The Hartford 2010 Annual Report Download - page 53

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The table above shows the cumulative deficiency (redundancy) of the Company’ s reserves, net of reinsurance, as now estimated with the
benefit of additional information. Those amounts are comprised of changes in estimates of gross losses and changes in estimates of
related reinsurance recoveries.
The table below, for the periods presented, reconciles the net reserves to the gross reserves, as initially estimated and recorded, and as
currently estimated and recorded, and computes the cumulative deficiency (redundancy) of the Company’ s reserves before reinsurance.
Loss And Loss Adjustment Expense Liability Development - Gross
For the Years Ended December 31, [1]
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Net reserve, as initially estimated $ 12,860 $ 13,141 $16,218 $16,191 $16,863 $17,604 $18,231 $ 18,347 $18,210 $17,948
Reinsurance and other recoverables, as
initially estimated 4,176 3,950 5,497 5,138 5,403 4,387 3,922 3,586 3,441 3,077
Gross reserve, as initially estimated $ 17,036 $ 17,091 $21,715 $21,329 $22,266 $21,991 $22,153 $ 21,933 $21,651 $21,025
Net re-estimated reserve $ 19,452 $ 19,373 $19,063 $17,777 $17,613 $17,439 $17,700 $ 18,004 $18,014
Re-estimated and other reinsurance
recoverables 5,908 5,511 5,423 5,311 5,646 4,069 3,785 3,459 2,959
Gross re-estimated reserve $ 25,360 $ 24,884 $24,486 $23,088 $23,259 $21,508 $21,485 $ 21,463 $20,973
Gross deficiency (redundancy) $ 8,324 $ 7,793 $2,771 $1,759 $ 993 $ (483) $(668) $ (470) $(678)
[1] The above table excludes Hartford Insurance, Singapore as a result of its sale in September 2001; Hartford Seguros as a result of its sale in
February 2001.
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, 2010. 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, 2010 for the indicated accident year(s).
Effect of Net Reserve Re-estimates on Calendar Year Operations
Calendar Year
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total
By Accident year
2000 & Prior $ 143 $ 317 $ 2,984 $ 824 $ 464 $ 464 $ 704 $ 194 $ 239 $ 273 $ 6,606
2001 — (24) 39 (232) 193 38 55 12 61 (13) 129
2002 — — (199) (56) 180 36 (5) 2 (12) (13) (67)
2003 — — — (122) (237) (31) (126) (21) (6) (20) (563)
2004 — — — — (352) (108) (226) (83) (56) (20) (845)
2005 — — — — — (103) (214) (133) (47) (91) (588)
2006 — — — — — — (140) (148) (213) (118) (619)
2007 — — — — — — — (49) (113) (156) (318)
2008 — — — — — — — — (39) 1 (38)
2009 — — — — — — — — — (39) (39)
Total $ 143 $ 293 $ 2,824 $ 414 $ 248 $ 296 $ 48 $ (226) $ (186) $(196) $3,658
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.
Reserve changes for accident years 2000 & Prior
The largest impacts of net reserve re-estimates are shown in the “2000 & Prior” accident years. Reserve deterioration was related to
calendar years, 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.
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.