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Liability for Future Policyholder Benefits
 9 Months Ended
Sep. 30, 2024
Insurance [Abstract]  
Liability for Future Policyholder Benefits Property and Casualty Insurance Reserves
Property and Casualty Insurance Reserve activity for the nine months ended September 30, 2024 and 2023 was:
 Nine Months Ended
(Dollars in Millions)Sep 30,
2024		Sep 30,
2023
Property and Casualty Insurance Reserves:
Gross of Reinsurance at Beginning of Year$2,680.5 $2,756.9 
Less: Reinsurance Recoverables at Beginning of Year27.8 39.6 
Property and Casualty Insurance Reserves, Net of Reinsurance at Beginning of Year2,652.7 2,717.3 
Incurred Losses and LAE related to:
Current Year2,053.0 2,660.5 
Prior Years27.4 158.5 
Total Incurred Losses and LAE2,080.4 2,819.0 
Paid Losses and LAE related to:
Current Year945.0 1,411.8 
Prior Years1,227.6 1,428.9 
Total Paid Losses and LAE2,172.6 2,840.7 
Property and Casualty Insurance Reserves, Net of Reinsurance at End of Period2,560.5 2,695.6 
Plus: Reinsurance Recoverables at End of Period26.4 28.9 
Property and Casualty Insurance Reserves, Gross of Reinsurance at End of Period$2,586.9 $2,724.5 
    
Note 4 - Property and Casualty Insurance Reserves (Continued)
Property and Casualty Insurance Reserves are estimated based on historical experience patterns and current economic trends. Actual loss experience and loss trends may 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 Income (Loss) in the period of change. Additionally, the Company reviews if any premium revisions are appropriate as a result of any incurred losses and loss adjustment expenses (“LAE”) related to prior years recorded in the current period. For the nine months ended September 30, 2024 and 2023, no additional premiums or return premiums were recorded.
For the nine months ended September 30, 2024, the Company increased its Property and Casualty Insurance Reserves by $27.4 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 $5.1 million due primarily to higher than expected settlements for extra-contractual demands related to prior year claims. Non-Core Operations loss and LAE reserves developed adversely by $22.1 million mainly due to higher than expected loss emergence related to homeowners, umbrella, and bodily injury coverages.
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 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. Commercial Automobile insurance loss and LAE reserves developed adversely by $22.2 million due to higher than expected emergence in loss patterns related to bodily injury coverages. Non-Core Operations loss and LAE reserves developed adversely by $25.4 million mainly due to higher than expected emergence in loss patterns related to bodily injury and physical damage coverages.
The Company cannot predict whether loss and LAE reserves will develop favorably or unfavorably from the amounts reported in the Condensed Consolidated Financial Statements. The Company believes that any such development will not have a material effect on the Company’s Shareholders’ Equity, but could have a material effect on the Company’s consolidated financial results for a given period.
Liability for Future Policyholder Benefits
The Company’s Life Insurance Reserves are reported using the Company’s estimate of its liability for future policyholder benefits.
The liability for future policyholder benefits is grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. 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’s actuaries review assumptions used to measure the liability for future policyholder benefits for nonparticipating traditional and limited pay long-duration contracts at least annually. If there is a change, assumptions are updated with the recognition and remeasurement recorded in the Company’s Condensed Consolidated Statements of Income (Loss). The Company’s actuaries use a variety of generally accepted actuarial methodologies, in accordance with Actuarial Standards of Practice, in determining the assumptions.
A key assumption in these estimation methodologies is that patterns observed in prior periods are indicative of how policyholder benefits are expected to develop in the future and that such historical data can be used to predict and estimate future losses. However, changes in the Company’s business processes and the macroeconomic environment, by their very nature, are likely to affect the actual to expected experience which generally results in the historical experience factors becoming less reliable over time in predicting how cash flows will ultimately develop. The Company’s actuaries use professional judgment in determining how much weight to place on the actual to expected experience based on the older historical data and how much weight to place on more recent experience data. In some cases, the Company’s actuaries make adjustments to the assumptions to estimate losses. These assumptions are reviewed by the Company’s actuaries and corporate management who apply their collective judgment and determine the appropriate assumptions to adopt for the underlying business. Numerous factors are considered in this determination process, including, but not limited to, the assessed reliability of key assumptions that may be significantly influencing the current actuarial indications, changes in pricing and product offerings, changes in customer base, changes in agency operations or other changes that affect the timing of payments, the
Note 5 - Liability for Future Policyholder Benefits (Continued)
policyholder behaviors observed over the recent past, the level of volatility within a particular line of business, and the improvement or deterioration of actuarial indications in the current period as compared to prior periods. Changes in the Company’s assumptions underlying these liabilities over time will occur and may be material.
