Note 4 - Property and Casualty Insurance Reserves

Property and casualty insurance reserve activity for the six months ended June 30, 2015 and 2014 was:



	Six Months Ended
(Dollars in Millions)	Jun 30, 2015			Jun 30, 2014
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	733.9		$	843.5
Less Reinsurance Recoverables at Beginning of Year	54.9			63.4
Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	679.0			780.1
Property and Casualty Insurance Reserves Acquired, Net of Reinsurance and Indemnification	125.4			—
Incurred Losses and LAE Related to:
Current Year:
Continuing Operations	501.2			531.2
Prior Years:
Continuing Operations	(10.4		)	(34.2		)
Discontinued Operations	(3.5		)	(0.1		)
Total Incurred Losses and LAE Related to Prior Years	(13.9		)	(34.3		)
Total Incurred Losses and LAE	487.3			496.9
Paid Losses and LAE Related to:
Current Year:
Continuing Operations	264.1			285.2
Prior Years:
Continuing Operations	230.2			233.0
Discontinued Operations	3.7			4.7
Total Paid Losses and LAE Related to Prior Years	233.9			237.7
Total Paid Losses and LAE	498.0			522.9
Property and Casualty Insurance Reserves - Net of Reinsurance and Indemnification at End of Period	793.7			754.1
Plus Reinsurance and Indemnification Recoverables at End of Period	80.7			61.1
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	874.4		$	815.2

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 six months ended June 30, 2015, the Company reduced its property and casualty insurance reserves by $13.9 million to recognize favorable development of loss and LAE reserves from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $9.5 million, and commercial lines insurance loss and LAE reserves developed favorably by $4.4 million. The commercial lines insurance loss and LAE reserve development included favorable development of $0.9 million from continuing operations and favorable development of $3.5 million from discontinued operations. Personal automobile insurance loss and LAE reserves developed favorably by $6.4 million, homeowners insurance loss and LAE reserves developed favorably by $4.6 million, and other personal lines loss and LAE reserves developed adversely by $1.4 million. Personal lines insurance loss and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the 2013, 2012 and 2011 accident years, partially offset by the emergence of loss patterns that were worse than expected for the 2014 accident year.

Note 4 - Property and Casualty Insurance Reserves (continued)

For the six months ended June 30, 2014, the Company reduced its property and casualty insurance reserves by $34.3 million to recognize favorable development of loss and LAE reserves from prior accident years. Personal lines insurance loss and LAE reserves developed favorably by $34.1 million, and commercial lines insurance loss and LAE reserves developed favorably by $0.2 million. The commercial lines insurance loss and LAE reserve development included favorable development of $0.1 million from continuing operations and favorable development of $0.1 million from discontinued operations. Personal automobile insurance loss and LAE reserves developed favorably by $23.5 million, homeowners insurance loss and LAE reserves developed favorably by $8.8 million, and other personal lines loss and LAE reserves developed favorably by $1.8 million. Personal lines insurance loss and LAE reserves developed favorably due primarily to the emergence of loss patterns that were more favorable than expected for the 2013, 2012 and 2011 accident years.

The Company cannot predict whether loss and LAE reserves 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.