Property and Casualty Insurance Products

Roll-forward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the years ended December 31,
	2017			2016		2015
Beginning liabilities for unpaid losses and loss adjustment expenses, gross [1]	$	22,545		$	22,568	$	22,579
Reinsurance and other recoverables [1]	3,488			3,625		3,814
Beginning liabilities for unpaid losses and loss adjustment expenses, net	19,057			18,943		18,765
Add: Maxum acquisition	—			122		—
Provision for unpaid losses and loss adjustment expenses
Current accident year	7,381			6,990		6,647
Prior accident year development	(41		)	457		250
Total provision for unpaid losses and loss adjustment expenses	7,340			7,447		6,897
Less: payments
Current accident year	2,751			2,749		2,653
Prior accident years	3,828			4,219		4,066
Total payments	6,579			6,968		6,719
Less: net reserves transferred to liabilities held for sale	—			487		—
Ending liabilities for unpaid losses and loss adjustment expenses, net	19,818			19,057		18,943
Reinsurance and other recoverables [1]	3,957			3,488		3,625
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	23,775		$	22,545	$	22,568


[1]	Reflects the addition of $688, $712 and $743 into Property & Casualty Commercial Lines of gross reserves and reinsurance recoverables for 2017, 2016 and 2015, respectively, for structured settlements reserves and recoverables due from the Company's life and annuity run-off business now classified as held for sale. These amounts were previously eliminated in consolidation.

Property and Casualty Insurance Products Reserves, Net of Reinsurance, that are Discounted



	For the years ended December 31,
	2017						2016						2015
Liability for unpaid losses and loss adjustment expenses, at undiscounted amounts	$	1,387					$	1,504					$	1,607
Less: amount of discount	410						483						523
Carrying value of liability for unpaid losses and loss adjustment expenses	$	977					$	1,021					$	1,084
Discount accretion included in losses and loss adjustment expenses	$	30					$	29					$	38
Weighted average discount rate	3.06					%	3.11					%	3.24					%
Range of discount rates	1.77		%	-	14.15	%	1.77		%	-	14.15	%	1.77		%	-	14.15	%

The current accident year benefit from discounting property and casualty insurance product reserves was $15 in 2017, $27 in 2016 and $35 in 2015. The reduction in the discount benefit in 2017 as compared to 2016 and in 2016 as compared to 2015 reflects lower claim volume and a shorter than expected payment pattern. Reserves are discounted at rates in effect at the time claims were incurred, ranging from 1.77% for accident year 2012 to 14.15% for accident year 1981.

The reserves recorded for the Company’s property and casualty insurance products at December 31, 2017 represent the Company’s best estimate of its ultimate liability for losses and loss adjustment expenses related to losses covered by policies written by the Company. However, because of the significant uncertainties surrounding reserves it is possible that management’s estimate of the ultimate liabilities for these claims may change and that the required adjustment to recorded reserves could exceed the currently recorded reserves by an amount that could be material to the Company’s results of operations or cash flows.

Losses and loss adjustment expenses are also impacted by trends including frequency and severity as well as changes in the legislative and regulatory environment. In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty in the ultimate settlement of the liabilities gross of reinsurance include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and inconsistent emerging legal doctrines. In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty in gross reserves include expanding theories of liabilities and damages, the risks inherent in major litigation, inconsistent decisions concerning the existence and scope of coverage for environmental claims, and uncertainty as to the monetary amount being sought by the claimant from the insured.

(Favorable) Unfavorable Prior Accident Year Development



	For the years ended December 31,
	2017			2016			2015
Workers’ compensation	$	(79	)	$	(119	)	$	(37	)
Workers’ compensation discount accretion	28			28			29
General liability	11			65			8
Package business	(25		)	65			28
Commercial property	(8		)	1			(6		)
Professional liability	1			(37		)	(36		)
Bond	32			(8		)	(2		)
Automobile liability - Commercial Lines	17			57			62
Automobile liability - Personal Lines	—			160			(8		)
Homeowners	(14		)	(10		)	9
Net asbestos reserves	—			197			146
Net environmental reserves	—			71			55
Catastrophes	(16		)	(7		)	(18		)
Uncollectible reinsurance	(15		)	(30		)	—
Other reserve re-estimates, net	27			24			20
Total prior accident year development	$	(41	)	$	457		$	250

2017 re-estimates of prior accident year reserves


•	Workers’ compensation reserves were reduced in Small Commercial and Middle Market, given the continued emergence of favorable frequency, primarily for accident years 2013 to 2015, as well as a reduction in estimated reserves for unallocated loss adjustment expenses ("ULAE"), partially offset by strengthening reserves for captive programs within Specialty Commercial.


•	General liability reserves were increased for the 2013 to 2016 accident years on a class of business that insures service and maintenance contractors. This increase was partially offset by a decrease in recent accident year reserves for other Middle Market general liability reserves.


•	Package business reserves were reduced for accident years 2013 and prior largely due to reducing the Company’s estimate of allocated loss adjustment expenses incurred to settle the claims.


