Unpaid Loss and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2013

Unpaid Loss and loss adjustment expenses [Abstract]

Unpaid Loss and Loss Adjustment Expenses

UNPAID LOSS AND LOSS ADJUSTMENT EXPENSES

The establishment of the provision for unpaid loss and loss adjustment expenses is based on known facts and interpretation of circumstances and is therefore a complex and dynamic process influenced by a large variety of factors. These factors include the Company's experience with similar cases and historical trends involving loss payment patterns, pending levels of unpaid loss and loss adjustment expenses, product mix or concentration, loss severity and loss frequency patterns.

Other factors include the continually evolving and changing regulatory and legal environment; actuarial studies; professional experience and expertise of the Company's claims departments' personnel and independent adjusters retained to handle individual claims; the quality of the data used for projection purposes; existing claims management practices including claims-handling and settlement practices; the effect of inflationary trends on future loss settlement costs; court decisions; economic conditions; and public attitudes.

Consequently, the process of determining the provision necessarily involves risks that the actual results will deviate, perhaps materially, from the best estimates made.

The Company's evaluation of the adequacy of unpaid loss and loss adjustment expenses includes a re-estimation of the liability for unpaid loss and loss adjustment expenses relating to each preceding financial year compared to the liability that was previously established.

(a) Property and Casualty

The results of this comparison and the changes in the provision for property and casualty unpaid loss and loss adjustment expenses, net of amounts recoverable from reinsurers, as of March 31, 2013 and March 31, 2012 were as follows:

(in thousands)	March 31, 2013			March 31, 2012
Balance at beginning of period, gross	$	103,116		$	120,258
Less reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses	5,478			298
Balance at beginning of period, net	97,638			119,960
Incurred related to:
Current year	20,950			21,533
Prior years	(789		)	242
Paid related to:
Current year	(8,210		)	(7,101		)
Prior years	(19,685		)	(29,546		)
Balance at end of period, net	89,904			105,088
Plus reinsurance recoverable related to property and casualty unpaid loss and loss adjustment expenses	8,019			969
Balance at end of period, gross	$	97,923		$	106,057

(b) Vehicle Service Agreements

The results of the comparison and the changes in the provision for vehicle service agreement unpaid loss and loss adjustment expenses as of March 31, 2013 are presented below. The changes in and the provision for vehicle service agreement unpaid loss and loss adjustment expenses were zero as of March 31, 2012.

(in thousands)	March 31, 2013
Balance at beginning of period	$	3,448
Incurred related to:
Current year	1,670
Prior years	—
Paid related to:
Current year	(1,756		)
Prior years	(81		)
Balance at end of period	$	3,281