As discussed in Note 2, the Company is newly required by ASU 2015-09 to present additional information about its claim estimates related to short-duration insurance contracts. The following information relates to the Company's unpaid claims and claim expense liabilities.

Accounting policy. Liabilities for unpaid claims and claim expenses are established by book of business within the Company's Group Disability and Life, Global Supplemental Benefits and Other Operations segments. The Group Disability and Life segment's liability for unpaid claims and claim expenses consists of the following primary products: long-term and short-term disability, life insurance, and accident coverages. Unpaid claims and claim expenses consist of (1) case or claims reserves for known claims that are unpaid as of the balance sheet date; (2) incurred but not reported reserves for claims when the insured event has occurred but has not been reported to the Company; and (3) loss adjustment expense reserves for the expected costs of settling these claims. The Company consistently estimates incurred but not yet reported losses using actuarial principles and assumptions based on historical and projected claim incidence patterns, claim size and the expected payment period. The Company recognizes the actuarial best estimate of the ultimate liability within a level of confidence, consistent with actuarial standards of practice that the liabilities be adequate under moderately adverse conditions. When estimates of these liabilities change, the Company immediately records the adjustment in benefits and expenses.

The Company's liability for disability claims reported but not yet paid is the present value of estimated future benefit payments over the expected disability period. The Company projects the expected disability period by using historical resolution rates combined with an analysis of current trends and operational factors to develop current estimates of resolution rates. Using the Company's experience, expected claim resolution rates may vary based upon the anticipated disability period, the covered benefit period, the cause of disability, the benefit design and the claimant's age, gender and income level. The gross monthly benefit is reduced (offset) by disability income received under other benefit programs, most commonly Social Security Disability Income, workers' compensation, statutory disability or other group benefit plans. For certain offsets not yet finalized, the Company estimates the probability and amount of future offset awards and lapses based on the Company's experience.

Liability balance details. The liability for unpaid claims and claim expenses by segment as of December 31 is as follows:

The Company discounts certain liabilities, predominantly long-term disability, because benefits payments are made over extended periods. Discount rate assumptions for these liabilities are based on projected investment returns for the supporting asset portfolios. Details of the Company's unpaid claim discounted liability balances as of December 31 were as follows:

Interest is accreted and recognized in other benefit expenses in the Consolidated Statement of Income.

Activity in the Company's Group Disability and Life and the Global Supplemental Benefits segments' liabilities for unpaid claims and claim expenses are presented in the following table. Liabilities associated with the Company's Other Operations segment are excluded because they pertain to obligations for long-duration insurance contracts or, if short-duration, the liabilities have been fully reinsured.

(In millions)	2016		2015		2014
Balance at January 1,	$	4,359	$	4,178	$	4,038
Less: Reinsurance		115		104		99
Balance at January 1, net		4,244		4,074		3,939
Incurred claims related to:
Current year		4,258		3,813		3,512
Prior years:
Interest accretion		161		163		149
All other incurred		93		(91)		(165)
Total incurred		4,512		3,885		3,496
Paid claims related to:
Current year		2,575		2,325		2,078
Prior years		1,560		1,382		1,271
Total paid		4,135		3,707		3,349

Acquisitions		-		11		-
Foreign currency		(16)		(19)		(12)

Balance at December 31, net		4,605		4,244		4,074
Add: Reinsurance		121		115		104
Balance at December 31,	$	4,726	$	4,359	$	4,178

Reinsurance in the table above reflect amounts due from reinsurers related to unpaid claims liabilities. The Company's insurance subsidiaries enter into agreements with other companies primarily to limit losses from large exposures and to permit recovery of a portion of incurred losses. See Note 9 for additional information on reinsurance.

The majority of the liability for unpaid claims and claim expenses is related to disability claims with long-tailed payouts. Interest earned on assets backing these liabilities is an integral part of pricing and reserving. Therefore, interest accreted on prior year balances is shown as a separate component of prior year incurred claims. This interest is calculated by applying the average discount rate used in determining the liability balance to the average liability balance over the period. The remaining prior year incurred claims amount primarily reflects updates to the Company's liability estimates and variances between actual experience during the period relative to the assumptions and expectations reflected in determining the liability. Assumptions reflect the Company's expectations over the life of the book of business and will vary from actual experience in any period, both favorably and unfavorably, with variation in resolution rates being the most significant driver for the long-term disability business. Prior year incurred claims reported in 2016 included the impact of modifications made to our disability claims management process and a period of elevated life claims.

