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 considers 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 laws and regulations, judicial decisions and economic conditions.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. Recent tort reform measures in certain jurisdictions have altered the legal environment and may affect claim settlement patterns over time. These changes require the Company to evaluate whether historical settlement trends remain appropriate for reserve development. In cases where tort reform is expected to influence claim outcomes, more recent claim settlement experience may be given greater consideration when selecting development factors. While inflationary pressures have moderated compared to prior periods, factors such as a higher mix of total losses continue to influence physical damage loss costs. Medical cost trends, increased treatment trends, higher attorney representation, rising litigation costs and more severe accidents have contributed to higher third-party bodily injury loss costs. The Company continues to digitize and modernize claim processes to increase effectiveness and efficiency. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

Generally, the initial reserves for a new accident year are established based on claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using several different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, driving behaviors, miles driven or other factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, changes in attorney-represented and litigated claim behavior, the effectiveness and efficiency of claim settlements and changes in mix of claim types. When changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves. The

Company’s reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine its best estimate of recorded reserves.

As part of the reserving process, 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, Run-off Property-Liability 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 initial reporting period as it contains the greatest proportion of losses that have not been reported or settled as well as heightened uncertainty for claims that involve litigation or take longer to settle during periods of rapidly increasing loss costs. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

The Company updates its reserve estimates at least quarterly as new information becomes available and as events unfold that may affect the resolution of unsettled claims. The Company conducts an annual review in the third quarter to evaluate, establish and adjust as necessary, asbestos, environmental and other run-off claims reserves. Changes in 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, laws and regulations.


Rollforward of the reserve for property and casualty insurance claims and claims expense
	Nine months ended September 30,
($ in millions)	2026		2025
Balance as of January 1	$	41,079	$	41,917
Less: recoverables (1)	8,012		8,602
Net balance as of January 1	33,067		33,315

Incurred claims and claims expense related to:
Current year	31,388		30,763
Prior years	(2,398)		(1,045)
Total incurred	28,990		29,718
Claims and claims expense paid related to:
Current year	(16,587)		(16,235)
Prior years	(11,975)		(12,688)
Total paid	(28,562)		(28,923)
Net balance as of September 30	33,495		34,110
Plus: recoverables	7,301		8,993
Balance as of September 30	$	40,796	$	43,103

(1)Recoverables comprises reinsurance and indemnification recoverables.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the period. This expense included losses from catastrophes of $4.61 billion and $4.75 billion in the nine months ended September 30, 2026 and 2025, 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)
	Excluding catastrophe losses				Catastrophe losses				Total
($ in millions)	2026		2025		2026		2025		2026		2025
Three months ended September 30,
Auto	$	(876)	$	(480)	$	(8)	$	(3)	$	(884)	$	(483)
Homeowners	(68)		(40)		19		(14)		(49)		(54)
Specialty lines	12		72		—		(6)		12		66
Commercial lines	(37)		(80)		(1)		(5)		(38)		(85)
Brokered solutions and collateral protection	(10)		(14)		—		—		(10)		(14)
Run-off Property-Liability (2)	216		146		—		—		216		146

Total prior year reserve reestimates	$	(763)	$	(396)	$	10	$	(28)	$	(753)	$	(424)

Nine months ended September 30,
Auto	$	(2,353)	$	(1,133)	$	(19)	$	(30)	$	(2,372)	$	(1,163)
Homeowners	(194)		(35)		71		3		(123)		(32)
Specialty lines	(58)		153		22		(11)		(36)		142
Commercial lines	(65)		(104)		(1)		—		(66)		(104)
Brokered solutions and collateral protection	(17)		(39)		—		—		(17)		(39)
Run-off Property-Liability (2)	216		151		—		—		216		151

Total prior year reserve reestimates	$	(2,471)	$	(1,007)	$	73	$	(38)	$	(2,398)	$	(1,045)

(1)Reserve releases are shown in parentheses.

(2)During the third quarter of 2026 and 2025, the Company’s annual reserve reviews, using established industry and actuarial best practices, resulted in reserve reestimates that increased reserves by $216 million and $146 million, respectively.

During the third quarter of 2026, favorable auto severity, excluding catastrophes, reflected improved prior period loss development and better than expected claim outcomes. Auto reserve releases for the third quarter of 2026 included $802 million related to auto injury coverages and $74 million related to other auto reserves. Approximately 28% of auto injury coverage reserve releases related to accident year 2025 and approximately 55% to 2023 and 2024.

During the first nine months of 2026, favorable auto severity, excluding catastrophes, reflected improved prior period loss development and better than expected claim outcomes. Auto reserve releases for the first nine months of 2026 included $2.07 billion related to auto injury coverages and $279 million related to other auto reserves. Approximately 29% of auto injury coverage reserve releases related to accident year 2025 and approximately 52% to 2023 and 2024.

For the third quarter of 2026 and first nine months of 2026, reserve releases in homeowners were primarily driven by favorable severity assumptions, offset by

catastrophe reserve increases. Reserve releases in commercial lines were primarily driven by improved commercial auto injury severity.