The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses, net of reinsurance, to the gross amounts reported in the condensed consolidated balance sheets. Reinsurance recoverables on unpaid losses and loss adjustment expenses are presented gross of an allowance for credit losses on reinsurance balances of $1.7 million at March 31, 2026, $1.6 million at December 31, 2025, $1.5 million at March 31, 2025 and $1.2 million at December 31, 2024.


	Three Months Ended March 31,
		2026		2025
		(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period		$	1,071,699	$	1,086,278
Add: Incurred losses and loss adjustment expenses net of reinsurance:
Current year		94,136		101,584
Prior years - retroactive reinsurance		14,189		(1,928)
Prior years - excluding retroactive reinsurance		(165)		(131)
Total incurred losses and loss and adjustment expenses		108,160		99,525
Deduct: Loss and loss adjustment expense payments net of reinsurance:
Current year		900		1,731
Prior years		93,151		90,239
Total loss and loss adjustment expense payments		94,051		91,970
Deduct: Change in deferred reinsurance gain - retroactive reinsurance		14,189		(1,928)


Reserve for losses and loss adjustment expenses net of reinsurance recoverables at end of period		1,071,619		1,095,761
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		2,016,229		1,985,779
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period		$	3,087,848	$	3,081,540

The Company experienced $165,000 of net favorable reserve development in the three months ended March 31, 2026 on the reserve for losses and loss adjustment expenses held at December 31, 2025 (excluding adverse prior year development subject to deferral under retroactive reinsurance accounting - see Loss Portfolio Transfers and Adverse Development Covers below). This reserve development included $100,000 of net favorable development in the Excess & Surplus Lines segment and $65,000 of net favorable development in the Specialty Admitted Insurance segment.

The Company experienced $131,000 of net favorable reserve development in the three months ended March 31, 2025 on the reserve for losses and loss adjustment expenses held at December 31, 2024 (excluding adverse prior year development subject to deferral under retroactive reinsurance accounting - see Loss Portfolio Transfers and Adverse Development Covers below). This reserve development included $10,000 of net favorable development in the Excess & Surplus Lines segment and $121,000 of net favorable development in the Specialty Admitted Insurance segment.

Loss portfolio transfers and adverse development covers are forms of retroactive reinsurance utilized by the Company to transfer losses and loss adjustment expenses and associated risk of adverse development on covered subject business, as defined in the respective agreements, to an assuming reinsurer in exchange for a reinsurance premium. This reinsurance can bring economic finality (up to the limit of such agreements, if applicable) on the subject risks when they no longer meet the Company's risk appetite or are no longer aligned with the Company's risk management guidelines.

On September 27, 2021, James River Insurance and James River Casualty Company (together, “James River”) entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc. (“Aleka”), a captive insurance company affiliate of Rasier LLC, to reinsure substantially all of the Excess & Surplus Lines segment's legacy portfolio of commercial auto policies previously issued to Rasier LLC and its affiliates (collectively, “Rasier”) for which James River is not

The E&S ADC was effective January 1, 2024 (the “Effective Date”) and applies to James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “Subject Business”). Pursuant to the E&S ADC, (a) State National reinsures 85% of losses paid on and after the Effective Date in respect of the Subject Business in excess of $716.6 million up to an aggregate limit of $467.1 million (with State National’s share of the aggregate limit being $397.0 million) in exchange for a reinsurance premium paid by James River equal to $313.2 million, and (b) James River continues to manage claims and to manage and collect the benefit of other existing third-party reinsurance on the Subject Business, which third-party reinsurance inures to the benefit of the E&S ADC. Additional adverse development of $35.0 million (net of the Company's 15% retention) recognized on the subject business of the E&S ADC in the year ended December 31, 2025 exhausted the remaining limit of the E&S ADC.

On November 11, 2024, Enstar, through its subsidiary Cavello Bay Reinsurance Limited (“Cavello Bay”), entered into an adverse development cover agreement with James River (“E&S Top Up ADC”), pursuant to which, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium), Cavello Bay reinsures, effective January 1, 2024, 100% of the losses associated with James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive). The E&S Top Up ADC excludes losses related to commercial auto policies issued to a former large insured or its affiliates and is subject to a retention by James River of $1,183.7 million (the limit of the E&S ADC executed on July 2, 2024) and up to an aggregate limit of $75.0 million. The E&S Top Up ADC closed on December 23, 2024. The Company recognized a $52.8 million reduction in pre-tax income in connection with the adverse development cover upon closing. In 2025, $51.4 million of adverse development was ceded to the E&S Top Up ADC, reducing the aggregate limit remaining on the E&S Top Up ADC to $23.6 million at December 31, 2025. In the three months ended March 31, 2026, an additional $16.2 million of adverse development was ceded to the E&S Top Up ADC, further reducing the aggregate limit remaining on the E&S Top Up ADC to $7.5 million at March 31, 2026. Of the $16.2 million, $14.8 million was subject to deferral under retroactive reinsurance accounting.

The Company periodically reevaluates the remaining reserves subject to the Commercial Auto LPT, the E&S ADC, and the E&S Top Up ADC, and when recognized adverse prior year development on the subject business causes the cumulative amounts ceded under the agreements to exceed the consideration paid, the agreements move into a gain position subject to deferral under retroactive reinsurance accounting. Gains are deferred under retroactive reinsurance accounting and recognized in earnings in proportion to actual paid recoveries under the agreements using the recovery method. While the deferral of gains can introduce volatility in the Company's operating results in the short-term, over the life of the contract, we would expect no economic impact to the Company as long as the counterparty performs under the contract. The impact of retroactive reinsurance accounting is not indicative of the Company's current and ongoing operations.


	Three Months Ended March 31,
	2026		2025
	(in thousands)
Commercial Auto LPT
Deferred retroactive reinsurance gain at beginning of period	$	2,927	$	9,222
Adverse prior year development ceded on subject business	—		144
Retroactive reinsurance benefits under the recovery method	(591)		(2,072)
Deferred retroactive reinsurance gain at end of period	$	2,336	$	7,294

E&S ADC
Deferred retroactive reinsurance gain at beginning of period	$	83,793	$	48,748
Adverse prior year development ceded on subject business	—		—
Retroactive reinsurance benefits under the recovery method	—		—
Deferred retroactive reinsurance gain at end of period	$	83,793	$	48,748

E&S Top Up ADC
Deferred retroactive reinsurance gain at beginning of period	$	—	$	—
Adverse prior year development ceded on subject business	14,780		—
Retroactive reinsurance benefits under the recovery method	—		—
Deferred retroactive reinsurance gain at end of period	$	14,780	$	—

Total
Deferred retroactive reinsurance gain at beginning of period	$	86,720	$	57,970
Adverse prior year development ceded on subject business	14,780		144
Retroactive reinsurance benefits under the recovery method	(591)		(2,072)
Deferred retroactive reinsurance gain at end of period	$	100,909	$	56,042