Reserve for Property and Casualty Insurance Claims and Claims Expense

3 Months Ended

Mar. 31, 2020

Reserve for Property-Liability Insurance Claims and Claims Expense [Abstract]

Reserve for Property and Liability Insurance Claims and Claims Expense



Note 8	Reserve for Property and Casualty Insurance Claims and Claims Expense

The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers,

inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Because reserves are estimates of unpaid portions of losses that have occurred, including incurred but not reported (“IBNR”) losses, the establishment of appropriate reserves, including reserves for catastrophes, Discontinued Lines and Coverages and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s

best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined.

Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately

established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Condensed Consolidated Statements of Financial Position based on available facts, technology, laws and regulations.

Allstate’s reserves for asbestos claims were $790 million and $810 million, net of recoverables of $351 million and $362 million, as of March 31, 2020 and December 31, 2019, respectively. Reserves for environmental claims were $175 million and $179 million, net of recoverables of $39 million and $40 million, as of March 31, 2020 and December 31, 2019, respectively.



Rollforward of the reserve for property and casualty insurance claims and claims expense
	Three months ended March 31,
($ in millions)	2020			2019
Balance as of January 1	$	27,712		$	27,423
Less recoverables ⁽¹⁾	(6,912		)	(7,155		)
Net balance as of January 1	20,800			20,268
Incurred claims and claims expense related to:
Current year	5,333			5,808
Prior years	8			12
Total incurred	5,341			5,820
Claims and claims expense paid related to:
Current year	(2,352		)	(2,270		)
Prior years	(3,554		)	(3,294		)
Total paid	(5,906		)	(5,564		)
Net balance as of March 31	20,235			20,524
Plus recoverables	6,913			7,020
Balance as of March 31	$	27,148		$	27,544


⁽¹⁾	Recoverables comprises reinsurance and indemnification recoverables.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the period. This expense included losses from catastrophes of $211 million and $680 million in the three months ended March 31, 2020 and 2019, respectively, net of recoverables.

Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.



Prior year reserve reestimates included in claims and claims expense ⁽¹⁾
	Three months ended March 31,
($ in millions)	Non-catastrophes losses						Catastrophes losses						Total
	2020			2019			2020			2019 ⁽²⁾			2020			2019
Auto	$	22		$	(53	)	$	(9	)	$	(1	)	$	13		$	(54	)
Homeowners	1			7			(8		)	46			(7		)	53
Other personal lines	(2		)	(2		)	(4		)	9			(6		)	7
Commercial lines	5			5			1			(1		)	6			4
Discontinued Lines and Coverages	2			2			—			—			2			2
Service Businesses	—			—			—			—			—			—
Total prior year reserve reestimates	$	28		$	(41	)	$	(20	)	$	53		$	8		$	12


⁽¹⁾	Favorable reserve reestimates are shown in parentheses.

⁽²⁾

Includes $15 million of reinstatement reinsurance premiums incurred during the period related to the 2018 Camp Fire, which primarily impacted homeowners reestimates.