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.

	2014			2013			2012
Reserves at the beginning of the year	$	288,088		$	289,236		$	290,092

Provision for losses and loss expenses:
Claims occurring during the current year		169,950			156,264			147,963
Claims occurring during prior years		(10,354	)		(5,563	)		(9,875	)
Total incurred		159,596			150,701			138,088

Loss and loss expense payments:
Claims occurring during the current year		59,826			47,908			44,941
Claims occurring during prior years		92,275			103,941			94,003
Total paid		152,101			151,849			138,944

Reserves at the end of the year		295,583			288,088			289,236

Reinsurance recoverable on unpaid losses at the end of the year		210,519			186,382			166,218
Reserves, gross of reinsurance
recoverable, at the end of the year	$	506,102		$	474,470		$	455,454

The table above shows that a savings of $10,354 was developed during 2014 in the settlement of claims occurring on or before December 31, 2013 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:

	2014			2013			2012

Property and casualty insurance	$	(5,423	)	$	(1,725	)	$	(7,111	)
Reinsurance		(4,931	)		(3,838	)		(2,764	)
Totals	$	(10,354	)	$	(5,563	)	$	(9,875	)

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 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, 2014 and 2013.

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, 2014 and 2013, loss reserves have been reduced by approximately $3,129 and $5,885, 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 $8,115 at December 31, 2014 and 2013, respectively.