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

12 Months Ended

Dec. 31, 2017

Notes

Liability for Future Policy Benefits and Unpaid Claims Disclosure

Note 10.Policy Benefits and Claims 

Policy benefits and claims is the liability for unpaid loss and loss adjustment expenses. It is comprised of unpaid claims and estimated IBNR reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands).

		2017		2016		2015
Balance at beginning of year	$	219,113	$	245,443	$	236,803
Less: reinsurance recoverable		88,853		65,362		78,531
Net balance at beginning of year		130,260		180,081		158,272
Amount assumed		-		-		10,343
Amount incurred, related to:
Current year		147,603		155,044		294,390
Prior years		(8,008)		(5,496)		(8,488)
Total incurred		139,595		149,548		285,902
Amount paid, related to:
Current year		80,839		78,159		169,488
Prior years		62,469		121,210		104,948
Total paid		143,308		199,369		274,436
Net balance at end of year		126,547		130,260		180,081
Plus:  reinsurance recoverable		42,136		88,853		65,362
Balance at end of year	$	168,683	$	219,113	$	245,443

Since unpaid loss and loss adjustment expenses are estimates, actual losses incurred may be more or less than the Company’s previously developed estimates and is referred to as either unfavorable or favorable development, respectively. The overall net favorable development of $8,008,000 in 2017 related to prior years consists of favorable developments of $3,742,000 in the group disability reserves, $3,084,000 in the other individual life, annuities and other reserves, and $2,607,000 in Medical Stop-Loss reserves, partially offset by an unfavorable development of $1,425,000 in the Specialty Health reserves. The overall net favorable development of $5,496,000 in 2016 related to prior years consists of favorable developments of $1,392,000 in the Specialty Health reserves, $2,728,000 in the group disability reserves and $1,728,000 in the other individual life, annuities and other reserves, partially offset by an unfavorable development of $352,000 in Medical Stop-Loss reserves. The overall net favorable development of $8,488,000 in 2015 related to prior years consists of favorable developments of $7,977,000 in the Specialty Health reserves and $4,464,000 in the group disability reserves, partially offset by an unfavorable development of $3,628,000 in Medical Stop-Loss reserves and $325,000 in other individual accident and health reserves.

Specialty Health Segment

The following tables provide undiscounted information about net incurred and paid claims development by accident year for significant short-duration contract liabilities for policy benefits and claims in our Specialty Health segment. All amounts are shown net of reinsurance. In addition, the tables present the total IBNR plus expected development on reported claims by accident year  and the cumulative number of reported claims (in thousands, except number of reported claims). Refer to Note 1 for information on the methods we use to estimate IBNR plus expected development, as well as changes to those methodologies and assumptions. Five years of claims development data is presented for lines that are included  in our Specialty Health segment since a majority of the claims are fully developed in that time. Certain information about incurred and paid claims is presented as supplementary information and unaudited where indicated.

Specialty Health Segment –Claims Development
									December 31, 2017
		Incurred Claims and Claim Adjustment Expenses, Net of Reinsurance							Incurred But	Cumulative
		For the years ended December 31,							Not Reported	Number of
Accident		2013	2014	2015	2016				Plus Expected	Reported
Year		(unaudited)	(unaudited)	(unaudited)	(unaudited)		2017		Development	Claims
										(Actual)
2013	$	180,649	181,454	180,595	181,114	$	181,113	$	660	447,248
2014			146,060	140,139	141,869		142,110		1,739	405,798
2015				104,497	100,988		101,241		3,638	392,846
2016					85,426		86,446		7,835	441,619
2017							87,070		37,781	436,623
Total						$	597,980

Specialty Health Segment –Claims Development
	Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident			2013	2014	2015	2016
Year			(unaudited)	(unaudited)	(unaudited)	(unaudited)		2017
2013		$	131,801	179,023	179,750	180,520	$	180,453
2014				103,064	134,557	139,162		140,371
2015					70,090	94,757		97,603
2016						45,454		78,611
2017								49,289
Total							$	546,327
Outstanding policy benefits and claims payable before 2013, net of reinsurance								57
Total policy benefits and claims, net of reinsurance							$	51,710

The claim frequency information consists of the count of claims submitted. Each claim was counted as one claim whether or not multiple claim lines were submitted with that claim, and each claim was counted whether or not it resulted in a liability.  For those portions of business that did not have claim records readily available, a reasonable count assumption was made based on a comparison to the known records of a similar business type. Cumulative claim count information is not a precise tool for calculating claim severity. Factors, such as changes in provider billing practices, the mix of services, benefit designs or processing systems could impact this type of analysis. The Company does not necessarily use the cumulative number of reported claims disclosed above in its claims analysis but has provided this information to comply with accounting standards.

