Reserves

9 Months Ended

Sep. 30, 2022

Reserve Roll Forward

The following table provides a roll forward of the Company’s beginning and ending claims and benefits payable balances. Claims and benefits payable is the liability for unpaid loss and loss adjustment expenses and is comprised of case and incurred but not reported (“IBNR”) reserves.

Since unpaid loss and loss adjustment expenses are estimates, the Company’s actual losses incurred may be more or less than the Company’s previously developed estimates, which is referred to as either unfavorable or favorable development, respectively.

The best estimate of ultimate loss and loss adjustment expense is generally selected from a blend of methods that are applied consistently each period. There have been no significant changes in the methodologies and assumptions utilized in estimating the liability for unpaid loss and loss adjustment expenses for any of the periods presented.


	For the Nine Months Ended September 30,
	2022		2021
Claims and benefits payable, at beginning of period	$	1,604.8	$	1,619.9
Less: Reinsurance ceded and other	(825.9)		(850.5)
Net claims and benefits payable, at beginning of period	778.9		769.4
Incurred losses and loss adjustment expenses related to:
Current year	1,728.0		1,714.8
Prior years	32.5		(30.6)
Total incurred losses and loss adjustment expenses	1,760.5		1,684.2
Paid losses and loss adjustment expenses related to:
Current year	1,106.2		1,158.2
Prior years	449.8		447.7
Total paid losses and loss adjustment expenses	1,556.0		1,605.9
Net claims and benefits payable, at end of period	983.4		847.7
Plus: Reinsurance ceded and other (1)	2,039.0		1,057.3
Claims and benefits payable, at end of period (1)	$	3,022.4	$	1,905.0

(1)Includes reinsurance recoverables and claims and benefits payable of $960.4 million and $221.6 million as of September 30, 2022 and 2021, respectively, which was ceded to the U.S. government. The Company acts as an administrator for the U.S. government under the voluntary National Flood Insurance Program.

The Company experienced net unfavorable loss development for the nine months ended September 30, 2022 of $32.5 million and net favorable loss development of $30.6 million for the nine months ended September 30, 2021 as presented in the roll forward table above. The unfavorable development is attributed to the sharing economy and small commercial lines of business, now reported in the Corporate and Other segment within non-core operations.

Global Lifestyle contributed $42.3 million and $34.1 million to the net favorable loss development for the nine months ended September 30, 2022 and 2021, respectively. The net favorable loss development in both periods was attributable to nearly all lines of business across most of the Company’s regions with a concentration on more recent accident years and based on emerging evaluations regarding loss experience each period. For the nine months ended September 30, 2022, Global Automotive also experienced favorable loss development from ancillary products due to the strong used vehicle market. Many of these contracts and products contain retrospective commission (profit sharing) provisions that would result in offsetting increases or decreases in expense dependent on if the development was favorable or unfavorable.

Global Housing contributed $22.8 million of net unfavorable loss development for the nine months ended September 30, 2022 and $0.6 million of net favorable development for the nine months ended September 30, 2021. The net unfavorable loss development for the nine months ended September 30, 2022 was comprised of $11.1 million from non-catastrophe losses and $11.7 million from prior catastrophe events. Hurricane Eta from accident year 2020 drove the unfavorable development for

catastrophes where the loss development pattern was longer than expected and the average claim severities were higher than expected. For non-catastrophe losses, Lender-placed Insurance and Multifamily Housing products developed unfavorably due to inflationary impacts on severity and lengthening claim settlement lags, partially offset by favorable development across other products. The net favorable loss development for the nine months ended September 30, 2021 were attributable to multiple lines of business with a concentration in recent accident years. The sharing economy and small commercial lines of business, reported within non-core operations, contributed $57.1 million and $11.0 million in unfavorable development during the nine months ended September 30, 2022 and 2021, respectively. The $57.1 million in unfavorable development consisted of $45.2 million from sharing economy and $11.9 million from small commercial. The unfavorable development from sharing economy was driven by emerging adverse claim development trends on known claims as well as reserve assumption revisions to reflect relevant industry benchmarks. Both sharing economy and small commercial experienced unfavorable development on known claims driven by social inflation and the release of the backlog from courts reopening after COVID-19. All others contributed $5.1 million and $6.9 million of net favorable loss development for the nine months ended September 30, 2022 and 2021 respectively.