The following table is a summary reconciliation of the beginning and ending Property and Casualty unpaid claims and claim expense reserves for the periods indicated. The table presents reserves on both gross and net (after reinsurance) basis. The total net Property and Casualty insurance claims and claim expense incurred amounts are reflected in the Consolidated Statements of Operations. The end of the year gross reserve (before reinsurance) balances and the reinsurance recoverable balances are reflected on a gross basis in the Consolidated Balance Sheets.



($ in thousands)	Years Ended December 31,
	2019			2018			2017
Property and Casualty segment
Gross reserves, beginning of year ⁽¹⁾	$	367,180		$	319,182		$	307,757
Less: reinsurance recoverables	89,725			57,409			61,199
Net reserves, beginning of year ⁽²⁾	277,455			261,773			246,558
Incurred claims and claim expenses:
Claims occurring in the current year	483,062			547,959			498,989
Decrease in estimated reserves for claims occurring in prior years ⁽³⁾	(7,500		)	(300		)	(2,700		)
Total claims and claim expenses incurred ⁽⁴⁾	475,562			547,659			496,289
Claims and claim expense payments for claims occurring during:
Current year	329,475			369,194			333,385
Prior years	157,072			162,783			147,689
Total claims and claim expense payments	486,547			531,977			481,074
Net reserves, end of year ⁽²⁾	266,470			277,455			261,773
Plus: reinsurance recoverables	120,506			89,725			57,409
Gross reserves, end of year ⁽¹⁾	$	386,976		$	367,180		$	319,182

Underwriting results for Property and Casualty are significantly influenced by estimates of the Company's ultimate liability for insured events. There is a high degree of uncertainty inherent in the estimates of ultimate losses underlying the liability for unpaid claims and claim settlement expenses. This inherent uncertainty is particularly significant for liability-related exposures due to the extended period, often many years, which transpires between a loss event, receipt of related claims data from policyholders and ultimate settlement of the claim. Reserves for Property and Casualty claims include provisions for payments to be made on reported claims (case reserves), IBNR claims and associated settlement expenses (together, loss reserves). The process by which these reserves are established requires reliance upon estimates based on known facts and on interpretations of circumstances, including the Company's experience with similar cases and historical trends involving claim payments and related patterns, pending levels of unpaid claims and product mix, as well as other factors including court decisions, economic conditions, public attitudes and medical costs.

The Company believes the Property and Casualty loss reserves are appropriately established based on available facts, laws, and regulations. The Company calculates and records a single best estimate of the reserve (which is equal to the actuarial point estimate) as of each reporting date, for each line of business and its coverages for reported losses and for IBNR losses and as a result believes no other estimate is better than the recognized amount. Due to uncertainties involved, the ultimate cost of losses may vary materially from recognized amounts.

The Company continually updates loss estimates using both quantitative and qualitative information from its reserving actuaries and information derived from other sources. Adjustments may be required as information develops which varies from experience, or, in some cases, augments data which previously were not considered sufficient for use in determining liabilities. The effects of these adjustments may be significant and are charged or credited to income in the period in which the adjustments are made.

Numerous risk factors will affect more than one product line. One of these factors is changes in claim department practices, including claim closure rates, number of claims closed without payment, the use of third-party claim adjusters and the level of needed case reserve estimated by the adjuster. Other risk factors include changes in claim frequency, changes in claim severity, regulatory and legislative actions, court actions, changes in economic conditions and trends (e.g., medical costs, labor rates and the cost of materials), the occurrence of unusually large or frequent catastrophic loss events, timeliness of claim reporting, the state in which the claim occurred and degree of claimant fraud. The extent of the impact of a risk factor will also vary by coverages within

While all product lines are exposed to these risks, there are some loss types or product lines for which the financial effect will be more significant. For instance, given the relatively large proportion (approximately 80.0% as of December 31, 2019) of the Company's reserves that are in the longer-tail automobile liability coverages, regulatory and court actions, changes in economic conditions and trends, and medical costs could be expected to impact this product line more extensively than others.

Reserves are established for claims as they occur for each line of business based on estimates of the ultimate cost to settle the claims. The actual loss results are compared to prior estimates and differences are recorded as re-estimates. The primary actuarial techniques (development of paid loss dollars, development of reported loss dollars, methods based on expected loss ratios and methods utilizing frequency and severity of claims) used to estimate reserves and provide for losses are applied to actual paid losses and reported losses (paid losses plus individual case reserves set by claim adjusters) for an accident year to create an estimate of how losses are likely to develop over time.

An accident year refers to classifying claims based on the year in which the claims occurred. For estimating short-tail coverage reserves (e.g., homeowners and automobile physical damage), which comprise approximately 20.0% of the Company's total loss reserves as of December 31, 2019, the primary actuarial technique utilized is the development of paid loss dollars due to the relatively quick claim settlement period. As it relates to estimating long-tail coverage reserves (primarily related to automobile liability), which comprise approximately 80.0% of the Company's total loss reserves as of December 31, 2019, the primary actuarial technique utilized is the development of reported loss dollars due to the relatively long claim settlement period.

