The table below provides a reconciliation of our consolidated liability for loss and loss adjustment expense payable (referred to as reserves), net of reinsurance ceded.

			Nine months ended September 30,				Three months ended September 30,
			2013		2012		2013		2012
Net reserves for loss and loss adjustment expense payable
	at beginning of period		$	2,749,803	$	2,683,483	$	2,811,021	$	2,748,995
Net reserve additions from acquired businesses				-		14,705		0		0
Foreign currency adjustment				(2,296)		11,261		22,331		15,717
Net loss and loss adjustment expense				992,547		969,767		320,376		304,014
Net loss and loss adjustment expense payments				(884,022)		(944,203)		(297,696)		(333,713)
	Net reserves for loss and loss adjustment expense
		payable at end of period	$	2,856,032	$	2,735,013	$	2,856,032	$	2,735,013

The table below details our net loss and loss adjustment expense on a consolidated basis and for our segments.

			Nine months ended September 30,				Three months ended September 30,
			2013		2012		2013		2012
Net (favorable) adverse loss development:
	U.S. Property & Casualty		$	(40,754)	$	2,138	$	(40,754)	$	2,138
	Professional Liability			(26,284)		(26,186)		(26,284)		(26,186)
	Accident & Health			-		(10,695)		-		(10,695)
	U.S. Surety & Credit			(9,492)		-		-		-
	International			36,896		-		39,196		-
	Exited Lines			-		111		-		111
		Total net favorable loss development		(39,634)		(34,632)		(27,842)		(34,632)
Catastrophe losses				48,055		21,406		18,134		8,738
All other net loss and loss adjustment expense				984,126		982,993		330,084		329,908
		Net loss and loss adjustment expense	$	992,547	$	969,767	$	320,376	$	304,014

In the third quarter of 2013, we conducted our annual review of the reserves in our U.S. Property & Casualty, Professional Liability and International segments. Based on this review, we recognized net favorable loss development of $27.8 million, which is described by segment below:

Net favorable development of $40.8 million was due to better than expected actual experience, primarily in underwriting years 2011 and prior, compared to the same review conducted in the third quarter of 2012. The majority of the net favorable development related to a run-off assumed quota share contract, where experience continues to develop favorably. While some lines of business experienced adverse loss development, which partially offset favorable development, such adverse development was immaterial.

Net favorable development of $26.3 million was due to better than expected experience in the U.S. D&O and International D&O lines of business, compared to the same review conducted in the third quarter of 2012. The favorable development primarily related to underwriting years prior to 2007, as well as 2009 and 2010 (totaling $64.2 million), partially offset by reserve strengthening in underwriting years 2007 and 2008 (totaling $37.9 million) that were impacted by the worldwide financial crisis. Reserves for the diversified financial products (DFP) line of business within U.S. D&O performed slightly better than expected in the past year, but no changes were made to the estimated ultimate losses given the continued evaluation and re-underwriting of this line of business.

Net adverse development of $39.2 million was due to reserve strengthening of $70.3 million in the surety & credit line of business, partially offset by net favorable development in several other lines of business, primarily energy and liability. For surety & credit, we increased our reserves on a specific class of Spanish surety bonds, the majority of which were written prior to 2006. The increase was made to reflect our revised estimates of our liability under these bonds in light of an adverse Spanish Supreme Court ruling reported in September 2013 against an unaffiliated insurance company with respect to a surety bond similar to ours. The net favorable development in energy ($13.1 million) and liability ($13.3 million) primarily related to better than expected experience in underwriting years 2011 and prior, as well as $3.0 million related to the release of 2012 energy catastrophe reserves for Hurricane Sandy, due to lower than expected losses.

In the second quarter of 2013, we recognized favorable development of $9.5 million in our U.S. Surety & Credit segment and $2.3 million in our International segment. Our review of reserves at that time indicated that continued lower than expected claims activity related to older underwriting years was contributing to a growing redundancy in our U.S. Surety & Credit segment. As a result, we recognized favorable development of $3.7 million and $5.8 million for our surety and credit lines of business, respectively, related to the 2010 and prior underwriting years. In the International segment, we released $2.3 million of prior year catastrophe reserves related to the 2010 New Zealand earthquake, due to settlement of these claims in 2013.

In the first nine months and third quarter of 2012, our Professional Liability and Accident & Health segments reported net favorable loss development of $26.2 million and $10.7 million, respectively, resulting from our scheduled annual reviews of these reserves. The net favorable development in our Professional Liability segment consisted of $9.3 million in U.S. D&O and $16.9 million in International D&O related to lower than expected reported loss development in underwriting years 2003 – 2006, partially offset by higher expected losses in underwriting year 2008. The favorable development in our Accident & Health segment related to favorable claims activity in the medical stop-loss product line for the 2011 underwriting year.