XML 35 R13.htm IDEA: XBRL DOCUMENT

Claim and Claim Adjustment Expense Reserves

12 Months Ended

Dec. 31, 2019

Liability for Claims and Claims Adjustment Expense [Abstract]

Claim and Claim Adjustment Expense Reserves

Claim, Claim Adjustment Expense and Future Policy Benefit 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 on the Consolidated Balance Sheets.



As of December 31
(In millions)	2019
Net liability for unpaid claim and claim adjustment expenses:
Specialty	$	4,676
Commercial	7,849
International	1,628
Corporate & Other	175
Life & Group ⁽¹⁾	3,557
Total net claim and claim adjustment expenses	17,885
Reinsurance receivables: ⁽²⁾
Specialty	562
Commercial	807
International	248
Corporate & Other ⁽³⁾	2,059
Life & Group	159
Total reinsurance receivables	3,835
Total gross liability for unpaid claim and claim adjustment expenses	$	21,720

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

(2) Reinsurance receivables presented are gross of the allowance for uncollectible reinsurance and 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 (LPT).

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)	2019			2018			2017
Reserves, beginning of year:
Gross	$	21,984		$	22,004		$	22,343
Ceded	4,019			3,934			4,094
Net reserves, beginning of year	17,965			18,070			18,249
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	5,356			5,358			5,201
Increase (decrease) in provision for insured events of prior years	(127		)	(179		)	(381		)
Amortization of discount	184			176			179
Total net incurred ⁽¹⁾	5,413			5,355			4,999
Net payments attributable to:
Current year events	(992		)	(1,046		)	(975		)
Prior year events	(4,584		)	(4,285		)	(4,366		)
Total net payments	(5,576		)	(5,331		)	(5,341		)
Foreign currency translation adjustment and other	83			(129		)	163
Net reserves, end of year	17,885			17,965			18,070
Ceded reserves, end of year	3,835			4,019			3,934
Gross reserves, end of year	$	21,720		$	21,984		$	22,004


(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 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.

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 are 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.

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.

Gross and Net Carried Reserves

The following tables present the gross and net carried reserves.



December 31, 2019	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
(In millions)	Specialty		Commercial		International		Life & Group		Corporate & Other		Total
Gross Case Reserves	$	1,481	$	3,937	$	858	$	3,576	$	1,137	$	10,989
Gross IBNR Reserves	3,757		4,719		1,018		140		1,097		10,731
Total Gross Carried Claim and Claim Adjustment Expense Reserves	$	5,238	$	8,656	$	1,876	$	3,716	$	2,234	$	21,720
Net Case Reserves	$	1,343	$	3,543	$	759	$	3,441	$	92	$	9,178
Net IBNR Reserves	3,333		4,306		869		116		83		8,707
Total Net Carried Claim and Claim Adjustment Expense Reserves	$	4,676	$	7,849	$	1,628	$	3,557	$	175	$	17,885



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

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.



Years ended December 31
(In millions)	2019			2018			2017
Pretax (favorable) unfavorable development:
Specialty	$	(92	)	$	(150	)	$	(174	)
Commercial	(2		)	(25		)	(115		)
International	21			(4		)	(9		)
Corporate & Other	—			(2		)	(10		)
Total pretax (favorable) unfavorable development	$	(73	)	$	(181	)	$	(308	)

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 2018 and prior is unaudited. Information contained in the tables pertaining to the Company's International segment has been presented at the year-end 2019 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 allocated loss adjusted expenses (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)	2019			2018			2017
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	75		$	47		$	30
Other Professional Liability and Management Liability	(69		)	(127		)	(126		)
Surety	(92		)	(70		)	(84		)
Warranty	(15		)	(10		)	4
Other	9			10			2
Total pretax (favorable) unfavorable development	$	(92	)	$	(150	)	$	(174	)

2019

Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident years 2016 through 2018 in our aging services business, higher than expected severity in accident year 2013 in our allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in our dentists business.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions, lower than expected large claim losses in recent accident years in our public company directors and officers liability (D&O) business and lower than expected loss adjustment expenses across accident years 2010 through 2018.

Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.

Favorable development in warranty was due to lower than expected paid loss emergence on vehicle products.

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.

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)	2019
Net liability for unpaid claim and claim adjustment expenses:
Medical Professional Liability	$	1,429
Other Professional Liability and Management Liability	2,739
Surety	369
Warranty	29
Other	110
Total net liability for unpaid claim and claim adjustment expenses	$	4,676

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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	402	$	412	$	423	$	426	$	415	$	395	$	365	$	360	$	356	$	369	$	1	14,624
2011			429		437		443		468		439		434		437		437		439		2		16,526
2012					464		469		508		498		493		484		493		499		8		17,724
2013							462		479		500		513		525		535		545		27		19,510
2014									450		489		537		530		535		529		16		19,723
2015											433		499		510		494		488		29		18,029
2016													427		487		485		499		63		15,823
2017															412		449		458		127		14,636
2018																	404		429		216		13,760
2019																			430		364		10,467
																	Total		$	4,685	$	853

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	10	$	86	$	173	$	257	$	306	$	326	$	337	$	346	$	350	$	353
2011			17		109		208		295		347		375		398		409		414
2012					14		117		221		323		388		427		457		479
2013							17		119		255		355		414		462		495
2014									23		136		258		359		417		472
2015											22		101		230		313		384
2016													18		121		246		339
2017															19		107		235
2018																	21		115
2019																			17
																	Total		$	3,303
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,382
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			22
Liability for unallocated claim adjustment expenses for accident years presented																			25
Total net liability for unpaid claim and claim adjustment expenses																			$	1,429

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
2010	$	10	$	11	$	3	$	(11	)	$	(20	)	$	(30	)	$	(5	)	$	(4	)	$	13		$	(33	)
2011			8		6		25			(29		)	(5		)	3			—			2			10
2012					5		39			(10		)	(5		)	(9		)	9			6			35
2013							17			21			13			12			10			10			83
2014										39			48			(7		)	5			(6		)	79
2015													66			11			(16		)	(6		)	55
2016																60			(2		)	14			72
2017																			37			9			46
2018																						25			25
Total net development for the accident years presented above																65			39			67
Total net development for accident years prior to 2010																(28		)	9			6
Total unallocated claim adjustment expense development																(7		)	(1		)	2
Total																$	30		$	47		$	75

(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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	828	$	828	$	848	$	848	$	847	$	837	$	824	$	827	$	821	$	821	$	9	17,891
2011			880		908		934		949		944		911		899		888		885		21		18,738
2012					923		909		887		878		840		846		833		831		18		18,499
2013							884		894		926		885		866		863		850		45		17,928
2014									878		898		885		831		835		854		74		17,553
2015											888		892		877		832		807		120		17,390
2016													901		900		900		904		188		17,890
2017															847		845		813		308		18,015
2018																	850		864		460		19,468
2019																			837		714		16,722
																	Total		$	8,466	$	1,957

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	31	$	204	$	405	$	541	$	630	$	670	$	721	$	752	$	784	$	790
2011			71		314		503		605		683		726		781		796		828
2012					56		248		400		573		651		711		755		792
2013							54		249		447		618		702		754		771
2014									51		223		392		515		647		707
2015											60		234		404		542		612
2016													64		248		466		625
2017															57		222		394
2018																	54		282
2019																			64
																	Total		$	5,865
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,601
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			88
Liability for unallocated claim adjustment expenses for accident years presented																			50
Total net liability for unpaid claim and claim adjustment expenses																			$	2,739

