Management’s process for establishing loss reserves is a comprehensive process that involves input from multiple functions throughout the organization, including actuarial, finance, claims, legal, underwriting, distribution and business operations management. A review of loss reserves for each of the classes of business which the Company writes is conducted regularly, generally quarterly. This review process takes into consideration a variety of trends that impact the ultimate settlement of claims. Where appropriate, the review includes a review of overall payment patterns and the emergence of paid and reported losses relative to expectations.

The loss reserve estimation process relies on the basic assumption that past experience, adjusted for the effects of current developments and likely trends, is an appropriate basis for predicting future outcomes. As part of this process, the Company uses a variety of analytical methods that consider experience, trends and other relevant factors. Incurred but not reported (“IBNR”) reserves are generally calculated by first projecting the ultimate cost of all claims that have been reported or expected to be reported in the future and then subtracting reported losses and loss adjustment expenses. IBNR reserves include both incurred-but-not-reported liabilities plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses. Reported losses include cumulative paid losses and loss adjustment expenses plus outstanding case reserves. The Company’s ultimate IBNR reserves are estimated by management and reserving actuaries on an aggregate basis for each line of business or coverage for loss and loss expense liabilities not reflected within the case reserves. Case reserves are established by claim personnel individually on a claim by claim basis and based on information specific to the occurrence and terms of the underlying policy. Case reserves are periodically reviewed and modified based on new or additional information pertaining to the claim.

For events designated as catastrophes, the Company generally calculates IBNR reserves directly as a result of an estimated IBNR claim count and an estimated average claim amount for each event. Such an assessment involves a comprehensive analysis of the nature of the event, of policyholder exposures within the affected geographic area and of available claims intelligence.

Carried reserves for each line of business and coverage are determined based on the quarterly loss reserving process. In making the determination, the Company considers numerous quantitative and qualitative factors. Quantitative factors include actual payments made and changes in case reserve estimates in the period, as compared to previously experienced patterns, the maturity of the accident year, trends observed over the recent past, the level of volatility within a particular class of business, the estimated effects of reinsurance, including reinstatement premiums, general economic trends, and other factors. Qualitative factors may include legal and regulatory developments, changes in claim handling and case reserving practices, recent entry into new markets or products, changes in underwriting practices, concerns that the Company does not have sufficient or quality historical reported and paid loss and LAE information with respect to a particular line or segment of business, effects of the economy and political outlook, perceived anomalies in the historical results, evolving trends or other factors.

The Company regularly updates its reserve estimates as new information becomes available and further events occur which may impact the resolution of unsettled claims. Reserve adjustments are reflected in results of operations as adjustments to losses and LAE. Often these adjustments are recognized in periods subsequent to the period in which the underlying policy was written and loss event occurred. These types of subsequent adjustments are described as “prior years’ loss reserves”. Such development can be either favorable or unfavorable to the Company’s financial results and may vary by line of business. In this section, all amounts presented include catastrophe losses and LAE, unless otherwise indicated.

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses.

The following table provides a summary of (favorable)/unfavorable loss and LAE reserve development.

Within other commercial lines, general liability is comprised of both monoline general liability and certain management and professional liability coverages and other lines is primarily comprised of lawyers professional liability, fidelity, marine, miscellaneous property, and healthcare lines. Loss and LAE reserve development in the Other segment is related to run-off voluntary assumed reinsurance pools business.

As a result of continuing trends in the Company’s business, reserves including catastrophes have been re-estimated for all prior accident years and were decreased by $8.9 million in 2018, decreased by $0.2 million in 2017 and increased by $238.2 million in 2016.

