Insurance Reserves

6 Months Ended

Jun. 30, 2012

Insurance Reserves

11. Insurance Reserves

The Company records expenses and liabilities for losses and loss adjustment expenses for claims associated with: (1) insurance policies with Allegiant and re-insurance agreements issued by StarAmerican; (2) self-insurance, including workers compensation; and (3) deductible amounts under the Company’s insurance policies. The establishment of the provisions for outstanding losses and loss adjustment expenses is based on actuarial studies that include known facts and interpretations of circumstances, including the Company’s experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns such as those caused by natural disasters, fires, or accidents, depending on the business conducted, and changing regulatory and legal environments.

The table set forth below summarizes the insurance reserve activity for the three and six months ended June 30, 2012 and 2011. The insurance reserve is included in accounts payable and accrued liabilities in the Financial Services segment of the accompanying balance sheets.

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012			2011
			(Dollars in thousands)
Balance at beginning of year	$	44,922	$	52,031		$	50,459		$	52,901
Expense provisions		909		587			1,553			1,067
Cash payments		—		(656	)		(6,181	)		(2,006	)
Adjustments		—		348			—			348
Balance at end of period	$	45,831	$	52,310		$	45,831		$	52,310

In the ordinary course of business, the Company makes payments from its insurance reserves to settle litigation claims arising primarily from its homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments shown for the three and six months ended June 30, 2012 are not necessarily indicative of what future cash payments will be for subsequent periods.