- The company accrued a $199.9 million loss contingency related to litigation from the termination of its management agreement with PRCM Advisers in 2020.
- The court ruled that Two Harbors did not have grants to terminate its management agreement for costs, leading to the accrual being recognized as not probable or estimable under ASC 450.
- The accrual includes statutory prejudgment interest at 9%, and the company is awaiting a trial date to resolve claims related to intellectual property and damages.
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- Second quarter catastrophe losses were $30 million, $11 million below the prior year and below historical averages.
- Favorable weather conditions, including fewer severe storms, contributed to lower claim frequency and severity.
- The company models catastrophe risk using a 5-year average of $90 million, which remains appropriate despite recent favorable results.
- Management expects the third quarter to be more volatile due to historical hurricane activity, but current data supports maintaining guidance.
- PrimeLending's results included a nonrecurring legal settlement of $9.5 million, positively impacting quarterly results.
- This legal recovery is a notable, one-time event that boosted profitability amidst challenging market conditions.
- The company is undergoing a restatement related to new accounting methodology recognizing certain relationships in the Credit Solutions business within held-for-investment loan balances on a gross basis.
- The process involves revisiting 13 quarters of financial data, with the majority of the work now in later stages.
- Preliminary results include an 8-quarter view with new balances and income statements, providing management's comfort level.
- The restatement is expected to negatively impact net income in fiscal 2022 and 2023, with an inflection point in 2024 leading to higher net income.
- Management indicated that the restatement process has been a significant but manageable distraction, with most of the work behind them.
- U.S. liability insurance rates are the highest globally, with a 150% increase over the past decade.
- Rise of nuclear verdicts exceeding $100 million have grown 400% in the last 10 years.
- In 2024, U.S. liability insurance experienced the most severe reserve development since the 2008 financial crisis.
- Escalating legal costs are effectively a 'tax' on the U.S. economy, discouraging investment and increasing consumer costs.
- Legislative proposals, such as Senator Tillis's amendment on litigation financing, could impact future liability costs.
- Management emphasized working with policymakers to address tort abuses and legal system inefficiencies.
Dafinchi