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
2010	$	—	$	20	$	—		$	(1	)	$	(10	)	$	(13	)	$	3		$	(6	)	$	—		$	(7	)
2011			28		26			15			(5		)	(33		)	(12		)	(11		)	(3		)	5
2012					(14		)	(22		)	(9		)	(38		)	6			(13		)	(2		)	(92		)
2013								10			32			(41		)	(19		)	(3		)	(13		)	(34		)
2014											20			(13		)	(54		)	4			19			(24		)
2015														4			(15		)	(45		)	(25		)	(81		)
2016																	(1		)	—			4			3
2017																				(2		)	(32		)	(34		)
2018																							14			14
Total net development for the accident years presented above																	(92		)	(76		)	(38		)
Total net development for accident years prior to 2010																	(27		)	(44		)	(17		)
Total unallocated claim adjustment expense development																	(7		)	(7		)	(14		)
Total																	$	(126	)	$	(127	)	$	(69	)

(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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	112	$	112	$	111	$	84	$	76	$	66	$	63	$	59	$	61	$	61	$	—	5,982
2011			120		121		116		87		75		70		66		62		62		2		5,813
2012					120		122		98		70		52		45		39		38		1		5,568
2013							120		121		115		106		91		87		83		3		5,062
2014									123		124		94		69		60		45		4		5,078
2015											131		131		104		79		63		11		4,976
2016													124		124		109		84		36		5,379
2017															120		115		103		54		5,496
2018																	114		108		76		5,451
2019																			119		102		3,549
																	Total		$	766	$	289

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	13	$	34	$	50	$	55	$	57	$	58	$	55	$	52	$	52	$	53
2011			19		42		55		58		60		60		56		57		57
2012					5		32		34		35		35		36		37		37
2013							16		40		69		78		78		78		77
2014									7		30		38		36		38		38
2015											7		26		38		40		42
2016													5		37		45		45
2017															23		37		41
2018																	5		25
2019																			12
																	Total		$	427
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	339
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			10
Liability for unallocated claim adjustment expenses for accident years presented																			20
Total net liability for unpaid claim and claim adjustment expenses																			$	369

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
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		)	(1		)	(82		)
2013									1			(6		)	(9		)	(15		)	(4		)	(4		)	(37		)
2014												1			(30		)	(25		)	(9		)	(15		)	(78		)
2015															—			(27		)	(25		)	(16		)	(68		)
2016																		—			(15		)	(25		)	(40		)
2017																					(5		)	(12		)	(17		)
2018																								(6		)	(6		)
Total net development for the accident years presented above																		(82		)	(66		)	(79		)
Total net development for accident years prior to 2010																		1			(4		)	(3		)
Total unallocated claim adjustment expense development																		(3		)	—			(10		)
Total																		$	(84	)	$	(70	)	$	(92	)

(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)	2019			2018			2017
Pretax (favorable) unfavorable development:
Commercial Auto	$	(25	)	$	1		$	(35	)
General Liability	54			32			(24		)
Workers' Compensation	(13		)	(32		)	(63		)
Property and Other	(18		)	(26		)	7
Total pretax (favorable) unfavorable development	$	(2	)	$	(25	)	$	(115	)

2019

Favorable development in commercial auto was primarily due to continued lower than expected severity across accident years 2015 and prior and a decline in bodily injury frequency in accident year 2018.

Unfavorable development in general liability was primarily due to higher than expected emergence in mass tort exposures, primarily from accident years 2016, 2015 and prior to 2010.

Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in accident years 2012 through 2018.

Favorable development in property and other was primarily driven by lower than expected claim severity related to catastrophe events in accident years 2017 and 2018.

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.

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)	2019
Net Claim and claim adjustment expenses:
Commercial Auto	$	404
General Liability	3,176
Workers' Compensation	3,932
Property and Other	337
Total net liability for claim and claim adjustment expenses	$	7,849

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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	267	$	283	$	287	$	291	$	298	$	293	$	289	$	288	$	288	$	288	$	1	48,035
2011			268		281		288		302		300		294		294		294		291		—		47,909
2012					275		289		299		303		307		299		299		297		3		46,288
2013							246		265		265		249		245		245		241		2		39,429
2014									234		223		212		205		205		201		3		33,622
2015											201		199		190		190		183		7		30,418
2016													198		186		186		186		7		30,414
2017															199		198		200		9		30,850
2018																	229		227		47		33,959
2019																			257		128		31,455
																	Total		$	2,371	$	207

