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Note 12 - Insurance and Construction Defect Claim Reserves
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]
1
2
.
Insurance
and Construction Defect Claim
Reserves
 
The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements 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.
 
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 insurance policies with Allegiant and (
2
) the entire cost of any construction defect claims that are
not
expected to be covered by insurance policies with Allegiant are based on actuarial studies that include known facts similar to those established 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 table set forth below summarizes our insurance and construction defect claim reserves activity for the
three
and
nine
months ended
September 30, 2018
and
2017.
These reserves are included as a component of accrued liabilities in either the financial services or homebuilding sections of the consolidated balance sheets.
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2018
   
2017
   
2018
   
2017
 
   
(Dollars in thousands)
 
Balance at beginning of period
  $
50,707
    $
49,647
    $
52,686
    $
50,954
 
Expense provisions
   
2,865
     
2,383
     
7,902
     
6,884
 
Cash payments, net of recoveries
   
(264
)    
(1,535
)    
(7,280
)    
(7,343
)
Balance at end of period
  $
53,308
    $
50,495
    $
53,308
    $
50,495
 
 
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
nine
months ended
September 30, 2018
and
2017
are
not
necessarily indicative of what future cash payments will be for subsequent periods.