The following is supplementary information about the average historical policy claims duration for the Specialty Health segment as of December 31, 2017:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
	Year 1	Year 2	Year 3	Year 4	Year 5
Specialty Health Segment	64.7%	27.7%	2.2%	0.6%	0.0%

The liability for policy benefits and claims associated with the Company’s health insurance lines are embedded within the Specialty Health segment. The table below summarizes the components of the change in the liability for policy benefits and claims that are specific to the health insurance claims that are included in our Specialty Health segment for the periods indicated (in thousands).

		Specialty Health Segment
		Health Insurance Claims
		2017		2016		2015
						(unaudited)
Balance at beginning of year	$	27,183	$	23,425	$	35,620
Less: reinsurance recoverable		1,179		1,362		3,584
Net balance at beginning of year		26,004		22,063		32,036
Amount incurred, related to:
Current year		54,333		44,243		63,122
Prior years		158		(4,702)		(8,410)
Total incurred		54,491		39,541		54,712
Amount paid, related to:
Current year		24,370		19,371		42,419
Prior years		23,983		16,229		22,266
Total paid		48,353		35,600		64,685
Net balance at end of year		32,142		26,004		22,063
Plus:  reinsurance recoverable		762		1,179		1,362
Balance at end of year	$	32,904	$	27,183	$	23,425

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims was $32,142,000 at December 31, 2017.

The incurred claims and claim adjustment expenses, net, for the 2013 accident year include the acquisition of $15,384,000 of disability policy benefits and claims liabilities from a Receivership.

Claim frequency information consists of the count of unique claims where a benefit has been paid, whether that benefit was paid for one month or multiple months.  Any claims where a benefit has not been paid are not in the count. Cumulative claim count information is not a precise tool for calculating claim severity. Changes in reinsurance and other factors, such as those described in Note 1, could impact this type of analysis with regards to our group disability business. The Company does not necessarily use the cumulative number of reported claims disclosed above in its claims analysis but has provided this information to comply with accounting standards.

Unpaid claim liabilities related to our group disability policies is presented at present value. The following is additional information on unpaid claims liabilities presented at present value (in thousands):

		Carrying Value of				Aggregate Amount
		Unpaid Claim Liabilities				of Discount
		December 31,				December 31
		2017		2016		2017		2016
Group disability	$	60,724	$	60,194	$	11,707	$	11,475

Discount rates for each of the years ended December 31, 2017 and 2016 ranged from 3% to 6%. Insurance benefits, claims and reserves on the Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015, include the accretion of interest amounting to $1,706,000, $1,571,000 and $1,451,000, respectively. 

The following is supplementary information about the average historical claims duration for our group disability business as of December 31, 2017:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8
Group disability	18.3%	22.5%	7.4%	3.5%	2.4%	1.4%	1.0%	0.4%

The following table reconciles the above disclosures of undiscounted net incurred and paid claims development for significant short-duration contract liabilities to the liability for policy benefits and claims on the consolidated balance sheet (in thousands).

		December 31, 2017
Net outstanding balances:
Specialty Health Segment	$	51,710
DBL		6,579
Group disability		72,432
Other short-duration insurance lines		7,410
Policy benefits and claims, net of reinsurance		138,131
Reinsurance recoverable on unpaid claims:
Specialty Health Segment		1,821
DBL		1,124
Group disability		26,849
Other short-duration insurance lines		6,168
Reinsurance recoverable on unpaid claims		35,962
Insurance lines other than short-duration		6,297
Aggregate discount		(11,707)
Total policy benefit and claims	$	168,683