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
	2012		2011		2012		2011
Future policy benefits
Life insurance policies:
Ordinary	$	51,256	$	49,261	$	244,634	$	237,966
Mass market		3,037		3,293		4,001		4,450
Individual annuities		142		186		-		-
		54,435		52,740	$	248,635	$	242,416
Accident and health insurance policies		12,497		10,581
		66,932		63,321
Unearned premiums		22,637		23,646
Losses, claims and loss adjustment expenses		62,873		57,975
Other policy liabilities		2,116		2,252
Total insurance reserves and policyholder funds	$	154,558	$	147,194

Annualized premiums for accident and health insurance policies were $83,038 and $68,783 at December 31, 2012 and 2011, 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 future policy benefits 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 through 2012 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:

	2012			2011
Balance at January 1	$	57,975		$	53,961
Less: Reinsurance receivable on unpaid losses		(15,673	)		(14,226	)
Net balance at January 1		42,302			39,735

Incurred related to:
Current year		86,780			73,980
Prior years		(1,841	)		(4,095	)
Total incurred		84,939			69,885

Paid related to:
Current year		61,786			51,316
Prior years		21,325			16,301
Total paid		83,111			67,617
Reserves acquired		-			299
Net balance at December 31		44,130			42,302
Plus: Reinsurance receivable on unpaid losses		18,743			15,673
Balance at December 31	$	62,873		$	57,975

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:

	2012		2011
Total incurred claims	$	84,939	$	69,885
Cash surrender value and matured endowments		1,241		1,400
Benefit reserve changes		3,637		2,329
Total insurance benefits and losses incurred	$	89,817	$	73,614