The Hartford 2008 Annual Report Download - page 210

Table of Contents
Personal Lines • The current accident year loss and loss adjustment expense ratio before
catastrophes in Personal Lines decreased by 1.4 points, primarily due to favorable
expected frequency on auto liability claims and the effect of earned pricing
increases for both auto and homeowners, partially offset by increased frequency
and severity of non-catastrophe losses on homeowners’ business.
Small Commercial • The current accident year loss and loss adjustment expense ratio before
catastrophes in Small Commercial decreased by 5.2 points, primarily due to a
lower loss and loss adjustment expense ratio for workers’ compensation business
and, to a lesser extent, a lower loss and loss adjustment expense ratio for package
business. The lower loss and loss adjustment expense ratio for workers’
compensation business was primarily due to lower expected claim frequency,
partially offset by the effect of earned pricing decreases.
Middle Market • The current accident year loss and loss adjustment expense ratio before
catastrophes in Middle Market decreased by 1.0 point, primarily due to a lower
loss and loss adjustment expense ratio for workers’ compensation and general
liability business, largely offset by higher non-catastrophe losses on property and
marine business and the effect of earned pricing decreases. The higher
non-catastrophe losses on property business were driven by increased severity,
including a number of large individual claims, and the higher non-catastrophe
losses on marine business were primarily driven by increased frequency.
Specialty Commercial • The current accident year loss and loss adjustment expense ratio before
catastrophes in Specialty Commercial increased by 1.5 points, primarily due to a
higher loss and loss adjustment ratio on directors and officers insurance in
professional liability driven by earned pricing decreases.
Current accident year catastrophes increased by $366
Current accident year catastrophe losses of $543, or 5.3 points, in 2008 were higher than current accident year catastrophe
losses of $177, or 1.7 points, in 2007, primarily due to losses from hurricane Ike and tornadoes and thunderstorms in the
South and Midwest.
An increase in net favorable prior accident year reserve development of $210
Net favorable prior accident year reserve development increased from net favorable development of $145, or 1.4 points, in
2007, to net favorable development of $355, or 3.4 points, in 2008. Among other reserve developments, net favorable
development in 2008 included a $156 release of workers’ compensation reserves, primarily related to accident years 2000 to
2007, a $105 release of general liability reserves, primarily related to accident years 2001 to 2007 and a $75 release of
reserves for directors’ and officers insurance and errors and omissions insurance claims related to accident years 2003 to
2006. Refer to the “Reserves” section of the MD&A for further discussion of the prior accident year reserve development in
2008.
Net favorable reserve development of $145 in 2007 included several changes in reserves, including a $151 release of
workers’ compensation loss and loss adjustment expense reserves, primarily for accident years 2002 to 2006. Refer to the
“Reserves” section of the MD&A for further discussion of the prior accident year reserve development in 2007.
Operating expenses decreased by $2
The $9 decrease in the amortization of deferred policy acquisition costs was primarily due to the decrease in earned
premium, partially offset by the amortization of higher acquisition costs on AARP business and higher underwriting costs in
Middle Market. Insurance operating costs and expenses increased by $7, primarily due to higher IT costs and an estimated
$20 of assessments owed to TWIA to fund Texas Gulf Coast losses sustained by TWIA in 2008 due to hurricane Ike,
partially offset by lower compensation-related costs. The expense ratio increased by 0.3 points, to 26.6, primarily due to the
amortization of higher acquisition costs on AARP business and higher underwriting costs in Middle Market and the increase
in insurance operating costs and expenses.
Net servicing income decreased by $21
The decrease in net servicing income was primarily driven by a decrease in servicing income from the AARP Health
program, Specialty Risk Services and the Write Your Own flood program and the write-off of software used in
administering policies for third parties.
A $608 change from income tax expense to an income tax benefit
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009