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Loss And Loss Adjustment Expense Reserves | 6 Months Ended
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Jun. 30, 2025
Insurance Loss Reserves [Abstract] |
Loss And Loss Adjustment Expense Reserves | Loss and Loss Adjustment Expense Reserves The following table presents the activity in loss and loss adjustment expense reserves:
| Six Months Ended June 30,
| 2025 |  | 2024
| (Amounts in thousands)
Gross reserves, beginning of period | $ | 3,152,031 |  |  | $ | 2,785,702 |
Reinsurance recoverables on unpaid losses, beginning of period | (28,645) |  |  | (32,148) |
Net reserves, beginning of period | 3,123,386 |  |  | 2,753,554 |
Incurred losses and loss adjustment expenses related to: |  |  |
Current year | 2,207,746 |  |  | 1,832,701 |
Prior years | (46,896) |  |  | 7,978 |
Total incurred losses and loss adjustment expenses | 2,160,850 |  |  | 1,840,679 |
Loss and loss adjustment expense payments related to: |  |  |
Current year | 938,379 |  |  | 801,750 |
Prior years | 896,037 |  |  | 846,290 |
Total payments | 1,834,416 |  |  | 1,648,040 |
Net reserves, end of period | 3,449,820 |  |  | 2,946,193 |
Reinsurance recoverables on unpaid losses, end of period | 162,340 |  |  | 30,210 |
Gross reserves, end of period | $ | 3,612,160 |  |  | $ | 2,976,403 |
The decrease in the provision for insured events of prior years during the six months ended June 30, 2025 of $46.9 million was primarily attributable to lower than estimated losses and loss adjustment expenses in the private passenger automobile line of insurance business, and the homeowners line of insurance business, including favorable development on the prior years' catastrophe losses. The increase in the provision for insured events of prior years during the six months ended June 30, 2024 of $8.0 million was primarily attributable to higher than estimated losses and loss adjustment expenses in the commercial automobile and commercial property lines of insurance business and catastrophe losses, partially offset by favorable development in the private passenger automobile line of insurance business. For the six months ended June 30, 2025 and 2024, the Company incurred catastrophe losses net of reinsurance of approximately $460 million and $197 million, respectively. Catastrophe losses incurred for the six months ended June 30, 2025 was reduced by approximately $575 million of subrogation recorded on the Palisades and Eaton wildfires. The majority of 2025 catastrophe losses resulted from the Palisades and Eaton wildfires in California and severe storms in Texas and Oklahoma. The majority of 2024 catastrophe losses resulted from tornadoes, hailstorms and convective storms in Texas and Oklahoma and winter storms and rainstorms in California. The Company experienced favorable development of approximately $14 million and unfavorable development of approximately $9 million on prior years' catastrophe losses for the six months ended June 30, 2025 and 2024, respectively. In January 2025, extreme wind-driven wildfires caused widespread damage across parts of Southern California, primarily in the communities of Pacific Palisades and Altadena. The two largest of these Southern California wildfires are known as the Palisades and Eaton wildfires. The Company recorded net catastrophe losses and loss adjustment expenses ("LAE") before taxes from the Palisades and Eaton wildfires of approximately $359 million in its consolidated statements of operations for the six months ended June 30, 2025. The following table presents the components of net losses from the Palisades and Eaton wildfires as of June 30, 2025 and March 31, 2025:
| For the Six Months Ended June 30, 2025 |  | For the Three Months Ended March 31, 2025
| (Amounts in thousands)
Gross losses and loss adjustment expenses | $ | 2,153,000 |  |  | $ | 2,149,000 |
Subrogation recoverable - Eaton fire (1) *** | (528,000) |  |  | (525,000) |
Subrogation recovered and recoverable - Palisades fire (2) *** | (46,500) |  |  | — |
Reinsurance recovered and recoverable (3) | (1,293,500) |  |  | (1,293,500) |
Net catastrophe losses and loss adjustment expenses on Eaton and Palisades fires before Fair Plan | $ | 285,000 |  |  | $ | 330,500 |
