Property and Casualty Insurance Reserves

9 Months Ended

Sep. 30, 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 nine months ended September 30, 2023 and 2022 was:


	Nine Months Ended
(Dollars in Millions)	Sep 30, 2023		Sep 30, 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	2,660.5		3,125.0



Prior Years	158.5		(22.5)
Total Incurred Losses and LAE	2,819.0		3,102.5
Paid Losses and LAE Related to:

Current Year	1,411.8		1,748.9



Prior Years	1,428.9		1,406.6
Total Paid Losses and LAE	2,840.7		3,155.5
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period	2,695.6		2,677.8
Plus Reinsurance Recoverables at End of Period	28.9		42.5
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Period	$	2,724.5	$	2,720.3

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 nine months ended September 30, 2023, the Company increased its property and casualty insurance reserves by $158.5 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 $110.9 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 as well as an increase in Florida personal injury protection driven by higher than expected frequency and severity resulting from an increase in litigated claim activity, mainly from policy years 2020 through 2022. Commercial automobile insurance loss and LAE reserves developed adversely by $22.2 million due to higher than expected emergence in loss patterns related to policy years 2021 and 2022 bodily injury coverages. Non-Core personal automobile insurance loss and LAE reserves developed adversely by $18.3 million due to higher than expected emergence in loss patterns related to the third and fourth accident quarters of 2022 within the bodily injury and physical damage coverages. Non-Core homeowners loss and LAE reserves developed adversely by $3.8 million. None-Core other lines loss and LAE reserves developed adversely by $3.3 million.

For the nine months ended September 30, 2022, the Company decreased its property and casualty insurance reserves by $22.5 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 $31.6 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 $7.5 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Non-Core personal automobile insurance loss and LAE reserves developed adversely by $1.9 million due primarily to the emergence of more adverse loss patterns than expected for liability insurance. Homeowners loss and LAE reserves developed favorably by $6.1 million due primarily to the emergence of more favorable loss patterns than expected. Other lines loss and LAE reserves developed adversely by $5.8 million due primarily to the emergence of more adverse loss patterns than expected for prior accident years.

Note 6 - Property and Casualty Insurance Reserves (Continued)

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 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 roll forward of changes in the allowance for expected credit losses for the nine months ended September 30, 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			32.8
Write-offs of Uncollectible Receivables from Policyholders			(32.4)
Balance at End of Period	$	1,102.6	$	13.5


(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			36.7
Write-offs of Uncollectible Receivables from Policyholders			(37.8)
Balance at End of Period	$	1,349.1	$	12.5

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 nine and three months ended September 30, 2023 and September 30, 2022:


		Nine Months Ended				Three Months Ended
		Sep 30, 2023		Sep 30, 2022		Sep 30, 2023		Sep 30, 2022
Present Value of Expected Net Premiums	Balance, Beginning of Period	$	688.6	$	669.0	$	711.7	$	646.4

	Beginning Balance at Original Discount Rate	$	728.9	$	599.8	$	745.1	$	660.3
	Effect of Changes in Cash Flow Assumptions	—		—		—		—
	Effect of Actual Variances from Expected Experience	(18.6)		5.2		(6.3)		(8.3)
	Adjusted Beginning of Period Balance	710.3		605.0		738.8		652.0
	Issuances	81.6		109.9		19.7		30.5
	Interest Accrual	22.2		15.6		7.7		5.3
	Net Premiums Collected	(71.6)		(66.0)		(23.7)		(23.3)
	Ending Balance at Original Discount Rate	742.5		664.5		742.5		664.5
	Effect of Changes in Discount Rate Assumptions	(56.1)		(42.7)		(56.1)		(42.7)
	Balance, End of Period	$	686.4	$	621.8	$	686.4	$	621.8
Present Value of Expected Future Policyholder Benefits	Balance, Beginning of Period	$	3,561.0	$	4,933.1	$	3,635.9	$	3,799.4

	Beginning Balance at Original Discount Rate	$	3,906.2	$	3,788.1	$	3,915.1	$	3,827.6
	Effect of Changes in Cash Flow Assumptions	—		—		—		—
	Effect of Actual Variances From Expected Experience	(21.7)		7.4		(8.5)		(7.9)
	Adjusted Beginning of Period Balance	3,884.5		3,795.5		3,906.6		3,819.7
	Issuances	80.8		110.0		18.9		30.5
	Interest Accrual	128.2		122.1		43.0		40.7
	Benefit Payments	(184.4)		(197.9)		(59.4)		(61.2)
	Ending Balance at Original Discount Rate	3,909.1		3,829.7		3,909.1		3,829.7
	Effect of Changes in Discount Rate Assumptions	(578.6)		(387.8)		(578.6)		(387.8)
	Balance, End of Period	$	3,330.5	$	3,441.9	$	3,330.5	$	3,441.9
	Net Liability for Future Policyholder Benefits	$	2,644.1	$	2,820.1	$	2,644.1	$	2,820.1
	Less: Reinsurance Recoverable	—		—		—		—
	Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable	$	2,644.1	$	2,820.1	$	2,644.1	$	2,820.1

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


	Sep 30, 2023	Sep 30, 2022
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)	13.8	15.5

Note 7 - 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:


	Sep 30, 2023		Sep 30, 2022


Net Liability for Future Policyholder Benefits	2,644.1		2,820.1
Deferred Profit Liability	304.9		249.9
Other1	149.1		149.8
Total Life and Health Insurance Reserves	$	3,098.1	$	3,219.8

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:


	Sep 30, 2023		Sep 30, 2022
Expected Future Benefit Payments, undiscounted	$	10,181.5	$	9,585.4
Expected Future Gross Premiums, undiscounted	$	4,446.4	$	3,801.1
Expected Future Gross Premiums, discounted	$	2,748.0	$	2,585.1

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


	Nine Months Ended				Three Months Ended
	Sep 30, 2023		Sep 30, 2022		Sep 30, 2023		Sep 30, 2022
Gross Premiums or Assessments	$	300.7	$	297.2	$	98.4	$	100.8
Interest Expense	$	106.1	$	106.5	$	35.4	$	35.4

The weighted-average interest rate is as follows:


	Sep 30, 2023		Sep 30, 2022
Interest Accretion Rate	4.57	%	4.59	%
Current Discount Rate	5.88	%	5.44	%

Significant assumption inputs to the calculation of the liability for future policyholder benefits include mortality, lapses, and discount rates (both accretion and current). The Company reviewed all significant assumptions and did not make any changes to mortality and lapse assumptions. Market data that underlies current discount rates was updated from June 30, 2023.