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Liability for Future Policyholder Benefits | 6 Months Ended
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Jun. 30, 2024
Insurance [Abstract] |
Liability for Future Policyholder Benefits | Property and Casualty Insurance Reserves Property and Casualty Insurance Reserve activity for the six months ended June 30, 2024 and 2023 was:
|  | Six Months Ended
(Dollars in Millions) |  | Jun 30, 2024 |  | Jun 30, 2023
Property and Casualty Insurance Reserves: |  |  |  |
Gross of Reinsurance at Beginning of Year |  | $ | 2,680.5 |  |  | $ | 2,756.9 |
Less Reinsurance Recoverables at Beginning of Year |  | 27.8 |  |  | 39.6 |
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year |  | 2,652.7 |  |  | 2,717.3 |
Incurred Losses and LAE related to: |  |  |  |
Current Year |  | 1,359.2 |  |  | 1,837.5 |
Prior Years |  | 17.0 |  |  | 67.9 |
Total Incurred Losses and LAE |  | 1,376.2 |  |  | 1,905.4 |
Paid Losses and LAE related to: |  |  |  |
Current Year |  | 555.1 |  |  | 864.1 |
Prior Years |  | 932.9 |  |  | 1,107.5 |
Total Paid Losses and LAE |  | 1,488.0 |  |  | 1,971.6 |
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period |  | 2,540.9 |  |  | 2,651.1 |
Plus Reinsurance Recoverables at End of Period |  | 26.3 |  |  | 29.0 |
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Period |  | $ | 2,567.2 |  |  | $ | 2,680.1 |
Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends may differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Condensed Consolidated Statements of Income (Loss) in the period of change. Additionally, the Company reviews if any premium revisions are appropriate as a result of any incurred losses and loss adjustment expenses (“LAE”) related to prior years recorded in the current period. For the six months ended June 30, 2024 and 2023, no additional premiums or return premiums were recorded. For the six months ended June 30, 2024, the Company increased its Property and Casualty Insurance Reserves by $17.0 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed adversely by $7.7 million due primarily to higher than expected settlements for extra-contractual demands related to prior year claims. Commercial Automobile insurance loss and LAE reserves developed favorably by $2.6 million primarily due to favorable emergence in loss patterns related to personal injury protection coverages. Non-Core Operations loss and LAE reserves developed adversely by $11.9 million mainly due to higher than expected large loss emergence. For the six months ended June 30, 2023, the Company increased its Property and Casualty Insurance Reserves by $67.9 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty Personal Automobile insurance loss and LAE reserves developed adversely by $40.0 million due primarily to higher than expected emergence in loss patterns within the bodily injury and physical damage coverages. Commercial Automobile insurance loss and LAE reserves developed adversely by $15.2 million due to higher than expected emergence in loss patterns related to bodily injury coverages. Non-Core Operations loss and LAE reserves developed adversely by $12.7 million mainly due to higher than expected emergence in loss patterns related to bodily injury and physical damage coverages. The Company cannot predict whether loss and LAE reserves will develop favorably or unfavorably from the amounts reported in the Condensed Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s Condensed Consolidated Shareholders’ Equity, but could have a material effect on the Company’s consolidated financial results for a given period. Liability for Future Policyholder Benefits The Company’s Life Insurance Reserves are reported using the Company’s estimate of its liability for future policyholder benefits. The liability for future policyholder benefits is grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapses, and discount rates (both accretion and current). The Company’s actuaries review assumptions used to measure the liability for future policyholder benefits for nonparticipating traditional and limited pay long-duration contracts at least annually. If