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Reserves For Claims
 9 Months Ended
Sep. 30, 2013
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]  
Reserves For Claims
Reserves for Claims

Transactions in the reserves for claims for the nine months ended September 30, 2013 and the year ended December 31, 2012 are summarized as follows:
 
September 30, 2013
 
December 31, 2012
Balance, beginning of period
$
39,078,000

 
$
37,996,000

(Benefit) Provision, charged to operations
(2,429,289
)
 
6,072,115

Payments of claims, net of recoveries
(1,832,711
)
 
(4,990,115
)
Ending balance
$
34,816,000

 
$
39,078,000



The total reserve for all reported and unreported losses the Company incurred through September 30, 2013 is represented by the reserves for claims. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy IBNR. Despite the variability of such estimates, management believes that the reserves are adequate to cover claim losses which might result from pending and future claims under policies issued through September 30, 2013.  The Company continually reviews and adjusts its reserve estimates to reflect its loss experience and any new information that becomes available.  Adjustments resulting from such reviews may be significant.

During the third quarter of 2013 certain actuarial inputs were changed  to provide a more refined IBNR reserve estimate. The Company considers these modifications in actuarial inputs to be a change in estimate. The Company believes that these changes in actuarial inputs were necessary in response to favorable reserve development and claims experience incurred in several recent reporting periods.  The approximate impact of this change in estimate for the quarter ended September 30, 2013 was a reduction of $2,400,000 to the reserves for claims in the Consolidated Balance Sheets, and in the Consolidated Statements of Income a decrease of $2,400,000 to the provision for claims, an increase of $821,000 in the provision for income taxes and an increase of $1,579,000 in net income, or approximately $0.76 per share, compared with the amounts that would have been recorded under the Company’s prior estimate. This change in estimate, coupled with several recent policy years which continued to emerge favorably in comparison with prior expectations, contributed to a benefit in the claims provision this quarter. The change in estimate was primarily driven by the following:

•
Changing the specific weightings used in performing certain actuarial methods, including weighting between policy years and weighting of title industry loss data; 
•
Making an adjustment to recognize revenue rate change information and the Company’s improved underwriting efforts related to construction business; and
•
Increasing the ratios used to estimate projected payments of unallocated loss adjustment expenses to more accurately reflect expected payments.
A summary of the Company’s loss reserves, broken down into its components of known title claims and IBNR, follows:
 
September 30, 2013
 
%
 
December 31, 2012
 
%
Known title claims
$
4,474,405

 
12.9
 
$
5,166,370

 
13.2
IBNR
30,341,595

 
87.1
 
33,911,630

 
86.8
Total loss reserves
$
34,816,000

 
100.0
 
$
39,078,000

 
100.0


Claims and losses paid are charged to the reserves for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated realizable value, net of any indebtedness on the property.