The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with: (1) the self-insured retention ("SIR") portion of construction defect claims that are expected to be covered under either third-party insurance policies or insurance policies with StarAmerican and (2) the entire cost of any construction defect claims that are not expected to be covered by insurance policies are based on third party actuarial studies that include known facts similar to those for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

The following table summarizes our self-insured retention for construction defect claims for the three and six months ended June 30, 2026 and 2025. These reserves are included as a component of accrued and other liabilities in the homebuilding section of the consolidated balance sheets.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
	(Dollars in thousands)
Balance at beginning of period	$	24,314	$	24,070	$	24,673	$	24,389
Expense provisions	233		497		457		943
Cash payments, net of recoveries	(626)		(787)		(1,209)		(1,552)
Adjustments	—		—		—		—
Balance at end of period	$	23,921	$	23,780	$	23,921	$	23,780

The establishment of reserves for estimated losses associated with insurance policies issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

Effective September 30, 2025, Allegiant Insurance Company, Inc., (“Allegiant”) novated, assigned and transferred to StarAmerican all of its rights, title, interest and obligations regarding insurance policies, including insurance reserves, claims, benefits, premiums, and other amounts payable or receivable. Effective December 19, 2025, Allegiant was dissolved.

The following table summarizes our insurance reserves associated with Allegiant and StarAmerican for the three and six months ended June 30, 2026 and 2025. All insurance reserves associated with Allegiant were transferred to StarAmerican effective September 30, 2025. These reserves are included as a component of accounts payable and accrued liabilities in the financial services section of the consolidated balance sheet.


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025

	(Dollars in thousands)
Balance at beginning of period	$	100,349	$	97,494	$	100,835	$	96,851
Expense provisions	2,922		4,020		5,734		7,483
Cash payments, net of recoveries	(871)		(3,638)		(4,169)		(6,458)
Adjustments	—		—		—		—
Balance at end of period	$	102,400	$	97,876	$	102,400	$	97,876

In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the three and six months ended June 30, 2026 and 2025 are not necessarily indicative of what future cash payments will be for subsequent periods.