Company: TIPT
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0001393726-25-000028
Chunk: 36

Company: TIPTREE INC.
Filing Date: 2025-03-03
Form: 10-K
Item: Item 7
Chunk 36
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 such as the chain ladder method, the Bornhuetter-Ferguson method and expected loss ratio method.

The unpaid claims reserves represent the Company’s best estimates, generally involving actuarial projections at a given time. Actual claim costs are dependent upon a number of complex factors such as changes in doctrines of legal liabilities and damage awards. These factors are not directly quantifiable, particularly on a prospective basis. The Company periodically reviews and updates its methods of making such unpaid claims reserve estimates and establishing the related liabilities based on our actual experience. The Company has not made any changes to its methodologies for determining unpaid claims reserves in the periods presented.

During the years ended December 31, 2024, 2023 and 2022, the Company experienced favorable prior year development of $0.6 million, $11.2 million and $0.9 million, respectively. In 2024, the $0.6 million favorable prior year development was 

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primarily driven by lower than expected claims paid development in our commercial lines of business. In 2023, the $11.2 million favorable prior year development was primarily driven by lower than expected claims paid development in our commercial lines of business for the 2018 and 2020 accident years. In 2022, the $0.9 million favorable prior year development was primarily due to lower-than-expected claim severity in our commercial lines business.

Management considers the prior year development for all three years to be insignificant when considered in the context of our annual earned premiums, net as well as our net losses and loss adjustment expenses and member benefit claims expenses. For the year ended December 31, 2024, net losses and loss adjustment expenses were $722.2 million, which resulted to a loss ratio of 45.5%. Without the $0.6 million of favorable prior year development, the 2024 loss ratio would have been approximately 0.1% higher. For comparison, the 2023 and 2022 loss ratios were 40.1% and 37.7%, respectively. In general, the Company's loss ratio results have been predictable and consistent over time, with the increase over prior year periods driven by the product mix increasing toward lines with higher loss ratios and lower acquisition ratios. Actuarial estimates are subject to estimation variability, and while management uses its best judgment in establishing the estimate of required unpaid claims, different assumptions and variables could lead to significantly different unpaid claims estimates. The variability in these estimates can, and have in the past,