Company's share of Fair Plan losses and loss adjustment expenses (4) | $ | 99,000 |  |  | $ | 108,500 |
Recoupable portion of Fair Plan losses and loss adjustment expenses (5) | (25,000) |  |  | (25,000) |
Net Fair Plan losses and loss adjustment expenses | $ | 74,000 |  |  | $ | 83,500 |
Net losses and loss adjustment expenses on Eaton and Palisades fires | $ | 359,000 |  |  | $ | 414,000 |
__________ (1) The Company is actively pursuing subrogation against Southern California Edison ("SCE") on the Eaton fire. The Company recorded approximately $528 million in estimated subrogation recoveries, or approximately 55% of its estimated ultimate losses on the Eaton fire, as an offset against loss and loss adjustment expense reserves in its consolidated balance sheet at June 30, 2025, and thereby reduced losses and loss adjustment expenses by the same amount in its consolidated statements of operations for the six months ended June 30, 2025. Although SCE has not admitted that its equipment caused the Eaton fire, significant evidence indicates that SCE's equipment was the cause of the Eaton fire. In addition, SCE has disclosed that it is probable that SCE will incur material losses from the Eaton fire. For utility caused California wildfires occurring since 2017, the utility companies, including SCE, have paid out average amounts equal to over 60% of the losses incurred with a range as low as 55% to over 70%. The Company believes that SCE has the wherewithal to settle the subrogation claims on the Eaton fire in a similar range of settlement amounts as on the recent past wildfires. SCE also has access to the California Wildfire Fund which provides additional funding to reimburse member utilities to pay wildfire claims. Based on the grounds described above, including the the history of settlement payouts on prior wildfires by SCE and other utility companies in similar situations where the utility equipment caused the wildfires and such companies settled the subrogation claims without admitting fault, the Company believes $528 million is a reasonable estimate of probable recovery on the Eaton fire. (2) In June 2025, the Company sold its subrogation rights on the Palisades fire to a third party for a guaranteed percentage of losses incurred plus a share in the amount recovered above a certain threshold (“Upside Recovery’). The recovery amount from the guaranteed percentage of losses is approximately $47 million, with $27 million received as of June 30, 2025. The remaining balance of approximately $20 million at June 30, 2025 will be settled each quarter based on the amount of claims payments the Company makes subsequent to the previous settlement date. The Company recorded the total sale price of approximately $47 million as an offset against losses and loss adjustment expenses in its consolidated statements of operations for the six months ended June 30, 2025. The Company did not record an amount for the potential Upside Recovery. (3) The Company’s catastrophe reinsurance program for the treaty year ended June 30, 2025 provides approximately $1,290 million of limits on a per occurrence basis after covered catastrophe losses exceed the Company’s retention of $150 million. It also allows the Company to consider catastrophe events that occur within a 150-mile radius as a single occurrence or separate occurrences for reinsurance purposes. The Company treated the Palisades and Eaton wildfires as one event for reinsurance purposes exhausting the full $1,290 million of limits and paid reinstatement premiums of approximately $101 million. The $1,290 million of limits used for the Palisades and Eaton wildfires was reduced by $6.5 million for ineligible parametric coverage. The Company also utilized $10 million from a separate property excess of loss reinsurance treaty making the total reinsurance used for the Palisades and Eaton wildfires approximately $1,294 million. (4) The Company is a member of the California FAIR Plan, the state's fire insurer of last resort. To the extent the FAIR Plan has losses exceeding its capital and reinsurance coverage, the FAIR Plan can assess its member companies for the shortfall based on each company’s California market share. The FAIR Plan had