Liabilities for Unpaid Claims and Claims Expenses

9 Months Ended

Sep. 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 unpaid claims and claim expense liabilities for short-duration insurance contracts other than those sold by the Global Health Care segment. 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 September 30is as follows:

(In millions)	September 30, 2017		September 30, 2016
Group Disability and Life	$	4,442	$	4,288
Global Supplemental Benefits		453		392
Other Operations		182		209
Unpaid claims and claim expenses	$	5,077	$	4,889

Activity in the Group Disability and Life and the Global Supplemental Benefits segments’ liabilities for unpaid claims and claim expenses is presented in the following table. Liabilities associated with Other Operations 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				Nine Months Ended
(In millions)	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Beginning balance	$	4,852	$	4,618	$	4,726	$	4,359
Less: Reinsurance		130		120		121		115
Beginning balance, net		4,722		4,498		4,605		4,244
Incurred claims related to:
Current year		1,066		1,046		3,290		3,158
Prior years:
Interest accretion		36		40		119		125
All other incurred		12		4		(59)		90
Total incurred		1,114		1,090		3,350		3,373
Paid claims related to:
Current year		806		761		1,880		1,771
Prior years		269		275		1,327		1,295
Total paid		1,075		1,036		3,207		3,066
Foreign currency		-		7		13		8
Ending balance, net		4,761		4,559		4,761		4,559
Add: Reinsurance		134		121		134		121
Ending balance	$	4,895	$	4,680	$	4,895	$	4,680

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 nine months endedSeptember 30, 2017 largely reflect improved claim resolution rates. Unfavorable prior year incurred claims reported for the nine months endedSeptember 30, 2016included the impact of modifications made to our disability claims management process and a period of elevated life claims.