The Hartford 2008 Annual Report Download - page 233

Table of Contents
Underwriting results and ratios
Year ended December 31, 2008 compared to the year ended December 31, 2007
Underwriting results increased by $12, from $157 in 2007 to $169 in 2008, with a corresponding 0.9 point decrease in the
combined ratio, from 93.5 to 92.6, due to:
Change in underwriting results
Decrease in earned premiums $ (121)
Losses and loss adjustment expenses
Volume change — Decrease in current accident year loss and loss adjustment expenses before
catastrophes due to the decrease in earned premium 78
Ratio change — A decrease in the current accident year loss and loss adjustment expense ratio
before catastrophes 23
Decrease in current accident year loss and loss adjustment expenses before catastrophes 101
Catastrophes — Increase in current accident year catastrophe losses (101)
Reserve changes — Increase in net favorable prior accident year reserve development 118
Net decrease in losses and loss adjustment expenses 118
Operating expenses
Decrease in amortization of deferred policy acquisition costs 16
Increase in insurance operating costs and expenses (1)
Decrease in operating expenses 15
Increase in underwriting results from 2007 to 2008 $ 12
Earned premium decreased by $121
Earned premiums for the Middle Market segment decreased by $121, or 5%, driven primarily by decreases in commercial
auto, workers’ compensation and general liability. Refer to the earned premium section for further discussion.
Losses and loss adjustment expenses decreased by $118
Current accident year losses and loss adjustment expenses before catastrophes decreased by $101
Middle Market current accident year losses and loss adjustment expenses before catastrophes decreased by $101 due largely
to a decrease in earned premium. Before catastrophes, the current accident year loss and loss adjustment expense ratio
decreased by 1.0 point, to 63.5, primarily due to a lower loss and loss adjustment expense ratio on workers’ compensation
and general liability business, largely offset by higher non-catastrophe losses on property and marine business and the effect
of earned pricing decreases. The higher non-catastrophe losses on property business were driven by increased severity,
including a number of large individual claims, and the higher non-catastrophe losses on marine business were primarily
driven by increased frequency.
Current accident year catastrophes increased by $101
Current accident year catastrophe losses of $116, or 5.1 points, in 2008 were higher than current accident year catastrophe
losses of $15, or 0.6 points, in 2007, primarily due to losses from hurricane Ike and tornadoes and thunderstorms in the
South and Midwest.
Net favorable prior accident year development increased by $118
Net favorable prior accident year reserve development increased from $16, or 0.7 points, in 2007 to $134, or 5.9 points, in
2008. Net favorable reserve development of $134 in 2008 primarily included a $90 release of reserves for high hazard and
umbrella general liability claims, primarily related to the 2001 to 2007 accident years, a $64 release of workers’
compensation reserves, primarily related to accident years 2000 to 2007 and a $27 release of commercial auto liability
reserves, primarily related to accident years 2002 to 2007, partially offset by a $50 strengthening of reserves for general
liability and products liability claims primarily for accident years 2004 and prior.
Net unfavorable reserve development of $16 in 2007 primarily included a $49 release of general liability loss and loss
adjustment expense reserves for accident years 2003 to 2006 and an $18 release of commercial auto liability reserves for
accident years 2003 and 2004, partially offset by a $40 strengthening of workers’ compensation reserves for accident years
1973 & prior and a $14 strengthening of general liability reserves for accident years more than 20 years old.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009