Hartford Life 10Q 2006 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-12749

HARTFORD LIFE, INC.

(Exact name of registrant as specified in its charter)


Delaware		06-1470915
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Hopmeadow Street, Simsbury, Connecticut 06089
(Address of principal executive offices)

(860) 547-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filero Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of April 24, 2006 there were outstanding 1,000 shares of Common Stock, $0.01 par value per share, of the registrant, all of which were directly owned by Hartford Holdings, Inc., a direct wholly owned subsidiary of The Hartford Financial Services Group, Inc.

The registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

INDEX


	Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Report of Independent Registered Public Accounting Firm		3

Condensed Consolidated Statements of Income — Three Months Ended March 31, 2006 and 2005		4

Condensed Consolidated Balance Sheets — March 31, 2006 and December 31, 2005		5

Condensed Consolidated Statements of Changes in Stockholder’s Equity — Three Months Ended March 31, 2006 and 2005		6

Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2006 and 2005		7

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 4. Controls and Procedures		44

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		44

Item 1A. Risk Factors		45

Item 5. Other Information		49

Item 6. Exhibits		49

Signature		50

Exhibits Index		51
EX-15.01: DELOITTE & TOUCHE LLP LETTER OF AWARENESS
EX-31.01: CERTIFICATION
EX-31.02: CERTIFICATION
EX-32.01: CERTIFICATION
EX-32.02: CERTIFICATION

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of
Hartford Life, Inc.
Hartford, Connecticut

We have reviewed the accompanying condensed consolidated balance sheet of Hartford Life, Inc. and subsidiaries (“the Company”) as of March 31, 2006, and the related condensed consolidated statements of income, changes in stockholder’s equity, and cash flows for the three-month periods ended March 31, 2006 and 2005. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2005, and the related consolidated statements of income, changes in stockholder’s equity, and cash flows for the year then ended (not presented herein); and in our report dated February 22, 2006 (which report includes an explanatory paragraph relating to the Company’s change in its method of accounting and reporting for certain nontraditional long-duration contracts and for separate accounts in 2004), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP

Hartford, Connecticut
April 25, 2006

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income


	Three Months
	Ended
	March 31,
(In millions)	2006			2005
	(Unaudited)
*Revenues*
Fee income	$	1,118		$	950
Earned premiums		1,273			999
Net investment income
Securities available-for-sale and other		766			729
Equity securities held for trading		454			221

Total net investment income		1,220			950
Net realized capital (losses) gains		(126	)		92

Total revenues		3,485			2,991


*Benefits, claims and expenses*
Benefits, claims and claim adjustment expenses		2,138			1,739
Insurance expenses and other		576			559
Amortization of deferred policy acquisition costs and present value of future profits		299			291
Dividends to policyholders		14			18
Interest expense		20			20
Total benefits, claims and expenses		3,047			2,627
Income before income tax expense		438			364
Income tax expense		103			86

Net income	$	335		$	278

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	March 31,			December 31,
	2006			2005
(In millions, except for share data)	(Unaudited)
*Assets*
Investments
Fixed maturities, available-for-sale, at fair value (amortized cost of $50,247 and $49,615)	$	50,571		$	50,812
Equity securities, available-for-sale, at fair value (cost of $802 and $781)		820			800
Equity securities, trading securities, at fair value (cost of $21,288 and $19,570)		26,057			24,034
Policy loans, at outstanding balance		2,007			2,016
Mortgage loans on real estate		1,920			1,513
Other investments		640			609

Total investments		82,015			79,784
Cash		1,104			1,001
Premiums receivable and agents’ balances		408			426
Reinsurance recoverables		805			800
Deferred policy acquisition costs and present value of future profits		9,048			8,567
Deferred income taxes		(414	)		(633	)
Goodwill		796			796
Other assets		1,982			2,146
Separate account assets		158,419			150,875

Total assets	$	254,163		$	243,762


*Liabilities*
Reserve for future policy benefits	$	13,163		$	12,777
Other policyholder funds		66,602			64,452
Long-term debt		1,048			1,048
Other liabilities		5,727			5,251
Separate account liabilities		158,419			150,875

Total liabilities		244,959			234,403


Commitments and Contingencies (Note 6)		—			—

*Stockholder’s Equity*
Common Stock — 1,000 shares authorized, issued and outstanding; par value $0.01		—			—
Capital surplus		3,094			3,094
Accumulated other comprehensive income
Net unrealized capital gains on securities, net of tax		146			608
Foreign currency translation adjustments		(67	)		(79	)

Total accumulated other comprehensive income		79			529
Retained earnings		6,031			5,736

Total stockholder’s equity		9,204			9,359

Total liabilities and stockholder’s equity	$	254,163		$	243,762

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholder’s Equity

Three Months Ended March 31, 2006


	Accumulated Other Comprehensive Income
								Net Gain
					Net Unrealized			(Loss) on
					Capital			Cash Flow			Foreign
					Gains (Losses)			Hedging			Currency						Total
	Common		Capital		on Securities,			Instruments,			Translation			Retained			Stockholder’s
(In millions) (Unaudited)	Stock		Surplus		Net of Tax			Net of Tax			Adjustments			Earnings			Equity

Balance, December 31, 2005	$	—	$	3,094	$	709		$	(101	)	$	(79	)	$	5,736		$	9,359
Comprehensive income
Net income															335			335

Other comprehensive income, net of tax (1)
Net change in unrealized capital losses on securities (2)						(377	)											(377	)
Net loss on cash flow hedging Instruments									(85	)								(85	)
Cumulative translation adjustments												12						12

Total other comprehensive income																		(450	)

Total comprehensive income																		(115	)

Dividends declared															(40	)		(40	)

Balance, March 31, 2006	$	—	$	3,094	$	332		$	(186	)	$	(67	)	$	6,031		$	9,204

Three Months Ended March 31, 2005


	Accumulated Other Comprehensive Income
								Net Gain
					Net Unrealized			(Loss) on
					Capital			Cash Flow			Foreign
					Gains (Losses)			Hedging			Currency					Total
	Common		Capital		on Securities,			Instruments,			Translation			Retained		Stockholder's
(In millions) (Unaudited)	Stock		Surplus		Net of Tax			Net of Tax			Adjustments			Earnings		Equity

Balance, December 31, 2004	$	—	$	3,094	$	1,348		$	(170	)	$	16		$	4,884	$	9,172
Comprehensive income
Net income															278		278

Other comprehensive income, net of tax (1)
Net change in unrealized capital losses on securities (2)						(370	)										(370	)
Net loss on cash flow hedging Instruments									(36	)							(36	)
Cumulative translation adjustments												(20	)				(20	)

Total other comprehensive income																	(426	)

Total comprehensive income																	(148	)

Balance, March 31, 2005	$	—	$	3,094	$	978		$	(206	)	$	(4	)	$	5,162	$	9,024


(1)		Net change in unrealized capital gains (losses) on securities is reflected net of tax benefit of $(200) and $(199) for the first quarters ended March 31, 2006 and 2005, respectively. Net gain (loss) on cash flow hedging instruments is net of tax benefit of $(49) and $(19) for the first quarters ended March 31, 2006 and 2005, respectively. There is no tax effect on cumulative translation adjustments.

(2)		There were reclassification adjustments for after-tax gains realized in net income of $(40) and $42 for each of the first quarters ended March 31, 2006 and 2005.

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


	Three Months Ended
	March 31,
(In millions) (Unaudited)	2006			2005

*Operating Activities*
Net income	$	335		$	278
*Adjustments to reconcile net income to net cash provided by operating activities*
Amortization of deferred policy acquisition costs and present value of future profits		299			291
Additions to deferred policy acquisition costs and present value of future profits		(504	)		(556	)
Change in:
Reserve for future policy benefits		385			125
Reinsurance recoverables		69			(18	)
Receivables		(61	)		54
Payables, accruals and other liabilities		(283	)		(16	)
Accrued and deferred income taxes		336			(18	)
Net realized capital losses (gains)		126			(92	)
Net increase in equity securities, held for trading		(2,028	)		(2,220	)
Net receipts from investment contracts credited to policyholder accounts associated with equity securities, held for trading		2,105			2,367
Depreciation and amortization		18			24
Other, net		287			(7	)

Net cash provided by operating activities		1,084			212

*Investing Activities*
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale		5,141			7,576
Equity securities, available-for-sale		29			2
Mortgage loans		102			114
Partnerships		35			7
Payments for the purchase of:
Fixed maturities, available-for-sale		(5,887	)		(8,280	)
Equity securities, available-for-sale		(50	)		(85	)
Mortgage loans		(508	)		(170	)
Partnerships		(147	)		(28	)
Change in policy loans, net		9			543
Change in payables for collateral under securities lending, net		436			(127	)
Change in other investments, net		(141	)		(7	)

Additions to property and equipment, net		(13	)		(21	)

Net cash used for investing activities		(994	)		(476	)

*Financing Activities*
Net receipts from investment and universal life-type contracts		43			548
Dividends paid		(42	)		(24	)

Net cash provided by financing activities		1			524

Foreign exchange rate effect on cash		12			5
Net increase in cash		103			260
Cash — beginning of period		1,001			933

Cash — end of period	$	1,104		$	1,198

*Supplemental Disclosure of Cash Flow Information*
*Net cash paid during the period for*
Income taxes (received) paid	$	(230	)	$	57
Interest	$	19		$	19

See Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, unless otherwise stated)
(Unaudited)

1. Basis of Presentation and Accounting Policies

Basis of Presentation

Hartford Life, Inc. (a Delaware corporation), together with its consolidated subsidiaries (“Hartford Life”, “Life” or the “Company”), is a leading financial services and insurance organization which provides, primarily in the United States, investment, retirement, estate planning and group benefits products. Hartford Life, Inc. is a direct wholly-owned subsidiary of Hartford Holdings, Inc., a direct wholly-owned subsidiary of The Hartford Financial Services Group, Inc. (“The Hartford”).

The condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”), which differ materially from the accounting practices prescribed by various insurance regulatory authorities. The financial statements include the accounts of Hartford Life and its wholly-owned as well as controlled majority owned subsidiaries. Investments in companies in which the Company exercises significant influence over operating and financial policies are accounted for using the equity method. All material intercompany transactions and balances between Hartford Life, its subsidiaries and affiliates have been eliminated.

The accompanying condensed consolidated financial statements and notes are unaudited. These condensed consolidated financial statements reflect all adjustments (consisting only of normal accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations, and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Hartford Life’s 2005 Form 10-K Annual Report. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

Reclassifications

Certain reclassifications have been made to prior year financial information to conform to the current year classifications.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining deferred policy acquisition costs and present value of future profits associated with variable annuity and other universal life-type contracts; the evaluation of other-than-temporary impairments on investments in available-for-sale securities; the valuation of guaranteed minimum withdrawal and income benefit derivatives; and contingencies relating to corporate litigation and regulatory matters.

Significant Accounting Policies

For a description of accounting policies, see Note 2 of Notes to Consolidated Financial Statements included in Hartford Life’s 2005 Form 10-K Annual Report.

Income Taxes

The effective tax rate for the three months ended March 31, 2006 and 2005 was 24 % and 24%, respectively. The principal causes of the difference between the effective rate and the U.S. statutory rate of 35% were tax-exempt interest earned on invested assets and the separate account dividends received deduction (“DRD”).

The separate account DRD is estimated for the current year using information from the most recent year-end, adjusted for projected equity market performance. The estimated DRD is generally updated in the third quarter for the provision to filed return adjustments, and in the fourth quarter based on known actual mutual fund distributions and fee income from the Company’s variable insurance products. The actual current year DRD can vary from the estimates based on, but not limited to, changes in eligible dividends received

by the mutual funds, amounts of distributions from these mutual funds, appropriate levels of taxable income as well as the utilization of capital loss carryforwards at the mutual fund level.

Adoption of New Accounting Standards

Hartford Life’s employees are included in The Hartford 2005 Incentive Stock Plan and The Hartford Employee Stock Purchase Plan.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and supercedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123R requires all companies to recognize compensation costs for share-based payments to employees based on the grant-date fair value of the award. The Company adopted SFAS 123R effective January 1, 2006 using the prospective method and therefore prior period amounts have not been restated. In January 2003, the Company began expensing all stock-based compensation awards granted or modified after January 1, 2003 under the fair value recognition provisions of SFAS 123 and therefore the adoption of SFAS 123R did not have a material effect on the Company’s financial position or results of operations and is not expected to have a material effect on future operations. The Company recognized an immaterial effect of adoption as of January 1, 2006 to reverse expense previously recognized on awards expected to be forfeited, as required under
SFAS 123R.

2. Segment Information

Life is organized into six reportable operating segments: Retail Products Group (“Retail”), Retirement Plans, Institutional Solutions Group (“Institutional”), Individual Life, Group Benefits and International.

The accounting policies of the reportable operating segments are the same as those described in the summary of significant accounting policies in Note 1. Life evaluates performance of its segments based on revenues, net income and the segment’s return on allocated capital. The Company charges direct operating expenses to the appropriate segment and allocates the majority of indirect expenses to the segments based on an intercompany expense arrangement. Intersegment revenues primarily occur between Life’s Other category and the operating segments. These amounts primarily include interest income on allocated surplus, interest charges on excess separate account surplus, the allocation of certain net realized capital gains and losses and the allocation of credit risk charges. For a discussion of segment allocations, see Note 3 of Notes to the Consolidated Financial Statements included in Hartford Life’s 2005 Form 10-K Annual Report.

The positive (negative) impact on realized gains and losses of the segments for allocated interest-rate related realized gains and losses and the credit-risk charges were as follows:


	Three Months Ended
	March 31,
	2006			2005

Retail
Realized gains (losses)	$	9		$	9
Credit risk charge		(6	)		(7	)
Retirement Plans
Realized gains (losses)		3			2
Credit risk charge		(2	)		(2	)
Institutional
Realized gains (losses)		4			3
Credit risk charge		(6	)		(5	)
Individual Life
Realized gains (losses)		3			3
Credit risk charge		(2	)		(2	)
Group Benefits
Realized gains (losses)		1			2
Credit risk charge		(2	)		(2	)
International
Realized gains (losses)		—			—
Credit risk charge		(1	)		—
Other
Realized gains (losses)		(20	)		(19	)
Credit risk charge		19			18

Total	$	—		$	—

The majority of the Company’s revenues are derived from customers within the United States. The Company’s long-lived assets primarily consist of deferred policy acquisition costs and deferred tax assets from within the United States. The following tables present

summarized financial information concerning the Company’s segments. For a full discussion of each segment, please refer to Hartford Life’s 2005 Form 10-K Annual Report.


