Insurance Claim Reserves

6 Months Ended

Jun. 30, 2019

INSURANCE CLAIM RESERVES

Claims and claim adjustment expense reserves were as follows:



(in millions)	June 30, 2019		December 31, 2018
Property-casualty	$	51,059	$	50,653
Accident and health	14		15
Total	$	51,073	$	50,668

The following table presents a reconciliation of beginning and ending property casualty reserve balances for claims and claim adjustment expenses:



	Six Months Ended June 30,
(in millions)	2019			2018
Claims and claim adjustment expense reserves at beginning of year	$	50,653		$	49,633
Less reinsurance recoverables on unpaid losses	8,182			8,123
Net reserves at beginning of year	42,471			41,510

Estimated claims and claim adjustment expenses for claims arising in the current year	9,329			9,084
Estimated decrease in claims and claim adjustment expenses for claims arising in prior years	(118		)	(268		)
Total increases	9,211			8,816

Claims and claim adjustment expense payments for claims arising in:
Current year	2,810			2,851
Prior years	5,897			5,454
Total payments	8,707			8,305
Unrealized foreign exchange (gain) loss	62			(102		)
Net reserves at end of period	43,037			41,919
Plus reinsurance recoverables on unpaid losses	8,022			8,026
Claims and claim adjustment expense reserves at end of period	$	51,059		$	49,945

Gross claims and claim adjustment expense reserves at June 30, 2019 increased by $406 million from December 31, 2018, primarily reflecting the impact of higher volumes of insured exposures and loss cost trends for the current accident year, partially offset by net favorable prior year reserve development.

Reinsurance recoverables on unpaid losses at June 30, 2019 decreased by $160 million from December 31, 2018, primarily reflecting the impact of cash collections in the first six months of 2019.

The Company continues to evaluate the estimated realizable value of its subrogation claims related to the 2017 and 2018 California wildfires and the impact of recent developments, including the recent re-organization proposals by various stakeholders in the Pacific Gas & Electric Company (PG&E) bankruptcy. Due to the risks and uncertainties associated with the PG&E bankruptcy and other factors, the Company has not recognized a subrogation benefit related to these claims.

Prior Year Reserve Development

The following disclosures regarding reserve development are on a “net of reinsurance” basis.

For the six months ended June 30, 2019 and 2018, estimated claims and claim adjustment expenses incurred included $118 million and $268 million, respectively, of net favorable development for claims arising in prior years, including $174 million and $336 million, respectively, of net favorable prior year reserve development and $25 million of accretion of discount in each period that impacted the Company's results of operations.

Business Insurance. Net favorable prior year reserve development in the second quarter of 2019 totaled $71 million, primarily driven by better than expected loss experience in the segment's domestic operations in (i) the workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the segment's domestic operations in (ii) the general liability product line for primary and excess coverages for multiple accident years, including a $60 million increase to environmental reserves for accident years 2009 and prior and (iii) the commercial automobile product line for recent accident years, as well as (iv) higher than expected loss experience in the segment's international operations. Net favorable prior year reserve development in the second quarter of 2018 totaled $84 million, primarily driven by better than expected loss experience in the segment's domestic operations in the workers’ compensation product line for multiple accident years, partially offset by higher than expected loss experience in the segment's domestic operations in the general liability product line, including a $55 million increase to environmental reserves, for accident years 2008 and prior.

Net favorable prior year reserve development in the first six months of 2019 totaled $50 million, primarily driven by better than expected loss experience in the segment's domestic operations in (i) the workers’ compensation product line for multiple accident years and (ii) the commercial property product line for recent accident years, partially offset by higher than expected loss experience in the segment's domestic operations in (iii) the general liability product line for primary and excess coverages for multiple accident years, including the impact of (a) the enactment of legislation by a number of states, which extended the statute of limitations for childhood sexual molestation claims and (b) a $60 million increase to environmental reserves, both of which impacted accident years 2009 and prior, (iv) the commercial automobile product line for recent accident years and (v) the commercial multi-peril product line for recent accident years. Net favorable prior year reserve development in the first six months of 2018 totaled $150 million, primarily driven by better than expected loss experience in the segment's domestic operations in (i) the workers' compensation product line for multiple accident years and (ii) the commercial property product line for recent accident years, partially offset by higher than expected loss experience in the segment's domestic operations in (iii) the general liability product line, including a $55 million increase to environmental reserves, for accident years 2008 and prior and (iv) the commercial automobile product line for recent accident years.

Bond & Specialty Insurance. Net favorable prior year reserve development in the second quarter and first six months of 2019 totaled $39 million and $42 million, respectively, and net favorable prior year reserve development in the second quarter and first six months of 2018 totaled $89 million and $124 million, respectively. Net favorable prior year reserve development in all periods was primarily driven by better than expected loss experience in the segment's domestic operations in the general liability product line for multiple accident years.

Personal Insurance. Net favorable prior year reserve development in each of the second quarters of 2019 and 2018 totaled $13 million. Net favorable prior year reserve development in the first six months of 2019 totaled $82 million, primarily driven by better than expected loss experience in the segment's domestic operations in both the automobile and homeowners and other product lines for recent accident years. Net favorable prior year reserve development in the first six months of 2018 totaled $62 million, primarily driven by better than expected loss experience in the segment's domestic operations in the automobile product line for recent accident years.