The Hartford 2007 Annual Report Download - page 103

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Other expenses increased by $26
Other expenses increased by $26, primarily due to $49 of interest charged by Corporate on the amount of capital held by the Property &
Casualty operation in excess of the amount needed to support the capital requirements of the Property & Casualty operation, partially
offset by a reduction in the estimated cost of legal settlements in 2007.
Year ended December 31, 2006 compared to the year ended December 31, 2005
Net income
Net income increased by $389, or 33%, due primarily to an increase in underwriting results and an increase in net investment income.
Underwriting results increased by $420
Underwriting results increased by $420, from $691 to $1,111, with a corresponding 3.9 point decrease in the combined ratio, from 93.2
to 89.3, due to:
Change in underwriting results
Earned premiums
An increase in earned premium, excluding a decrease in catastrophe treaty reinstatement premium $ 203
An increase in earned premium due to a decrease in catastrophe treaty reinstatement premium 73
Increase in earned premiums 276
Losses and loss adjustment expenses
Volume change — Increase in current accident year loss and loss adjustment expenses before catastrophes
due to the increase in earned premium (127)
Ratio change — Excluding the effect of catastrophe treaty reinstatement premium, an increase in the
current accident year non-catastrophe loss and loss adjustment expense ratio (16)
Total increase in current accident year loss and loss adjustment expenses before catastrophes (143)
Catastrophes — Decrease in current accident year catastrophe losses 152
Reserve changes — Change in net favorable prior accident year reserve development 100
Net decrease in losses and loss adjustment expenses 109
Operating expenses
Increase in amortization of deferred policy acquisition costs (106)
Decrease in insurance operating costs and expenses 141
Net decrease in operating expenses 35
Increase in underwriting results from 2005 to 2006 $ 420
Earned premium increased by $276
Ongoing Operations’ earned premium increased by $276, or 3%, to $10,428, in part due to $73 of catastrophe treaty reinstatement
premium recorded as a reduction of earned premium in 2005. Apart from the effect of catastrophe treaty reinstatement premium in
2005, earned premium grew by $203, or 2%, driven by earned premium increases in Small Commercial, Personal Lines and Middle
Market, partially offset by an earned premium decrease in Specialty Commercial. Refer to the earned premium discussion in the
Executive Overview section of the Property & Casualty MD&A for further discussion of the increase in earned premium.