	Three Months Ended
	March 31,
	2006			2005

Revenues
Earned premiums, fees and other considerations
Retail	$	631		$	542
Retirement Plans		57			37
Institutional		294			119
Individual Life		191			187
Group Benefits		1,032			948
International		166			97
Other		20			19

Total premiums, fees and other considerations		2,391			1,949
Net investment income
Securities available-for-sale and other		766			729
Equity securities held for trading		454			221

Total net investment income		1,220			950

Net realized capital (losses) gains		(126	)		92

Total revenues	$	3,485		$	2,991


	Three Months Ended
	March 31,
	2006			2005

Net Income (Loss)
Retail	$	176		$	148
Retirement Plans		21			17
Institutional		22			21
Individual Life		45			39
Group Benefits		68			59
International		46			14
Other		(43	)		(20	)

Total net income[1]	$	335		$	278

[1]

Includes charges of (i) $66, after tax, for the three months ended March 31, 2005, and (ii) $7, after tax, for the three months ended March 31, 2006, to reserve for investigations by the SEC and New York Attorney General’s Office related to market timing, by the SEC related to directed brokerage and by the New York Attorney General’s Office and the Connecticut Attorney General’s Office related to single premium group annuities.

3. Investments and Derivative Instruments


	As of March 31, 2006									As of December 31, 2005
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value

Bonds and Notes
Asset-backed securities (“ABS”)	$	6,810	$	51	$	(77	)	$	6,784	$	6,819	$	48	$	(75	)	$	6,792
Collateralized mortgage obligations (“CMOs”)
Agency backed		782		2		(10	)		774		758		3		(5	)		756
Non-agency backed		96		1		(1	)		96		106		—		—			106
Commercial mortgage-backed securities (“CMBS”)
Agency backed		70		1		(2	)		69		70		1		—			71
Non-agency backed		9,521		122		(160	)		9,483		9,219		174		(97	)		9,296
Corporate		24,336		814		(502	)		24,648		23,893		1,178		(259	)		24,812
Government/Government agencies Foreign		714		40		(8	)		746		719		50		(4	)		765
United States		813		8		(15	)		806		630		24		(5	)		649
Mortgage-backed securities (“MBS”) —agency backed		2,207		2		(62	)		2,147		2,794		6		(43	)		2,757
States, municipalities and political subdivisions		3,229		152		(32	)		3,349		3,256		210		(9	)		3,457
Redeemable preferred stock		16		—		—			16		17		—		—			17
Short-term investments		1,653		—		—			1,653		1,334		—		—			1,334

Total fixed maturities	$	50,247	$	1,193	$	(869	)	$	50,571	$	49,615	$	1,694	$	(497	)	$	50,812

Derivative Instruments

The Company utilizes a variety of derivative instruments, including swaps, caps, floors, forwards, futures and options through one of four Company-approved objectives: to hedge risk arising from interest rate, equity market, price or currency exchange rate risk or volatility; to manage liquidity; to control transaction costs; or to enter into replication transactions.

On the date the derivative contract is entered into, the Company designates the derivative as (1) a hedge of the fair value of a recognized asset or liability (“fair value” hedge), (2) a hedge of the variability of cash flows of a forecasted transaction or of amounts to be received or paid related to a recognized asset or liability (“cash flow” hedge), (3) a foreign-currency fair value or cash flow hedge (“foreign-currency” hedge), (4) a hedge of a net investment in a foreign operation (“net investment” hedge) or (5) held for other investment and risk management purposes, which primarily involve managing asset or liability related risks which do not qualify for hedge accounting.

The Company’s derivative transactions are used in strategies permitted under the derivatives use plans filed and/or approved, as applicable, by the State of Connecticut, the State of Illinois and the State of New York insurance departments. The Company does not make a market or trade in these instruments for the express purpose of earning short-term trading profits.

For a detailed discussion of the Company’s use of derivative instruments, see Notes 2 and 4 of Notes to Consolidated Financial Statements included in Hartford Life’s 2005 Form 10-K Annual Report.

Derivative instruments are recorded in the condensed consolidated balance sheets at fair value. Asset and liability values are determined by calculating the net position for each derivative counterparty by legal entity and are presented as follows:


	March 31, 2006				December 31, 2005
			Liability				Liability
	Asset Values		Values		Asset Values		Values

Other investments	$	144	$	—	$	179	$	—
Reinsurance recoverables		—		29		—		17
Other policyholder funds and benefits payable		73		—		8		—
Other liabilities		—		552		—		420

Total	$	217	$	581	$	187	$	437

The following table summarizes the notional amount and fair value of derivatives by hedge designation as of March 31, 2006 and December 31, 2005. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not necessarily reflective of credit risk. The fair value amounts of derivative assets and liabilities are presented on a net basis in the following table.


	March 31, 2006					December 31, 2005
	Notional					Notional
	Amount		Fair Value			Amount		Fair Value

Cash flow hedge	$	7,395	$	(360	)	$	7,197	$	(242	)
Fair value hedge		2,126		11			1,707		(1	)
Other investment and risk management activities		56,578		(15	)		54,161		(7	)

Total	$	66,099	$	(364	)	$	63,065	$	(250	)

The increase in notional amount since December 31, 2005, is primarily due to an increase in derivatives associated with guaranteed minimum withdrawal benefit (“GMWB”) product sales. The decrease in net fair value of derivative instruments since December 31, 2005, was primarily related to interest rate swaps and the Japanese fixed annuity hedging instruments resulting primarily from rising interest rates, partially offset by an increase in the fair value of GMWB related derivatives primarily resulting from an increase in notional.

The Company offers certain variable annuity products with a GMWB rider, which is accounted for as an embedded derivative. For further discussion, refer to Note 5 of Notes to Condensed Consolidated Financial Statements.

For the three months ended March 31, 2006, after-tax net gains (losses) representing the total ineffectiveness of all cash flow hedges and fair value hedges were $(5) and less than $1, respectively. For the three months ended March 31, 2005, after-tax net gains and losses representing the total ineffectiveness of all cash flow hedges and fair value hedges were $(2) and less than $l, respectively. For the three months ended March 31, 2006 and 2005, there were no after-tax net gains and losses representing the total ineffectiveness of net investment hedges.

The total change in value for derivative-based strategies that do not qualify for hedge accounting treatment, including periodic net coupon settlements, are reported in net realized capital gains and losses. For the three months ended March 31, 2006 and 2005, the Company recognized an after-tax net gain or loss of $(61) and $10, respectively, for derivative-based strategies which do not qualify for hedge accounting treatment. Net realized capital losses were recognized for the three months ended March 31, 2006, as compared to net

realized capital gains for the three months ended March 31, 2005, primarily due to losses associated with the Japanese fixed annuity contract hedges, GMWB related derivatives and non-qualifying interest rate swaps.

As of March 31, 2006, the after-tax deferred net gains on derivative instruments recorded in accumulated other comprehensive income (loss) (“AOCI”) that are expected to be reclassified to earnings during the next twelve months are $(1). This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to interest income over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows (for all forecasted transactions, excluding interest payments on variable-rate debt) is twenty-four months. For the three months ended March 31, 2006 and 2005, the Company had less than $1 of net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

4. Deferred Policy Acquisition Costs and Present Value of Future Profits

Changes in deferred policy acquisition costs and present value of future profits were as follows:


	2006			2005

Balance, January 1	$	8,567		$	7,437
Capitalization		504			556
Amortization — Deferred policy acquisition costs and present value of future profits		(299	)		(291	)
Adjustments to unrealized gains and losses on securities available-for-sale and other		276			245
Effect of currency translation adjustment		—			(39	)

Balance, March 31	$	9,048		$	7,908

5. Separate Accounts, Death Benefits and Other Insurance Benefit Features

Many of the variable annuity contracts issued by the Company offer various guaranteed minimum death, withdrawal and income benefits. Guaranteed minimum death and income benefits are offered in various forms as described in the footnotes to the table below. The Company currently reinsures a significant portion of the death benefit guarantees associated with its in-force block of business. Changes in the gross U.S. guaranteed minimum death benefit (“GMDB”) and Japan GMDB/guaranteed minimum income benefits (“GMIB”) liability balance sold with annuity products are as follows:


	U.S. GMDB [1]			Japan GMDB/GMIB
Liability balance as of January 1, 2006	$	158		$	50
Incurred		34			9
Paid		(29	)		—

Liability balance as of March 31, 2006	$	163		$	59

[1]

The reinsurance recoverable asset related to the U.S. GMDB was $38 as of March 31, 2006.


	U.S. GMDB [1]			Japan GMDB/GMIB
Liability balance as of January 1, 2005	$	174		$	28
Incurred		32			7
Paid		(38	)		—
Currency translation adjustment		—			(2	)

Liability balance as of March 31, 2005	$	168		$	33

[1]

The reinsurance recoverable asset related to the U.S. GMDB was $55 as of March 31, 2005.

The net GMDB and GMIB liability is established by estimating the expected value of net reinsurance costs and death and income benefits in excess of the projected account balance. The excess death and income benefits and net reinsurance costs are recognized ratably over the accumulation period based on total expected assessments. The GMDB and GMIB liabilities are recorded in Future Policy Benefits on the Company’s balance sheet. Changes in the GMDB and GMIB liability are recorded in Benefits, Claims and Claim Adjustment Expenses on the Company’s statement of income. The Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense.

The following table provides details concerning GMDB and GMIB exposure as of March 31, 2006:

Breakdown of Individual Variable and Group Annuity Account Value by GMDB/GMIB Type


					Retained Net		Weighted Average
	Account		Net Amount		Amount		Attained Age of
Maximum anniversary value (MAV) [1]	Value		at Risk		at Risk		Annuitant

MAV only	$	57,174	$	4,488	$	440		64
With 5% rollup [2]		4,040		436		81		63
With Earnings Protection Benefit Rider (EPB) [3]		5,499		379		72		60
With 5% rollup & EPB		1,453		140		31		62

Total MAV		68,166		5,443		624
Asset Protection Benefit (APB) [4]		29,845		27		15		61
Lifetime Income Benefit (LIB) [5]		924		1		1		59
Reset [6] (5-7 years)		7,326		365		365		65
Return of Premium [7]/Other		9,438		35		34		49

Subtotal U.S. Guaranteed Minimum Death Benefits		115,699		5,871		1,039		62
Japan Guaranteed Minimum Death and Income Benefit [8]		26,696		12		12		66

Total	$	142,395	$	5,883	$	1,051

[1]		[1] MAV: the death benefit is the greatest of current account value, net premiums paid and the highest account value on any anniversary before age 80 (adjusted for withdrawals).

[2]		Rollup: the death benefit is the greatest of the MAV, current account value, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier of age 80 or 100% of adjusted premiums.

[3]		EPB: the death benefit is the greatest of the MAV, current account value, or contract value plus a percentage of the contract’s growth. The contract’s growth is account value less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.

[4]		APB: the death benefit is the greater of current account value or MAV, not to exceed current account value plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months).

[5]		LIB: the death benefit is the greater of current account value or MAV, net premiums paid, or a benefit amount that rachets over time, generally based on market performance.

[6]		Reset: the death benefit is the greatest of current account value, net premiums paid and the most recent five to seven year anniversary account value before age 80 (adjusted for withdrawals).

[7]		Return of premium: the death benefit is the greater of current account value and net premiums paid.

[8]		Benefits include a Return of Premium and MAV (before age 75) death benefit and a guarantee to return initial investment, adjusted for earnings liquidity, through a fixed annuity, after a minimum deferral period of 10, 15 or 20 years. The guaranteed remaining balance related to the Japan GMIB was $17.1 billion and $15.2 billion as of March 31, 2006 and December 31, 2005, respectively.

The Company offers certain variable annuity products with a guaranteed minimum withdrawal benefit (“GMWB”) rider. The GMWB provides the policyholder with a guaranteed remaining balance (“GRB”) if the account value is reduced to zero through a combination of market declines and withdrawals. The GRB is generally equal to premiums less withdrawals. However, annual withdrawals that exceed a specific percentage of the premiums paid may reduce the GRB by an amount greater than the withdrawals and may also impact the guaranteed annual withdrawal amount that subsequently applies after the excess annual withdrawals occur. For certain of the withdrawal benefit features, the policyholder also has the option, after a specified time period, to reset the GRB to the then-current account value, if greater. In addition, the Company has recently added a feature, available to new contract holders, that allows the policyholder the option to receive the guaranteed annual withdrawal amount for as long as they are alive. In this new feature, in all cases the contract holder or their beneficiary will receive the GRB and the GRB is reset on an annual basis to the maximum anniversary account value subject to a cap. The GMWB represents an embedded derivative in the variable annuity contracts that is required to be reported separately from the host variable annuity contract. It is carried at fair value and reported in other policyholder funds. The fair value of the GMWB obligation is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. Because of the dynamic and complex nature of these cash flows, stochastic techniques under a variety of market return scenarios and other best estimate assumptions are used. Estimating these cash flows involves numerous estimates and subjective judgments including those regarding expected market rates of return, market volatility, correlations of market returns and discount rates. At each valuation date, the Company assumes expected returns based on risk-free rates as represented by the current LIBOR forward curve rates; market volatility assumptions for each underlying index based on a blend of observed market “implied volatility” data and annualized standard deviations of monthly returns using the most recent 20 years of observed market performance; correlations of market returns across underlying indices based on actual observed market returns and relationships over the ten years preceding the valuation date; and current risk-free spot rates as represented by the current LIBOR spot curve to determine the present value of expected future cash flows produced in the stochastic projection process. During the fourth quarter of 2005, the Company reflected a newly reliable market input for volatility on Standard and Poor’s (“S&P”) 500 index options.

As of March 31, 2006 and December 31, 2005, the embedded derivative asset recorded for GMWB, before reinsurance or hedging, was $73 and $8, respectively. As of March 31, 2006 and 2005, the increase (decrease) in value of the GMWB, before reinsurance and hedging, reported in realized gains was $84 and $19, respectively. There were no payments made for the GMWB during 2006 or 2005.

As of March 31, 2006 and December 31, 2005, $29.4 billion, or 72%, and $26.4 billion, or 69%, respectively, of account value representing substantially all of the contracts written after July 2003, with the GMWB feature were unreinsured. In order to minimize the volatility associated with the unreinsured GMWB liabilities, the Company has established an alternative risk management strategy. In 2003, the Company began hedging its unreinsured GMWB exposure using interest rate futures, and Standard and Poor’s (“S&P”) 500 and NASDAQ index options and futures contracts. During 2004, the Company began using Europe, Australasia and Far East (“EAFE”) Index swaps to hedge GMWB exposure to international equity markets. The GRB as of March 31, 2006 and December 31, 2005 was $33.4 billion and $31.8 billion, respectively.

