Loss And Loss Adjustment Expense Reserves

6 Months Ended

Jun. 30, 2019

Loss And Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense Reserves

The following table presents the activity in loss and loss adjustment expense reserves:



	Six Months Ended June 30,
	2019			2018

	(Amounts in thousands)
Gross reserves at January 1	$	1,829,412		$	1,510,613
Less reinsurance recoverables on unpaid losses	(180,859		)	(64,001		)
Net reserves at January 1	1,648,553			1,446,612
Incurred losses and loss adjustment expenses related to:
Current year	1,276,235			1,173,862
Prior years	10,758			63,919
Total incurred losses and loss adjustment expenses	1,286,993			1,237,781
Loss and loss adjustment expense payments related to:
Current year	701,282			640,496
Prior years	557,457			540,803
Total payments	1,258,739			1,181,299
Net reserves at June 30	1,676,807			1,503,094
Reinsurance recoverables on unpaid losses	107,117			46,756
Gross reserves at June 30	$	1,783,924		$	1,549,850

The increase in the provision for insured events of prior years in 2019 of approximately $10.8 million was primarily attributable to higher than estimated defense and cost containment expenses in the California automobile line of insurance business, partially offset by lower than estimated California homeowners losses largely due to reductions in the Company's retained losses on the Camp and Woolsey Fires under the Treaty after accounting for the assignment of subrogation rights and re-estimation of reserves as part of normal reserving procedures during the first quarter of 2019, as described further below. The increase in the provision for insured events of prior years in 2018 of approximately $63.9 million was primarily attributable to higher than estimated California automobile losses resulting from severity in excess of expectations for bodily injury claims as well as higher than estimated defense and cost containment expenses in the California automobile line of insurance business.

For the six months ended June 30, 2019 and 2018, the Company recorded catastrophe losses net of reinsurance of approximately $14 million and $11 million, respectively. Gross catastrophe losses due to the catastrophe events that occurred during the six months ended June 30, 2019 totaled approximately $17 million resulting primarily from winter storms in California and tornadoes and wind and hail storms in the Midwest, with no reinsurance benefits used for these losses. These losses were partially offset by favorable development of approximately $3 million on prior years' catastrophe losses, primarily from reductions in the Company’s retained portion of losses on the Camp and Woolsey Fires, as described further below. The 2018 catastrophe losses were primarily due to winter storms and mudslides in California, winter storms in the states along the Atlantic Seaboard, and storms in Texas. There were no reinsurance benefits used for catastrophe losses incurred during the first half of 2018.

During the first quarter of 2019, the Company completed the sale of its subrogation rights related to the 2018 Camp and Woolsey Fires and the 2017 Thomas Fire (which was a component of the "2017 Southern California fires") to a third party. The Company’s reinsurers were the primary beneficiaries of this transaction, as they had absorbed most of the losses under the terms of the Treaty. The Company re-estimated its gross and net losses from the 2018 Camp and Woolsey Fires and the 2017 Southern California fires in conjunction with this sale, and its total gross losses from these catastrophes, after accounting for the assignment of subrogation rights and adjustments made to claims reserves as part of normal reserving procedures, were approximately $208 million, and its total net losses, after reinsurance benefits, were approximately $40 million at March 31, 2019. The Company benefited by approximately $10 million, before taxes, in the first quarter of 2019 from the sale of the subrogation rights, including adjustments made to the associated claims as a result of normal reserving procedures, reductions in the Company's retained portion of losses on the Camp and Woolsey Fires, and reduced reinstatement premiums recognized.