The Hartford 2009 Annual Report Download - page 201

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-52
6. Reinsurance (continued)
The effect of reinsurance on property and casualty premiums written and earned was as follows:
For the years ended December 31,
Premiums Written 2009 2008 2007
Direct $10,185 $10,831 $ 11,281
Assumed 238 218 205
Ceded (712) (818) (1,046)
Net $9,711 $10,231 $ 10,440
Premiums Earned
Direct $10,386 $10,999 $ 11,396
Assumed 253 216 204
Ceded (778) (877) (1,104)
Net $9,861 $10,338 $ 10,496
Ceded losses, which reduce losses and loss adjustment expenses incurred, were $286, $384, and $187 for the years ended December 31,
2009, 2008, and 2007, respectively.
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 $335 and $379 as of December 31, 2009 and 2008, 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.