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	74	$	141	$	203	$	246	$	271	$	281	$	286	$	287	$	287	$	287
2011			79		145		199		248		274		284		287		289		289
2012					78		160		220		259		282		285		290		291
2013							74		135		168		200		225		234		238
2014									64		102		137		166		187		196
2015											52		96		130		153		172
2016													52		93		126		154
2017															58		107		150
2018																	66		128
2019																			77
																	Total		$	1,982
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	389
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			1
Liability for unallocated claim adjustment expenses for accident years presented																			14
Total net liability for unpaid claim and claim adjustment expenses																			$	404

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
2010	$	16	$	4	$	4	$	7	$	(5	)	$	(4	)	$	(1	)	$	—		$	—		$	21
2011			13		7		14		(2		)	(6		)	—			—			(3		)	23
2012					14		10		4			4			(8		)	—			(2		)	22
2013							19		—			(16		)	(4		)	—			(4		)	(5		)
2014									(11		)	(11		)	(7		)	—			(4		)	(33		)
2015												(2		)	(9		)	—			(7		)	(18		)
2016															(12		)	—			—			(12		)
2017																		(1		)	2			1
2018																					(2		)	(2		)
Total net development for the accident years presented above															(41		)	(1		)	(20		)
Total net development for accident years prior to 2010															4			1			(4		)
Total unallocated claim adjustment expense development															2			1			(1		)
Total															$	(35	)	$	1		$	(25	)

(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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	646	$	664	$	658	$	709	$	750	$	726	$	697	$	691	$	691	$	690	$	19	44,229
2011			591		589		631		677		676		681		670		669		667		20		39,361
2012					587		611		639		636		619		635		635		630		31		35,219
2013							650		655		650		655		613		623		620		27		33,570
2014									653		658		654		631		635		658		57		27,877
2015											581		576		574		589		600		73		23,834
2016													623		659		667		671		166		23,817
2017															632		632		632		226		21,114
2018																	653		644		408		17,889
2019																			680		602		12,916
																	Total		$	6,492	$	1,629

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	27	$	145	$	280	$	429	$	561	$	611	$	642	$	652	$	656	$	667
2011			28		148		273		411		517		568		602		622		638
2012					28		132		247		374		454		510		559		579
2013							31		128		240		352		450		510		551
2014									31		119		247		376		481		547
2015											19		110		230		357		446
2016													32		163		279		407
2017															23		118		250
2018																	33		107
2019																			25
																	Total		$	4,217
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	2,275
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			836
Liability for unallocated claim adjustment expenses for accident years presented																			65
Total net liability for unpaid claim and claim adjustment expenses																			$	3,176

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾			2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
2010	$	18	$	(6	)	$	51	$	41	$	(24	)	$	(29	)	$	(6	)	$	—		$	(1	)	$	44
2011			(2		)	42		46		(1		)	5			(11		)	(1		)	(2		)	76
2012						24		28		(3		)	(17		)	16			—			(5		)	43
2013								5		(5		)	5			(42		)	10			(3		)	(30		)
2014										5			(4		)	(23		)	4			23			5
2015													(5		)	(2		)	15			11			19
2016																36			8			4			48
2017																			—			—			—
2018																						(9		)	(9		)
Total net development for the accident years presented above																(32		)	36			18
Total net development for accident years prior to 2010																—			—			29
Total unallocated claim adjustment expense development																8			(4		)	7
Total																$	(24	)	$	32		$	54

