The Hartford 2008 Annual Report Download - page 40

Table of Contents
The following table is derived from the Loss Development table and summarizes the effect of reserve re-estimates, net of
reinsurance, on calendar year operations for the ten-year period ended December 31, 2008. The total of each column details
the amount of reserve re-estimates made in the indicated calendar year and shows the accident years to which the
re-estimates are applicable. The amounts in the total accident year column on the far right represent the cumulative reserve
re-estimates during the ten year period ended December 31, 2008 for the indicated accident year(s).
Effect of Net Reserve Re-estimates on Calendar Year Operations
Calendar Year
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total
By Accident
year
1998 & Prior $ (240) $ (93) $ 15 $ 79 $ 2,879 $ 534 $ 214 $ 509 $ 641 $ 176 $ 4,714
1999 — 89 40 92 32 113 98 (46) (17) 10 411
2000 — — 88 146 73 177 152 1 80 8 725
2001 — — — (24) 39 (232) 193 38 55 12 81
2002 — — — — (199) (56) 180 36 (5) 2 (42)
2003 — — — — — (122) (237) (31) (126) (21) (537)
2004 — — — — — — (352) (108) (226) (83) (769)
2005 — — — — — — — (103) (214) (133) (450)
2006 — — — — — — — — (140) (148) (288)
2007 — — — — — — — — — (49) (49)
Total $ (240) $ (4) $ 143 $ 293 $ 2,824 $ 414 $ 248 $ 296 $ 48 $ (226) $ 3,796
Reserve changes for accident years 1998 & Prior
During the 2007 calendar year, the Company refined its processes for allocating incurred but not reported (“IBNR”) reserves
by accident year, resulting in a reclassification of $347 of IBNR reserves from the 2003 to 2006 accident years to the 2002
and prior accident years. This reclassification of reserves by accident year had no effect on total recorded reserves within
any segment or on total recorded reserves for any line of business within a segment.
The largest impacts of net reserve re-estimates are shown in the “1998 & Prior” accident years. The reserve re-estimates in
calendar year 2003 include an increase in reserves of $2.6 billion related to reserve strengthening based on the Company’s
evaluation of its asbestos reserves. The reserve evaluation that led to the strengthening in calendar year 2003 confirmed the
Company’s view of the existence of a substantial long-term deterioration in the asbestos litigation environment. The reserve
re-estimates in calendar years 2004 and 2006 were largely attributable to reductions in the reinsurance recoverable asset
associated with older, long-term casualty liabilities. Excluding the impacts of asbestos and environmental strengthening,
over the past ten years, reserve re-estimates for total Property & Casualty ranged from (3.0)% to 1.6% of total net recorded
reserves.
Apart from the effect of reserve reclassifications by accident year during the 2007 calendar year, the Company strengthened
workers’ compensation and general liability reserves in 2007 by $79 related to accident years prior to 1987 and recorded a
charge of $99 in 2007 principally as a result of an adverse arbitration decision involving claims prior to 1993 that were owed
to an insurer of the Company’s former parent.
Reserve changes for accident years 1999 and 2000
Prior to calendar year 2006, there was reserve deterioration, spread over several calendar years, on accident years 1998-2000
driven, in part, by deterioration of reserves for assumed casualty reinsurance and workers’ compensation claims. Numerous
actuarial assumptions on assumed casualty reinsurance turned out to be low, including loss cost trends, particularly on
excess of loss business, and the impact of deteriorating terms and conditions. Workers’ compensation reserves also
deteriorated, as medical inflation trends were above initial expectations.
Reserve changes for accident years 2001 and 2002
Accident years 2001 and 2002 are reasonably close to original estimates. However, each year shows some swings by
calendar period, with some favorable development prior to calendar year 2005, largely offset by unfavorable development in
calendar years 2005 through 2008. The release for accident year 2001 during calendar year 2004 relates primarily to reserves
for September 11. Subsequent adverse developments on accident year 2001 relate to assumed casualty reinsurance and
unexpected development on mature claims in both general liability and workers’ compensation. Reserve releases for
accident year 2002 during calendar years 2003 and 2004 come largely from short-tail lines of business, where results emerge
quickly and actual reported losses are predictive of ultimate losses. Reserve increases on accident year 2002 during calendar
year 2005 were recognized, as unfavorable development on accident years prior to 2002 caused the Company to increase its
estimate of unpaid losses for the 2002 accident year. Net favorable reserve development in calendar year 2008 related to the
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009