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.

	2013			2012			2011
Reserves at the beginning of the year	$	289,236		$	290,092		$	218,629

Provision for losses and loss expenses:
Claims occurring during the current year		156,264			147,963			225,251
Claims occurring during prior years		(5,563	)		(9,875	)		(9,696	)
Total incurred		150,701			138,088			215,555

Loss and loss expense payments:
Claims occurring during the current year		47,908			44,941			71,699
Claims occurring during prior years		103,941			94,003			72,393
Total paid		151,849			138,944			144,092

Reserves at the end of the year		288,088			289,236			290,092

Reinsurance recoverable on unpaid losses at the end of the year		186,382			166,218			131,464
Reserves, gross of reinsurance
recoverable, at the end of the year	$	474,470		$	455,454		$	421,556

The table above shows that a savings of $5,563 was developed during 2013 in the settlement of claims occurring on or before December 31, 2012 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:

	2013			2012			2011

Property and casualty insurance	$	(1,725	)	$	(7,111	)	$	(7,417	)
Reinsurance		(3,838	)		(2,764	)		(2,279	)
Totals	$	(5,563	)	$	(9,875	)	$	(9,696	)

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 reinsurance business are established partially by the ceding reinsurers although the Company routinely adjusts such reserves if management determines that additional reserves could be necessary. Accordingly, there is potential for fluctuations in loss developments related to reinsurance assumed 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, 2013 and 2012.

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, 2013 and 2012, loss reserves have been reduced by approximately $5,885 and $6,118, 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 $8,115 and $7,839 at December 31, 2013 and 2012, respectively.