•	Bond business reserves increased for customs bonds written between 2000 and 2010 which was partly offset by a reduction in reserves for recent accident years as reported losses for commercial and contract surety have emerged favorably.


•	Automobile liability reserves within Commercial Lines were increased in Small Commercial and large national accounts for the 2013 to 2016 accident years, driven by higher frequency of more severe accidents, including litigated claims.


•	Asbestos and environmental reserves were unchanged as $285 of adverse development arising from the fourth quarter 2017 comprehensive annual review was offset by a $285 recoverable from NICO. For additional information related to the adverse development cover with NICO, see Note 8 - Reinsurance and Note 14 - Commitments and Contingencies of Notes to Consolidated Financial Statements.


•	Catastrophes reserves were reduced primarily due to lower estimates of 2016 wind and hail event losses and a decrease in losses on a 2015 wildfire.


•	Uncollectible reinsurance reserves decreased as a result of giving greater weight to favorable collectibility experience in recent calendar periods in estimating future collections.

2016 re-estimates of prior accident year reserves

•

Workers' compensation reserves consider favorable emergence on reported losses for recent accident years as well as a partially offsetting adverse impact related to two recent Florida Supreme Court rulings that have increased the Company’s exposure to workers’ compensation claims in that state. The favorable emergence has been driven by lower frequency and, to a lesser extent, lower medical severity and management has placed additional weight on this favorable experience as it becomes more credible.


•	General liability reserves increased for accident years 2012 - 2015 primarily due to higher severity losses incurred on a class of business that insures service and maintenance contractors and increased reserves in general liability for accident years 2008 and 2010 primarily due to indemnity losses and legal costs associated with a litigated claim.


•	Package business reserves increased due to higher than expected severity on liability claims, principally for accident years 2013 - 2015. Severity for these accident years has developed unfavorably and management has placed more weight on emerged experience.


•	Professional liability reserves decreased for claims made years 2008 - 2013, primarily for large accounts, including on non-securities class action cases. Claim costs have emerged favorably as these years have matured and management has placed more weight on the emerged experience.

•

Automobile liability reserves increased due to increases in both commercial lines automobile and personal lines automobile. Commercial automobile liability reserves increased, predominately for the 2015 accident year, primarily due to increased frequency of large claims. Personal automobile liability reserves increased, primarily related to increased bodily injury frequency and severity for the 2015 accident year, including for uninsured and under-insured motorist claims, and increased bodily injury severity for the 2014 accident year. Increases in automobile liability loss costs were across both the direct and agency distribution channels.


•	Asbestos and environmental reserves were increased during the period as a result of the second quarter 2016 comprehensive annual review.


•	Uncollectible reinsurance reserves decreased as a result of giving greater weight to favorable collectibility experience in recent calendar periods in estimating future collections.

2015 re-estimates of prior accident year reserves


•	Workers' compensation reserves decreased due to an improvement in claim closure rates resulting in a decrease in outstanding claims for permanently disabled claimants. In addition, accident years 2013 and 2014 continue to exhibit favorable frequency and medical severity trends; management has been placing additional weight on this favorable experience as it becomes more credible.


•	Package business reserves increased due to higher than expected severity on liability claims, impacting recent accident years.


•	Professional liability reserves decreased for claims made years 2009 through 2012 primarily for large accounts. Claim costs have emerged favorably as these years have matured and management has placed more weight on the emerged experience.


•	Automobile liability reserves within Commercial Lines were increased due to increased severity of large claims predominantly for accident years 2010 to 2013.


•	Asbestos and environmental reserves were increased during the period as a result of the 2015 comprehensive annual review.


•	Catastrophe reserves decreased primarily for accident year 2014 as fourth quarter 2014 catastrophes have developed favorably.

•

Other reserve re-estimates, net, decreased due to decreased contract surety reserves across several accident years and decreased commercial surety reserves for accident years 2012 through 2014 as a result of lower emerged losses. These reserve decreases were offset by an increase in commercial surety reserves related to accident years 2007 and prior, as the number of new claims reported has outpaced expectations.

Reconciliation of Loss Development to Liability for Unpaid Losses and Loss Adjustment Expenses As of December 31, 2017



	Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance												Subtotal
Reserve Line	Cumulative Incurred for Accident Years Displayed in Triangles		Cumulative Paid for Accident Years Displayed in Triangles			Unpaid for Accident Years not Displayed in Triangles [1]		Unpaid Unallocated Loss Adjustment Expenses, Net of Reinsurance		Discount			Unpaid Losses and Loss Adjustment Expenses, Net of Reinsurance		Reinsurance and Other Recoverables			Liability for Unpaid Losses and Loss Adjustment Expenses
Workers' compensation	$	18,351	$	(10,945	)	$	2,242	$	346	$	(394	)	$	9,600	$	2,166		$	11,766
General liability	3,473		(1,894		)	500		88		—			2,167		239			2,406
Package business	6,553		(5,198		)	46		99		—			1,500		45			1,545
Commercial property	3,263		(2,898		)	15		10		—			390		53			443
Commercial automobile liability	3,446		(2,559		)	17		23		—			927		41			968
Commercial automobile physical damage	238		(227		)	2		—		—			13		—			13
Professional liability	1,647		(1,146		)	43		17		—			561		282			843
Bond	598		(333		)	4		17		—			286		15			301
Personal automobile liability	12,363		(10,749		)	19		74		—			1,707		21			1,728
Personal automobile physical damage	1,884		(1,856		)	1		3		—			32		—			32
Homeowners	7,588		(7,161		)	4		40		—			471		50			521
Other ongoing business						204		—		(16		)	188		308			496
Asbestos and environmental [2]						1,452		—		—			1,452		765			2,217
Other operations [2]						402		122		—			524		(28		)	496
Total P&C	$	59,404	$	(44,966	)	$	4,951	$	839	$	(410	)	$	19,818	$	3,957		$	23,775


[1]	Amounts represent reserves for claims that were incurred more than ten years ago for long-tail lines and more than three years ago for short-tail lines.

[2]

Asbestos and environmental and other operations include asbestos, environmental and other latent exposures not foreseen when coverages were written, including, but not limited to, potential liability for pharmaceutical products, silica, talcum powder, head injuries, lead paint, construction defects, molestation and other long-tail liabilities. These reserve lines do not have significant paid or incurred loss development for the most recent ten accident years and therefore do not have loss development displayed in triangles.

The reserve lines in the above table and the loss triangles that follow represent the significant lines of business for which the Company regularly reviews the appropriateness of reserve levels. These reserve lines differ from the reserve lines reported on a statutory basis, as prescribed by the National Association of Insurance Commissioners ("NAIC").

The following loss triangles present historical loss development for incurred and paid claims by accident year. Triangles are limited to the number of years for which claims incurred typically remain outstanding, not exceeding ten years. Short-tail lines, which represent claims generally expected to be paid within a few years, have three years of claim development displayed. IBNR reserves shown in loss triangles include reserve for incurred but not reported claims as well as reserves for expected development on reported claims.

Workers' Compensation



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	1,456	$	1,444	$	1,456	$	1,470	$	1,473	$	1,477	$	1,477	$	1,492	$	1,493	$	1,493	$	123	141,627
2009			1,462		1,455		1,478		1,493		1,504		1,504		1,519		1,529		1,522		166		135,731
2010					1,560		1,775		1,814		1,858		1,857		1,882		1,881		1,878		242		156,515
2011							2,013		2,099		2,204		2,206		2,221		2,224		2,232		361		177,652
2012									2,185		2,207		2,207		2,181		2,168		2,169		443		171,021
2013											2,020		1,981		1,920		1,883		1,861		510		150,884
2014													1,869		1,838		1,789		1,761		638		125,487
2015															1,873		1,835		1,801		806		112,970
2016																	1,772		1,772		944		110,072
2017																			1,862		1,349		102,626
Total																			$	18,351



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	264	$	581	$	781	$	917	$	1,015	$	1,089	$	1,146	$	1,190	$	1,216	$	1,242
2009			265		587		792		937		1,042		1,115		1,170		1,208		1,242
2010					316		709		970		1,154		1,287		1,374		1,439		1,489
2011							371		841		1,156		1,368		1,518		1,622		1,690
2012									359		809		1,106		1,313		1,436		1,529
2013											304		675		917		1,071		1,175
2014													275		598		811		960
2015															261		576		778
2016																	255		579
2017																			261
Total																			$	10,945

General Liability



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	501	$	457	$	468	$	454	$	451	$	416	$	398	$	401	$	398	$	394	$	40	21,374
2009			382		398		394		382		359		348		347		346		341		33		20,530
2010					355		362		352		355		343		345		376		377		33		18,729
2011							353		343		323		316		315		320		318		49		16,637
2012									321		315		310		295		304		298		66		11,614
2013											318		321		332		352		344		88		9,715
2014													317		318		336		342		128		10,048
2015															316		346		345		194		10,326
2016																	352		351		262		11,028
2017																			363		302		8,823
Total																			$	3,473



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	31	$	69	$	141	$	216	$	270	$	300	$	318	$	330	$	337	$	343
2009			22		63		124		181		227		256		277		287		297
2010					14		51		115		181		224		259		314		331
2011							11		47		93		154		198		234		252
2012									8		39		75		124		167		198
2013											7		35		95		152		207
2014													11		31		88		142
2015															7		32		80
2016																	8		32
2017																			12
Total																			$	1,894

Package Business



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	667	$	703	$	709	$	677	$	675	$	674	$	676	$	673	$	675	$	674	$	16	58,109
2009			587		584		584		572		578		577		576		576		574		20		50,351
2010					657		662		654		652		652		651		653		651		24		52,345
2011							810		792		790		800		808		814		813		37		60,892
2012									736		725		728		731		736		735		38		59,621
2013											579		565		573		585		586		50		43,284
2014													566		578		601		602		86		42,718
2015															582		588		585		137		41,202
2016																	655		638		228		42,042
2017																			695		348		39,524
Total																			$	6,553