Note 5 - Liability for Future Policyholder Benefits (Continued)
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 and nine months ended September 30, 2024 and 2023:
Three Months EndedNine Months Ended
(Dollars in Millions)Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023
Present Value of Expected Net PremiumsBalance, Beginning of Period$692.6 $711.7 $675.4 $688.6 
Beginning Balance at Original Discount Rate$733.2 $745.1 $694.7 $728.9 
        Effect of Changes in Cash Flow Assumptions— — — — 
        Effect of Actual Variances from Expected Experience(1.4)(6.3)4.3 (18.6)
Adjusted Beginning of Period Balance731.8 738.8 699.0 710.3 
         Issuances29.4 19.7 92.9 81.6 
         Interest Accrual8.0 7.7 23.5 22.2 
         Net Premiums Collected(24.0)(23.7)(70.2)(71.6)
Ending Balance at Original Discount Rate745.2 742.5 745.2 742.5 
         Effect of Changes in Discount Rate Assumptions(12.0)(56.1)(12.0)(56.1)
Balance, End of Period$733.2 $686.4 $733.2 $686.4 
Present Value of Expected Future Policyholder BenefitsBalance, Beginning of Period$3,380.1 $3,635.9 $3,613.2 $3,561.0 
Beginning Balance at Original Discount Rate$3,874.5 $3,915.1 $3,835.9 $3,906.2 
        Effect of Changes in Cash Flow Assumptions— — — — 
        Effect of Actual Variances From Expected Experience(2.6)(8.5)1.6 (21.7)
Adjusted Beginning of Period Balance3,871.9 3,906.6 3,837.5 3,884.5 
         Issuances 29.5 18.9 92.9 80.8 
         Interest Accrual43.0 43.0 128.2 128.2 
         Benefit Payments(57.6)(59.4)(171.8)(184.4)
Ending Balance at Original Discount Rate3,886.8 3,909.1 3,886.8 3,909.1 
         Effect of Changes in Discount Rate Assumptions(256.1)(578.6)(256.1)(578.6)
Balance, End of Period$3,630.7 $3,330.5 $3,630.7 $3,330.5 
Net Liability for Future Policyholder Benefits, pre-flooring$2,897.5 $2,644.1 $2,897.5 $2,644.1 
Cumulative impact of flooring the future Policyholder Benefits Reserve— — — — 
Net Liability for Future Policyholder Benefits, post-flooring2,897.5 2,644.1 2,897.5 2,644.1 
Less: Reinsurance Recoverable— — — — 
Net Liability for Future Policyholder Benefits, After Reinsurance Recoverable$2,897.5 $2,644.1 $2,897.5 $2,644.1 
The weighted-average liability duration of the liability for future policyholder benefits as calculated under current rates is as follows:
Sep 30, 2024Sep 30, 2023
Weighted-Average Liability Duration of the Liability for Future Policyholder Benefits (Years)14.813.8
Note 5 - 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:
(Dollars in Millions)Sep 30, 2024Sep 30, 2023
Net Liability for Future Policyholder Benefits, post-flooring$2,897.5 $2,644.1 
Deferred Profit Liability390.6 304.9 
Other1
137.7 149.1 
Total Life and Health Insurance Reserves$3,425.8 $3,098.1 
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, is as follows:
(Dollars in Millions)Sep 30, 2024Sep 30, 2023
Expected Future Benefit Payments, undiscounted$10,274.0 $10,181.5 
Expected Future Gross Premiums, undiscounted$4,159.0 $4,446.4 
Expected Future Gross Premiums, discounted$2,853.8 $2,748.0 
The amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) is as follows:
Three Months EndedNine Months Ended
(Dollars in Millions)Sep 30, 2024Sep 30, 2023Sep 30, 2024Sep 30, 2023
Gross Premiums or Assessments $99.8 $98.4 $300.3 $300.7 
Interest Expense $35.0 $35.4 $104.7 $106.1 
The weighted-average interest rate is as follows:
Sep 30, 2024Sep 30, 2023
Interest Accretion Rate4.54 %4.57 %
Current Discount Rate5.17 %5.88 %
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 did not make any changes to mortality and lapse assumptions during the nine months ended September 30, 2024 and 2023. Market data that underlies current discount rates is updated as of September 30, 2024.
The balances of and changes in Deferred Profit Liability as of and for the periods indicated are as follows:
Nine Months Ended
(Dollars in Millions)Sep 30, 2024Sep 30, 2023
Balance, Beginning of Year$337.8 $253.6 
Profits Deferred121.1 123.2 
Interest Accrual12.5 9.6 
Amortization(82.0)(83.3)
Effect of Actual Variances from Expected Experience and Other Changes1.2 1.8 
Balance, End of Period$390.6 $304.9