Reserve for Losses and Loss Adjustment Expenses

3 Months Ended

Mar. 31, 2024

Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]

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
	March 31,
	2024		2023
Reserve for losses and loss adjustment expenses at beginning of period	$	22,752	$	20,032
Unpaid losses and loss adjustment expenses recoverable	6,690		6,280
Net reserve for losses and loss adjustment expenses at beginning of period	16,062		13,752
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year	1,852		1,607
Prior years	(124)		(136)
Total net incurred losses and loss adjustment expenses	1,728		1,471
Net foreign exchange (gains) losses and other	(84)		55
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year	(92)		(140)
Prior years	(978)		(727)
Total net paid losses and loss adjustment expenses	(1,070)		(867)
Net reserve for losses and loss adjustment expenses at end of period	16,636		14,411
Unpaid losses and loss adjustment expenses recoverable	7,069		6,347
Reserve for losses and loss adjustment expenses at end of period	$	23,705	$	20,758

Development on Prior Year Loss Reserves

2024 First Quarter

During the 2024 first quarter, the Company recorded net favorable development on prior year loss reserves of $124 million, which consisted of $10 million from the insurance segment, $40 million from the reinsurance segment and $74 million from the mortgage segment.

The insurance segment’s net favorable development of $10 million, or 0.7 loss ratio points, for the 2024 first quarter consisted of $30 million of net favorable development in short-tailed and long-tailed lines and $20 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines included $18 million of favorable development in property (excluding marine), primarily from the 2019, 2022 and 2023 accident years (i.e., the year in which a loss occurred), and $10 million of favorable development related to travel and accident business, primarily from the 2022 and 2023 accident years. Net favorable development in long-tailed lines included $7 million of favorable development in executive assurance business, primarily from the 2018 to 2021 accident years, and $3 million of favorable development in alternative markets business, primarily from 2020 and prior accident years, which was partially offset by $7 million of adverse development in construction and national accounts, primarily

from the 2023 accident year. Net adverse development in medium-tailed lines included $17 million of adverse development in marine business, primarily from the 2022 accident year.

The reinsurance segment’s net favorable development of $40 million, or 2.4 loss ratio points, for the 2024 first quarter consisted of $44 million of net favorable development in short-tailed lines and $4 million of net adverse development in medium and long-tailed lines. Net favorable development in short-tailed lines included $33 million of favorable development related to other specialty business, primarily from the 2019 to 2023 underwriting years (i.e., all premiums and losses attributable to contracts having an inception or renewal date within the given twelve-month period), and $21 million of favorable development related to property other than property catastrophe business, primarily from the 2022 and 2023 underwriting years, which was partially offset by $8 million of adverse development from property catastrophe business, primarily from the 2023 underwriting year. Net adverse development in medium-tailed lines included $2 million in marine and aviation lines, primarily from the 2020 and 2023 underwriting years, while net adverse development in long-tailed lines reflected $2 million of adverse development in casualty business, primarily from the 2017 underwriting year.

The mortgage segment’s net favorable development was $74 million, or 24.4 loss ratio points, for the 2024 first quarter. Such amounts were primarily related to reductions on reserves for delinquent loans associated with the U.S. first lien portfolio from the 2022 and 2023 accident years. The Company’s credit risk transfer and international businesses also contributed to the favorable development.

2023 First Quarter

During the 2023 first quarter, the Company recorded net favorable development on prior year loss reserves of $136 million, which consisted of $12 million from the insurance segment, $53 million from the reinsurance segment and $71 million from the mortgage segment.

The insurance segment’s net favorable development of $12 million, or 0.9 loss ratio points, for the 2023 first quarter consisted of $25 million of net favorable development in short-tailed and long-tailed lines and $13 million of net adverse development in medium-tailed lines. Net favorable development in short-tailed lines reflected $9 million of favorable development in property (excluding marine), primarily from 2020 and 2022 accident years, $8 million of favorable development related to travel and accident business, primarily from the 2020 to 2022 accident years, and $7 million of favorable development in warranty and lenders solutions, primarily from the 2022 accident year. Net favorable development in long-tailed lines of $1 million included favorable development in executive assurance business, partially offset by adverse development in casualty and healthcare. Net adverse development in medium-tailed lines included $18 million of adverse development in professional liability business, primarily from the 2017 to 2019 accident years, partially offset by favorable development in marine business of $7 million, primarily from the 2021 and 2022 accident years.

The reinsurance segment’s net favorable development of $53 million, or 4.0 loss ratio points, for the 2023 first quarter consisted of $49 million of net favorable development in short-tailed lines and $3 million of net favorable development in medium-tailed and long-tailed lines. Net favorable development in short-tailed lines reflected $23 million of favorable development related to property other than property catastrophe business, across most underwriting years, $18 million of favorable development related to other specialty and other short-tailed lines, primarily from the 2020 and 2021 underwriting years, and $8 million of favorable development related to property catastrophe business, primarily from the 2018, 2019 and 2022 underwriting years. Net favorable development in medium-tailed lines included $2 million in marine and aviation lines, while net favorable development in long-tailed lines included $3 million in casualty business.

The mortgage segment’s net favorable development was $71 million, or 23.9 loss ratio points, for the 2023 first quarter. Such amounts were primarily related to reductions on reserves for loans becoming delinquent after the onset of the COVID-19 pandemic. The Company’s credit risk transfer and international businesses also contributed to the favorable development.