In 2018, net favorable loss and LAE development was $8.9 million, primarily as a result of net favorable Commercial Lines development of $40.9 million, partially offset by unfavorable Personal Lines development of $30.8 million. Commercial Lines favorable development was primarily due to lower than expected losses of $31.0 million within the workers’ compensation line in accident years 2015 through 2017, $29.1 million in other commercial lines, primarily in our professional and management liability and monoline general liability lines, related to the 2014 through 2016 accident years, and our surety line in accident years 2015 and 2017, partially offset by higher than expected losses in AIX programs and business classes which have since been terminated. Also partially offsetting the favorable Commercial Lines development was higher than expected losses of $23.2 million in the commercial automobile line, driven by higher bodily injury severity in the 2014, 2016, and 2017 accident years. Personal Lines unfavorable development was primarily due to higher than expected losses of $14.3 million in the personal automobile line, driven by bodily injury severity in the 2015 and 2016 accident years and $13.8 million in homeowners in accident years 2015 through 2017. In addition, Other segment unfavorable development of $1.2 million was due to higher than expected losses in our runoff voluntary pools business.

In 2017, net favorable loss and LAE development was $0.2 million, primarily as a result of net favorable development of $10.8 million for Commercial Lines, partially offset by unfavorable development of $9.4 million for Personal Lines. Commercial Lines favorable development was primarily due to lower than expected losses within the workers’ compensation line in accident years 2012 through 2016. Personal Lines unfavorable development was primarily due to higher than expected losses in homeowners for accident year 2016. In addition, Other segment unfavorable development of $1.2 million was due to higher than expected losses in our runoff voluntary pools business.

In 2016, net unfavorable loss and LAE development was $238.2 million, primarily as a result of net unfavorable development of $219.3 million for Commercial Lines. The net unfavorable Commercial Lines development primarily resulted from higher than expected losses in other commercial lines of $169.7 million, which includes the AIX program business. This was primarily driven by AIX programs and business classes, general liability coverages in accident years 2012 through 2015, and surety bonds in accident years 2012 through 2015. The Company also experienced higher than expected losses within the commercial multiple peril lines of $68.8 million for accident years 2012 through 2015 and commercial automobile of $27.5 million in accident years 2012 through 2014, both primarily within liability coverages. Partially offsetting the unfavorable development was lower than expected losses of $46.7 million within the workers’ compensation line, primarily related to accident years 2013 through 2015, and, to a lesser extent, the commercial umbrella line primarily related to the 2015 accident year.

As a result of the 2016 fourth quarter reserve review, carried reserves for prior accident years, excluding catastrophes, were increased by $174.1 million in the fourth quarter of 2016, of which $161.5 million related to Commercial Lines. The majority of this adjustment was attributed to long-tailed commercial liability coverages, including AIX program business and was largely driven by worsening trends in the number and nature of high severity losses and higher than anticipated legal defense costs. The Company reacted to this adverse emergence by updating its assumptions about loss severity, loss development patterns, expected loss ratios and loss adjustment expenses for the most recent accident years, placing greater weight on the adverse severity trends experienced in the most recent calendar years. The adverse prior year development for the Other segment was due to run-off voluntary assumed reinsurance pools business. The reserve increase was primarily based on an updated third-party actuarial study received in the fourth quarter for a pool that primarily consists of asbestos and environmental exposures.

The table below summarizes the gross, ceded and net reserve for losses and LAE and reconciles to the incurred claims development in the following section. Accordingly, the commercial multiple peril, workers’ compensation, commercial automobile liability lines and general liability and umbrella - occurrence presentation includes AIX program business.

General liability and umbrella - occurrence is primarily comprised of our commercial monoline general liability and umbrella coverages. General liability - claims made is primarily comprised of our commercial professional and management liability lines. Within total Commercial Lines and other, other lines is primarily comprised of marine, surety, miscellaneous commercial property, product liability, voluntary pools, healthcare and fidelity lines. Included in the above table, primarily in other lines, are $57.6 million and $59.4 million of gross asbestos and environmental reserves as of December 31, 2018 and 2017, respectively.

