The Company establishes reserves for the estimated total unpaid costs of Loss and loss adjustment expenses (“LAE”). Loss and LAE reserves reflect management’s best estimate of the total cost of (i) claims that have been incurred, but not yet paid in full, and (ii) claims that have been incurred but not yet reported to the Company (“IBNR”). Reserves established by management represent an estimate of the outcome of future events and, as such, cannot be considered an exact calculation of our liability. Rather, loss and LAE reserves represent management’s best estimate of the Company’s liability based on the application of actuarial techniques and other projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss and LAE reserves is complex and inherently imprecise, as it involves the estimation of the outcome of future uncertain events. The impact of both internal and external variables on ultimate losses and LAE costs is difficult to estimate. In determining loss and LAE reserves, the Company gives careful consideration to all available data and actuarial analyses.

The Company primarily writes insurance in states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

Activity related to the loss and LAE reserves are summarized as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2025			2024		2025			2024
Balances, beginning of period	$	571,812		$	293,687	$	595,487		$	249,567
Less reinsurance recoverables		240,241			78,360		341,051			105,092
Net balances, beginning of period		331,571			215,327		254,436			144,475
Incurred related to:
Current year		66,755			110,255		263,505			279,169
Prior years		(33,515	)		1,409		(55,135	)		1,036
Total incurred	$	33,240		$	111,664	$	208,370		$	280,205
Paid related to:
Current year		36,191			42,433		72,140			91,586
Prior years		12,600			6,599		74,646			55,135
Total paid	$	48,791		$	49,032	$	146,786		$	146,721
Net balances, end of period		316,020			277,959		316,020			277,959
Plus reinsurance recoverables		207,939			78,709		207,939			78,709
Balances at September 30	$	523,959		$	356,668	$	523,959		$	356,668

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. 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 adjusted. During the three and nine months ended September 30, 2025, the Company recognized favorable development of losses related to prior years of approximately $33,515 and $55,135 primarily to reduce non-catastrophe reserves in response to lower than

expected payments. During the three and nine months ended September 30, 2024, the Company recognized (unfavorable) of losses related to prior years of approximately $(1,409) and (1,036) primarily to increase non-catastrophe reserves in response to higher than expected payments.