Other Insurance Reserves and Policyholder Funds

Note 8. Other Insurance Reserves and Policyholder Funds

Loss and Claim Reserves

Loss and claim reserves represent estimates of projected ultimate losses and are based upon: (a) management’s estimate of ultimate liability and claims adjusters’ evaluations for unpaid claims reported prior to the close of the accounting period, (b) estimates of IBNR claims based on past experience, and (c) estimates of loss adjustment expenses. The estimated liability is periodically reviewed by management and updated, with changes to the estimated liability recorded in the statement of operations in the year in which such changes are known.

Activity in the liability for unpaid loss and claim reserves is summarized as follows:

Balance at January 1

Less: Reinsurance recoverable on unpaid losses

Net balance at January 1

Incurred related to:

Net balance at December 31

Plus: Reinsurance recoverable on unpaid losses

Balance at December 31

(1) Prior years’ development was primarily the result of unfavorable development in the property and casualty operations predominately in the automobile liability line of business due to reserve strengthening, partially offset by favorable development in the Medicare Supplement line of business in the life and health segment.

(2) Prior years’ development was primarily the result of unfavorable development in the property and casualty operations in the automobile liability line of business due to frequency and severity in the inflationary factors, as well as unfavorable development in the 2021 and 2022 accident years.

Following is a reconciliation of total incurred losses to total insurance benefits and losses incurred:

Total incurred losses

Cash surrender value and matured endowments

Benefit reserve changes

Total insurance benefits and losses incurred⁽¹⁾

(1) This line is net of LFPB remeasurement gain of $4,866 and $2,334 for 2025 and 2024, respectively.

Liability for Unpaid Losses, Claims and Loss Adjustment Expenses

The following is information, by significant product lines, about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included within the net incurred claims amounts. The information presented for the years ended December 31, 2024 and prior is presented as supplementary information and is unaudited.

Medicare Supplement

																					As of December 31, 2025
	For the Years Ended December 31,																				IBNR Reserves		Cumulative Number of Reported Claims
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of
	Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	58,849	$	59,851	$	63,226	$	63,225	$	63,221	$	63,221	$	63,221	$	63,221	$	63,221	$	63,221	$	-		1,879
2017				67,960		69,655		69,643		69,635		69,633		69,633		69,632		69,633		69,633		-		2,929
2018						79,140		80,404		80,361		80,357		80,351		80,348		80,348		80,348		-		4,106
2019								88,765		87,028		86,988		86,986		86,980		86,978		86,978		-		4,494
2020										75,857		75,715		75,730		75,730		75,708		75,709		-		3,706
2021												65,267		61,579		61,785		61,740		61,727		-		3,543
2022														58,777		56,047		55,970		55,911		11		4,214
2023																48,367		47,029		47,098		66		4,320
2024																		43,708		39,863		474		3,797
2025																				41,383		12,033		2,014
																			$	621,871

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	49,165	$	59,747	$	63,226	$	63,225	$	63,221	$	63,221	$	63,221	$	63,221	$	63,221	$	63,221
2017				57,696		69,517		69,643		69,635		69,633		69,633		69,633		69,633		69,633
2018						66,565		80,222		80,361		80,355		80,351		80,348		80,348		80,348
2019								72,333		86,856		86,978		86,985		86,980		86,978		86,978
2020										63,129		75,527		75,710		75,715		75,708		75,709
2021												50,197		61,350		61,733		61,726		61,727
2022														46,111		55,808		55,920		55,900
2023																36,388		46,795		47,032
2024																		31,500		39,389
2025																				29,350
																			$	609,287
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	12,584

The cumulative number of reported claims for the Medicare Supplement line of business is the number of distinct claims incurred and submitted to the Centers for Medicare and Medicaid Services (or its designee) for payment in the given year. Multiple payments on the same claim are not counted in the claim frequency data. For Medicare Supplement policies, the estimated ultimate claims incurred, using claims data reported during each month of any given year, are calculated using the chain ladder method. Because claim patterns vary significantly during the year, this method is modified to reflect claim experience over the corresponding four-month period prior to the statement date during the prior two calendar years, and recent claim experience during a twelve-month period from sixteen months prior to the valuation date through five months prior to the valuation date. Additional adjustments to the estimated ultimate claims incurred are then applied to account for seasonal changes in claim experience and changes in the rate of claim processing. The liability for Medicare Supplement claims that are Incurred but Not Reported (the IBNR) is calculated by subtracting both paid claims through the valuation date and claims in the course of settlement as of the valuation date from the estimated ultimate claims. Thirty-six months of loss data are used to develop the estimated ultimate incurred claims. For other accident and health products and life products, similar approaches are used and modified to reflect the unique aspects of the products.

