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,
	2021		2020		2019
Gross loss and loss expense reserves, January 1	$	6,677	$	6,088	$	5,646
Less reinsurance recoverable	277		342		238
Net loss and loss expense reserves, January 1	6,400		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	4,024		3,968		3,600
Prior accident years	(428)		(131)		(248)
Total incurred	3,596		3,837		3,352
Net paid loss and loss expenses related to:
Current accident year	1,379		1,493		1,462
Prior accident years	1,715		1,690		1,798
Total paid	3,094		3,183		3,260

Net loss and loss expense reserves, December 31	6,902		6,400		5,746
Plus reinsurance recoverable	327		277		342
Gross loss and loss expense reserves, December 31	$	7,229	$	6,677	$	6,088

In 2021, 2020 and 2019, the reserve for loss and loss expense in the consolidated balance sheets also included $76 million, $69 million and $59 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 2021, we experienced $428 million of favorable development on prior accident years including $353 million of favorable development in commercial lines, $50 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 $120 million for the commercial casualty line, $97 million for the commercial property line,$66 million for the workers' compensation line and $43 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 $31 million in personal auto and $14 million for the homeowner line of business.

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.

$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.

Included in our lines of business are asbestos and environmental claims. We carried $88 million and $85 million of net loss and loss expense reserves for asbestos and environmental claims at December 31, 2021 and 2020, respectively. 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	$	5,383	$	3,146	$	90	$	2,327	$	33	$	2,360
Workers' compensation	1,923		1,279		301		945		65		1,010
Commercial auto	2,203		1,515		34		722		4		726
Commercial property	3,118		2,698		17		437		46		483
Personal auto	1,802		1,552		10		260		32		292
Homeowner	2,169		1,893		5		281		8		289
Excess and surplus	1,021		496		1		526		21		547
Other lines											1,210
Total liabilities for loss and ALAE reserves											6,917
Unallocated loss adjustment expense reserves											312
Gross loss and loss expense reserves											$	7,229

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 consistent with the number of years for which claims incurred typically remain outstanding.


(Dollars in millions, reported claims in thousands)																					As of December 31, 2021
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	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	466	$	414	$	417	$	394	$	394	$	404	$	399	$	397	$	397	$	397		$	10	18
2013			448		443		431		416		413		407		391		386		385			17		20
2014					503		496		479		476		479		465		469		466			22		21
2015							533		526		529		516		508		502		504			42		21
2016									563		574		557		555		554		538			58		22
2017											610		597		577		571		555			68		21
2018													650		641		622		588			101		22
2019															672		643		607			141		20
2020																	674		629			307		14
2021																			714			492		10
Total																			$	5,383

Cumulative paid losses and ALAE, net of reinsurance
2012	$	27	$	88	$	170	$	232	$	288	$	330	$	346	$	364	$	374	$	383
2013			35		90		159		232		286		312		337		348		355
2014					34		97		172		287		338		390		409		421
2015							38		108		200		287		362		404		424
2016									46		126		228		331		395		434
2017											48		122		234		320		392
2018													44		148		253		345
2019															39		134		259
2020																	33		102
2021																			31
Total																			3,146
All outstanding liabilities before 2012, net of reinsurance																			90
Liabilities for loss and ALAE, net of reinsurance																			$	2,327


(Dollars in millions, reported claims in thousands)																					As of December 31, 2021
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	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	265	$	245	$	234	$	220	$	213	$	211	$	209	$	208	$	207	$	209		$	20	21
2013			264		246		221		212		208		205		202		201		204			17		20
2014					261		233		214		203		201		198		197		202			17		19
2015							246		220		208		195		179		173		173			26		17
2016									230		218		206		188		183		183			24		16
2017											218		208		190		183		172			31		15
2018													222		207		199		186			34		15
2019															224		215		202			50		14
2020																	204		190			68		11
2021																			202			72		10
Total																			$	1,923