there is a change, assumptions are updated with the recognition and remeasurement recorded in the Company’s Condensed Consolidated Statements of Income (Loss). The Company’s actuaries use a variety of generally accepted actuarial methodologies, in accordance with Actuarial Standards of Practice, in determining the assumptions. A key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how policyholder benefits are expected to develop in the future and that such historical data can be used to predict and estimate future losses. However, changes in the Company’s business processes and the macroeconomic environment, by their very nature, are likely to affect the actual to expected experience which generally results in the historical experience factors becoming less reliable over time in predicting how cash flows will ultimately develop. The Company’s actuaries use professional judgment in determining how much weight to place on the actual to expected experience based on the older historical data and how much weight to place on more recent experience data. In some cases, the Company’s actuaries make adjustments to the assumptions to estimate losses. These assumptions are reviewed by the Company’s actuaries and corporate management who apply their collective judgment and determine the appropriate assumptions to adopt for the underlying business. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliability of key assumptions that may be significantly influencing the current actuarial indications, changes in pricing and product offerings, changes in customer base, changes in agency operations or other changes that affect the timing of payments, the policyholder behaviors observed over the recent past, the level of volatility within a particular line of business, and the improvement or deterioration of actuarial indications in the current period as compared to prior periods. Changes in the Company’s assumptions underlying these liabilities over time will occur and may be material. Note 5 - Liability for Future Policyholder Benefits (Continued) The following tables summarize balances and changes in the present value of expected net premiums, present value of expected future policyholder benefits and net liability for future policyholder benefits as of and for the three and six months ended June 30, 2024 and 2023:
|  | Three Months Ended |  | Six Months Ended
(Dollars in Millions) |  | Jun 30, 2024 |  | Jun 30, 2023 |  | Jun 30, 2024 |  | Jun 30, 2023
Present Value of Expected Net Premiums | Balance, Beginning of Period |  | $ | 690.1 |  |  | $ | 722.4 |  |  | $ | 675.4 |  |  | $ | 688.6 |
Beginning Balance at Original Discount Rate |  | $ | 723.1 |  |  | $ | 744.5 |  |  | $ | 694.7 |  |  | $ | 728.9 |
Effect of Changes in Cash Flow Assumptions |  | — |  |  | — |  |  | — |  |  | — |
Effect of Actual Variances from Expected Experience |  | 0.4 |  |  | (13.0) |  |  | 5.7 |  |  | (12.3) |
Adjusted Beginning of Period Balance |  | 723.5 |  |  | 731.5 |  |  | 700.4 |  |  | 716.6 |
Issuances |  | 25.3 |  |  | 30.1 |  |  | 63.5 |  |  | 61.9 |
Interest Accrual |  | 7.9 |  |  | 7.5 |  |  | 15.5 |  |  | 14.5 |
Net Premiums Collected |  | (23.5) |  |  | (24.0) |  |  | (46.2) |  |  | (47.9) |
Ending Balance at Original Discount Rate |  | 733.2 |  |  | 745.1 |  |  | 733.2 |  |  | 745.1 |
Effect of Changes in Discount Rate Assumptions |  | (40.6) |  |  | (33.4) |  |  | (40.6) |  |  | (33.4) |
Balance, End of Period |  | $ | 692.6 |  |  | $ | 711.7 |  |  | $ | 692.6 |  |  | $ | 711.7 |
Present Value of Expected Future Policyholder Benefits | Balance, Beginning of Period |  | $ | 3,488.2 |  |  | $ | 3,699.5 |  |  | $ | 3,613.2 |  |  | $ | 3,561.0 |
Beginning Balance at Original Discount Rate |  | $ | 3,865.7 |  |  | $ | 3,916.9 |  |  | $ | 3,835.9 |  |  | $ | 3,906.2 |
Effect of Changes in Cash Flow Assumptions |  | — |  |  | — |  |  | — |  |  | — |
Effect of Actual Variances From Expected Experience |  | (1.3) |  |  | (13.5) |  |  | 4.2 |  |  | (13.2) |
Adjusted Beginning of Period Balance |  | 3,864.4 |  |  | 3,903.4 |  |  | 3,840.1 |  |  | 3,893.0 |
Issuances |  | 25.2 |  |  | 30.1 |  |  | 63.4 |  |  | 61.9 |
Interest Accrual |  | 42.6 |  |  | 42.8 |  |  | 85.2 |  |  | 85.2 |
Benefit Payments |  | (57.7) |  |  | (61.2) |  |  | (114.2) |  |  | (125.0) |
Ending Balance at Original Discount Rate |  | 3,874.5 |  |  | 3,915.1 |  |  | 3,874.5 |  |  | 3,915.1 |
Effect of Changes in Discount Rate Assumptions |  | (494.4) |  |  | (279.2) |  |  | (494.4) |  |  | (279.2) |
Balance, End of Period |  | $ | 3,380.1 |  |  | $ | 3,635.9 |  |  | $ | 3,380.1 |  |  | $ | 3,635.9 |
| Net Liability for Future Policyholder Benefits, pre-flooring |  | $ | 2,687.5 |  |  | $ | 2,924.2 |  |  | $ | 2,687.5 |  |  | $ | 2,924.2 |
| Cumulative impact of flooring the future Policyholder Benefits Reserve |  | 0.6 |  |  | — |  |  | 0.6 |  |  | — |
| Net Liability for Future Policyholder Benefits, post-flooring |  | 2,688.1 |  |  | 2,924.2 |  |  | 2,688.1 |  |  | 2,924.2 |
| Less: Reinsurance Recoverable |  | — |  |  | — |  |  | — |  |  | — |
| Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable |  | $ | 2,688.1 |  |  | $ | 2,924.2 |  |  | $ | 2,688.1 |  |  | $ | 2,924.2 |
The weighted-average liability duration of the liability for future policyholder benefits as calculated under current rates is as follows:
| Jun 30, 2024 |  | Jun 30, 2023
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years) | 14.1 |  | 15.0
Note 5 - Liability for Future Policyholder Benefits (Continued) The reconciliation of the net liability for future policyholder benefits to Life and Health Insurance Reserves in the Condensed Consolidated Balance Sheets is as follows:
(Dollars in Millions) | Jun 30, 2024 |  | Jun 30, 2023
Net Liability for Future Policyholder Benefits, post-flooring | $ | 2,688.1 |  |  | $ | 2,924.2 |
Deferred Profit Liability | 374.1 |  |  | 288.8 |
Other 1 | 139.8 |  |  | 150.8 |
Total Life and Health Insurance Reserves | $ | 3,202.0 |  |  | $ | 3,363.8 |
1 Other primarily consists of Accident and Health and Universal Life reserves
The amounts of expected undiscounted future benefit payments, expected undiscounted future gross premiums and expected discounted future gross premiums, is as follows:
(Dollars in Millions) | Jun 30, 2024 |  | Jun 30, 2023
Expected Future Benefit Payments, undiscounted | $ | 10,260.5 |  |  | $ | 10,170.1 |
Expected Future Gross Premiums, undiscounted | $ | 4,160.2 |  |  | $ | 4,436.6 |
Expected Future Gross Premiums, discounted | $ | 2,737.1 |  |  | $ | 2,860.4 |
The amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) is as follows:
|  | Three Months Ended |  | Six Months Ended
(Dollars in Millions) |  | Jun 30, 2024 |  | Jun 30, 2023 |  | Jun 30, 2024 |  | Jun 30, 2023
Gross Premiums or Assessments |  | $ | 99.2 |  |  | $ | 98.5 |  |  | $ | 200.5 |  |  | $ | 202.3 |
Interest Expense |  | $ | 34.7 |  |  | $ | 35.3 |  |  | $ | 69.7 |  |  | $ | 70.7 |
The weighted-average interest rate is as follows:
| Jun 30, 2024 |  | Jun 30, 2023
Interest Accretion Rate | 4.51 | % |  | 4.54 | %
Current Discount Rate | 5.68 | % |  | 5.17 | %
Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapses, and discount rates (both accretion and current). The Company did not make any changes to mortality and lapse assumptions during the six months ended June 30, 2024 and 2023. Market data that underlies current discount rates is updated as of June 30, 2024. The balances of and changes in Deferred Profit Liability as of and for the periods indicated are as follows:
| Six Months Ended
(Dollars in Millions) | Jun 30, 2024 |  | Jun 30, 2023
Balance, Beginning of Year | $ | 337.8 |  |  | $ | 253.6 |
Profits Deferred | 81.4 |  |  | 83.3 |
Interest Accrual | 8.1 |  |  | 6.2 |
Amortization | (53.9) |  |  | (55.0) |
Effect of Actual Variances from Expected Experience and Other Changes | 0.7 |  |  | 0.7 |
Balance, End of Period | $ | 374.1 |  |  | $ | 288.8 |

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- Definition The entire disclosure for liabilities related to future policy benefits and unpaid claims and claim adjustments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480081/944-40-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/944-40/tableOfContent + Details
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