Reserve for Property and Casualty Insurance Claims and Claims Expense

9 Months Ended

Sep. 30, 2019

Reserve for Property-Liability Insurance Claims and Claims Expense [Abstract]

Reserve for Property and Liability Insurance Claims and Claims Expense



Note 8	Reserve for Property and Casualty Insurance Claims and Claims Expense

The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. In the normal course of business, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Because reserves are estimates of unpaid portions of losses that have occurred, including incurred but not reported (“IBNR”) losses, the establishment of appropriate reserves, including reserves for catastrophes, Discontinued Lines and Coverages and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the

current reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in prior year reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined.

Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Condensed Consolidated Statements of Financial Position based on available facts, technology, laws and regulations.

Allstate’s reserves for asbestos claims were $840 million and $866 million, net of recoverables of $387 million and $400 million, as of September 30, 2019 and December 31, 2018, respectively. Reserves for environmental claims were $188 million and $170 million, net of recoverables of $42 million and $39 million, as of September 30, 2019 and December 31, 2018, respectively.



Rollforward of the reserve for property and casualty insurance claims and claims expense
	Nine months ended September 30,
($ in millions)	2019			2018
Balance as of January 1	$	27,423		$	26,325
Less recoverables ⁽¹⁾	(7,155		)	(6,471		)
Net balance as of January 1	20,268			19,854
Incurred claims and claims expense related to:
Current year	18,345			16,846
Prior years	(118		)	(135		)
Total incurred	18,227			16,711
Claims and claims expense paid related to:
Current year	(10,640		)	(10,077		)
Prior years	(6,872		)	(6,174		)
Total paid	(17,512		)	(16,251		)
Net balance as of September 30	20,983			20,314
Plus recoverables	7,093			6,625
Balance as of September 30	$	28,076		$	26,939


⁽¹⁾	Recoverables comprises reinsurance and indemnification recoverables.

Incurred claims and claims expense represents the sum of paid losses and reserve changes in the period. This expense included losses from catastrophes of $2.26 billion and $1.89 billion in the nine months ended September 30, 2019 and 2018, respectively, net of recoverables.

Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.



Prior year reserve reestimates included in claims and claims expense ⁽¹⁾
	Nine months ended September 30,
($ in millions)	Non-catastrophes						Catastrophes						Total
	2019			2018			2019 ⁽²⁾			2018			2019			2018
Auto ⁽³⁾	$	(302	)	$	(319	)	$	(9	)	$	(37	)	$	(311	)	$	(356	)
Homeowners	—			(38		)	59			84			59			46
Other personal lines	13			(13		)	4			(2		)	17			(15		)
Commercial lines	18			107			(1		)	—			17			107
Discontinued Lines and Coverages ⁽⁴⁾	103			85			—			—			103			85
Service Businesses	(3		)	(2		)	—			—			(3		)	(2		)
Total prior year reserve reestimates	$	(171	)	$	(180	)	$	53		$	45		$	(118	)	$	(135	)


⁽¹⁾	Favorable reserve reestimates are shown in parentheses.


⁽²⁾	Includes $13 million of reinstatement reinsurance premiums incurred during the period related to the 2018 Camp Fire, which primarily impacted homeowners reestimates.


⁽³⁾	Non-catastrophe results related to continued favorable personal lines auto injury coverage development.

⁽⁴⁾

The Company’s 2019 annual reserve review, using established industry and actuarial best practices, resulted in unfavorable reestimates of $95 million.