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	278	$	451	$	510	$	562	$	595	$	620	$	633	$	643	$	649	$	652
2009			227		351		411		463		503		527		539		547		550
2010					270		414		487		539		570		601		613		618
2011							377		555		621		684		727		748		762
2012									286		486		560		616		652		673
2013											225		339		414		467		504
2014													226		345		416		468
2015															212		332		383
2016																	225		353
2017																			235
Total																			$	5,198

Commercial Property



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	478	$	465	$	465	$	464	$	467	$	464	$	464	$	463	$	464	$	464	$	—	31,995
2009			267		264		259		258		251		257		257		257		257		—		28,286
2010					286		283		279		282		284		284		284		284		—		28,515
2011							357		356		356		362		361		360		359		—		29,103
2012									329		301		301		305		306		305		1		25,785
2013											234		218		219		220		216		—		20,287
2014													268		260		262		264		—		19,742
2015															264		264		268		3		19,031
2016																	328		331		6		19,868
2017																			515		81		18,883
Total																			$	3,263



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	280	$	422	$	449	$	459	$	464	$	464	$	464	$	465	$	466	$	465
2009			179		247		252		256		256		257		257		257		257
2010					198		266		276		281		283		284		284		284
2011							231		332		350		355		358		359		360
2012									171		279		294		300		304		303
2013											157		208		216		218		215
2014													168		243		258		264
2015															172		239		255
2016																	188		285
2017																			210
Total																			$	2,898

Commercial Automobile Liability



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	303	$	311	$	304	$	303	$	304	$	304	$	302	$	307	$	306	$	306	$	4	43,885
2009			306		292		287		287		297		301		302		302		302		1		38,688
2010					277		280		296		319		323		328		327		324		7		38,112
2011							272		310		356		356		366		365		362		7		39,262
2012									311		376		390		401		394		390		14		35,970
2013											309		314		329		336		335		24		31,881
2014													306		314		328		333		48		29,171
2015															302		353		368		99		27,928
2016																	372		380		155		27,771
2017																			346		243		22,665
Total																			$	3,446



Cumulative Paid Losses & Allocated Loss Adjustment Expense, Net of Reinsurance
	For the years ended December 31
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	61	$	124	$	185	$	238	$	270	$	289	$	295	$	299	$	300	$	302
2009			56		115		175		237		274		291		298		300		301
2010					55		125		188		252		289		300		308		313
2011							62		133		211		273		315		339		348
2012									65		142		233		306		345		358
2013											61		128		199		255		289
2014													58		129		195		249
2015															61		141		204
2016																	62		140
2017																			55
Total																			$	2,559

Commercial Automobile Physical Damage



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2015		2016		2017		IBNR Reserves		Claims Reported
2015	$	74	$	75	$	75	$	—	26,812
2016			79		78		—		26,320
2017					85		4		22,965
Total					$	238



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2015		2016		2017
2015	$	69	$	75	$	75
2016			71		78
2017					74
Total					$	227

Professional Liability



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Claims Made Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	281	$	253	$	244	$	274	$	280	$	276	$	276	$	282	$	277	$	284	$	16	4,959
2009			254		251		244		266		257		263		255		257		257		19		5,114
2010					202		211		212		205		201		200		195		199		31		4,890
2011							226		228		232		226		219		219		220		44		4,707
2012									174		172		168		149		146		144		33		3,729
2013											136		136		123		110		103		35		2,782
2014													116		123		118		114		44		2,878
2015															104		113		113		51		2,943
2016																	106		106		66		3,090
2017																			107		82		2,733
Total																			$	1,647



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Claims Made Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	13	$	61	$	126	$	166	$	202	$	221	$	230	$	260	$	264	$	266
2009			17		69		127		177		194		226		225		226		235
2010					22		62		103		137		148		157		162		166
2011							11		57		100		128		163		170		173
2012									11		41		60		89		97		107
2013											4		19		31		39		55
2014													4		21		40		64
2015															4		23		49
2016																	4		25
2017																			6
Total																			$	1,146

Bond



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	75	$	67	$	62	$	52	$	47	$	47	$	44	$	47	$	48	$	46	$	7	3,450
2009			71		71		69		58		57		51		49		49		49		4		3,309
2010					71		75		80		79		73		69		70		90		24		2,670
2011							72		76		76		75		70		70		69		10		2,126
2012									69		69		60		53		48		48		16		1,719
2013											63		58		54		48		48		29		1,452
2014													69		65		65		66		20		1,362
2015															65		65		62		29		1,347
2016																	59		59		45		1,227
2017																			61		53		1,018
Total																			$	598



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	5	$	18	$	23	$	30	$	32	$	34	$	39	$	39	$	39	$	39
2009			9		32		45		46		44		43		44		44		44
2010					13		46		59		58		59		63		66		66
2011							12		39		51		56		57		59		59
2012									12		25		26		24		25		25
2013											3		9		17		18		18
2014													18		31		40		43
2015															9		19		23
2016																	2		11
2017																			5
Total																			$	333

