The Hartford 2008 Annual Report Download - page 173

Table of Contents
Year ended December 31, 2007 compared to the year ended December 31, 2006
Ongoing Operations earned premium growth
Personal Lines • The decrease in the earned premium growth rate from 2006 to 2007 was due to the
Company’s exit from the Omni non-standard auto business. Omni, which was sold in the
fourth quarter of 2006, accounted for $127 of earned premium in 2006. Excluding Omni,
the Personal Lines earned premium growth rate was 7% in both 2006 and 2007. In 2007,
an increase in the growth rate of AARP earned premium was offset by the effect of a
decrease in the growth rate of Agency earned premium.
Small Commercial • The decrease in the earned premium growth rate was primarily attributable to a decrease
in new business written premium and premium renewal retention over the last six months
of 2006 and the first six months of 2007. Also contributing to the lower growth rate was a
decrease in earned pricing.
Middle Market • The change from an increase in earned premium in 2006 to a decrease in earned premium
in 2007 was primarily attributable to earned pricing decreases, a decrease in new business
written premium over the last six months of 2006 and the first six months of 2007 and a
decrease in premium renewal retention over the first six months of 2007.
Specialty Commercial • The rate of decline in Specialty Commercial earned premium slowed in 2007, primarily
due to a lower earned premium decrease in casualty and property, partially offset by a
lower earned premium increase in professional liability, fidelity and surety. Casualty
earned premium experienced a larger decrease in 2006, primarily because of a decrease
in 2006 earned premium from a single captive insured program that expired in 2005.
Earned premium decreases in property were larger in 2006 than in 2007 as a result of a
strategic decision in 2006 not to renew certain accounts with properties in
catastrophe-prone areas. The growth rate in professional liability, fidelity and surety
earned premium slowed in 2007 due to a decrease in earned pricing and a decline in new
business growth and premium renewal retention.
Ongoing Operations combined ratio
For the year ended December 31, 2007, the Ongoing Operations’ combined ratio increased 1.5 points, to 90.8, due to a 2.5
point increase in the combined ratio before catastrophes and prior accident year development, partially offset by a 0.8 point
improvement in prior accident year reserve development and the effect of the sale of Omni in the fourth quarter of 2006.
Omni had a higher combined ratio before catastrophes and prior accident year development than other business written by
the Company.
Combined ratio before
catastrophes and
prior accident year
development
• The increase in the combined ratio before catastrophes and prior accident year
development, from 88.0 to 90.5, was primarily due to a 1.4 point increase in the current
accident year loss and loss adjustment expense ratio before catastrophes and, to a lesser
extent, an increase in the expense ratio. The increase in the loss and loss adjustment
expense ratio before catastrophes and prior accident year development was primarily due
to increased severity on Personal Lines auto liability claims, increased frequency on
Personal Lines auto property damage claims and, to a lesser extent, increased severity on
Personal Lines homeowners claims and a higher loss and loss adjustment expense ratio
for both Small Commercial package business and Middle Market workers’ compensation
claims. Contributing to the increase in the expense ratio was the effect of a $41 reduction
of estimated Florida Citizens’ assessments in 2006 related to the 2005 Florida hurricanes.
Catastrophes • The catastrophe ratio increased, primarily due to the effect of net favorable reserve
development of prior accident year catastrophe losses in 2006. In 2006, the Company
recognized $83 of net reserve releases related to the 2005 and 2004 hurricanes.
Non-catastrophe prior
accident year
development
• Net non-catastrophe prior accident year reserve development was slightly unfavorable in
2006, but favorable in 2007. Favorable reserve development in 2007 was largely
attributable to the release of reserves for workers’ compensation claims, primarily related
to accident years 2002 to 2006. See the “Reserves” section for a discussion of prior
accident year reserve development for Ongoing Operations in 2007.
Other Operations net income (loss)
•
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009