12. Liability for Unpaid Claims

Changes in the liability for unpaid claims (in millions), were as follows:



	For the Years Ended December 31,
	2018			2017			2016
Balance as of beginning-of-year	$	2,222		$	2,242		$	2,307
Reinsurance recoverable		57			69			71
Net balance as of beginning-of-year		2,165			2,173			2,236
Business acquired (1)		2,842			-			-
Incurred related to:
Current year		2,531			1,346			1,395
Prior years:
Interest		120			69			71
All other incurred (2)		(208	)		(76	)		(156	)
Total incurred		2,443			1,339			1,310
Paid related to:
Current year		(1,197	)		(798	)		(806	)
Prior years		(1,061	)		(549	)		(567	)
Total paid		(2,258	)		(1,347	)		(1,373	)
Net balance as of end-of-year		5,192			2,165			2,173
Reinsurance recoverable		143			57			69
Balance as of end-of-year	$	5,335		$	2,222		$	2,242

⁽¹⁾

Represents Liberty group life and disability reserves, net, as of May 1, 2018, subject to finalization of acquisition date fair values. See Note 3 for additional information.

⁽²⁾

All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably.

The majority of the reserves included above are for long-term disability claims. The interest rate assumption is an important part of the reserving process due to the long benefit period for these claims. Interest accrued on prior years reserves has been calculated on the opening reserve balance less one-half of the prior year’s incurred claim payments at our average reserve discount rate.

Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods. As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates. Long-term disability reserves are discounted using rates ranging from 3.25% to 5%. The discount rates vary by year of claim incurral.

A reconciliation of future contract benefits as reported in our Consolidated Balance Sheets to the liability for unpaid claims (in millions), was as follows:



	As of December 31,
	2018		2017		2016
Future contract benefits	$	34,648	$	22,887	$	21,576
Less:
Life insurance and annuity reserves and claims due		27,732		19,066		17,634
Accident and health life insurance reserves		1,581		1,599		1,700
Liability for unpaid claims	$	5,335	$	2,222	$	2,242