Personal Automobile Liability



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	1,253	$	1,249	$	1,227	$	1,207	$	1,197	$	1,196	$	1,192	$	1,191	$	1,188	$	1,188	$	3	248,990
2009			1,351		1,305		1,280		1,255		1,256		1,260		1,259		1,257		1,257		3		254,551
2010					1,346		1,321		1,293		1,287		1,282		1,275		1,265		1,265		3		248,944
2011							1,181		1,170		1,180		1,173		1,166		1,154		1,154		7		221,879
2012									1,141		1,149		1,146		1,142		1,133		1,130		8		210,740
2013											1,131		1,145		1,144		1,153		1,152		14		205,428
2014													1,146		1,153		1,198		1,200		34		208,817
2015															1,195		1,340		1,338		92		216,189
2016																	1,407		1,402		235		213,563
2017																			1,277		554		175,871
Total																			$	12,363



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	469	$	861	$	1,031	$	1,121	$	1,160	$	1,175	$	1,181	$	1,183	$	1,184	$	1,184
2009			492		888		1,083		1,171		1,223		1,240		1,246		1,250		1,251
2010					496		915		1,108		1,202		1,239		1,251		1,256		1,258
2011							447		826		1,006		1,088		1,126		1,140		1,145
2012									441		818		986		1,067		1,104		1,114
2013											442		816		1,002		1,091		1,121
2014													430		843		1,032		1,125
2015															475		935		1,142
2016																	505		968
2017																			441
Total																			$	10,749

Personal Automobile Physical Damage



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2015		2016		2017		IBNR Reserves			Claims Reported
2015	$	629	$	632	$	630	$	—		395,923
2016			665		656		2			406,162
2017					598		(8		)	343,178
Total					$	1,884



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2015		2016		2017
2015	$	610	$	630	$	629
2016			634		653
2017					574
Total					$	1,856

Homeowners



Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017		IBNR Reserves		Claims Reported
2008	$	742	$	768	$	777	$	778	$	779	$	779	$	779	$	779	$	780	$	779	$	—	165,108
2009			757		777		776		772		772		772		772		769		768		—		149,790
2010					838		850		838		840		840		840		836		834		—		161,581
2011							955		920		919		916		914		911		908		1		179,377
2012									774		741		741		741		739		738		2		142,804
2013											673		638		637		634		632		4		113,469
2014													710		707		702		700		5		121,809
2015															690		703		690		9		119,722
2016																	669		673		20		118,748
2017																			866		96		115,488
Total																			$	7,588



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Accident Year	2008		2009		2010		2011		2012		2013		2014		2015		2016		2017
2008	$	548	$	721	$	750	$	764	$	773	$	775	$	777	$	777	$	778	$	778
2009			559		727		749		759		763		765		766		766		767
2010					599		789		815		825		829		832		833		833
2011							709		871		891		899		903		905		908
2012									547		696		719		727		731		734
2013											467		590		611		622		626
2014													526		663		684		691
2015															487		645		665
2016																	481		621
2017																			538
Total																			$	7,161

Property and casualty reserves, including IBNR reserves

The Company estimates ultimate losses and allocated loss adjustment expenses by accident year. IBNR represents the excess of estimated ultimate loss reserves over case reserves. The process to estimate ultimate losses and loss adjustment expenses is an integral part of the Company's reserve setting. Reserves for allocated and unallocated loss adjustment expenses are generally established separate from the reserves for losses.

Reserves for losses are set by line of business within the reporting segments. Case reserves are established by a claims handler on each individual claim and are adjusted as new information becomes known during the course of handling the claim. Lines of business for which reported losses emerge over a long period of time are referred to as long-tail lines of business. Lines of business for which reported losses emerge more quickly are referred to as short-tail lines of business. The Company’s shortest tail lines of business are homeowners, commercial property and automobile physical damage. The longest tail lines of business include workers’ compensation, general liability and professional liability. For short-tail lines of business, emergence of paid loss and case reserves is credible and likely indicative of ultimate losses. For long-tail lines of business, emergence of paid losses and case reserves is less credible in the early periods after a given accident year and, accordingly, may not be indicative of ultimate losses.

The Company’s reserving actuaries regularly review reserves for both current and prior accident years using the most current claim data. A variety of actuarial methods and judgments are used for most lines of business to arrive at selections of estimated ultimate losses and loss adjustment expenses. While actuarial methods used and judgments change depending on the age of the accident year, in 2017, there were no new methods or types of judgments introduced or changes in how those methods and judgments were applied. The reserve selections incorporate input, as appropriate, from claims personnel, pricing actuaries and operating management about reported loss cost trends and other factors that could affect the reserve estimates.

