687 |
A- |  | 2,054 |  |  | — |  |  | 2,054 |
B++ |  | 135 |  |  | 244 |  |  | 379 |
B+ |  | — |  |  | — |  |  | — |
Total rated reinsurers |  | $ | 505,499 |  |  | $ | 2,899 |  |  | $ | 508,398 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 86,512 |  |  | $ | — |  |  | $ | 86,512 |
Other than federal and state pools |  | 3,474 |  |  | 274 |  |  | 3,748 |
Total non-rated reinsurers |  | $ | 89,986 |  |  | $ | 274 |  |  | $ | 90,260 |
Total reinsurance recoverable, gross |  | $ | 595,485 |  |  | $ | 3,173 |  |  | $ | 598,658 |
Less: allowance for credit losses 1 |  |  |  |  |  | (1,777) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 596,881 |
|  | December 31, 2020
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 37,464 |  |  | $ | 102 |  |  | $ | 37,566 |
A+ |  | 354,846 |  |  | 2,452 |  |  | 357,298 |
A |  | 105,652 |  |  | 415 |  |  | 106,067 |
A- |  | 2,139 |  |  | — |  |  | 2,139 |
B++ |  | 56 |  |  | 324 |  |  | 380 |
B+ |  | — |  |  | — |  |  | — |
Total rated reinsurers |  | $ | 500,157 |  |  | $ | 3,293 |  |  | $ | 503,450 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 82,575 |  |  | $ | — |  |  | $ | 82,575 |
Other than federal and state pools |  | 2,676 |  |  | 568 |  |  | 3,244 |
Total non-rated reinsurers |  | $ | 85,251 |  |  | $ | 568 |  |  | $ | 85,819 |
Total reinsurance recoverable, gross |  | $ | 585,408 |  |  | $ | 3,861 |  |  | $ | 589,269 |
Less: allowance for credit losses 1 |  |  |  |  |  | (1,777) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 587,492 |
1 Represents our current expectation of credit losses on total current and past due reinsurance recoverables, and is not identifiable by reinsurer. For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2020 Annual Report. The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:
($ in thousands) |  | Quarter ended June 30, |  | Six Months ended June 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Balance at beginning of period |  | $ | 1,840 |  |  | 1,502 |  |  | $ | 1,777 |  |  | 4,400 |
Cumulative effect adjustment 1 |  | — |  |  | — |  |  | — |  |  | (2,903) |
Balance at beginning of period, as adjusted |  | $ | 1,840 |  |  | 1,502 |  |  | $ | 1,777 |  |  | 1,497 |
Current period provision for expected credit losses |  | (63) |  |  | 894 |  |  | — |  |  | 899 |
Write-offs charged against the allowance for credit losses |  | — |  |  | — |  |  | — |  |  | — |
Recoveries |  | — |  |  | — |  |  | — |  |  | — |
Allowance for credit losses, end of period |  | $ | 1,777 |  |  | 2,396 |  |  | $ | 1,777 |  |  | 2,396 |
1 Represents the impact of our adoption of ASU 2016-13, Financial Instruments - Credit Losses. The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2020 Annual Report.
|  | Quarter ended June 30, |  | Six Months ended June 30,
($ in thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Premiums written: |  |  |  |  |  |  |  |
Direct |  | $ | 954,770 |  |  | 834,643 |  |  | $ | 1,863,544 |  |  | 1,581,074 |
Assumed |  | 4,872 |  |  | 6,410 |  |  | 10,405 |  |  | 12,453 |
Ceded |  | (126,437) |  |  | (116,301) |  |  | (242,566) |  |  | (221,448) |
Net |  | $ | 833,205 |  |  | 724,752 |  |  | $ | 1,631,383 |  |  | 1,372,079 |
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 853,456 |  |  | 733,647 |  |  | $ | 1,690,825 |  |  | 1,488,538 |
Assumed |  | 4,411 |  |  | 6,055 |  |  | 10,087 |  |  | 12,228 |
Ceded |  | (117,349) |  |  | (109,031) |  |  | (235,434) |  |  | (218,392) |
Net |  | $ | 740,518 |  |  | 630,671 |  |  | $ | 1,465,478 |  |  | 1,282,374 |
Loss and loss expenses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | 460,073 |  |  | 451,013 |  |  | $ | 901,580 |  |  | 876,808 |
Assumed |  | 3,217 |  |  | 4,300 |  |  | 6,664 |  |  | 9,198 |
Ceded |  | (41,667) |  |  | (51,364) |  |  | (73,220) |  |  | (81,733) |
Net |  | $ | 421,623 |  |  | 403,949 |  |  | $ | 835,024 |  |  | 804,273 |
Direct premiums written ("DPW") increased $120.1 million, or 14%, in Second Quarter 2021 compared to Second Quarter 2020. The increase included three percentage points from the COVID-19-related $19.7 million premium credit to our personal and commercial automobile policyholders in Second Quarter 2020. This premium credit to customers with in-force polices was equivalent to 15% of their April and May 2020 premiums. Additionally, DPW increased $282.5 million, or 18%, in Six Months 2021 compared to Six Months 2020 resulted from (i) overall renewal pure price increases, (ii) new business growth, and (iii) strong retention. This increase also included seven percentage points from the $75.0 million return audit and endorsement premium accrual that was recorded in the first quarter of 2020 and the premium credit mentioned above. This accrual reflected lower exposure levels, which determine the premium we charge, attributable to the economic impacts of the COVID-19 pandemic and the anticipated decline in sales and payroll exposures on the general liability and workers compensation lines of business. Ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our flood premiums, losses, and loss expenses, were as follows:
Ceded to NFIP |  | Quarter ended June 30, |  | Six Months ended June 30,
($ in thousands) |  | 2021 |  | 2020 |  | 2021 |  | 2020
Ceded premiums written |  | $ | (75,081) |  |  | (74,187) |  |  | $ | (140,823) |  |  | (136,274) |
Ceded premiums earned |  | (66,833) |  |  | (67,369) |  |  | (134,352) |  |  | (134,230) |
Ceded loss and loss expenses incurred |  | (18,941) |  |  | (12,991) |  |  | (21,148) |  |  | (18,087) |

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
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