Property and Casualty Insurance Reserves

3 Months Ended

Mar. 31, 2023

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

Property and Casualty Insurance Reserves

Property and casualty insurance reserve activity for the three months ended March 31, 2023 and 2022 was:


	Three Months Ended
(Dollars in Millions)	Mar 31, 2023		Mar 31, 2022
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year	$	2,756.9	$	2,772.7
Less Reinsurance Recoverables at Beginning of Year	39.6		41.9
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year	2,717.3		2,730.8

Incurred Losses and Loss Adjustment Expenses (“ LAE”) Related to:

Current Year	944.0		1,041.9



Prior Years	41.9		(2.7)
Total Incurred Losses and LAE	985.9		1,039.2
Paid Losses and LAE Related to:

Current Year	325.5		373.9



Prior Years	690.9		676.9
Total Paid Losses and LAE	1,016.4		1,050.8
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period	2,686.8		2,719.2
Plus Reinsurance Recoverables at End of Period	34.3		40.9
Property and Casualty Insurance Reserves - Gross of Reinsurance at End of Period	$	2,721.1	$	2,760.1

Property and casualty insurance reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends are likely to differ from these historical experience patterns and economic conditions. Loss experience and loss trends emerge over several years from the dates of loss inception. The Company monitors such emerging loss trends on a quarterly basis. Changes in such estimates are included in the Condensed Consolidated Statements of Loss in the period of change.

For the three months ended March 31, 2023, the Company increased its property and casualty insurance reserves by $41.9 million to recognize adverse development of loss and LAE reserves from prior accident years. Specialty personal automobile insurance loss and LAE reserves developed adversely by $22.9 million due primarily to higher than expected emergence in loss patterns related to third and fourth accident quarters of 2022 within the bodily injury and physical damage coverages. Commercial automobile insurance loss and LAE reserves developed adversely by $8.2 million due to higher than expected emergence in loss patterns related to 2021 and 2022 bodily injury coverages. Preferred personal automobile insurance loss and LAE reserves developed adversely by $3.4 million due to higher than expected emergence in loss patterns related to the third and fourth accident quarters of 2022 within the physical damage coverages. Homeowners loss and LAE reserves developed adversely by $5.5 million. Other lines loss and LAE reserves developed adversely by $1.9 million due to higher than expected loss patterns related to fourth quarter 2022 non-weather and weather related losses.

For the three months ended March 31, 2022, the Company decreased its property and casualty insurance reserves by $2.7 million to recognize favorable development of loss and LAE reserves from prior accident years. Specialty personal automobile insurance loss and LAE reserves developed favorably by $8.3 million due primarily to the emergence of more favorable loss patterns than expected for liability and physical damage insurance. Commercial automobile insurance loss and LAE reserves developed adversely by $5.2 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Preferred personal automobile insurance loss and LAE reserves developed adversely by $1.6 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Homeowners loss and LAE reserves developed favorably by $4.4 million due primarily to the emergence of more favorable loss patterns than expected. Other lines loss and LAE reserves developed adversely by $3.2 million due primarily to the emergence of more adverse loss patterns than expected for prior accident years.

The Company cannot predict whether loss and LAE reserves will develop favorably or adversely from the amounts reported in the Company’s Condensed Consolidated Financial Statements. The Company believes that any such development will not have

Note 5 - Property and Casualty Insurance Reserves (Continued)

a material effect on the Company’s Condensed Consolidated Shareholders’ Equity, but could have a material effect on the Company’s consolidated financial results for a given period.

Receivables from Policyholders - Allowance for Expected Credit Losses

The following table presents receivables from policyholders, net of the allowance for expected credit losses including a rollforward of changes in the allowance for expected credit losses for the three months ended March 31, 2023.


