
	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Gross reserves, beginning-of-period	$	324,362	$	296,230	$	230,515
Less: reinsurance recoverable (1)	(164,429)		(166,396)		(98,345)
Net reserves, beginning-of-period	159,933		129,834		132,170

Net reserves from the Maison Companies acquisition	—		11,825		—

Incurred loss, net of reinsurance, related to:
Current year	358,952		262,118		231,133
Prior year loss development (redundancy) (2)	18,367		13,460		2,166
Ceded losses subject to offsetting experience account adjustments (3)	(816)		(2,489)		(4,883)
Prior years	17,551		10,971		(2,717)
Amortization of acquisition fair value adjustment	(54)		(9)		—
Total incurred loss and LAE, net of reinsurance	376,449		273,080		228,416

Paid loss, net of reinsurance, related to:
Current year	253,344		173,313		155,462
Prior years	100,799		81,493		75,290
Total paid loss and LAE, net of reinsurance	354,143		254,806		230,752

Net reserves, end-of-period	182,239		159,933		129,834
Plus: reinsurance recoverable (1)	358,128		164,429		166,396
Gross reserves, end-of-period	$	540,367	$	324,362	$	296,230

The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple interpretations. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made.

During the year ended December 31, 2020, the Company experienced $18.4 million of net unfavorable loss and LAE reserve development on prior accident years, primarily in its commercial general liability line of business as a result of higher than expected late reported claims across a number of accident years during 2020.

During the year ended December 31, 2019, the Company experienced $13.5 million of net unfavorable loss and LAE reserve development on prior accident years, primarily in its personal automobile and commercial general liability lines of business. The development in commercial general liability was driven by late reported claims as well as large losses that drove up the overall severity metrics. Additionally, the unfavorable automobile development primarily related to 2017 accident year from our auto programs in the states of Georgia and Texas, and was driven by claims reopening and higher severity.

During the year ended December 31, 2018, the Company experienced $2.2 million of net unfavorable loss and LAE reserve development on prior accident years, primarily driven by net development in our personal automobile line of business, partially offset by net redundancy in our homeowners line of business. The unfavorable development on automobile primarily related to the 2016 accident year in the state of Georgia. The favorable net redundancy on homeowners was primarily driven by lower LAE expenses associated with Hurricane Irma, partially offset by continued adverse impact from assignment of benefits (“AOB”) and related litigation costs in the state of Florida.

As previously disclosed, the Company entered into 30% and 10% retrospectively-rated Florida-only property quota-share treaties, which ended on July 1, 2016 and 2017, respectively. These agreements included a profit share (experience account) provision, under which the Company will receive ceded premium adjustments at the end of the treaty to the extent there is a positive balance in the experience account. This experience account is based on paid losses rather than incurred losses. Due to the retrospectively-rated nature of this treaty, when the experience account is positive we cede losses under these treaties as the claims are paid with an equal and offsetting adjustment to ceded premiums (in recognition of the related change to the experience account receivable), with no impact on net income. Conversely, when the experience account is negative, the Company cedes losses on an incurred basis with no offsetting adjustment to ceded premiums, which impacts net income. Loss development can be either favorable or unfavorable regardless of whether the experience account is in a positive or negative position.

AOB is a legal construct that allows a third party to step into the shoes of the insured and is then paid directly by an insurance company for services rendered on behalf of the insured for a covered loss. Absent an AOB, the insured would pay the third party and those costs would be reimbursed by the insurance company to the insured. AOB is commonly used when a homeowner experiences a water loss, for example a leaky pipe, an overflow from a sink, or a damaged appliance, and contacts a contractor or water remediation company.

Misuse of this legal construct has led to contractors over inflating costs of claims and/or submitting improper claims, causing insurance companies to have to either pay the overinflated claim, fight the claim in court, or both. In all cases, AOB claims cost the insurance company, on average, more than five times the cost to settle non-AOB claims, which has been a primary driver the increase to our overall loss and loss adjustment in comparison to historical severity averages.

The following tables provide incurred losses and allocated LAE ("ALAE") and cumulative paid losses and ALAE, net of reinsurance, for the prior 10 accident years, and the total of IBNR reserves plus expected development on reported claims and the cumulative number of reported claims (in thousands, except number of reported claims), as of the most recent reporting period, by the Company’s significant lines of business, which are homeowners, commercial general liability and automobile.


