Liability for Loss and LAE

3 Months Ended

Mar. 31, 2012

Liability for Loss and LAE

6. Liability for Loss and LAE

Activity in liability for loss and LAE in the first three months of 2012 and 2011 is summarized as follows (in millions):

	Three Months Ended March 31,
	2012			2011
Reserves as of January 1	$	2,313.0		$	2,328.7
Less: reinsurance recoverables(1)		831.8			847.4
Net reserves		1,481.2			1,481.3
Reserves acquired(2)		9,156.1			—
Incurred loss, net of reinsurance, related to:
Current year(3)		249.3			90.1
Prior years		(15.4	)		(19.1	)
Total incurred loss and LAE, net of reinsurance		233.9			71.0
Paid loss, net of reinsurance, related to:
Current year(3)		158.6			6.7
Prior years		98.7			95.0
Total paid loss and LAE, net of reinsurance		257.3			101.7
Foreign exchange effect(3)		—			—
Reserves, net of reinsurance recoverables, as of March 31		10,613.9			1,450.6
Reinsurance recoverables as of March 31(1)		1,256.4			839.6
Reserves, gross of reinsurance recoverables, as of March 31	$	11,870.3		$	2,290.2

(1) Reinsurance recoverables in this table include only ceded loss reserves.

(2) Represents the carrying value of Transatlantic’s net reserves acquired in the merger. Gross loss reserves and ceded loss reserves as of the Acquisition Date were $9,627.8 million and $471.7 million, respectively. See Note 2.

(3) Includes amounts from Transatlantic from the Acquisition Date through March 31, 2012. See Note 2.

The increase in gross loss and LAE reserves in the first three months of 2012 reflects the acquisition of Transatlantic.