The Hartford 2007 Annual Report Download - page 111

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Current accident year catastrophes increased by $22
Current accident year catastrophe losses increased by $22, from $98, or 2.7 points, in 2005 to $120, or 3.2 points, in 2006. Catastrophe
losses increased principally due to losses in 2006 from tornados and hail storms in the Midwest and windstorms in Texas and on the
East coast. Catastrophe losses in 2005 included $51 of losses from hurricanes Katrina, Rita and Wilma.
Decrease in net favorable prior accident year reserve development by $57
Net favorable prior accident year reserve development decreased from $95, or 2.6 points, in 2005 to $38, or 1.0 point, in 2006. Net
favorable prior accident year reserve development of $38 in 2006 included a $53 reduction in auto liability reserves and a $23 reduction
in hurricane catastrophe reserves, including $10 related to hurricane Katrina in 2005 and $7 related to hurricane Charley in 2004,
partially offset by a $30 increase in reserves for personal auto liability claims due to an increase in estimated severity on claims where
the company is exposed to losses in excess of policy limits. The $53 reduction in auto liability reserves in 2006 included a $31
reduction in reserves for auto liability claims related to accident year 2005 as a result of better than expected frequency trends and a $22
reduction of reserves for AARP and other affinity auto liability claims related to accident years 2003 to 2005 as a result of better than
expected severity trends. Net favorable prior accident year reserve development of $95 in 2005 included a $95 reduction in reserves for
allocated loss adjustment expenses.
Operating expenses decreased by $3
The expense ratio decreased by 1.0 point, to 22.7, in 2006, due primarily to a decrease in insurance operating costs and expenses.
Insurance operating costs decreased by $44, largely because of a $19 decrease in estimated Citizens’ assessments in 2006 compared to a
$30 increase in Citizens assessments in 2005. Amortization of deferred policy acquisition costs increased by $41, due largely to the
increase in earned premium.