																					IBNR & Expected		Cumulative
	Homeowners Incurred Losses and ALAE, Net of Reinsurance																				Development on		Number of
	For the Years Ended December 31,																				Reported Claims		Reported Claims (1)
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		2020		2020
2011	$	20,492	$	21,344	$	23,007	$	23,932	$	24,582	$	25,957	$	26,143	$	26,394	$	26,394	$	26,375	$	12	2,428
2012			23,032		23,301		24,186		24,468		25,889		26,356		26,836		26,951		26,984		85		2,694
2013					43,807		42,021		35,834		35,859		37,185		37,880		37,978		38,088		15		3,431
2014							64,312		63,300		61,770		62,206		61,817		62,043		62,535		378		7,606
2015									99,497		92,411		95,129		94,760		94,703		96,144		1,522		13,038
2016											171,264		162,043		158,764		157,880		156,316		1,394		22,614
2017													202,844		192,769		188,548		179,327		47,728		67,165
2018															210,158		213,128		216,570		20,849		35,817
2019																	257,644		261,541		23,909		19,661
2020																			342,119		236,080		35,117
																	Total		$	1,405,999



	Homeowners Cumulative Paid Losses and ALAE, Net of Reinsurance
	For the Years Ended December 31,
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	11,119	$	19,250	$	21,323	$	22,723	$	24,047	$	25,580	$	25,982	$	26,287	$	26,340	$	26,342
2012			13,693		20,728		23,120		23,923		25,186		26,113		26,777		26,861		26,901
2013					19,986		31,606		33,867		35,123		35,803		37,473		37,688		37,915
2014							37,033		53,831		57,891		59,722		60,555		61,441		61,692
2015									52,214		79,359		86,647		90,415		92,327		93,405
2016											102,556		142,716		148,274		152,258		153,997
2017													135,589		176,580		179,327		178,013
2018															141,173		194,160		206,133
2019																	157,768		236,090
2020																			236,197
																			$	1,256,685


All outstanding liabilities for unpaid claims and ALAE prior to 2011, net of reinsurance																			—
Total outstanding liabilities for unpaid claims and ALAE, net of reinsurance																			$	149,314


																					IBNR & Expected		Cumulative
	Commercial General Liability Incurred Losses and ALAE, Net of Reinsurance																				Development on		Number of
	For the Years Ended December 31,																				Reported Claims		Reported Claims
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		2020		2020
2011	$	6,436	$	5,854	$	4,749	$	4,603	$	4,760	$	5,409	$	6,254	$	6,828	$	7,817	$	9,394	$	1,572	1,367
2012			5,279		4,952		4,801		4,700		4,658		4,346		4,509		5,109		6,431		1,209		817
2013					7,095		5,069		5,221		5,502		5,704		5,580		5,984		7,588		1,245		759
2014							7,475		7,709		6,384		6,620		6,348		6,697		9,028		1,549		1,016
2015									8,082		7,008		6,020		5,377		7,947		9,141		2,043		877
2016											10,727		5,809		6,561		8,502		12,267		3,086		845
2017													8,289		7,853		6,558		8,519		3,369		639
2018															6,553		6,233		7,280		4,281		420
2019																	1,604		2,535		1,826		114
2020																			37		—		6
																	Total		$	72,220


	Commercial General Liability Cumulative Paid Losses and ALAE, Net of Reinsurance
	For the Years Ended December 31,
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	764	$	2,763	$	3,366	$	3,673	$	4,246	$	4,866	$	5,831	$	6,349	$	7,365	$	7,693
2012			871		1,714		2,632		3,342		3,686		3,841		4,098		4,521		4,790
2013					882		2,233		3,366		3,867		4,606		5,033		5,467		5,847
2014							717		2,593		3,855		4,375		5,130		6,270		6,901
2015									798		2,296		3,249		3,827		5,866		6,566
2016											1,515		3,657		5,088		6,606		8,382
2017													1,592		2,478		3,293		4,225
2018															963		1,554		2,604
2019																	147		424
2020																			5
																	Total		$	47,437

All outstanding liabilities for unpaid claims and ALAE prior to 2011, net of reinsurance																			3,545
Total outstanding liabilities for unpaid claims and ALAE, net of reinsurance																			$	28,328


	Average Annual Payout of Losses and ALAE, Net of Reinsurance
	(Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Commercial general liability	10.2	%	14.1	%	10.4	%	7.2	%	10.3	%	6.5	%	6.3	%	5.0	%	7.2	%	4.7	%