(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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	583	$	632	$	654	$	676	$	698	$	710	$	730	$	733	$	732	$	735	$	55	49,333
2011			607		641		647		659		651		676		676		674		688		40		45,959
2012					601		627		659		669		678		673		671		668		67		42,586
2013							537		572		592		618		593		582		561		93		38,688
2014									467		480		479		452		450		446		99		33,480
2015											422		431		406		408		394		130		31,861
2016													426		405		396		382		144		31,945
2017															440		432		421		138		33,029
2018																	450		440		185		34,647
2019																			452		257		29,795
																	Total		$	5,187	$	1,208

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	97	$	251	$	359	$	442	$	510	$	542	$	577	$	615	$	625	$	631
2011			99		249		358		438		478		522		564		571		581
2012					87		232		342		416		470		509		524		536
2013							80		213		300		370		417		419		411
2014									61		159		215		258		282		290
2015											51		131		180		212		231
2016													53		129		169		198
2017															63		151		207
2018																	68		163
2019																			71
																	Total		$	3,319
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,868
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			2,061
Other⁽²⁾																			(22		)
Liability for unallocated claim adjustment expenses for accident years presented																			25
Total net liability for unpaid claim and claim adjustment expenses																			$	3,932

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total
Accident Year
2010	$	49	$	22	$	22	$	22	$	12		$	20		$	3		$	(1	)	$	3		$	152
2011			34		6		12		(8		)	25			—			(2		)	14			81
2012					26		32		10			9			(5		)	(2		)	(3		)	67
2013							35		20			26			(25		)	(11		)	(21		)	24
2014									13			(1		)	(27		)	(2		)	(4		)	(21		)
2015												9			(25		)	2			(14		)	(28		)
2016															(21		)	(9		)	(14		)	(44		)
2017																		(8		)	(11		)	(19		)
2018																					(10		)	(10		)
Total net development for the accident years presented above															(100		)	(33		)	(60		)
Adjustment for development on a discounted basis															(3		)	—			3
Total net development for accident years prior to 2010															39			8			21
Total unallocated claim adjustment expense development															1			(7		)	23
Total															$	(63	)	$	(32	)	$	(13	)

(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)	2019			2018			2017
Pretax (favorable) unfavorable development:
Casualty	$	(20	)	$	(17	)	$	9
Property	23			19			(12		)
Energy and Marine	2			(19		)	(12		)
Specialty⁽¹⁾	16			13			6
Total pretax (favorable) unfavorable development	$	21		$	(4	)	$	(9	)

(1) Effective January 1, 2019 the Healthcare and Technology line of business has been absorbed within the Specialty line of business in the International segment. Prior period information has been conformed to the new line of business presentation.

2019

Favorable development in casualty was driven by lower than expected large losses and claim severity in accident years 2018 and prior in Hardy, Europe and Canada.

Unfavorable development in property was driven by higher than expected claims in Hardy on 2018 accident year Asian catastrophe events.

Unfavorable development in specialty was primarily driven by professional indemnity within Europe financial lines in accident years 2017 and 2018 due to potential design and construct exposures.

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. This was partially offset by favorable development in accident years 2015 and prior in Europe healthcare and technology.

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.

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)	2019
Net Claim and claim adjustment expenses:
International excluding Hardy	$	1,155
Hardy	473
Total net liability for claim and claim adjustment expenses	$	1,628

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, 2019
(In millions, except reported claims data)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019		IBNR		Cumulative Number of Claims
Accident Year
2010	$	238	$	234	$	228	$	223	$	213	$	207	$	200	$	194	$	190	$	187	$	6	21,952
2011			271		272		264		244		233		226		224		221		214		3		24,589
2012					272		279		264		256		256		249		242		236		19		24,978
2013							294		295		287		267		263		255		246		18		23,932
2014									282		297		297		285		277		294		31		24,912
2015											296		311		310		292		286		37		23,305
2016													290		309		294		292		59		17,626
2017															306		371		393		133		18,176
2018																	376		394		132		19,756
2019																			350		185		13,415
																	Total		$	2,892	$	623

