The Hartford 2008 Annual Report Download - page 192

Table of Contents
• Strengthened Middle Market workers’ compensation reserves by $40 for accident years 1973 and prior, primarily
driven by a reduction in reinsurance recoverables from the commutation of certain reinsurance treaties. Due to the
commutations, within the past two years, net paid losses on these claims have begun to emerge unfavorably to initial
expectations and, during 2007, the Company determined that this trend in higher paid losses would ultimately result in
unpaid losses settling for more than management’s previous estimates. The $40 reserve strengthening represented 2%
of net reserves for Middle Market workers’ compensation claims as of December 31, 2006.
• Strengthened general liability reserves by $39 for accident years more than 20 years old. The Company has experienced
an increase in defense costs for certain mass tort claims and, during 2007, the Company determined that the increase in
defense costs was a sustained trend that resulted in an increase in reserves. The $39 reserve strengthening represented
2% of the Company’s net reserves for general liability claims as of December 31, 2006.
• Strengthened reserves for Specialty Commercial general and products liability claims by $34, primarily related to the
1987 to 1997 accident years. Reported losses on general and products liability claims have been emerging unfavorably
to previous expectations and loss adjustment expenses have been higher than expected on late emerging claims. The
$34 reserve strengthening represented 3% of the Company’s net reserves for Specialty Commercial general liability
claims as of December 31, 2006.
• Also during 2007, the Company refined its processes for allocating IBNR reserves by accident year, resulting in a
reclassification of $347 of IBNR reserves from the 2003 to 2006 accident years to the 2002 and prior accident years.
This reclassification of reserves by accident year had no effect on total recorded reserves within any segment or on total
recorded reserves for any line of business within a segment.
Other Operations
• During the second quarter of 2007, an arbitration panel found that a Hartford subsidiary, established as a captive
reinsurance company in the 1970s by The Hartford’s former parent, ITT Corporation (“ITT”), had additional
obligations to ITT’s primary insurance carrier under ITT’s captive insurance program, which ended in 1993. When ITT
spun off The Hartford in 1995, the former captive became a Hartford subsidiary. The arbitration concerned whether
certain claims could be presented to the former captive in a different manner than ITT’s primary insurance carrier
historically had presented them. The Company recorded a charge of $99 principally as a result of this adverse
arbitration decision.
• The Company completed its environmental reserve evaluation and increased its environmental reserves by $25. As part
of this evaluation, the Company reviewed all of its open direct domestic insurance accounts exposed to environmental
liability as well as assumed reinsurance accounts and its London Market exposures for both direct and assumed
reinsurance. The Company found estimates for individual cases changed based upon the particular circumstances of
each account. These changes were case specific and not as a result of any underlying change in the current
environment.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009