Reserves for Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2024

Reserves for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):


	Successor		Predecessor
(in millions)	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Net reserves - beginning of the year	$	2,747.1	$	2,213.1


Add:
Losses and LAE incurred during current calendar year, net of reinsurance:
Current accident year	195.2		236.0
Prior accident years	24.8		48.6
Losses and LAE incurred during calendar year, net of reinsurance	220.0		284.6
Deduct:
Losses and LAE payments made during current calendar year, net of reinsurance:
Current accident year	6.7		36.8
Prior accident years	174.8		149.1
Losses and LAE payments made during current calendar year, net of reinsurance:	181.5		185.9
Add/(Deduct):
Divestitures (1)	—		24.4


Retroactive reinsurance (2)	—		21.7



Total net reserve adjustments	—		46.1
Foreign exchange adjustments	(1.3)		2.1
Net reserves - end of period	2,784.3		2,360.0
Add:
Reinsurance recoverables on unpaid losses and LAE, end of period	2,758.8		2,824.1
Gross reserves - end of period	$	5,543.1	$	5,184.1

(1)For the three months ended March 31, 2023, the adjustment relates to the quarterly activity of Syndicate 1200 and on reinsurance contracts with AUA subsidiaries. Refer to the sale of Argo Underwriting Agency Limited in Note 1, “Business and Significant Accounting Policies” for additional information.

(2) In connection with the sale of AUA, the Company entered into two retroactive reinsurance agreements with AUA subsidiaries.

Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.

The impact from the unfavorable (favorable) development of prior accident years’ loss and LAE reserves on each reporting segment is presented below:


	Successor		Predecessor
(in millions)	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
U.S. Operations	$	13.6	$	39.7
International Operations	10.9		7.8
Run-off Lines	0.3		1.1
Total unfavorable (favorable) prior-year development	$	24.8	$	48.6

The following describes the primary factors behind each segment’s net prior accident year loss reserve development for the three months ended March 31, 2024 and 2023:

Three months ended March 31, 2024:

•U.S. Operations: Net unfavorable development primarily related to movements on large individual surety claims in specialty lines.

•International Operations: Net unfavorable development primarily related to our assumed business from our former Malta operations, ArgoGlobal Holdings (Malta) Ltd., which was sold in 2022.

•Run-off Lines: Net unfavorable development primarily related to involuntary pools.

Three months ended March 31, 2023:

•U.S. Operations: Net unfavorable development primarily related to liability and professional lines. The liability lines development was driven by businesses we have exited. The professional lines development was driven by accident years 2019 and prior.

•International Operations: Net unfavorable development primarily related to movements on claims in professional lines in Argo Insurance Bermuda.

•Run-off Lines: Net unfavorable loss reserve development on prior accident years in other run-off lines.

Our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and reasonable assumptions where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.