Reserve For Losses LAE And Future Policy Benefit Reserve | 3. RESERVE FOR LOSSES, LAE AND FUTURE POLICY BENEFIT RESERVE Reserves for losses and LAE. Activity in the reserve for losses and LAE is summarized for the periods indicated: At December 31, (Dollars in thousands) 2016 2015 2014 Gross reserves at January 1 $ 9,951,798 $ 9,720,813 $ 9,673,240 Less reinsurance recoverables (881,503 ) (655,095 ) (478,151 ) Net reserves at January 1 9,070,295 9,065,718 9,195,089 Incurred related to: Current year 3,434,964 3,129,744 2,915,612 Prior years (295,335 ) (65,029 ) (39,676 ) Total incurred losses and LAE 3,139,629 3,064,715 2,875,936 Paid related to: Current year 745,642 690,030 755,880 Prior years 2,042,972 2,180,076 2,088,772 Total paid losses and LAE 2,788,614 2,870,106 2,844,652 Foreign exchange/translation adjustment (99,859 ) (190,032 ) (160,655 ) Net reserves at December 31 9,321,451 9,070,295 9,065,718 Plus reinsurance recoverables 990,862 881,503 655,095 Gross reserves at December 31 $ 10,312,313 $ 9,951,798 $ 9,720,813 Incurred prior years' reserves decreased by $ 295,335 65,029 39,676 468,749 53,909 60,000 16,720 43,280 173,414 The decrease for 2015 was attributable to favorable development in the reinsurance segments of $ 217,169 152,140 The decrease for 2014 was attributable to favorable development in the reinsurance segments of $ 202,418 137,769 24,973 The following is information about incurred and paid claims development as of December 31, 2016, net of reinsurance, as well as cumulative claim frequency and the total of incurred but not reported liabilities (IBNR) plus expected development on reported claims included within the net incurred claims amounts. Each of the Company's financial reporting segments has been disaggregated into casualty and property business. The casualty and property segregation results in groups that have homogeneous loss development characteristics and are large enough to represent credible trends. Generally, casualty claims take longer to be reported and settled, resulting in longer payout patterns and increased volatility. Property claims on the other hand, tend to be reported and settled quicker and therefore tend to exhibit less volatility. The property business is more exposed to catastrophe losses, which can result in year over year fluctuations in incurred claims depending on the frequency and severity of catastrophes claims in any one accident year. The information about incurred and paid claims development for the years ended December 31, 2012 to December 31, 2015 is presented as supplementary information. These tables present five years of incurred and paid claims development as it is impracticable to retrospectively create the tables for ten years. For the reinsurance groups, for the years prior to 2012, the total of IBNR plus expected development on reported claims was not prepared on an accident year basis. The Company calculated these IBNR amounts in the aggregate for each business unit in total as of prior year end points in time. While business written in the United States would have been allocated to accident year for regulatory reporting purposes, business written outside of the United States would not have been similarly allocated. Attempting to allocate the non-U.S. business IBNR reserves to accident year currently for older year end valuations would require making assumptions and estimates which may not be in line with assumptions that would have been made at the time. A similar situation applies to insurance where the accumulation of the business lines reported in the regulatory filings are not consistent with the breakout of the tables presented below. As a result of not being able to present the information prior to 2012, prospectively an additional year will be added to the tables each reporting year until a ten year table is presented. The Cumulative Number of Reported Claims is shown only for Insurance Casualty as it is impracticable to provide the information for the remaining groups. The reinsurance groups each include pro rata contracts for which ceding companies provide only summary information via a bordereau. This summary information does not include the number of reported claims underlying the paid and reported losses. Therefore, it is not possible to provide this information. The Insurance Property group includes Accident & Health insurance