A contract is ‘in the money’ if the contract holder’s GRB is greater than the account value. For contracts that were ‘in the money’ the Company’s exposure, as of March 31, 2006 and December 31, 2005, was $7 and $8, respectively. However, the only ways the contract holder can monetize the excess of the GRB over the account value of the contract is upon death or if their account value is reduced to zero through a combination of a series of withdrawals that do not exceed a specific percentage of the premiums paid per year and market declines. If the account value is reduced to zero, the contract holder will receive a period certain annuity equal to the remaining GRB. As the amount of the excess of the GRB over the account value can fluctuate with equity market returns on a daily basis the ultimate amount to be paid by the Company, if any, is uncertain and could be significantly more or less than $7.

6. Commitments and Contingencies

Litigation

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid claim and claim adjustment expense reserves. Management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of the Company.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with life insurance policies; improper sales practices in connection with the sale of life insurance and other investment products; and improper fee arrangements in connection with mutual funds. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of the Company. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

Broker Compensation Litigation— On October 14, 2004, the New York Attorney General’s Office filed a civil complaint (the “NYAG Complaint”) against Marsh Inc. and Marsh & McLennan Companies, Inc. (collectively, “Marsh”) alleging, among other things, that certain insurance companies, including The Hartford, participated with Marsh in arrangements to submit inflated bids for business insurance and paid contingent commissions to ensure that Marsh would direct business to them. The Hartford was not joined as a defendant in the action, which has since settled. Since the filing of the NYAG Complaint, several private actions have been filed against The Hartford asserting claims arising from the allegations of the NYAG Complaint.

Two securities class actions, now consolidated, have been filed in the United States District Court for the District of Connecticut alleging claims against The Hartford and certain of its executive officers under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. The consolidated amended complaint alleges on behalf of a putative class of shareholders that The Hartford and the four named individual defendants, as control persons of The Hartford, failed to disclose to the investing public that The Hartford’s business and growth was predicated on the unlawful activity alleged in the NYAG Complaint. The class period alleged is August 6, 2003 through October 13, 2004, the day before the NYAG Complaint was filed. The complaint seeks damages and attorneys’ fees. Defendants filed a motion to dismiss in June 2005, and the Court heard oral argument on December 22, 2005. The Hartford and the individual defendants dispute the allegations and intend to defend these actions vigorously.

Two corporate derivative actions, now consolidated, also have been filed in the same court. The consolidated amended complaint, brought by a shareholder on behalf of The Hartford against its directors and an executive officer, alleges that the defendants knew adverse non-public information about the activities alleged in the NYAG Complaint and concealed and misappropriated that information to make profitable stock trades, thereby breaching their fiduciary duties, abusing their control, committing gross mismanagement, wasting corporate assets, and unjustly enriching themselves. The complaint seeks damages, injunctive relief, disgorgement, and attorneys’ fees. Defendants filed a motion to dismiss in May 2005, and the plaintiffs thereafter agreed to stay further proceedings pending resolution of the motion to dismiss the securities class action. All defendants dispute the allegations and intend to defend these

actions vigorously.

The Hartford is also a defendant in a multidistrict litigation in federal district court in New Jersey. There are two consolidated amended complaints filed in the multidistrict litigation, one related to alleged conduct in connection with the sale of property-casualty insurance and the other related to alleged conduct in connection with the sale of group benefits products. The Hartford and various of its subsidiaries are named in both complaints. The actions assert, on behalf of a class of persons who purchased insurance through the broker defendants, claims under the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), state law, and in the case of the group benefits complaint, claims under ERISA arising from conduct similar to that alleged in the NYAG Complaint. The class period alleged is 1994 through the date of class certification, which has not yet occurred. The complaints seek treble damages, injunctive and declaratory relief, and attorneys’ fees. Motions to dismiss the two consolidated amended complaints are pending. The Hartford also has been named in two similar actions filed in state courts, which the defendants have removed to federal court. Those actions currently are transferred to the court presiding over the multidistrict litigation. In addition, The Hartford was joined as a defendant in an action by the California Commissioner of Insurance alleging similar conduct by various insurers in connection with the sale of group benefits products. The Commissioner’s action asserts claims under California insurance law and seeks injunctive relief only. The Hartford disputes the allegations in all of these actions and intends to defend the actions vigorously.

Additional complaints may be filed against The Hartford in various courts alleging claims under federal or state law arising from the conduct alleged in the NYAG Complaint. The Hartford’s ultimate liability, if any, in the pending and possible future suits is highly uncertain and subject to contingencies that are not yet known, such as how many suits will be filed, in which courts they will be lodged, what claims they will assert, what the outcome of investigations by the New York Attorney General’s Office and other regulatory agencies will be, the success of defenses that The Hartford may assert, and the amount of recoverable damages if liability is established. In the opinion of management, it is possible that an adverse outcome in one or more of these suits could have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

Regulatory Developments

In June 2004, The Hartford received a subpoena from the New York Attorney General’s Office in connection with its inquiry into compensation arrangements between brokers and carriers. In mid-September 2004 and subsequently, The Hartford has received additional subpoenas from the New York Attorney General’s Office, which relate more specifically to possible anti-competitive activity among brokers and insurers. Since the beginning of October 2004, The Hartford has received subpoenas or other information requests from Attorneys General and regulatory agencies in more than a dozen jurisdictions regarding broker compensation and possible anti-competitive activity. The Hartford may receive additional subpoenas and other information requests from Attorneys General or other regulatory agencies regarding similar issues. In addition, The Hartford has received a request for information from the New York Attorney General’s Office concerning The Hartford’s compensation arrangements in connection with the administration of workers compensation plans. The Hartford intends to continue cooperating fully with these investigations, and is conducting an internal review, with the assistance of outside counsel, regarding broker compensation issues in its Group Benefits operations.

On October 14, 2004, the New York Attorney General’s Office filed a civil complaint against Marsh & McLennan Companies, Inc., and Marsh, Inc. (collectively, “Marsh”). The complaint alleges, among other things, that certain insurance companies, including The Hartford, participated with Marsh in arrangements to submit inflated bids for business insurance and paid contingent commissions to ensure that Marsh would direct business to them. The Hartford was not joined as a defendant in the action, which has since settled. Although no regulatory action has been initiated against The Hartford in connection with the allegations described in the civil complaint, it is possible that the New York Attorney General’s Office or one or more other regulatory agencies may pursue action against The Hartford or one or more of its employees in the future. The potential timing of any such action is difficult to predict. If such an action is brought, it could have a material adverse effect on the Company.

On October 29, 2004, the New York Attorney General’s Office informed The Hartford that the Attorney General is conducting an investigation with respect to the timing of the previously disclosed sale by Thomas Marra, a director and executive officer of The Hartford, of 217,074 shares of The Hartford’s common stock on September 21, 2004. The sale occurred shortly after the issuance of two additional subpoenas dated September 17, 2004 by the New York Attorney General’s Office. The Hartford has engaged outside counsel to review the circumstances related to the transaction and is fully cooperating with the New York Attorney General’s Office. On the basis of the review, The Hartford has determined that Mr. Marra complied with The Hartford’s applicable internal trading procedures and has found no indication that Mr. Marra was aware of the additional subpoenas at the time of the sale.

There continues to be significant federal and state regulatory activity relating to financial services companies, particularly mutual funds companies. These regulatory inquiries have focused on a number of mutual fund issues, including market timing and late trading, revenue sharing and directed brokerage, fees, transfer agents and other fund service providers, and other mutual-fund related issues. The Hartford has received requests for information and subpoenas from the SEC, subpoenas from the New York Attorney General’s Office, a subpoena from the Connecticut Attorney General’s Office, requests for information from the Connecticut Securities and Investments Division of the Department of Banking, and requests for information from the New York Department of Insurance, in each case requesting documentation and other information regarding various mutual fund regulatory issues. The Hartford continues to cooperate fully with these regulators in these matters.

The SEC’s Division of Enforcement and the New York Attorney General’s Office are investigating aspects of The Hartford’s variable annuity and mutual fund operations related to market timing. The Hartford continues to cooperate fully with the SEC and the New York Attorney General’s Office in these matters. The Hartford’s mutual funds are available for purchase by the separate accounts of different variable universal life insurance policies, variable annuity products, and funding agreements, and they are offered directly to certain qualified retirement plans. Although existing products contain transfer restrictions between subaccounts, some products, particularly older variable annuity products, do not contain restrictions on the frequency of transfers. In addition, as a result of the settlement of litigation against The Hartford with respect to certain owners of older variable annuity contracts, The Hartford’s ability to restrict transfers by these owners has, until recently, been limited. The Hartford has executed an agreement with the parties to the previously settled litigation which, together with separate agreements between these contract owners and their broker, has resulted in the exchange or surrender of all of the variable annuity contracts that were the subject of the previously settled litigation.

The SEC’s Division of Enforcement also is investigating aspects of The Hartford’s variable annuity and mutual fund operations related to directed brokerage and revenue sharing. The Hartford discontinued the use of directed brokerage in recognition of mutual fund sales in late 2003. The Hartford continues to cooperate fully with the SEC in these matters.

The Hartford has received subpoenas from the New York Attorney General’s Office and the Connecticut Attorney General’s Office requesting information relating to The Hartford’s group annuity products, including single premium group annuities used in maturity or terminal funding programs. These subpoenas seek information about how various group annuity products are sold, how The Hartford selects mutual funds offered as investment options in certain group annuity products, and how brokers selling The Hartford’s group annuity products are compensated. The Hartford continues to cooperate fully with these regulators in these matters.

To date, none of the SEC’s and New York Attorney General’s market timing investigation, the SEC’s directed brokerage investigation, or the New York Attorney General’s and Connecticut Attorney General’s single premium group annuity investigation has resulted in the initiation of any formal action against The Hartford by these regulators. However, The Hartford believes that the SEC, the New York Attorney General’s Office, and the Connecticut Attorney General’s Office are likely to take some action against The Hartford at the conclusion of the respective investigations. The Hartford is engaged in active discussions with the SEC, the New York Attorney General’s Office and the Connecticut Attorney General’s Office. The potential timing of any resolution of any of these matters or the initiation of any formal action by any of these regulators is difficult to predict. The Company recorded a charge of $102, after tax, in 2005 to establish a reserve for the market timing, directed brokerage and single premium group annuity matters and, based on recent developments, the Company recorded an additional charge of $7, after tax, in the first quarter of 2006 to increase the reserve. This reserve is an estimate; in view of the uncertainties regarding the outcome of these regulatory investigations, as well as the tax-deductibility of payments, it is possible that the ultimate cost to the Company of these matters could exceed the reserve by an amount that would have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular quarterly or annual period.

On May 24, 2005, The Hartford received a subpoena from the Connecticut Attorney General’s Office seeking information about The Hartford’s participation in finite reinsurance transactions in which there was no substantial transfer of risk between the parties. The Hartford is cooperating fully with the Connecticut Attorney General’s Office in this matter.

On June 23, 2005, The Hartford received a subpoena from the New York Attorney General’s Office requesting information relating to purchases of The Hartford’s variable annuity products, or exchanges of other products for The Hartford’s variable annuity products, by New York residents who were 65 or older at the time of the purchase or exchange. On August 25, 2005, The Hartford received an additional subpoena from the New York Attorney General’s Office requesting information relating to purchases of or exchanges into The Hartford’s variable annuity products by New York residents during the past five years where the purchase or exchange was funded using funds from a tax-qualified plan or where the variable annuity purchased or exchanged for was a sub-account of a tax-qualified plan or was subsequently put into a tax-qualified plan. The Hartford is cooperating fully with the New York Attorney General’s Office in these matters.

On July 14, 2005, The Hartford received an additional subpoena from the Connecticut Attorney General’s Office concerning The Hartford’s structured settlement business. This subpoena requests information about The Hartford’s sale of annuity products for structured settlements, and about the ways in which brokers are compensated in connection with the sale of these products. The Hartford is cooperating fully with the Connecticut Attorney General’s Office in these matters.

The Hartford has received a request for information from the New York Attorney General’s Office about issues relating to the reporting of workers’ compensation premium. The Hartford is cooperating fully with the New York Attorney General’s Office in this matter.

7. Stock Compensation Plans

Hartford Life’s employees are included in The Hartford 2005 Incentive Stock Plan and The Hartford Employee Stock Purchase Plan.

The Hartford has two primary stock-based compensation plans which are described below. Shares issued in satisfaction of stock-based compensation may be made available from authorized but unissued shares, shares held by The Hartford in treasury or from shares purchased in the open market. The Hartford typically issues new shares in satisfaction. Hartford Life was allocated expense of $7 and $5 for the three months ended March 31, 2006 and 2005, respectively. Hartford Life’s income tax benefit recognized for stock-based compensation plans was $2 and $2 for the quarters ended March 31, 2006 and 2005, respectively. Hartford Life did not capitalize any cost of stock-based compensation.

Stock Plan

In 2005, the shareholders of The Hartford approved The Hartford 2005 Incentive Stock Plan (the “2005 Stock Plan”), which superseded and replaced The Hartford Incentive Stock Plan and The Hartford Restricted Stock Plan for Non-employee Directors. The terms of the 2005 Stock Plan are substantially similar to the terms of these superseded plans. The 2005 Stock Plan provides for awards to be granted in the form of non-qualified or incentive stock options qualifying under Section 422A of the Internal Revenue Code, stock appreciation rights, restricted stock units, restricted stock, performance shares, or any combination of the foregoing.

The fair values of awards granted under the 2005 Stock Plan are measured as of the grant date and expensed ratably over the awards’ vesting periods, generally three years. For stock option awards granted or modified in 2006 and later, the Company began expensing awards to retirement-eligible employees hired before January 1, 2002 immediately or over a period shorter than the stated vesting period because the employees receive accelerated vesting upon retirement and therefore the vesting period is considered non-substantive. For the three months ended March 31, 2005, the Company would have recognized an immaterial amount of additional stock-based compensation expense if it had been accelerating expense for all awards to retirement-eligible employees entitled to accelerated vesting. All awards provide for accelerated vesting upon a change in control of The Hartford as defined in the 2005 Stock Plan.

Stock Option Awards

Under the 2005 Stock Plan, all options granted have an exercise price equal to the market price of The Hartford’s common stock on the date of grant, and an option’s maximum term is ten years and two days. Certain options become exercisable over a three year period commencing one year from the date of grant, while certain other options become exercisable upon the attainment of specified market price appreciation of The Hartford’s common shares. For any year, no individual employee may receive an award of options for more than 1,000,000 shares. As of December 31, 2005, The Hartford had not issued any incentive stock options under any plans.

For all options granted or modified on or after January 1, 2004, The Hartford uses a hybrid lattice/Monte-Carlo based option valuation model (the “valuation model”) that incorporates the possibility of early exercise of options into the valuation. The valuation model also incorporates The Hartford’s historical termination and exercise experience to determine the option value. For these reasons, The Hartford believes the valuation model provides a fair value that is more representative of actual experience than the value calculated under the Black-Scholes model which The Hartford used prior to January 1, 2004.

