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Reserve for Unpaid Losses and Loss Adjustment Expenses
 3 Months Ended
Mar. 31, 2024
Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract]  
Reserve for Unpaid Losses and Loss Adjustment Expenses
9. RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
|PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF REINSURANCE
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
 For the three months ended March 31,
 20242023
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
$34,044 $33,083 
Reinsurance and other recoverables6,696 6,465 
Beginning liabilities for unpaid losses and loss adjustment expenses, net
27,348 26,618 
Provision for unpaid losses and loss adjustment expenses
  
Current accident year2,461 2,270 
Prior accident year development [1]
(56)— 
Total provision for unpaid losses and loss adjustment expenses
2,405 2,270 
Change in deferred gain on retroactive reinsurance included in other liabilities [1]24 — 
Payments
  
Current accident year(349)(321)
Prior accident years(1,591)(1,646)
Total payments
(1,940)(1,967)
Foreign currency adjustment(5)8 
Ending liabilities for unpaid losses and loss adjustment expenses, net
27,832 26,929 
Reinsurance and other recoverables6,705 6,469 
Ending liabilities for unpaid losses and loss adjustment expenses, gross
$34,537 $33,398 
[1]Prior accident year development for the three months ended March 31, 2024 includes a $24 benefit for amortization of a deferred gain under retroactive reinsurance accounting related to the Navigators Adverse Development Cover ("ADC") as the Company began collection recoveries of the ceded losses from National Indemnity Company ("NICO"), a subsidiary of Berkshire Hathaway Inc, during the period. For additional information regarding the ADC reinsurance agreement, refer to "Change in Deferred Gain on Retroactive Reinsurance" discussion below.
Unfavorable (Favorable) Prior Accident Year Development
For the three months ended March 31,
20242023
Workers’ compensation$(67)$(61)
Workers’ compensation discount accretion12 11 
General liability17 12 
Marine7 1 
Package business— (5)
Commercial property(3)5 
Professional liability(5)— 
Bond— — 
Assumed reinsurance9 2 
Automobile liability - Commercial Lines— — 
Automobile liability - Personal Lines— — 
Homeowners— (1)
Net asbestos and environmental ("A&E") reserves— — 
Catastrophes— — 
Uncollectible reinsurance— 8 
Other reserve re-estimates, net (2)28 
Prior accident year development before change in deferred gain(32)— 
Change in deferred gain on retroactive reinsurance included in other liabilities [1](24)— 
Total prior accident year development$(56)$— 
[1]The $24 change in deferred gain on retroactive reinsurance for the three months ended March 31, 2024, is related to amortization of the Navigators ADC deferred gain. For additional information regarding the ADC reinsurance agreement, refer to "Change in Deferred Gain on Retroactive Reinsurance" discussion below.
Re-estimates of prior accident year reserves for the three months ended March 31, 2024
Workers’ compensation reserves were decreased within the 2016 to 2020 accident years primarily in small commercial, driven by lower than previously estimated claim severity. In addition, the 2020 accident year includes a $20 reduction of COVID-19 related reserves driven by favorable claim count emergence.
General liability reserves were increased within the 2016 to 2019 accident years driven by higher frequency of large losses on individual claims of excess and umbrella coverages within middle & large commercial and deterioration in global specialty primary construction business.
Marine reserves increased related to higher frequency of large losses on individual U.S. cargo claims for the 2023 accident year.
Professional liability reserves decreased modestly due to favorable development on directors' and officers' ("D&O") claims driven by the 2020 accident year.
Assumed reinsurance reserves were increased due to higher reserve estimates in the Latin America surety business related to the 2021 to 2023 accident years.
Other reserve re-estimates, net, were decreased due to lower severity than expected on Personal Lines automobile physical damage for accident year 2023, partially offset by unfavorable development from participation in involuntary market pools.
Re-estimates of prior accident year reserves for the three months ended March 31, 2023
Workers’ compensation reserves were decreased within the 2014 to 2019 accident years primarily in small commercial, driven by lower than previously estimated claim severity. In addition, the 2020 accident year reflects a $20 reduction of COVID-19 related reserves.
General liability reserves were increased in middle & large commercial, driven by an increase in the frequency and estimated cost to settle large individual claims for the 2016 to 2021 accident years.
Package business reserves decreased primarily due to lower than previously estimated property severity for accident year 2021. Package liability is flat overall with improvement in accident year 2020 due to favorable claim count emergence offset by reserve increases in accident years 2019 and prior related to higher severity.
Commercial property reserves were increased due to unfavorable development for accident year 2022 in middle & large commercial.
Automobile liability reserves - Personal Lines were flat as decreases due to lower estimated severity, within accident years 2019 to 2021 were offset by increases in accident year 2022 due to higher estimated severity and increasing attorney representation rates.
Uncollectible reinsurance was increased primarily in Commercial Lines related to a captive reinsurer, and to a lesser extent in P&C Other Operations related to one larger reinsurer entering liquidation proceedings.
Other reserve re-estimates, net, were increased primarily due to an increase in accident year 2022 Personal Lines automobile physical damage severity.
Change in Deferred Gain on Retroactive Reinsurance
The Company has in place an ADC reinsurance agreement that covers substantially all reserve development of Navigators Insurance Company and certain of its affiliates for 2018 and prior accident years (the “Navigators ADC”) up to an aggregate limit of $300, for which the Company had previously ceded the available limit. As of December 31, 2023, the Company had paid claims related to the Navigators ADC in excess of the $1.816 billion acquisition date reserves plus the $100 retention. During the three months ended March 31, 2024, the Company began collecting recoveries from NICO and as a result amortized $24 of the deferred gain within benefits, losses and loss adjustment expenses in the Condensed Consolidated Statements of Operations. As of March 31, 2024 and December
31, 2023, the deferred gain on the Navigators ADC was $185 and $209, respectively, and is included in other liabilities on the Condensed Consolidated Balance Sheets.
