Note 3 - Property and Casualty Insurance Reserves

Property and casualty insurance reserve activity for the three months ended March 31, 2015 and 2014 was:



	Three Months Ended
(Dollars in Millions)	Mar 31, 2015			Mar 31, 2014
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	733.9		$	843.5
Less Reinsurance Recoverables at Beginning of Year	54.9			63.4
Property and Casualty Insurance Reserves - Net of Reinsurance at Beginning of Year	679.0			780.1
Incurred Losses and LAE Related to:
Current Year:
Continuing Operations	214.2			253.0
Prior Years:
Continuing Operations	(7.4		)	(15.2		)
Discontinued Operations	—			0.2
Total Incurred Losses and LAE Related to Prior Years	(7.4		)	(15.0		)
Total Incurred Losses and LAE	206.8			238.0
Paid Losses and LAE Related to:
Current Year:
Continuing Operations	91.1			108.4
Prior Years:
Continuing Operations	126.0			140.1
Discontinued Operations	1.8			2.2
Total Paid Losses and LAE Related to Prior Years	127.8			142.3
Total Paid Losses and LAE	218.9			250.7
Property and Casualty Insurance Reserves - Net of Reinsurance at End of Period	666.9			767.4
Plus Reinsurance Recoverables at End of Period	53.2			62.2
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	720.1		$	829.6

Property and casualty insurance reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Condensed Consolidated Statements of Income in the period of change.

For the three months ended March 31, 2015, the Company reduced its property and casualty insurance reserves by $7.4 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance losses and LAE reserves developed favorably by $7.2 million, and commercial lines insurance losses and LAE reserves developed favorably by $0.2 million. Personal automobile insurance losses and LAE reserves developed favorably by $5.1 million, homeowners insurance losses and LAE reserves developed favorably by $2.6 million, and other personal lines losses and LAE reserves developed adversely by $0.5 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the 2013 and 2012 accident years, partially offset by the emergence of worse than expected loss patterns for the 2014 accident year.

Note 3 - Property and Casualty Insurance Reserves (continued)

For the three months ended March 31, 2014, the Company reduced its property and casualty insurance reserves by $15.0 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance losses and LAE reserves developed favorably by $14.7 million, and commercial lines insurance losses and LAE reserves developed favorably by $0.3 million. The commercial lines insurance losses and LAE reserves included favorable development of $0.5 million from continuing operations and unfavorable development of $0.2 million from discontinued operations. Personal automobile insurance losses and LAE reserves developed favorably by $11.5 million, homeowners insurance losses and LAE reserves developed favorably by $2.8 million, and other personal lines losses and LAE reserves developed favorably by $0.4 million. The personal lines insurance losses and LAE reserves developed favorably due primarily to the emergence of more favorable loss patterns than expected for the three most recent accident years.

The Company cannot predict whether losses and LAE will develop favorably or unfavorably from the amounts reported in the Company’s Condensed Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s consolidated shareholders’ equity, but could have a material effect on the Company’s consolidated financial results for a given period.