Property Casualty Loss and Loss Expenses

3 Months Ended

Mar. 31, 2020

Property Casualty Loss And Loss Expenses

Property Casualty Loss and Loss Expenses

This table summarizes activity for our consolidated property casualty loss and loss expense reserves:



(Dollars in millions)	Three months ended March 31,
	2020			2019
Gross loss and loss expense reserves, beginning of period	$	6,088		$	5,646
Less reinsurance recoverable	342			238
Net loss and loss expense reserves, beginning of period	5,746			5,408

Net loss and loss expense reserves related to acquisition of Cincinnati Global at February 28, 2019	—			246

Net incurred loss and loss expenses related to:
Current accident year	963			857
Prior accident years	(33		)	(67		)
Total incurred	930			790
Net paid loss and loss expenses related to:
Current accident year	186			177
Prior accident years	631			647
Total paid	817			824
Net loss and loss expense reserves, end of period	5,859			5,620
Plus reinsurance recoverable	294			266
Gross loss and loss expense reserves, end of period	$	6,153		$	5,886

We use actuarial methods, models and judgment to estimate, as of a financial statement date, the property casualty loss and loss expense reserves required to pay for and settle all outstanding insured claims, including incurred but not reported (IBNR) claims, as of that date. The actuarial estimate is subject to review and adjustment by an inter-departmental committee that includes actuarial, claims, underwriting, loss prevention and accounting management. This committee is familiar with relevant company and industry business, claims and underwriting trends, as well as general economic and legal trends that could affect future loss and loss expense payments. The amount we will actually have to pay for claims can be highly uncertain. This uncertainty, together with the size of our reserves, makes the loss and loss expense reserves our most significant estimate. The reserve for loss and loss expenses in the condensed consolidated balance sheets also included $53 million at March 31, 2020, and $58 million at March 31, 2019, for certain life and health loss and loss expense reserves.

For the three months ended March 31, 2020, we experienced $33 million of favorable development on prior accident years, including $6 million of favorable development in commercial lines, $28 million of favorable development in personal lines and $1 million of unfavorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $7 million for the workers' compensation line and $5 million for the commercial casualty line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. This was partially offset by unfavorable reserve development of $6 million for the commercial auto line. Within personal lines, we recognized favorable reserve development of $18 million for the homeowner line of business and $13 million in personal auto.

For the three months ended March 31, 2019, we experienced $67 million of favorable development on prior accident years, including $62 million of favorable development in commercial lines, $3 million of unfavorable development in personal lines and $2 million of favorable development in excess and surplus lines. Within commercial lines, we recognized favorable reserve development of $31 million for the commercial casualty line, $15 million for the workers' compensation line and $11 million for the commercial auto line due to reduced uncertainty of prior accident year loss and loss adjustment expense for these lines. Within personal lines, we recognized unfavorable reserve development of $11 million for the homeowner line of business due primarily to higher-than-anticipated loss development on known claims.