																					IBNR & Expected		Cumulative
	Automobile Incurred Losses and ALAE, Net of Reinsurance																				Development on		Number of
	For the Years Ended December 31,																				Reported Claims		Reported Claims
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020		2020		2020
2011	$	3,580	$	3,350	$	2,954	$	2,912	$	2,762	$	2,848	$	2,796	$	2,756	$	2,762	$	2,760	$	—	789
2012			1,735		1,741		1,717		1,424		1,455		1,491		1,448		1,444		1,448		4		824
2013					1,517		1,863		1,826		1,829		2,161		2,123		2,127		2,127		6		3,471
2014							2,038		3,213		3,551		4,315		4,379		4,417		4,413		4		6,019
2015									3,045		2,882		2,781		2,878		2,915		2,944		14		6,553
2016											13,414		20,205		24,346		25,918		25,923		251		67,655
2017													20,411		22,472		24,579		24,669		740		52,885
2018															3,513		4,623		4,439		887		9,604
2019																	(3)		—		2		101
2020																			—		—		1
																	Total		$	68,723



	Automobile Cumulative Paid Losses and ALAE, Net of Reinsurance
	For the Years Ended December 31,
	(Unaudited)
Accident Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	1,417	$	2,381	$	2,562	$	2,644	$	2,726	$	2,755	$	2,755	$	2,755	$	2,755	$	2,755
2012			867		1,293		1,333		1,384		1,393		1,430		1,444		1,447		1,449
2013					907		1,609		1,906		2,069		2,109		2,112		2,116		2,116
2014							1,455		3,120		3,678		4,122		4,291		4,383		4,396
2015									1,393		2,293		2,670		2,807		2,890		2,897
2016											8,084		17,258		23,053		25,582		26,132
2017													12,821		20,762		23,860		24,468
2018															2,331		3,626		3,137
2019																	(5)		—
2020																			—
																	Total		$	67,350

All outstanding liabilities for unpaid claims and ALAE prior to 2011, net of reinsurance																			15
Total outstanding liabilities for unpaid claims and ALAE, net of reinsurance																			$	1,388


	December 31,
	2020		2019
	(In thousands)
Liabilities for unpaid losses and ALAE:
Homeowners	$	149,314	$	137,168
Commercial general liability	28,328		17,014
Automobile	1,388		2,142
Flood	—		—
Total liabilities for unpaid losses and ALAE, net of reinsurance	179,030		156,324

Reinsurance recoverables:
Homeowners	353,741		160,578
Commercial general liability	—		500
Automobile	1,424		3,228
Flood	2,963		123
Total reinsurance recoverables	358,128		164,429

Unallocated loss adjustment expenses	3,209		3,609
Gross liability for unpaid losses and LAE	$	540,367	$	324,362

Management establishes a liability on an aggregate basis to provide for the estimated IBNR. The estimates of the liability for loss and LAE reserves are subject to the effect of trends in claims severity and frequency and are continually reviewed. As part of this process, we review historical data and consider various factors, including known and anticipated legal developments, inflation and economic conditions. As experience develops and other data become available, these estimates are revised, as required, resulting in increases or decreases to the existing liability for loss and LAE reserves. Adjustments are reflected in results of operations in the period in which they are made and the liabilities may deviate substantially from prior estimates.

Various actuarial methods are utilized to determine the reserves that are booked to our financial statements. Weightings of tests and methods at a detailed level may change from evaluation to evaluation based on a number of observations, measures and time elements. On an overall basis, changes to methods and/or assumptions underlying reserve estimations and selections as of December 31, 2020 and 2019, were not considered material, except for our commercial general liability line of business. For this line of business, we updated our actuarial assumptions to reflect the new, emerging trend relating to the increased level of new claims being reported related to construction defects, as the new development patterns are different than the historical patterns.

IBNR reserves are established for the quarter and year-end based on a quarterly reserve analysis by our actuarial staff. Various standard actuarial tests are applied to subsets of the business at a line of business and coverage basis. Included in the analyses are the following:

•Reported Loss Development Method: A reported loss development pattern is calculated based on historical loss development data, and this pattern is then used to project the latest evaluation of cumulative reported losses for each accident year or underwriting year, as appropriate, to ultimate levels;

•Paid Development Method: A paid loss development pattern is calculated based on historical paid loss development data, and this pattern is then used to project the latest evaluation of cumulative paid losses for each accident year or underwriting year, as appropriate, to ultimate levels;

•Expected Loss Ratio Method: Expected loss ratios are applied to premiums earned, based on historical company experience, or historical insurance industry results when company experience is deemed not to be sufficient; and