Note 3 - Property and Casualty Insurance Reserves

Property and casualty insurance reserve activity for the three months ended March 31, 2017 and 2016 was:



	Three Months Ended
(Dollars in Millions)	Mar 31, 2017			Mar 31, 2016
Property and Casualty Insurance Reserves:
Gross of Reinsurance and Indemnification at Beginning of Year	$	931.4		$	862.8
Less Reinsurance and Indemnification Recoverables at Beginning of Year	50.2			52.0
Property and Casualty Insurance Reserves - Net of Reinsurance and Indemnification at Beginning of Year	881.2			810.8
Incurred Losses and LAE Related to:
Current Year:
Continuing Operations	373.0			341.7
Prior Years:
Continuing Operations	11.1			2.7
Discontinued Operations	(0.2		)	(0.1		)
Total Incurred Losses and LAE Related to Prior Years	10.9			2.6
Total Incurred Losses and LAE	383.9			344.3
Paid Losses and LAE Related to:
Current Year:
Continuing Operations	120.6			120.1
Prior Years:
Continuing Operations	211.6			180.8
Discontinued Operations	0.8			3.1
Total Paid Losses and LAE Related to Prior Years	212.4			183.9
Total Paid Losses and LAE	333.0			304.0
Property and Casualty Insurance Reserves - Net of Reinsurance and Indemnification at End of Period	932.1			851.1
Plus Reinsurance and Indemnification Recoverables at End of Period	52.3			49.3
Property and Casualty Insurance Reserves - Gross of Reinsurance and Indemnification at End of Period	$	984.4		$	900.4

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 Operations in the period of change.

For the three months ended March 31, 2017, the Company increased its property and casualty insurance reserves by $10.9 million to recognize adverse development of loss and LAE reserves from prior accident years. Personal lines insurance loss and LAE reserves developed adversely by $9.3 million, and commercial lines insurance loss and LAE reserves developed adversely by $1.6 million. The commercial lines insurance loss and LAE reserve development included $1.8 million of adverse development from continuing operations and favorable development of $0.2 million from discontinued operations. Personal automobile insurance loss and LAE reserves developed adversely by $9.9 million due primarily to the emergence of loss patterns that were worse than expected for both the physical damage and liability insurance lines for the 2016 accident year. Homeowners insurance loss and LAE reserves developed adversely by $0.1 million due primarily to the emergence of loss patterns that were worse than expected for the 2016 accident year, partially offset by favorable development on catastrophes of $0.6 million related to the 2016 and 2015 accident years. Other personal lines loss and LAE reserves developed favorably by $0.7 million due primarily to the emergence of more favorable loss patterns than expected for the 2015, 2014 and 2013 accident years, partially offset by the emergence of worse than expected loss patterns for the 2016 accident year.

Note 3 - Property and Casualty Insurance Reserves (continued)

For the three months ended March 31, 2016, the Company increased its property and casualty insurance reserves by $2.6 million to recognize adverse development of loss and LAE reserves from prior accident years. Personal lines insurance loss and LAE reserves developed adversely by $5.1 million, and commercial lines insurance loss and LAE reserves developed favorably by $2.5 million. The commercial lines insurance loss and LAE reserve development included favorable development of $2.4 million from continuing operations and favorable development of $0.1 million from discontinued operations. Personal automobile insurance loss and LAE reserves developed adversely by $9.6 million, homeowners insurance loss and LAE reserves developed favorably by $5.1 million, and other personal lines loss and LAE reserves developed adversely by $0.6 million. Personal lines insurance loss and LAE reserves developed adversely due primarily to the emergence of worse than expected loss patterns than expected for the 2015 and 2014 accident years, partially offset by the emergence of more favorable loss patterns than expected for the 2013 and prior 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.