ASSURANT INC

9. Reserves

Reserve Roll Forward

The following table provides a roll forward of the Company’s beginning and ending claims and benefits payable balances. Claims and benefits payable is the liability for unpaid loss and loss adjustment expenses and is comprised of case and incurred but not reported (“IBNR”) reserves.

Since unpaid loss and loss adjustment expenses are estimates, the Company’s actual losses incurred may be more or less than the Company’s previously developed estimates, which is referred to as either unfavorable or favorable development, respectively.

The best estimate of ultimate loss and loss adjustment expense is generally selected from a blend of methods that are applied consistently each period. There have been no significant changes in the methodologies and assumptions utilized in estimating the liability for unpaid loss and loss adjustment expenses for any of the periods presented.

(1)Includes reinsurance recoverables and claims and benefits payable of $905.6 million and $104.9 million as of September 30, 2024 and 2023, respectively, which was ceded to the U.S. government. The Company acts as an administrator for the U.S. government under the voluntary National Flood Insurance Program.

The Company experienced net favorable loss development of $98.9 million and $30.7 million for the nine months ended September 30, 2024 and 2023, respectively, as presented in the roll forward table above.

Global Lifestyle contributed $16.7 million and $27.4 million in net favorable loss development for the nine months ended September 30, 2024 and 2023, respectively. The net favorable loss development in both periods was attributable to nearly all lines of business in Global Lifestyle across most of the Company’s regions with a concentration on more recent accident years and based on emerging evaluations regarding loss experience. Connected Living contributed $20.5 million of net favorable development, of which $9.9 million was from extended service contracts, $8.4 million from credit and other insurance and $2.2 million from mobile. For extended service contracts, improvements in data quality for certain clients allowed for reserve releases and contributed to the favorable development. The favorable development for credit and other insurance was primarily from Canada and Europe through the release of reserves associated with older claims. Frequency improvements in Europe and reserve releases on older claims in Brazil contributed to the favorable development in mobile. Global Automotive contributed $3.8 million of net unfavorable development driven by higher claim frequencies as more vehicles meet the loss criteria in an asset protection product. For the nine months ended September 30, 2023 the favorable development was also primarily from Connected Living and due to similar drivers. Many of these contracts and products contain retrospective commission (profit sharing) provisions that would result in offsetting increases or decreases in expense dependent on if the development was favorable or unfavorable.

Global Housing contributed $87.1 million and $30.0 million of net favorable loss development for the nine months ended September 30, 2024 and 2023, respectively. The net favorable loss development for the nine months ended September 30, 2024 consisted of favorable non-catastrophe development of $85.1 million and $2.0 million from net favorable development from prior catastrophe events. The favorable non-catastrophe development was driven by $69.2 million from lender-placed hazard primarily in accident year 2023 due to favorable frequency, easing inflation and legislative reform changes in Florida. The net favorable loss development for the nine months ended September 30, 2023 was primarily attributable to favorable frequency and severity trends from lower than anticipated inflation, partially offset by unfavorable development on Winter Storm Elliott as a result of higher severity than initially projected.

The sharing economy and small commercial businesses, reported within non-core operations, contributed $11.6 million and $32.0 million in net unfavorable loss development during the nine months ended September 30, 2024 and 2023, respectively. The $11.6 million in net unfavorable loss development was primarily attributable to sharing economy, driven by more newly reported claims than expected and an increase in the portion and amount of claims anticipated to exceed the per policy deductible. The net unfavorable loss development for the nine months ended September 30, 2023 was attributable primarily to reserve assumption increases in sharing economy related to higher frequency expectations for the number of claims closed with indemnity payment.

All others contributed $6.7 million and $5.3 million of net favorable loss development for the nine months ended September 30, 2024 and 2023 respectively.

Long-Duration Contracts

The Company adopted the targeted improvements accounting guidance for long-duration insurance contracts as of January 1, 2023, using a modified retrospective method on liabilities for future policy benefits and expenses to January 1, 2021 for long-term care insurance contracts that have been fully reinsured. The Company also elected to not apply the amended accounting guidance to long-duration contracts of legal entities sold and derecognized before the January 1, 2023 effective date as the Company has no significant continuing involvement with them.

A remeasurement of the ending reporting period future policy benefits and expenses reserve is calculated using the current upper medium grade fixed-income corporate bond instrument yield as of the consolidated balance sheet ending period (the “current discount rate”). The current discount rate used is an externally published US corporate A index weighted average spot rate that is updated quarterly and effectively matches the duration of the expected cash flow streams of the long-term care reserves. The difference between the ending period future policy benefits and expenses reserve measured using the original discount rate and the future policy benefits and expenses reserve measured using the current discount rate is recorded in accumulated other comprehensive income (“AOCI”) in the Company’s consolidated statements of comprehensive income.

The long-term care insurance contracts are fully reinsured and there is no impact to consolidated stockholders’ equity or net income as the reserves are fully reinsured.

The following table presents the balances and changes in the long-term care future policy benefits and expenses reserve:

(1)The increase in the effect of changes in cash flow assumptions is due to historical experience reflecting a decreasing trend in lapse and mortality rates on the long-term care insurance products for the year ended December 31, 2023.

(2)Experience variance includes adverse development resulting from the allocation of the premium deficiency reserve to the cohort level for issue years where net premiums exceed gross premiums.

The following table presents a reconciliation of the long-term care net future policy benefits and expenses to the future policy benefits and expenses reserve in the consolidated balance sheet:

The following table presents the amount of undiscounted expected future benefit payments and expected gross premiums for the long-term care insurance contracts:

The following table presents the amount of long-term care revenue and interest recognized in the consolidated statements of operations:

The following table presents the weighted-average interest rate for long-term care insurance contracts: