Claim and Claim Adjustment Expense Reserves

12 Months Ended

Dec. 31, 2018

Liability for Claims and Claims Adjustment Expense [Abstract]

Claim and Claim Adjustment Expense Reserves

Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including IBNR claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.

Liability for Unpaid Claim and Claim Adjustment Expenses

The table below reconciles the net liability for unpaid claim and claim adjustment expenses to the amount presented in the Consolidated Balance Sheets.



As of December 31
(In millions)	2018
Net liability for unpaid claim and claim adjustment expenses:
Specialty	$	4,831
Commercial	7,998
International	1,524
Corporate & Other	192
Life & Group ⁽¹⁾	3,420
Total net claim and claim adjustment expenses	17,965
Reinsurance receivables: ⁽²⁾
Specialty	634
Commercial	745
International	226
Corporate & Other ⁽³⁾	2,233
Life & Group	181
Total reinsurance receivables	4,019
Total gross liability for unpaid claim and claim adjustment expenses	$	21,984

(1) The Life & Group segment amounts are primarily related to long term care claim reserves, but also includes amounts related to unfunded structured settlements arising from short duration contracts. Long term care policies are long duration contracts.

(2) Reinsurance receivables presented do not include reinsurance receivables related to paid losses.

(3) The Corporate & Other Reinsurance receivables are primarily related to A&EP claims covered under the Loss Portfolio Transfer.

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.



As of or for the years ended December 31
(In millions)	2018			2017			2016
Reserves, beginning of year:
Gross	$	22,004		$	22,343		$	22,663
Ceded	3,934			4,094			4,087
Net reserves, beginning of year	18,070			18,249			18,576
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	5,358			5,201			5,025
Decrease in provision for insured events of prior years	(179		)	(381		)	(342		)
Amortization of discount	176			179			175
Total net incurred ⁽¹⁾	5,355			4,999			4,858
Net payments attributable to:
Current year events	(1,046		)	(975		)	(967		)
Prior year events	(4,285		)	(4,366		)	(4,167		)
Total net payments	(5,331		)	(5,341		)	(5,134		)
Foreign currency translation adjustment and other	(129		)	163			(51		)
Net reserves, end of year	17,965			18,070			18,249
Ceded reserves, end of year	4,019			3,934			4,094
Gross reserves, end of year	$	21,984		$	22,004		$	22,343


(1)	Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables, and benefit expenses related to future policy benefits, which are not reflected in the table above.

Reserving Methodology

In developing claim and claim adjustment expense (“loss” or “losses”) reserve estimates, the Company's actuaries perform detailed reserve analyses that are staggered throughout the year. Every reserve group is reviewed at least once during the year, but most are reviewed more frequently. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. Factors considered include, but are not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in the Company's pricing and underwriting, pricing and underwriting trends in the insurance market and legal, judicial, social and economic trends. In addition to the detailed analyses, the Company reviews actual loss emergence for all products each quarter.

In developing the loss reserve estimates for property and casualty contracts, the Company generally projects ultimate losses using several common actuarial methods as listed below. The Company reviews the various indications from the various methods and applies judgment to select an actuarial point estimate. The carried reserve may differ from the actuarial point estimate as the result of the Company's consideration of the factors noted above as well as the potential volatility of the projections associated with the specific product being analyzed and other factors affecting claims costs that may not be quantifiable through traditional actuarial analysis. The indicated required reserve is the difference between the selected ultimate loss and the inception-to-date paid losses. The difference between the selected ultimate loss and the case incurred or reported loss is IBNR. IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims. Further, the Company does not establish case reserves for allocated loss adjustment expenses (ALAE), therefore ALAE reserves are included in the Company's estimate of IBNR.

The most frequently utilized methods to project ultimate losses include the following:


•	Paid development: The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss.


•	Incurred development: The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses.


•	Loss ratio: The loss ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year.


•	Bornhuetter-Ferguson using premiums and paid loss: The Bornhuetter-Ferguson using premiums and paid loss method is a combination of the paid development approach and the loss ratio approach. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method.


•	Bornhuetter-Ferguson using premiums and incurred loss: The Bornhuetter-Ferguson using premiums and incurred loss method is similar to the Bornhuetter-Ferguson using premiums and paid loss method except that it uses case incurred losses.


•	Frequency times severity: The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates.


•	Stochastic modeling: The stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular product being modeled.

For many exposures, especially those that can be considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, the Company's actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of the Company's products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, the Company may not assign any weight to the paid and incurred development methods. The Company will use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner, primarily because the Company's history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, the Company may also use the loss ratio, Bornhuetter-Ferguson and frequency times severity methods for short-tail exposures. For other more complex reserve groups where the above methods may not produce reliable indications, the Company uses additional methods tailored to the characteristics of the specific situation.

Certain claim liabilities are more difficult to estimate or have differing methodologies and considerations which are described below.

Mass Tort and A&EP Reserves

The Company's reserving methodologies for mass tort and A&EP are similar as both are based on detailed reviews of large accounts with estimates of ultimate payments based on the facts in each case and the Company's view of applicable law and coverage litigation.

Life & Group

The Life & Group segment includes the run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and we have the ability to increase policy premiums, subject to state regulatory approval.

The Company maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for the Life & Group segment. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for the long term care policies, the Company's actuaries perform a detailed claim experience study on an annual basis. The study reviews the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. The Company's recorded claim and claim adjustment expense reserves reflect management's best estimate after incorporating the results of the most recent study. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations. Both elements of the Life & Group reserves are discounted as discussed in Note A to the Consolidated Financial Statements.

Gross and Net Carried Reserves

The following tables present the gross and net carried reserves.



December 31, 2018	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
(In millions)	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
Gross Case Reserves	$	1,623	$	4,181	$	867	$	3,516	$	1,208	$	11,395
Gross IBNR Reserves	3,842		4,562		883		85		1,217		10,589
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	5,465	$	8,743	$	1,750	$	3,601	$	2,425	$	21,984
Net Case Reserves	$	1,483	$	3,831	$	749	$	3,364	$	96	$	9,523
Net IBNR Reserves	3,348		4,167		775		56		96		8,442
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	4,831	$	7,998	$	1,524	$	3,420	$	192	$	17,965



December 31, 2017	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
(In millions)	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
Gross Case Reserves	$	1,742	$	4,427	$	744	$	3,386	$	1,371	$	11,670
Gross IBNR Reserves	3,927		4,337		892		113		1,065		10,334
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	5,669	$	8,764	$	1,636	$	3,499	$	2,436	$	22,004
Net Case Reserves	$	1,600	$	4,103	$	640	$	3,208	$	94	$	9,645
Net IBNR Reserves	3,407		4,033		792		82		111		8,425
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	5,007	$	8,136	$	1,432	$	3,290	$	205	$	18,070

Net Prior Year Development

Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development). These changes can be favorable or unfavorable. The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.



December 31, 2018
(In millions)	2018			2017			2016
Pretax (favorable) unfavorable development:
Specialty	$	(150	)	$	(174	)	$	(247	)
Commercial	(25		)	(115		)	15
International	(4		)	(9		)	(58		)
Corporate & Other	(2		)	(10		)	2
Total pretax (favorable) unfavorable development	$	(181	)	$	(308	)	$	(288	)

Favorable net prior year loss reserve development of $19 million, $72 million and $46 million was recorded in the Life & Group segment for the years ended December 31, 2018, 2017 and 2016. The favorable net prior year loss reserve development for the year ended December 31, 2018 was driven by lower than expected claim severity.

Segment Development Tables

For the Specialty, Commercial and International segments, the following tables present further detail and commentary on the development reflected in the financial statements for each of the periods presented. Also presented are loss reserve development tables that illustrate the change over time of reserves established for claim and allocated claim adjustment expenses arising from short duration insurance contracts for certain lines of business within each of these segments. Not all lines of business or segments are presented based on their context to the Company's overall loss reserves, calendar year reserve development, or calendar year net earned premiums. Insurance contracts are considered to be short duration contracts when the contracts are not expected to remain in force for an extended period of time.

The Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative net incurred claim and allocated claim adjustment expenses relating to each accident year at the end of the stated calendar year. Changes in the cumulative amount across time are the result of the Company's expanded awareness of additional facts and circumstances that pertain to the unsettled claims. The Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative amount paid for claims in each accident year as of the end of the stated calendar year. The Net Strengthening or (Releases) of Prior Accident Year Reserves tables, reading across, show the net increase or decrease in the cumulative net incurred accident year claim and allocated claim adjustment expenses during each stated calendar year and indicates whether the reserves for that accident year were strengthened or released.

The information in the tables is reported on a net basis after reinsurance and does not include the effects of discounting. The information contained in calendar years 2017 and prior is unaudited. Information contained in the tables pertaining to the Company's International segment has been presented at the year-end 2018 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate changes between calendar years. The Company has presented development information for the Hardy business prospectively from the date of acquisition and is presented as a separate table within the Company's International segment. To the extent the Company enters into a commutation, the transaction is reported on a prospective basis. To the extent that the Company enters into a disposition, the effects of the disposition are reported on a retrospective basis by removing the balances associated with the disposed of business.

The amounts reported for the cumulative number of reported claims include direct and assumed open and closed claims by accident year at the claimant level. The number excludes claim counts for claims within a policy deductible where the insured is responsible for payment of losses in the deductible layer. Claim count data for certain assumed reinsurance contracts is unavailable.

IBNR includes reserves for incurred but not reported losses and expected development on case reserves. The Company does not establish case reserves for ALAE, therefore ALAE reserves are also included in the estimate of IBNR.

Specialty

The following table presents further detail of the development recorded for the Specialty segment.



Years ended December 31
(In millions)	2018			2017			2016
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	47		$	30		$	9
Other Professional Liability and Management Liability	(127		)	(126		)	(140		)
Surety	(70		)	(84		)	(63		)
Warranty	(10		)	4			4
Other	10			2			(57		)
Total pretax (favorable) unfavorable development	$	(150	)	$	(174	)	$	(247	)

2018

Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident years 2014 and 2017 in our hospitals business. Additionally, there was higher than expected frequency and severity in aging services in accident years 2014 through 2017 combined, partially offset by lower than expected frequency in accident year 2015.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency in recent accident years related to financial institutions and professional liability errors and omissions (E&O), favorable severity in accident years 2015 and prior related to professional liability E&O and favorable outcomes on individual claims in financial institutions in accident years 2013 and prior.

Favorable development in surety was due to lower than expected loss emergence for accident years 2017 and prior.

2017

Unfavorable development in medical professional liability was primarily due to continued higher than expected frequency in aging services and higher than expected severity for hospitals in recent accident years. This was partially offset by favorable development in hospitals in prior accident years as well as favorable development related to unallocated claim adjustment expenses.

Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and a lower frequency of large losses for accident years 2011 through 2015 for professional and management liability, lower than expected claim frequency in accident years 2012 through 2015 for professional liability and lower than expected severity in accident years 2014 through 2015 for professional liability.

Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2015 and prior.

2016

Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and lower than expected frequency of claims in accident years 2010 through 2014 related to professional services and financial institutions. This was partially offset by unfavorable development related to a specific financial institutions claim in accident year 2014, higher management liability severities in accident year 2015 and deterioration on credit crises-related claims in accident year 2009.

Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2014 and prior.

Favorable development in other coverages provided to Specialty customers was due to better than expected claim frequency and claim severity in commercial lines coverages in accident years 2010 through 2015.

Specialty - Line of Business Composition

The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Specialty segment.



As of December 31
(In millions)	2018
Net liability for unpaid claim and claim adjustment expenses:
Medical Professional Liability	$	1,457
Other Professional Liability and Management Liability	2,849
Surety	379
Warranty	40
Other	106
Total net liability for unpaid claim and claim adjustment expenses	$	4,831

Specialty - Medical Professional Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	389	$	390	$	392	$	392	$	366	$	346	$	336	$	309	$	302	$	310	$	—	14,716
2010			402		412		423		426		415		395		365		360		356		—		14,615
2011					429		437		443		468		439		434		437		437		8		16,505
2012							464		469		508		498		493		484		493		10		17,691
2013									462		479		500		513		525		535		28		19,442
2014											450		489		537		530		535		30		19,602
2015													433		499		510		494		78		17,835
2016															427		487		485		120		15,427
2017																	412		449		217		13,777
2018																			404		333		11,205
																	Total		$	4,498	$	824

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	9	$	63	$	143	$	211	$	247	$	269	$	280	$	288	$	291	$	300
2010			10		86		173		257		306		326		337		346		350
2011					17		109		208		295		347		375		398		409
2012							14		117		221		323		388		427		457
2013									17		119		255		355		414		462
2014											23		136		258		359		417
2015													22		101		230		313
2016															18		121		246
2017																	19		107
2018																			21
																	Total		$	3,082
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,416
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			18
Liability for unallocated claim adjustment expenses for accident years presented																			23
Total net liability for unpaid claim and claim adjustment expenses																			$	1,457

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	1	$	2	$	—	$	(26	)	$	(20	)	$	(10	)	$	(27	)	$	(7	)	$	8		$	(79	)
2010			10		11		3			(11		)	(20		)	(30		)	(5		)	(4		)	(46		)
2011					8		6			25			(29		)	(5		)	3			—			8
2012							5			39			(10		)	(5		)	(9		)	9			29
2013										17			21			13			12			10			73
2014													39			48			(7		)	5			85
2015																66			11			(16		)	61
2016																			60			(2		)	58
2017																						37			37
Total net development for the accident years presented above																60			58			47
Total net development for accident years prior to 2009																(51		)	(21		)	1
Total unallocated claim adjustment expense development																—			(7		)	(1		)
Total																$	9		$	30		$	47

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Specialty - Other Professional Liability and Management Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	831	$	875	$	908	$	903	$	893	$	903	$	897	$	906	$	904	$	892	$	18	17,374
2010			828		828		848		848		847		837		824		827		821		19		17,888
2011					880		908		934		949		944		911		899		888		39		18,728
2012							923		909		887		878		840		846		833		41		18,491
2013									884		894		926		885		866		863		65		17,918
2014											878		898		885		831		835		88		17,515
2015													888		892		877		832		194		17,333
2016															901		900		900		279		17,787
2017																	847		845		479		17,780
2018																			850		726		16,564
																	Total		$	8,559	$	1,948

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	37	$	195	$	361	$	553	$	641	$	722	$	772	$	801	$	825	$	844
2010			31		204		405		541		630		670		721		752		784
2011					71		314		503		605		683		726		781		796
2012							56		248		400		573		651		711		755
2013									54		249		447		618		702		754
2014											51		223		392		515		647
2015													60		234		404		542
2016															64		248		466
2017																	57		222
2018																			54
																	Total		$	5,864
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,695
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			90
Liability for unallocated claim adjustment expenses for accident years presented																			64
Total net liability for unpaid claim and claim adjustment expenses																			$	2,849

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	44	$	33	$	(5	)	$	(10	)	$	10		$	(6	)	$	9		$	(2	)	$	(12	)	$	61
2010			—		20			—			(1		)	(10		)	(13		)	3			(6		)	(7		)
2011					28			26			15			(5		)	(33		)	(12		)	(11		)	8
2012								(14		)	(22		)	(9		)	(38		)	6			(13		)	(90		)
2013											10			32			(41		)	(19		)	(3		)	(21		)
2014														20			(13		)	(54		)	4			(43		)
2015																	4			(15		)	(45		)	(56		)
2016																				(1		)	—			(1		)
2017																							(2		)	(2		)
Total net development for the accident years presented above																	(125		)	(94		)	(88		)
Total net development for accident years prior to 2009																	(15		)	(25		)	(32		)
Total unallocated claim adjustment expense development																	—			(7		)	(7		)
Total																	$	(140	)	$	(126	)	$	(127	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Specialty - Surety

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	114	$	114	$	103	$	85	$	68	$	59	$	52	$	53	$	53	$	52	$	1	6,688
2010			112		112		111		84		76		66		63		59		61		1		5,971
2011					120		121		116		87		75		70		66		62		1		5,808
2012							120		122		98		70		52		45		39		2		5,559
2013									120		121		115		106		91		87		6		5,039
2014											123		124		94		69		60		19		5,036
2015													131		131		104		79		36		4,887
2016															124		124		109		60		5,185
2017																	120		115		78		4,936
2018																			114		101		3,105
																	Total		$	778	$	305

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	13	$	24	$	34	$	41	$	43	$	45	$	46	$	47	$	47	$	47
2010			13		34		50		55		57		58		55		52		52
2011					19		42		55		58		60		60		56		57
2012							5		32		34		35		35		36		37
2013									16		40		69		78		78		78
2014											7		30		38		36		38
2015													7		26		38		40
2016															5		37		45
2017																	23		37
2018																			5
																	Total		$	436
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	342
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			7
Liability for unallocated claim adjustment expenses for accident years presented																			30
Total net liability for unpaid claim and claim adjustment expenses																			$	379

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	—	$	(11	)	$	(18	)	$	(17	)	$	(9	)	$	(7	)	$	1		$	—		$	(1	)	$	(62	)
2010			—			(1		)	(27		)	(8		)	(10		)	(3		)	(4		)	2			(51		)
2011						1			(5		)	(29		)	(12		)	(5		)	(4		)	(4		)	(58		)
2012									2			(24		)	(28		)	(18		)	(7		)	(6		)	(81		)
2013												1			(6		)	(9		)	(15		)	(4		)	(33		)
2014															1			(30		)	(25		)	(9		)	(63		)
2015																		—			(27		)	(25		)	(52		)
2016																					—			(15		)	(15		)
2017																								(5		)	(5		)
Total net development for the accident years presented above																		(64		)	(82		)	(67		)
Total net development for accident years prior to 2009																		1			1			(3		)
Total unallocated claim adjustment expense development																		—			(3		)	—
Total																		$	(63	)	$	(84	)	$	(70	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial

The following table presents further detail of the development recorded for the Commercial segment.



Years ended December 31
(In millions)	2018			2017			2016
Pretax (favorable) unfavorable development:
Commercial Auto	$	1		$	(35	)	$	(47	)
General Liability	32			(24		)	(65		)
Workers' Compensation	(32		)	(63		)	145
Property and Other	(26		)	7			(18		)
Total pretax (favorable) unfavorable development	$	(25	)	$	(115	)	$	15

2018

Unfavorable development in general liability was driven by higher than expected claim severity in unsupported umbrella in accident years 2013 through 2016.

Favorable development in workers’ compensation was driven by lower frequency and severity experience and favorable impacts from California reforms.

Favorable development in property and other was driven by lower than expected claim severity in catastrophes in accident year 2017.

2017

Favorable development in commercial auto was primarily due to lower than expected severity in accident years 2013 through 2016, as well as a large favorable recovery on a claim in accident year 2012.

Favorable development in general liability was due to lower than expected severity in life sciences.

Favorable development in workers’ compensation was primarily related to decreases in frequency and severity in recent accident years, partially attributable to California reforms impacting medical costs. This was partially offset by unfavorable development related to an adverse arbitration ruling on reinsurance recoverables from older accident years as well as the recognition of loss estimates associated with earned premium from a prior exposure year.

2016

Favorable development in commercial auto was primarily due to favorable settlements on claims in accident years 2010 through 2014 and lower than expected severities in accident years 2012 through 2015.

Favorable development in general liability was primarily due to better than expected claim settlements in accident years 2012 through 2014, better than expected severity on umbrella claims in accident years 2010 through 2013, and better than expected severity in medical products liability in accident years 2010 through 2015. This was partially offset by unfavorable development related to an increase in reported claims prior to the closing of the three year window set forth by the Minnesota Child Victims Act in accident years 2006 and prior.

Unfavorable development in workers' compensation was primarily due to higher than expected severity for Defense Base Act contractors that largely resulted from a reduction of expected future recoveries from the US Department of Labor under the War Hazard Act. Further unfavorable development was due to the impact of recent Florida court rulings for accident years 2008 through 2015. These were partially offset by favorable development related to lower than expected frequencies related to our ongoing Middle Market and Small Business results for accident years 2009 through 2014.

Favorable development in property and other was primarily due to better than expected loss frequency in accident years 2013 through 2015. This was partially offset by unfavorable development related to higher than expected severity from a fourth quarter 2015 catastrophe event.

Commercial - Line of Business Composition

The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Commercial segment.



As of December 31
(In millions)	2018
Net Claim and claim adjustment expenses:
Commercial Auto	$	412
General Liability	3,195
Workers' Compensation	3,968
Property and Other	423
Total net liability for claim and claim adjustment expenses	$	7,998

Commercial - Commercial Auto

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	291	$	276	$	280	$	282	$	285	$	281	$	278	$	276	$	276	$	277	$	—	48,499
2010			267		283		287		291		298		293		289		288		288		1		48,030
2011					268		281		288		302		300		294		294		294		4		47,905
2012							275		289		299		303		307		299		299		6		46,288
2013									246		265		265		249		245		245		7		39,429
2014											234		223		212		205		205		9		33,609
2015													201		199		190		190		22		30,388
2016															198		186		186		27		30,342
2017																	199		198		45		30,580
2018																			229		118		28,602
																	Total		$	2,411	$	239

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	73	$	130	$	191	$	233	$	261	$	272	$	274	$	274	$	275	$	277
2010			74		141		203		246		271		281		286		287		287
2011					79		145		199		248		274		284		287		289
2012							78		160		220		259		282		285		290
2013									74		135		168		200		225		234
2014											64		102		137		166		187
2015													52		96		130		153
2016															52		93		126
2017																	58		107
2018																			66
																	Total		$	2,016
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	395
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			6
Liability for unallocated claim adjustment expenses for accident years presented																			11
Total net liability for unpaid claim and claim adjustment expenses																			$	412

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾			2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	(15	)	$	4	$	2	$	3	$	(4	)	$	(3	)	$	(2	)	$	—		$	1		$	(14	)
2010				16		4		4		7			(5		)	(4		)	(1		)	—			21
2011						13		7		14			(2		)	(6		)	—			—			26
2012								14		10			4			4			(8		)	—			24
2013										19			—			(16		)	(4		)	—			(1		)
2014													(11		)	(11		)	(7		)	—			(29		)
2015																(2		)	(9		)	—			(11		)
2016																			(12		)	—			(12		)
2017																						(1		)	(1		)
Total net development for the accident years presented above																(37		)	(41		)	—
Total net development for accident years prior to 2009																(10		)	4			—
Total unallocated claim adjustment expense development																—			2			1
Total																$	(47	)	$	(35	)	$	1

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial - General Liability

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	662	$	716	$	733	$	755	$	752	$	756	$	755	$	754	$	755	$	755	$	16	44,934
2010			646		664		658		709		750		726		697		691		691		24		44,144
2011					591		589		631		677		676		681		670		669		26		39,283
2012							587		611		639		636		619		635		635		46		35,083
2013									650		655		650		655		613		623		51		33,420
2014											653		658		654		631		635		71		27,736
2015													581		576		574		589		122		23,471
2016															623		659		667		265		23,078
2017																	632		632		412		19,716
2018																			653		553		13,336
																	Total		$	6,549	$	1,586

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	33	$	124	$	305	$	468	$	576	$	625	$	663	$	701	$	721	$	727
2010			27		145		280		429		561		611		642		652		656
2011					28		148		273		411		517		568		602		622
2012							28		132		247		374		454		510		559
2013									31		128		240		352		450		510
2014											31		119		247		376		481
2015													19		110		230		357
2016															32		163		279
2017																	23		118
2018																			33
																	Total		$	4,342
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,207
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			927
Liability for unallocated claim adjustment expenses for accident years presented																			61
Total net liability for unpaid claim and claim adjustment expenses																			$	3,195

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	54	$	17	$	22		$	(3	)	$	4	$	(1	)	$	(1	)	$	1		$	—		$	93
2010			18		(6		)	51			41		(24		)	(29		)	(6		)	—			45
2011					(2		)	42			46		(1		)	5			(11		)	(1		)	78
2012								24			28		(3		)	(17		)	16			—			48
2013											5		(5		)	5			(42		)	10			(27		)
2014													5			(4		)	(23		)	4			(18		)
2015																(5		)	(2		)	15			8
2016																			36			8			44
2017																						—			—
Total net development for the accident years presented above																(46		)	(31		)	36
Total net development for accident years prior to 2009																(19		)	(1		)	—
Total unallocated claim adjustment expense development																—			8			(4		)
Total																$	(65	)	$	(24	)	$	32

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

Commercial - Workers' Compensation

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	592	$	599	$	609	$	611	$	616	$	626	$	631	$	638	$	649	$	650	$	46	51,822
2010			583		632		654		676		698		710		730		733		732		44		49,106
2011					607		641		647		659		651		676		676		674		27		45,637
2012							601		627		659		669		678		673		671		59		42,477
2013									537		572		592		618		593		582		86		38,665
2014											467		480		479		452		450		104		33,465
2015													422		431		406		408		146		31,828
2016															426		405		396		171		31,905
2017																	440		432		171		32,811
2018																			450		276		30,399
																	Total		$	5,445	$	1,130

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	89	$	227	$	321	$	388	$	443	$	476	$	503	$	525	$	549	$	557
2010			97		251		359		442		510		542		577		615		625
2011					99		249		358		438		478		522		564		571
2012							87		232		342		416		470		509		524
2013									80		213		300		370		417		419
2014											61		159		215		258		282
2015													51		131		180		212
2016															53		129		169
2017																	63		151
2018																			68
																	Total		$	3,578
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,867
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			2,131
Other⁽²⁾																			(32		)
Liability for unallocated claim adjustment expenses for accident years presented																			2
Total net liability for unpaid claim and claim adjustment expenses																			$	3,968

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018			Total
Accident Year
2009	$	7	$	10	$	2	$	5	$	10	$	5		$	7		$	11		$	1		$	58
2010			49		22		22		22		12			20			3			(1		)	149
2011					34		6		12		(8		)	25			—			(2		)	67
2012							26		32		10			9			(5		)	(2		)	70
2013									35		20			26			(25		)	(11		)	45
2014											13			(1		)	(27		)	(2		)	(17		)
2015														9			(25		)	2			(14		)
2016																	(21		)	(9		)	(30		)
2017																				(8		)	(8		)
Total net development for the accident years presented above														95			(89		)	(32		)
Adjustment for development on a discounted basis														(3		)	(3		)	—
Total net development for accident years prior to 2009														53			28			7
Total unallocated claim adjustment expense development														—			1			(7		)
Total														$	145		$	(63	)	$	(32	)

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) Other includes the effect of discounting lifetime claim reserves.

International

The following table presents further detail of the development recorded for the International segment.



Years ended December 31
(In millions)	2018			2017			2016
Pretax (favorable) unfavorable development:
Casualty	$	(17	)	$	9		$	(29	)
Property	17			(16		)	(21		)
Energy and Marine	(19		)	(12		)	(18		)
Specialty	27			12			19
Healthcare and Technology	(12		)	(2		)	(9		)
Total pretax (favorable) unfavorable development	$	(4	)	$	(9	)	$	(58	)

2018

Favorable development in casualty was primarily driven by better than expected frequency in the liability portion of the package business in Canada and general liability in Europe.

Unfavorable development in property was primarily driven by higher than expected severity in Canada and higher than expected frequency in Hardy, both in accident year 2017.

Favorable development in energy and marine was primarily driven by better than expected large loss frequency in the energy book in accident year 2017, as well as a reduction in incurred losses within the Europe marine discontinued portfolio.

Unfavorable development in specialty was driven by increased loss severity in the accident year 2017 in Europe professional indemnity.

Favorable development in healthcare and technology was primarily driven by lower than expected frequency in accident years 2015 and prior in Europe.

2017

Favorable development in property and in energy and marine was due to better than expected frequency in accident years 2014 through 2016.

Unfavorable development in specialty was primarily due to higher than expected severity in accident year 2015 arising from the management liability business, partially offset by favorable development in accident years 2014 and prior. Additional unfavorable development was related to adverse large claims experience in the Hardy political risks portfolio, relating largely to accident year 2016.

2016

Favorable development in casualty was primarily due to favorable settlements on claims in accident years 2013 and prior related to our Canadian package business. Additional favorable development in accident year 2013 was primarily due to lower than expected frequency of large losses related to our Europe business.

Favorable development in property and in energy and marine was due to better than expected severity on the December 2015 U.K. floods and better than expected attritional losses and large loss experience on accident years 2013 through 2015 for Hardy business. Additional favorable development was due to a commutation of exposures in marine run-off classes on our Europe business.