For both short-tail and long-tail lines of business, an expected loss ratio is used to record initial reserves. This expected loss ratio is determined by starting with the average loss ratio of recent prior accident years and adjusting that ratio for the effect of expected changes to earned pricing, loss frequency and severity, mix of business, ceded reinsurance and other factors. For short-tail lines, IBNR for the current accident year is initially recorded as the product of the expected loss ratio for the period, earned premium for the period and the proportion of losses expected to be reported in future calendar periods for the current accident period. For long-tailed lines, IBNR reserves for the current accident year are initially recorded as the product of the expected loss ratio for the period and the earned premium for the period, less reported losses for the period. For certain short-tailed lines of business, IBNR amounts in the above loss development triangles are negative due to anticipated salvage and subrogation recoveries on paid losses.

As losses for a given accident year emerge or develop in subsequent periods, reserving actuaries use other methods to estimate ultimate unpaid losses in addition to the expected loss ratio method. These primarily include paid and reported loss development methods, frequency / severity techniques and the Bornhuetter-Ferguson method (a combination of the expected loss ratio and paid development or reported development method). Within any one line of business, the methods that are given more weight vary based primarily on the maturity of the accident year, the mix of business and the particular internal and external influences impacting the claims experience or the methods. The output of the reserve reviews are reserve estimates that are referred to as the “actuarial indication”.

Paid development and reported development techniques are used for most lines of business though more weight is given to the reported development method for some of the long-tailed lines like general liability. In addition, for long-tailed lines of business, the Company relies on the expected loss ratio method for immature accident years. Frequency/severity techniques are used predominantly for professional liability and are also used for automobile liability. For most lines, reserves for allocated loss adjustment expenses ("ALAE", or those expenses related to specific claims) are analyzed using paid development techniques and an analysis of the relationship between ALAE and loss payments. Reserves for ULAE are determined using the expected cost per claim year and the anticipated claim closure pattern as well as the ratio of paid ULAE to paid losses.

In the final step of the reserve review process, senior reserving actuaries and senior management apply their judgment to determine the appropriate level of reserves considering the actuarial indications and other factors not contemplated in the actuarial indications. Those factors include, but are not limited to, the assessed reliability of key loss trends and assumptions used in the current actuarial indications, pertinent trends observed over the recent past, the level of volatility within a particular line of business, and the improvement or deterioration of actuarial indications.

Cumulative number of reported claims

For property and casualty, claim counts represent the number of claim features on a reported claim where a claim feature is each separate coverage for each claimant affected by the claim event. For example, one car accident that results in two bodily injury claims and one automobile damage liability claim would be counted as three claims within the personal automobile liability triangle. Similarly, a fire that impacts one commercial building may result in multiple claim features due to the potential for claims related to business interruption, structural damage, and loss of the physical contents of the building. Claim features that result in no paid losses are included in the reported claim counts.



Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	(Unaudited)
Reserve Line	1st Year		2nd Year		3rd Year		4th Year		5th Year		6th Year		7th Year		8th Year		9th Year		10th Year
Workers' compensation	16.0	%	19.9	%	13.1	%	9.2	%	6.4	%	4.7	%	3.5	%	2.7	%	2.0	%	1.7	%
General liability	3.7	%	9.0	%	16.0	%	17.4	%	13.8	%	9.4	%	7.7	%	3.6	%	2.2	%	1.6	%
Package business	38.9	%	22.0	%	10.3	%	8.3	%	5.5	%	3.6	%	1.9	%	1.2	%	0.7	%	0.4	%
Commercial property	61.8	%	27.8	%	4.6	%	1.6	%	0.5	%	0.1	%	0.1	%	0.1	%	—	%	—	%
Commercial automobile liability	17.4	%	20.5	%	20.3	%	18.1	%	11.0	%	5.0	%	2.3	%	1.1	%	0.4	%	0.5	%
Commercial automobile physical damage	90.1	%	8.2	%	(0.3	)%
Professional liability	5.5	%	18.5	%	18.7	%	16.2	%	10.3	%	6.8	%	1.6	%	4.3	%	2.4	%	0.4	%
Bond	14.6	%	26.8	%	13.6	%	3.7	%	0.9	%	2.0	%	3.8	%	—	%	(0.1	)%	0.6	%
Personal automobile liability	37.6	%	33.1	%	15.4	%	7.4	%	3.2	%	1.1	%	0.4	%	0.3	%	0.1	%	—	%
Personal automobile physical damage	96.5	%	3.1	%	(0.2	)%
Homeowners	72.1	%	20.8	%	3.1	%	1.3	%	0.6	%	0.3	%	0.1	%	0.1	%	0.1	%	—	%

Group Life, Disability and Accident Products

Roll-forward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the years ended December 31,
	2017			2016			2015
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	5,772		$	5,889		$	6,013
Reinsurance recoverables	208			218			209
Beginning liabilities for unpaid losses and loss adjustment expenses, net	5,564			5,671			5,804
Add: Aetna U.S. group life and disability business acquisition [3]	2,833			—			—
Provision for unpaid losses and loss adjustment expenses
Current incurral year	2,868			2,562			2,447
Prior year's discount accretion	202			202			214
Prior incurral year development [1]	(185		)	(162		)	(146		)
Total provision for unpaid losses and loss adjustment expenses [2]	2,885			2,602			2,515
Less: payments
Current incurral year	1,528			1,327			1,257
Prior incurral years	1,451			1,382			1,391
Total payments	2,979			2,709			2,648
Ending liabilities for unpaid losses and loss adjustment expenses, net	8,303			5,564			5,671
Reinsurance recoverables	209			208			218
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,512		$	5,772		$	5,889


[1]	Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.


