Note C - Loss and Loss Expense Reserves

Activity in the reserves for losses and loss expenses is summarized as follows. All amounts are shown net of reinsurance, unless otherwise indicated.

	2011			2010			2009
Reserves at the beginning of the year	$	218,629		$	203,253		$	231,633

Provision for losses and loss expenses:
Claims occurring during the current year		225,251			154,775			108,935
Claims occurring during prior years		(9,696	)		(8,823	)		(9,584	)
Total incurred		215,555			145,952			99,351

Loss and loss expense payments:
Claims occurring during the current year		71,699			56,394			41,302
Claims occurring during prior years		72,393			74,182			84,777
Total paid		144,092			130,576			126,079

Other reserve adjustment		-			-			(1,652	)

Reserves at the end of the year		290,092			218,629			203,253

Reinsurance recoverable on unpaid losses at the end of the year		131,464			125,891			155,778
Reserves, gross of reinsurance recoverable,
at the end of the year	$	421,556		$	344,520		$	359,031

The table above shows that a savings of $9,696 was developed during 2011 in the settlement of claims occurring on or before December 31, 2010 with comparative developments for the two previous calendar years. The net savings for each year are composed of individual claim savings and deficiencies which, in the aggregate have resulted from the settlement of claims at amounts lower than previously reserved and from changes in estimates of losses incurred but not reported as part of the normal reserving process.

The major components of the developments shown above are as follows for the years ended December 31 (savings) deficiency:

	2011			2010			2009

Property and casualty insurance	$	(7,417	)	$	(6,567	)	$	(13,526	)
Reinsurance		(2,279	)		(2,256	)		3,942
Total	$	(9,696	)	$	(8,823	)	$	(9,584	)

Favorable loss development is influenced by the Company's long-standing policy of reserving for losses realistically and a willingness to settle claims based upon a seasoned evaluation of its exposures. Loss reserves pertaining to the Company's property reinsurance business are established largely by the ceding reinsurers although the Company may adjust such reserves if management determines that additional reserves could be necessary. Accordingly, the fluctuation in loss developments related to reinsurance will tend to be more pronounced than those experienced on directly produced business which is reserved entirely by Company personnel. In addition, changes in the Company's net retention under reinsurance treaties will impact developments as more or less business is retained. These trends were considered in the establishment of the Company's reserves at December 31, 2011 and 2010.

Loss reserves on certain permanent total disability workers' compensation reserves have been discounted to present value at pre-tax rates not exceeding 3.5%. At December 31, 2011 and 2010, loss reserves have been reduced by approximately $6,642 and $6,463, respectively. Discounting is applied to these claims since the amount of periodic payments to be made during the lifetime of claimants is fixed and determinable.

Loss reserves have been reduced by estimated salvage and subrogation recoverable of approximately $7,158 and $6,370 at December 31, 2011 and 2010, respectively.