INSURANCE LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2017

LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE, FUTURE POLICY BENEFITS FOR LIFE AND ACCIDENT AND HEALTH INSURANCE CONTRACTS, AND POLICYHOLDER CONTRACT DEPOSITS

Schedule of reconciliation of activity in the liability for unpaid claims and claims adjustment expense

The following table presents the roll forward of activity in Loss Reserves:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)		2017		2016		2017		2016
Liability for unpaid loss and loss adjustment expenses, beginning of period	$	76,422	$	74,143	$	77,077	$	74,942
Reinsurance recoverable		(27,660)		(14,520)		(15,532)		(14,339)
Net Liability for unpaid loss and loss adjustment expenses, beginning of period		48,762		59,623		61,545		60,603
Foreign exchange effect		330		(147)		688		53
Dispositions^(a)		-		-		-		-
Retroactive reinsurance adjustment (net of discount)^(b)		22		-		(11,438)		-
Total		49,114		59,476		50,795		60,656
Losses and loss adjustment expenses incurred:
Current year		7,511		4,960		16,021		14,896
Prior years, excluding discount and amortization of deferred gain		901		274		1,354		214
Prior years, discount charge (benefit)		48		32		283		323
Prior years, amortization of deferred gain on retroactive reinsurance^(c)		(75)		-		(195)		-
Total losses and loss adjustment expenses incurred		8,385		5,266		17,463		15,433
Losses and loss adjustment expenses paid:
Current year		(1,634)		(1,948)		(3,342)		(3,945)
Prior years		(3,395)		(3,779)		(12,438)		(13,129)
Total losses and loss adjustment expenses paid		(5,029)		(5,727)		(15,780)		(17,074)
Reclassified to liabilities held for sale^(d)		8		(1,060)		-		(1,060)
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses		52,478		57,955		52,478		57,955
Reinsurance recoverable		27,609		14,501		27,609		14,501
Total	$	80,087	$	72,456	$	80,087	$	72,456

(a) Includes amounts related to dispositions through the date of disposition. Includes sale of United Guaranty and Ascot Underwriting Holdings Limited, Ascot Corporate Name Limited and Ascot Employees Corporate Member Limited (Ascot).

(b) Includes discount on retroactive reinsurance in the amount of $53 million and $1.5 billion for the three- and nine-month periods ended September 30, 2017, respectively.

(c) Includes $6 million and $11 million for the 2011 retroactive reinsurance agreement with NICO covering U.S. asbestos exposures for the three- and nine-month periods ended September 30, 2017, respectively.

(d) Represents change in loss reserves included in our pending sale of certain of our insurance operations to Fairfax for the three- and nine-month periods ended September 30, 2017. Upon consummation of the sale, we may retain a portion of these reserves through reinsurance arrangements.

Schedule of loss reserve discount and loss reserve discount benefit (charge)

The following table presents the components of the loss reserve discount discussed above:

	September 30, 2017						December 31, 2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
U.S. workers' compensation	$	2,376	$	911	$	3,287	$	2,583	$	987	$	3,570
Retroactive reinsurance		(1,494)		-		(1,494)		-		-		-
Total reserve discount^*	$	882	$	911	$	1,793	$	2,583	$	987	$	3,570

* Excludes $167 million and $181 million of discount related to certain long tail liabilities in the United Kingdom at September 30, 2017 and December 31, 2016, respectively.

The following tables present increase (decrease) in the net loss reserve discount:

Three Months Ended September 30,	2017						2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
Current accident year	$	33	$	-	$	33	$	37	$	-	$	37
Accretion and other adjustments
to prior year discount		(100)		25		(75)		(43)		(12)		(55)
Effect of interest rate changes		(7)		1		(6)		(11)		(3)		(14)
Net reserve discount
benefit (charge)		(74)		26		(48)		(17)		(15)		(32)
Change in discount on loss reserves
ceded under retroactive reinsurance^(a)		53		-		53		-		-		-
Net change in total reserve
discount^(b)	$	(21)	$	26	$	5	$	(17)	$	(15)	$	(32)
Comprised of:
U.S. Workers' compensation	$	(21)	$	26	$	5	$	(17)	$	(15)	$	(32)
Asbestos	$	-	$	-	$	-	$	-	$	-	$	-

Nine Months Ended September 30,	2017						2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
Current accident year	$	94	$	-	$	94	$	118	$	-	$	118
Accretion and other adjustments
to prior year discount		(205)		(34)		(239)		(104)		(42)		(146)
Effect of interest rate changes		(96)		(42)		(138)		(196)		(99)		(295)
Net reserve discount
benefit (charge)		(207)		(76)		(283)		(182)		(141)		(323)
Change in discount on loss reserves
ceded under retroactive reinsurance		(1,494)		-		(1,494)		-		-		-
Net change in total reserve
discount^(c)	$	(1,701)	$	(76)	$	(1,777)	$	(182)	$	(141)	$	(323)
Comprised of:
U.S. Workers' compensation	$	(1,701)	$	(76)	$	(1,777)	$	(182)	$	(139)	$	(321)
Asbestos	$	-	$	-	$	-	$	-	$	(2)	$	(2)

(a) Included in the deferred gain from retroactive reinsurance reported in other liabilities.

(b) Excludes $(18) million and $4 million of discount related to certain long tail liabilities in the United Kingdom for the three-month period ended September 30, 2017 and 2016, respectively.

(c) Excludes $20 million and $(16) million of discount related to certain long tail liabilities in the United Kingdom for the nine-month period ended September 30, 2017 and 2016, respectively.