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Reserve for Future Policy Benefits

6 Months Ended

Jun. 30, 2019

Property and Casualty Insurance Products

Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the six months ended June 30,
	2019		2018
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	24,584	$	23,775
Reinsurance and other recoverables	4,232		3,957
Beginning liabilities for unpaid losses and loss adjustment expenses, net	20,352		19,818
Navigators Group acquisition	2,001		—
Provision for unpaid losses and loss adjustment expenses
Current accident year	3,475		3,362
Prior accident year development	24		(79		)
Total provision for unpaid losses and loss adjustment expenses	3,499		3,283
Less payments
Current accident year	848		934
Prior accident years	2,381		2,308
Total payments	3,229		3,242
Ending liabilities for unpaid losses and loss adjustment expenses, net	22,623		19,859
Reinsurance and other recoverables	5,125		3,772
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	27,748	$	23,631

Unfavorable (Favorable) Prior Accident Year Development



	For the six months ended June 30,
	2019			2018
Workers’ compensation	$	(50	)	$	(73	)
Workers’ compensation discount accretion	17			20
General liability	43			28
Marine	10			—
Package business	(9		)	(7		)
Commercial property	(15		)	(12		)
Professional liability	33			8
Bond	—			—
Assumed Reinsurance	3			—
Automobile liability - Commercial Lines	2			(10		)
Automobile liability - Personal Lines	(5		)	—
Homeowners	1			(13		)
Net asbestos reserves	—			—
Net environmental reserves	—			—
Catastrophes	(22		)	(34		)
Uncollectible reinsurance	—			11
Other reserve re-estimates, net	16			3
Total prior accident year development	$	24		$	(79	)

Re-estimates of prior accident year reserves for the six months ended June 30, 2019

Workers’ compensation reserves were reduced, principally in small commercial driven by lower than previously estimated claim severity for the 2014 through 2017 accident years.

General liability reserves were increased, primarily due to reserve increases in small commercial for accident years 2017 and 2018 due to higher frequency of high-severity bodily injury claims, as well as increased estimated severity on the acquired Navigators book of business related to U.S. construction, premises liability, products liability and excess casualty, mostly related to accident years 2014 to 2018.

Package business reserves were decreased, primarily due to favorable emergence on property claims related to accident years 2016 through 2018.

Commercial property reserves were decreased, principally due to favorable emergence of reported losses, including on the acquired Navigators Group book of business related to offshore energy in accident years 2017 to 2018 and construction engineering across accident years 2015 to 2018.

Professional liability reserves were increased, primarily due to large loss activity, including wrongful termination

and discrimination claims, in accident years 2017 and 2018 and increased estimated frequency and severity of directors’ and officers’ reserves on the Navigators Group book of business, principally for the 2014 to 2018 accident years.

Marine reserves were increased, principally related to pollution exposure from the 1980s and 1990s related to the Navigators Group book of business.

Automobile liability reserves were reduced, primarily driven by the emergence of lower estimated severity in personal automobile liability for accident year 2017.

Catastrophes reserves were reduced, primarily as a result of lower estimated net losses from 2017 hurricanes Harvey and Irma.

Re-estimates of prior accident year reserves for the six months ended June 30, 2018

Workers’ compensation reserves were reduced in small commercial and middle market, primarily for accident years 2011 to 2015, as both claim frequency and medical claim severity have emerged favorably compared to previous reserve estimates.

General liability reserves were increased, primarily due to an increase in reserves for higher hazard general liability exposures in middle market for accident years 2009 to 2017, partially offset by a decrease in reserves for other lines within middle market, including premises and operations, umbrella and products liability, principally for accident years 2015 and prior. Contributing to the increase in reserves for higher hazard general liability exposures was an increase in large losses and, in more recent accident years, an increase in claim frequency. Contributing to the reduction in reserves for other middle market lines were more favorable outcomes due to initiatives to reduce legal expenses. In addition, reserve increases for claims with lead paint exposure were offset by reserve decreases for other mass torts and extra-contractual liability claims.

Commercial property reserves were reduced, driven by an increase in estimated reinsurance recoverables on middle market property losses from the 2017 accident year.

Automobile liability reserves were reduced, primarily driven by reduced estimates of loss adjustment expenses in small commercial for recent accident years.

Homeowners reserves were reduced, primarily in accident years 2013 to 2017, driven by lower than expected severity across multiple perils.

Catastrophe reserves were reduced, primarily as a result of lower estimated net losses from 2017 catastrophes, principally related to hurricanes Harvey and Irma. Before reinsurance, estimated losses for 2017 catastrophe events decreased by $123 in the six months ended June 30, 2018, resulting in a decrease in reinsurance recoverables of $90 as the Company no longer expects to recover under the 2017 Property Aggregate reinsurance treaty as aggregate ultimate losses for 2017 catastrophe events are now projected to be less than $850.

Group Life, Disability and Accident Products

Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the six months ended June 30,
	2019			2018
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	8,445		$	8,512
Reinsurance recoverables	239			209
Beginning liabilities for unpaid losses and loss adjustment expenses, net	8,206			8,303
Provision for unpaid losses and loss adjustment expenses
Current incurral year	2,269			2,317
Prior year's discount accretion	117			120
Prior incurral year development [1]	(206		)	(217		)
Total provision for unpaid losses and loss adjustment expenses [2]	2,180			2,220
Less: payments
Current incurral year	922			974
Prior incurral years	1,342			1,335
Total payments	2,264			2,309
Ending liabilities for unpaid losses and loss adjustment expenses, net	8,122			8,214
Reinsurance recoverables	234			235
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,356		$	8,449


[1]	Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.


[2]	Includes unallocated loss adjustment expenses of $85 for the six months ended June 30, 2019 and 2018 that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.

Re-estimates of prior incurral years reserves for the six months ended June 30, 2019

Group disability- Prior period reserve estimates decreased by approximately $175 largely driven by group long-term disability claim incidence lower than prior assumptions, as well as claim recoveries and Social Security Disability approvals higher than prior reserve assumptions. New York paid family leave also experienced favorable claim emergence compared to year-end estimates.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $25 largely driven by lower-than-previously expected claim incidence in group life premium waiver.

Re-estimates of prior incurral years reserves for the six months ended June 30, 2018

Group disability- Prior period reserve estimates decreased by approximately $150 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions and claim incidence lower than prior assumptions. Short-term disability has also experienced favorable claim recoveries.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $65 largely driven by lower-than-previously expected claim incidence inclusive of group life, group life premium waiver, and group accidental death & dismemberment.

9. RESERVE FOR FUTURE POLICY BENEFITS



Changes in Reserves for Future Policy Benefits^[1]
Liability balance, as of January 1, 2019	$	642
Incurred	44
Paid	(55		)
Change in unrealized investment gains and losses	13
Liability balance, as of June 30, 2019	$	644
Reinsurance recoverable asset, as of January 1, 2019	$	27
Incurred	—
Paid	—
Reinsurance recoverable asset, as of June 30, 2019	$	27



Liability balance, as of January 1, 2018	$	713
Incurred	14
Paid	(19		)
Change in unrealized investment gains and losses	(40		)
Liability balance, as of June 30, 2018	$	668
Reinsurance recoverable asset, as of January 1, 2018	$	26
Incurred	9
Paid	—
Reinsurance recoverable asset, as of June 30, 2018	$	35

[1]Reserves for future policy benefits includes paid-up life insurance and whole-life policies resulting from conversion from group life policies included within the Group Benefits segment and reserves for run-off structured settlement and terminal funding agreement liabilities which are in the Corporate category.