Unfavorable development in specialty was primarily due to higher than expected large loss emergence in accident years 2011 through 2015 associated with our Commercial Institutions business, partially offset by favorable settlements on claims in accident years 2013 and prior.

International - Line of Business Composition

The table below provides the composition of the net liability for unpaid claim and claim adjustment expenses for the International segment.



As of December 31
(In millions)	2018
Net Claim and claim adjustment expenses:
International excluding Hardy	$	1,059
Hardy	465
Total net liability for claim and claim adjustment expenses	$	1,524

International - Excluding Hardy

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year																				As of December 31, 2018
(In millions, except reported claims data)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018		IBNR		Cumulative Number of Claims
Accident Year
2009	$	254	$	251	$	253	$	253	$	239	$	236	$	226	$	218	$	216	$	219	$	8	20,257
2010			232		229		223		217		208		201		195		188		184		8		21,949
2011					265		266		258		239		227		221		219		216		9		24,585
2012							266		273		258		251		251		244		236		20		24,975
2013									287		289		281		261		257		250		25		23,909
2014											275		290		290		279		271		38		24,874
2015													289		305		304		286		51		23,239
2016															284		302		289		79		17,557
2017																	300		363		134		17,865
2018																			369		174		16,565
																	Total		$	2,683	$	546

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2009⁽¹⁾		2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018
Accident Year
2009	$	39	$	92	$	122	$	137	$	153	$	162	$	174	$	185	$	190	$	198
2010			48		96		119		133		146		156		164		167		169
2011					44		114		135		149		162		174		181		185
2012							43		112		144		164		180		191		201
2013									49		112		138		155		169		179
2014											51		120		148		165		182
2015													55		131		161		181
2016															66		131		157
2017																	64		145
2018																			90
Total																			$	1,687
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	996
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																			39
Liability for unallocated claim adjustment expenses for accident years presented																			24
Total net liability for unpaid claim and claim adjustment expenses																			$	1,059

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2010⁽¹⁾			2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾⁽²⁾			2016⁽¹⁾⁽²⁾			2017⁽¹⁾⁽²⁾			2018⁽²⁾			Total ⁽²⁾
Accident Year
2009	$	(3	)	$	2		$	—		$	(14	)	$	(3	)	$	(10	)	$	(8	)	$	(2	)	$	3		$	(35	)
2010				(3		)	(6		)	(6		)	(9		)	(7		)	(6		)	(7		)	(4		)	(48		)
2011							1			(8		)	(19		)	(12		)	(6		)	(2		)	(3		)	(49		)
2012										7			(15		)	(7		)	—			(7		)	(8		)	(30		)
2013													2			(8		)	(20		)	(4		)	(7		)	(37		)
2014																15			—			(11		)	(8		)	(4		)
2015																			16			(1		)	(18		)	(3		)
2016																						18			(13		)	5
2017																									63			63

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) The amounts included in the loss reserve development tables above are presented at the year-end 2018 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 102 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.

International - Hardy

Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31								Calendar Year																As of December 31, 2018
(In millions, except reported claims data)	Net Claim and Allocated Claim Adjustment Expense Reserves at Acquisition		Net Incurred Claim and Allocated Claim Adjustment Expenses in 2012⁽¹⁾⁽²⁾			Total Acquired Net Claim and Allocated Claim Adjustment Expense Reserves and 2012 Incurreds		2013⁽¹⁾		2014⁽¹⁾			2015⁽¹⁾		2016⁽¹⁾			2017⁽¹⁾			2018			IBNR			Cumulative Number of Claims
Accident Year
2009	$	11	$	—		$	12	$	6	$	(4	)	$	1	$	(2	)	$	(3	)	$	(3	)	$	(2	)	3,856
2010	48		(9		)	38		47		52			46		52			51			50			—			4,540
2011	125		(1		)	124		134		134			138		137			137			140			(2		)	6,252
2012	33		71			104		104		112			119		113			113			115			1			6,900
2013								130		146			138		139			140			144			4			7,624
2014										184			182		176			170			170			2			8,097
2015													190		179			177			178			3			8,968
2016															227			245			234			28			9,536
2017																		244			252			48			10,309
2018																					270			103			7,563
																		Total			$	1,550		$	185

Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.



As of December 31	Calendar Year
(In millions)	2012⁽¹⁾⁽²⁾		2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018
Accident Year
2009	$	2	$	(2	)	$	(4	)	$	(4	)	$	(4	)	$	(5	)	$	(4	)
2010	19		35			42			45			47			48			46
2011	30		83			123			127			131			132			134
2012	14		79			100			109			106			109			110
2013			38			101			120			126			130			133
2014						56			122			141			150			155
2015									29			98			129			144
2016												63			144			171
2017															53			150
2018																		55
Total																		$	1,094
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																		$	456
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2009																		—
Liability for unallocated claim adjustment expenses for accident years presented																		9
Total net liability for unpaid claim and claim adjustment expenses																		$	465

Net strengthening or (releases) of prior accident year reserves is presented in the following table.