In all of the loss estimation techniques referred to above, a ratio (development factor) is calculated which compares current results to results in the prior period for each accident year. Various development factors, based on historical results, are multiplied by the current experience to estimate the development of losses of each accident year from the current time period into the next time period. The development factors for the next time period for each accident year are compounded over the remaining calendar years to calculate an estimate of ultimate losses for each accident year. Occasionally, unusual aberrations in loss patterns are caused by factors such as changes in claim reporting, settlement patterns, unusually large losses, process changes, legal or regulatory environment changes, and other influences. In these instances, analyses of alternate development factor selections are performed to evaluate the effect of these factors and judgment is applied to make appropriate development factor assumptions needed to develop a best estimate of ultimate losses. Paid losses are then subtracted from estimated ultimate losses to determine the indicated loss reserves. The difference between indicated reserves and recorded reserves is the amount of reserve re-estimate.

Claim count estimates are also established for claims as they occur for each line of business based on estimates of the ultimate claim counts. (These counts are derived by counting the number of claimants by insurance coverage.) The primary actuarial techniques (development of paid claim counts and development of reported claim counts) used to estimate ultimate claim counts are applied to actual paid claim counts and reported claim counts (paid claims plus individual unpaid claims set by claim adjusters) for an accident year to create an estimate of how claims are likely to develop over time. An accident year refers to classifying claims based on the year in which the claim occurred. The ultimate claim count generally gives equal consideration to the results of the two actuarial techniques described.

Numerous actuarial estimates of the types described above are prepared each quarter to monitor losses for each line of business, including the line's individual coverages; for reported losses and IBNR. Often, several different estimates are prepared for each detailed component, incorporating alternative analyses of changing claim settlement patterns and other influences on losses, from which the Company selects the best estimate for each component, occasionally incorporating additional analyses and judgment, as described above. These estimates also incorporate the historical impact of inflation into reserve estimates, the implicit assumption being that a multi-year average development factor represents an adequate provision. Based on the Company's review of these estimates, as well as the review of the independent reserve studies, the best estimate of required reserves for each line of business, including the line's individual coverages, is determined by management and is recognized for each accident year, then the required reserves for each component are summed to create the reserve balances carried on the Company's Consolidated Balance Sheets.

Based on the Company's products and coverages, historical experience, and various actuarial methodologies used to develop reserve estimates, the Company estimates that the potential variability of the Property and Casualty loss reserves within a reasonable probability of other possible outcomes may be approximately plus or minus 6.0% of reserves, which equates to plus or minus approximately $13.0 million of net income as of December 31, 2019. Although this evaluation reflects the most likely outcomes, it is possible the final outcome may fall below or above these estimates.

Net favorable development of total reserves for Property and Casualty claims occurring in prior years was $7.5 million in 2019, $0.3 million in 2018 and $2.7 million in 2017. In 2019, the favorable development was predominantly the result of favorable severity trends in Auto for accident year 2018. In 2018, the favorable development was predominantly the result of favorable severity trends in property for accident years 2016 and prior. In 2017, the favorable development was predominantly the result of favorable severity trends in property for accident years 2015 and prior.

The Company completes a detailed study of Property and Casualty reserves based on information available at the end of each quarter and year. Trends of reported losses (paid amounts and case reserves on claims reported to the Company) for each accident year are reviewed and ultimate loss costs for those accident years are estimated. The Company engages an independent property and casualty actuarial consulting firm to prepare an independent study of the Company's Property and Casualty reserves at December 31^st of each year. The result of the independent actuarial study at December 31, 2019 was consistent with management's analysis and selected estimates and did not result in any adjustments to the Company's Property and Casualty reserves recognized.



($ in thousands)
Homeowners
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,																						As of December 31, 2019
																						Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims

Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	140,994	$	136,907	$	133,358	$	133,235	$	133,216	$	133,136	$	132,859		$	132,905	$	132,627	$	132,627	$	—	25,150
2011			150,141		150,334		150,791		148,860		148,755		148,414			148,370		148,079		148,067		—		29,531
2012					108,754		109,156		109,360		106,486		106,308			106,348		106,000		106,028		—		21,578
2013							105,584		107,489		103,982		102,407			102,345		101,769		101,709		—		19,221
2014									111,647		113,505		109,059			106,844		106,554		106,458		59		20,084
2015											111,706		115,134			114,404		114,053		115,050		276		18,714
2016													115,931			118,604		117,009		117,933		280		19,853
2017																126,285		129,818		132,666		2,285		19,827
2018																		166,793		157,404		4,170		20,954
2019																				130,391		16,842		16,155
																		Total		$	1,248,333


($ in thousands)
Homeowners
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	98,190	$	124,326	$	129,790	$	132,246	$	132,523	$	132,604	$	132,599		$	132,602	$	132,602	$	132,602
2011			123,046		142,846		145,852		146,908		147,451		148,026			148,014		148,069		148,067
2012					84,260		101,566		104,203		105,156		105,561			105,909		105,993		106,021
2013							76,890		96,599		99,361		100,968			101,527		101,677		101,709
2014									83,314		103,030		105,704			106,081		106,258		106,388
2015											90,704		109,303			111,882		113,321		114,648
2016													95,772			113,186		115,053		117,537
2017																106,800		128,518		129,767
2018																		130,548		152,356
2019																				103,790
																Total				1,212,885
															Outstanding prior to 2010					32
															Prior years paid					668
															Liabilities for claims and claim adjustment expenses, net of reinsurance					$	35,480