Cumulative paid losses and ALAE, net of reinsurance
2012	$	62	$	121	$	147	$	162	$	171	$	175	$	178	$	180	$	182	$	183
2013			61		119		144		157		164		168		170		174		177
2014					56		110		134		148		157		162		165		168
2015							47		93		115		129		134		137		139
2016									46		97		119		131		141		146
2017											45		88		106		114		119
2018													48		95		115		127
2019															49		94		115
2020																	37		68
2021																			37
Total																			1,279
All outstanding liabilities before 2012, net of reinsurance																			301
Liabilities for loss and ALAE, net of reinsurance																			$	945


(Dollars in millions, reported claims in thousands)											As of December 31, 2021
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	2017		2018		2019		2020		2021
2017	$	451	$	441	$	443	$	444	$	449		$	8	51
2018			453		442		442		440			15		49
2019					452		451		453			34		46
2020							424		391			86		36
2021									470			154		36
Total									$	2,203

Cumulative paid losses and ALAE, net of reinsurance
2017	$	187	$	266	$	334	$	381	$	411
2018			184		266		337		378
2019					183		268		333
2020							154		214
2021									179
Total									1,515
All outstanding liabilities before 2017, net of reinsurance									34
Liabilities for loss and ALAE, net of reinsurance									$	722

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, 2021
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	2017		2018		2019		2020		2021
2017	$	587	$	560	$	556	$	565	$	572		$	2	18
2018			630		603		590		597			6		18
2019					621		606		600			9		17
2020							855		742			43		23
2021									607			49		13
Total									$	3,118

Cumulative paid losses and ALAE, net of reinsurance
2017	$	395	$	522	$	547	$	560	$	567
2018			386		559		576		589
2019					413		561		579
2020							489		637
2021									326
Total									2,698
All outstanding liabilities before 2017, net of reinsurance									17
Liabilities for loss and ALAE, net of reinsurance									$	437


(Dollars in millions, reported claims in thousands)											As of December 31, 2021
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	2017		2018		2019		2020		2021
2017	$	412	$	394	$	391	$	393	$	393		$	1	109
2018			424		398		395		398			—		111
2019					399		383		380			2		102
2020							305		281			18		71
2021									350			51		75
Total									$	1,802

Cumulative paid losses and ALAE, net of reinsurance
2017	$	256	$	324	$	358	$	374	$	383
2018			262		327		358		379
2019					250		314		346
2020							186		225
2021									219
Total									1,552
All outstanding liabilities before 2017, 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, 2021
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	2017		2018		2019		2020		2021
2017	$	356	$	383	$	385	$	387	$	389		$	1	27
2018			370		386		387		388			5		24
2019					432		421		422			7		22
2020							497		475			16		23
2021									495			95		17
Total									$	2,169

Cumulative paid losses and ALAE, net of reinsurance
2017	$	277	$	356	$	378	$	384	$	386
2018			268		368		378		381
2019					303		391		407
2020							326		434
2021									285
Total									1,893
All outstanding liabilities before 2017, net of reinsurance									5
Liabilities for loss and ALAE, net of reinsurance									$	281


(Dollars in millions, reported claims in thousands)																			As of December 31, 2021
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	2012		2013		2014		2015		2016		2017		2018		2019		2020			2021
2012	$	67	$	56	$	49	$	40	$	37	$	36	$	35	$	36	$	35		$	35	$	—	1
2013			74		64		54		45		42		41		41		41			40		1		2
2014					95		82		75		64		60		59		59			58		3		2
2015							96		81		73		67		65		66			65		4		2
2016									93		87		84		82		90			91		8		3
2017											104		95		95		94			94		13		3
2018													116		109		110			108		23		3
2019															137		135			141		41		3
2020																	172			172		78		3
2021																				217		129		3
Total																				$	1,021

Cumulative paid losses and ALAE, net of reinsurance
2012	$	9	$	15	$	19	$	25	$	29	$	31	$	32	$	33	$	34		$	34
2013			7		12		20		27		32		34		37		39			39
2014					9		17		27		37		43		48		51			53
2015							8		19		29		41		51		54			56
2016									10		21		39		51		62			75
2017											11		23		41		57			68
2018													11		26		50			62
2019															13		34			55
2020																	16			37
2021																				17
Total																				496
All outstanding liabilities before 2012, net of reinsurance																				1
Liabilities for loss and ALAE, net of reinsurance																				$	526

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.