For the following net reserve components, commercial multiple peril, workers’ compensation, commercial automobile liability, general liability and umbrella - occurrence, general liability - claims made, personal automobile liability and homeowners, the Company is presenting incurred claims development tables by accident year. The commercial multiple peril, workers’ compensation, commercial automobile liability and general liability and umbrella - occurrence lines presentation includes AIX program business. In each of these tables, the Company is presenting the number of years for which claims are typically outstanding, which is consistent with the period at which substantially all of the reserve development has emerged based on past history. The tables presented below include cumulative incurred loss and allocated loss adjustment expenses (“ALAE”), cumulative paid loss and ALAE and IBNR balances at December 31, 2018. IBNR includes both incurred but not reported liabilities and expected development on reported claims. In addition, cumulative incurred claim counts are presented as of December 31, 2018 and claim duration is presented in a separate table disclosing the average annual percentage payout of incurred claims by age, net of reinsurance. Claim duration is calculated as an average of paid loss and ALAE divided by incurred loss and ALAE by elapsed year. The incurred claims development tables presented are reconciled to the net carried reserves in the preceding table as of December 31, 2018.

Incurred claim count information presented represents claim frequency by individual claimant and measures the frequency of direct claim settlements that have resulted in or are expected to result in claim payments. Claim count information is presented in a manner consistent with that used in the quarterly loss reserving process. A single claim event, particularly in automobile lines, may result in multiple individual claimants and, therefore, multiple claim counts. Incurred claim counts are comprised of outstanding claims and those that are closed with a loss payment and exclude those that are closed without a loss payment. A single claim event may result in multiple claims closed with a payment when a claim is subsequently reopened with further payment. In this case, a reopened claim payment is counted as an incremental claim settlement. Claim count information is not available for direct and assumed participations in various involuntary pools and residual market mechanisms, which represent approximately 5% or less of the total gross earned premium and gross incurred claims for the lines presented. Incurred claim counts are also not adjusted for the effect of claims ceded as part of reinsurance programs, although the incurred losses and cumulative paid losses presented in the following tables are presented net of reinsurance ceded.

Commercial multiple peril
(in millions)															As of
Incurred Losses and ALAE, Net of Reinsurance															December 31, 2018
YEARS ENDED DECEMBER 31,																	Cumulative
																	Incurred
Accident	2012		2013		2014		2015										Claim
Year	Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2012	$	480.0	$	462.8	$	456.2	$	459.7	$	475.6	$	474.9	$	476.6	$	8.8		16,983
2013				380.0		362.5		367.9		391.8		392.1		393.0		10.2		14,830
2014						443.9		439.6		464.8		459.4		449.1		22.6		15,922
2015								446.0		456.3		463.7		467.4		33.0		15,731
2016										447.1		449.6		448.7		55.5		15,981
2017												538.7		544.8		122.2		16,674
2018														578.2		228.3		16,716
Total													$	3,357.8


Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,

Accident	2012		2013		2014		2015
Year	Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018
2012	$	175.8	$	307.5	$	350.8	$	389.3	$	424.2	$	442.8	$	454.9
2013				137.6		221.5		262.3		306.4		334.6		355.9
2014						171.7		267.8		316.0		363.4		395.2
2015								161.9		260.1		315.6		363.2
2016										140.3		237.9		290.2
2017												170.9		296.4
2018														178.8
Total													$	2,334.6
Total reserves for 2012 – 2018 accident years (incurred - paid)														1,023.2
Total reserves for 2011 and prior accident years														53.2
Unallocated loss adjustment expense														19.3
Net reserves at December 31, 2018													$	1,095.7

Workers' compensation
(in millions)																					As of
Incurred Losses and ALAE, Net of Reinsurance																					December 31, 2018
YEARS ENDED DECEMBER 31,																							Cumulative
																							Incurred
Accident	2009		2010		2011		2012		2013		2014		2015										Claim
Year	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2009	$	93.8	$	87.6	$	82.5	$	80.3	$	79.4	$	79.2	$	77.5	$	77.5	$	77.9	$	78.7	$	1.9		8,032
2010				115.5		116.9		115.8		115.9		116.3		114.9		114.7		115.9		116.5		3.3		10,174
2011						141.4		144.2		144.3		145.5		143.8		146.7		148.3		147.9		7.1		12,465
2012								176.3		171.1		165.2		157.2		162.9		163.7		163.7		10.2		13,042
2013										179.3		167.4		160.1		154.4		155.3		155.4		12.3		11,683
2014												182.1		172.9		154.7		152.1		150.3		15.2		10,880
2015														189.6		164.2		157.5		150.3		22.5		11,417
2016																189.6		180.5		164.6		24.5		15,790
2017																		186.1		172.1		35.4		16,405
2018																				187.2		69.4		15,711
Total																			$	1,486.7

