Reserve for Future Policy Benefits

6 Months Ended

Jun. 30, 2018

Property and Casualty Insurance Products

Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the six months ended June 30,
	2018			2017
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	23,775		$	22,545
Reinsurance and other recoverables	3,957			3,488
Beginning liabilities for unpaid losses and loss adjustment expenses, net	19,818			19,057
Provision for unpaid losses and loss adjustment expenses
Current accident year	3,362			3,563
Prior accident year development	(79		)	2
Total provision for unpaid losses and loss adjustment expenses	3,283			3,565
Less payments
Current accident year	934			1,009
Prior accident years	2,308			2,292
Total payments	3,242			3,301
Ending liabilities for unpaid losses and loss adjustment expenses, net	19,859			19,321
Reinsurance and other recoverables	3,772			3,508
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	23,631		$	22,829

Unfavorable (Favorable) Prior Accident Year Development



	For the six months ended June 30,
	2018			2017
Workers’ compensation	$	(73	)	$	(20	)
Workers’ compensation discount accretion	20			16
General liability	28			10
Package business	(7		)	—
Commercial property	(12		)	(6		)
Professional liability	8			—
Bond	—			(10		)
Automobile liability - Commercial Lines	(10		)	20
Automobile liability - Personal Lines	—			—
Homeowners	(13		)	—
Net asbestos reserves	—			—
Net environmental reserves	—			—
Catastrophes	(34		)	(13		)
Uncollectible reinsurance	11			—
Other reserve re-estimates, net	3			5
Total prior accident year development	$	(79	)	$	2

Re-estimates of prior accident year reserves for the six months ended June 30, 2018

Workers’ compensation reserves were reduced in small commercial and middle market, primarily for accident years 2011 to 2015, as both claim frequency and medical claim severity have emerged favorably compared to previous reserve estimates.

General liability reserves were increased, primarily due to an increase in reserves for higher hazard general liability exposures in middle market for accident years 2009 to 2017, partially offset by a decrease in reserves for other lines within middle market, including premises and operations, umbrella and products liability, principally for accident years 2015 and prior. Contributing to the increase in reserves for higher hazard general liability exposures was an increase in large losses and, in more recent accident years, an increase in claim frequency. Contributing to the reduction in reserves for other middle market lines were more favorable outcomes due to initiatives to reduce legal expenses. In addition, reserve increases for claims with lead paint exposure were offset by reserve decreases for other mass torts and extra-contractual liability claims.

Commercial property reserves were reduced, driven by an increase in estimated reinsurance recoverables on middle market property losses from the 2017 accident year.

Automobile liability reserves were reduced, primarily driven by reduced estimates of loss adjustment expenses in small commercial for recent accident years.

Homeowners reserves were reduced, primarily in accident years 2013 to 2017, driven by lower than expected severity across multiple perils.

Catastrophe reserves were reduced, primarily as a result of lower estimated net losses from 2017 catastrophes, principally related to hurricanes Harvey and Irma. Before reinsurance, estimated losses for 2017 catastrophe events decreased by $123 in the six months ended June 30, 2018, resulting in a decrease in reinsurance recoverables of $90 as the Company no longer expects to recover under the 2017 Property Aggregate reinsurance treaty as aggregate ultimate losses for 2017 catastrophe events are now projected to be less than $850.

Re-estimates of prior accident year reserves for the six months ended June 30, 2017

Workers’ compensation reserves in small commercial were reduced given the continued emergence of favorable frequency for accident years 2013 to 2015. Management has placed additional weight on this favorable experience as it becomes more credible.

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.

Bond business reserves related to recent accident years were reduced, 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.

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

Group Life, Disability and Accident Products

Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses



	For the six months ended June 30,
	2018			2017
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	8,512		$	5,772
Reinsurance recoverables	209			208
Beginning liabilities for unpaid losses and loss adjustment expenses, net	8,303			5,564
Provision for unpaid losses and loss adjustment expenses
Current incurral year	2,317			1,319
Prior year's discount accretion	120			101
Prior incurral year development [1]	(217		)	(112		)
Total provision for unpaid losses and loss adjustment expenses [2]	2,220			1,308
Less: payments
Current incurral year	974			542
Prior incurral years	1,335			833
Total payments	2,309			1,375
Ending liabilities for unpaid losses and loss adjustment expenses, net	8,214			5,497
Reinsurance recoverables	235			212
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,449		$	5,709


[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 $85, and $48 for the six months ended June 30, 2018 and 2017, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.

Re-estimates of prior incurral years reserves for the six months ended June 30, 2018

Group disability- Prior period reserve estimates decreased by approximately $150 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions and claim incidence lower than prior assumptions. Short-term disability has also experienced favorable claim recoveries.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $65 largely driven by lower-than-previously expected claim incidence inclusive of group life, group life premium waiver, and group accidental death & dismemberment.

Re-estimates of prior incurral years reserves for the six months ended June 30, 2017

Group disability- Prior period reserve estimates decreased by approximately $65 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions. This favorability was partially reduced by lower expectation of future benefit offsets, particularly lower Social Security disability income approval rates and longer decision turnaround times in the Social Security Administration.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $45 largely driven by lower than previously expected claim incidence in group life and group life premium waiver and lower than expected severity on group accidental death & dismemberment.



Changes in Reserves for Future Policy Benefits^[1]
Liability balance as of January 1, 2018	$	713
Incurred	14
Paid	(19		)
Change in unrealized investment gains and losses	(40		)
Liability balance as of June 30, 2018	$	668
Reinsurance recoverable asset, as of January 1, 2018	$	26
Incurred	9
Paid	—
Reinsurance recoverable asset, as of June 30, 2018	$	35



Liability balance as of January 1, 2017	$	322
Incurred	23
Paid	(18		)
Change in unrealized investment gains and losses	(9		)
Liability balance as of June 30, 2017	$	318
Reinsurance recoverable asset, as of January 1, 2017	$	28
Incurred	(5		)
Paid	—
Reinsurance recoverable asset, as of June 30, 2017	$	23

[1]Reserves for future policy benefits includes paid-up life insurance and whole-life policies resulting from conversion from group life policies included within the Group Benefits segment and reserves for run-off structured settlement and terminal funding agreement liabilities which are in the Corporate category.