The Hartford 2008 Annual Report Download - page 426

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Reinsurance (continued)
The Company has several catastrophe reinsurance programs, including reinsurance treaties that cover property and workers’
compensation losses aggregating from single catastrophe events.
The effect of reinsurance on property and casualty premiums written and earned was as follows:
For the years ended December 31,
2008 2007 2006
Premiums Written
Direct $ 10,831 $ 11,281 $ 11,600
Assumed 218 205 265
Ceded (818) (1,046) (1,203)
Net $ 10,231 $ 10,440 $ 10,662
Premiums Earned
Direct $ 10,999 $ 11,396 $ 11,465
Assumed 216 204 259
Ceded (877) (1,104) (1,291)
Net $ 10,338 $ 10,496 $ 10,433
Ceded losses, which reduce losses and loss adjustment expenses incurred, were $384, $187, and $370 for the years ended
December 31, 2008, 2007, and 2006 respectively. Ceded incurred losses increased from $187 in 2007 to $384 in 2008 and
decreased from $370 in 2006 to $187 in 2007, primarily because of a decrease in ceded incurred losses within Other
Operations in 2007.
Reinsurance recoverables include balances due from reinsurance companies for paid and unpaid losses and loss adjustment
expenses and are presented net of an allowance for uncollectible reinsurance. The reinsurance recoverables balance includes
an estimate of the amount of gross losses and loss adjustment expense reserves that may be ceded under the terms of the
reinsurance agreements, including incurred but not reported unpaid losses. The Company’s estimate of losses and loss
adjustment expense reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing
the gross reserves for business ceded to the reinsurance contracts. The Company calculates its ceded reinsurance projection
based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how incurred but not
reported losses will ultimately be ceded by reinsurance agreement. Accordingly, the Company’s estimate of reinsurance
recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss
adjustment expenses.
The allowance for uncollectible reinsurance was $379 and $404 as of December 31, 2008 and 2007, respectively. The
allowance for uncollectible reinsurance reflects management’s best estimate of reinsurance cessions that may be
uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The Company analyzes recent developments
in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes
between reinsurers and cedants and the overall credit quality of the Company’s reinsurers. Where its contracts permit, the
Company secures future claim obligations with various forms of collateral, including irrevocable letters of credit, secured
trusts, funds held accounts and group-wide offsets.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, it is
possible that future adjustments to the Company’s reinsurance recoverables, net of the allowance, could be required, which
could have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular
quarter or annual period.
F-61
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009