The Hartford 2015 Annual Report Download - page 75

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Income Taxes
The effective tax rates in 2015 and 2014 differ from the U.S. Federal statutory rate of 35% primarily due to permanent differences
related to investments in tax exempt securities. For discussion of income taxes, see Note 14 - Income Taxes of Notes to Consolidated
Financial Statements.
Year ended December 31, 2014 compared to the year ended December 31, 2013
Overview
Net income, as compared to the prior year period, increased in 2014 primarily due to an improvement in underwriting results, driven by
lower current accident year losses and loss adjustment expenses before catastrophes and lower prior accident year development, partially
offset by a shift to net realized capital losses in the current year from net realized capital gains in the prior year period. Underwriting
expenses, compared to the prior year period, reflect a reduction of $49, before tax, in the Company's estimated liability for NY State
Workers' Compensation Board assessments.
Revenues - Earned and Written Premium
Earned premiums increased in 2014, reflecting the impact of higher written premiums primarily in small commercial and to a lesser
extent in middle market, partially offset by written premium declines in specialty lines.
Written premium increased in all small commercial lines of business, driven by favorable renewal premium due to higher policy count
retention and higher written pricing, as well as an increase in new business and higher audit premium on workers' compensation policies.
Written premium increases in middle market were driven primarily by higher renewal written premium in property, general liability and
auto, partially offset by the impact of underwriting actions that reduced written premium in the programs business. Written premium
decreases in specialty lines were primarily the result of underwriting actions to improve profitability of the captives business, partially
offset by growth in national accounts and bond.
Losses and Loss Adjustment Expenses
Losses and loss adjustment expenses reflect favorable current accident year losses before catastrophes in all lines of business and lower
unfavorable prior accident year development.
• The reduction in the current accident year loss and loss adjustment expense ratio before catastrophes in 2014 was primarily
driven by a lower loss and loss adjustment expense ratio in workers' compensation due to earned pricing increases and
favorable frequency and severity trends. Accordingly, the current accident year loss and loss adjustment expense ratio before
catastrophes decreased by 3.4 points to 59.4 in 2014 from 62.8 in 2013.
• Current accident year catastrophe losses of $109, before tax, in 2014, compared to $105, before tax, in 2013. Losses in 2014
were primarily due to multiple winter storm and wind and hail events across various U.S. geographic regions. Losses in 2013
were primarily due to multiple wind and hail and tornado events across various U.S. geographic regions. For additional
information, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of
Reinsurance.
• Prior accident year development increases of $13, before tax, in 2014, compared to $83, before tax, in 2013. Development in
2014 was primarily due to discount accretion on workers' compensation and an increase related to commercial auto liability,
partially offset by a decrease of professional and general liability reserves. Development in 2013 was primarily due to increases
related to commercial auto liability and the closing of the New York Section 25A Fund for Reopened Cases, partially offset by a
decrease of professional and general liability reserves. For additional information, see MD&A - Critical Accounting Estimates,
Reserve Roll-forwards and Development.
Underwriting Ratios
The combined ratio, before catastrophes and prior year development, improved 3.6 points to 91.5 in 2014 from 95.1 in 2013. The
improvement primarily reflects a decrease in the current accident year loss and loss adjustment expense ratio before catastrophes, as well
as a decrease in the expense ratio (including a 0.8 point favorable impact on the expense ratio related to a reduction in NY State Workers'
Compensation Board assessments).
Investment Results
Investment income decreased in 2014, as compared to the prior year period. For discussion of consolidated investment results, see
MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
Income Taxes
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 of income taxes, see Note 14 - Income Taxes of Notes to Consolidated
Financial Statements.