Property Casualty Loss and Loss Expenses

9 Months Ended

Sep. 30, 2019

Property Casualty Loss And Loss Expenses

Property Casualty Loss and Loss Expenses

This table summarizes activity for our consolidated property casualty loss and loss expense reserves:



(Dollars in millions)	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Gross loss and loss expense reserves, beginning of period	$	5,954		$	5,423		$	5,646		$	5,219
Less reinsurance recoverable	269			188			238			187
Net loss and loss expense reserves, beginning of period	5,685			5,235			5,408			5,032

Net loss and loss expense reserves related to acquisition of MSP at February 28, 2019	—			—			246			—

Net incurred loss and loss expenses related to:
Current accident year	916			857			2,720			2,548
Prior accident years	(52		)	(44		)	(203		)	(123		)
Total incurred	864			813			2,517			2,425
Net paid loss and loss expenses related to:
Current accident year	457			392			995			928
Prior accident years	373			313			1,457			1,186
Total paid	830			705			2,452			2,114
Net loss and loss expense reserves, end of period	5,719			5,343			5,719			5,343
Plus reinsurance recoverable	278			186			278			186
Gross loss and loss expense reserves, end of period	$	5,997		$	5,529		$	5,997		$	5,529

We use actuarial methods, models and judgment to estimate, as of a financial statement date, the property casualty loss and loss expense reserves required to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims, as of that date. The actuarial estimate is subject to review and adjustment by an inter-departmental committee that includes actuarial, claims, underwriting, loss prevention and accounting management. This committee is familiar with relevant company and industry business, claims and underwriting trends, as well as general economic and legal trends that could affect future loss and loss expense payments. The amount we will actually have to pay for claims can be highly uncertain. This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate. The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $59 million at September 30, 2019, and $49 million at September 30, 2018, for certain life and health loss and loss expense reserves.

For the three months ended September 30, 2019, we experienced $52 million of favorable development on prior accident years, including $33 million of favorable development in commercial lines, $6 million of favorable development in personal lines and $4 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $20 million for the workers' compensation line, $8 million for the commercial casualty line and $7 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. Within personal lines, we recognized favorable reserve development of $3 million in personal auto.

For the nine months ended September 30, 2019, we experienced $203 million of favorable development on prior accident years, including $153 million of favorable development in commercial lines, $17 million of favorable development in personal lines and $11 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $65 million for the commercial casualty line, $62 million for the workers' compensation line, $15 million for the commercial property line and $7 million for the commercial auto line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. Within personal lines, we recognized favorable reserve development of $23 million in personal auto. We recognized unfavorable reserve development of $15 million for the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.

For the three months ended September 30, 2018, we experienced $44 million of favorable development on prior accident years, including $37 million of favorable development in commercial lines, $8 million of favorable development in excess and surplus lines and $1 million of adverse development in our reinsurance assumed operations. This included $5 million from favorable development of catastrophe losses. Within commercial lines, we recognized favorable reserve development of $20 million for the commercial casualty line, $9 million for the workers' compensation line, $9 million for the commercial property line and $2 million for the other commercial lines due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. This was partially offset by unfavorable reserve development of $3 million for the commercial auto line. Within personal lines, we recognized unfavorable reserve development of $7 million for the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.

For the nine months ended September 30, 2018, we experienced $123 million of favorable development on prior accident years, including $114 million of favorable development in commercial lines, $16 million of unfavorable development in personal lines, $22 million of favorable development in excess and surplus lines and $3 million of favorable development in our reinsurance assumed operations. This included $12 million from favorable development of catastrophe losses. Within commercial lines, we recognized favorable reserve development of $39 million for the workers' compensation line, $37 million for the commercial property line, $31 million for the commercial casualty line and $14 million for the other commercial lines due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. This was partially offset by unfavorable reserve development of $7 million for the commercial auto line. Within personal lines, we recognized unfavorable reserve development of $24 million for the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.