($ in thousands)
Auto Liability
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,																							As of December 31, 2019
																							Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims

Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	157,712	$	160,058	$	156,369	$	154,222	$	152,483	$	151,653	$	149,818		$	149,425	$	149,542	$	149,481		$	—	48,942
2011			150,803		146,713		145,735		143,133		142,488		139,840			138,891		138,949		138,849			94		45,976
2012					156,448		153,815		150,336		149,346		147,594			145,847		145,620		145,515			204		45,984
2013							153,860		152,858		150,720		150,657			148,111		147,993		148,135			575		47,369
2014									155,105		157,249		158,470			159,937		159,794		159,355			665		49,386
2015											165,517		172,553			177,021		178,325		178,654			1,850		50,618
2016													180,380			184,440		184,567		186,568			2,649		51,995
2017																187,983		188,756		188,625			8,025		48,906
2018																		200,314		195,284			26,931		47,078
2019																				181,141			64,778		42,587
																		Total		$	1,671,607


($ in thousands)
Auto Liability
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	63,416	$	118,345	$	137,012	$	144,255	$	147,337	$	148,751	$	149,247		$	149,364	$	149,439	$	149,474
2011			61,070		108,837		126,812		133,931		136,906		138,151			138,358		138,689		138,692
2012					61,279		109,574		127,185		138,641		142,916			144,622		145,121		145,184
2013							62,224		108,856		131,214		139,954			145,291		146,770		147,409
2014									61,329		117,468		139,463			149,059		155,758		157,596
2015											70,836		134,473			157,980		170,088		174,495
2016													73,073			140,901		166,815		177,834
2017																70,682		139,531		166,614
2018																		77,528		141,537
2019																				69,665
																Total				1,468,500
															Outstanding prior to 2010					73
															Prior years paid					(219		)
															Liabilities for claims and claim adjustment expenses, net of reinsurance					$	203,180



($ in thousands)
Auto Physical Damage
Incurred Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,																						As of December 31, 2019
																						Total of Incurred- But-Not-Reported Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Reported Claims

Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	84,112	$	83,420	$	83,103	$	83,046	$	83,052	$	83,050	$	83,036		$	83,028	$	83,018	$	83,011	$	—		81,581
2011			86,205		85,507		86,023		85,120		85,143		85,116			85,108		85,102		85,090		—			80,804
2012					83,770		82,337		83,402		83,431		83,354			83,342		83,334		83,322		—			78,165
2013							91,448		88,856		88,672		88,627			88,455		88,525		88,457		—			80,920
2014									95,572		95,634		95,422			95,239		95,232		95,241		—			87,901
2015											99,291		97,994			97,624		97,455		97,612		(18		)	87,497
2016													112,430			109,515		109,348		109,603		(17		)	93,225
2017																115,483		111,798		110,520		(161		)	91,270
2018																		109,040		108,886		(326		)	94,388
2019																				111,577		(6,829		)	89,207
																		Total		$	973,319


($ in thousands)
Auto Physical Damage
Cumulative Paid Claims and Allocated Claim Adjustment Expense, Net of Reinsurance
Years Ended December 31,
Accident	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited			Unaudited		Unaudited
Year	2010		2011		2012		2013		2014		2015		2016			2017		2018		2019
2010	$	79,329	$	83,120	$	83,103	$	83,087	$	83,067	$	83,051	$	83,036		$	83,028	$	83,015	$	83,009
2011			83,227		85,254		85,181		85,148		85,127		85,116			85,108		85,095		85,090
2012					80,519		83,418		83,372		83,355		83,347			83,342		83,326		83,322
2013							85,110		88,688		88,580		88,532			88,484		88,471		88,452
2014									88,939		95,444		95,266			95,256		95,258		95,243
2015											92,138		97,850			97,685		97,638		97,625
2016													106,459			109,686		109,536		109,611
2017																105,156		110,817		110,674
2018																		103,559		109,103
2019																				106,243
																Total				968,372
															Outstanding prior to 2010					—
															Prior years paid					—
															Liabilities for claims and claim adjustment expenses, net of reinsurance					$	4,947



($ in thousands)	Years Ended December 31,
	2019
Property and Casualty segment
Net reserves
Homeowners	$	35,480
Auto liability	203,180
Auto physical damage	4,947
Other short duration lines	2,892
Total net reserves for unpaid claims and claim adjustment expense, net of reinsurance	246,499

Reinsurance recoverable on unpaid claims
Homeowners	12,394
Auto liability	100,866
Other short duration lines	7,246
Total reinsurance recoverable on unpaid claims	120,506

Insurance lines other than short duration ⁽¹⁾	55,878
Unallocated claims adjustment expenses	19,971
Total other than short duration and unallocated claims adjustment expenses	75,849

Gross reserves, end of year ⁽¹⁾	$	442,854