business. This business is written via a master contract and individual claim counts are not provided. This business represents a significant enough portion of the business in the Insurance Property group so that including the number of reported claims for the remaining business would distort any analytics performed on the group. The Cumulative Number of Reported Claims shown for the Insurance Casualty is determined by claim and line of business. For example, a claim event with three claimants in the same line of business is a single claim. However, a claim event with a single claimant that spans two lines of business contributes two claims. The following tables present the ultimate loss and ALAE and the paid loss and ALAE, net of reinsurance for casualty and property, as well as the average annual percentage payout of incurred claims by age, net of reinsurance for each of our disclosed lines of business. U.S. Reinsurance Casualty Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 400,944 $ 395,674 $ 328,910 $ 324,870 $ 320,908 69,381 N/A 2013 310,899 388,247 385,498 388,157 147,320 N/A 2014 367,454 383,597 392,300 215,144 N/A 2015 326,321 354,224 248,529 N/A 2016 330,352 272,614 N/A $ 1,785,940 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 9,930 $ 38,398 $ 82,900 $ 143,370 $ 187,125 2013 14,814 48,891 108,736 170,781 2014 18,791 54,220 110,199 2015 19,882 53,592 2016 18,920 $ 540,617 All outstanding liabilities prior to 2012, net of reinsurance 1,103,846 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 2,349,169 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Casualty 4.6% 9.0% 14.6% 17.3% 13.6% U.S. Reinsurance Property Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 937,168 $ 723,126 $ 621,543 $ 608,568 $ 608,182 15,899 N/A 2013 621,644 547,741 494,573 455,623 8,005 N/A 2014 641,489 550,471 473,579 46,920 N/A 2015 679,170 543,978 113,327 N/A 2016 966,314 488,562 N/A $ 3,047,676 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 242,129 $ 401,879 $ 492,597 $ 528,903 $ 546,305 2013 234,163 322,603 381,281 405,331 2014 218,595 321,473 369,615 2015 226,198 327,261 2016 286,082 $ 1,934,594 All outstanding liabilities prior to 2012, net of reinsurance 70,472 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 1,183,554 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Property 39.6% 21.7% 12.8% 5.7% 2.9% International Casualty Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 222,381 $ 145,165 $ 134,433 $ 134,806 $ 118,381 19,893 N/A 2013 182,388 167,152 164,664 146,192 38,720 N/A 2014 194,110 187,335 170,072 66,586 N/A 2015 192,610 179,393 99,975 N/A 2016 183,120 135,120 N/A $ 797,159 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 18,968 $ 30,309 $ 46,356 $ 56,937 $ 66,755 2013 17,945 41,511 55,190 68,508 2014 25,854 45,309 63,412 2015 24,408 49,198 2016 26,582 $ 274,456 All outstanding liabilities prior to 2012, net of reinsurance 132,472 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 655,175 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Casualty 14.3% 12.9% 11.0% 9.0% 8.3% International Property Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 562,356 $ 516,568 $ 464,379 $ 468,016 $ 468,340 3,276 N/A 2013 493,798 446,011 409,911 402,109 5,153 N/A 2014 590,986 536,437 491,539 73,701 N/A 2015 563,857 439,133 68,845 N/A 2016 510,072 151,258 N/A $ 2,311,193 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 200,839 $ 327,627 $ 396,237 $ 420,097 $ 433,538 2013 135,240 272,527 326,747 357,358 2014 163,098 285,019 352,586 2015 145,406 267,899 2016 150,819 $ 1,562,200 All outstanding liabilities prior to 2012, net of reinsurance 135,170 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 884,163 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Property 34.4% 28.2% 14.0% 6.3% 2.9% Bermuda Casualty Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 277,335 $ 257,552 $ 238,136 $ 228,861 $ 236,554 69,097 N/A 2013 223,085 254,485 250,151 259,719 120,413 N/A 2014 205,404 239,078 257,310 163,951 N/A 2015 263,919 293,967 196,691 N/A 2016 282,729 208,938 N/A $ 1,330,278 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 12,975 $ 29,971 $ 52,026 $ 76,682 $ 103,489 2013 17,185 34,498 53,035 78,476 2014 13,846 25,272 43,582 2015 13,664 58,647 2016 45,134 $ 329,328 All outstanding liabilities prior to 2012, net of reinsurance 507,747 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 