Automobile Liability

																					As of December 31, 2025
	For the Years Ended December 31,																				IBNR Reserves		Cumulative Number of Reported Claims
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	20,549	$	21,275	$	21,846	$	22,388	$	22,245	$	22,310	$	22,448	$	22,448	$	22,448	$	22,448				3,863
2017				22,179		24,212		23,766		25,180		26,009		26,153		26,231		26,254		26,255	$	1		3,813
2018						24,284		25,682		27,338		30,013		30,464		31,135		31,170		31,154		16		3,651
2019								25,241		24,045		25,724		28,042		28,513		29,216		29,384		59		3,608
2020										22,416		16,442		20,137		21,164		21,459		21,066		84		2,523
2021												25,887		21,172		24,957		27,041		26,866		215		2,794
2022														28,860		27,293		31,633		33,348		1,379		2,933
2023																33,266		33,626		39,468		3,408		2,986
2024																		34,105		31,049		3,955		2,808
2025																				42,314		22,340		2,371
																				303,352

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	6,796	$	13,141	$	16,397	$	19,613	$	21,408	$	21,809	$	22,448	$	22,448	$	22,448	$	22,448
2017				7,401		16,317		20,221		22,778		25,023		25,712		26,222		26,249		26,249
2018						6,989		15,647		21,121		24,662		27,671		29,201		30,507		31,057
2019								7,305		14,694		19,384		22,868		26,126		28,778		29,025
2020										5,172		9,941		14,693		18,133		20,466		20,553
2021												6,242		13,918		19,230		24,798		25,552
2022														7,023		18,010		24,137		29,123
2023																9,068		22,232		29,019
2024																		8,939		18,929
2025																				8,193
																			$	240,148
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	63,204

Automobile Physical Damage

											As of December 31, 2025
	For the Years Ended December 31,										IBNR Reserves		Cumulative Number of Reported Claims
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Accident Year		2021		2022		2023		2024		2025
2021	$	14,296	$	13,385	$	13,305	$	13,329	$	13,323	$	1		1,914
2022				10,962		10,648		10,564		10,574		-		1,777
2023						6,460		6,485		6,301		3		1,599
2024								7,418		8,029		12		1,679
2025										9,707		247		1,538
										47,934

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2021		2022		2023		2024		2025
2021	$	11,993	$	13,277	$	13,257	$	13,302	$	13,315
2022				8,475		10,368		10,528		10,573
2023						5,397		6,340		6,263
2024								5,864		7,885
2025										7,055
									$	45,091
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance									$	2,843

General Liability

																					As of December 31, 2025
	For the Years Ended December 31,																				IBNR Reserves		Cumulative Number of Reported Claims
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Accident Year		2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	3,119	$	1,148	$	736	$	608	$	621	$	619	$	620	$	620	$	620	$	620				94
2017				1,490		488		513		738		738		839		777		777		777				84
2018						1,656		333		198		128		183		183		193		185				77
2019								1,916		707		455		515		909		516		547	$	12		98
2020										2,223		670		657		363		793		687		13		91
2021												2,567		1,329		1,328		1,267		1,377		9		106
2022														2,770		2,380		2,530		2,447		103		143
2023																2,887		1,445		1,015		70		126
2024																		3,139		1,836		405		120
2025																				2,111		1,271		70
																				11,602

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	116	$	203	$	568	$	608	$	617	$	619	$	620	$	620	$	620	$	620
2017				75		136		365		556		696		741		777		777		777
2018						65		90		115		128		183		183		185		185
2019								41		209		242		354		404		433		491
2020										208		385		462		539		593		629
2021												364		646		813		1,178		1,336
2022														402		1,169		1,622		2,156
2023																125		399		857
2024																		239		1,002
2025																				247
																			$	8,300
All outstanding liabilities before 2016, net of reinsurance																				205
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	3,507

Surety

																					As of December 31, 2025
	For the Years Ended December 31,																				As of December 31, 2025
																					IBNR Reserves		Cumulative Number of Reported Claims
	Incurred Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance

Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	3,314	$	1,812	$	1,865	$	1,876	$	1,865	$	1,678	$	1,670	$	1,666	$	1,660	$	1,654	$	-	$	50
2017				4,677		3,671		3,799		3,629		3,514		3,440		3,448		3,403		3,398		2		47
2018						3,528		1,938		1,381		956		767		750		750		748		-		67
2019								2,130		657		630		513		507		439		424		-		64
2020										2,263		574		465		460		402		400		-		32
2021												2,936		1,455		1,497		1,475		1,524		7		23
2022														3,202		2,339		2,296		2,265		19		36
2023																2,634		1,627		1,581		4		51
2024																		2,324		1,074		159		122
2025																				1,771		1,413		33
																			$	14,839