Long-Term Disability Development Tables. The table below presents information about incurred and paid claims development as of December 31, 2016 (net of reinsurance) cumulative claim frequency and total incurred but not reported liabilities for the Company's long-term disability book of business. The information about incurred and paid claims development for the years ended December 31, 2012 through 2015, is presented as supplementary information and is unaudited. As permitted under the standard in the initial year of adoption, the Company presented development table information for five years because obtaining information beyond this period was impracticable as historical data was not maintained in such detail at this level.

(In millions, except for claims frequency)
		Incurred Claims (undiscounted)
Accident Year	2012 (Unaudited)		2013 (Unaudited)		2014 (Unaudited)		2015 (Unaudited)		2016		Incurred But Not Reported Liabilities		Claims Frequency
2012	$	995	$	951	$	889	$	876	$	883	$	-		21,170
2013				1,063		1,037		1,062		1,072		-		23,493
2014						1,158		1,129		1,167		3		25,175
2015								1,184		1,154		17		25,133
2016										1,246		524		13,734
Cumulative incurred claims for the periods presented									$	5,522

		Cumulative Paid Claims
Accident Year	2012 (Unaudited)		2013 (Unaudited)		2014 (Unaudited)		2015 (Unaudited)		2016
2012	$	81	$	288	$	429	$	504	$	571
2013				92		342		503		600
2014						111		379		575
2015								114		417
2016										122
Cumulative paid claims for the periods presented										2,285
All outstanding liabilities prior to 2012, net of reinsurance										1,361
Impact of discounting										(976)
Liability for long-term disability unpaid claims and claim expenses, net of reinsurance									$	3,622

The claims frequency metric used for the Company's long-term disability line of business represents the number of unique claim events for which benefits have been approved and payments made. Claim events are identified using a unique claimant identifier and incurral date. Thus, if an individual has multiple claims for different disabling events (and therefore different incurral dates), each will be determined to be a unique claim event. However, if an individual receives multiple benefits under more than one policy (for example for supplemental disability benefits such as pension contribution benefits or survivor benefits), the Company treats this as a single claim occurrence because they related to the same claim event. Claims frequency metrics for the most recent year are expected to be low reflecting the long-term disability product features including waiting and elimination periods that result in delayed eligibility for contract benefits.

The following is supplementary and unaudited information about average historical claims payout patterns for the long-term disability business for the years presented in the development table as of December 31, 2016. The average annual percentage payout of incurred claims, net of reinsurance, is approximately 9% in year one, 24% in year two, 16% in year three, 9% in year four and 8% in year five.

The following reconciles the long-term disability net incurred and paid claims development table to the liability for unpaid claims and claim expenses in the Company's Consolidated Balance Sheets as of December 31, 2016.

(In millions)
Net outstanding liabilities – Group Disability and Life segment
Long-term disability liabilities, net of reinsurance	$	3,622
Other short-duration insurance books of business, net of reinsurance		620
Liabilities for unpaid claims and claim expenses, net of reinsurance		4,242
Reinsurance recoverable on unpaid claims – Group Disability and Life segment
Long-term disability		86
Other short-duration insurance books of business		14
Total reinsurance recoverable on unpaid claims		100
Total liability for unpaid claims and claim expenses – Group Disability and Life segment		4,342
Global Supplemental Benefits segment		384
Other Operations segment		191
Total liability for unpaid claims and claim expenses	$	4,917

The other short-duration insurance books of business, net of reinsurance, primarily include liabilities for life, accident and short-term disability insurance products. Liabilities for these products are typically complete within one year. Claim development on these liabilities is largely driven by completion factors and loss ratio assumptions. In 2016, development on these liabilities was driven by a period of elevated life claims.