The Hartford 2007 Annual Report Download - page 101

101
Year ended December 31, 2007 compared to the year ended December 31, 2006
Net income
Net income decreased by $77, or 5%, due primarily to a decrease in underwriting results and an increase in net realized capital losses,
partially offset by an increase in net investment income.
Underwriting results decreased by $142
Underwriting results decreased by $142, from $1,111 to $969, with a corresponding 1.5 point increase in the combined ratio, from 89.3
to 90.8, due to:
Change in underwriting results
Earned premiums
Excluding Omni, a 2% increase in earned premium $ 185
Decrease in earned premium due to the sale of Omni in the fourth quarter of 2006 (122)
Net increase in earned premiums 63
Losses and loss adjustment expenses
Ratio change — An increase in the current accident year loss and loss adjustment expense ratio before
catastrophes, excluding Omni (176)
Volume change — Increase in current accident year loss and loss adjustment expenses before catastrophes
due to the increase in earned premium, excluding Omni (114)
Sale of Omni — Decrease in current accident year loss and loss adjustment expenses before catastrophes as
a result of the sale of Omni 105
Net increase in current accident year loss and loss adjustment expenses before catastrophes (185)
Catastrophes — Decrease in current accident year catastrophe losses 22
Reserve changes — Increase in net favorable prior accident year reserve development 81
Net increase in losses and loss adjustment expenses (82)
Operating expenses
Decrease in amortization of deferred policy acquisition costs 2
Increase in insurance operating costs and expenses (125)
Net increase in operating expenses (123)
Decrease in underwriting results from 2006 to 2007 $ (142)
Sale of Omni
The Company sold its Omni non-standard auto business in the fourth quarter of 2006. Omni accounted for an underwriting loss of $52
in 2006, including $127 of earned premiums, $140 of loss and loss adjustment expenses, $30 of amortization of deferred policy
acquisition costs and $9 of insurance operating costs and expenses.
Earned premium increased by $63
Ongoing Operations’ earned premium increased by $63, or 1%, to $10,491, driven by a 3% increase in both Personal Lines and Small
Commercial, partially offset by a 4% decrease in Middle Market and a 3% decrease in Specialty Commercial. Excluding Omni, earned
premium increased by $185, or 2%. Refer to the earned premium discussion in the Executive Overview section of the Property &
Casualty MD&A for further discussion of the increase in earned premium.
Losses and loss adjustment expenses increased by $82
Current accident year loss and loss adjustment expenses before catastrophes increased by $185
Ongoing Operations’ current accident year loss and loss adjustment expenses before catastrophes increased by $185 in 2007, to $6,692,
due largely to an increase in the current accident year loss and loss adjustment expense ratio and an increase in earned premium,
partially offset by a decrease due to the sale of Omni. Excluding Omni, the current accident year loss and loss adjustment expense ratio
before catastrophes increased by 1.7 points, to 63.8, due to an increase in the current accident year loss and loss adjustment expense
ratio before catastrophes of 3.3 points in Personal Lines, 1.4 points in Small Commercial and 2.2 points in Middle Market, partially
offset by a decrease in the current accident year loss and loss adjustment expense ratio before catastrophes of 2.2 points in Specialty
Commercial.