Liability for Unpaid Claims and Claim Adjustment Expenses

3 Months Ended

Mar. 31, 2020

Liability for Unpaid Claims and Claim Adjustment Expenses

The liability for unpaid claims and claim adjustment expenses (“claims”) for health and property and casualty insurance is included in “Policy and contract claims” in the condensed consolidated statements of financial position and is the amount estimated for incurred but not reported (“IBNR”) claims and claims that have been reported but not settled. The liability for unpaid claims is estimated based upon American National’s historical experience and actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, less anticipated salvage and subrogation. The effects of the changes are included in the condensed consolidated results of operations in the period in which the changes occur. The time value of money is not taken into account for the purposes of calculating the liability for unpaid claims. There have been no significant changes in methodologies or assumptions used to calculate the liability for unpaid claims and claim adjustment expenses.

Information regarding the liability for unpaid claims is shown below (in thousands):


	Three months ended March 31,
	2020		2019
Unpaid claims balance, beginning	$	1,322,837	$	1,305,225
Less: Reinsurance recoverables	246,447		254,466
Net beginning balance	1,076,390		1,050,759
Incurred related to
Current	260,025		278,864
Prior years	4,172		(17,296)
Total incurred claims	264,197		261,568
Paid claims related to
Current	95,635		93,273
Prior years	174,986		168,879
Total paid claims	270,621		262,152
Net balance	1,069,966		1,050,175
Plus: Reinsurance recoverables	244,230		244,098
Unpaid claims balance, ending	$	1,314,196	$	1,294,273

The net and gross reserve calculations have shown unfavorable development in 2020 as a result of unfavorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years increased by approximately $4,172,000 during the first three months of 2020 and decreased by $17,296,000 during the same period in 2019. The unfavorable development in 2020 was a reflection of higher-than-anticipated losses in the Managing General Underwriting and Collateral Protection Insurance lines of business. The favorable development for the first three months in 2019 reflects lower-than-anticipated losses in the business owner and commercial package policy lines of business.

For short-duration health insurance claims, the total of IBNR plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses at March 31, 2020 and December 31, 2019 was $23,092,000 and $21,379,000 respectively.