Reserve for Losses and Loss Adjustment Expenses

The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and ending reserve for losses and loss adjustment expenses:



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Reserve for losses and loss adjustment expenses at beginning of period	$	10,296,821		$	9,378,987		$	10,200,960		$	9,125,250
Unpaid losses and loss adjustment expenses recoverable	2,095,130			1,937,724			2,083,575			1,828,837
Net reserve for losses and loss adjustment expenses at beginning of period	8,201,691			7,441,263			8,117,385			7,296,413

Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	759,261			670,381			1,395,037			1,249,359
Prior years	(69,401		)	(85,789		)	(152,607		)	(141,818		)
Total net incurred losses and loss adjustment expenses	689,860			584,592			1,242,430			1,107,541

Net foreign exchange losses (gains)	75,295			(48,328		)	106,574			(14,733		)

Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(80,499		)	(107,957		)	(115,502		)	(157,036		)
Prior years	(482,046		)	(401,691		)	(946,586		)	(764,306		)
Total net paid losses and loss adjustment expenses	(562,545		)	(509,648		)	(1,062,088		)	(921,342		)

Net reserve for losses and loss adjustment expenses at end of period	8,404,301			7,467,879			8,404,301			7,467,879
Unpaid losses and loss adjustment expenses recoverable	2,116,210			2,003,768			2,116,210			2,003,768
Reserve for losses and loss adjustment expenses at end of period	$	10,520,511		$	9,471,647		$	10,520,511		$	9,471,647

Development on Prior Year Loss Reserves

2017 Second Quarter

During the 2017 second quarter, the Company recorded net favorable development on prior year loss reserves of $69.4 million, which consisted of $39.5 million from the reinsurance segment, $2.0 million from the insurance segment, $29.8 million from the mortgage segment and adverse development of $1.9 million from the ‘other’ segment.

The reinsurance segment’s net favorable development of $39.5 million, or 12.6 points, for the 2017 second quarter consisted of $28.1 million from short-tailed lines and $11.4 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $16.9 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), reflecting lower levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty reserves of $9.0 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2004 underwriting years, and favorable development in marine reserves of $2.4 million across most underwriting years.

The insurance segment’s net favorable development of $2.0 million, or 0.4 points, for the 2017 second quarter consisted of $5.3 million of net favorable development in short-tailed lines, partially offset by $3.3 million of net adverse development in long-tailed and medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2012 to 2016 accident years (i.e., the year in which a loss occurred). Net adverse development in medium-tailed and long-tailed lines reflected $12.2 million of adverse development on programs, primarily on a small number of programs in the 2014 and 2015 accident years, and $8.9 million on construction reserves across various accident years. Such amounts were partially offset by net favorable development of $17.8 million in other medium-tailed lines, primarily in professional liability with $12.1 million of favorable development across most accident years, and surety with $3.6 million of favorable development.

The mortgage segment’s net favorable development was $29.8 million, or 11.5 points, for the 2017 second quarter. The 2017 second quarter development was primarily driven by continued lower than expected claim emergence across most origination years and also reflected $4.9 million related to subrogation recoveries on second lien and other portfolios.

2016 Second Quarter

During the 2016 second quarter, the Company recorded net favorable development on prior year loss reserves of $85.8 million, which consisted of $69.8 million from the reinsurance segment, $4.9 million from the insurance segment, $11.1 million from the mortgage segment and minimal activity from the ‘other’ segment.

The reinsurance segment’s net favorable development of $69.8 million, or 24.0 points, for the 2016 second quarter consisted of $48.9 million from short-tailed lines and $20.9 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $39.5 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $22.8 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2009 underwriting years and 2012 to 2013 underwriting years.

The insurance segment’s net favorable development of $4.9 million, or 0.9 points, for the 2016 second quarter consisted of $8.1 million of net favorable development in long-tailed lines and $6.5 million of net favorable development in short-tailed lines, partially offset by $9.7 million of net adverse development in medium-tailed lines. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves from the 2008 to 2012 accident years (i.e., the year in which a loss occurred), and net reductions in casualty reserves from the 2004 to 2012 accident years, offset by a large energy casualty claim from the 2015 accident year. Net favorable development in short-tailed lines primarily resulted from reductions in property (including special risk other than marine) reserves from the 2012 to 2014 accident years and the 2008 accident year, primarily due to varying levels of reported claims activity. Such amount included $4.1 million of favorable development on the 2005 to 2015 named catastrophic events. Net adverse development in medium-tailed lines primarily resulted from an increase in programs of $16.4 million stemming in part from terminated programs, partially offset by favorable development of $6.7 million in other medium-tailed lines, primarily in professional liability and surety.

