We use actuarial methods, models, assumptions 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 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 finance 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.

Our reserving process takes into account known facts and interpretations of circumstances and factors including the type of claim, policy provisions pertaining to each claim, potential subrogation or salvage recoverable, large loss activity and trends, new business activity, judicial decisions, economic conditions, changes in law and regulation and product and underwriting changes. There have been no significant changes in methodologies and assumptions used in calculating loss and loss expense reserves for all years presented. There were no material additional premiums or return premiums accrued for as a result of prior-year effects.

For events designated as natural catastrophes resulting in losses incurred related to direct premiums, we calculate IBNR reserves directly as a result of an estimated claim counts and estimated average dollar amount per claim for each event. Once individual case reserves are established for a catastrophe event, we reduce the IBNR reserves.

Our actuarial staff uses generally accepted actuarial methods and models to derive ultimate loss and IBNR reserve estimates. The time interval between a claims occurrence and its settlement is one of the crucial attributes when estimating ultimate losses and IBNR reserves.

Due to the uncertainties inherent with loss reserves, our ultimate loss experience could prove better or worse than what our carried reserves reflect. To the extent that reserves are inadequate and are required to be increased, the amount of the increase is a charge in that period, raising our loss and loss expense ratio and reducing earnings. To the extent that reserves are redundant and are required to be released, the amount of the release is a credit in that period, reducing our loss and loss expense ratio and increasing earnings.


(Dollars in millions)	Years ended December 31,
	2020		2019		2018
Gross loss and loss expense reserves, January 1	$	6,088	$	5,646	$	5,219
Less reinsurance recoverable	342		238		187
Net loss and loss expense reserves, January 1	5,746		5,408		5,032

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	3,968		3,600		3,390
Prior accident years	(131)		(248)		(167)
Total incurred	3,837		3,352		3,223
Net paid loss and loss expenses related to:
Current accident year	1,493		1,462		1,391
Prior accident years	1,690		1,798		1,456
Total paid	3,183		3,260		2,847

Net loss and loss expense reserves, December 31	6,400		5,746		5,408
Plus reinsurance recoverable	277		342		238
Gross loss and loss expense reserves, December 31	$	6,677	$	6,088	$	5,646

In 2020, 2019 and 2018, the reserve for loss and loss expense in the consolidated balance sheets also included $69 million, $59 million and $61 million, respectively, for certain life and health loss and loss expense reserves. Additional disclosures for reserves related to these health claims are not material and therefore not provided.

During 2020, we experienced $131 million of favorable development on prior accident years including $95 million of favorable development in commercial lines, $18 million of favorable development in personal lines and $7 million of unfavorable development in excess and surplus lines. Within commercial lines, we recognized favorable development of $54 million for the commercial casualty line, $39 million for the workers' compensation line and $16 million for the commercial property line due to reduced uncertainty of prior accident year loss and loss expense for these lines. This was partially offset by unfavorable development of $17 million for the commercial auto line. Within personal lines, we recognized favorable reserve development of $15 million in personal auto and $5 million for the homeowner line of business.

During 2019, we experienced $248 million of favorable development on prior accident years including $192 million of favorable development in commercial lines, $27 million of favorable development in personal lines and $11 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable development of $78 million for the commercial casualty line, $77 million for the workers' compensation line, $25 million for the commercial property line and $6 million for the commercial auto line due to reduced uncertainty of prior accident year loss and loss expense for these lines. Within personal lines, we recognized favorable reserve development of $26 million in personal auto. We recognized unfavorable reserve development of $11 million for the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.

During 2018, we experienced $167 million of favorable development on prior accident years including $157 million of favorable development in commercial lines, $13 million of unfavorable development in personal lines, $24 million of favorable development in excess and surplus lines and $1 million of unfavorable development in our reinsurance assumed operations. We recognized favorable development of $58 million for the workers' compensation line and $47 million for both the commercial property line and commercial casualty line due to reduced uncertainty of prior accident year loss and loss expense for these lines.

Included in our lines of business are asbestos and environmental claims. We carried $85 million of net loss and loss expense reserves for asbestos and environmental claims at December 31, 2020 and 2019. The asbestos and environmental claims amounts for each respective year constituted less than 2.0% of total net loss and loss expense reserves at these year-end dates. We believe our exposure to asbestos and environmental claims is limited, largely because our reinsurance retention was $500,000 or below prior to 1987. We also were predominantly a personal lines company in the 1960s and 1970s. During the 1980s and early 1990s, commercial lines grew as a percentage of our overall business and our exposure to asbestos and environmental claims grew accordingly. Over that period, we included an asbestos and environmental exclusion in almost all policies or endorsed the exclusion to the policies. We have no exposure to asbestos and environmental claims related to our acquisition of Cincinnati Global. We continue to monitor our claims for evidence of material exposure to other mass tort classes but have found no such credible evidence to date.