	Cumulative Paid Losses, Claims and Allocated Loss Adjustment Expenses, Net of Reinsurance
Accident Year	2016		2017		2018		2019		2020		2021		2022		2023		2024		2025
2016	$	1,054	$	1,732	$	1,772	$	1,873	$	1,862	$	1,677	$	1,670	$	1,666	$	1,660	$	1,654
2017				1,971		3,255		3,523		3,545		3,442		3,402		3,400		3,394		3,388
2018						1,157		1,454		1,361		941		760		749		748		748
2019								259		395		568		446		444		439		424
2020										97		460		464		459		400		400
2021												156		803		1,496		1,475		1,475
2022														970		2,191		2,180		2,153
2023																98		1,602		1,565
2024																		392		735
2025																				211
																			$	12,753
All outstanding liabilities before 2016, net of reinsurance																				47
Liabilities for losses, claims and loss adjustment expenses, net of reinsurance																			$	2,133

For the property and casualty lines of business, the number of claims presented above equals the number of occurrences by type of claim reported to the Company. The number of claims reported during a given year corresponds to the number of claims records opened during the year. Frequency information is maintained on a cumulative basis by accident year by line of business. For automobile claims, a claim count is separately maintained for bodily injury, property damage and physical damage claims. The Company has consistently monitored claim frequency on this basis, and believes this provides more meaningful information than using claimant count which can change over the course of settling a claim.

In general, when a claim is reported, claims representatives establish a “case reserve” for the estimated amount of the ultimate payment based on the known information of the claim at that time. Claims managers review and monitor all property and casualty claims in excess of $25,000. As new information becomes available or payments are made on a claim, the case reserve is adjusted to reflect the revised estimate of the ultimate amount to be paid out. Estimates and assumptions pertaining to individual claims are based on complex and subjective judgments and subject to change at any time as new information becomes available.

In addition to case reserves, IBNR reserves are established to provide for claims which have not been reported to the Company as of the reporting date as well as potential adverse development on known case reserves. IBNR reserve estimates are derived through a number of analytical techniques. Actuarial data is analyzed by line of business, coverage and accident year. Qualitative factors are also considered in determining IBNR reserves and include such factors as judicial decisions, general economic trends such as inflation, changes in policy forms, and underwriting changes. Reserves are reviewed quarterly and any indicated adjustments are made.

Because of the inherent uncertainties in establishing both case and IBNR reserves, ultimate loss experience may prove better or worse than indicated by the combined claim reserves. Adjustments to claim reserves are reflected in the period recognized and could increase or decrease earnings for the period.

The following is supplementary information about average historical claims duration as of December 31, 2025.

	Average Annual Percentage Payout of Incurred Claims by Age, Net of Subrogation and Reinsurance (Unaudited)
Reserve Line	1st Year			2nd Year			3rd Year			4th Year			5th Year			6th Year			7th Year			8th Year			9th Year			10th Year
Medicare Supplement		80.5	%		18.1	%		0.3	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
Automobile liability		24.6	%		29.4	%		17.6	%		14.2	%		8.5	%		3.8	%		2.5	%		0.6	%		0.0	%		0.0	%
Automobile physical damage		80.3	%		16.9	%		0.0	%		0.4	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
General liability		18.1	%		23.6	%		24.4	%		16.9	%		12.9	%		3.3	%		4.1	%		0.0	%		0.0	%		0.0	%
Surety		46.9	%		51.6	%		10.3	%		-11.7	%		-7.2	%		-3.0	%		-1.0	%		-0.1	%		-0.3	%		-0.4	%

The reconciliation of the net incurred and paid claims development tables to the liability for losses, claims and loss adjustment expenses is as follows:

Net outstanding liabilities:

Automobile liability

Automobile physical damage

Other short-duration insurance lines⁽¹⁾

Liabilities for unpaid losses, claims and loss adjustment expenses, net of reinsurance

Reinsurance recoverable on unpaid losses:

Automobile liability

Automobile physical damage

Other short-duration insurance lines

Total reinsurance recoverable on unpaid losses

Unallocated claims adjustment expenses

Total gross liability for unpaid losses, claims and loss adjustment expenses

(1) For American Southern, other short duration insurance lines are inland marine cargo policies. For Bankers Fidelity, other short duration insurance lines for which the detailed claim development is not shown are group accident and health products, which collectively have a claim liability of $705. These products are group critical illness, group disability income, group hospital indemnity, and group accident and medical expense. There are no reinsurance arrangements for any of these Bankers Fidelity products.

- Definition

The entire disclosure for the types of coverages and products sold, and the assets, obligations, recorded liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

+ References + Details