Note 3.

Insurance Reserves and Policyholder Funds

The following table presents the Company's reserves for life, accident, health and property and casualty losses as well as loss adjustment expenses.

					Amount of Insurance In Force
	2011		2010		2011		2010
Future policy benefits
Life insurance policies:
Ordinary	$	49,261	$	48,278	$	237,966	$	252,543
Mass market		3,293		3,572		4,450		4,941
Individual annuities		186		193		-		-
		52,740		52,043	$	242,416	$	257,484
Accident and health insurance policies		10,581		8,768
		63,321		60,811
Unearned premiums		23,646		21,170
Losses, claims and loss adjustment expenses		57,975		53,961
Other policy liabilities		2,252		1,960
Total insurance reserves and policyholder funds	$	147,194	$	137,902

Annualized premiums for accident and health insurance policies were $68,783 and $54,026 at December 31, 2011 and 2010, respectively.

Future Policy Benefits

Liabilities for life insurance future policy benefits are based upon assumed future investment yields, mortality rates, and withdrawal rates after giving effect to possible risks of unexpected claim experience. The assumed mortality and withdrawal rates are based upon the Company's experience. The interest rates assumed for life, accident and health are generally: (i) 2.5% to 5.5% for issues prior to 1977, (ii) 7% graded to 5.5% for 1977 through 1979 issues, (iii) 9% for 1980 through 1987 issues, (iv) 5% to 7% for 1988 through 2009 issues, and (v) 4% for 2010 and 2011 issues.

Loss and Claim Reserves

Loss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management's estimate of ultimate liability and claims adjusters' evaluations for unpaid claims reported prior to the close of the accounting period, (b) estimates of incurred but not reported (“IBNR”) claims based on past experience, and (c) estimates of loss adjustment expenses. The estimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in the statement of operations in the year in which such changes are known.

Activity in the liability for unpaid loss and claim reserves is summarized as follows:

	2011			2010
Balance at January 1	$	53,961		$	50,112
Less: Reinsurance recoverables		(14,226	)		(11,489	)
Net balance at January 1		39,735			38,623

Incurred related to:
Current year		73,980			69,779
Prior years		(4,095	)		(6,304	)
Total incurred		69,885			63,475

Paid related to:
Current year		51,316			47,749
Prior years		16,301			14,614
Total paid		67,617			62,363
Reserves acquired		299			-
Net balance at December 31		42,302			39,735
Plus: Reinsurance recoverables		15,673			14,226
Balance at December 31	$	57,975		$	53,961

Prior years' development was primarily the result of better than expected development on prior years IBNR reserves for certain lines of business primarily within American Southern.

Following is a reconciliation of total incurred claims to total insurance benefits and losses incurred:

	2011		2010
Total incurred claims	$	69,885	$	63,475
Cash surrender value and matured endowments		1,400		1,509
Benefit reserve changes		2,329		1,870
Total insurance benefits and losses incurred	$	73,614	$	66,854