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, Net
	2013		2012		2013		2012
Future policy benefits
Life insurance policies:
Ordinary	$	52,915	$	51,256	$	237,694	$	244,634
Mass market		2,715		3,037		3,504		4,001
Individual annuities		135		142		-		-
		55,765		54,435	$	241,198	$	248,635
Accident and health insurance policies		14,099		12,497
		69,864		66,932
Unearned premiums		27,415		22,637
Losses, claims and loss adjustment expenses		63,018		62,873
Other policy liabilities		2,076		2,116
Total insurance reserves and policyholder funds	$	162,373	$	154,558

Annualized premiums for accident and health insurance policies were $91,359 and $83,038 at December 31, 2013 and 2012, 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 2013 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:

	2013			2012
Balance at January 1	$	62,873		$	57,975
Less: Reinsurance receivable on unpaid losses		(18,743	)		(15,673	)
Net balance at January 1		44,130			42,302

Incurred related to:
Current year		97,904			86,780
Prior years		(1,657	)		(1,841	)
Total incurred		96,247			84,939

Paid related to:
Current year		66,705			61,786
Prior years		24,968			21,325
Total paid		91,673			83,111
Net balance at December 31		48,704			44,130
Plus: Reinsurance receivable on unpaid losses		14,314			18,743
Balance at December 31	$	63,018		$	62,873

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:

	2013		2012
Total incurred claims	$	96,247	$	84,939
Cash surrender value and matured endowments		1,215		1,241
Benefit reserve changes		2,910		3,637
Total insurance benefits and losses incurred	$	100,372	$	89,817