When evaluating the reasonableness of the assumptions used in management's estimate for Budget, what prior-year data was compared to actuals incurred during the current year?

According to Budget's 2025 Franchise Disclosure Document, when evaluating the reasonableness of the assumptions used in management's estimate for self-insurance reserves, prior-year assumptions of expected development and ultimate loss are compared to actuals incurred during the current year. This process is used to identify potential bias in determining these liabilities. The self-insurance reserves are related to public liability and property damage claims. These reserves represent an estimate for reported claims not yet paid and claims incurred but not yet reported.

Budget calculates the estimated reserve requirements for such claims on an undiscounted basis using actuarial methods and various assumptions, including historical loss experience and projected loss development factors. The required liability is subject to adjustment in the future based upon changes in claims experience, including changes in the number of incidents for which Budget is ultimately liable and changes in the cost per incident.

For a prospective franchisee, this means that Budget's financial stability and reported liabilities are subject to ongoing auditing and adjustments based on historical data and current claims experience. Understanding how these self-insurance reserves are estimated and adjusted can provide insight into Budget's risk management and potential financial exposures.