The Hartford 2008 Annual Report Download - page 227

Table of Contents
Underwriting results and ratios
Year ended December 31, 2008 compared to the year ended December 31, 2007
Underwriting results decreased by $71, from $508 to $437, with a corresponding 2.6 point increase in the combined ratio,
from 81.4 to 84.0, due to:
Change in underwriting results
Decrease in earned premiums $ (12)
Losses and loss adjustment expenses
Ratio change — A decrease in the current accident loss and loss adjustment expense ratio
before catastrophes 140
Volume change — Decrease in current accident year losses and loss adjustment expenses
before catastrophes due to the decrease in earned premium 7
Decrease in current accident year losses and loss adjustment expenses before catastrophes 147
Catastrophes — Increase in current accident year catastrophes (94)
Reserve changes — Decrease in net favorable prior accident year reserve development (120)
Net increase in losses and loss adjustment expenses (67)
Operating expenses
Increase in amortization of deferred policy acquisition costs (1)
Decrease in insurance operating costs and expenses 9
Decrease in operating expenses 8
Decrease in underwriting results from 2007 to 2008 $ (71)
Earned premium decreased by $12
Refer to the earned premium section above for discussion.
Losses and loss adjustment expenses increased by $67
Current accident year losses and loss adjustment expenses before catastrophes decreased by $147
Small Commercial’s current accident year losses and loss adjustment expenses before catastrophes decreased by $147 in
2008, to $1,447, primarily due to a 5.2 point decrease in the current accident year loss and loss adjustment expense ratio
before catastrophes, to 53.1. The decrease in this ratio was primarily due to a lower loss and loss adjustment expense ratio
for workers’ compensation business and, to a lesser extent, a lower loss and loss adjustment expense ratio for package
business. Workers’ compensation claim frequency has been trending favorably for recent accident years due to improved
workplace safety and underwriting actions and the lower loss and loss adjustment expense ratio for the 2008 accident year
includes an assumption that this lower of claim frequency would continue for the 2008 accident year. The loss and loss
adjustment expense ratio for the 2007 accident year recorded in 2007 did not give as much credence to this lower level of
claim frequency. The effect of lower claim frequency for workers’ compensation claims was partially offset by the effect of
earned pricing decreases.
Current accident year catastrophes increased by $94
Current accident year catastrophe losses of $122, or 4.5 points, in 2008 were higher than current accident year catastrophe
losses of $28, or 1.0 point, in 2007, primarily due to hurricane Ike and tornadoes and thunderstorms in the South and
Midwest.
Net favorable prior accident year development decreased by $120
Net favorable prior accident year development of $89 in 2008 included a $92 release of workers’ compensation reserves
related to accident years 2000 to 2007. Net favorable reserve development of $209 in 2007 included a $151 release of
workers’ compensation loss and loss adjustment expense reserves for accident years 2002 to 2006, a $33 release of workers’
compensation loss reserves accident years 1987 to 2000 and a $30 release of loss reserves for package business for accident
years 2003 to 2006.
Operating expenses decreased by $8
Insurance operating costs and expenses decreased by $9, primarily due to lower compensation-related and servicing costs,
partially offset by an estimated $7 of TWIA assessments in 2008. Amortization of deferred policy acquisition costs of $636
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009