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Liability For Unpaid Claims

9 Months Ended

Sep. 30, 2022

Liability For Unpaid Claims [Abstract]

9. Liability for Unpaid Claims

The liability for unpaid claims consists primarily of long-term disability claims and is reported in future contract benefits on our Consolidated Balance Sheets. Changes in the liability for unpaid claims (in millions) were as follows:



	For the Nine
	Months Ended
	September 30,
	2022			2021
Balance as of beginning-of-year	$	6,280		$	5,934
Reinsurance recoverable		147			151
Net balance as of beginning-of-year		6,133			5,783
Incurred related to:
Current year		2,972			2,999
Prior years:
Interest		123			112
All other incurred ⁽¹⁾		(206	)		(284	)
Total incurred		2,889			2,827
Paid related to:
Current year		(1,362	)		(1,393	)
Prior years		(1,363	)		(1,222	)
Total paid		(2,725	)		(2,615	)
Net balance as of end-of-period		6,297			5,995
Reinsurance recoverable		144			145
Balance as of end-of-period	$	6,441		$	6,140

⁽¹⁾All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably.

The interest rate assumption used for discounting long-term claim reserves is an important part of the reserving process due to the long benefit period for these claims. Interest accrued on prior years’ reserves has been calculated on the opening reserve balance less one-half of the prior years’ incurred claim payments at our average reserve discount rate.

Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods. As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates. Long-term disability reserves are discounted using rates ranging from 2.5% to 5.0% that vary by year of claim incurral.