1,508,697 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Casualty 7.7% 8.7% 7.8% 10.1% 11.3% Bermuda Property Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 233,738 $ 177,683 $ 162,787 $ 158,711 $ 159,285 624 N/A 2013 203,306 147,275 129,687 120,904 1,207 N/A 2014 178,615 157,187 131,588 13,592 N/A 2015 187,738 157,662 45,387 N/A 2016 198,310 123,224 N/A $ 767,749 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 45,233 $ 84,680 $ 115,938 $ 141,516 $ 148,159 2013 31,315 67,966 106,936 114,050 2014 28,540 81,535 101,239 2015 32,687 72,186 2016 26,324 $ 461,959 All outstanding liabilities prior to 2012, net of reinsurance 44,730 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 350,520 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Property 21.4% 29.6% 21.8% 11.7% 4.2% Insurance Casualty Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 349,301 $ 351,107 $ 346,685 $ 347,989 $ 353,145 50,190 15,638 2013 393,201 393,103 392,539 392,829 101,156 21,168 2014 430,554 456,532 454,071 151,768 24,829 2015 518,706 527,109 282,784 25,939 2016 552,006 406,759 23,463 $ 2,279,161 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 33,162 $ 101,258 $ 157,834 $ 213,365 $ 246,294 2013 33,303 117,016 176,280 224,558 2014 41,182 124,865 201,545 2015 44,298 134,658 2016 54,710 $ 861,765 All outstanding liabilities prior to 2012, net of reinsurance 644,177 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 2,061,572 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Casualty 9.1% 18.9% 16.0% 13.9% 9.3% Insurance Property Business At December 31, 2016 Total of IBNR Liabilites Incurred Claims and Allocated Claim Adjustment Expenses, Net of reinsurance Plus Expected Years Ended December 31, Development Cumulative 2012 2013 2014 2015 2016 on Reported Number of Accident Year (unaudited) (unaudited) (unaudited) (unaudited) Claims Reported Claims (Dollars in thousands) 2012 $ 106,229 $ 88,908 $ 81,682 $ 82,382 $ 81,957 52 N/A 2013 111,926 97,870 91,054 91,956 5 N/A 2014 131,505 123,487 119,781 1,044 N/A 2015 172,535 152,580 3,999 N/A 2016 300,127 82,989 N/A $ 746,400 (Some amounts may not reconcile due to rounding.) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, 2012 2013 2014 2015 2016 Accident Year (unaudited) (unaudited) (unaudited) (unaudited) (Dollars in thousands) 2012 $ 56,498 $ 81,712 $ 80,405 $ 81,686 $ 81,830 2013 68,656 92,945 91,653 91,923 2014 81,766 115,913 118,085 2015 102,005 141,010 2016 162,060 $ 594,908 All outstanding liabilities prior to 2012, net of reinsurance 171 Liabilities for claims and claim adjustment expenses, net of reinsurance $ 151,663 (Some amounts may not reconcile due to rounding.) Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited) Years 1 2 3 4 5 Property 63.1% 27.5% -0.1% 0.9% 0.2% Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated statement of financial position is as follows. December 31, 2016 (Dollars in thousands) Net outstanding liabilities U.S. Reinsurance Casualty $ 2,349,169 U.S. Reinsurance Property 1,183,554 International Casualty 655,175 International Property 884,163 Bermuda Casualty 1,508,697 Bermuda Property 350,520 Insurance Casualty 2,061,572 Insurance Property 151,663 Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance 9,144,514 Reinsurance recoverable on unpaid claims U.S. Reinsurance Casualty 98,282 U.S. Reinsurance Property 84,224 International Casualty 83,912 International Property 79,044 Bermuda Casualty 10,135 Bermuda Property 101,210 Insurance Casualty 498,493 Insurance Property 35,562 Total reinsurance recoverable on unpaid claims 990,862 Insurance lines other than short-duration - Unallocated claims adjustment expenses 132,210 Other 44,727 176,937 Total gross liability for unpaid claims and claim adjustment expense $ 10,312,313 (Some amounts may not reconcile due to rounding.) Reserving Methodology The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense (LAE) for reported and unreported claims for our insurance and reinsurance businesses. Because reserves are based on estimates of ultimate losses and LAE by underwriting or accident year, the Company uses a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known, and adjust reserves whenever an adjustment appears warranted. The Company considers many factors when setting reserves including: (1) exposure base and projected ultimate