[2]	Includes unallocated loss adjustment expenses of $111, $100 and $96 for the years ended December 31, 2017, 2016 and 2015, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.


[3]	Represents Aetna U.S. group life and disability business reserves, net as of the acquisition date, subject to final purchase accounting.

Group Life, Disability and Accident Products Reserves, Net of Reinsurance, that are Discounted



	For the years ended December 31,
	2017						2016						2015
Liability for unpaid losses and loss adjustment expenses, at undiscounted amounts	$	9,071					$	6,382					$	6,565
Less: amount of discount	1,536						1,303						1,382
Carrying value of liability for unpaid losses and loss adjustment expenses	$	7,535					$	5,079					$	5,183
Weighted average discount rate	3.5					%	4.3					%	4.4					%
Range of discount rate	2.1		%	-	8.0	%	3.0		%	-	8.0	%	3.0		%	-	8.0	%

Reserves are discounted at rates in effect at the time claims were incurred, ranging from 2.1% for life and disability reserves acquired from Aetna based on interest rates in effect at the acquisition date of November 1, 2017, to 8.0% for the Company’s pre-acquisition reserves for incurral year 1990, and vary by product. Prior year's discount accretion has been calculated as the average reserve balance for the year times the weighted average discount rate. The decrease in the weighted average discount rate for 2017 was primarily due to the fact that reserves for the Aetna U.S. group life and disability business are discounted at market rates in effect as of the acquisition date.

Re-estimates of prior incurral years reserves in 2017 was driven by the following:


•	Group Disability- Prior period estimates decreased by approximately $125 driven by group long-term disability favorable claim incidence for incurral year 2016 and claim recoveries higher than prior reserve assumptions.


•	Group Life and Accident (including Group Life Premium Waiver)- Contributing to an approximately $60 decrease in prior period reserve estimates was favorable claim incidence on group life premium waiver for incurral year 2016.

Re-estimates of prior incurral years reserves in 2016 was driven by the following:


•	Group Disability- Prior period estimates decreased by approximately $90 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions, particularly in the older incurral years. This favorability was partially offset by lower Social Security Disability approvals driven by lower approval rates and backlogs in the Social Security Administration.


•	Group Life and Accident (including Group Life Premium Waiver)- Contributing to an approximately $75 decrease in prior period reserve estimates was favorable claim incidence on group life premium waiver for incurral year 2015.

Re-estimates of prior incurral years reserves in 2015 was driven by the following:


•	Group Disability- Prior period estimates decreased by approximately $90 largely driven by updated assumptions related to the probability and timing of long-term disability claim recoveries, which were updated to reflect recent favorable trends. This favorability was partially offset by lower approval rates and backlogs in the Social Security Administration.


•	Group Life and Accident (including Group Life Premium Waiver- Prior period estimates decreased by approximately $50 largely driven by favorable claim incidence and recovery experience on group life premium waiver.

Reconciliation of Loss Development to Liability for Unpaid Losses and Loss Adjustment Expenses as of December 31, 2017



	Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance												Subtotal
Reserve Line	Cumulative Incurred for Incurral Years Displayed in Triangles		Cumulative Paid for Incurral Years Displayed in Triangles			Unpaid for Incurral Years not Displayed in Triangles		Unpaid Unallocated Loss Adjustment Expenses, Net of Reinsurance		Discount			Unpaid Losses and Loss Adjustment Expenses, Net of Reinsurance		Reinsurance and Other Recoverables		Liability for Unpaid Losses and Loss Adjustment Expenses
Group long-term disability	$	10,511	$	(5,138	)	$	2,651	$	166	$	(1,383	)	$	6,807	$	207	$	7,014
Group life and accident, excluding premium waiver	5,839		(5,350		)	138		3		(21		)	609		1		610
Group short-term disability						99		5		—			104		—		104
Group life premium waiver						869		7		(132		)	744		1		745
Group supplemental health						39		—		—			39		—		39
Total Group Benefits	$	16,350	$	(10,488	)	$	3,796	$	181	$	(1,536	)	$	8,303	$	209	$	8,512

The following loss triangles present historical loss development for incurred and paid claims by the year the insured claim occurred, referred to as the incurral year. Triangles are limited to the number of years for which claims incurred typically remain outstanding. For group long-term disability, the Company has provided seven incurral years of claims data as data for earlier periods was not available with respect to the U.S. group life and disability business acquired from Aetna. Short-tail lines, which represent claims generally expected to be paid within a few years, have three years of claim development displayed.

