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Unpaid losses and loss adjustment expenses
6 Months Ended
Jun. 30, 2019
Insurance [Abstract]  
Unpaid losses and loss adjustment expenses

Note 16. Unpaid losses and loss adjustment expenses

Our liabilities for unpaid losses and loss adjustment expenses (also referred to as “claim liabilities”) under short-duration property and casualty insurance and reinsurance contracts are based upon estimates of the ultimate claim costs associated with claim occurrences on or before the balance sheet date and include estimates for incurred-but-not-reported (“IBNR”) claims. Reconciliations of the changes in claim liabilities, excluding liabilities under retroactive reinsurance contracts (see Note 17), for each of the six months ending June 30, 2019 and 2018 follow (in millions).

 

 

 

2019

 

 

2018

 

Balances – beginning of year:

 

 

 

 

 

 

 

 

Gross liabilities

 

$

68,458

 

 

$

61,122

 

Reinsurance recoverable on unpaid losses

 

 

(3,060

)

 

 

(3,201

)

Net liabilities

 

 

65,398

 

 

 

57,921

 

Incurred losses and loss adjustment expenses:

 

 

 

 

 

 

 

 

Current accident year events

 

 

20,127

 

 

 

18,905

 

Prior accident years’ events

 

 

71

 

 

 

(1,054

)

Total incurred losses and loss adjustment expenses

 

 

20,198

 

 

 

17,851

 

Paid losses and loss adjustment expenses:

 

 

 

 

 

 

 

 

Current accident year events

 

 

(7,724

)

 

 

(7,332

)

Prior accident years’ events

 

 

(10,243

)

 

 

(8,581

)

Total payments

 

 

(17,967

)

 

 

(15,913

)

Foreign currency translation adjustment

 

 

3

 

 

 

(111

)

Balances – June 30:

 

 

 

 

 

 

 

 

Net liabilities

 

 

67,632

 

 

 

59,748

 

Reinsurance recoverable on unpaid losses

 

 

3,149

 

 

 

2,989

 

Gross liabilities

 

$

70,781

 

 

$

62,737

 

 

Incurred losses and loss adjustment expenses in the first six months of 2019 included a net increase of estimated ultimate liabilities for prior accident years of $71 million compared to a net decrease of $1,054 million in the first six months of 2018. Increases and decreases in estimated ultimate liabilities produce corresponding decreases and increases to pre-tax earnings. Such amounts as percentages of net liabilities at the beginning of the year were 0.1% in 2019 and 1.8% in 2018.

In the first six months of 2019, we lowered estimated ultimate liabilities of primary insurance for prior years’ events by $198 million, compared to $768 million in 2018. Reductions of estimated liabilities in the first six months of 2019 were less than the first six months of 2018 for private passenger automobile and medical malpractice insurance. In addition, we increased estimated liabilities in the first six months of 2019 for legacy casualty exposures and other commercial insurance business.

In the first six months of 2019, we increased estimated ultimate property and casualty reinsurance liabilities for prior years’ events by $269 million, compared to a decrease of $286 million in the first six months of 2018. The increases in prior years’ incurred losses in 2019 derived primarily from casualty claims, and to a lesser degree property claims.