The Hartford 2011 Annual Report Download - page 49

49
Prior accident years development recorded in 2009
Included within prior accident years development for the year ended December 31, 2009 were the following loss and loss adjustment
expense reserve strengthenings (releases):
For the year ended December 31, 2009
Property & Casualty
Commercial
Consumer
Markets
Property &
Casualty
Other
Operations
Total Property and
Casualty Insurance
Auto liability
$
(47)
$
(77)
$
—
$
(124)
Professional liability
(127)
—
—
(127)
General liability, umbrella and high hazard liability
(112)
—
—
(112)
Workers’ compensation
(92)
—
—
(92)
Package business
38
—
—
38
Fidelity and surety
28
—
—
28
Homeowners
—
18
—
18
Net environmental reserves
—
—
75
75
Net asbestos reserves
—
—
138
138
All other non-A&E
—
—
35
35
Uncollectible reinsurance
(20)
—
(20)
(40)
Change in workers' compensation discount, including accretion
24
—
—
24
Catastrophes
(23)
—
—
(23)
Other reserve re-estimates, net
(63)
26
13
(24)
Total prior accident years development
$
(394)
$
(33)
$
241
$
(186)
During 2009, the Company’ s re-estimates of prior accident years reserves included the following significant reserve changes:
• Released reserves for personal auto liability claims, for accident years 2005 to 2007, as the Company recognized that favorable
development in reported severity, first observed in early 2008, which was attributed, in part, to changes made in claim handling
procedures in 2007, was a sustained trend for those accident years. In the third and fourth quarters of 2009, management also
recognized sustained favorable development trends in AARP for accident years 2006 to 2008 and released reserves for those
accident years.
• Released reserves for commercial auto liability claims, primarily related to accident years 2003 to 2008. In the fourth quarter of
2009, the Company recognized that the full value of large auto liability claims was being recognized as case reserves at an earlier
age. The increased adequacy of case reserves caused the Company to decrease its estimate of reserves for IBNR loss and loss
adjustment expenses.
• The Company released reserves for D&O and errors and omissions (“E&O”) claims in 2009 related to the 2003 to 2008 accident
years. For these accident years, reported losses for claims under D&O and E&O policies had been emerging favorably to initial
expectations due to lower than expected claim severity.
• Released reserves for general liability claims, primarily related to accident years 2003 to 2007. 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 reserve releases from the third quarter of 2007 through 2009. During 2009,
management determined that the lower level of loss emergence was also evident in accident year 2007 and had continued for
accident years 2003 to 2006 and, as a result, the Company reduced the reserves. Largely offsetting the releases, the Company
recognized that the cost of late emerging exposures were likely to be higher than previously expected, and also recognized
additional ceded losses on accident years 1999 and prior.
• Released workers' compensation reserves, primarily related to additional ceded losses on accident years 1999 and prior and lower
allocated loss adjustment expense reserves in accident years 2003 to 2007. During the first quarter of 2009, the Company observed
lower than expected allocated loss adjustment expense payments on older accident years. As a result, the Company reduced its
estimate for future expense payments on more recent accident years.
• Strengthened reserves for liability claims under package business, primarily related to allocated loss adjustment expenses for
accident years 2000 to 2005 and 2007 and 2008. During the first quarter of 2009, the Company identified higher than expected
expense payments on older accident years related to the liability coverage. Additional analysis in the second quarter of 2009
showed that this higher level of loss adjustment expense was likely to continue into more recent accident years. As a result, in the
second quarter of 2009, the Company increased its estimates for future expense payments for the 2007 and 2008 accident years.
Largely offsetting the strengthenings, the Company recognized the cost of late emerging exposures were likely to be higher than
previously expected, and also recognized a lower than expected frequency of high severity claims.