Property Casualty Loss and Loss Expenses

6 Months Ended

Jun. 30, 2020

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 June 30,						Six months ended June 30,
	2020		2019		2020		2019
Gross loss and loss expense reserves, beginning of period	$	6,153	$	5,886	$	6,088	$	5,646
Less reinsurance recoverable	294		266		342		238
Net loss and loss expense reserves, beginning of period	5,859		5,620		5,746		5,408

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



Net incurred loss and loss expenses related to:
Current accident year	1,054		947		2,017		1,804
Prior accident years	(47)		(84)		(80)		(151)
Total incurred	1,007		863		1,937		1,653
Net paid loss and loss expenses related to:
Current accident year	369		361		555		538
Prior accident years	382		437		1,013		1,084
Total paid	751		798		1,568		1,622
Net loss and loss expense reserves, end of period	6,115		5,685		6,115		5,685
Plus reinsurance recoverable	294		269		294		269
Gross loss and loss expense reserves, end of period	$	6,409	$	5,954	$	6,409	$	5,954

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 $54 million at June 30, 2020 and  $55 million at June 30, 2019, for certain life and health loss and loss expense reserves.

For the three months ended June 30, 2020, we experienced $47 million of favorable development on prior accident years, including $45 million of favorable development in commercial lines and $8 million of unfavorable development in excess and surplus lines. We had no net development in personal lines for the three months ended June 30, 2020. Within commercial lines, we recognized favorable reserve development of $21 million for the commercial casualty line and $19 million for the workers' compensation 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 $7 million in personal auto and unfavorable reserve development of $7 million for the homeowner line of business.

For the six months ended June 30, 2020, we experienced $80 million of favorable development on prior accident years, including $51 million of favorable development in commercial lines, $28 million of favorable development in personal lines and $9 million of unfavorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $26 million for both the workers' compensation line and the commercial casualty line 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 favorable reserve development of $20 million in personal auto and $11 million for the homeowner line of business.

For the three months ended June 30, 2019, we experienced $84 million of favorable development on prior accident years, including $58 million of favorable development in commercial lines, $14 million of favorable development in personal lines and $5 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $27 million for the workers' compensation line, $25 million for the commercial casualty line and $6 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 $15 million in personal auto.

For the six months ended June 30, 2019, we experienced $151 million of favorable development on prior accident years, including $120 million of favorable development in commercial lines, $11 million of favorable development in personal lines and $7 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $56 million for the commercial casualty line, $42 million for the workers' compensation line, $9 million for the commercial auto line and $8 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 $20 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.