INSURANCE LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2017

LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE, FUTURE POLICY BENEFITS FOR LIFE AND ACCIDENT AND HEALTH INSURANCE CONTRACTS, AND POLICYHOLDER CONTRACT DEPOSITS

Schedule of reconciliation of activity in the liability for unpaid claims and claims adjustment expense

The following table presents the roll forward of activity in Loss Reserves:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)		2017		2016		2017		2016
Liability for unpaid loss and loss adjustment expenses, beginning of period	$	76,050	$	73,946	$	77,077	$	74,942
Reinsurance recoverable		(26,920)		(14,212)		(15,532)		(14,339)
Net Liability for unpaid loss and loss adjustment expenses, beginning of period		49,130		59,734		61,545		60,603
Foreign exchange effect		463		360		358		200
Dispositions^(a)		-		-		-		-
Retroactive reinsurance adjustment (net of discount)^(b)		(299)		-		(11,460)		-
Total		49,294		60,094		50,443		60,803
Losses and loss adjustment expenses incurred:
Current year		4,209		5,023		8,510		9,935
Prior years, excluding discount and amortization of deferred gain		391		6		453		(60)
Prior years, discount charge (benefit)		260		300		235		291
Prior years, amortization of deferred gain on retroactive reinsurance^(c)		(82)		-		(120)		-
Total losses and loss adjustment expenses incurred		4,778		5,329		9,078		10,166
Losses and loss adjustment expenses paid:
Current year		(1,137)		(2,378)		(1,708)		(2,958)
Prior years		(4,252)		(3,423)		(9,043)		(8,389)
Total losses and loss adjustment expenses paid		(5,389)		(5,801)		(10,751)		(11,347)
Reclassified to liabilities held for sale^(d)		79		-		(8)		-
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses		48,762		59,622		48,762		59,622
Reinsurance recoverable		27,660		14,520		27,660		14,520
Total	$	76,422	$	74,142	$	76,422	$	74,142

(a) Includes amounts related to dispositions through the date of disposition. Includes sale of UGC and Ascot.

(b) Includes discount on retroactive reinsurance in the amount of $108 million and $1.5 billion for the three- and six-month periods ended June 30, 2017, respectively.

(c) Includes $10 million and $5 million for the 2011 retroactive reinsurance agreement with NICO covering U.S. asbestos exposures for the three- and six-month periods ended June 30, 2017, respectively.

(d) Represents change in loss reserves included in our pending sale of certain of our insurance operations to Fairfax for the three- and six-month periods ended June 30, 2017. Upon consummation of the sale, we may retain a portion of these reserves through reinsurance arrangements.

Schedule of loss reserve discount and loss reserve discount benefit (charge)

The following table presents the components of the loss reserve discount discussed above:

	June 30, 2017						December 31, 2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
U.S. workers' compensation	$	2,450	$	885	$	3,335	$	2,583	$	987	$	3,570
Retroactive reinsurance		(1,547)		-		(1,547)		-		-		-
Total reserve discount^*	$	903	$	885	$	1,788	$	2,583	$	987	$	3,570

* Excludes $185 million and $181 million of discount related to certain long tail liabilities in the United Kingdom at June 30, 2017 and December 31, 2016, respectively.

The following tables present increase (decrease) in the net loss reserve discount:

Three Months Ended June 30,	2017						2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
Current accident year	$	29	$	-	$	29	$	33	$	-	$	33
Accretion and other adjustments
to prior year discount		(57)		(43)		(100)		(47)		(16)		(63)
Effect of interest rate changes		(128)		(61)		(189)		(177)		(93)		(270)
Net reserve discount
benefit (charge)		(156)		(104)		(260)		(191)		(109)		(300)
Change in discount on loss reserves
ceded under retroactive reinsurance^(a)		108		-		108		-		-		-
Net change in total reserve
discount^(b)	$	(48)	$	(104)	$	(152)	$	(191)	$	(109)	$	(300)
Comprised of:
U.S. Workers' compensation	$	(48)	$	(104)	$	(152)	$	(191)	$	(108)	$	(299)
Asbestos	$	-	$	-	$	-	$	-	$	(1)	$	(1)

Six Months Ended June 30,	2017						2016
			Legacy Portfolio						Legacy Portfolio
	U.S. Liability		- Property and				U.S. Liability		- Property and
	and		Casualty run-off				and		Casualty run-off
(in millions)	Financial Lines		Insurance Lines			Total	Financial Lines		Insurance Lines			Total
Current accident year	$	61	$	-	$	61	$	81	$	-	$	81
Accretion and other adjustments
to prior year discount		(105)		(59)		(164)		(61)		(30)		(91)
Effect of interest rate changes		(89)		(43)		(132)		(185)		(96)		(281)
Net reserve discount
benefit (charge)		(133)		(102)		(235)		(165)		(126)		(291)
Change in discount on loss reserves
ceded under retroactive reinsurance		(1,547)		-		(1,547)		-		-		-
Net change in total reserve
discount^(c)	$	(1,680)	$	(102)	$	(1,782)	$	(165)	$	(126)	$	(291)
Comprised of:
U.S. Workers' compensation	$	(1,680)	$	(102)	$	(1,782)	$	(165)	$	(124)	$	(289)
Asbestos	$	-	$	-	$	-	$	-	$	(2)	$	(2)

(a) Included in the deferred gain from retroactive reinsurance reported in other liabilities.

(b) Excludes $4 million and $(42) million of discount related to certain long tail liabilities in the United Kingdom for the three-month period ended June 30, 2017 and 2016, respectively.

(c) Excludes $(4) million and $(15) million of discount related to certain long tail liabilities in the United Kingdom for the six-month period ended June 30, 2017 and 2016, respectively.