What assumptions are included in the actuarial methods used to estimate Budget's self-insurance reserves for public liability and property damage claims?

According to Budget's 2025 Franchise Disclosure Document, the company is self-insured for public liability and property damage claims. The estimated reserve requirements for these claims are calculated on an undiscounted basis using actuarial methods. These methods rely on various assumptions, including historical loss experience and projected loss development factors.

The self-insurance reserves represent an estimate for both reported claims not yet paid and claims incurred but not yet reported. The required liability is subject to future adjustments based on changes in claims experience. These changes can include the number of incidents for which Budget is ultimately liable and the cost per incident.

For a prospective franchisee, this means that Budget's financial stability is tied to its ability to accurately predict and manage its self-insurance liabilities. Unexpected increases in claims or costs could negatively impact the company's financial performance. The liabilities associated with retained risks of liability to third parties totaled $451 million as of December 31, 2024, and $397 million as of December 31, 2023. These figures highlight the substantial financial risk Budget assumes through its self-insurance program.