Trust - TMLT

3. Unpaid Losses and Loss Adjustment ExpensesThe following table provides a reconciliation of the beginning and ending reservebalances for unpaid losses and loss adjustment expenses (LAE), net of reinsurancerecoverables, for 2005 and 2004:Notes to ConsolidatedFinancial StatementsYears ended December 31, 2005 2004(in thousands)Reserve for unpaid losses and LAE, net of related $ 218,148 $ 270,060reinsurance recoverables at beginning of the yearAdd provision for claims, net of reinsurance,occurring in:Current year 74,192 75,732Prior years (969) 42,273Incurred losses during the current year,net of reinsurance 73,223 119,005Deduct payments for claims, net of reinsurance,occurring in:Current year 4,011 97,160Prior years 7,587 163,330Net claim payments during the year 101,171 170,917Reserve for losses and LAE, net of related reinsurancerecoverables, at end of year 190,200 218,148Reinsurance recoverables on unpaid losses and LAE,at end of year 50,633 53,411Reserve for unpaid losses and LAE, gross of $ 240,833 $ 271,559reinsurance recoverables on unpaid losses,at end of yearThe foregoing reconciliation shows that the Trust’s reserve for unpaid losses andLAE, net of related reinsurance recoverable, at December 31, 2005 decreased byapproximately $969 primarily as a result of favorable reserve development. Thedecrease is a result of ongoing analysis of recent loss development trends. Originalestimates are increased or decreased as additional information becomes knownregarding individual claims. At December 31, 2004, unpaid losses and LAE, net ofreinsurance increased by $43,273 for claims that had occurred on or prior to 2003.During 2004, the Trust increased reserves due to higher than anticipated loss severityand frequency, which resulted in higher reserves for 2004 and prior year’s reportedclaims. This change in management’s estimate of claims resulted from plaintiff’sattorney’s response to 2004 changes in the procedure for filing lawsuits and the timeperiod allowed for discovery in Texas.Medical malpractice claims have a very long development period. Historically, caseshave taken years to be reported and, as a rule, take years to adjust, settle, or litigate.With respect to the Trust’s estimates of reserves for unpaid losses and LAE, there isTRUST - The Annual Report Magazine35