(Dollars in millions)	Cumulative incurred losses and ALAE as reported within the triangles, net of reinsurance		Cumulative paid losses and ALAE as reported within the triangles, net of reinsurance		Liabilities for loss and ALAE for accident years not presented in the triangles, net of reinsurance		Total liabilities for loss and ALAE, net of reinsurance		Reinsurance recoverable on unpaid losses		Total liabilities for gross loss and loss expense reserves




Commercial casualty	$	5,179	$	3,012	$	91	$	2,258	$	24	$	2,282
Workers' compensation	1,990		1,357		308		941		61		1,002
Commercial auto	2,235		1,581		26		680		5		685
Commercial property	3,158		2,725		15		448		66		514
Personal auto	1,860		1,610		10		260		32		292
Homeowner	1,996		1,781		4		219		18		237
Excess and surplus	836		430		1		407		16		423
Other lines											959
Total liabilities for loss and ALAE reserves											6,394
Unallocated loss adjustment expense reserves											283
Gross loss and loss expense reserves											$	6,677

For all lines of business, the claim counts reported are primarily measured by insurance coverages that are triggered when a loss occurs and a reserve is established. For this purpose, coverages are defined as unique combinations of certain attributes such as line of business and cause of loss. Claims that are opened and closed without payment are included in the reported claim counts. Claim counts are presented on a direct basis only and do not reflect any assumed or ceded reinsurance.

In the following tables, commercial casualty, workers' compensation and excess and surplus lines each disclose 10 accident years of loss and ALAE reserves and the cumulative number of reported claims. Commercial auto, commercial property, personal auto and homeowner each disclose five accident years of loss and ALAE reserves and the cumulative number of reported claims as each of these lines have five year cumulative average annual percentage payouts of approximately 95% or higher.


(Dollars in millions, reported claims in thousands)																					As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,																						Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	466	$	404	$	377	$	377	$	375	$	380	$	366	$	365	$	368	$	361		$	—	19
2012			466		414		417		394		394		404		399		397		397			11		18
2013					448		443		431		416		413		407		391		386			22		20
2014							503		496		479		476		479		465		469			27		21
2015									533		526		529		516		508		502			54		21
2016											563		574		557		555		554			89		21
2017													610		597		577		571			124		21
2018															650		641		622			181		22
2019																	672		643			293		19
2020																			674			472		11
Total																			$	5,179

Cumulative paid losses and ALAE, net of reinsurance
2011	$	27	$	93	$	149	$	227	$	266	$	298	$	315	$	325	$	337	$	342
2012			27		88		170		232		288		330		346		364		374
2013					35		90		159		232		286		312		337		348
2014							34		97		172		287		338		390		409
2015									38		108		200		287		362		404
2016											46		126		228		331		395
2017													48		122		234		320
2018															44		148		253
2019																	39		134
2020																			33
Total																			3,012
All outstanding liabilities before 2011, net of reinsurance																			91
Liabilities for loss and ALAE, net of reinsurance																			$	2,258


(Dollars in millions, reported claims in thousands)																					As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,																						Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2011		2012		2013		2014		2015		2016		2017		2018		2019		2020
2011	$	284	$	251	$	246	$	242	$	239	$	236	$	231	$	229	$	228	$	228		$	17	24
2012			265		245		234		220		213		211		209		208		207			19		21
2013					264		246		221		212		208		205		202		201			12		20
2014							261		233		214		203		201		198		197			13		19
2015									246		220		208		195		179		173			26		17
2016											230		218		206		188		183			27		16
2017													218		208		190		183			46		15
2018															222		207		199			52		15
2019																	224		215			65		14
2020																			204			100		10
Total																			$	1,990

Cumulative paid losses and ALAE, net of reinsurance
2011	$	65	$	131	$	161	$	177	$	186	$	190	$	192	$	195	$	197	$	198
2012			62		121		147		162		171		175		178		180		182
2013					61		119		144		157		164		168		170		174
2014							56		110		134		148		157		162		165
2015									47		93		115		129		134		137
2016											46		97		119		131		141
2017													45		88		106		114
2018															48		95		115
2019																	49		94
2020																			37
Total																			1,357
All outstanding liabilities before 2011, net of reinsurance																			308
Liabilities for loss and ALAE, net of reinsurance																			$	941


