Note 3 - Property and Casualty Insurance Reserves

Property and Casualty Insurance Reserve activity for the nine months ended September 30, 2013 and 2012 was:



	Nine Months Ended
(Dollars in Millions)	Sep 30, 2013			Sep 30, 2012
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	970.6		$	1,029.1
Less Reinsurance Recoverables at Beginning of Year	66.2			74.5
Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	904.4			954.6
Incurred Losses and LAE Related to:
Current Year:
Continuing Operations	811.1			925.0
Prior Years:
Continuing Operations	(43.2		)	(23.2		)
Discontinued Operations	(4.5		)	(0.5		)
Total Incurred Losses and LAE Related to Prior Years	(47.7		)	(23.7		)
Total Incurred Losses and LAE	763.4			901.3
Paid Losses and LAE Related to:
Current Year:
Continuing Operations	485.8			545.0
Prior Years:
Continuing Operations	354.4			382.0
Discontinued Operations	9.8			14.1
Total Paid Losses and LAE Related to Prior Years	364.2			396.1
Total Paid Losses and LAE	850.0			941.1
Property and Casualty Insurance Reserves - Net of Reinsurance at End of Period	817.8			914.8
Plus Reinsurance Recoverables at End of Period	66.8			67.0
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	884.6		$	981.8

Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Condensed Consolidated Statements of Income in the period of change.

For the nine months ended September 30, 2013, the Company reduced its property and casualty insurance reserves by $47.7 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance losses and LAE reserves developed favorably by $41.2 million and commercial lines insurance losses and LAE reserves developed favorably by $6.5 million. The commercial lines insurance losses and LAE reserves included favorable development of $2.0 million from continuing operations and $4.5 million from discontinued operations. Personal automobile insurance losses and LAE reserves developed favorably by $22.6 million, homeowners insurance losses and LAE reserves developed favorably by $13.3 million and other personal lines losses and LAE reserves developed favorably by $5.3 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the three most recent accident years.

Note 3 - Property and Casualty Insurance Reserves (continued)

For the nine months ended September 30, 2012, the Company reduced its property and casualty insurance reserves by $23.7 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance losses and LAE reserves developed favorably by $10.4 million and commercial lines insurance losses and LAE reserves developed favorably by $13.3 million. The commercial lines insurance losses and LAE reserves included favorable development of $12.8 million from continuing operations and $0.5 million from discontinued operations. Personal automobile insurance losses and LAE reserves developed adversely by $3.6 million, homeowners insurance losses and LAE reserves developed favorably by $11.3 million and other personal lines losses and LAE reserves developed favorably by $2.7 million. The commercial lines insurance losses and LAE reserves from continuing operations developed favorably due primarily to the emergence of more favorable loss patterns than expected for the four most recent accident years.

The Company cannot predict whether losses and LAE will develop favorably or unfavorably from the amounts reported in the Company’s Condensed Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s consolidated shareholders’ equity, but could have a material effect on the Company’s consolidated financial results for a given period.