Reserve for Losses and Loss Adjustment Expenses

6 Months Ended

Jun. 30, 2023

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Reserve for losses and loss adjustment expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Reserve for losses and loss adjustment expenses at beginning of period	$	20,758	$	18,109	$	20,032	$	17,757
Unpaid losses and loss adjustment expenses recoverable	6,347		5,710		6,280		5,599
Net reserve for losses and loss adjustment expenses at beginning of period	14,411		12,399		13,752		12,158

Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	1,612		1,274		3,219		2,416
Prior years	(121)		(171)		(257)		(312)
Total net incurred losses and loss adjustment expenses	1,491		1,103		2,962		2,104







Net foreign exchange (gains) losses and other	44		(249)		99		(282)

Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(215)		(166)		(355)		(237)
Prior years	(857)		(579)		(1,584)		(1,235)
Total net paid losses and loss adjustment expenses	(1,072)		(745)		(1,939)		(1,472)

Net reserve for losses and loss adjustment expenses at end of period	14,874		12,508		14,874		12,508
Unpaid losses and loss adjustment expenses recoverable	6,394		5,686		6,394		5,686
Reserve for losses and loss adjustment expenses at end of period	$	21,268	$	18,194	$	21,268	$	18,194

Development on Prior Year Loss Reserves

2023 Second Quarter

During the 2023 second quarter, the Company recorded net favorable development on prior year loss reserves of $121 million, which consisted of $12 million from the insurance segment, $29 million from the reinsurance segment and $80 million from the mortgage segment.

The insurance segment’s net favorable development of $12 million, or 0.9 loss ratio points, for the 2023 second quarter consisted of $30 million of net favorable development in short-tailed and long-tailed lines and $18 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines included $16 million of favorable development in property (excluding marine), primarily from the 2022 accident year (i.e., the year in which a loss occurred), and $7 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year. Net favorable development in long-tailed lines included $6 million of favorable development in executive assurance business, primarily from the 2016 and 2021 accident years. Net adverse development in medium-tailed lines included $8 million of adverse development in programs business, primarily from 2020 accident year, $5 million of adverse development in professional liability, across multiple accident years, and $4 million of adverse

development in marine business, primarily from the 2022 accident year.

The reinsurance segment’s net favorable development of $29 million, or 2.2 loss ratio points, for the 2023 second quarter consisted of $51 million of net favorable development in short-tailed and medium-tailed lines and $22 million of net adverse development in long-tailed lines. Net favorable development in short-tailed lines included $23 million of favorable development related to property other than property catastrophe business, primarily from the 2021 underwriting year (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), and $21 million of favorable development related to other specialty and other short-tailed lines, primarily from the 2020 and 2021 underwriting years. Net favorable development in medium-tailed lines included $7 million in marine and aviation lines, primarily from the 2019 to 2022 underwriting years. Net adverse development in long-tailed lines reflected $22 million of adverse development in casualty business, primarily from the 2013 to 2019 underwriting years.

The mortgage segment’s net favorable development was $80 million, or 27.2 loss ratio points, for the 2023 second quarter. Such amounts were primarily related to reductions on reserves for delinquent loans associated with the U.S. first lien portfolio from the 2020 to 2022 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.

2022 Second Quarter

During the 2022 second quarter, the Company recorded net favorable development on prior year loss reserves of $171 million, which consisted of $7 million from the insurance segment, $46 million from the reinsurance segment and $118 million from the mortgage segment.

The insurance segment’s net favorable development of $7 million, or 0.6 loss ratio points, for the 2022 second quarter consisted of $14 million of net favorable development in short-tailed lines and $7 million of net adverse development in medium-tailed and long-tailed lines. Net favorable development in short-tailed lines included $12 million of favorable development in warranty and lenders solutions, primarily from the 2021 accident year. Net adverse development in medium-tailed lines included $6 million of adverse development in professional liability business, primarily from the 2018 and 2019 accident years, partially offset by favorable development in marine business of $3 million, primarily from the 2019 and prior accident years. Net adverse development in long-tailed lines reflected $6 million related to executive assurance business, primarily from the 2013 and 2020 accident years.

The reinsurance segment’s net favorable development of $46 million, or 5.0 loss ratio points, for the 2022 second quarter consisted of $54 million of net favorable development in short-tailed and medium-tailed lines and $8 million of net adverse development in long-tailed lines. Net favorable development in short-tailed lines reflected $32 million of favorable development related to property other than property catastrophe business, primarily from 2016 to 2021 underwriting years, $13 million of favorable development in other specialty business, primarily from the 2018 and 2021 underwriting years, and $6 million of favorable development related to property catastrophe business, primarily from the 2017 to 2021 underwriting years. Net favorable development in medium-tailed lines included $4 million in marine and aviation lines, across most underwriting years. Adverse development in long-tailed lines reflected an increase in casualty reserves, across several years, most notably the 2013 and 2021 underwriting years.

