The Hartford 2008 Annual Report Download - page 190

Table of Contents
During the year ended December 31, 2007, the Company’s reestimates of prior accident year reserves included the following
significant reserve changes.
Ongoing Operations
• Released Small Commercial workers’ compensation reserves by $151, primarily related to accident years 2002 to 2006.
This reserve release is a continuation of favorable developments first recognized in 2005 and 2006. The workers’
compensation reserve releases in 2007 resulted from a determination that workers’ compensation losses continue to
develop even more favorably from prior expectations due to the California and Florida legal reforms and underwriting
actions as well as cost reduction initiatives first instituted in 2003. In particular, the state legal reforms and
underwriting actions have resulted in lower than expected medical claim severity. In addition, the Company determined
that paid losses related to workers’ compensation policies sold through payroll service providers were emerging
favorably, leading to a release of reserves for the 2003 to 2006 accident years. The $151 reserve release represented 9%
of the Company’s net reserves for Small Commercial workers’ compensation claims as of December 31, 2006.
• Released reserves for Middle Market general liability claims related to the 2003 to 2006 accident years by $49.
Beginning in the third quarter of 2007, the Company observed that reported losses for high hazard and umbrella general
liability claims for the 2003 to 2006 accident years were emerging favorably and this caused management to reduce its
estimate of the cost of future reported claims for these accident years, resulting in a reserve release in the third and
fourth quarter of 2007. This reserve development is unrelated to the reserve strengthening in 2005 and 2006 of other
Middle Market general liability claims which developed unfavorably due to higher than anticipated loss payments
beyond four years of development. The $49 reserve release represented 6% of the Company’s net reserves for Middle
Market general liability claims as of December 31, 2006.
• Released Small Commercial workers’ compensation reserves related to accident years 2000 and prior by $33. The
severity of workers’ compensation medical claims for these accident years has emerged favorably to previous
expectations. As the continued development of these claims has resulted in a sustained favorable trend, management
released reserves in the fourth quarter of 2007. The $33 reserve release represented 2% of the Company’s net reserves
for Small Commercial workers’ compensation claims as of December 31, 2006.
• Recorded a $30 net release of reserves for Small Commercial package business related to the 2003 to 2006 accident
years. Reserve reviews completed during 2007 identified that the frequency of reported liability claims on Small
Commercial package business policies for these accident years was lower than the previously expected frequency. In
addition, reported loss costs on property coverages have emerged favorably for the 2006 accident year. In recognition
of these trends, in the second and fourth quarter of 2007, management reduced reserves by a total of $30. The $30
reserve release represented 3% of the Company’s net reserves for Small Commercial package business claims as of
December 31, 2006.
• Released reserves for commercial surety business by $22 for accident years 2003 to 2006. Reported losses for
commercial surety business have been emerging favorably resulting in the Company lowering its estimate of ultimate
unpaid losses during the third quarter of 2007. The $22 reserve release represented 14% of the Company’s net reserves
for fidelity and surety claims as of December 31, 2006.
• Released Middle Market commercial auto liability reserves by $18 for accident years 2003 and 2004. Since the first
quarter of 2007, reported losses for commercial auto liability claims in these accident years have emerged favorably
although management did not determine that this was a verifiable trend until the third quarter of 2007 when it released
the reserves. The $18 reserve release represented 6% of the Company’s net reserves for Middle Market auto liability
claims as of December 31, 2006.
• Released reserves for Personal Lines auto liability claims for accident years 2002 to 2006 by $16. This reserve release
was a continuation of trends first observed in 2006. During the first quarter of 2006, the Company released auto
liability reserves related to the 2005 accident year due to frequency emerging favorable to initial expectations. During
the second quarter of 2006, the Company observed that loss cost severity on auto liability claims for the 2004 accident
year was emerging favorable to initial expectations and released reserves to recognize this trend. For each of the 2002
to 2006 accident years, the Company has continued to observe favorable trends in reported severity and, in the fourth
quarter of 2007, the Company released an additional $16 in reserves. The $16 reserve release represented 1% of the
Company’s net reserves for Personal Lines auto liability claims as of December 31, 2006.
• Released reserves for errors and omissions claims for accident year 2005 by $15. During the fourth quarter of 2007, the
Company updated its analysis of certain professional liability claims and the new analysis showed that claims under
errors and omissions policies were emerging favorable to initial expectations, resulting in this reserve release. The $15
reserve release represented 3% of the Company’s net reserves for professional liability claims as of December 31,
2006.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009