10.Reserves

The following table provides reserve information of the Company’s major product lines at the dates shown:

	December 31, 2014								December 31, 2013
					Claims and Benefits Payable								Claims and Benefits Payable
	Future Policy Benefits and Expenses		Unearned Premiums		Case Reserves		Incurred But Not Reported Reserves		Future Policy Benefits and Expenses		Unearned Premiums		Case Reserves		Incurred But Not Reported Reserves
Long Duration Contracts:
Preneed funeral life insurance policies and investment-type annuity contracts	$	906,864	$	42	$	5,737	$	3,021	$	976,837	$	101	$	4,189	$	3,003
Life insurance no longer offered	251,495		525		1,485		1,163		258,513		528		1,140		2,521
FFG, LTC and other disposed businesses	1,714,854		25,227		265,886		34,869		1,474,858		17,623		205,524		26,351
All other	33,493		370		13,616		9,707		33,668		461		14,595		8,324
Short Duration Contracts:
Group term life	0		2,780		160,789		27,730		0		4,039		161,042		28,480
Group disability	0		1,430		1,063,982		104,953		0		2,435		1,086,870		111,546
Medical	0		22		1,412		726		0		244		1,895		1,205
Dental	0		3,773		2,106		16,448		0		4,921		2,245		16,787
Credit disability	0		14		0		1,962		0		2		0		2,203
All other	0		172		360		1,986		0		181		245		1,565
Total	$	2,906,706	$	34,355	$	1,515,373	$	202,565	$	2,743,876	$	30,535	$	1,477,745	$	201,985

The following table provides a roll forward of the Company’s product lines with the most significant claims and benefits payable balances: group term life and group disability lines of business. Claims and benefits payable is comprised of case and IBNR reserves.

	Group Term Life			Group Disability

Balance as of December 31, 2011, gross of reinsurance	205,989			1,288,470

Less: Reinsurance ceded and other (1)	(3,109		)	(32,709		)

Balance as of January 1, 2012, net of reinsurance	202,880			1,255,761
Incurred losses related to:
Current year	121,051			280,183
Prior year’s interest	7,575			54,696
Prior year (s)	(25,441		)	(56,891		)
Total incurred losses	103,185			277,988
Paid losses related to:
Current year	76,377			67,069
Prior year (s)	39,693			270,749
Total paid losses	116,070			337,818
Balance as of December 31, 2012, net of reinsurance	189,995			1,195,931
Plus: Reinsurance ceded and other (1)	2,612			33,494

Balance as of December 31, 2012, gross of reinsurance	$	192,607		$	1,229,425

Less: Reinsurance ceded and other (1)	(2,612		)	(33,494		)

Balance as of January 1, 2013, net of reinsurance	189,995			1,195,931
Incurred losses related to:
Current year	116,735			275,567
Prior year’s interest	7,388			53,255
Prior year (s)	(12,207		)	(29,995		)
Total incurred losses	111,916			298,827
Paid losses related to:
Current year	72,794			68,769
Prior year (s)	41,891			262,215
Total paid losses	114,685			330,984
Balance as of December 31, 2013, net of reinsurance	187,226			1,163,774
Plus: Reinsurance ceded and other (1)	2,296			34,642

Balance as of December 31, 2013 gross of reinsurance	$	189,522		$	1,198,416

Less: Reinsurance ceded and other (1)	(2,296		)	(34,642		)

Balance as of January 1, 2014, net of reinsurance	187,226			1,163,774
Incurred losses related to:
Current year	119,725			278,082
Prior year’s interest	7,187			50,610
Prior year (s)	(14,875		)	(34,238		)
Total incurred losses	112,037			294,454
Paid losses related to:
Current year	74,687			78,411
Prior year (s)	39,322			248,166
Total paid losses	114,009			326,577
Balance as of December 31, 2014, net of reinsurance	185,254			1,131,651
Plus: Reinsurance ceded and other (1)	3,265			37,284

Balance as of December 31, 2014 gross of reinsurance	$	188,519		$	1,168,935

(1)

Reinsurance ceded and other includes claims and benefits payable balances that have either been (a) reinsured to third parties, (b) established for claims related expenses whose subsequent payment is not recorded as a paid claim, or (c) reserves established for obligations that would persist even if contracts were cancelled (such as extension of benefits), which cannot be analyzed appropriately under a roll-forward approach.