premium; (2) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies which analyze loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss payments, and product mix; (4) current legal interpretations of coverage and liability; and (5) economic conditions. Insurance and reinsurance loss and LAE reserves represent the Company's best estimate of its ultimate liability. Actual loss and LAE ultimately paid may deviate, perhaps substantially, from such reserves. Net income (gain or loss) will be impacted in a period in which the change in estimated ultimate loss and LAE is recorded. The detailed data required to evaluate ultimate losses for the Company's insurance business is accumulated from its underwriting and claim systems. Reserving for reinsurance requires evaluation of loss information received from ceding companies. Ceding companies report losses in many forms depending on the type of contract and the agreed or contractual reporting requirements. Generally, pro rata contracts require the submission of a monthly/quarterly account, which includes premium and loss activity for the period with corresponding reserves as established by the ceding company. This information is recorded into the Company's records. For certain pro rata contracts, the Company may require a detailed loss report for claims that exceed a certain dollar threshold or relate to a particular type of loss. Excess of loss and facultative contracts generally require individual loss reporting with precautionary notices provided when a loss reaches a significant percentage of the attachment point of the contract or when certain causes of loss or types of injury occur. Experienced claims staff handles individual loss reports and supporting claim information. Based on evaluation of a claim, the Company may establish additional case reserves in addition to the case reserves reported by the ceding company. To ensure ceding companies are submitting required and accurate data, Everest's Underwriting, Claim, Reinsurance Accounting, and Internal Audit Departments perform various reviews of ceding companies, particularly larger ceding companies, including on-site audits. The Company segments both reinsurance and insurance reserves into exposure groupings for actuarial analysis. The Company assigns business to exposure groupings so that the underlying exposures have reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate losses. The Company periodically reviews its exposure groupings and may change groupings over time as business changes. The Company currently uses approximately 200 The Company uses a variety of actuarial methodologies, such as the expected loss ratio method, chain ladder methods, and Bornhuetter-Ferguson methods, supplemented by judgment where appropriate, to estimate ultimate loss and LAE for each exposure group. Expected Loss Ratio Method: The expected loss ratio method uses earned premium times an expected loss ratio to calculate ultimate losses for a given underwriting or accident year. This method relies entirely on expectation to project ultimate losses with no consideration given to actual losses. As such, it may be appropriate for an immature underwriting or accident year where few, if any, losses have been reported or paid, but less appropriate for a more mature year. Chain Ladder Method: Chain ladder methods use a standard loss development triangle to project ultimate losses. Age-to-age development factors are selected for each development period and combined to calculate age-to-ultimate development factors which are then applied to paid or reported losses to project ultimate losses. This method relies entirely on actual paid or reported losses to project ultimate losses. No other factors such as changes in pricing or other expectations are taken into account. It is most appropriate for groups with homogeneous, stable experience where past development patterns are expected to continue in the future. It is least appropriate for groups which have changed significantly over time or which are more volatile. Bornhuetter-Ferguson Method: The Bornhuetter-Ferguson method is a combination of the expected loss ratio method and the chain ladder method. Ultimate losses are projected based partly on actual paid or reported losses and partly on expectation. Incurred but not reported (IBNR) reserves are calculated using earned premium, an a priori loss