Settlement Agreement with Boy Scouts of America
On February 14, 2022, the Company executed a final settlement agreement (the “Settlement”) with the Boy Scouts of America (“BSA”), the Local Councils, and the attorneys representing a majority of the alleged victims, pursuant to which The Hartford agreed to pay $787 for sexual molestation and sexual abuse claims associated with liability policies issued by various
Hartford Writing Companies in the 1970s and early 1980s. In exchange for its payment, the Company receives a complete release of its policies issued to BSA and the Local Councils, as well as an injunction against further abuse claims involving BSA. All conditions precedent to the Settlement have been satisfied, including approval by the bankruptcy court and the district court, and on April 20, 2023, The Hartford paid the Settlement amount of $787. Certain objecting parties have appealed the district court’s ruling and that appeal is pending before the Third Circuit. If the court approvals for the BSA’s plan of reorganization are not affirmed on appeal, it is possible that adverse outcomes, if any, could have a material adverse effect on the Company’s operating results.
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
For the three months ended March 31,
20242023
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$8,274 $8,160 
Reinsurance recoverables254 245 
Beginning liabilities for unpaid losses and loss adjustment expenses, net8,020 7,915 
Provision for unpaid losses and loss adjustment expenses
Current incurral year1,376 1,325 
Prior year's discount accretion53 53 
Prior incurral year development [1](189)(133)
Total provision for unpaid losses and loss adjustment expenses [2]1,240 1,245 
Payments
Current incurral year(357)(335)
Prior incurral years(924)(889)
Total payments(1,281)(1,224)
Ending liabilities for unpaid losses and loss adjustment expenses, net7,979 7,936 
Reinsurance recoverables255 248 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$8,234 $8,184 
[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 ("ULAE") of $45 and $45 for the three months ended March 31, 2024 and 2023, 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 three months ended March 31, 2024
Group disability- Prior period reserve estimates decreased by approximately $149 largely driven by group long-term disability claim incidence lower than prior assumptions and strong recoveries on prior incurral year claims.
Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $37 largely driven by favorable mortality emergence and continued low incidence in group life premium waiver.
Supplemental accident and health- Prior period reserve estimates decreased by approximately $3 driven by lower than previously expected claim incidence.
Re-estimates of prior incurral years reserves for the three months ended March 31, 2023
Group disability- Prior period reserve estimates decreased by approximately $120 largely driven by group long-term disability claim incidence lower than prior assumptions and strong recoveries on prior incurral year claims.
Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $8 largely driven by continued low incidence in group life premium waiver.
Supplemental Accident & Health- Prior period reserve estimates decreased by approximately $5 driven by lower than previously expected claim incidence.
. RESERVE FOR FUTURE POLICY BENEFITS
Rollforward of Reserve for Future Policy Benefits
For the three months ended March 31,
20242023
Payout AnnuitiesLife ConversionsPaid-up LifePayout AnnuitiesLife ConversionsPaid-up Life
Present Value of Expected Net Premiums
Balance, beginning of the period$49 $47 
Balance, ending of the period $47 $46 
Present Value of Expected Future Policy Benefits
Beginning balance at single-A rate$137 $113 $185 $140 $112 $192 
Beginning adjustment for changes in single-A rate7 (11)(32)4 (14)(39)
Beginning balance at original discount rate130 124 217 136 126 231 
Effect of changes in cash flow assumptions— — — — — — 
Effect of actual variances from expected experience1 1 — — 2 — 
Adjusted beginning balance131 125 217 136 128 231 
Interest accrual and other2 4 2 2 4 2 
Benefit Payments(3)(8)(7)(3)(7)(6)
Ending balance at original discount rate130 121 212 135 125 227 
Ending adjustment for changes in single-A rate5 (12)(35)8 (12)(35)
Ending balance at single-A rate$135 $109 $177 $143 $113 $192 
Net reserve for future policy benefits$135 $62 $177 $143 $67 $192 
Weighted-average duration of the reserve for future policy benefits (years)9.011.96.39.112.36.5
 Net Reserve for Future Policy Benefits
As of March 31,
20242023
Payout Annuities$135 $143 
Life Conversions62 67 
Paid-up Life177 192 
Deferred Profit Liability20 19 
Other85 87 
Total$479 $508 
Undiscounted Expected Future Gross Premiums and Benefit Payments
As of March 31,
20242023
Payout Annuities [1]
Expected future benefit payments$255 $269 
Life Conversions
Expected future gross premiums$111 $118 
Expected future benefit payments$201 $208 
Paid-up Life [1]
Expected future benefit payments$274 $295 
[1]Payout Annuities and Paid-up Life have no expected future gross premiums.
Weighted-Average Interest Rates
As of March 31,
20242023
Payout Annuities
Interest accretion rate5.6 %5.6 %
Current discount rate5.1 %5.0 %
Life Conversions
Interest accretion rate4.2 %4.2 %
Current discount rate5.3 %5.1 %
Paid-up Life
Interest accretion rate2.9 %2.9 %
Current discount rate5.2 %5.0 %
Gross premiums and interest accretion recognized on long-duration insurance policies for the three months ended March 31, 2024 and 2023 were immaterial.