Share Awards

Share awards are valued equal to the market price of The Hartford’s common stock on the date of grant, less a discount for those awards that do not provide for dividends during the vesting period. Share awards granted under the 2005 Plan and outstanding include restricted stock units, restricted stock and performance shares. Generally, restricted stock units vest after three years and restricted stock vests in three to five years. Performance shares become payable within a range of 0% to 200% of the number of shares initially granted based upon the attainment of specific performance goals achieved over a specified period, generally three years. On a cumulative basis, no more than 20% of the aggregate number of shares which may be awarded under the 2005 Stock Plan are available for restricted stock units, restricted stock and performance shares. Also, the maximum award of restricted stock units, restricted stock or performance shares for any individual employee in any year is 200,000 shares or units.

Employee Stock Purchase Plan

In 1996, The Hartford established The Hartford Employee Stock Purchase Plan (“ESPP”). Under this plan, eligible employees of The Hartford may purchase common stock of The Hartford at a 15% discount from the lower of the closing market price at the beginning or end of the quarterly offering period. Employees purchase a variable number of shares of stock through payroll deductions elected as of the beginning of each quarter. The per share fair value is estimated based on the 15% discount off of the beginning stock price plus the value of three-month European call and put options on shares of stock at the beginning stock price calculated using the Black Scholes model.

8. Transactions with Affiliates

For a description of transactions with affiliates, see Note 18 of Notes to Consolidated Financial Statements included in Hartford Life’s 2005 Form 10-K Annual Report.

9. Sale of Affiliates

On March 2, 2006, Hartford Life Insurance Company completed the sale of Servus Life Insurance Company to XL Life and Annuity Holding Company and received cash in the amount of approximately $15.

On November 16, 2005, Hartford Life and Accident Insurance Company agreed to sell Hart Life Insurance Company to Ace Group Holdings Inc., pursuant to a Stock Purchase Agreement (the “Agreement”). The transaction was approved by the State of Connecticut Insurance Commissioner in April 2006. Subject to closing adjustments described in the Agreement, the expected sale price would be approximately $14 and it is anticipated that the sale would be completed by the end of April 2006.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollar amounts in millions, unless otherwise stated)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of Hartford Life, Inc. and its subsidiaries (“Hartford Life”, “Life” or the “Company”) as of March 31, 2006, compared with December 31, 2005, and its results of operations for the three months ended March 31, 2006 compared with the equivalent period in 2005. This discussion should be read in conjunction with the MD&A in Hartford Life’s 2005 Form 10-K Annual Report.

Certain of the statements contained herein are forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include estimates and assumptions related to economic, competitive and legislative developments. These forward-looking statements are subject to change and uncertainty which are, in many instances, beyond the Company’s control and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management. Actual results could differ materially from those expected by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in Part II, Item 1A, Risk Factors. These factors include: the possible occurrence of terrorist attacks; the response of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; changes in the stock markets, interest rates or other financial markets, including the potential effect on the Company’s statutory capital levels; the inability to effectively mitigate the impact of equity market volatility on the Company’s financial position and results of operations arising from obligations under annuity product guarantees; the Company’s potential exposure arising out of regulatory proceedings or private claims relating to incentive compensation or payments made to brokers or other producers and alleged anti-competitive conduct; the uncertain effect on the Company of regulatory and market-driven changes in practices relating to the payment of incentive compensation to brokers and other producers, including changes that have been announced and those which may occur in the future; the possibility of unfavorable loss development; stronger than anticipated competitive activity; unfavorable judicial or legislative developments; the potential effect of domestic and foreign regulatory developments, including those which could increase the Company’s business costs and required capital levels; the possibility of general economic and business conditions that are less favorable than anticipated; the Company’s ability to distribute its products through distribution channels, both current and future; the uncertain effects of emerging claim and coverage issues; a downgrade in the Company’s financial strength or credit ratings; the ability of the Company’s subsidiaries to pay dividends to the Company; the ability to recover the Company’s systems and information in the event of a disaster or other unanticipated event; and other factors described in such forward-looking statements.

INDEX


Overview			20
Critical Accounting Estimates			22
Consolidated Results of Operations			24
Retail			27
Retirement Plans			28
Institutional			29
Individual Life			30
Group Benefits			31
International			32
Other			33
Investments			34
Investment Credit Risk			37
Capital Markets Risk Management			39
Capital Resources and Liquidity			42
Accounting Standards			44

OVERVIEW

The Company has six reportable operating segments: Retail Products Group (“Retail”), Retirement Plans, Institutional Solutions Group (“Institutional”), Individual Life, Group Benefits and International. The Company provides investment and retirement products, such as variable and fixed annuities, mutual funds and retirement plan services and other institutional investment products, such as structured settlements; individual and private-placement life insurance (“PPLI”) and products including variable universal life, universal life, interest sensitive whole life and term life; and group benefit products, such as group life and group disability insurance.

Regulatory Developments

The SEC’s Division of Enforcement and the New York Attorney General’s Office are investigating aspects of The Hartford’s variable annuity and mutual fund operations related to market timing. The Hartford continues to cooperate fully with the SEC and the New York Attorney General’s Office in these matters. The Hartford’s mutual funds are available for purchase by the separate accounts of different variable universal life insurance policies, variable annuity products, and funding agreements, and they are offered directly to certain qualified retirement plans. Although existing products contain transfer restrictions between subaccounts, some products, particularly older variable annuity products, do not contain restrictions on the frequency of transfers. In addition, as a result of the settlement of litigation against The Hartford with respect to certain owners of older variable annuity contracts, The Hartford’s ability to restrict transfers by these owners has, until recently, been limited. The Hartford has executed an agreement with the parties to the previously settled litigation, which, together with separate agreements between these contract owners and their broker, has resulted in the exchange or surrender of all of the variable annuity contracts that were the subject of the previously settled litigation.

Broker Compensation

As the Company has disclosed previously, the Company pays brokers and independent agents commissions and other forms of incentive compensation in connection with the sale of many of the Company’s insurance products. Since the New York Attorney General’s Office filed a civil complaint against Marsh on October 14, 2004, several of the largest national insurance brokers, including Marsh, Aon Corporation and Willis Group Holdings Limited, have announced that they have discontinued the use of contingent compensation arrangements. Other industry participants may make similar, or different, determinations in the future. In addition, legal, legislative, regulatory, business or other developments may require changes to industry practices relating to incentive compensation. At this time, it is not possible to predict the effect of these announced or potential changes on the Company’s business or distribution strategies .

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: deferred policy acquisition costs and present value of future profits; valuation of guaranteed minimum withdrawal benefits; evaluation of other-than-temporary impairments on available-for-sale securities; and contingencies relating to corporate litigation and regulatory matters. In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements. For a discussion of each of these critical accounting estimates, see MD&A in Hartford Life’s 2005 Form 10-K Annual Report.

Life Deferred Policy Acquisition Costs and Present Value of Future Profits Associated with Variable Annuity and Other Universal Life-Type Contracts

Accounting Policy and Assumptions

Life policy acquisition costs include commissions and certain other expenses that vary with and are primarily associated with acquiring business. Present value of future profits is an intangible asset recorded upon applying purchase accounting in an acquisition of a life insurance company. Deferred policy acquisition costs and the present value of future profits intangible asset are amortized in the same way. Both are amortized over the estimated life of the contracts acquired, generally 20 years. Within the following discussion, deferred policy acquisition costs and the present value of future profits intangible asset will be referred to as “DAC”. At March 31, 2006 and December 31, 2005, the carrying value of the Company’s Life DAC asset was $9.0 billion and $8.6 billion, respectively. Of those amounts, $4.6 billion and $4.5 billion related to individual variable annuities sold in the U.S., $1.3 billion and $1.2 billion related to individual variable annuities sold in Japan and $2.0 billion and $1.9 billion related to universal life-type contracts sold by Individual Life.

The Company amortizes DAC related to traditional policies (term, whole life and group insurance) over the premium-paying period in proportion to the present value of annual expected premium income. The Company amortizes DAC related to investment contracts and universal life-type contracts (including individual variable annuities) using the retrospective deposit method. Under the retrospective deposit method, acquisition costs are amortized in proportion to the present value of estimated gross profits (“EGPs”). The Company uses other measures for amortizing DAC, such as gross costs, as a replacement for EGPs when EGPs are expected to be negative for multiple years of the contract’s life. The Company also adjusts the DAC balance, through other comprehensive income, by an amount that represents the amortization of DAC that would have been required as a charge or credit to operations had unrealized gains and losses on investments been realized. Actual gross profits, in a given reporting period, that vary from management’s initial estimates result in increases or decreases in the rate of amortization, commonly referred to as a “true-up”, which are recorded in the current period. The true-up recorded for the first three months ended March 31, 2006 and 2005 was an increase to amortization of $9 and $4, respectively.

Each year, the Company develops future EGPs for the products sold during that year. The EGPs for products sold in a particular year are aggregated into cohorts. Future gross profits are projected for the estimated lives of the contracts, generally 20 years and are, to a large extent, a function of future account value projections for individual variable annuity products and to a lesser extent for variable universal life products. The projection of future account values requires the use of certain assumptions. The assumptions considered to be important in the projection of future account value, and hence the EGPs, include separate account fund performance, which is impacted by separate account fund mix, less fees assessed against the contract holder’s account balance, surrender and lapse rates, interest margin, and mortality. The assumptions are developed as part of an annual process and are dependent upon the Company’s current best estimates of future events which are likely to be different for each year’s cohort. For example, upon completion of a study during the fourth quarter of 2005, the Company, in developing projected account values and the related EGPs for the 2005 cohorts, used a separate account return assumption of 7.6% (after fund fees, but before mortality and expense charges) for U.S. products and 4.3% (after fund fees, but before mortality and expense charges) for Japanese products. (Although the Company used a separate account return assumption of 4.3% and 5.8% for the 2005 and 2006 cohorts, respectively, based on the relative fund mix of all variable products sold in Japan, the weighted average rate on the entire Japan block is 5.0%.) For prior year cohorts, the Company’s separate account return assumption, at the time those cohorts’ account values and related EGPs were projected, was 9.0% for U.S. products and ranged from 5.0% to 7.47% for Japanese products.

Unlock and Sensitivity Analysis

EGPs that are used as the basis for determining amortization of DAC are evaluated regularly to determine if actual experience or other evidence suggests that earlier estimates should be revised. Assumptions used to project account values and the related EGPs

are not revised unless the EGPs in the DAC amortization model fall outside of a reasonable range. In the event that the Company was to revise assumptions used for prior year cohorts, thereby changing its estimate of projected account value, and the related EGPs, in the DAC amortization model, the cumulative DAC amortization would be adjusted to reflect such changes in the period the revision was determined to be necessary, a process known as “unlocking”.

To determine the reasonableness of the prior assumptions used and their impact on previously projected account values and the related EGPs, the Company evaluates, on a quarterly basis, its previously projected EGPs. The Company’s process to assess the reasonableness of its EGPs involves the use of internally developed models, which run a large number of stochastically determined scenarios of separate account fund performance. Incorporated in each scenario are the Company’s current best estimate assumptions with respect to separate account returns, lapse rates, mortality, and expenses. These scenarios are run for individual variable annuity business in the U.S. and independently for individual variable annuity business in Japan and are used to calculate statistically significant ranges of reasonable EGPs. The statistical ranges produced from the stochastic scenarios are compared to the present value of EGPs used in the respective DAC amortization models. If EGPs used in the DAC amortization model fall outside of the statistical ranges of reasonable EGPs, a revision to the assumptions in prior year cohorts used to project account value and the related EGPs, in the DAC amortization model would be necessary. A similar approach is used for variable universal life business.

As of March 31, 2006, the present value of the EGPs used in the DAC amortization models, for variable annuities and variable universal life business, fell within the Company’s parameters. Therefore, the Company did not revise the separate account return assumption, the account value or any other assumptions, in those DAC amortization models, for 2005 and prior cohorts.

The Company performs analyses with respect to the potential impact of an unlock. To illustrate the effects of an unlock, assume the Company had concluded that a revision to previously projected account values and the related EGPs was required as of March 31, 2006. If the Company assumed a separate account return assumption of 7.6% for all U.S. product cohorts and 5.0% for all Japanese product cohorts and used its current best estimate assumptions for all products to project account values forward from the current account value to reproject future EGPs, the estimated increase to amortization (a decrease to net income) for all businesses would be approximately $20-$25, after-tax. If, instead, the Company assumed a separate account return assumption of 8.6% in the U.S. (6.0% in Japan) or 6.6% in the U.S. (4.0% in Japan), the estimated after-tax change in amortization for all businesses would have been a decrease (an increase to net income) of $10-$12 and an increase (a decrease to net income) of $55-$65, respectively.

The Company has estimated that the present value of the EGPs would be likely to remain within the statistical range for its U.S. individual variable annuity business if account values were to decline (due to declining separate account return performance, increased lapses or increased mortality) by 17% or less over the next twelve months or increase (due to increasing separate account return performance, decreasing lapses or decreased mortality) by 18% or less over the next twelve months.

For the Japan individual variable annuity business, significant favorable experience in the underlying funds has resulted in actual account values and EGPs exceeding the projected account value and EGPs in the DAC amortization model. However, as stated above, the present value of EGPs used in the DAC amortization model for the Japan individual variable annuity business continue to fall within the Company’s parameters. Continued favorable experience on key assumptions for the Japan variable annuity business, which could include stable or increasing fund return performance, decreasing lapses or decreasing mortality, would likely result in the DAC amortization model EGPs falling outside of the Company’s parameters during 2006, resulting in an unlock, a decrease to DAC amortization and an increase to the DAC asset. If the Company had unlocked as of March 31, 2006, assuming a separate account return assumption of 5.0% for all Japanese product cohorts and using its current best estimate assumptions to project account values forward from the current account values to reproject future EGPs, the estimated decrease to amortization for Japan variable annuities would be approximately $33-$36, after-tax.

Aside from absolute levels and timing of market performance, additional factors that influence unlock determinations include the degree of volatility in separate account fund performance and policyholder shifts in asset allocation within the separate account. The overall return generated by the separate account is dependent on several factors, including the relative mix of the underlying sub-accounts among bond funds and equity funds as well as equity sector weightings. The Company’s overall U.S. separate account fund performance has been reasonably correlated to the overall performance of the S&P 500 Index (which closed at 1,295 on March 31, 2006), although no assurance can be provided that this correlation will continue in the future.

The overall recoverability of the DAC asset is dependent on the future profitability of the business. The Company tests the aggregate recoverability of the DAC asset by comparing the amounts deferred to the present value of total EGPs. In addition, the Company routinely stress tests its DAC asset for recoverability against severe declines in its separate account assets, which could occur if the equity markets experienced a significant sell-off, as the majority of policyholders’ funds in the separate accounts is invested in the equity market. As of March 31, 2006, the Company believed U.S. individual and Japan individual variable annuity separate account assets could fall, through a combination of negative market returns, lapses and mortality, by at least 44% and 63%, respectively, before portions of its DAC asset would be unrecoverable.

