The Hartford 2008 Annual Report Download - page 167

Table of Contents
Underwriting results • Underwriting results before catastrophes and prior accident year reserve development
increased by $145 as the result of a lower current accident year loss and loss adjustment
expense ratio before catastrophes, partially offset by the effect of the decline in earned
premiums in Middle Market and Specialty Commercial. The 2008 results benefited from
a lower current accident year loss and loss adjustment expense ratio before catastrophes
for Small Commercial and Middle Market workers’ compensation claims, lower claim
frequency on Personal Lines auto claims and lower non-catastrophe loss costs on Small
Commercial package business, partially offset by higher non-catastrophe losses on
Middle Market property and Personal Lines homeowners’ business.
• The $366 increase in current accident year catastrophe losses was primarily due to more
severe catastrophes in 2008, including losses from hurricane Ike and tornadoes and
thunderstorms in the South and Midwest.
• The change to favorable prior accident year reserve development was largely due to a
$210 increase in net favorable reserve development in Ongoing Operations, driven
largely by an increase in net reserve releases for workers’ compensation, professional
liability and personal auto liability claims. Refer to the “Reserves” section of the MD&A
for further discussion.
Net servicing and other
income
• The $21 decrease in net servicing income was primarily driven by a decrease in servicing
income from the AARP Health program, Specialty Risk Services and the Write Your
Own flood program and the write-off of software used in administering policies for third
parties.
Income tax expense • Income taxes changed from income tax expense of $570 in 2007 to an income tax benefit
of $95 in 2008. Despite near break-even pre-tax income in 2008, there was a net income
tax benefit in 2008 because the income tax benefit on realized capital losses was greater
than the income tax expense on all other components of pre-tax income. A portion of the
Company’s net investment income was generated from tax-exempt securities.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009