The Hartford 2010 Annual Report Download - page 194

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-66
11. Reserves for Future Policy Benefits and Unpaid Losses and Loss Adjustment Expenses (continued)
Life Insurance Products Reserve Development
Reserve development resulting primarily from group disability products is as follow:
For the years ended December 31,
2010 2009 2008
Beginning liabilities for life unpaid losses and loss adjustment expenses-gross $6,131 $ 6,066 $ 6,028
Reinsurance recoverables 213 231 261
Beginning liabilities for life unpaid losses and loss adjustment expenses 5,918 5,835 5,767
Add provision for life unpaid losses and loss adjustment expenses
Current year 3,260 3,244 3,243
Prior years 70 (88) (118)
Total provision for life unpaid losses and loss adjustment expenses 3,330 3,156 3,125
Less payments
Current year 1,552 1,580 1,554
Prior years 1,517 1,493 1,503
Total payments 3,069 3,073 3,057
Ending liabilities for life unpaid losses and loss adjustment expenses, net 6,179 5,918 5,835
Reinsurance recoverables 209 213 231
Ending liabilities for life unpaid losses and loss adjustment expenses-gross $6,388 $ 6,131 $ 6,066
The unfavorable prior year development in 2010 is a result of lower claim terminations, particularly in long-term disability. The
favorable prior year development in 2009 and 2008 was principally due to continued disability and waiver claims management.
The liability for future policy benefits and unpaid losses and loss adjustment expenses is as follows:
2010 2009
Group Life Term, Disability and Accident unpaid losses and loss adjustment expenses $ 6,388 $6,131
Group Life Other unpaid losses and loss adjustment expenses 216 232
Individual Life unpaid losses and loss adjustment expenses 110 123
Future Policy Benefits 11,859 11,494
Future Policy Benefits and Unpaid Losses and Loss Adjustment Expenses $ 18,573 $ 17,980
Property and Casualty Insurance Products Accounting Policy
The Hartford establishes property and casualty insurance products reserves to provide for the estimated costs of paying claims under
insurance policies written by the Company. These reserves include estimates for both claims that have been reported and those that
have been incurred but not reported, and include estimates of all losses and loss adjustment expenses associated with processing and
settling these claims. Estimating the ultimate cost of future losses and loss adjustment expenses is an uncertain and complex process.
This estimation process is based significantly on the assumption that past developments are an appropriate predictor of future events,
and involves a variety of actuarial techniques that analyze experience, trends and other relevant factors. The uncertainties involved with
the reserving process have become increasingly difficult due to a number of complex factors including social and economic trends and
changes in the concepts of legal liability and damage awards. Accordingly, final claim settlements may vary from the present estimates,
particularly when those payments may not occur until well into the future.
The Hartford regularly reviews the adequacy of its estimated losses and loss adjustment expense reserves by line of business within the
various reporting segments. Adjustments to previously established reserves are reflected in the operating results of the period in which
the adjustment is determined to be necessary. Such adjustments could possibly be significant, reflecting any variety of new and adverse
or favorable trends.
Most of the Company’ s property and casualty insurance products insurance reserves are not discounted. However, the Company has
discounted liabilities funded through structured settlements and has discounted certain reserves for indemnity payments due to
permanently disabled claimants under workers' compensation policies. Structured settlements are agreements that provide fixed
periodic payments to claimants and include annuities purchased to fund unpaid losses for permanently disabled claimants and, prior to
2008, agreements that funded loss run-offs for unrelated parties. Most of the annuities have been issued by the Company and these
structured settlements are recorded at present value as annuity obligations, either within the reserve for future policy benefits if the
annuity benefits are life-contingent or within other policyholder funds and benefits payable if the annuity benefits are not life-
contingent. If not funded through an annuity, reserves for certain indemnity payments due to permanently disabled claimants under
workers' compensation policies are recorded as property and casualty insurance products reserves and were discounted to present value
at an average interest rate of 4.8% in 2010 and 5.0% in 2009. As of December 31, 2010 and 2009, property and casualty insurance
products reserves were discounted by a total of $524 and $511, respectively. The current accident year benefit from discounting