The Hartford 2008 Annual Report Download - page 248

Table of Contents
Reserve Activity
Reserves and reserve activity in the Other Operations segment are categorized and reported as asbestos, environmental, or
“all other”. The “all other” category of reserves covers a wide range of insurance and assumed reinsurance coverages,
including, but not limited to, potential liability for construction defects, lead paint, silica, pharmaceutical products,
molestation and other long-tail liabilities. In addition, within the “all other” category of reserves, Other Operations records
its allowance for future reinsurer insolvencies and disputes that might affect reinsurance collectability associated with
asbestos, environmental, and other claims recoverable from reinsurers.
The following table presents reserve activity, inclusive of estimates for both reported and incurred but not reported claims,
net of reinsurance, for Other Operations, categorized by asbestos, environmental and all other claims, for the years ended
December 31, 2008, 2007 and 2006.
Other Operations Losses and Loss Adjustment Expenses
Asbestos Environmental All Other [1][6] Total
2008
Beginning liability — net [2] [3] $ 1,998 $ 251 $ 1,888 $ 4,137
Losses and loss adjustment expenses
incurred 68 54 7 129
Losses and loss adjustment expenses paid (182) (36) (267) (485)
Ending liability — net [2] [3] $ 1,884 [5] $ 269 $ 1,628 $ 3,781
2007
Beginning liability — net [2] [3] $ 2,242 $ 316 $ 1,858 $ 4,416
Losses and loss adjustment expenses
incurred 43 28 122 193
Losses and loss adjustment expenses paid (287) (93) (217) (597)
Reallocation of reserves for unallocated
loss adjustment expenses [4] — — 125 125
Ending liability — net [2] [3] $ 1,998 $ 251 $ 1,888 $ 4,137
2006
Beginning liability — net [2] [3] $ 2,291 $ 360 $ 2,240 $ 4,891
Losses and loss adjustment expenses
incurred 314 62 (16) 360
Losses and loss adjustment expenses paid (363) (106) (366) (835)
Ending liability — net [2] [3] $ 2,242 $ 316 $ 1,858 $ 4,416
[1] “All Other” includes unallocated loss adjustment expense reserves and the allowance for uncollectible reinsurance.
[2] Excludes asbestos and environmental net liabilities reported in Ongoing Operations of $12 and $6, respectively, as of
December 31, 2008, $9 and $6, respectively, as of December 31, 2007, and $9 and $6, respectively, as of December 31,
2006. Total net losses and loss adjustment expenses incurred in Ongoing Operations for the years ended December 31,
2008, 2007 and 2006 includes $16, $10 and $11, respectively, related to asbestos and environmental claims. Total net
losses and loss adjustment expenses paid in Ongoing Operations for the years ended December 31, 2008, 2007 and
2006 includes $13, $10 and $12, respectively, related to asbestos and environmental claims.
[3] Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,498
and $309, respectively, as of December 31, 2008, $2,707 and $290, respectively, as of December 31, 2007, and $3,242
and $362, respectively, as of December 31, 2006.
[4] Prior to the second quarter of 2007, the Company evaluated the adequacy of the reserves for unallocated loss
adjustment expenses on a company-wide basis. During the second quarter of 2007, the Company refined its analysis of
the reserves at the segment level, resulting in the reallocation of reserves among segments, including a reallocation of
reserves from Ongoing Operations to Other Operations.
[5] The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, were $189
and $283, respectively, resulting in a one year net survival ratio of 10.0 and a three year net survival ratio of 6.7. Net
survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an
indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim
payments were consistent with the calculated historical average.
[6] The Company includes its allowance for uncollectible reinsurance in the “All Other” category of reserves. When the
Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, the portion of the allowance
for uncollectible reinsurance attributable to that commutation or settlement, if any, is reclassified to the appropriate
cause of loss.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009