ratio, and selected age-to-age development factors and added to actual reported (paid) losses to determine ultimate losses. It is more responsive to actual reported or paid development than the expected loss ratio method but less responsive than the chain ladder method. The reliability of the method depends on the accuracy of the selected a priori loss ratio. Although the Company uses similar actuarial methods for both short tail and long tail lines, the faster reporting of experience for the short tail lines allows the Company to have greater confidence in its estimates of ultimate losses for short tail lines at an earlier stage than for long tail lines. As a result, the Company utilizes, as well, exposure-based methods to estimate its ultimate losses for longer tail lines, especially for immature underwriting or accident years. For both short and long tail lines, the Company supplements these general approaches with analytically based judgments. Key actuarial assumptions contain no explicit provisions for reserve uncertainty nor does the Company supplement the actuarially determined reserves for uncertainty. Carried reserves at each reporting date are the Company's best estimate of ultimate unpaid losses and LAE at that date. The Company completes detailed reserve studies for each exposure group annually for both reinsurance and insurance operations. The completed annual reserve studies are "rolled-forward" for each accounting period until the subsequent reserve study is completed. Analyzing the roll-forward process involves comparing actual reported losses to expected losses based on the most recent reserve study. The Company analyzes significant variances between actual and expected losses and post adjustments to its reserves as warranted. The Company continues to receive claims under expired insurance and reinsurance contracts asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the release of hazardous substances into the land, air or water. Asbestos claims typically assert liability for bodily injury from exposure to asbestos or for property damage resulting from asbestos or products containing asbestos. The Company's reserves include an estimate of the Company's ultimate liability for A&E claims. The Company's A&E liabilities emanate from Mt. McKinley's direct insurance business and Everest Re's assumed reinsurance business. All of the contracts of insurance and reinsurance, under which the Company has received claims during the past three years, expired more than 20 years ago. There are significant uncertainties surrounding the Company's reserves for its A&E losses. A&E exposures represent a separate exposure group for monitoring and evaluating reserve adequacy. The following table summarizes incurred losses with respect to A&E reserves on both a gross and net of reinsurance basis for the periods indicated: At December 31, (Dollars in thousands) 2016 2015 2014 Gross basis: Beginning of period reserves $ 433,117 $ 476,205 $ 402,461 Incurred losses 73,336 40,000 142,233 Paid losses (65,342 ) (83,088 ) (68,489 ) End of period reserves $ 441,111 $ 433,117 $ 476,205 Net basis: Beginning of period reserves $ 319,620 $ 458,211 $ 386,677 Incurred losses 53,909 38,440 137,769 Paid losses (54,457 ) (177,031 ) (66,235 ) End of period reserves $ 319,072 $ 319,620 $ 458,211 On July 13, 2015, the Company sold Mt. McKinley, a Delaware domiciled insurance company and wholly-owned subsidiary of the Company to Clearwater Insurance Company, a Delaware domiciled insurance company. Concurrently with the closing, the Company entered into a retrocession treaty with an affiliate of Clearwater Insurance Company. Per the retrocession treaty, the Company retroceded 100 140,279 440,279 300,000 Reinsurance Receivables. Reinsurance receivables for both paid and recoverable on unpaid losses totaled $ 1,018,325 894,037 175,042 17.2 129,040 12.7 109,392 10.7 78,225 7.7 51,124 5.0 5 Future Policy Benefit Reserve. Activity in the reserve for future policy benefits is summarized for the periods indicated: At December 31, (Dollars in thousands) 2016 2015 2014 Balance at beginning of year $ 58,910 $ 59,820 $ 59,512 Liabilities assumed 175 315 250 Adjustments to reserves 303 2,310 4,724 Benefits paid in the current year (4,315 ) (3,535 ) (4,667 ) Balance at end of year $ 55,074 $ 58,910 $ 59,820 (Some amounts may not reconcile due to rounding.) |