RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES

9 Months Ended

Sep. 30, 2025

RESERVES FOR LOSSES AND LOSS SETTLEMENT EXPENSES

Property insurance indemnifies an insured with an interest in physical property for loss of, or damage to, such property or the loss of its income-producing abilities. Casualty insurance is primarily concerned with losses caused by injuries to persons and legal liability imposed on the insured for such injury or for damage to property of others. In most cases, casualty insurance also obligates the insurance company to provide a defense for the insured in litigation, arising out of events covered by the policy.

Liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what we expect to pay for claims that have been reported and those that have been incurred but not reported ("IBNR"), based on known facts, circumstances, and historical trends. Because property and casualty insurance reserves are estimates of the unpaid portions of incurred losses that have been reported to us, as well as losses that have been IBNR, the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process. The ultimate cost of losses and related loss settlement expenses may vary materially from recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported as a component of losses and loss settlement expenses incurred in the period such changes are determined.

The determination of reserves (particularly those relating to liability lines of insurance that have relatively longer lag in claim reporting) requires significant estimation to reasonably project expected future claim reporting and payment patterns. If, during the course of our regular monitoring of reserves, we determine that coverages previously written are incurring higher than expected losses, we will evaluate an appropriate response that may include, among other things, increasing the related reserves. Any adjustments we make to reserves are reflected in operating results in the year in which we make those adjustments. In addition to our internal process, we engage a third-party firm to provide an independent and unbiased assessment of our reserves to assist in establishing appropriate reserves.

On a quarterly basis, we perform a detailed review of IBNR reserves. There are two fundamental types or sources of IBNR reserves. We record IBNR reserves for "normal" types of claims and also specific IBNR reserves related to unique circumstances or events. A major hurricane is an example of an event that might necessitate establishing specific IBNR reserves because an analysis of existing historical data would not provide an appropriate estimate.

We do not discount loss reserves based on the time value of money.

The following table provides an analysis of changes in our property and casualty losses and loss settlement expense reserves at September 30, 2025 and December 31, 2024 (net of reinsurance amounts):



	September 30, 2025		December 31, 2024
Gross liability for losses and loss settlement expenses at beginning of year	$	1,796,782	$	1,638,755
Ceded losses and loss settlement expenses	(198,083)		(191,640)
Net liability for losses and loss settlement expenses at beginning of year	$	1,598,699	$	1,447,115
Losses and loss settlement expenses incurred for claims occurring during
Current year	$	585,403	$	745,813
Prior years	(13,795)		(1,208)
Total incurred	$	571,608	$	744,605
Losses and loss settlement expense payments for claims occurring during
Current year	$	137,516	$	186,322
Prior years	355,983		406,699
Total paid	$	493,499	$	593,021
Net liability for losses and loss settlement expenses at end of period	$	1,676,808	$	1,598,699
Ceded losses and loss settlement expenses	205,259		198,083
Gross liability for losses and loss settlement expenses at end of period	$	1,882,067	$	1,796,782

Generally, we base case reserves for each claim on the estimated ultimate exposure for that claim. However, due to the uncertainty associated with the ultimate claim settlement values and additional claims not yet reported, we believe that it is appropriate and reasonable to establish a best estimate for reserves within a range of reasonable estimates, especially when we are reserving for claims for bodily injury, disabilities and similar claims as settlements and verdicts can vary widely. We believe our approach produces recorded reserves that are consistent as to their relative position within a range of reasonable reserves from year-to-year. However, conditions and trends that affect the reserve development for a given year do change. Therefore, such development cannot be used to project future reserve redundancies or deficiencies.

Our IBNR methodologies and assumptions are reviewed periodically for appropriateness and reasonability. Items reviewed and revised include development factors for paid and reported loss, paid development factors for allocated loss adjustment expense ("LAE"), expected loss and LAE ratios, as well as selected frequency and severity trend factors.

Because of the type of property coverage we write, we have potential exposure to environmental pollution, mold and asbestos claims. Our underwriters are aware of these exposures and use riders or endorsements to limit exposure. We are not aware of any significant contingent liabilities related to environmental issues.

Reserve Development

The Company experienced $1.9 million and $13.8 million of favorable reserve development in net reserves for prior accident years for the three- and nine-month periods ended September 30, 2025, respectively. The favorable reserve development for both the three- and nine-month periods was driven in part by reductions in prior year reserves as catastrophe experience emerged better than expected. Also contributing to the nine-month development was better

than expected LAE payments. The Company experienced $0.1 million and $5.1 million favorable non-catastrophe development for the three- and nine-month periods ended September 30, 2025, respectively. For the nine-month period, strengthening in other liability lines of business due to continued uncertainty in future loss cost trends related to economic and social inflation was offset by improvement in the automobile, fire and allied lines, workers’ compensation, and surety lines of business.