The Hartford 2008 Annual Report Download - page 217

Table of Contents
Earned Premiums
Year ended December 31, 2008 compared to the year ended December 31, 2007
Earned premiums increased $37, or 1%, due primarily to earned premium growth in AARP, partially offset by earned
premium decreases in Agency and Other.
• AARP earned premium grew $97, reflecting modest earned pricing increases for both auto and homeowners and the
effect of new business premium outpacing non-renewals in the last nine months of 2007. New business has offset
non-renewals in 2008 and new business in 2008 has been driven by growth in the size of the AARP target market, the
effect of direct marketing programs and the effect of cross selling homeowners insurance to insureds who have auto
policies.
• Agency earned premium decreased by $43 as the effect of a decline in new business premium and premium renewal
retention since the middle of 2007 was partially offset by the effect of modest earned pricing increases. The market
environment continues to be intensely competitive. The increase in advertising for auto business among the top
carriers is also occurring with homeowners’ business, particularly in non-coastal and non-catastrophe prone areas. In
2008, a number of Personal Lines carriers began to increase rates although a significant portion of the market
continues to compete heavily on price.
• Other earned premium decreased by $17, primarily due to a decision to reduce other affinity business.
Auto earned premium was relatively flat in 2008 as the effect of earned pricing increases of 1% was largely offset by a
decrease in new business since the middle of 2007. Homeowners’ earned premium grew 3% largely due to earned pricing
increases of 3%.
New business premium • Both auto and homeowners’ new business written premium decreased in 2008.
Auto new business decreased by $60, or 14%, including decreases in both AARP
and Agency. Homeowners’ new business decreased by $34, or 24%, including
decreases in both AARP and Agency. AARP new business written premium
decreased primarily due to lower auto and homeowners’ policy conversion rates,
driven by increased competition, including the effect of price decreases by some
carriers and the effect of continued advertising among carriers for new business.
Agency new business written premium decreased primarily due to price
competition driven, in part, by a greater number of agents using comparative rating
software to obtain quotes from multiple carriers.
Premium renewal retention • Premium renewal retention for auto decreased from 88% to 87%, driven primarily
by a decrease in policy retention for both AARP and Agency business, partially
offset by the effect of modest written pricing increases in 2008. Premium renewal
retention for homeowners decreased from 96% to 89% driven by a decrease in
retention for both AARP and Agency business. The decrease in premium renewal
retention for AARP homeowners’ business was driven by increased price
competition by some carriers and mandated homeowners rate declines in Florida
for AARP policies. The decrease in premium renewal retention for Agency
homeowners’ business was due, in part, to Florida policyholders non-renewing as a
result of the Company’s decision to stop renewing Florida homeowners’ policies
sold through agents.
Earned pricing increase
(decrease)
• Auto earned pricing increases of 1% represent the portion of the 2% increase in
written pricing for 2008 that is reflected in earned premium. While auto written
pricing was flat in 2007, in 2008 the Company has increased auto insurance rates
in certain states for certain classes to maintain profitability in the face of rising loss
costs. Although moderating, written pricing increases in 2008 included the effect
of policyholders purchasing newer vehicle models in place of older models.
Homeowners’ earned pricing increases of 3% primarily reflect the earning of a
blend of mid-single digit written pricing increases recognized over the last nine
months of 2007 and 2% written pricing increases recognized in the first nine
months of 2008. Written pricing increases in homeowners were largely driven by
increases in coverage limits due to rising replacement costs.
Policies in-force • The number of policies in-force decreased slightly for both auto and homeowners,
primarily due to a 7% decline in the number of Agency policies in-force, partially
offset by a 1% increase in the number of AARP policies in-force.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009