Liability for Policy and Contract Claims

6 Months Ended

Jun. 30, 2022

Liability for Policy and Contract Claims

(8) Liability for Policy and Contract Claims

The following table sets forth changes in our liability for policy and contract claims as of the dates indicated:

	As of or for the six months ended June 30,
(Amounts in millions)	2022			2021
Beginning balance	$	11,841		$	11,486
Less reinsurance recoverables		(2,388	)		(2,431	)
Net beginning balance		9,453			9,055
Incurred related to insured events of:
Current year		2,047			1,991
Prior years		(483	)		(332	)
Total incurred		1,564			1,659
Paid related to insured events of:
Current year		(412	)		(477	)
Prior years		(1,250	)		(1,255	)
Total paid		(1,662	)		(1,732	)
Interest on liability for policy and contract claims		207			202
Net ending balance		9,562			9,184
Add reinsurance recoverables		2,353			2,362
Ending balance	$	11,915		$	11,546

The liability for policy and contract claims represents our current best estimate; however, there may be future adjustments to this estimate and related assumptions. Such adjustments, reflecting any variety of new and adverse trends, could be significant, and result in increases in reserves by an amount that could be material to our results of operations and financial condition and liquidity. In addition, loss reserves recorded on new delinquencies in our Enact segment have a high degree of estimation, particularly due to the level of uncertainty regarding whether borrowers in forbearance will ultimately cure or result in a claim payment.

For the six months ended June 30, 2022, the favorable development of $483 million related to insured events of prior years was primarily attributable to our long-term care insurance business largely related to favorable claim terminations mostly attributable to higher mortality, favorable development on prior year incurred but not reported claims and favorable experience on pending claims that did not become an active claim. The coronavirus pandemic (“COVID-19”) significantly increased mortality on our most vulnerable claimants and temporarily decreased the number of new claims submitted. As of June 30, 2022 and December 31, 2021, the balance of incremental claim reserves recorded in connection with changes to claims incidence and mortality experience resulting from COVID-19 was $156 million and $209 million, respectively. For the six months ended June 30, 2022, we reduced our incremental claim reserves associated with insured events of prior years by $53 million as the impacts of COVID-19 lessened.

The favorable development related to insured events of prior years was also attributable to our Enact segment, predominantly associated with $146 million of favorable reserve adjustments in the first half of 2022, primarily related to COVID-19 delinquencies in 2020 curing at levels above original reserve expectations.