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,
Accident	2009		2010		2011		2012		2013		2014		2015
Year	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018
2009	$	19.2	$	41.2	$	54.6	$	61.6	$	65.4	$	68.6	$	69.8	$	70.8	$	72.4	$	73.1
2010				22.1		57.2		76.9		89.5		96.5		101.0		104.2		106.3		107.2
2011						30.0		71.3		97.3		114.0		122.9		128.0		130.9		132.8
2012								30.4		74.8		102.6		120.1		130.7		136.0		141.4
2013										30.9		74.6		101.2		114.0		122.8		127.4
2014												30.6		70.5		92.3		105.6		112.5
2015														28.0		65.7		87.2		99.4
2016																33.9		78.1		99.5
2017																		32.8		73.0
2018																				35.6
Total																			$	1,001.9
Total reserves for 2009 – 2018 accident years (incurred - paid)																				484.8
Total reserves for 2008 and prior accident years																				91.1
Unallocated loss adjustment expense and other																				17.0
Net reserves at December 31, 2018																			$	592.9

Commercial automobile liability
(in millions)													As of
Incurred Losses and ALAE, Net of Reinsurance													December 31, 2018
YEARS ENDED DECEMBER 31,															Cumulative
															Incurred
Accident	2013		2014		2015										Claim
Year	Unaudited		Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2013	$	177.7	$	179.4	$	205.3	$	227.5	$	225.6	$	231.0	$	1.4		15,274
2014				168.5		163.3		177.3		181.7		185.1		6.4		13,477
2015						163.4		168.3		166.9		167.8		10.0		12,838
2016								157.0		157.7		163.0		16.4		11,629
2017										159.5		170.1		43.4		11,343
2018												182.8		110.7		10,338
Total											$	1,099.8

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,

Accident	2013		2014		2015
Year	Unaudited		Unaudited		Unaudited		2016		2017		2018
2013	$	35.9	$	89.6	$	137.6	$	176.3	$	200.6	$	214.9
2014				33.1		70.8		102.7		137.1		168.2
2015						32.2		63.8		96.4		129.3
2016								27.8		60.7		98.3
2017										26.9		71.2
2018												29.2
Total											$	711.1
Total reserves for 2013 – 2018 accident years (incurred - paid)												388.7
Total reserves for 2012 and prior accident years												14.4
Unallocated loss adjustment expense												4.9
Net reserves at December 31, 2018											$	408.0

General liability and umbrella - occurrence
(in millions)																	As of
Incurred Losses and ALAE, Net of Reinsurance																	December 31, 2018
YEARS ENDED DECEMBER 31,																			Cumulative
																			Incurred
Accident	2011		2012		2013		2014		2015										Claim
Year	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2011	$	47.6	$	43.8	$	38.2	$	42.2	$	51.0	$	55.6	$	55.4	$	57.5	$	3.3		1,398
2012				77.2		59.3		62.2		64.3		71.1		74.2		69.1		3.7		1,779
2013						84.1		67.4		71.5		88.6		84.4		81.2		8.2		2,031
2014								100.9		82.3		98.6		101.4		98.3		10.6		2,133
2015										104.2		99.3		99.6		97.0		21.3		2,550
2016												95.6		100.7		101.5		33.9		2,015
2017														97.7		107.6		54.2		1,844
2018																99.8		74.4		1,917
Total															$	712.0

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,
Accident	2011		2012		2013		2014		2015
Year	Unaudited		Unaudited		Unaudited		Unaudited		Unaudited		2016		2017		2018
2011	$	1.6	$	6.7	$	19.4	$	31.1	$	39.8	$	45.8	$	47.8	$	50.6
2012				2.2		12.6		29.8		43.8		52.1		60.6		63.0
2013						2.4		11.0		26.8		43.1		56.1		63.5
2014								3.1		14.5		31.4		52.8		70.4
2015										3.3		15.2		30.8		48.5
2016												3.1		15.0		31.6
2017														4.4		17.0
2018																4.1
Total															$	348.7
Total reserves for 2011 – 2018 accident years (incurred - paid)																363.3
Total reserves for 2010 and prior accident years																25.8
Unallocated loss adjustment expense and other																11.5
Net reserves at December 31, 2018															$	400.6

