Progressive 2015 Annual Report Download - page 33

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6. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
Activity in the loss and loss adjustment expense reserves is summarized as follows:
(millions) 2015 2014 2013
Balance at January 1 $ 8,857.4 $ 8,479.7 $ 7,838.4
Less reinsurance recoverables on unpaid losses 1,185.9 1,045.9 862.1
Net balance at January 1 7,671.5 7,433.8 6,976.3
Net loss and loss adjustment reserves acquired1222.4 0 0
Total beginning reserves 7,893.9 7,433.8 6,976.3
Incurred related to:
Current year 14,657.1 13,330.3 12,427.3
Prior years (315.1) (24.1) 45.1
Total incurred 14,342.0 13,306.2 12,472.4
Paid related to:
Current year 9,577.3 8,831.5 8,095.0
Prior years 4,062.3 4,237.0 3,919.9
Total paid 13,639.6 13,068.5 12,014.9
Net balance at December 31 8,596.3 7,671.5 7,433.8
Plus reinsurance recoverables on unpaid losses 1,442.7 1,185.9 1,045.9
Balance at December 31 $10,039.0 $ 8,857.4 $ 8,479.7
1Net reserves acquired in ARX acquisition.
We experienced favorable reserve development of $315.1 million in 2015 and $24.1 million in 2014, compared to
unfavorable reserve development of $45.1 million in 2013, which is reflected as “Incurred related to prior years” in the table
above.
2015
• The favorable prior year reserve development was primarily attributable to accident year 2014.
• Favorable reserve development occurred in all segments; personal auto businesses experienced approximately
65% of total development, with the remainder split between our Commercial Lines business and Property business.
• In our personal auto and Commercial Lines businesses, we incurred favorable case loss reserve development
primarily in bodily injury and uninsured motorist bodily injury coverages due to lower than anticipated severity.
• In our Property business, development was favorable due to lower than anticipated severity and frequency,
primarily in accident years 2014 and 2013.
2014
• The favorable prior year reserve development was primarily attributable to accident year 2010.
• Favorable reserve development in our Commercial Lines business was partially offset by unfavorable development
in our Agency auto business. Our Direct auto business experienced slightly favorable development.
• The favorable reserve development in our Commercial Lines business was primarily related to favorable case
reserve development on our high limit policies.
• In Agency auto, the unfavorable development was primarily attributable to personal injury protection (PIP) loss
reserves and to the adjusting and other loss adjustment expense reserves.
2013
• Approximately 80% of the unfavorable reserve development was attributable to accident year 2011, while the
remaining 20% was related to accident year 2012. The aggregate reserve development for accident years 2010
and prior was slightly favorable.
• About 55% of our unfavorable reserve development was in our Commercial Lines business, with the remainder
split about equally between our Personal Lines business and our run-off businesses. In our Personal Lines
business, unfavorable development in our Agency auto channel was offset in large part by favorable development
in our Direct auto channel.
App.-A-32