XML 64 R16.htm IDEA: XBRL DOCUMENT v3.24.2
Reserve for Unpaid Losses and Loss Adjustment Expenses
 6 Months Ended
Jun. 30, 2024
Liability for Unpaid Claims and Claims Adjustment Expense, Activity in Liability [Abstract]  
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 six months ended June 30,
 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 year5,088 4,712 
Prior accident year development [1]
(171)(39)
Total provision for unpaid losses and loss adjustment expenses
4,917 4,673 
Change in deferred gain on retroactive reinsurance included in other liabilities [1]61 — 
Payments
  
Current accident year(987)(997)
Prior accident years(2,849)(3,731)
Total payments
(3,836)(4,728)
Foreign currency adjustment(9)18 
Ending liabilities for unpaid losses and loss adjustment expenses, net
28,481 26,581 
Reinsurance and other recoverables6,656 6,448 
Ending liabilities for unpaid losses and loss adjustment expenses, gross
$35,137 $33,029 
[1]Prior accident year development for the six months ended June 30, 2024 includes a $61 benefit for amortization of a deferred gain under retroactive reinsurance accounting related to the Navigators Adverse Development Cover (the "Navigator's ADC") as the Company began collection recoveries of the ceded losses from National Indemnity Company ("NICO"), a subsidiary of Berkshire Hathaway Inc, during the period. For additional information regarding the ADC reinsurance agreement, refer to "Change in Deferred Gain on Retroactive Reinsurance" discussion below.
Unfavorable (Favorable) Prior Accident Year Development
For the six months ended June 30,
20242023
Workers’ compensation$(119)$(113)
Workers’ compensation discount accretion23 22 
General liability49 28 
Marine(1)(1)
Package business(1)(8)
Commercial property(5)— 
Professional liability(7)(3)
Bond(22)12 
Assumed reinsurance24 17 
Automobile liability - Commercial Lines10 6 
Automobile liability - Personal Lines(13)— 
Homeowners(10)1 
Net asbestos and environmental ("A&E") reserves— — 
Catastrophes(38)(44)
Uncollectible reinsurance— 12 
Other reserve re-estimates, net — 32 
Prior accident year development before change in deferred gain(110)(39)
Change in deferred gain on retroactive reinsurance included in other liabilities [1](61)— 
Total prior accident year development$(171)$(39)
[1]The $61 change in deferred gain on retroactive reinsurance for the six months ended June 30, 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 six months ended June 30, 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 primarily in response to higher frequency of large losses within certain lines in the 2016 to 2019 accident years, with some modest increases in the more recent accident years. In addition, reserves for sexual molestation and sexual abuse claims were increased for older accident years. Lastly, reserves for extra contractual liability claims and other miscellaneous run-off lines were reduced in response to recent favorable loss activity.
Professional liability reserves decreased modestly due to favorable development on directors' and officers' ("D&O") claims driven by the 2020 to 2022 accident years, partially offset by deterioration in older accident years.
Bond reserves decreased due to favorable development on commercial and contract surety driven by accident years 2019 and prior.
Assumed reinsurance reserves were increased due to higher reserve estimates in the Latin America surety and Latin America P&C businesses related to the 2020 to 2023 accident years.
Automobile liability reserves - Commercial Lines increased primarily due to adverse loss development within accident year 2022 driven by higher severity than estimated.
Automobile liability reserves - Personal Lines were decreased primarily in response to better than anticipated accident year 2023 claim severity for property damage liability.
Catastrophes reserves were decreased primarily within Commercial Lines driven by a reduction in reserves in accident years 2021 to 2022 related to favorable emergence related to various hail events, as well as favorable development in accident year 2022 related to Hurricane Ian.
Other reserve re-estimates, net, included a decrease in reserves due to lower severity than expected on Personal Lines automobile physical damage for accident year 2023, offset by an increase in reserves related to unfavorable development from participation in involuntary market pools.
Re-estimates of prior accident year reserves for the six months ended June 30, 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 driven by higher frequency and estimated cost to settle large individual claims for the 2016 to 2019 accident years, partially offset by a decrease in reserves for the 2020 accident year due to favorable experience. In addition, reserves for sexual molestation and sexual abuse claims were increased for older accident years. Also included was a decrease in reserves for extra contractual liability claims and other miscellaneous run-off lines.
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 flat primarily due to unfavorable development for accident year 2022 in middle & large commercial, offset by favorable development in global specialty.