General liability - claims made
(in millions)													As of
Incurred Losses and ALAE, Net of Reinsurance													December 31, 2018
YEARS ENDED DECEMBER 31,															Cumulative
															Incurred
Accident	2013		2014		2015										Claim
Year	Unaudited		Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2013	$	54.9	$	55.4	$	60.6	$	71.4	$	69.2	$	68.4	$	0.9		645
2014				61.7		69.9		83.9		86.2		82.5		2.9		907
2015						93.2		98.8		98.4		90.2		4.9		1,035
2016								103.6		101.7		97.1		18.4		1,082
2017										103.3		104.6		35.5		1,310
2018												120.9		59.5		2,586
Total											$	563.7

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,
Accident	2013		2014		2015
Year	Unaudited		Unaudited		Unaudited		2016		2017		2018
2013	$	9.3	$	36.2	$	53.7	$	61.1	$	64.5	$	65.7
2014				11.0		38.8		59.1		71.5		75.4
2015						10.0		43.6		64.2		76.0
2016								11.1		42.9		66.1
2017										12.3		42.3
2018												17.3
Total											$	342.8
Total reserves for 2013– 2018 accident years (incurred - paid)												220.9
Total reserves for 2012 and prior accident years												4.0
Unallocated loss adjustment expense												4.8
Net reserves at December 31, 2018											$	229.7

Personal automobile liability
(in millions)											As of
Incurred Losses and ALAE, Net of Reinsurance											December 31, 2018
YEARS ENDED DECEMBER 31,													Cumulative
													Incurred
Accident	2014		2015										Claim
Year	Unaudited		Unaudited		2016		2017		2018		IBNR		Count
2014	$	323.1	$	304.1	$	308.8	$	310.2	$	312.5	$	4.7		43,356
2015				327.4		334.1		328.6		332.4		5.6		42,358
2016						337.9		344.5		355.3		11.5		42,214
2017								363.6		362.3		35.0		42,200
2018										394.2		151.7		39,164
Total									$	1,756.7

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,
Accident	2014		2015
Year	Unaudited		Unaudited		2016		2017		2018
2014	$	107.2	$	188.6	$	241.1	$	279.4	$	298.4
2015				112.9		205.4		261.5		301.9
2016						112.8		213.1		288.0
2017								115.0		229.2
2018										121.7
Total									$	1,239.2
Total reserves for 2014 – 2018 accident years (incurred - paid)										517.5
Total reserves for 2013 and prior accident years										65.4
Unallocated loss adjustment expense										13.8
Net reserves at December 31, 2018									$	596.7

Homeowners
(in millions)									As of
Incurred Losses and ALAE, Net of Reinsurance									December 31, 2018
YEARS ENDED DECEMBER 31,											Cumulative
											Incurred
Accident	2015										Claim
Year	Unaudited		2016		2017		2018		IBNR		Count
2015	$	267.1	$	272.0	$	272.0	$	274.2		1.7		30,436
2016				222.1		226.5		231.4		3.2		25,456
2017						291.4		296.5		3.4		33,394
2018								312.9		46.0		30,487
Total							$	1,115.0

Cumulative Paid Losses and ALAE, Net of Reinsurance
YEARS ENDED DECEMBER 31,
Accident	2015
Year	Unaudited		2016		2017		2018
2015	$	199.9	$	253.8	$	260.6	$	267.5
2016				154.3		207.9		218.2
2017						204.5		271.6
2018								213.7
Total							$	971.0
Total reserves for 2015 – 2018 accident years (incurred - paid)								144.0
Total reserves for 2014 and prior accident years								4.8
Unallocated loss adjustment expense								3.4
Net reserves at December 31, 2018							$	152.2

The following table is information about average historical claims duration as of December 31, 2018. The table is computed based on the paid and incurred claims data, net of reinsurance, for the accident years presented in the preceding claims development tables.