Other Critical Accounting Estimates

There have been no material changes to the Company’s other critical accounting estimates since the filing of the Company’s 2005 Form

10-K Annual Report.

The following provides a summary of the significant factors used by management to assess the performance of the business. For a complete discussion of these factors see the MD&A in Hartford Life’s 2005 Form 10-K Annual Report.

CONSOLIDATED RESULTS OF OPERATIONS

Performance Measures

Fee Income

Fee income is largely driven from amounts collected as a result of contractually defined percentages of assets under management on investment type contracts. Therefore, the growth in assets under management either through positive net flows or net sales and favorable equity market performance will have a favorable impact on fee income. Conversely, negative net flows or net sales and unfavorable equity market performance will reduce fee income generated from investment type contracts.


	As of and For the
	Three Months Ended
	March 31,
Product/Key Indicator Information	2006			2005

U.S. Variable Annuities
Account value, beginning of period	$	105,314		$	99,617
Net flows		(828	)		406
Change in market value and other		4,209			(1,952	)

Account value, end of period	$	108,695		$	98,071


Retail Mutual Funds
Assets under management, beginning of period	$	29,063		$	25,240
Net sales		1,528			381
Change in market value and other		1,397			(672	)

Assets under management, end of period	$	31,988		$	24,949


Retirement Plans
Account value, beginning of period	$	19,317		$	16,493
Net flows		854			677
Change in market value and other		294			(224	)

Account value, end of period	$	20,465		$	16,946


Individual Life Insurance
Variable universal life account value, end of period	$	6,191		$	5,249
Total life insurance inforce	$	153,445		$	141,739

S&P 500 Index
Period end closing value		1,295			1,181
Daily average value		1,284			1,192

Japan Annuities
Account value, beginning of period	$	26,104		$	14,631
Net flows		1,846			3,543
Change in market value and other		291			(559	)

Account value, end of period	$	28,241		$	17,615

•		The increase in U.S. variable annuity account values can be attributed to market growth over the past four quarters. Net flows for the U.S. variable annuity business have decreased from prior year levels resulting from higher surrenders due to increased competition.

•		Mutual Fund net sales increased substantially over the prior year period as a result of focused wholesaling efforts and favorable equity market performance.

•		Changes in market value are based on market conditions and investment management performance. Japan annuity account values continue to grow as a result of strong sales and significant market growth in 2006. Japan net flows have decreased due to increased competition.

Net Investment Income and Interest Credited

Certain investment type contracts such as fixed annuities and other spread-based contracts generate deposits that the Company collects and invests to earn investment income. These investment type contracts use this investment income to credit the contract holder an amount of interest specified in the respective contract; therefore, management evaluates performance of these products based on the spread between net investment income and interest credited. Net investment income and interest credited can be volatile period over period, which can have a significant positive or negative effect on the operating results of each segment. The volatile nature of net investment income is driven primarily by prepayments on securities and earnings on partnership investments. In addition, insurance type contracts such as those sold by Group Benefits (discussed below) collect and invest premiums for protection from losses specified in the particular insurance contract and those sold by Institutional collect and invest premiums for certain life contingent benefits.

•		Net investment income and interest credited in Other increased for the three months ended March 31, 2006 due to an increase in the mark-to-market effects of trading account securities supporting the Japanese variable annuity business.

•		Net investment income and interest credited on general account assets in Retail declined for the three months ended March 31, 2006 due to lower assets under management from surrenders on market value adjusted (“MVA”) fixed annuity products at the end of their guarantee period. Also contributing to the decline were transfers within Variable Annuity products from the general account option to separate account funds.

•		Net investment income and interest credited on general account assets in Institutional increased as a result of the Company’s funding agreement backed Investor Notes program, but was partially offset by surrenders in the PPLI business.

Premiums

As discussed above, traditional insurance type products collect premiums from policyholders in exchange for financial protection of the policyholder from a specified insurable loss, such as death or disability. Sales are one indicator of future premium growth.


	Three Months Ended
	March 31,
Group Benefits	2006		2005

Total premiums and other considerations	$	1,032	$	948
Fully insured ongoing sales (excluding buyouts)		441		376

•

Earned premiums and other considerations include $4 and $25 in buyout premiums for the three months ended March 31, 2006 and 2005, respectively. The increase in premiums and other considerations for Group Benefits in 2006 compared to 2005 was driven by sales and continued strong persistency.

Expenses

There are three major categories for expenses: benefits and claims, insurance operating costs and expenses, and amortization of deferred policy acquisition costs and the present value of future profits.


	For the Three Months Ended March 31,
	2006			2005

Retail
General insurance expense ratio (individual annuity)		15.4	bps		17.8	bps
DAC amortization ratio (individual annuity)		49.3	%		50.1	%
Individual Life

Death benefits	$	69		$	66
Insurance expenses, net of deferrals	$	42		$	40

Group Benefits

Total benefits, claims and claim adjustment expenses	$	767		$	722
Loss ratio (excluding buyout premiums)		74.2	%		75.5	%
Insurance expenses, net of deferrals	$	261		$	237
Expense ratio, (excluding buyout premiums)		26.4	%		26.4	%

•		Asset growth and lower contract maintenance expenses for the three months ended March 31, 2006 decreased individual annuity’s expense ratio to a level lower than previous quarters. Additionally, the expense ratio continued to benefit from the Company’s disciplined expense management and economies of scale in the variable annuity business. Management expects the 2006 full year ratio to be between 17-19 bps.

•		The ratio of individual annuity DAC amortization over income before taxes and DAC amortization declined for the three months ended March 31, 2006 as a result of higher gross profits.

•		Individual Life death benefits increased for the three months ended March 31, 2006 due to unfavorable mortality experience and larger insurance inforce.

•		The Group Benefits loss ratio, excluding buyouts, for the three months ended March 31, 2006 decreased primarily due to favorable morbidity experience compared to the prior year period.

Profitability

Management evaluates the rates of return various businesses can provide as a way of determining where additional capital can be invested to increase net income and shareholder returns. Specifically, because of the importance of its individual annuity products, the Company uses the return on assets for the individual annuity business for evaluating profitability. In Group Benefits, after tax margin is a key indicator of overall profitability.


	For the Three Months Ended
	March 31,
Ratios	2006			2005

Retail
Individual annuity return on assets (“ROA”)		55	bps		49	bps
Group Benefits
After-tax margin (excluding buyouts)		6.6	%		6.4	%

•		Individual annuity’s ROA increased for the three months ended March 31, 2006 compared to the prior year period. In particular, variable annuity fees and the DRD benefit each increased for the three months ended March 31, 2006 compared to the prior year period. The increase in the ROA pertaining to fees can be attributed to the increase in account values and resulting increased fees including GMWB rider fees. Additionally, general insurance expenses were also favorable as a percentage of total assets.

•		The improvement in the Group Benefits after-tax margin for the three months ended March 31, 2006 was due to a lower loss ratio principally driven by improved morbidity experience.


	Three Months Ended
	March 31,
	2006			2005		Change

Operating Summary
Fee income	$	1,118		$	950		18	%
Earned premiums		1,273			999		27	%
Net investment income
Securities available-for-sale and other		766			729		5	%
Equity securities held for trading [1]		454			221		105	%

Total net investment income		1,220			950		28	%
Net realized capital (losses) gains		(126	)		92	NM

Total revenues		3,485			2,991		17	%

Benefits, claims and claim adjustment expenses [1]		2,138			1,739		23	%
Amortization of deferred policy acquisition costs and present value of future profits		299			291		3	%
Insurance operating costs and other expenses		610			597		2	%

Total benefits, claims and expenses		3,047			2,627		16	%

Income before income tax expense		438			364		20	%
Income tax expense		103			86		20	%

Net income	$	335		$	278		21	%

[1]

Includes investment income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, claims and claim adjustment expenses.

The Company defines “NM” as not meaningful for increases or decreases greater than 200%, or changes from a net gain to a net loss position, or vice versa.

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

The increase in the Company’s net income was due to the following:

•		Net income in Retail increased 19%, principally driven by higher fee income from growth in the variable annuity and mutual fund businesses as a result of higher assets under management as compared to the prior year period.

•		Retirement Plans net income increased 24% primarily driven by 401(k) fees attributable to growth in assets under management.

•		Institutional contributed higher earnings, increasing 5%, driven by higher assets under management.

•		Individual Life earnings increased primarily driven by growth in fee income generated from higher life insurance inforce and account values and revisions to estimates in DAC amortization of $5, which are not expected to recur.

•		Net income in Group Benefits increased 15% primarily due to higher premiums and a lower loss ratio.

•		Net income in International increased primarily driven by the increased fees from an increase in assets under management of the Japan annuity business.

•

In addition, net income was lower in Other due to the following:

•		Net realized capital losses occurred in 2006 compared to net realized capital gains in the prior year period due to increasing interest rates, realized losses from the Japan fixed annuity contract hedges and the realized loss associated with GMWB derivatives.

•		During the first quarter of 2006 and 2005, the Company recorded a $7 after-tax reserve and a $66 after-tax reserve, respectively for investigations related to market timing by the SEC and the New York Attorney General’s Office, directed brokerage by the SEC and single premium group annuities by the New York Attorney General’s Office and the Connecticut Attorney General’s Office.

•		During the first quarter of 2006, the Company achieved favorable settlements in several cases brought against the Company by policyholders regarding their purchase of broad-based leveraged corporate owned life insurance (“leveraged COLI”) policies in the early to mid-1990s.

RETAIL


	Three Months Ended
	March 31,
	2006			2005			Change

Operating Summary
Fee income	$	648		$	557			16	%
Earned premiums		(17	)		(15	)		(13	)%
Net investment income		216			244			(11	)%
Net realized capital gains		3			4			(25	)%

Total revenues		850			790			8	%

Benefits, claims and claim adjustment expenses		207			235			(12	)%
Insurance operating costs and other expenses		228			189			21	%
Amortization of deferred policy acquisition costs and present value of future profits		198			181			9	%

Total benefits, claims and expenses		633			605			5	%

Income before income tax expense		217			185			17	%
Income tax expense		41			37			11	%

Net income	$	176		$	148			19	%


Assets Under Management

Individual variable annuity account values	$	108,695		$	98,071			11	%
Individual fixed annuity and other account values		10,069			10,946			(8	)%
Other retail products account values		386			216			79	%

Total account values [1]		119,150			109,233			9	%
Retail mutual fund assets under management		31,988			24,949			28	%
Other mutual fund assets under management		1,140			694			64	%

Total mutual fund assets under management		33,128			25,643			29	%

Total assets under management	$	152,278		$	134,876			13	%
��

[1]

Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income in the Retail segment increased primarily due to improved fee income. Higher fee income was driven by higher assets under management resulting from market growth. A more expanded discussion of earnings can be found below:

•		The increase in fee income in the variable annuity business occurred primarily as result of growth in average account values. The year-over-year increase in average account values can be attributed to market appreciation of $12.7 billion over the past four quarters. Variable annuities had net outflows of $828 for the three months ended March 31, 2006 compared to net inflows of $406 for the prior year period. The net outflows from additional surrender activity was due to increased sales competition, particularly as it relates to guaranteed living benefits offered with variable annuity products.

•		Mutual fund fee income increased 24% due to increased assets under management driven by market appreciation of $4.6 billion and net sales of $2.5 billion during the past four quarters. Net sales grew four fold to $1.5 billion. This increase was primarily attributable to focused wholesaling efforts and a favorable equity market.

•		Despite stable general account investment spread income over the past four quarters, net investment income has steadily declined due to an increased level of surrenders and transfers. Over the same period, benefits, claims and claim adjustment expenses have decreased due to a decline in interest credited as older fixed annuity MVA business with higher credited rates matures and either lapses or renews at lower credited rates.

•		Throughout Retail, insurance operating costs and other expenses increased. Mutual Fund commissions increased due to significant growth in sales. In addition, variable annuity asset based commissions increased due to an 11% growth in assets under management, as well as an increase in the number of contracts reaching anniversaries when trail commission payments begin.

•		Higher amortization of DAC resulted from higher gross profits due to the positive earnings drivers discussed above, however, the DAC amortization rate as a percentage of pre-tax profits remained fairly stable.

RETIREMENT PLANS


	Three Months Ended
	March 31,
	2006		2005		Change

Operating Summary
Fee income	$	43	$	34		26	%
Earned premiums		14		3	NM
Net investment income		80		76		5	%

Total revenues		137		113		21	%

Benefits, claims and claim adjustment expenses		69		56		23	%
Insurance operating costs and other expenses		31		27		15	%
Amortization of deferred policy acquisition costs		8		7		14	%

Total benefits, claims and expenses		108		90		20	%

Income before income tax expense		29		23		26	%
Income tax expense		8		6		33	%

Net income	$	21	$	17		24	%


Assets Under Management

Governmental account values		$10,427	$	9,882	$	6	%
401(k) account values		10,038		7,064		42	%

Total account values[1]		20,465		16,946		21	%
Governmental mutual fund assets under management [2]		—		738		(100	)%
401(k) mutual fund assets under management		1,032		767		35	%

Total mutual fund assets under management		1,032		1,505		(31	)%

Total assets under management		$21,497	$	18,451	$	17	%

[1]		Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts

[2]		Government Mutual Fund assets declined to zero due to a large case surrender in 2005 and the remaining business being transferred to the Institutional segment.

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income in Retirement Plans increased due to higher earnings in the 401(k) business. Net income for the Government business was relatively stable as a result of modest growth in assets under management.

Ÿ Fee income for 401(k) increased 39% or $9. This increase is mainly attributable to positive net flows of $1.9 billion over the past four quarters resulting from strong sales and increasing ongoing deposits. Total 401(k) deposits and net flows increased by 32% and 27%, respectively.

Ÿ General account spread increased for both 401(k) and Governmental businesses. The increase is attributable to a decrease in the weighted average interest credited rate for both businesses. Overall, an increase in net investment income and the associated interest credited within benefits, claims and claim adjustment expenses, each increased $4 and $3, respectively as a result of 6% growth in general account assets under management.

Ÿ Benefits and claims expense increased due to a large case annuitization in the 401(k) business, resulting in an increase in premiums and reserves of $12.

