The Hartford 2007 Annual Report Download - page 109

109
Underwriting Results and Ratios
Year ended December 31, 2007 compared to the year ended December 31, 2006
Underwriting results decreased by $107, from $429 to $322, with a corresponding 3.1 point increase in the combined ratio, from 88.6 to
91.7, due to:
Change in underwriting results
Earned premiums
Excluding Omni, a 7% increase in earned premium $ 251
Decrease in earned premium due to the sale of Omni in the fourth quarter of 2006 (122)
Net increase in earned premiums 129
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 premiums, excluding Omni (160)
Ratio change — An increase in the current accident year loss and loss adjustment expense ratio before
catastrophes, excluding Omni (125)
Sale of Omni — Decrease in current accident year loss and loss adjustment expenses before catastrophes as
a result of the sale of Omni 105
Net increase in current accident year loss and loss adjustment expenses before catastrophes (180)
Catastrophes — Increase in current accident year catastrophe losses (5)
Reserve changes — A decrease in net favorable prior accident year reserve development (34)
Net increase in losses and loss adjustment expenses (219)
Operating expenses
Decrease in amortization of deferred policy acquisition costs 5
Increase in insurance operating costs and expenses (22)
Net increase in operating expenses (17)
Decrease in underwriting results from 2006 to 2007 $ (107)
Sale of Omni
The Company sold its Omni non-standard auto business in the fourth quarter of 2006. Omni accounted for an underwriting loss of $52
in 2006, including $127 of earned premiums, $140 of loss and loss adjustment expenses, $30 of amortization of deferred policy
acquisition costs and $9 of insurance operating costs and expenses.
Earned premium increased by $129
Personal Lines earned premium increased by $129, or 3%, to $3,889, primarily driven by an increase in AARP and Agency earned
premium, partially offset by a decrease of $122 due to the sale of Omni in 2006. Refer to the earned premium discussion for a
description of the increase in earned premium.
Losses and loss adjustment expenses increased by $219
Current accident year loss and loss adjustment expenses before catastrophes increased by $180
Personal Lines current accident year loss and loss adjustment expenses before catastrophes increased by $180 in 2007, to $2,576, due to
an increase in earned premium and an increase in the current accident year loss and loss adjustment expense ratio before catastrophes,
partially offset by a decrease due to the sale of Omni. Excluding the effect of Omni, the current accident year loss and loss adjustment
expense ratio before catastrophes increased by 3.3 points, to 66.2. The increase was primarily due to a higher loss and loss adjustment
expense ratio for auto liability claims, increased frequency on auto property damage claims and, to a lesser extent, increased severity on
homeowners claims, partially offset by the effect of earned pricing increases in homeowners. The higher loss and loss adjustment
expense ratio for auto liability claims was primarily driven by increased bodily injury severity.
Current accident year catastrophes increased by $5
Current accident year catastrophe losses of $125, or 3.2 points, in 2007 were slightly higher than current accident year catastrophe losses
of $120, or 3.2 points, in 2006. The largest catastrophe losses in 2007 were from wildfires in California, spring windstorms in the
Southeast and Northeast, tornadoes and thunderstorms in the Midwest and a December ice storm in the Midwest. Catastrophes losses
during 2006 included tornadoes and hail storms in the Midwest and windstorms in Texas and on the East coast.