Bond reserves were increased primarily due to unfavorable development for 2013 and prior accident years related to customs bonds.
Assumed reinsurance reserves were increased due to higher reserve estimates in the specialty casualty, Latin America casualty and surety business.
Automobile liability reserves - Commercial Lines increased primarily due to adverse loss development within accident years 2017 to 2019.
Automobile liability reserves - Personal Lines were flat as increases for accident year 2022 from higher estimated severity and increasing attorney representation rates were fully offset by decreases, primarily within accident years 2019 to 2021, due to lower estimated severity.
Catastrophes reserves were decreased primarily within Commercial Lines driven by a reduction in reserves in accident year 2022 for Hurricane Ian and accident year 2021 for Hurricane Ida.
Uncollectible reinsurance was increased primarily in Commercial Lines related to a captive reinsurer and, to a lesser extent, an increase in reserves for potential collection disputes and credit concerns.
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 and six months ended June 30, 2024, the Company collected recoveries from NICO and as a result amortized $37 and $61 of the deferred gain within benefits, losses and loss adjustment expenses in the three and six month periods, respectively. As of June 30, 2024 and December 31, 2023, the deferred gain on the Navigators ADC was $148 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 six months ended June 30,
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 year2,662 2,622 
Prior year's discount accretion103 103 
Prior incurral year development [1](339)(265)
Total provision for unpaid losses and loss adjustment expenses [2]2,426 2,460 
Payments
Current incurral year(1,071)(1,012)
Prior incurral years(1,455)(1,416)
Total payments(2,526)(2,428)
Ending liabilities for unpaid losses and loss adjustment expenses, net7,920 7,947 
Reinsurance recoverables266 243 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$8,186 $8,190 
[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 $92 and $91 for the six months ended June 30, 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 six months ended June 30, 2024
Group disability- Prior period reserve estimates decreased by approximately $282 largely driven by group long-term disability claim incidence lower than prior assumptions and favorable recoveries on prior incurral year claims, as well as a higher New York paid family leave risk adjustment benefit than expected.
Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $56 largely driven by favorable mortality emergence and continued low incidence in group life premium waiver.
Re-estimates of prior incurral years reserves for the six months ended June 30, 2023
Group disability- Prior period reserve estimates decreased by approximately $236 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 $19 largely driven by continued low incidence in group life premium waiver.
Supplemental Accident & Health- Prior period reserve estimates decreased by approximately $10 driven by lower than previously expected claim incidence.
. RESERVE FOR FUTURE POLICY BENEFITS
Rollforward of Reserve for Future Policy Benefits
For the six months ended June 30,
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 $45 $44 
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 2 — 1 3 (1)
Adjusted beginning balance131 126 217 137 129 230 
Interest accrual and other3 9 3 4 9 3 
Benefit Payments(6)(16)(12)(6)(14)(9)
Ending balance at original discount rate128 119 208 135 124 224 
Ending adjustment for changes in single-A rate1 (14)(36)4 (15)(38)
Ending balance at single-A rate$129 $105 $172 $139 $109 $186 
Net reserve for future policy benefits$129 $60 $172 $139 $65 $186 
Weighted-average duration of the reserve for future policy benefits (years)9.011.56.39.112.26.3
 Net Reserve for Future Policy Benefits
As of June 30,
20242023
Payout Annuities$129 $139 
Life Conversions60 65 
Paid-up Life172 186 
Deferred Profit Liability20 19 
Other83 80 
Total$464 $489 
Undiscounted Expected Future Gross Premiums and Benefit Payments
As of June 30,
20242023
Payout Annuities [1]
Expected future benefit payments$252 $267 
Life Conversions
Expected future gross premiums$109 $117 
Expected future benefit payments$199 $208 
Paid-up Life [1]
Expected future benefit payments$268 $290 
[1]Payout Annuities and Paid-up Life have no expected future gross premiums.
Weighted-Average Interest Rates
As of June 30,
20242023
Payout Annuities
Interest accretion rate5.6 %5.6 %
Current discount rate5.5 %5.2 %
Life Conversions
Interest accretion rate4.2 %4.2 %
Current discount rate5.5 %5.2 %
Paid-up Life
Interest accretion rate2.9 %2.9 %
Current discount rate5.4 %5.3 %
Gross premiums and interest accretion recognized on long-duration insurance policies for the six months ended June 30, 2024 and 2023 were immaterial.