The Hartford 2012 Annual Report Download - page 82

Table of Contents
Year ended December 31, 2012 compared to the year ended December 31, 2011
Net income improved relative to the comparable prior period, primarily due to more favorable prior accident year reserve development, lower current accident
year catastrophes, and a $73 after-tax charge in 2011, related to the write off of capitalized costs associated with a policy administration software project that
was discontinued.
Current accident year catastrophe losses for 2012 were $381, pre-tax. In 2012, catastrophes primarily included Storm Sandy in the Northeast, severe
tornadoes and thunderstorms in the Midwest, the South and Colorado, as well as tornadoes and thunderstorms spanning from the Ohio Valley to the Mid-
Atlantic. In 2011, catastrophes losses of $425, pre-tax, primarily included severe tornado, hail and thunderstorm events in the Midwest and Southeast and
Hurricane Irene.
Favorable prior year development of $141, pre-tax, in 2012 compared with $75, pre-tax, in 2011, as a result of more favorable development in homeowners'
and catastrophe losses. For additional information regarding prior accident years reserve development, see the Property and Casualty Insurance Product
Reserves, Net of Reinsurance section within Critical Accounting Estimates.
Earned premiums decreased in auto and were down modestly for homeowners, as a decline in renewal written premium more than offset an increase in new
business written premium. Compared to 2011, the number of policies in-force decreased for both auto and home, driven by non-renewals. Policy count
retention for auto and home increased as moderating renewal written price increases improved the Company's price competitiveness. Changes in underwriting
practices and service operations have also contributed to the improvement in retention.
Auto and home new business written premium increased primarily due to more competitive new business pricing in AARP Direct and an increase in the sale of
the AARP auto product through independent agents. The lower auto and homeowners renewal earned pricing in 2012 was primarily due to lower rate increases.
For both auto and homeowners, an increase in earned pricing was partially offset by a shift in the mix of business by territory, class plan and pricing tier to
policies with lower average earned premium, such that increases in average earned premium were less than the increases in earned pricing.
Current accident year losses and loss adjustment expenses before catastrophes decreased primarily due to lower earned premiums and a decrease in the overall
current accident year loss and loss adjustment expense ratio before catastrophes. In 2012, the current accident year loss and loss adjustment expense ratio
before catastrophes decreased primarily due to a decrease in home, partially offset by an increase in auto. The decrease for home was primarily due to earned
pricing increases and a decrease in the frequency of non-catastrophe weather claims. The increase for auto was primarily due to higher loss cost severity for
first party physical damage and third party property damage claims, largely offset by the effect of earned pricing increases.
The effective tax rate, in both periods, differs from the U.S. Federal statutory rate primarily due to permanent differences related to investments in tax exempt
securities. For further discussion, see Income Taxes within Note 14 of the Notes to Consolidated Financial Statements.
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