Insurance Reserves

3 Months Ended

Mar. 31, 2013

Insurance [Abstract]

Insurance Reserves

12. Insurance Reserves

We record expenses and liabilities for losses and loss adjustment expenses for claims associated with: (1) insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican; (2) self-insurance, including workers compensation; and (3) deductible amounts under our insurance policies. The establishment of the provisions for outstanding losses and loss adjustment expenses is based on actuarial or internally developed studies that include known facts and interpretations of circumstances, including our 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 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 months ended March 31, 2013 and 2012. The insurance reserve is included as a component of accrued liabilities in the Financial Services section of the accompanying consolidated balance sheets.

	Three Months Ended March 31,
	2013			2012
	(Dollars in thousands)
Balance at beginning of period	$	47,852		$	49,376
Expense provisions		1,527			766
Cash payments		(430	)		(5,418	)
Balance at end of period	$	48,949		$	44,724

In the ordinary course of business, we make payments from our insurance reserves to settle litigation claims arising primarily from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments shown for the three months ended March 31, 2013 are not necessarily indicative of what future cash payments will be for subsequent periods. This is exemplified by the higher cash payments for the three months ended March 31, 2012 compared to the same period in 2013, which were driven by resolution of several significant covered claims in the first quarter of 2012. The increase in our expense provisions was driven by a higher number of homes delivered during the first quarter of 2013 when compared to the same period in 2012 in addition to a higher expense provision rate per home closed as the result of a recent actuarial study performed.