Short Duration Contracts

The Company’s short duration contracts are comprised of group term life, group disability, medical, dental, credit disability. The principal products and services included in these categories are described in the summary of significant accounting policies. See Note 2 for further information.

Case and IBNR reserves are developed using actuarial principles and assumptions that consider, among other things, contractual requirements, historical utilization trends and payment patterns, benefit changes, medical inflation, seasonality, membership, product mix, legislative and regulatory environment, economic factors, disabled life mortality and claim termination rates and other relevant factors. The Company consistently applies the principles and assumptions listed above from year to year, while also giving due consideration to the potential variability of these factors.

Since case and IBNR reserves include estimates developed from various actuarial methods, the Company’s actual losses incurred may be more or less than the Company’s previously developed estimates. As shown in the table above, if the amounts listed on the line labeled “Incurred losses related to: Prior years” are negative (redundant) this means that the Company’s actual losses incurred related to prior years for these lines were less than the estimates previously made by the Company. If the line labeled “Incurred losses related to: Prior years” are positive (deficient) this means that the Company’s actual losses incurred related to prior years for these lines were greater than the estimates previously made by the Company.

The group term life case and IBNR reserve redundancies in all years are due to actual mortality rates running below those assumed in prior year reserves, and actual recovery rates running higher than those assumed in prior year reserves.

Group disability case and IBNR reserves show redundancies in all years due to actual claim recovery rates exceeding those assumed in prior year reserves.

The Company’s group disability products include short and long term disability coverage. Case and IBNR reserves for long-term disability claims have been discounted at 5.25% for claims incurred in 2010 and prior years, and between 4.25% and 4.75% for claims incurred after 2010. The amount of discounts deducted from outstanding reserves as of December 31, 2014 and 2013 are $344,012 and $365,234 respectively.

Long Duration Contracts

The Company’s long duration contracts are primarily comprised of preneed life insurance and annuity policies, life insurance policies (no longer offered), and FFG and LTC disposed businesses. The principal products and services included in these categories are described in the summary of significant accounting policies. See Note 2 for further information.

Preneed Business — no longer offered

Interest and discount rates for preneed life insurance vary by year of issuance and product, and ranged from 4.7% to 7.3% in 2014 and 2013 before provisions for adverse deviation, which ranged from 0.2% to 0.5% in both 2014 and 2013.

Interest and discount rates for traditional life insurance vary by year of issuance and products and were 7.5% grading to 5.3% over 20 years in 2014 and 2013 with the exception of a block of pre-1980 business which had a level 8.8% discount rate in 2014 and 2013.

Mortality assumptions are based upon pricing assumptions and modified to allow for provisions for adverse deviation. Surrender rates vary by product and are based upon pricing assumptions.

Future policy benefit increases on preneed life insurance policies ranged from 1.0% to 7.0% in 2014 and 2013. Some policies have future policy benefit increases that are guaranteed or tied to equal some measure of inflation. The inflation assumption for most of these inflation-linked benefits was 3.0% in both 2014 and 2013 with the exception of most policies issued in 2005 through 2007 where the assumption was 2.3%.

The reserves for preneed annuities are based on assumed interest rates credited on deferred annuities, which vary by year of issue, and ranged from 1.0% to 5.5% in 2014 and 2013. Withdrawal charges, if any, can range from 7.0% to 0.0% and grade to zero over a period of seven years.

FFG and LTC

Reserves for businesses previously disposed of by FFG and LTC are included in the Company’s reserves in accordance with the insurance guidance. The Company maintains an offsetting reinsurance recoverable related to these reserves. See Note 9 for further information.