INSURANCE LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2018

Claims Development [Line Items]

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)		2018		2017		2018		2017
Liability for unpaid loss and loss adjustment expenses, beginning of period	$	76,713	$	76,422	$	78,393	$	77,077
Reinsurance recoverable		(27,406)		(27,660)		(26,708)		(15,532)
Net Liability for unpaid loss and loss adjustment expenses, beginning of period		49,307		48,762		51,685		61,545
Losses and loss adjustment expenses incurred:
Current year		6,670		7,511		15,800		16,021
Prior years, excluding discount and amortization of deferred gain		949		901		884		1,354
Prior years, discount charge (benefit)		3		48		(174)		283
Prior years, amortization of deferred gain on retroactive reinsurance(a)		(175)		(75)		(283)		(195)
Total losses and loss adjustment expenses incurred		7,447		8,385		16,227		17,463
Losses and loss adjustment expenses paid:
Current year		(1,791)		(1,634)		(3,289)		(3,342)
Prior years		(4,526)		(3,395)		(14,312)		(12,438)
Total losses and loss adjustment expenses paid		(6,317)		(5,029)		(17,601)		(15,780)
Other changes:
Foreign exchange effect		(236)		330		(393)		688
Acquisitions(b)		3,020		-		3,020		-
Retroactive reinsurance adjustment (net of discount)(c)		(464)		22		(181)		(11,438)
Reclassified to liabilities held for sale(d)		-		8		-		-
Total other changes		2,320		360		2,446		(10,750)
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses		52,757		52,478		52,757		52,478
Reinsurance recoverable		29,202		27,609		29,202		27,609
Total	$	81,959	$	80,087	$	81,959	$	80,087

(a) Includes $9 million and $6 million for the retroactive reinsurance agreement with NICO covering U.S. asbestos exposures for the three-month periods ended September 30, 2018 and 2017, respectively, and $22 million and $11 million for the nine-month periods ended September 30, 2018 and 2017, respectively.

(b) Amounts relate to the acquisition of Validus in July 2018.

(c) Includes discount on retroactive reinsurance of $46 million and $(53) million for the three-month periods ended September 30, 2018 and 2017, respectively, and $154 million and $1.5 billion for the nine-month periods ended September 30, 2018 and 2017, respectively.

(d)Represents change in loss reserves included in our sale of certain of our insurance operations to Fairfax Financial Holdings Limited (Fairfax) for the three- and nine-month periods ended September 30, 2017. Upon consummation of the sale, we retained 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, 2018						December 31, 2017
	North						North
	America						America
	Commercial			Legacy			Commercial			Legacy
(in millions)	Insurance			Portfolio		Total	Insurance			Portfolio		Total
U.S. workers' compensation	$	2,733	$	955	$	3,688	$	2,465	$	918	$	3,383
Retroactive reinsurance		(1,693)		-		(1,693)		(1,539)		-		(1,539)
Total reserve discount*	$	1,040	$	955	$	1,995	$	926	$	918	$	1,844

*Excludes $182 million and $173 million of discount related to certain long tail liabilities in the United Kingdom at September 30, 2018 and December 31, 2017, respectively.

The following tables present the net loss reserve discount benefit (charge):

Three Months Ended September 30,	2018						2017
	North						North
	America						America
	Commercial			Legacy			Commercial			Legacy
(in millions)	Insurance			Portfolio		Total	Insurance			Portfolio		Total
Current accident year	$	89	$	-	$	89	$	33	$	-	$	33
Accretion and other adjustments
to prior year discount		(7)		(12)		(19)		(100)		25		(75)
Effect of interest rate changes		13		3		16		(7)		1		(6)
Net reserve discount
benefit (charge)		95		(9)		86		(74)		26		(48)
Change in discount on loss reserves
ceded under retroactive reinsurance		(46)		-		(46)		53		-		53
Net change in total reserve
discount(a)	$	49	$	(9)	$	40	$	(21)	$	26	$	5
Nine Months Ended September 30,	2018						2017
	North						North
	America						America
	Commercial			Legacy			Commercial			Legacy
(in millions)	Insurance			Portfolio		Total	Insurance			Portfolio		Total
Current accident year	$	131	$	-	$	131	$	94	$	-	$	94
Accretion and other adjustments
to prior year discount		(95)		(42)		(137)		(205)		(34)		(239)
Effect of interest rate changes		232		79		311		(96)		(42)		(138)
Net reserve discount
benefit (charge)		268		37		305		(207)		(76)		(283)
Change in discount on loss reserves
ceded under retroactive reinsurance		(154)		-		(154)		(1,494)		-		(1,494)
Net change in total reserve
discount(b)	$	114	$	37	$	151	$	(1,701)	$	(76)	$	(1,777)

(a) Excludes $12 million and $(18) million discount related to certain long tail liabilities in the United Kingdom for the three-month periods ended September 30, 2018 and 2017, respectively.

(b) Excludes $10 million and $20 milliondiscount related to certain long tail liabilities in the United Kingdom for the nine-month periods ended September 30, 2018 and 2017, respectively.