INSTITUTIONAL


	Three Months Ended
	March 31,
	2006			2005			Change

Operating Summary
Fee income	$	27		$	37			(27	)%
Earned premiums		267			82		NM
Net investment income		225			181			24	%
Net realized capital losses		(1	)		(1	)		—

Total revenues		518			299			73	%

Benefits, claims and claim adjustment expenses		463			254			82	%
Insurance operating costs and other expenses		16			10			60	%
Amortization of deferred policy acquisition costs		8			6			33	%

Total benefits, claims and expenses		487			270			80	%

Income before income tax expense		31			29			7	%
Income tax expense		9			8			13	%

Net income	$	22		$	21			5	%


Assets Under Management

Institutional Investment Product account values [1] [2]	$	19,017		$	15,497			23	%
Private Placement Life Insurance account values [2]		24,216			22,641			7	%
Mutual fund assets under management [1]		2,100			815			158	%

Total assets under management[1]	$	45,333		$	38,953			16	%

[1]		Institutional investment product account values and mutual fund assets under management include transfers from the Retirement Plans segment of $413 and $178, respectively.

[2]		Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income in Institutional increased and was driven by higher earnings in institutional investment products (“IIP”). Net income in the private-placement life insurance (“PPLI”) business was unchanged. A more expanded discussion of earnings growth can be found below:

•		Total revenues increased in IIP driven by positive net flows of $2.1 billion during the past four quarters resulting in higher assets under management. Net flows for IIP were strong primarily as a result of the Company’s funding agreement backed Investor Notes program. Investor Notes sales for the four quarters ended March 31, 2006 were $1.6 billion.

•		General account spread is the main driver of net income for IIP. An increase in spread income in 2006 was driven by higher assets under management. The increase was partially offset by lower mortality gains related to terminal funding and structured settlement contracts that include life contingencies. For the three months ended March 31, 2006 and 2005, gains related to mortality, investments or other activity were $1 and $3 after-tax, respectively.

Partially offsetting these positive earnings drivers were the following items:

•		IIP had higher operating costs as a result of business growth.

•		PPLI’s cost of insurance charges have decreased due to reductions in the face amount of certain cases.

INDIVIDUAL LIFE


	Three Months Ended
	March 31,
	2006			2005			Change

Operating Summary
Fee income	$	203		$	195			4	%
Earned premiums		(12	)		(8	)		(50	)%
Net investment income		79			74			7	%
Net realized capital gains		1			1			—

Total revenues		271			262			3	%

Benefits, claims and claim adjustment expenses		131			120			9	%
Insurance operating costs and other expenses		42			40			5	%
Amortization of deferred policy acquisition costs and present value of future profits		32			45			(29	)%

Total benefits, claims and expenses		205			205			—

Income before income tax expense		66			57			16	%
Income tax expense		21			18			17	%

Net income	$	45		$	39			15	%


Account values

Variable universal life insurance	$	6,191		$	5,249			18	%
Universal life/interest sensitive whole life		3,775			3,452			9	%
Modified guaranteed life and other		712			728			(2	)%

Total account values	$	10,678		$	9,429			13	%
Life Insurance Inforce
Variable universal life insurance	$	71,852		$	69,442			3	%
Universal life/interest sensitive whole life		42,372			39,349			8	%
Modified guaranteed life and other		39,221			32,948			19	%

Total life insurance inforce	$	153,445		$	141,739			8	%

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income increased 15% due to growth in life insurance inforce, account values and revisions to estimates in DAC amortization of $5, which are not expected to recur, as discussed below. The following factors contributed to the earnings increase:

•		Fee income increased $8. Cost of insurance charges, the largest component of fee income, increased $8 driven by business growth and aging in the variable universal, universal, and interest-sensitive whole life insurance inforce. Variable fee income grew $2 as favorable equity markets and increased premiums added to the variable universal life account value.

•		Amortization of DAC declined $9 primarily due to adjustments made to actual gross profits and deferrals reflecting revisions in the first quarter of 2006 to estimates made at December 31, 2005. The remaining decrease resulted from changes in the mix of product profitability.

•		Net investment income increased primarily due to increased general account assets from sales growth.

Partially offsetting these positive earnings drivers were the following factors:

•		Earned premiums, which include premiums for ceded reinsurance, decreased primarily due to increased use of reinsurance.

•		Benefits, claims and claim adjustment expenses increased primarily due to interest credited on growing account values and increased death benefits as a result of the growth in life insurance inforce.

•		Operating costs increased over the prior year period as a result of business growth.

GROUP BENEFITS


	Three Months Ended
	March 31,
	2006			2005		Change

Operating Summary
Earned premiums and other	$	1,032		$	948		9	%
Net investment income		101			98		3	%
Net realized capital losses		(1	)		—		—

Total revenues		1,132			1,046		8	%

Benefits, claims and claim adjustment expenses		767			722		6	%
Insurance operating costs and other expenses		261			237		10	%
Amortization of deferred policy acquisition costs		10			7		43	%

Total benefits, claims and expenses		1,038			966		7	%

Income before income tax expense		94			80		18	%
Income tax expense		26			21		24	%

Net income	$	68		$	59		15	%

Earned premiums and other

Fully insured — ongoing premiums	$	1,017		$	912	$	12	%
Buyout premiums		4			25		(84	)%
Other		11			11		—

Total earned premiums and other	$	1,032		$	948	$	9	%

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income increased primarily due to higher earned premiums and a lower loss ratio. The following factors contributed to the earnings increase:

•		Earned premiums increased 9% driven by sales (excluding buyouts) growth, particularly in life, of 17% and continued strong persistency.

•		The segment’s loss ratio (defined as benefits, claims and claim adjustment expenses as a percentage of premiums and other considerations excluding buyouts) was 74.2%, down from 75.5% in the prior year period due to improved morbidity experience. Excluding financial institutions, the loss ratio was 79.2%, down from 79.5% in the prior year period.

•		The segment’s expense ratio was 26.4% for both the current and the prior year period. Excluding financial institutions, the expense ratio was 21.6%, down from 23.1% in the prior year period due to growth in premiums outpacing growth in expenses.

INTERNATIONAL


	Three Months Ended
	March 31,
	2006			2005			Change

Operating Summary
Fee income	$	166		$	97			71	%
Net investment income		28			12			133	%
Net realized capital losses		(14	)		(5	)		(180	)%

Total revenues		180			104			73	%

Benefits, claims and claim adjustment expenses		12			13			(8	)%
Insurance operating costs and other expenses		46			39			18	%
Amortization of deferred policy acquisition costs		49			32			53	%

Total benefits, claims and expenses		107			84			27	%

Income before income tax expense		73			20		NM
Income tax expense		27			6		NM

Net income	$	46		$	14		NM


Assets under Management

Japan variable annuity assets under management	$	26,696		$	16,495		$	62	%
Japan MVA fixed annuity assets under management		1,545			1,120			38	%

Total assets under management	$	28,241		$	17,615		$	60	%

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net income increased significantly, principally driven by higher fee income in Japan derived from a 60% increase in assets under management. A more expanded discussion of earnings growth can be found below:

•		The increase in fee income was mainly a result of growth in Japan’s variable annuity assets under management. As of March 31, 2006, Japan’s variable annuity assets under management were $26.7 billion, a 62% increase from the prior year period. The increase in assets under management was driven by positive net flows of $8.6 billion and favorable market appreciation of $3.6 billion, partially offset by a $(2.0) billion impact of foreign currency exchange over the past four quarters.

•		Also contributing to the higher fee income was increased surrender activity as customers surrendered policies in order to take advantage of significant appreciation in their account balances. For the quarter ended March 31, 2006, surrender fees increased by $10 from the respective prior year period.

•		The Japan MVA fixed annuity business contributed $3 of higher investment spread income, including net periodic coupon settlements included in realized losses. This increase in investment spread was driven by higher assets under management. As of March 31, 2006, Japan’s MVA assets under management increased to $1.5 billion compared to $1.1 billion in the prior year period. The increase in fixed annuity assets under management can be attributed to positive net flows of $530 over the past four quarters.

Partially offsetting the positive earnings drivers discussed above were the following items:

•		The increase in operating costs was primarily due to the significant growth in the Japan operation and the investment in our United Kingdom operation.

•		DAC amortization was higher due to higher EGP’s consistent with the growth in the Japan operation.

•		Tax rates increased primarily due to an increase in the deferred tax valuation allowance established for losses on the United Kingdom operation.

OTHER


	Three Months Ended
	March 31,
	2006			2005			Change

Operating Summary
Fee income	$	20		$	19			5	%
Net investment income
Securities available-for-sale and other		37			44			(16	)%
Equity securities held for trading		454			221			105	%

Total net investment income		491			265			85	%
Net realized capital (losses) gains		(114	)		93		NM

Total revenues		397			377			5	%

Benefits, claims and claim adjustment expenses		489			339			44	%
Insurance operating costs and other expenses		(14	)		55		NM
Amortization of deferred policy acquisition costs		(6	)		13		NM

Total benefits, claims and expenses		469			407			15	%

Loss before income tax benefit		(72	)		(30	)		140	%
Income tax benefit		(29	)		(10	)		190	%

Net loss	$	(43	)	$	(20	)		115	%

Three months ended March 31, 2006 compared to the three months ended March 31, 2005

Net loss increased due to the following factors:

•		Net realized capital losses occurred in 2006 compared to net realized capital gains in the prior year period due to increasing interest rates, realized losses from the Japan fixed annuity contract hedges and the realized loss associated with GMWB derivatives.

•		During the first quarter of 2006 and 2005, the Company recorded a $7 after-tax reserve and a $66 after-tax reserve, respectively for investigations related to market timing by the SEC and the New York Attorney General’s Office, directed brokerage by the SEC and single premium group annuities by the New York Attorney General’s Office and the Connecticut Attorney General’s Office.

•		During the first quarter of 2006, the Company achieved favorable settlements in several cases brought against the Company by policyholders regarding their purchase of broad-based leveraged corporate owned life insurance (“leveraged COLI”) policies in the early to mid-1990s. The Company ceased offering this product in 1996. Based on the favorable outcome of these cases, together with the Company’s current assessment of the few remaining leveraged COLI cases, the Company reduced its estimate of the ultimate cost of these cases as of March 31, 2006. This reserve reduction, recorded in insurance operating costs and other expenses, resulted in an after-tax benefit of $34 in the quarter ended March 31, 2006.

INVESTMENTS

General

The investment portfolios of the Company are managed by HIMCO, a wholly-owned subsidiary of The Hartford. HIMCO manages the portfolios to maximize economic value, while attempting to generate the income necessary to support the Company’s various product obligations, within internally established objectives, guidelines and risk tolerances. For a further discussion of how HIMCO manages the investment portfolios, see the Investments section of the MD&A under the “General” section in Hartford Life’s 2005 Form 10-K Annual Report. Also, for a further discussion of how the investment portfolio’s credit and market risks are assessed and managed, see the Investment Credit Risk and Capital Markets Risk Management sections that follow.

Return on general account invested assets is an important element of Hartford Life’s financial results. Significant fluctuations in the fixed income or equity markets could weaken the Company’s financial condition or its results of operations. Additionally, changes in market interest rates may impact the period of time over which certain investments, such as mortgage-backed securities (“MBS”), are repaid and whether certain investments are called by the issuers. Such changes may, in turn, impact the yield on these investments and also may result in re-investment of funds received from calls and prepayments at rates below the average portfolio yield. Net investment income and net realized capital gains and losses accounted for approximately 31% and 35% of the Company’s consolidated revenues for the three months ended March 31, 2006 and 2005, respectively.

Fluctuations in interest rates affect the Company’s return on, and the fair value of, fixed maturity investments, which comprised approximately 62% and 64% of the fair value of its invested assets as of March 31, 2006 and December 31, 2005, respectively. Other events beyond the Company’s control could also adversely impact the fair value of these investments. Specifically, a downgrade of an issuer’s credit rating or default of payment by an issuer could reduce the Company’s investment return.

A decrease in the fair value of any investment that is deemed other-than-temporary would result in the Company’s recognition of a net realized capital loss in its financial results prior to the actual sale of the investment. For a further discussion of the evaluation of other-than-temporary impairments, see the Critical Accounting Estimates section of the MD&A under “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” in Hartford Life’s 2005 Form 10-K Annual Report.

The primary investment objective of the Company’s general account is to maximize economic value consistent with acceptable risk parameters, including the management of the interest rate sensitivity of invested assets, while generating sufficient after-tax income to meet policyholder and corporate obligations.

The following table identifies the Company’s invested assets by type as of March 31, 2006 and December 31, 2005.

Composition of Invested Assets


	March 31, 2006					December 31, 2005
	Amount		Percent			Amount		Percent

Fixed maturities, available-for-sale, at fair value	$	50,571		61.7	%	$	50,812		63.7	%
Equity securities, available-for-sale, at fair value		820		1.0	%		800		1.0	%
Equity securities held for trading, at fair value		26,057		31.8	%		24,034		30.1	%
Policy loans, at outstanding balance		2,007		2.4	%		2,016		2.5	%
Mortgage loans, at amortized cost		1,920		2.3	%		1,513		1.9	%
Limited partnerships, at fair value		491		0.6	%		431		0.6	%
Other investments		149		0.2	%		178		0.2	%

Total investments	$	82,015		100.0	%	$	79,784		100.0	%

Fixed maturity investments decreased $241, or less than 1%, since December 31, 2005, primarily the result of an increase in interest rates predominantly offset by positive operating cash flows, product sales and, to a lesser extent, credit spread tightening. Equity securities held for trading increased $2.0 billion, or 8%, since December 31, 2005, due to positive cash flow primarily generated from sales and deposits related to variable annuity products sold in Japan and positive performance of the underlying investment funds supporting the Japanese variable annuity product. Mortgage loans increased $407, or 27%, since December 31, 2005, as a result of a decision to increase the Company’s investment in this asset class primarily due to its attractive yields and diversification opportunities.

Investment Results

The following table summarizes the Company’s investment results.


	Three Months Ended
	March 31,
(before-tax)	2006			2005

Net investment income — excluding income on policy loans and equity securities held for trading	$	733		$	693
Equity securities held for trading [1]		454			221
Policy loan income		33			36

Net investment income — total	$	1,220		$	950
Yield on average invested assets [2]		5.7	%		5.6	%

Gross gains on sale	$	41		$	98
Gross losses on sale		(59	)		(48	)
Impairments		(9	)		(1	)
Japanese fixed annuity contract hedges, net [3]		(44	)		36
Periodic net coupon settlements on credit derivatives/Japan		(14	)		(4	)
GMWB derivatives, net		(13	)		7
Other, net [4]		(28	)		4

Net realized capital gains (losses), before-tax	$	(126	)	$	92

[1]		Represents the change in value of equity securities held for trading.

[2]		Represents annualized net investment income (excluding income related to equity securities held for trading) divided by the monthly weighted average invested assets at cost or amortized cost, as applicable, excluding equity securities held for trading, collateral received associated with the securities lending program and reverse repurchase agreements as well as consolidated variable interest entity minority interests.

[3]		Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).

