Note 6 - Unpaid Loss and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2011

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]

6. Unpaid Loss and Loss Adjustment Expenses

The following table summarizes the activity in unpaid loss and loss adjustment expense for the three month and six month periods ended June 30, 2011 and 2010:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in thousands)
Beginning balance:
Unpaid loss and loss adjustment expense	$	446,977		$	362,334		$	440,919		$	351,891
Reinsurance recoverables		(63,564	)		(36,853	)		(56,350	)		(34,080	)
Net balance, beginning of period		383,413			325,481			384,569			317,811
Incurred related to:
Current period		45,536			49,964			87,567			93,666
Prior periods		27,121			30,583			28,356			30,458
Total incurred		72,657			80,547			115,923			124,124
Paid related to:
Current period		(9,306	)		(7,328	)		(13,383	)		(13,153	)
Prior periods		(35,928	)		(30,430	)		(76,273	)		(60,512	)
Total paid		(45,234	)		(37,758	)		(89,656	)		(73,665	)
Net balance, end of period		410,836			368,270			410,836			368,270
Reinsurance recoverable		80,093			44,052			80,093			44,052
Unpaid loss and loss adjustment expense	$	490,929		$	412,322		$	490,929		$	412,322

As a result of changes in estimates of insured events in prior periods, the Company experienced adverse loss development and, as a result, increased its loss reserves for prior years by a net amount of $27.1 million in the three months ended June 30, 2011 and $28.4 million in the six months ended June 30, 2011. The net adverse development in the second quarter of 2011 related to the following accident years: $1.4 million in 2010, $8.3 million in 2009, $8.8 million in 2008, $6.6 million in 2007, and $2.0 million in 2006 and prior years.

On a gross basis, approximately 39.0% of the reserve strengthening in the second quarter of 2011 related to the Company’s California book of business, driven mainly by adverse development on medical and indemnity losses primarily in accident years 2007 through 2009. Development related to the Company’s state act business in states other than California accounted for approximately 47.0% of the second quarter gross reserve strengthening, driven primarily by adverse development of medical and indemnity losses primarily in accident years 2007 through 2010. The remaining second quarter gross reserve development related to the Company’s USL&H business and was driven primarily by indemnity losses.