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



As of December 31	Calendar Year
(In millions)	2010⁽¹⁾		2011⁽¹⁾		2012⁽¹⁾		2013⁽¹⁾		2014⁽¹⁾		2015⁽¹⁾		2016⁽¹⁾		2017⁽¹⁾		2018⁽¹⁾		2019
Accident Year
2010	$	49	$	99	$	122	$	137	$	151	$	160	$	169	$	172	$	174	$	178
2011			45		116		139		152		166		178		186		190		193
2012					45		115		148		168		184		196		205		209
2013							50		114		141		158		173		183		202
2014									52		123		151		169		186		207
2015											57		135		165		186		209
2016													67		134		161		184
2017															65		149		190
2018																	91		169
2019																			75
Total																			$	1,816
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented																			$	1,076
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010																			52
Liability for unallocated claim adjustment expenses for accident years presented																			27
Total net liability for unpaid claim and claim adjustment expenses																			$	1,155

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



For the years ended December 31	Calendar Year
(In millions)	2011⁽¹⁾			2012⁽¹⁾			2013⁽¹⁾			2014⁽¹⁾			2015⁽¹⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total ⁽²⁾
Accident Year
2010	$	(4	)	$	(6	)	$	(5	)	$	(10	)	$	(6	)	$	(7	)	$	(6	)	$	(4	)	$	(3	)	$	(51	)
2011				1			(8		)	(20		)	(11		)	(7		)	(2		)	(3		)	(7		)	(57		)
2012							7			(15		)	(8		)	—			(7		)	(7		)	(6		)	(36		)
2013										1			(8		)	(20		)	(4		)	(8		)	(9		)	(48		)
2014													15			—			(12		)	(8		)	17			12
2015																15			(1		)	(18		)	(6		)	(10		)
2016																			19			(15		)	(2		)	2
2017																						65			22			87
2018																									18			18

(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 2019 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 99 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, 2019
(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⁽¹⁾		2019			IBNR			Cumulative Number of Claims
Accident Year
2010	$	48	$	(10	)	$	39	$	48	$	52	$	46	$	53	$	52	$	51	$	51		$	(1	)	4,565
2011	126		(1		)	125		136		136		140		139		139		142		142			(1		)	6,292
2012	33		71			104		105		112		119		113		113		116		115			1			6,950
2013								131		146		138		140		141		144		145			2			7,724
2014										185		183		177		171		171		172			—			8,242
2015												191		180		179		179		178			1			9,274
2016														229		247		236		225			18			10,152
2017																245		255		244			15			11,837
2018																		273		305			43			12,646
2019																				223			120			6,271
																		Total		$	1,800		$	198

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⁽¹⁾		2019
Accident Year
2010	$	19	$	36	$	43	$	45	$	48	$	49	$	47	$	47
2011	31		84		124		129		133		134		136		137
2012	14		80		100		109		107		109		110		111
2013			38		102		121		127		131		134		138
2014					56		123		142		151		157		162
2015							30		98		130		145		158
2016									63		145		172		182
2017											53		151		184
2018													55		176
2019															44
Total															$	1,339
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented															$	461
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2010															3
Liability for unallocated claim adjustment expenses for accident years presented															9
Total net liability for unpaid claim and claim adjustment expenses															$	473

Net strengthening (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⁾			2016⁽¹⁾			2017⁽¹⁾			2018⁽¹⁾			2019			Total⁽³⁾
Accident Year
2010	$	(9	)	$	9	$	4	$	(6	)	$	7		$	(1	)	$	(1	)	$	—		$	3
2011	(1		)	11		—		4			(1		)	—			3			—			16
2012				1		7		7			(6		)	—			3			(1		)	11
2013						15		(8		)	2			1			3			1			14
2014								(2		)	(6		)	(6		)	—			1			(13		)
2015											(11		)	(1		)	—			(1		)	(13		)
2016														18			(11		)	(11		)	(4		)
2017																	10			(11		)	(1		)
2018																				32			32