(Dollars in millions, reported claims in thousands)											As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,												Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2016		2017		2018		2019		2020
2016	$	417	$	430	$	450	$	463	$	474		$	5	53
2017			451		441		443		444			13		51
2018					453		442		442			36		49
2019							452		451			73		46
2020									424			164		33
Total									$	2,235

Cumulative paid losses and ALAE, net of reinsurance
2016	$	184	$	273	$	350	$	408	$	441
2017			187		266		334		381
2018					184		266		337
2019							183		268
2020									154
Total									1,581
All outstanding liabilities before 2016, net of reinsurance									26
Liabilities for loss and ALAE, net of reinsurance									$	680

The following table shows the average annual percentage payout of incurred losses for the commercial auto line of business. Commercial auto includes both physical damage and liability losses. A majority of the incurred losses paid after year 2 are the result of liability losses.


(Dollars in millions, reported claims in thousands)											As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,												Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2016		2017		2018		2019		2020
2016	$	590	$	551	$	541	$	545	$	542		$	2	17
2017			587		560		556		565			3		18
2018					630		603		590			7		18
2019							621		606			6		17
2020									855			141		22
Total									$	3,158

Cumulative paid losses and ALAE, net of reinsurance
2016	$	358	$	504	$	528	$	539	$	539
2017			395		522		547		560
2018					386		559		576
2019							413		561
2020									489
Total									2,725
All outstanding liabilities before 2016, net of reinsurance									15
Liabilities for loss and ALAE, net of reinsurance									$	448


(Dollars in millions, reported claims in thousands)											As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,												Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2016		2017		2018		2019		2020
2016	$	383	$	384	$	386	$	384	$	384		$	1	110
2017			412		394		391		393			1		109
2018					424		398		395			1		111
2019							399		383			14		102
2020									305			62		67
Total									$	1,860

Cumulative paid losses and ALAE, net of reinsurance
2016	$	243	$	316	$	351	$	370	$	378
2017			256		324		358		374
2018					262		327		358
2019							250		314
2020									186
Total									1,610
All outstanding liabilities before 2016, net of reinsurance									10
Liabilities for loss and ALAE, net of reinsurance									$	260

The following table shows the average annual percentage payout of incurred losses for the personal auto line of business. Personal auto includes both physical damage and liability losses. A majority of the incurred losses paid after year 2 are the result of liability losses.


(Dollars in millions, reported claims in thousands)											As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,												Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2016		2017		2018		2019		2020
2016	$	315	$	304	$	303	$	302	$	304		$	—	23
2017			356		383		385		387			—		26
2018					370		386		387			5		24
2019							432		421			10		22
2020									497			54		21
Total									$	1,996

Cumulative paid losses and ALAE, net of reinsurance
2016	$	208	$	283	$	295	$	299	$	302
2017			277		356		378		384
2018					268		368		378
2019							303		391
2020									326
Total									1,781
All outstanding liabilities before 2016, net of reinsurance									4
Liabilities for loss and ALAE, net of reinsurance									$	219


(Dollars in millions, reported claims in thousands)																			As of December 31, 2020
Incurred losses and ALAE, net of reinsurance for the years ended December 31,																						Total of incurred but not reported liabilities plus expected development on reported losses		Cumulative number of reported claims

Accident	Unaudited
Year	2011		2012		2013		2014		2015		2016		2017		2018		2019			2020
2011	$	48	$	47	$	44	$	38	$	36	$	35	$	35	$	34	$	34		$	34	$	—	1
2012			67		56		49		40		37		36		35		36			35		—		1
2013					74		64		54		45		42		41		41			41		2		2
2014							95		82		75		64		60		59			59		5		2
2015									96		81		73		67		65			66		6		2
2016											93		87		84		82			90		13		3
2017													104		95		95			94		15		3
2018															116		109			110		29		3
2019																	137			135		50		3
2020																				172		$	105	2
Total																				$	836

Cumulative paid losses and ALAE, net of reinsurance
2011	$	8	$	14	$	23	$	27	$	30	$	32	$	34	$	33	$	33		$	33
2012			9		15		19		25		29		31		32		33			34
2013					7		12		20		27		32		34		37			39
2014							9		17		27		37		43		48			51
2015									8		19		29		41		51			54
2016											10		21		39		51			62
2017													11		23		41			57
2018															11		26			50
2019																	13			34
2020																				16
Total																				430
All outstanding liabilities before 2011, net of reinsurance																				1
Liabilities for loss and ALAE, net of reinsurance																				$	407

The following table shows the average annual percentage payout of incurred losses for the excess and surplus lines insurance segment. Excess and surplus lines consist mostly of commercial casualty and commercial property coverages. A majority of the incurred losses paid after year 2 are the result of commercial casualty losses.