Reserves for Unpaid Losses and Loss Adjustment Expenses	9 Months Ended
Sep. 30, 2011
Reserves for Unpaid Losses and Loss Adjustment Expenses	7. Reserves for Unpaid Losses and Loss Adjustment Expenses Unpaid losses and loss adjustment expenses (“LAE”) represent the estimated ultimate net cost of all reported and unreported losses incurred through each balance sheet date. The reserves for unpaid losses and LAE are estimated using individual case-basis valuations and statistical analyses. These reserves are revised periodically and are subject to the effects of trends in loss severity and frequency. Due to the inherent uncertainty in estimating unpaid losses and LAE, the actual ultimate amounts may differ from the recorded amounts. The estimates are periodically reviewed and adjusted as experience develops or new information becomes known. Such adjustments are included in current operations. We recorded $2.3 million and $18.1 million of unfavorable prior years’ loss development during the three and nine months ended September 30, 2011, respectively. The unfavorable prior year’s loss development for the nine months ended September 30, 2011 included $17.2 million of unfavorable prior years’ loss development in our Personal Lines business unit of which $10.1 million was attributable to Florida developing much worse than expected due primarily to rapid growth in the claim volume from Florida and the complexity related to Florida personal injury protection coverage claims. The remaining unfavorable prior years’ loss development for our Personal Lines business unit was primarily due to development of auto liability claims spread throughout our other states. For the first nine months of fiscal 2011, our E&S Commercial business unit had $3.4 million of unfavorable prior years’ loss development related primarily to commercial auto liability and physical damage. These unfavorable developments were partially offset by favorable prior years’ loss development of $2.3 million in our General Aviation business unit related to our liability lines of business and $0.2 million in our Standard Commercial business unit primarily related to our commercial property lines of business, partially offset by unfavorable prior years’ loss development driven by a late developing umbrella claim. We recorded $0.5 million and $7.0 million of unfavorable prior years’ loss development during the three and nine months ended September 30, 2010, respectively. The unfavorable prior years development during the nine months ended September 30, 2010 was comprised of $1.2 million of unfavorable development in our Personal Lines business primarily attributable to geographic expansion; $1.5 million of unfavorable development in our E&S Commercial business unit related primarily to general liability claims and increased volatility in large liability losses; $4.1 million of unfavorable development in our Standard Commercial business unit primarily attributable to our commercial property and general liability lines of business; $0.1 million of unfavorable development in our General Aviation business unit related to our liability lines of business; and $0.1 million of unfavorable development in our Excess & Umbrella business unit. For the purpose of estimating the reserves for unpaid losses and LAE during the nine months ended September 30, 2011, past experience was adjusted for the rapid emergence of additional Florida claims development. While we believe the reserves for unpaid losses and LAE are adequate, given our limited historical experience within the state, there is a reasonable possibility that this recent claims experience could be an indication of an unfavorable trend that may require additional reserves for unpaid losses and LAE. We have estimated the increase in reserves attributable to recent Florida claim experience to be $10.1 million for the nine months ended September 30, 2011, based on an estimated range of possible adverse development of $9.5 million to $11.0 million.

7. Reserves for Unpaid Losses and Loss Adjustment Expenses

Unpaid losses and loss adjustment expenses (“LAE”) represent the estimated ultimate net cost of all reported and unreported losses incurred through each balance sheet date. The reserves for unpaid losses and LAE are estimated using individual case-basis valuations and statistical analyses. These reserves are revised periodically and are subject to the effects of trends in loss severity and frequency. Due to the inherent uncertainty in estimating unpaid losses and LAE, the actual ultimate amounts may differ from the recorded amounts. The estimates are periodically reviewed and adjusted as experience develops or new information becomes known. Such adjustments are included in current operations.

We recorded $2.3 million and $18.1 million of unfavorable prior years’ loss development during the three and nine months ended September 30, 2011, respectively. The unfavorable prior year’s loss development for the nine months ended September 30, 2011 included $17.2 million of unfavorable prior years’ loss development in our Personal Lines business unit of which $10.1 million was attributable to Florida developing much worse than expected due primarily to rapid growth in the claim volume from Florida and the complexity related to Florida personal injury protection coverage claims. The remaining unfavorable prior years’ loss development for our Personal Lines business unit was primarily due to development of auto liability claims spread throughout our other states. For the first nine months of fiscal 2011, our E&S Commercial business unit had $3.4 million of unfavorable prior years’ loss development related primarily to commercial auto liability and physical damage. These unfavorable developments were partially offset by favorable prior years’ loss development of $2.3 million in our General Aviation business unit related to our liability lines of business and $0.2 million in our Standard Commercial business unit primarily related to our commercial property lines of business, partially offset by unfavorable prior years’ loss development driven by a late developing umbrella claim.

We recorded $0.5 million and $7.0 million of unfavorable prior years’ loss development during the three and nine months ended September 30, 2010, respectively. The unfavorable prior years development during the nine months ended September 30, 2010 was comprised of $1.2 million of unfavorable development in our Personal Lines business primarily attributable to geographic expansion; $1.5 million of unfavorable development in our E&S Commercial business unit related primarily to general liability claims and increased volatility in large liability losses; $4.1 million of unfavorable development in our Standard Commercial business unit primarily attributable to our commercial property and general liability lines of business; $0.1 million of unfavorable development in our General Aviation business unit related to our liability lines of business; and $0.1 million of unfavorable development in our Excess & Umbrella business unit.

For the purpose of estimating the reserves for unpaid losses and LAE during the nine months ended September 30, 2011, past experience was adjusted for the rapid emergence of additional Florida claims development. While we believe the reserves for unpaid losses and LAE are adequate, given our limited historical experience within the state, there is a reasonable possibility that this recent claims experience could be an indication of an unfavorable trend that may require additional reserves for unpaid losses and LAE. We have estimated the increase in reserves attributable to recent Florida claim experience to be $10.1 million for the nine months ended September 30, 2011, based on an estimated range of possible adverse development of $9.5 million to $11.0 million.