The Hartford 2010 Annual Report Download - page 54

54
Reserve changes for accident years 2001 and 2002
Accident years 2001 and 2002 are reasonably close to original estimates. However, each year shows some swings by calendar period,
with some favorable development prior to calendar year 2005, largely offset by unfavorable development in calendar years 2005 through
2008. The release for accident year 2001 during calendar year 2004 relates primarily to reserves for the terrorist attack on September
11, 2001. Subsequent adverse developments on accident year 2001 relate to assumed casualty reinsurance and unexpected development
on mature claims in both general liability and workers’ compensation. Reserve releases for accident year 2002 during calendar years
2003 and 2004 come largely from short-tail lines of business, where results emerge quickly and actual reported losses are predictive of
ultimate losses. Reserve increases on accident year 2002 during calendar year 2005 were recognized, as unfavorable development on
accident years prior to 2002 caused the Company to increase its estimate of unpaid losses for the 2002 accident year.
Reserve changes for accident years 2003 through 2009
Even after considering the 2007 calendar year reclassification of $347 of IBNR reserves from the 2003 to 2006 accident years to the
2002 and prior accident years, accident years 2003 through 2007 show favorable development in calendar years 2004 through 2010. A
portion of the release comes from short-tail lines of business, where results emerge quickly. During calendar year 2005 and 2006,
favorable re-estimates occurred for both loss and allocated loss adjustment expenses. In addition, catastrophe reserves related to the
2004 and 2005 hurricanes developed favorably in 2006. During calendar years 2005 through 2008, the Company recognized favorable
re-estimates of both loss and allocated loss adjustment expenses on workers’ compensation claims driven, in part, by state legal reforms,
including in California and Florida, underwriting actions and expense reduction initiatives that have had a greater impact in controlling
costs than was originally estimated. In 2007, the Company released reserves for package business claims as reported losses have
emerged favorably to previous expectations. In 2007 through 2009, the Company released reserves for general liability claims due to
the favorable emergence of losses for high hazard and umbrella general liability claims. Reserves for professional liability claims were
released in 2008 and 2009 related to the 2003 through 2007 accident years due to a lower estimate of claim severity on both directors’
and officers’ insurance claims and errors and omissions insurance claims. Reserves of auto liability claims, within Consumer Markets,
were released in 2008 due largely to an improvement in emerged claim severity for the 2005 to 2007 accident years.