The Hartford 2009 Annual Report Download - page 211

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-62
11. Reserves for Future Policy Benefits and Unpaid Losses and Loss Adjustment Expenses (continued)
Property and Casualty Unpaid Losses and Loss Adjustment Expenses
A rollforward of liabilities for property and casualty unpaid losses and loss adjustment expenses follows:
For the years ended December 31,
2009 2008 2007
Beginning liabilities for property and casualty unpaid losses and loss
adjustment expenses-gross $ 21,933 $ 22,153 $ 21,991
Reinsurance and other recoverables 3,586 3,922 4,387
Beginning liabilities for property and casualty unpaid losses and loss
adjustment expenses-net 18,347 18,231 17,604
Add provision for property & casualty unpaid losses and loss adjustment
expenses
Current year 6,596 6,933 6,869
Prior years (186) (226) 48
Total provision for property and casualty unpaid losses and loss
adjustment expenses 6,410 6,707 6,917
Less payments
Current year 2,776 2,888 2,563
Prior years 3,771 3,703 3,727
Total payments 6,547 6,591 6,290
Ending liabilities for property and casualty unpaid losses and loss
adjustment expenses-net 18,210 18,347 18,231
Reinsurance and other recoverables 3,441 3,586 3,922
Ending liabilities for property and casualty unpaid losses and loss
adjustment expenses-gross $ 21,651 $ 21,933 $ 22,153
In the opinion of management, based upon the known facts and current law, the reserves recorded for The Hartford’ s property and
casualty businesses at December 31, 2009 represent the Company’ s best estimate of its ultimate liability for losses and loss adjustment
expenses related to losses covered by policies written by the Company. Based on information or trends that are not presently known,
future reserve re-estimates may result in adjustments to these reserves. Such adjustments could possibly be significant, reflecting any
variety of new and adverse or favorable trends. Because of the significant uncertainties surrounding environmental and particularly
asbestos exposures, it is possible that management’ s estimate of the ultimate liabilities for these claims may change and that the required
adjustment to recorded reserves could exceed the currently recorded reserves by an amount that could be material to The Hartford’ s
results of operations, financial condition and liquidity. For a further discussion, see Note 12.
Examples of current trends affecting frequency and severity include increases in medical cost inflation rates, the changing use of
medical care procedures, the introduction of new products and changes in internal claim practices. Other trends include changes in the
legislative and regulatory environment over workers’ compensation claims and evolving exposures to claims relating to molestation or
abuse and other mass torts. In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty
include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and
inconsistent emerging legal doctrines. In the case of the reserves for environmental exposures, factors contributing to the high degree of
uncertainty include expanding theories of liabilities and damages, the risks inherent in major litigation, inconsistent decisions
concerning the existence and scope of coverage for environmental claims, and uncertainty as to the monetary amount being sought by
the claimant from the insured.
Net favorable reserve development of $186 in 2009 included, among other reserve changes, a $127 release of reserves for directors’ and
officers’ claims and errors and omissions claims for accident years 2003 to 2008, a $112 release of general liability claims, primarily related
to accident years 2003 to 2007 and a $92 release of workers’ compensation reserves, partially offset by a $213 strengthening of asbestos
and environmental reserves. Net favorable reserve development of $226 in 2008 included, among other reserve changes, a $156 release
of workers’ compensation reserves primarily for accident years 2000 to 2007, a $105 release of general liability claims, primarily related
to accident years 2001 to 2007, and a $75 release of reserves for directors and officers claims and errors and omissions claims for accident
years 2003 to 2006, partially offset by a $103 strengthening of asbestos and environmental reserves. Among other reserve changes, net
unfavorable reserve development of $48 in 2007 included a $151 release of workers’ compensation reserves for accident years 2002 to
2006, a $79 strengthening of workers’ compensation and general liability reserves for accident years more than 20 years old and a
charge of $99 principally as a result of an adverse arbitration decision involving claims owed to an insurer of the Company’ s former
parent.