The Hartford 2008 Annual Report Download - page 241

Table of Contents
Underwriting Results and Ratios
Year ended December 31, 2008 compared to the year ended December 31, 2007
Underwriting results increased by $89, with a corresponding 6.5 point decrease in the combined ratio, from 101.3 to 94.8,
due to:
Change in underwriting results
Decrease in earned premiums $ (64)
Losses and loss adjustment expenses
Volume change — Decrease in current accident year loss and loss adjustment expenses before
catastrophes due to the decrease in earned premium 42
Ratio change — Increase in the current accident year non-catastrophe loss and loss adjustment
expense ratio before catastrophes (22)
Net decrease in current accident year losses and loss adjustment expenses before
catastrophes 20
Catastrophes — Increase in current accident year catastrophe losses (38)
Reserve changes — A change to net favorable prior accident year reserve development 165
Net decrease in losses and loss adjustment expenses 147
Operating expenses
Decrease in amortization of deferred policy acquisition costs 10
Increase in insurance operating costs and expenses (4)
Net decrease in operating expenses 6
Increase in underwriting results from 2007 to 2008 $ 89
Earned premium decreased by $64
Earned premiums for the Specialty Commercial segment decreased by $64, or 4%, primarily due to a decrease in property
and, to a lesser extent, casualty earned premiums. Refer to the earned premium section above for further discussion.
Losses and loss adjustment expenses decreased by $147
Current accident year losses and loss adjustment expenses before catastrophes decreased by $20
Specialty Commercial current accident year losses and loss adjustment expenses before catastrophes decreased by $20 in
2008, to $941, due to a decrease in earned premium, partially offset by an increase in the loss and loss adjustment expense
ratio before catastrophes and prior accident year development. The loss and loss adjustment expense ratio before
catastrophes and prior accident year development increased by 1.5 points, to 68.1, primarily due to a higher loss and loss
adjustment expense ratio for directors and officers insurance in professional liability, driven by earned pricing decreases,
and a lower mix of property business which has a lower loss and loss adjustment ratio than other businesses within Specialty
Commercial.
Current accident year catastrophes increased by $38
Current accident year catastrophe losses increased $38, or 2.8 points, primarily due to losses from hurricane Ike.
Change to net favorable prior accident year reserve development by $165
Prior accident year reserve development changed from net unfavorable prior accident year reserve development of $84, or
5.8 points, in 2007 to net favorable prior accident year reserve development of $81, or 5.8 points, in 2008. Net favorable
prior accident year reserve development of $81 in 2008 primarily included a $75 release of reserves for directors’ and
officers insurance and errors and omissions insurance claims related to accident years 2003 to 2006.
Prior accident year reserve development in 2007 consisted primarily of a $47 strengthening of workers’ compensation loss
and loss adjustment expense reserves for accident years 1987 to 2001, a $34 strengthening of general liability reserves,
primarily related to accident years 1987 to 1997, and a $25 strengthening of general liability reserves for accident years
more than 20 years old. Partially offsetting the unfavorable reserve development in 2007 was a $22 release of reserves for
surety business for accident years 2003 to 2006.
Operating expenses decreased by $6
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009