The Hartford 2008 Annual Report Download - page 225

Table of Contents
SMALL COMMERCIAL
Small Commercial provides standard commercial insurance coverage to small commercial businesses, primarily throughout
the United States, with up to $5 in annual payroll, $15 in annual revenues or $15 in total property values. This segment
offers workers’ compensation, property, automobile, liability and umbrella coverages.
Premiums [1] 2008 2007 2006
Written premiums $ 2,696 $ 2,747 $ 2,728
Earned premiums $ 2,724 $ 2,736 $ 2,652
[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium
reserve.
Premium Measures 2008 2007 2006
New business premium $ 446 $ 481 $ 533
Premium renewal retention 82% 84% 87%
Written pricing increase (decrease) (2%) (2%) 1%
Earned pricing increase (decrease) (2%) (1%) 1%
Policies in-force end of period 1,055,463 1,038,542 991,979
Earned Premiums
Year ended December 31, 2008 compared to the year ended December 31, 2007
Earned premiums for the Small Commercial segment were down slightly as a decrease in commercial auto was largely
offset by an increase in worker’s compensation. The earned premium decrease was largely due to the effect of non-renewals
outpacing new business for commercial auto business in 2008 and to earned pricing decreases, largely offset by new
business outpacing non-renewals in workers’ compensation business over the last nine months of 2007 and the first nine
months of 2008. While the Company has focused on increasing new business from its agents and expanding writings in
certain territories, actions taken by some of the Company’s competitors to increase market share and increase business
appetite in certain classes of risks and actions taken by the Company to reduce workers’ compensation rates in certain states
have contributed to the decrease in written premiums from 2007 to 2008.
New business
premium
• New business written premium was down $35, or 7%, driven by a decrease in new package and
commercial automobile business. New business for package and commercial auto business
declined due to increased competition despite the use of lower pricing on targeted accounts and
an increase in commissions paid to agents. New business written premium for workers’
compensation was up modestly.
Premium renewal
retention
• Premium renewal retention decreased from 84% to 82% due largely to the effect of a decrease
in retention of workers’ compensation business, including the effect of larger written pricing
decreases.
Earned pricing
increase
(decrease)
• Earned pricing decreased for workers’ compensation and commercial auto and was flat for
package business. As written premium is earned over the 12-month term of the policies, the
earned pricing changes during 2008 were primarily a reflection of written pricing decreases of
2% over the last nine months of 2007 and 2% over the first nine months of 2008.
Policies in-force • While earned premium was slightly down for 2008, the number of policies in-force has
increased 2%. The growth in policies in-force does not correspond directly with the change in
earned premiums due to the effect of changes in earned pricing and changes in the average
premium per policy.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009