Group Long-Term Disability



Undiscounted Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Incurral Year	2011	2012	2013	2014	2015	2016	2017		IBNR Reserves	Claims Reported
2011	1,917	1,761	1,660	1,659	1,669	1,660	1,649		1	39,149
2012		1,829	1,605	1,539	1,532	1,530	1,515		—	37,438
2013			1,660	1,479	1,429	1,429	1,416		2	31,752
2014				1,636	1,473	1,430	1,431		2	32,936
2015					1,595	1,442	1,422		15	33,349
2016						1,651	1,481		38	33,413
2017							1,597		687	23,158
Total							$	10,511



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Incurral Year	2011	2012	2013	2014	2015	2016	2017
2011	118	508	743	886	996	1,087	1,167
2012		108	483	708	835	933	1,014
2013			102	443	664	791	881
2014				103	448	675	801
2015					108	460	687
2016						112	479
2017							109
Total							$	5,138

Group Life and Accident, excluding Premium Waiver



Undiscounted Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Incurral Year	2015		2016		2017		IBNR Reserves		Claims Reported
2015	$	1,983	$	1,919	$	1,921	$	8	47,954
2016			1,974		1,919		23		44,762
2017					1,999		401		35,592
Total					$	5,839



Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
	(Unaudited)
Incurral Year	2015		2016		2017
2015	$	1,541	$	1,889	$	1,911
2016			1,529		1,888
2017					1,551
Total					$	5,350

Group life, disability and accident reserves, including IBNR

The majority of Group Benefits’ reserves are for long-term disability ("LTD") claimants who are known to be disabled and are currently receiving benefits. A Disabled Life Reserve ("DLR") is calculated for each LTD claim. The DLR for each claim is the expected present value of all estimated future benefit payments and includes estimates of claim recovery, investment yield, and offsets from other income, including offsets from Social Security benefits and workers’ compensation. Estimated future benefit payments represent the monthly income benefit that is paid until recovery, death or expiration of benefits. Claim recoveries are estimated based on claim characteristics such as age and diagnosis and represent an estimate of benefits that will terminate, generally as a result of the claimant returning to work or being deemed able to return to work. The DLR also includes a liability for payments to claimants who have not yet been approved for LTD either because they have not yet satisfied the waiting (or elimination) period or because the approval or denial decision has not yet been made. In these cases, the present value of future benefits is reduced for the likelihood of claim denial based on Company experience. For claims recently closed due to recovery, a portion of the DLR is retained for the possibility that the claim reopens upon further evidence of disability. In addition, a reserve for estimated unpaid claim expenses is included in the DLR.

For incurral years with IBNR claims, estimates of ultimate losses are made by applying completion factors to the dollar amount of claims reported or expected depending on the market segment. IBNR represents estimated ultimate losses less both DLR and cumulative paid amounts for all reported claims. Completion factors are derived using standard actuarial techniques using triangles that display historical claim count emergence by incurral month. These estimates are reviewed for reasonableness and are adjusted for current trends and other factors expected to cause a change in claim emergence. The IBNR includes an estimate of unpaid claim expenses, including a provision for the cost of initial set-up of the claim once reported.

For all products, including LTD, there is a period generally ranging from two to twelve months, depending on the product and market segment, where emerged claim information for an incurral year is not yet credible enough to be a basis for an IBNR projection. In these cases, the ultimate losses and allocated loss adjustment expenses are estimated using earned premium multiplied by an expected loss ratio.

The Company also records reserves for future death benefits under group term life policies that provide for premiums to be waived in the event the insured has a permanent and total disablement and has satisfied an elimination period, which is typically nine months ("premium waiver reserves"). The death benefit reserve for these group life premium waiver claims is estimated for a known disabled claimant equal to the present value of expected future cash outflows (typically a lump sum face amount payable at death plus claim expenses) with separate estimates for claimant recovery (when no death benefit is payable) and for death before recovery or benefit expiry (when death benefit is payable). The IBNR for premium waiver death benefits is estimated with standard actuarial development methods.

In addition, the Company also records reserves for group term life, accidental death & dismemberment, short term disability, and other group products that have short claim payout periods. For these products, reserves are determined using paid or reported actuarial development methods. The resulting claim triangles produce a completion pattern and estimate of ultimate loss. IBNR for these lines of business equals the estimated ultimate losses and loss adjustment expenses less the amount of paid or reported claims depending on whether the paid or reported development method was used. Estimates are reviewed for reasonableness and are adjusted for current trends or other factors that affect the development pattern.

Cumulative number of reported claims

For group life, disability and accident coverages, claim counts include claims that are approved, pending approval and terminated and exclude denied claims. Due to the nature of the claims, one claimant represents one event.



Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
	(Unaudited)
	1st Year		2nd Year		3rd Year		4th Year		5th Year		6th Year		7th Year
Group long-term disability	7.2	%	24.4	%	15.3	%	8.7	%	6.5	%	5.4	%	4.8	%
Group life and accident, excluding premium waiver	79.2	%	18.4	%	1.1	%