The Hartford 2010 Annual Report Download - page 46

46
Prior accident years development recorded in 2008
Included within prior accident years development for the year ended December 31, 2008 were the following reserve strengthenings
(releases):
For the year ended December 31, 2008
Propert
y
& Casualt
y
Commercial
Consumer
Markets
Corporate and
Other
Total Property and
Casualty Insurance
Auto liability $(27) $(46) $ — $ (73)
Workers’ compensation (156) — — (156)
General liability, umbrella and high hazard liability (105) — — (105)
General liability and products liability 67 — 67
Professional liability (75) — — (75)
Extra-contractual liability claims under non-standard personal
auto policies — (24) — (24)
Construction defect claims (10) — — (10)
National account general liability allocated loss adjustment
expense reserves 25 — — 25
Net environmental reserves — — 53 53
Net asbestos reserves — — 50 50
Discount accretion on workers' compensation 26 — — 26
Catastrophes (27) — — (27)
Other reserve re-estimates, net (16) 18 21 23
Total prior accident years development $ (298) $ (52) $ 124 $ (226)
During 2008, the Company’ s re-estimates of prior accident year reserves included the following significant reserve changes:
• Released commercial auto liability reserves, primarily related to accident years 2002 to 2007. Management has observed fewer
than previously expected large losses in accident years 2006 and 2007 and lower than previously expected severity on large claims
in accident years 2002 to 2005. In 2008, management recognized that favorable development in reported claim severity was a
sustained trend and, accordingly, management reduced its estimate of the reserves.
• Released reserves for personal auto liability claims, principally related to AARP business for the 2005 through 2007 accident years.
Beginning in the first quarter of 2008, management observed an improvement in emerged claim severity for the 2005 through 2007
accident years attributed, in part, to changes made in claim handling procedures in 2007. In the third and fourth quarter of 2008, the
Company recognized that favorable development in reported severity was a sustained trend and, accordingly, management reduced
its reserve estimate.
• Released workers' compensation reserves primarily related to accident years 2000 to 2007. These reserve releases are a
continuation of favorable developments first recognized in 2005 and recognized in both 2006 and 2007. The reserve releases in
2008 resulted from a determination that workers' compensation losses continue to develop even more favorably from prior
expectations due, in part, to state legal reforms, including in California and Florida, and underwriting actions as well as cost
reduction initiatives first instituted in 2003. In particular, the state legal reforms and underwriting actions have resulted in lower
than expected medical claim severity.
• Released reserves for general liability claims primarily related to the 2001 to 2007 accident years. Beginning in the third quarter of
2007, the Company observed that reported losses for high hazard and umbrella general liability claims, primarily related to the 2001
to 2006 accident years, were emerging favorably and this caused management to reduce its estimate of the cost of future reported
claims for these accident years, resulting in a reserve release in each quarter since the third quarter of 2007. During 2008, the
Company observed that this favorable trend continued with the 2007 accident year. The number of reported claims for this line of
business has been lower than expected, a trend first observed in 2005. Over time, management has come to believe that the lower
than expected number of claims reported to date will not be offset by a higher than expected number of late reported claims.
• Strengthened reserves for general liability and products liability claims primarily for accident years 2004 and prior for losses
expected to emerge after 20 years of development. In 2007, management observed that long outstanding general liability claims
have been settling for more than previously anticipated and, during the first quarter of 2008, the Company increased the estimate of
late development of general liability claims.
• Released reserves for professional liability claims for accident years 2003 to 2006. During 2008, the Company updated its analysis
of certain professional liability claims and the new analysis showed that claim severity for directors and officers losses in the 2003
to 2006 accident years were favorable to previous expectations, resulting in a reduction of reserves. The analysis also showed
favorable emergence of claim severity on errors and omission policy claims for the 2004 and 2005 accident years, resulting in a
release of reserves.