11. Losses and LAE

N/A – Not applicable

Reserve Activity

Incurred Losses

Total incurred losses in our Mortgage segment are driven by: (i) case reserves established for new default notices, which are primarily impacted by both the number of new primary default notices received in the period and our related gross Default to Claim Rate and Claim Severity assumptions applied to those new defaults and (ii) reserve developments on prior period defaults, which are primarily impacted by changes to our prior Default to Claim Rate and Claim Severity assumptions applied to these loans.

New primary default notices totaled 13,584 for the three months ended March 31, 2026, compared to 12,505 for the three months ended March 31, 2025, representing an increase of 9%.

Our gross Default to Claim Rate assumption applied to new defaults was 7.5% as of both March 31, 2026, and March 31, 2025, based on our review of trends in Cures and claims paid for our default inventory and taking into consideration the risks and uncertainties associated with the current economic environment.

Our provision for losses during both the first three months of 2026 and 2025 was positively impacted by favorable reserve development on prior year defaults, primarily as a result of more favorable trends in Cures than originally estimated. These Cures have been due primarily to favorable outcomes resulting from positive trends in home price appreciation, which has also contributed to a higher rate of claims that result in no ultimate loss to us and that are withdrawn by servicers as a result. These favorable observed trends for prior year default notices resulted in reductions in our Default to Claim Rate and other reserve assumptions in both of the first three months of 2026 and 2025.

Claims Paid

Total claims paid increased for the three months ended March 31, 2026, compared to the same period in 2025, consistent with both the growth and seasoning of our IIF and our reserving expectations.

For additional information about our Reserve for Losses and LAE, including our accounting policies, see Notes 2 and 11 of Notes to Consolidated Financial Statements in our 2025 Form 10-K.

Our specialty insurance loss reserves represent management’s estimate of the ultimate cost of settling all claims incurred but unpaid at the balance sheet date, whether reported or not. Estimating loss reserves is a complex and inherently judgmental process due to the uncertainty in the amount and timing of claim payments, particularly for claims that have been incurred but not yet reported to Inigo.

Loss reserves comprise the following components:

Case reserves are established on an individual claim basis for reported claims not yet settled as of the balance sheet date, taking into consideration available information regarding claim circumstances, handling costs and observed settlement trends.

The estimated cost of unpaid claims is calculated using a variety of actuarial and statistical estimation techniques based primarily on historical loss experience, which assume that future claims development patterns will be consistent with past experience. Adjustments are made, as necessary, to reflect factors that may not be fully captured in the historical data, including changes in claims handling procedures, legal or regulatory environments, inflationary pressures, the impact of large losses, and relevant industry trends.

IBNR reserves are determined using actuarial techniques that project the development of claims over time based on historical experience, taking into consideration recent underwriting activity, changes in the mix of business and underlying policy terms and conditions. For more recent accident periods, where claims development may be more volatile, estimates may incorporate additional reliance on actuarial judgment, rating models and assessments of current underwriting conditions.

Large losses are analyzed separately, when appropriate, to mitigate potential distortions in underlying reserve development patterns.

Loss reserves are based on information available as of the balance sheet date and are intended to represent management’s best estimate of ultimate claims settlement costs within a reasonable range of possible outcomes.

Anticipated salvage and subrogation recoveries are estimated on an individual claim basis based on currently available information, including claims experience and applicable legal considerations, and are reported as reductions to loss reserves.

LAE reserves represent the estimated internal and external costs of investigating, managing and settling claims incurred by the Company, whether reported or not. These costs include allocated expenses directly attributable to individual claims, such as legal, loss adjuster, expert and other professional fees and unallocated claims handling costs, including the relevant costs of the claims function and related administration. LAE reserves are included within reserve for losses and LAE on our condensed consolidated balance sheets and are estimated consistently with the underlying provisions for notified claims and IBNR.

Reserve Activity

Incurred Losses

Loss and LAE reserves, net of reinsurance recoverables, increased $88 million from the Closing Date to March 31, 2026, driven primarily by current year incurred losses and the acquisition-date fair value reserves adjustment for VOBA, partly offset by paid claims and favorable prior year development.

Net incurred losses for the period were $86 million excluding the amortization of the VOBA intangible asset attributable to reserves of $3 million, comprising $99 million of current accident year losses, partially offset by favorable prior year development of $13 million. Prior year development was favorable in aggregate, reflecting positive catastrophe reserve movements, predominantly within the reinsurance business, and favorable attritional development across most classes. These favorable movements were partly offset by adverse development on certain large losses, primarily within general liability coverages, driven by deterioration related to coverage written in the 2021–2022 underwriting years, and within property-related damage exposures, partially offset by favorable development in certain financial and specialty coverages, resulting from favorable claims experience and releases of general IBNR reserves.

The current year benefited from relatively benign catastrophe loss experience with limited catastrophe loss activity in the period.

Claims Paid

Net paid losses and LAE of $32 million during the period primarily reflect settlement activity on prior year claims, primarily relating to settlements of catastrophe losses from the California wildfires in early 2025.