POLICY AND CLAIM RESERVES

12 Months Ended

Dec. 31, 2021

POLICY AND CLAIM RESERVES The Company regularly updates its reserve estimates as new information becomes available and events occur that may impact the resolution of unsettled claims. Reserve estimation can be an inherently uncertain process and reserve estimates can be revised up or down depending on changes in circumstances. Changes in prior years' reserve estimates are reflected in the results of operations in the year such changes are determined.

The following table is a reconciliation of beginning and ending property and casualty reserve balances for claims and claim adjustment expense:


($ in thousands)	Year ended December 31,
		2021		2020
Summary of claims and claim adjustment expense reserves
Balance, beginning of year		$	10,177	$	7,199
Less reinsurance recoverable on unpaid losses		3,321		249
Net balances at beginning of year		6,856		6,950
Net losses:
Provision for claims and claim adjustment expenses for claims arising in current year		37,207		50,112
Estimated claims and claim adjustment expenses for claims arising in prior years		(522)		(687)
Total increases		36,685		49,425
Claims and claim adjustment expense payments for claims arising in:
Current year		32,579		44,816
Prior years		4,171		4,703
Total payments		36,750		49,519
Net balance at end of period		6,791		6,856
Plus reinsurance recoverable on unpaid losses		2,139		3,321
Claims and claim adjustment expense reserves at end of period		$	8,930	$	10,177

Claims and claim adjustment expense reserves before reinsurance recoverables at December 31, 2021 were down significantly compared to prior year primarily due to fewer outstanding hurricane losses at the balance sheet date compared to prior year. The estimate for claims arising in prior years was reduced $522,000 in 2021 (reduced $687,000 in 2020) due to favorable loss development during the year on claims arising in prior years.

The Company has a geographic exposure to catastrophe losses in certain areas of the country, particularly the north-central Gulf of Mexico and the Georgia and South Carolina coast. Catastrophes can be caused by various events including hurricanes, windstorms, earthquakes, hail, severe winter weather, explosions and fires, and the incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophe losses are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. The Company generally seeks to reduce its exposure to catastrophes through individual risk selection and the purchase of catastrophe reinsurance. At December 31, 2021, the Company's estimate of unpaid losses and adjustment expenses for claims incurred in prior years related to catastrophes that exceeded our retention totaled $117,000 before reinsurance ($0 in 2020).

The claim development table that follows presents incurred and cumulative paid claims and adjustment expense by accident year. Information presented is undiscounted and net of reinsurance.

Homeowners, Dwelling Fire and Other Liability


	For the Years Ended December 31,
	20121		20131		20141		20151		20161		20171		20181		2019		2020		2021
	Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance

	($ in thousands)
Years																					IBNR Reserves Dec. 31, 2021		Cumulative Number of Reported Claims
2012	$	29,959	$	30,190	$	30,402	$	30,091	$	29,948	$	29,885	$	29,827	$	29,834	$	29,830	$	29,831	$	—	5,206
2013	—		27,436		27,147		27,076		27,023		27,191		27,236		27,022		27,015		27,013		3		5,217
2014	—		—		25,929		26,422		26,290		26,225		26,130		26,096		26,086		26,086		—		4,759
2015	—		—		—		31,484		30,861		30,360		30,890		30,960		31,033		30,822		193		5,868
2016	—		—		—		—		36,287		35,343		35,399		35,144		35,151		35,137		—		5,207
2017	—		—		—		—		—		40,210		38,958		38,642		38,675		38,685		4		5,341
2018	—		—		—		—		—		—		37,079		36,195		36,229		36,668		349		4,813
2019	—		—		—		—		—		—		—		35,929		35,199		35,231		135		4,852
2020	—		—		—		—		—		—		—		—		50,722		49,911		495		6,366
2021	—		—		—		—		—		—		—		—		—		37,814		2,595		4,947
																	Total		$	347,198

1Required supplementary information (unaudited)


	Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance

	($ in thousands)
Years	20121		20131		20141		20151		20161		20171		20181		2019		2020		2021
2012	$	26,162	$	29,135	$	29,614	$	29,765	$	29,834	$	29,835	$	29,823	$	29,824	$	29,825	$	29,825
2013	—		24,157		26,114		26,487		26,661		26,788		26,976		27,011		27,006		27,006
2014	—		—		22,844		25,461		25,800		26,033		26,095		26,094		26,086		26,086
2015	—		—		—		25,923		30,066		30,190		30,296		30,366		30,492		30,519
2016	—		—		—		—		31,893		34,722		35,030		35,139		35,131		35,132
2017	—		—		—		—		—		35,209		38,245		38,499		38,659		38,674
2018	—		—		—		—		—		—		32,456		35,543		35,924		36,121
2019	—		—		—		—		—		—		—		30,796		34,593		34,905
2020	—		—		—		—		—		—		—		—		45,423		49,024
2021	—		—		—		—		—		—		—		—		—		33,185
																	Total		$	340,477
			All outstanding liabilities before 2011, net of reinsurance																70
			Liabilities for claims and claim adjustment expenses, net of reinsurance																$	6,791

1Required supplementary information (unaudited)

The cumulative number of reported claims presented above is reported on a per claimant basis.


	Average Annual Percentage Payout of Incurred Claims by Age (in Years), Net of Reinsurance
	(Required Supplementary Information - Unaudited)
Years	1		2		3		4		5		6		7		8		9		10
	88.5	%	9.3	%	1.0	%	0.5	%	0.3	%	0.2	%	—	%	0.2	%	—	%	—	%

The tables presented above represent homeowners, dwelling fire and other liability lines of business. The Company combined the data for these lines of business because the policy coverage and payout pattern for homeowners and dwelling fire are not materially different. Also, other liability is combined with dwelling fire because liability coverage is only sold as an additional coverage offered only with the dwelling fire policy. The Company offers no stand alone liability products.

Management periodically estimates the liability for claims that have been reported but not paid and for claims incurred but not reported (IBNR). Management utilizes expected losses along with historical data analysis of paid and incurred loss development patterns over the past ten years to aide in establishing the claims liability. Management also separately evaluates any recent large events in establishing claim reserves. The Company also engages a consulting actuary to review managements' estimates of claim liabilities each year. There has been no material change in reserving methodology in 2021 compared to prior years.

As shown in the table above depicting average annual payout of incurred claims, 88.5% of claims are settled within twelve months of the date of loss and cumulatively, 97.8% of claims are settled within two years of the date of loss. While reserves for reported but unpaid and incurred but not reported claims can ultimately prove to be excessive or deficient, the short duration of the Company's claim liabilities serves to lessen the uncertainty compared to longer tail lines of insurance. The Company has no material exposure to difficult to estimate long tail liabilities such as toxic waste cleanup, asbestos related illness or other environmental remediation exposures.


Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid Claims and Claim Adjustment Expenses

($ in thousands)	December 31, 2021		December 31, 2020
Net outstanding liabilities
Homeowners' insurance	$	2,399	$	2,359
Dwelling fire insurance	2,483		2,877
Other Liability insurance	1,908		1,618
Other short-duration insurance lines	1		2
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	6,791		6,856

Reinsurance recoverable on unpaid claims
Homeowners' insurance	2,064		2,620
Dwelling fire insurance	75		700
Other Liability insurance	—		—
Other short-duration insurance lines	—		1
Total reinsurance recoverable on unpaid claims	2,139		3,321

Insurance lines other than short-duration	—		—
Unallocated claims adjustment expenses	—		—
Other	—		—
	—		—

Total gross liability for unpaid claims and claim adjustment expense	$	8,930	$	10,177

Accident and Health Claim Reserves

The Company, through its life insurance subsidiary, underwrites a limited number of short duration accident and health contracts. These claims are typically settled in three years or less and the reserve for unpaid claims totaled $390,000 at December 31, 2021 ($426,000 at December 31, 2020). These claims are a component of policy and contract claims which totaled $1,210,000 at December 31, 2021 ($1,309,000 at December 31, 2020).

Cumulative incurred and paid claims over the last three years, along with annual percentage payouts related to accident and health claims, is as follows:


	For the Years Ended December 31,
	20191		2020		2021
	Incurred Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance ($ in thousands)


Years							IBNR Reserves Dec. 31, 2021		Cumulative Number of Reported Claims
2019	$	935	$	968	$	935	$	—	1,468
2020			818		741		—		1,019
2021					778		390		793

1Required supplementary information (unaudited)


	Cumulative Paid Claims and Allocated Claims Adjustment Expenses, Net of Reinsurance ($ in thousands)


Years	20191		2020		2021
2019	$	614	$	917	$	929
2020			451		703
2021					433

1Required supplementary information (unaudited)


	Average Annual Percentage Payout of Incurred Claims by Age
	Required supplementary information (unaudited)
Years	1	2	3
	60.7%	35.7%	2.9%