[4]		Primarily consists of changes in fair value on non-qualifying derivatives, changes in fair value of certain derivatives in fair value hedge relationships and hedge ineffectiveness on qualifying derivative instruments.

For the three months ended March 31, 2006, net investment income, excluding income on policy loans and equity securities held for trading, increased $40, or 6%, compared to the prior year period. The increase in net investment income was primarily due to income earned on a higher average invested assets base. The increase in the average invested assets base, as compared to the prior year, was primarily due to positive operating cash flows, investment contract sales such as retail and institutional notes, and universal life-type product sales such as the individual fixed annuity products sold in Japan.

Net investment income on equity securities held for trading for the three months ended March 31, 2006, was primarily generated by positive performance of the underlying investment funds supporting the Japanese variable annuity product. Net investment income on equity securities held for trading for the three months ended March 31, 2005, was primarily generated by slightly positive performance of the underlying investment funds supporting the Japanese variable annuity product partially offset by foreign currency depreciation in comparison to the U.S. dollar. The change in net investment income as compared to the prior year period is primarily due to the performance of the underlying funds on a higher asset base.

For the three months ended March 31, 2006, the yield on average invested assets remained fairly consistent compared to the prior year period. The average new investment yield during the three months ended March 31, 2006, approximated the yield on average invested assets.

Net realized capital losses were recognized for the three months ended March 31, 2006, compared to net realized capital gains in the prior year period. During the three months ended March 31, 2006, the significant components of net realized capital gains and losses included losses associated with the Japanese fixed annuity contract hedges including the periodic net coupon settlements, net losses on sales of fixed maturity securities as well as losses associated with GMWB derivatives. Also, there were losses in Other, net which primarily relate to changes in market value of non-qualifying derivatives due to changes in interest rates. The circumstances giving rise to the changes in these components are as follows:

•		The Japanese fixed annuity contract hedges, net amount consists of the foreign currency transaction remeasurements associated with the yen denominated fixed annuity contracts offered in Japan and the corresponding offsetting cross currency swaps. Although the Japanese fixed annuity contracts are economically hedged, the net realized capital losses result from the mixed attribute accounting model, which requires fixed annuity liabilities to be recorded at cost and remeasured only for foreign currency exchange rates but the associated derivatives to be reported at fair value. The net realized capital losses in 2006 resulted from rising Japanese interest rates. The periodic net coupon settlements on credit derivatives and the Japan fixed annuity cross currency swaps includes the net periodic income/expense or coupon associated with the swap contracts. The net loss for 2006 is primarily associated with the Japan fixed annuity cross currency swaps and results from the interest rate differential between U.S. and Japanese interest rates.

•		The net losses on fixed maturity sales in 2006 were primarily the result of rising interest rates and, to a lesser extent, credit spread widening on certain issuers.

•

The losses associated with the GMWB derivatives were primarily driven by equity market volatility.

Gross gains on sales for the three months ended March 31, 2006, were primarily within fixed maturities and were largely comprised of corporate securities. The sales were made to reposition the portfolio to shorter-term assets with the expectation of higher future interest rates and a steeper yield curve. The gains on sales were primarily the result of changes in interest rates and credit spreads since the date of purchase.

Gross losses on sales for the three months ended March 31, 2006, were primarily within fixed maturities and were concentrated in the corporate and CMBS sectors with no single security sold at a loss in excess of $5 and an average loss as a percentage of the fixed maturity’s amortized cost of less than 3%, which, under the Company’s impairment policy was deemed to be depressed only to a minor extent.

Gross gains on sales for the three months ended March 31, 2005, were primarily within fixed maturities and were concentrated in the CMBS, foreign government and corporate sectors. The CMBS sales resulted from a decision to divest securities that were backed by a single asset due to the then scheduled expiration of the Terrorism Risk Insurance Act (“TRIA”) at the end of 2005. Gains on these sales were realized as a result of an improved credit environment and interest rate declines from the date of purchase. Foreign government securities were sold in the first quarter of 2005, primarily to reduce the foreign currency exposure in the portfolio due to the expected near term volatility of foreign exchange rates. Gains resulted from the depreciation of the U.S. dollar against foreign currencies and credit spread tightening. Certain lower quality corporate securities that had appreciated in value as a result of an improved corporate credit environment were sold in order to reposition the corporate holdings into higher quality securities.

Gross losses on sales for the three months ended March 31, 2005, were primarily within fixed maturities and were concentrated in foreign and U.S. government securities, corporate securities and CMBS, with no single security sold at a loss in excess of $5 and an average loss as a percentage of the fixed maturity’s amortized cost of less than 2%, which, under the Company’s impairment policy, was deemed to be depressed only to a minor extent.

Other-Than-Temporary Impairments

For the three months ended March 31, 2006, total other-than-temporary impairments were $9 as compared to less than $1, for the comparable period in 2005.

During the three months ended March 31, 2006, other-than-temporary impairments were recorded on corporate securities of $8 and CMBS of $1. Other-than-temporary impairments were recorded on certain corporate securities that had declined in value and for which the Company was uncertain of its intent and ability to retain the investment for a period of time sufficient to allow recovery to amortized cost. Prior to the other-than-temporary impairments, these securities had an average market value as a percentage of amortized cost of 88%. Other-than-temporary impairments recorded on CMBS resulted from a decline in future expected cash flows for several securities.

During the three months ended March 31, 2005, other-than-temporary impairments of less than $1 were recorded on ABS and primarily resulted from a decline in expected cash flows and deterioration of the underlying collateral.

For further discussion of risk factors associated with portfolio sectors with significant unrealized loss positions, see the risk factor commentary under the Fixed Maturities by Type table in the Investment Credit Risk section that follows.

INVESTMENT CREDIT RISK

The Company has established investment credit policies that focus on the credit quality of obligors and counterparties, limit credit concentrations, encourage diversification and require frequent creditworthiness reviews. Investment activity, including setting of policy and defining acceptable risk levels, is subject to regular review and approval by senior management and by The Hartford’s Board of Directors.

The Company invests primarily in securities which are rated investment grade and has established exposure limits, diversification standards and review procedures for all credit risks including borrower, issuer and counterparty. Creditworthiness of specific obligors is determined by consideration of external determinants of creditworthiness, typically ratings assigned by nationally recognized ratings agencies and is supplemented by an internal credit evaluation. Obligor, asset sector and industry concentrations are subject to established Company limits and are monitored on a regular basis.

The Company is not exposed to any credit concentration risk of a single issuer greater than 10% of the Company’s stockholders’ equity other than certain U.S. government and government agencies. For further discussion, see the Investment Credit Risk section of the MD&A in Hartford Life’s 2005 Form 10-K Annual Report for a description of the Company’s objectives, policies and strategies, including the use of derivative instruments.

The following table identifies fixed maturity securities by type as of March 31, 2006 and December 31, 2005.


Fixed Maturities by Type
	March 31, 2006												December 31, 2005
										Percent												Percent
										of Total												of Total
	Amortized		Unrealized		Unrealized			Fair		Fair			Amortized		Unrealized		Unrealized			Fair		Fair
	Cost		Gains		Losses			Value		Value			Cost		Gains		Losses			Value		Value

ABS	$	6,810	$	51	$	(77	)	$	6,784		13.4	%	$	6,819	$	48	$	(75	)	$	6,792		13.4	%
CMBS		9,591		123		(162	)		9,552		18.9	%		9,289		175		(97	)		9,367		18.4	%
Collateralized mortgage obligations (“CMOs”)		878		3		(11	)		870		1.7	%		864		3		(5	)		862		1.7	%
Corporate Basic industry		2,205		53		(47	)		2,211		4.4	%		2,296		87		(36	)		2,347		4.6	%
Capital goods		1,669		64		(30	)		1,703		3.4	%		1,701		91		(18	)		1,774		3.5	%
Consumer cyclical		2,187		44		(68	)		2,163		4.3	%		2,186		71		(37	)		2,220		4.4	%
Consumer non-cyclical		2,316		77		(52	)		2,341		4.6	%		2,294		124		(24	)		2,394		4.7	%
Energy		1,131		68		(18	)		1,181		2.3	%		1,068		104		(7	)		1,165		2.3	%
Financial services		6,979		226		(97	)		7,108		14.0	%		6,768		302		(54	)		7,016		13.8	%
Technology and communications		3,017		133		(68	)		3,082		6.1	%		2,982		193		(32	)		3,143		6.2	%
Transportation		654		18		(15	)		657		1.3	%		638		29		(6	)		661		1.3	%
Utilities		2,838		114		(70	)		2,882		5.7	%		2,804		154		(30	)		2,928		5.7	%
Other		1,340		17		(37	)		1,320		2.6	%		1,156		23		(15	)		1,164		2.3	%
Government/Government agencies Foreign		714		40		(8	)		746		1.5	%		719		50		(4	)		765		1.5	%
United States		813		8		(15	)		806		1.6	%		630		24		(5	)		649		1.3	%
MBS — agency		2,207		2		(62	)		2,147		4.2	%		2,794		6		(43	)		2,757		5.4	%
Municipal
Taxable		953		14		(25	)		942		1.9	%		948		47		(4	)		991		2.0	%
Tax-exempt		2,276		138		(7	)		2,407		4.8	%		2,308		163		(5	)		2,466		4.9	%
Redeemable preferred stock		16		—		—			16		—			17		—		—			17		—
Short-term		1,653		—		—			1,653		3.3	%		1,334		—		—			1,334		2.6	%

Total fixed maturities	$	50,247	$	1,193	$	(869	)	$	50,571		100.0	%	$	49,615	$	1,694	$	(497	)	$	50,812		100.0	%

The Company’s fixed maturity portfolio gross unrealized gains and losses as of March 31, 2006, in comparison to December 31, 2005, were primarily impacted by changes in interest rates as well as credit spread movements, asset sales and other-than-temporary impairments. The Company’s fixed maturity gross unrealized gains decreased $501 and gross unrealized losses increased $372 from December 31, 2005 to March 31, 2006, primarily due to an increase in interest rates offset in part by credit spread tightening. Gross unrealized gains and losses as of March 31, 2006, were reduced by securities sold in a gain or loss position, respectively.

The sectors with the most significant concentration of unrealized losses were CMBS, corporate fixed maturities primarily within the financial services sector and ABS supported by aircraft lease receivables. The Company’s current view of risk factors relative to these fixed maturity types is as follows:

CMBS— The unrealized loss position as of March 31, 2006, was primarily the result of an increase in interest rates from the security’s purchase date. Substantially all of these securities are investment grade securities priced at or greater than 90% of amortized cost as of March 31, 2006. Additional changes in fair value of these securities are primarily dependent on future changes in interest rates.

Financial services— As of March 31, 2006, the Company held approximately 150 different securities in the financial services sector that had been in an unrealized loss position for greater than six months. Substantially all of these securities are investment grade securities priced at or greater than 90% of amortized cost as of March 31, 2006. These positions are a mixture of fixed and variable rate securities with extended maturity dates, which have been adversely impacted by changes in interest rates after the purchase date. Additional changes in fair value of these securities are primarily dependent on future changes in interest rates.

Aircraft lease receivables— The Company’s holdings are asset-backed securities secured by leases to airlines primarily outside of the United States. Based on the current and expected future collateral values of the underlying aircraft, a recent improvement in lease rates and an overall increase in worldwide travel, the Company expects to recover the full amortized cost of these investments. However, future price recovery will depend on continued improvement in economic fundamentals, political stability, airline operating performance and collateral value. Although worldwide travel and aircraft demand has improved, U.S. domestic airline operating costs, including fuel and certain employee benefits costs, continue to weigh heavily on this sector.

For further discussion of risk factors associated with securities in unrealized loss positions, see the Investment Credit Risk section of the MD&A in Hartford Life’s 2005 Form 10-K Annual Report.

Investment sector allocations as a percentage of total fixed maturities have not significantly changed since December 31, 2005, with the exception of MBS. The decrease in MBS, as of March 31, 2006, in comparison to December 31, 2005, is primarily related to an increase in dollar-roll activity. MBS dollar-roll transactions involve the sale and simultaneous agreement to repurchase a pool of underlying mortgage-backed securities at a future date. The forward purchase agreement is accounted for as a derivative until the repurchase of the MBS is settled and accordingly the dollar-rolled securities are not included in the Fixed Maturities by Type table above. Also, HIMCO continues to overweight, in comparison to the Lehman Aggregate Index, ABS supported by diversified pools of consumer loans (e.g., home equity and auto loans and credit card receivables) and CMBS due to the securities’ attractive spread levels and underlying asset diversification and quality. In general, CMBS have lower prepayment risk than MBS due to contractual fees.

As of March 31, 2006, 26% of the fixed maturities were invested in private placement securities, including 17% in Rule 144A offerings to qualified institutional buyers. Private placement securities are generally less liquid than public securities. Most of the private placement securities are rated by nationally recognized rating agencies.

At the March 2006 Federal Open Market Committee (“FOMC”) meeting, the Federal Reserve increased the target federal funds rate by 25 basis points to 4.75%, a 50 basis point increase from year-end 2005 levels. The FOMC stated that economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace. Some further policy firming may be needed to keep the risks of both growth and inflation roughly in balance. Based upon the most recent economic data, the Company believes the FOMC will increase the federal funds rate to at least 5.00% with additional increases being data dependent. The risk of inflation could increase if energy and commodity prices continue to rise, productivity growth slows, U.S. budget or trade deficits continue to rise or the U.S. dollar significantly depreciates in comparison to foreign currencies. Increases in future interest rates may result in lower fixed maturity valuations.

CAPITAL MARKETS RISK MANAGEMENT

For a complete discussion on capital markets risk management, please refer to the MD&A included in Hartford Life’s 2005 Annual Report on Form 10-K.

Market Risk

Hartford Life is exposed to market risk, primarily relating to the market price and/or cash flow variability associated with changes in interest rates, market indices or foreign currency exchange rates. The Company analyzes interest rate risk using various models including parametric models that forecast cash flows of the liabilities and the supporting investments, including derivative instruments under various market scenarios. (For further discussion of market risk, see the Capital Markets Risk Management section of MD&A in Hartford Life’s 2005 Form 10-K Annual Report.) There have been no material changes in market risk exposures from December 31, 2005.

Derivative Instruments

Hartford Life utilizes a variety of derivative instruments, including swaps, caps, floors, forwards and exchange traded futures and options, in compliance with Company policy and regulatory requirements designed to achieve one of four Company approved objectives: to hedge risk arising from interest rate, price, equity market or currency exchange rate volatility; to manage liquidity; to control transaction costs; or to enter into replication transactions. The Company does not make a market or trade in these instruments for the express purpose of earning short-term trading profits. (For further discussion on Hartford Life’s use of derivative instruments, refer to Note 3 of Notes to Condensed Consolidated Financial Statements.)