significant losses from the Palisades and Eaton wildfires, and the Company's share of the FAIR Plan losses from the Palisades and Eaton wildfires was approximately $99 million (an amount based on information provided to the Company directly from the FAIR Plan), which was recorded as part of the Company's losses from the Palisades and Eaton wildfires in its consolidated statements of operations for the six months ended June 30, 2025. (5) The FAIR Plan assessed the Company $50 million to strengthen the FAIR Plan's capital position following the Palisades and Eaton wildfires in the first quarter of 2025. The California DOI allows for recoupment of 50% or $25 million of the $50 million assessment via a temporary surcharge to the Company's policyholders. The Company has filed with the California DOI to begin recouping the $25 million, which partially offset the Company's share of the FAIR Plan's losses of $99 million. Accordingly, the Company recorded a net loss of $74 million for its share of the FAIR Plan's losses from the Palisades and Eaton wildfires in its consolidated statements of operations for the six months ended June 30, 2025. *** Accounting Standards Codification (“ASC”) 944-40-30-2 through 3 and Statement of Statutory Accounting Principles (“SSAP”) No. 55 paragraph 15 require salvage and subrogation recoverables to be deducted from the liability for unpaid claims; therefore, loss and loss adjustment expense reserves on the Company's consolidated balance sheets is shown net of estimated salvage and subrogation recoverables, and losses and loss adjustment expenses on its consolidated statements of operations is shown net of salvage and subrogation. The Company applies this accounting method for salvage and subrogation in a consistent manner for both GAAP and statutory reporting purposes. As of June 30, 2025, the Company has paid out approximately $1,320 million for losses and loss adjustment expenses related to the Palisades and Eaton wildfires. Through June 30, 2025, the Company has billed reinsurers $933 million for the losses and loss adjustment expenses paid and as of July 15, 2025, 100% of that amount has been collected. On July 16, 2025, the Company billed the reinsurers $225 million for losses and loss adjustment expenses paid subsequent to the previous reinsurance billings. Catastrophe Reinsurance Premiums The Company exhausted the catastrophe reinsurance limits on the Palisades and Eaton wildfires, which triggered a full reinstatement of the limits with payment of $101 million of reinstatement premiums, and accelerated expensing of the remaining premiums on the original limits into the first quarter rather than over the first and second quarters. The following table shows the impact of catastrophe reinsurance utilization on ceded premiums written and earned compared to a pro-forma showing those premiums without any use of catastrophe reinsurance limits:
| Six Months Ended |  | Three Months Ended |  | Second Quarter
| 6/30/2025 |  | 3/31/2025 |  | 2025
| (Amounts in thousands)
Pro-forma if Company had used $0 of reinsurance limit |  |  |  |  |
Ceded premiums written | $ | 52,000 |  |  | $ | 26,000 |  |  | $ | 26,000 |
Ceded premiums earned | 52,000 |  |  | 26,000 |  |  | 26,000 |
Amount recorded based on 100% of reinsurance limit used |  |  |  |  |
Ceded premiums written (original Limit) | 52,000 |  |  | 52,000 |  |  | — |
Reinstatement premiums written | 101,000 |  |  | 101,000 |  |  | — |
Total ceded premiums written | $ | 153,000 |  |  | $ | 153,000 |  |  | $ | — |
Ceded premiums earned (original limit) | 52,000 |  |  | 52,000 |  |  | — |
Reinstatement premiums earned | 101,000 |  |  | 50,000 |  |  | 51,000 |
Total ceded premiums earned | $ | 153,000 |  |  | $ | 102,000 |  |  | $ | 51,000 |
Difference in reinsurance premiums between $0 limit used (pro-forma) and full limit used (recorded) |  |  |  |  |
Ceded premiums written | $ | 101,000 |  |  | $ | 127,000 |  |  | $ | (26,000) |
Ceded premiums earned | $ | 101,000 |  |  | $ | 76,000 |  |  | $ | 25,000 |
__________ Note that ceded premiums written and earned are recorded as reductions to the Company’s net premiums written and earned, respectively.

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