For the years ended December 31	Calendar Year
(In millions)	2012⁽¹⁾⁽²⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾⁽³⁾			2016⁽¹⁾⁽³⁾			2017⁽¹⁾⁽³⁾			2018⁽³⁾			Total⁽³⁾
Accident Year
2009	$	1		$	(6	)	$	(10	)	$	5		$	(3	)	$	(1	)	$	—		$	(14	)
2010	(10		)	9			5			(6		)	6			(1		)	(1		)	2
2011	(1		)	10			—			4			(1		)	—			3			15
2012				—			8			7			(6		)	—			2			11
2013							16			(8		)	1			1			4			14
2014										(2		)	(6		)	(6		)	—			(14		)
2015													(11		)	(2		)	1			(12		)
2016																18			(11		)	7
2017																			8			8

(1) Data presented for these calendar years is required supplemental information, which is unaudited.

(2) Data presented for this calendar year is post-acquisition of Hardy.

(3) The amounts included in the loss reserve development tables above are presented at the year-end 2018 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 102 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.

The table below presents information about average historical claims duration as of December 31, 2018 and is presented as required supplementary information, which is unaudited.



Average Annual Percentage Payout of Ultimate Net Incurred Claim and Allocated Claim Adjustment Expenses in Year:
	1		2		3		4		5		6		7		8		9		10		Total
Specialty
Medical Professional Liability	3.8	%	19.7	%	24.3	%	20.1	%	12.1	%	7.2	%	4.5	%	2.5	%	1.0	%	2.9	%	98.1	%
Other Professional Liability and Management Liability	6.2	%	21.5	%	21.3	%	17.4	%	10.7	%	6.4	%	5.8	%	2.9	%	3.3	%	2.1	%	97.6	%
Surety⁽¹⁾	21.6	%	37.9	%	21.0	%	7.9	%	2.1	%	1.6	%	(1.7	)%	(0.5	)%	—	%	—	%	89.9	%

Commercial
Commercial Auto	28.0	%	23.0	%	18.5	%	14.2	%	9.3	%	3.1	%	1.3	%	0.3	%	0.2	%	0.7	%	98.6	%
General Liability	4.3	%	15.9	%	19.5	%	20.5	%	15.7	%	8.0	%	5.6	%	3.2	%	1.6	%	0.8	%	95.1	%
Workers' Compensation	13.7	%	21.1	%	13.9	%	10.6	%	7.5	%	4.4	%	4.4	%	3.2	%	2.5	%	1.2	%	82.5	%

International
International - Excluding Hardy	20.5	%	26.0	%	11.2	%	7.1	%	6.5	%	4.8	%	4.3	%	2.8	%	1.7	%	3.7	%	88.6	%
International - Hardy ⁽²⁾	24.0	%	38.9	%	13.3	%	6.0	%	2.9	%	2.1	%									87.2	%

(1) Due to the nature of the Surety business, average annual percentage payout of ultimate net incurred claim and allocated claim adjustment expenses has been calculated using only the payouts of mature accident years presented in the loss reserve development tables.

(2) Average historical claims duration for Hardy is presented prospectively beginning with the first full year subsequent to acquisition, 2013.

A&EP Reserves

In 2010, CCC together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits in the Consolidated Statements of Operations.

The following table presents the impact of the Loss Portfolio Transfer on the Consolidated Statements of Operations.



Years ended December 31
(In millions)	2018			2017			2016
Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT	$	178		$	60		$	200
Provision for uncollectible third-party reinsurance on A&EP	(16		)	—			—
Total additional amounts ceded under LPT	162			60			200
Retroactive reinsurance benefit recognized	(114		)	(68		)	(107		)
Pretax impact of deferred retroactive reinsurance	$	48		$	(8	)	$	93

The Company completed reserve reviews in both the first and fourth quarters of 2018 and, going forward, intends to perform a single annual review in the fourth quarter. Net unfavorable prior year development of $178 million, $60 million and $200 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2018, 2017 and 2016. Additionally, in 2018, the Company released a portion of its provision for uncollectible third party reinsurance. The 2018 unfavorable development was driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and by paid losses on assumed reinsurance exposures. The 2017 unfavorable development of $60 million was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure. The 2016 unfavorable development of $200 million was driven by an increase in anticipated future expenses associated with determination of coverage, higher anticipated payouts associated with a limited number of historical accounts having significant asbestos exposures and higher than expected severity on pollution claims.

As of December 31, 2018 and 2017, the cumulative amounts ceded under the LPT were $3.1 billion and $2.9 billion. The unrecognized deferred retroactive reinsurance benefit was $374 million and $326 million as of December 31, 2018 and 2017 and is included within Other liabilities on the Consolidated Balance Sheets.

NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $2.7 billion and $3.1 billion as of December 31, 2018 and 2017. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the Company’s A&EP claims.