(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 2019 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 99 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, 2019 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	%	20.0	%	24.3	%	19.4	%	12.4	%	7.8	%	5.1	%	3.1	%	1.1	%	0.8	%	97.8	%
Other Professional Liability and Management Liability	6.6	%	22.6	%	21.7	%	16.9	%	10.5	%	6.0	%	4.9	%	3.3	%	3.8	%	0.7	%	97.0	%
Surety⁽¹⁾	20.0	%	44.5	%	21.0	%	4.4	%	2.2	%	0.9	%	(2.5	)%	(1.1	)%	—	%	1.6	%	91.0	%

Commercial
Commercial Auto	28.6	%	24.0	%	18.6	%	14.3	%	9.4	%	3.2	%	1.5	%	0.4	%	—	%	—	%	100.0	%
General Liability	4.3	%	15.8	%	19.0	%	20.1	%	15.7	%	8.7	%	6.0	%	2.5	%	1.5	%	1.6	%	95.2	%
Workers' Compensation	14.1	%	21.4	%	13.9	%	10.3	%	7.0	%	3.7	%	2.9	%	2.7	%	1.4	%	0.8	%	78.2	%

International
International - Excluding Hardy	20.8	%	25.7	%	11.0	%	7.3	%	6.8	%	5.3	%	5.0	%	1.7	%	1.2	%	2.1	%	86.9	%
International - Hardy ⁽²⁾	23.3	%	39.6	%	8.7	%	5.6	%	4.5	%	2.5	%	2.8	%							87.0	%

(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, Continental Casualty Company (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 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)	2019			2018			2017
Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT	$	150		$	178		$	60
Provision for uncollectible third-party reinsurance on A&EP	(25		)	(16		)	—
Total additional amounts ceded under LPT	125			162			60
Retroactive reinsurance benefit recognized	(107		)	(114		)	(68		)
Pretax impact of deferred retroactive reinsurance	$	18		$	48		$	(8	)

Net unfavorable prior year development of $150 million, $178 million and $60 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2019, 2018 and 2017. The 2019 unfavorable development of $150 million was primarily driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and a reduction in estimated reinsurance recoverable. The 2018 unfavorable development of $178 million 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. Additionally, in 2019 and 2018, the Company released $25 million and $16 million of its provision for uncollectible third-party reinsurance. The 2017 unfavorable development of $60 million was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure.

As of December 31, 2019 and 2018, the cumulative amounts ceded under the LPT were $3.2 billion and $3.1 billion. The unrecognized deferred retroactive reinsurance benefit was $392 million and $374 million as of December 31, 2019 and 2018 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 $3.7 billion and $2.7 billion as of December 31, 2019 and 2018. 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 majority of the Company’s A&EP claims.

Life & Group Policyholder Reserves

The Company’s Life & Group segment includes its 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 the Company has 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 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. In developing the claim and claim adjustment expense reserve estimates for our structured settlement obligations, the Company's actuaries monitor mortality experience on an annual basis. Both elements of the Life & Group reserves are discounted as discussed in Note A to the Consolidated Financial Statements.

The Company completed its annual long term care claim experience study in the third quarter of 2019 and 2018 which resulted in $56 million and $31 million pretax reductions in claim and claim adjustment expense reserves, respectively. The favorable claim reserve development in 2019 and 2018 was primarily due to lower claim severity than anticipated in the reserve estimates.

Future policy benefit reserves represent the active life reserves related to the Company’s long term care policies which are the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.

The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, the Company’s long term care reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations.

Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a GPV to determine if there is a premium deficiency. Management also uses the GPV process to evaluate the adequacy of its claim and claim adjustment expense reserves for structured settlement obligations not funded by annuities. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required.

Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions. The most recent third party assessment, performed in early 2019, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.

In the third quarter of 2019 the Company performed the GPV for the long term care future policy benefit reserves. This GPV indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the premium deficiency resulted in a $216 million pretax charge in policyholders' benefits reflected in the Company's results of operations. The Company's 2018 and 2017 GPV for the long term care future policy benefit reserves indicated the reserves were not deficient and no adjustment was required.