The Hartford 2008 Annual Report Download - page 252

Table of Contents
The following table displays gross asbestos reserves and other statistics by policyholder category as of December 31, 2008.
Summary of Gross Asbestos Reserves
As of December 31, 2008
Number of All Time Total All Time
Gross Asbestos Reserves as of June 30, 2008 [1] Accounts [2] Paid [3] Reserves Ultimate [3]
Major asbestos defendants [5]
Structured settlements (includes 3 Wellington
accounts) 5 $ 194 $ 408 $ 602
Wellington (direct only) 31 968 67 1,035
Other major asbestos defendants 29 482 168 650
No known policies (includes 3 Wellington
accounts) 5 — — —
Accounts with future exposure > $2.5 74 715 603 1,318
Accounts with future exposure < $2.5 1,090 282 119 401
Unallocated [6] 1,653 444 2,097
Total Direct 4,294 1,809 6,103
Assumed Reinsurance 1,058 497 1,555
London Market 558 370 928
Total as of June 30, 2008 [1] 5,910 2,676 8,586
Gross paid loss activity for the third quarter and
fourth quarter 2008 183 (183) —
Gross incurred loss activity for the third quarter and
fourth quarter 2008 — 5 5
Total as of December 31, 2008 [4] $ 6,093 $ 2,498 $ 8,591
[1] Gross Asbestos Reserves based on the second quarter 2008 asbestos reserve study.
[2] An account may move between categories from one evaluation to the next. Reclassifications were made as a result of
the reserve evaluation completed in the second quarter of 2008.
[3] “All Time Paid” represents the total payments with respect to the indicated claim type that have already been made by
the Company as of the indicated balance sheet date. “All Time Ultimate” represents the Company’s estimate, as of the
indicated balance sheet date, of the total payments that are ultimately expected to be made to fully settle the indicated
payment type. The amount is the sum of the amounts already paid (e.g. “All Time Paid”) and the estimated future
payments (e.g. the amount shown in the column labeled “Total Reserves”).
[4] Survival ratio is a commonly used industry ratio for comparing reserve levels between companies. While the method is
commonly used, it is not a predictive technique. Survival ratios may vary over time for numerous reasons such as large
payments due to the final resolution of certain asbestos liabilities, or reserve re-estimates. The survival ratio is
computed by dividing the recorded reserves by the average of the past three years of payments. The ratio is the
calculated number of years the recorded reserves would survive if future annual payments were equal to the average
annual payments for the past three years. The 3-year gross survival ratio of 5.7 as of December 31, 2008 is computed
based on total paid losses of $1.307 billion for the period from January 1, 2006 to December 31, 2008. As of
December 31, 2008, the one year gross paid amount for total asbestos claims is $294 resulting in a one year gross
survival ratio of 8.5.
[5] Includes 25 open accounts at June 30, 2008. Included 26 open accounts at June 30, 2007.
[6] Includes closed accounts (exclusive of Major Asbestos Defendants) and unallocated IBNR.
For paid and incurred losses and loss adjustment expenses reporting, the Company classifies its asbestos and environmental
reserves into three categories: Direct, Assumed — Domestic and London Market. Direct insurance includes primary and
excess coverage. Assumed reinsurance includes both “treaty” reinsurance (covering broad categories of claims or blocks of
business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance
companies). London Market business includes the business written by one or more of the Company’s subsidiaries in the
United Kingdom, which are no longer active in the insurance or reinsurance business. Such business includes both direct
insurance and assumed reinsurance.
Of the three categories of claims (Direct, Assumed — Domestic and London Market), direct policies tend to have the
greatest factual development from which to estimate the Company’s exposures.
Assumed reinsurance exposures are inherently less predictable than direct insurance exposures because the Company may
not receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the
receipt of information at the reinsurer level and adds to the uncertainty of estimating related reserves.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009