(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
Balance at Beginning of Year	$	1,286.6	$	13.1
Provision for Expected Credit Losses			11.0
Write-offs of Uncollectible Receivables from Policyholders			(12.8)
Balance at End of Period	$	1,344.0	$	11.3


(Dollars in Millions)	Receivables from Policyholders, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
Balance at Beginning of Year	$	1,418.7	$	13.6
Provision for Expected Credit Losses			11.3
Write-offs of Uncollectible Receivables from Policyholders			(11.9)
Balance at End of Period	$	1,404.5	$	13.0

Liability for Future Policyholder Benefits

The following tables summarize balances and changes in the present value of expected net premiums, present value of expected future policyholder benefits and net liability for future policyholder benefits as of and for the three months ended March 31, 2023 and March 31, 2022:


	Present Value of Expected Net Premiums
	Mar 31, 2023		Mar 31, 2022
Balance, Beginning of Year	$	688.6	$	669.0

Beginning Balance at Original Discount Rate	$	728.9	$	599.8
Effect of Changes in Cash Flow Assumptions	—		—
Effect of Actual Variances from Expected Experience	0.7		12.5
Adjusted Beginning of Year Balance	729.6		612.3
Issuances	31.8		41.6
Interest Accrual	7.0		5.1
Net Premiums Collected	(23.9)		(21.1)
Ending Balance at Original Discount Rate	744.5		637.9
Effect of Changes in Discount Rate Assumptions	(22.1)		23.1
Balance, End of Period	$	722.4	$	661.0

	Present Value of Expected Future Policyholder Benefits
	Mar 31, 2023		Mar 31, 2022
Balance, Beginning of Year	$	3,561.0	$	4,933.1

Beginning Balance at Original Discount Rate	$	3,906.2	$	3,788.1
Effect of Changes in Cash Flow Assumptions	—		—
Effect of Actual Variances From Expected Experience	0.3		12.7
Adjusted Beginning of Year Balance	3,906.5		3,800.8
Issuances	31.8		41.6
Interest Accrual	42.4		40.8
Benefit Payments	(63.8)		(71.0)
Ending Balance at Original Discount Rate	3,916.9		3,812.2
Effect of Changes in Discount Rate Assumptions	(217.4)		536.5
Balance, End of Period	$	3,699.5	$	4,348.7

	Net Liability for Future Policyholder Benefits
	Mar 31, 2023		Mar 31, 2022
Net Liability for Future Policyholder Benefits	$	2,977.1	$	3,687.7
Less: Reinsurance Recoverable	—		—
Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable	$	2,977.1	$	3,687.7

The weighted-average liability duration of the liability for future policyholder benefits as calculated under current rates is as follows:


	Mar 31, 2023	Mar 31, 2022
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)	14.9	17.1

Note 6 - Liability for Future Policyholder Benefits (Continued)

The reconciliation of the net liability for future policyholder benefits to Life and Health Insurance Reserves in the Condensed Consolidated Balance Sheets is as follows:


	Mar 31, 2023		Mar 31, 2022
Present Value of Expected Future Policyholder benefits	$	3,699.5	$	4,348.7
Less: Present Value of Expected Net Premiums	722.4		661.0
Net Liability for Future Policyholder benefits	2,977.1		3,687.7
Deferred Profit Liability	272.6		213.9
Other1	149.9		202.6
Total Life and Health Insurance Reserves	$	3,399.6	$	4,104.2

1Other primarily consists of Accident and Health and Universal Life reserves

The amounts of expected undiscounted future benefit payments, expected undiscounted future gross premiums and expected discounted future gross premiums, were as follows:


	Mar 31, 2023		Mar 31, 2022
Expected Future Benefit Payments, undiscounted	$	10,177.7	$	9,536.9
Expected Future Gross Premiums, undiscounted	$	4,464.2	$	3,808.5
Expected Future Gross Premiums, discounted	$	2,931.1	$	2,912.1

The amount of revenue and interest recognized in the Condensed Consolidated Statements of Loss is as follows:


	Three Months Ended
	Mar 31, 2023		Mar 31, 2022
Gross Premiums or Assessments	$	103.8	$	101.4
Interest Expense	$	35.4	$	35.6

The weighted-average interest rate is as follows:


	Mar 31, 2023		Mar 31, 2022
Interest Accretion Rate	4.55	%	4.55	%
Current Discount Rate	5.05	%	3.76	%

Significant assumption inputs to the calculation of the liability for future policyholder benefits for term life, permanent limited pay, permanent recurring pay, and guaranteed issue products include mortality, lapses, and discount rates (both accretion and current). In the first quarter of 2023, the Company reviewed all significant assumptions and did not make any changes to mortality and lapse assumptions as actual experience for mortality and lapse across these products was materially consistent with the underlying assumptions. Market data that underlies current discount rates was updated from December 31, 2022.