Liabilities for Unpaid Claims and Claims Expenses

6 Months Ended

Jun. 30, 2017

Group Disability and Life, Global Supplemental Beneftits and Other Operations [Member]

Liability For Unpaid Claims And Claims Adjustment Expense [Line Items]

Liabilities for Unpaid Claims and Claims Expenses

Note7―Liabilities for Unpaid Claims and Claim Expenses

The following information relates to the Company’s unpaid claims and claim expense liabilities that are related to short-duration insurance contracts. See Note 8 to the Consolidated Financial Statements in the Company’s 2016 Form 10-K for further information about the assumptions and estimates used to establish this liability.

The liability for unpaid claims and claim expenses by segment as of June 30 is as follows:

(In millions)	June 30, 2017		June 30, 2016
Group Disability and Life	$	4,400	$	4,245
Global Supplemental Benefits		452		373
Other Operations		187		213
Unpaid claims and claim expenses	$	5,039	$	4,831

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.

	Three Months Ended				Six Months Ended
(In millions)	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Beginning balance	$	4,809	$	4,513	$	4,726	$	4,359
Less: Reinsurance		123		115		121		115
Beginning balance, net		4,686		4,398		4,605		4,244
Incurred claims related to:
Current year		1,076		1,124		2,224		2,112
Prior years:
Interest accretion		40		42		83		85
All other incurred		(7)		(19)		(71)		86
Total incurred		1,109		1,147		2,236		2,283
Paid claims related to:
Current year		703		683		1,074		1,010
Prior years		367		360		1,058		1,020
Total paid		1,070		1,043		2,132		2,030
Foreign currency		(3)		(4)		13		1
Ending balance, net		4,722		4,498		4,722		4,498
Add: Reinsurance		130		120		130		120
Ending balance	$	4,852	$	4,618	$	4,852	$	4,618

Reinsurance in the table above reflects 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 8 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, and is therefore the basis for determining the rate used to discount these liabilities. Accordingly, 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 rateused 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 can 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 and variations in mortality and morbidity being the most significant factors for other business. Favorable prior year incurred claims reported for the six months endedJune 30, 2017 largely reflect improved claim resolution rates. Unfavorable prior year incurred claims reported for the six months endedJune 30, 2016included the impact of modifications made to our disability claims management process and a period of elevated life claims.