THG 2018 Annual Report

The table below provides a reconciliation of the gross beginning and ending reserve for unpaid losses and loss adjustment expenses. YEARS ENDED DECEMBER 31 2018 2017 2016 (in millions) Gross loss and LAE reserves, beginning of year $ 5,058.5 $ 4,660.0 $ 4,201.9 Reinsurance recoverable on unpaid losses 1,455.0 1,349.2 1,295.3 Net loss and LAE reserves, beginning of year 3,603.5 3,310.8 2,906.6 Net incurred losses and LAE in respect of losses occurring in: Current year 2,733.5 2,579.8 2,307.8 Prior years (8.9) (0.2) 238.2 Total incurred losses and LAE 2,724.6 2,579.6 2,546.0 Net payments of losses and LAE in respect of losses occurring in: Current year 1,232.3 1,203.8 1,063.0 Prior years 1,264.3 1,083.1 1,078.8 Total payments 2,496.6 2,286.9 2,141.8 Net reserve for losses and LAE, end of year 3,831.5 3,603.5 3,310.8 Reinsurance recoverable on unpaid losses 1,472.6 1,455.0 1,349.2 Gross reserve for losses and LAE, end of year $ 5,304.1 $ 5,058.5 $ 4,660.0 The following table provides a summary of (favorable)/unfavorable loss and LAE reserve development. YEARS ENDED DECEMBER 31 2018 2017 2016 (in millions) Commercial multiple peril $ (4.0) $ 2.9 $ 68.8 :RUNHUV¶ FRPSHQVDWLRQ (31.0) (9.1) (46.7) Commercial automobile 23.2 2.3 27.5 Other commercial lines: AIX program business 17.0 (1.9) 75.1 General liability (21.1) (1.9) 56.0 Surety (9.0) 0.1 35.3 Umbrella 2.3 0.9 (8.9) Other lines (18.3) (4.1) 12.2 Total other commercial lines (29.1) (6.9) 169.7 Total Commercial Lines (40.9) (10.8) 219.3 Personal automobile 14.3 3.4 4.8 Homeowners and other personal lines 16.5 6.0 5.8 Total Personal Lines 30.8 9.4 10.6 Total Other Segment 1.2 1.2 8.3 Total loss and LAE reserve development, including catastrophes $ (8.9) $ (0.2) $ 238.2 Within other commercial lines, general liability is comprised of both monoline general liability and certain management and professional liability coverages and other lines is primarily comprised of lawyers professional liability, fidelity, marine, miscellaneous property, and healthcare lines. Loss and LAE reserve development in the Other segment is related to run-off voluntary assumed reinsurance pools business. $V D UHVXOW RI FRQWLQXLQJ WUHQGV LQ WKH &RPSDQ\¶V E usiness, reserves including catastrophes have been re-estimated for all prior accident years and were decreased by $8.9 million in 2018, decreased by $0.2 million in 2017 and increased by $238.2 million in 2016. 122 THE HANOVER INSURANCE GROUP | 2018 ANNUAL REPORT