Reserves for Losses and Loss Adjustment Expenses

9 Months Ended

Sep. 30, 2024

Reserves for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):


	Successor		Predecessor
(in millions)	Nine Months Ended September 30, 2024		Nine Months Ended September 30, 2023
Net reserves - beginning of the year	$	2,747.1	$	2,213.1


Add:
Losses and LAE incurred during current calendar year, net of reinsurance:
Current accident year	583.8		680.9
Prior accident years	209.7		126.0
Losses and LAE incurred during calendar year, net of reinsurance	793.5		806.9
Deduct:
Losses and LAE payments made during current calendar year, net of reinsurance:
Current accident year	53.2		94.9
Prior accident years	552.6		361.6
Losses and LAE payments made during current calendar year, net of reinsurance:	605.8		456.5
Add/(Deduct):
Divestitures (1)	—		24.4


Retroactive reinsurance (2)	—		21.7
Deferred gain on U.S. loss portfolio transfer, net of amortization	—		(16.8)
Purchase accounting adjustment (3)	19.4		—

Total net reserve adjustments	19.4		29.3
Foreign exchange adjustments	(1.6)		0.9
Net reserves - end of period	2,952.6		2,593.7
Add:
Reinsurance recoverables on unpaid losses and LAE, end of period	2,840.3		2,735.0
Gross reserves - end of period	$	5,792.9	$	5,328.7

(1)For the nine months ended September 30, 2023, the adjustment relates to the year-to-date activity of Syndicate 1200 and on reinsurance contracts with AUA subsidiaries. Refer to the sale of Argo Underwriting Agency Limited in Note 1, “Business and Significant Accounting Policies” for additional information.

(2) In connection with the sale of AUA, the Company entered into two retroactive reinsurance agreements with AUA subsidiaries.

(3) Impact of measurement period adjustment in connection with the Merger. Refer to Note 1, “Business and Significant Accounting Policies” for additional information.

Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.

The impact from the unfavorable (favorable) development of prior accident years’ loss and LAE reserves on each reporting segment is presented below:


	Successor		Predecessor
(in millions)	Nine Months Ended September 30, 2024		Nine Months Ended September 30, 2023
U.S. Operations	$	125.1	$	111.7
International Operations	77.3		11.7
Run-off Lines	7.3		2.6
Total unfavorable (favorable) prior-year development	$	209.7	$	126.0

The following describes the primary factors behind each segment’s net prior accident year loss reserve development for the nine months ended September 30, 2024 and 2023:

Nine months ended September 30, 2024:

•U.S. Operations: Net unfavorable development primarily related to the recognition of higher-than-expected loss experience across a number of specialty, casualty, and professional lines and by updates to the expectations for future loss experience and development, along with movements on large individual surety claims in specialty lines.

•International Operations: Net unfavorable development primarily related to the recognition of higher-than-expected loss experience in Bermuda professional and casualty lines and by updates to the expectations for future loss experience and development.

•Run-off Lines: Net unfavorable loss reserve development on prior accident years in other run-off lines.

Nine months ended September 30, 2023:

•U.S. Operations: Net unfavorable development primarily related to liability and professional lines partially offset by favorable development in specialty lines. The liability lines development was driven by actual losses greater than expected including the impact of large claims with a significant portion of the unfavorable development coming from businesses we have exited. The professional lines development was driven by movements on individual management liability claims. The favorable development in specialty lines was due to a lack of claim activity in surety business.

•International Operations: Net unfavorable development primarily related to movements on claims in professional and liability lines in our Bermuda operations partially offset by favorable development in runoff Reinsurance lines.

•Run-off Lines: Net unfavorable loss reserve development on prior accident years in other run-off lines.

Our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and reasonable assumptions where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.