The mortgage segment’s net favorable development was $118 million, or 39.9 loss ratio points, for the 2022 second quarter, primarily related to the U.S. first lien portfolio from the 2020 accident year. The Company’s credit risk transfer, international, second lien and student loan business also contributed to the favorable development.

Six Months Ended June 30, 2023

During the six months ended June 30, 2023, the Company recorded net favorable development on prior year loss reserves of $257 million, which consisted of $24 million from the insurance segment, $82 million from the reinsurance segment and $151 million from the mortgage segment.

The insurance segment’s net favorable development of $24 million, or 0.9 loss ratio points, for the 2023 period consisted of $55 million of net favorable development in short and long-tailed lines and $31 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines reflected $25 million of favorable development in property (excluding marine), primarily from the 2022 accident year, and $14 million of favorable development related to warranty and lenders solutions business, primarily from the 2022 accident year. Net favorable development in long-tailed lines included $16 million of favorable development in executive assurance business, primarily from the 2019 to 2022 accident years, and $5 million of favorable development in alternative markets business, primarily from 2021 and prior accident years, partially offset by $5 million of adverse development in healthcare, primarily from the 2018 and 2021 accident years. Net adverse development in medium-tailed lines included $24 million of adverse development in professional liability business, primarily from the 2017 and 2020 accident years, and $6 million of adverse development in programs business, primarily from the 2020 accident year.

The reinsurance segment’s net favorable development of $82 million, or 3.0 loss ratio points, for the 2023 period consisted of $103 million of net favorable development from short and medium-tailed lines, partially offset by $21 million of net adverse development from long-tailed lines. Net favorable development in short-tailed lines reflected $46 million of favorable development from property other than property catastrophe business, primarily from the 2018 to 2022 underwriting years, $7 million of favorable development from property catastrophe, primarily from the 2019 underwriting year, $27 million from other specialty business, primarily from the 2021 underwriting year, and $13 million of favorable development from other lines of business, primarily from the 2020 underwriting year. Net favorable development in medium-tailed lines included $9 million in marine and aviation lines, primarily from the 2016 to 2021 underwriting years. Net adverse development in long-tailed lines primarily reflected $19 million in casualty, primarily from the 2013 to 2019 underwriting years.

The mortgage segment’s net favorable development was $151 million, or 25.6 loss ratio points, for the 2023 period, with the largest contributor being reserve releases associated with the U.S. first lien portfolio from the 2020 to 2022 accident years. The Company’s credit risk transfer, international, second lien and student loan businesses also contributed to the favorable development.

Six Months Ended June 30, 2022

During the six months ended June 30, 2022, the Company recorded net favorable development on prior year loss reserves of $312 million, which consisted of $14 million from the insurance segment, $78 million from the reinsurance segment, $220 million from the mortgage segment.

The insurance segment’s net favorable development of $14 million, or 0.7 loss ratio points, for the 2022 period consisted of $33 million of net favorable development in short-tailed and $19 million of net adverse development in medium and long-tailed lines. Net favorable development in short-tailed lines reflected $31 million of favorable development in warranty and lenders solutions, primarily from the 2021 accident year. Net adverse development in medium-tailed lines included $14 million of adverse development in professional liability business, primarily from the 2018 and 2019 accident years, and $6 million of adverse development in contract binding business, across most accident years, partially offset by $6 million of favorable development in marine business, across most accident years, and $5 million of favorable development in program business, primarily from the 2020 accident year. Net adverse development in long-tailed lines primarily reflected $8 million of adverse development related to construction and national accounts, primarily from the 2020 and 2021 accident year.

The reinsurance segment’s net favorable development of $78 million, or 4.6 loss ratio points, for the 2022 period consisted of $90 million of net favorable development from short-tailed and medium-tailed lines, partially offset by $11 million of net adverse development from long-tailed lines. Net favorable development of $75 million in short-tailed lines reflected $47 million of favorable development from property other than property catastrophe business, primarily from the 2015 to 2021 underwriting years, $18 million of favorable development from other specialty business, primarily from the 2016 and 2021 underwriting years, and $10 million from property catastrophe, primarily from the 2018 and 2019 underwriting years. Net favorable development in medium-tailed lines included $15 million in marine and aviation lines, across most underwriting years. Adverse development in long-tailed lines reflected an increase in casualty reserves, primarily from the 2021 underwriting year.

The mortgage segment’s net favorable development was $220 million, or 37.6 loss ratio points, for the 2022 period,

with the largest contributor being reserve releases associated with the U.S. first lien portfolio from the 2020 accident year. The Company’s credit risk transfer, international, second lien and student loan business also contributed to the favorable development.