The mortgage segment’s net favorable development was $11.1 million, or 16.6 points, for the 2016 second quarter. The 2016 second quarter development was primarily driven by lower than expected claim rates across most origination years.

Six Months Ended June 30, 2017

During the six months ended June 30, 2017, the Company recorded net favorable development on prior year loss reserves of $152.6 million, which consisted of $96.8 million from the reinsurance segment, $4.1 million from the insurance segment, $53.4 million from the mortgage segment and adverse development of $1.7 million from the ‘other’ segment.

The reinsurance segment’s net favorable development of $96.8 million, or 17.3 points, for the 2017 period consisted of $68.9 million from short-tailed lines and $27.9 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $51.0 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years, reflecting lower levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed and medium-tailed lines reflected reductions in casualty reserves of $15.6 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2013 underwriting years, and favorable development in marine reserves of $12.3 million across most underwriting years.

The insurance segment’s net favorable development of $4.1 million, or 0.4 points, for the 2017 period consisted of $7.2 million of net favorable development in short-tailed lines and $6.6 million of net favorable development in long-tailed lines, partially offset by $9.7 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines primarily resulted from property (including special risk other than marine) reserves from the 2011 to 2016 accident years. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves from the 2008 to 2014 accident years and reductions in healthcare reserves across various accident years, partially offset by $13.4 million on construction reserves across various accident years. Net adverse development in medium-tailed lines primarily resulted from an increase in programs of $26.4 million stemming in part from development on a small number of programs in the 2013 to 2015 accident years, partially offset by net favorable development of $16.7 million in other medium-tailed lines, primarily in professional liability and surety.

The mortgage segment’s net favorable development was $53.4 million, or 10.6 points, for the 2017 period. The development was primarily driven by continued lower than expected claim emergence across most origination years and also reflected $13.1 million related to subrogation recoveries on second lien and other portfolios.

Six Months Ended June 30, 2016

During the six months ended June 30, 2016, the Company recorded net favorable development on prior year loss reserves of $141.8 million, which consisted of $117.2 million from the reinsurance segment, $11.1 million from the insurance segment, $13.8 million from the mortgage segment and adverse development of $0.2 million from the ‘other’ segment.

The reinsurance segment’s net favorable development of $117.2 million, or 21.2 points, for the 2016 period consisted of $85.4 million from short-tailed lines and $31.8 million from long-tailed and medium-tailed lines. Favorable development in short-tailed lines included $69.4 million from property catastrophe and property other than property catastrophe reserves, across most underwriting years. The net reduction of loss estimates for the reinsurance segment’s short-tailed lines primarily resulted from varying levels of reported and paid claims activity than previously anticipated which led to decreases in certain loss ratio selections during the period. Favorable development in long-tailed lines reflected reductions in casualty reserves of $37.0 million based on varying levels of reported and paid claims activity, primarily from the 2002 to 2013 underwriting years. Such amounts were partially offset by net adverse development on marine reserves of $3.9 million, primarily from the 2002 and 2015 underwriting years, partially offset by favorable development from most other underwriting years.

The insurance segment’s net favorable development of $11.1 million, or 1.1 points, for the 2016 period consisted of $18.0 million of net favorable development in long-tailed lines and $10.2 million of net favorable development in short-tailed lines, partially offset by $17.1 million of net adverse development in medium-tailed lines. Net favorable development in long-tailed lines reflected net reductions in executive assurance reserves from the 2008 to 2012 accident years, and net reductions in casualty reserves from the 2004 to 2013 accident years, partially offset by a large energy casualty claim from the 2015 accident year. Net favorable development in short-tailed lines primarily resulted from reductions in property (including special risk other than marine) reserves from the 2012 to 2014 accident years, primarily due to varying levels of reported claims activity. Such amount included $7.3 million of favorable development on the 2005 to 2015 named catastrophic events. Net adverse development in medium-tailed lines primarily resulted from an increase in programs of $22.4 million stemming in part from terminated programs, partially offset by favorable development of $5.3 million in other medium-tailed lines, primarily in professional liability and surety.

The mortgage segment’s net favorable development was $13.8 million, or 10.8 points, for the 2016 period. The development was primarily driven by lower than expected claim rates across most origination years.