Equity Risk

The Company’s operations are significantly influenced by changes in the equity markets, primarily in the U.S., but increasingly in Japan and other global markets. The Company’s profitability in its investment products businesses depends largely on the amount of assets under management, which is primarily driven by the level of sales, equity market appreciation and depreciation and the persistency of the in-force block of business. Prolonged and precipitous declines in the equity markets can have a significant effect on the Company’s operations, as sales of variable products may decline and surrender activity may increase, as customer sentiment towards the equity market turns negative. Lower assets under management will have a negative effect on the Company’s financial results, primarily due to lower fee income related to the Retail, Retirement Plans, Institutional and International and, to a lesser extent, the Individual Life segment, where a heavy concentration of equity linked products are administered and sold.

Furthermore, the Company may experience a reduction in profit margins if a significant portion of the assets held in the U.S. variable annuity separate accounts move to the general account and the Company is unable to earn an acceptable investment spread, particularly in light of the low interest rate environment and the presence of contractually guaranteed minimum interest credited rates, which for the most part are at a 3% rate.

In addition, prolonged declines in one or more equity markets may also decrease the Company’s expectations of future gross profits in one or more product lines, which are utilized to determine the amount of DAC to be amortized in reporting product profitability in a given financial statement period. A significant decrease in the Company’s future estimated gross profits would require the Company to accelerate the amount of DAC amortization in a given period, which, particularly in the case of U.S. variable annuities, could potentially cause a material adverse deviation in that period’s net income. Although an acceleration of DAC amortization would have a negative effect on the Company’s earnings, it would not affect the Company’s cash flow or liquidity position.

The Company sells variable annuity contracts that offer one or more benefit guarantees, the value of which generally increases with declines in equity markets. As is described in more detail below, the Company manages the equity market risks embedded in these guarantees through reinsurance, product design and hedging programs. The Company believes its ability to manage equity market risks by these means gives it a competitive advantage; and, in particular, its ability to create innovative product designs that allow the Company to meet identified customer needs while generating manageable amounts of equity market risk. The Company’s relative sales and variable annuity market share inthe U.S. have generally increased during periods when it has recently introduced new products to the market. In contrast, the Company’s relative sales and market share have generally decreased when competitors introduce products that cause an issuer to assume larger amounts of equity and other market risk than the Company is confident it can prudently manage. The Company believes its long-term success in the variable annuity market will continue to be aided by successful innovation that allows the Company to offer attractive product features in tandem with prudent equity market risk management. In the absence of this innovation, the Company’s market share in one or more of its markets could decline. Recently, the Company has experienced lower levels of U.S. variable annuity sales as competitors continue to introduce new equity guarantees of increasing risk and complexity. New product development is an ongoing process and during the fourth quarter of 2005, the Company introduced a new U.S. living income benefit, which guarantees a steady income stream for the life of the policyholder and a new Japan product which adds greater liquidity and asset allocations with a greater equity component but lower currency exposure. The Company expects to make further changes in its

U.S. living benefit offerings in 2006. Depending on the degree of consumer receptivity and competitor reaction to continuing changes in the Company’s product offerings, the Company’s future level of sales will continue to be subject to a high level of uncertainty.

The accounting for various benefit guarantees offered with variable annuity contracts can be significantly different. Those accounted for under SFAS No. 133 (such as GMWBs) are subject to significant fluctuation in value, which is reflected in net income, due to changes in interest rates, equity markets and equity market volatility as use of those capital market rates are required in determining the liability’s fair value at each reporting date. Benefit guarantee liabilities accounted for under SOP 03-1 (such as GMIBs and GMDBs) may also change in value; however, the change in value is not immediately reflected in net income. Under SOP 03-1, the income statement reflects the current period increase in the liability due to the deferral of a percentage of current period revenues. The percentage is determined by dividing the present value of claims by the present value of revenues using best estimate assumptions over a range of market scenarios. Current period revenues are impacted by actual increases or decreases in account value. Claims recorded against the liability have no immediate impact on the income statement unless those claims exceed the liability. As a result of these significant accounting differences the liability for guarantees recorded under SOP 03-1 may be significantly different if it was recorded under SFAS No. 133 and vice versa. In addition, the conditions in the capital markets in Japan vs. those in the U.S. are sufficiently different that if the Company’s GMWB product currently offered in the U.S. were offered in Japan, the capital market conditions in Japan would have a significant impact on the valuation of the GMWB, irrespective of the accounting model. The same would hold true if the Company’s GMIB product currently offered in Japan were to be offered in the U.S. Capital market conditions in the U.S. would have a significant impact on the valuation of the GMIB. Many benefit guarantees meet the definition of an embedded derivative, under SFAS No. 133 (GMWB), and as such are recorded at fair value with changes in fair value recorded in net income. However, certain contract features that define how the contract holder can access the value of the guaranteed benefit change the accounting from SFAS No. 133 to SOP 03-1. For contracts where the contract holder can only obtain the value of the guaranteed benefit upon the occurrence of an insurable event such as death (GMDB) or by making a significant initial net investment (GMIB), such as when one invests in an annuity, the accounting for the benefit is prescribed by SOP 03-1.

In the U.S., the Company sells variable annuity contracts that offer various guaranteed death benefits. The Company maintains a liability, under SOP 03-1, for the death benefit costs of $163, as of March 31, 2006. Declines in the equity market may increase the Company’s net exposure to death benefits under these contracts. The majority of the contracts with the guaranteed death benefit feature are sold by the Retail Products Group segment. For certain guaranteed death benefits, The Hartford pays the greater of (1) the account value at death; (2) the sum of all premium payments less prior withdrawals; or (3) the maximum anniversary value of the contract, plus any premium payments since the contract anniversary, minus any withdrawals following the contract anniversary. For certain guaranteed death benefits sold with variable annuity contracts beginning in June 2003, the Retail Products Group segment pays the greater of (1) the account value at death; or (2) the maximum anniversary value; not to exceed the account value plus the greater of (a) 25% of premium payments, or (b) 25% of the maximum anniversary value of the contract. The Company currently reinsures a significant portion of these death benefit guarantees associated with its in-force block of business.

The Company’s total gross exposure (i.e. before reinsurance) to these guaranteed death benefits as of March 31, 2006 is $5.9 billion. Due to the fact that 82% of this amount is reinsured, the Company’s net exposure is $1.1 billion. This amount is often referred to as the retained net amount at risk. However, the Company will incur these guaranteed death benefit payments in the future only if the policyholder has an in-the-money guaranteed death benefit at their time of death.

In Japan, the Company offers certain variable annuity products with both a guaranteed death benefit and a guaranteed income benefit. The Company maintains a liability for these death and income benefits, under SOP 03-1, of $59 as of March 31, 2006. Declines in equity markets as well as a strengthening of the Japanese Yen in comparison to the U.S. dollar may increase the Company’s exposure to these guaranteed benefits. This increased exposure may be significant in extreme market scenarios. For the guaranteed death benefits, the Company pays the greater of (1) account value at death; (2) a guaranteed death benefit which, depending on the contract, may be based upon the premium paid and/or the maximum anniversary value established no later than age 80, as adjusted for withdrawals under the terms of the contract. The guaranteed income benefit guarantees to return the contract holder’s initial investment, adjusted for any earnings withdrawals, through periodic payments that commence at the end of a minimum deferral period of 10, 15 or 20 years as elected by the contract holder.

The Company’s net amount at risk related to the guaranteed death and income benefits offered in Japan was $12 as of March 31, 2006. The Company will incur these guaranteed death or income benefits in the future only if the contract holder has an in-the-money guaranteed benefit at either the time of their death or if the account value is insufficient to fund the guaranteed living benefits. During 2005, the Company received regulatory approval and consummated a transaction to reinsure guaranteed minimum income benefit risk associated with the sale of variable annuities in Japan to Hartford Life and Annuity Insurance Company, a U.S. subsidiary.

The majority of the Company’s recent U.S. variable annuities are sold with a GMWB living benefit rider, which, as described above, is accounted for under SFAS No. 133. Declines in the equity market may increase the Company’s exposure to benefits under the GMWB contracts. For all contracts in effect through July 6, 2003, the Company entered into a reinsurance arrangement to offset its exposure to the GMWB for the remaining lives of those contracts. As of July 6, 2003, the Company exhausted all but a small portion of the reinsurance capacity for new business under the current arrangement and has been ceding only a very small number of new contracts subsequent to July 6, 2003. Substantially all U.S. GMWB riders sold since that date are not covered by reinsurance. These

unreinsured contracts generate volatility in net income each quarter as the underlying embedded derivative liabilities are recorded at fair value each reporting period, resulting in the recognition of net realized capital gains or losses in response to changes in certain critical factors including capital market conditions and policyholder behavior. In order to minimize the volatility associated with the unreinsured GMWB liabilities, the Company established an alternative risk management strategy. During the third quarter of 2003, the Company began hedging its unreinsured GMWB exposure using interest rate futures, Standard and Poor’s (“S&P”) 500 and NASDAQ index put options and futures contracts. During the first quarter of 2004, the Company entered into Europe, Australasia and Far East (“EAFE”) Index swaps to hedge GMWB exposure to international equity markets. The hedging program involves a detailed monitoring of policyholder behavior and capital markets conditions on a daily basis and rebalancing of the hedge position as needed. While the Company actively manages this hedge position, hedge ineffectiveness may result due to factors including, but not limited to, policyholder behavior, capital markets dislocation or discontinuity and divergence between the performance of the underlying funds and the hedging indices.

The net effect of the change in value of the embedded derivative net of the results of the hedging program was a $13 loss and $7 gain before deferred policy acquisition costs and tax effects for the three months ended March 31, 2006 and 2005, respectively. As of March 31, 2006, the notional and fair value related to the embedded derivatives, the hedging strategy and reinsurance was $47.9 billion and $218, respectively. As of December 31, 2005, the notional and fair value related to the embedded derivatives, the hedging strategy, and reinsurance was $45.5 billion and $166, respectively.

The Company employs additional strategies to manage equity market risk in addition to the derivative and reinsurance strategy described above that economically hedges the fair value of the U.S. GMWB rider. Notably, the Company purchases one and two year S&P 500 Index put option contracts to economically hedge certain other liabilities that could increase if the equity markets decline. As of March 31, 2006 and December 31, 2005, the notional value related to this strategy was $1.2 billion and $1.1 billion, respectively, while the fair value related to this strategy was $5 and $14, respectively. Because this strategy is intended to partially hedge certain equity-market sensitive liabilities calculated under statutory accounting (see “Capital Resources and Liquidity”), changes in the value of the put options may not be closely aligned to changes in liabilities determined in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), causing volatility in GAAP net income.

The Company continually seeks to improve its equity risk management strategies. The Company has made considerable investment in analyzing current and potential future market risk exposures arising from a number of factors, including but not limited to, product guarantees (GMDB, GMWB and GMIB), equity market and interest rate risks (in both the U.S. and Japan) and foreign currency exchange rates. The Company evaluates these risks individually and, increasingly, in the aggregate to determine the risk profiles of all of its products and to judge their potential impacts on GAAP net income, statutory capital volatility and other metrics. Utilizing this and future analysis, the Company expects to evolve its risk management strategies over time, modifying its reinsurance, hedging and product design strategies to optimally mitigate its aggregate exposures to market-driven changes in GAAP equity, statutory capital and other economic metrics. Because these strategies could target an optimal reduction of a combination of exposures rather than targeting a single one, it is possible that volatility of GAAP net income would increase, particularly if the Company places an increased relative weight on protection of statutory surplus in future strategies.

Interest Rate Risk

The Company’s exposure to interest rate risk relates to the market price and/or cash flow variability associated with changes in market interest rates. The Company manages its exposure to interest rate risk through asset allocation limits, asset/liability duration matching and through the use of derivatives. (For further discussion of interest rate risk, see the Interest Rate Risk discussion within the “Capital Markets Risk Management” section of the MD&A in Hartford Life’s 2005 Form 10-K Annual Report.)

CAPITAL RESOURCES AND LIQUIDITY

Liquidity Requirements

The liquidity requirements of Hartford Life have been and will continue to be met by funds from operations as well as the issuance of commercial paper, debt securities and borrowings from its credit facilities. The principal sources of operating funds for its insurance entities are fees, premiums and investment income as well as maturities and sales of invested assets. Hartford Life is a holding company which relies upon operating cash flow in the form of dividends from its subsidiaries, which enables it to service its debt, pay dividends to its parent, and pay certain business expenses. As a holding company, Hartford Life has no significant business operations of its own and, therefore, relies mainly on the dividends from its insurance company subsidiaries, which are primarily domiciled in Connecticut, as the principal source of cash to meet its obligations (predominantly debt obligations) and pay stockholder dividends.

Dividends to Hartford Life from its direct subsidiary, Hartford Life and Accident Company (“HLA”), are restricted. The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of Connecticut. Under these laws, the insurance subsidiaries may only make their dividend payments out of unassigned surplus. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve months ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting policies. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. HLA declared to the Company dividends of $142 in the first quarter of 2006. The statutory net gain was $320 for the three months ended March 31, 2006. U.S. statutory capital and surplus as of March 31, 2006 was $4 billion.

During 2005, HLA transferred ownership of HLIKK to Hartford Life, which resulted in the full utilization of HLA’s 2005 dividend capacity. Accordingly, HLA will need prior approval from the insurance commissioner for dividends paid, starting from the date of the transfer through the following twelve-month period.

The insurance holding company laws of the jurisdictions in which Hartford Life’s insurance subsidiaries are incorporated (or deemed commercially domiciled) limit the payment of dividends.

The primary uses of funds are to pay claims, policy benefits, operating expenses and commissions, and to purchase new investments. In addition, Hartford Life has a policy of carrying a significant short-term investment position and accordingly does not anticipate selling intermediate and long-term fixed maturity investments to meet any liquidity needs. (For a discussion of the Company’s investment objectives and strategies, see the “Investments” and “Capital Markets Risk Management” sections.)

Sources of Capital

Revolving Credit Facilities

As of March 31, 2006, the Company’s Japanese operation has a ¥5.0 billion yen, approximately $42, line of credit with a Japanese bank with no outstanding borrowings under this facility.

Ratings

Ratings are an important factor in establishing the competitive position in the insurance and financial services marketplace. There can be no assurance that the Company’s ratings will continue for any given period of time or that they will not be changed. In the event the Company’s ratings are downgraded, the level of revenues or the persistency of the Company’s business may be adversely impacted.

The following table summarizes Hartford Life’s significant member companies’ financial ratings from the major independent rating organizations as of April 25, 2006:


			Standard &
	A.M. Best	Fitch	Poor’s	Moody’s

*Insurance Ratings*
Hartford Life Insurance Company	A+	AA	AA-	Aa3
Hartford Life and Accident Insurance Company	A+	AA	AA-	Aa3
Hartford Life Group Insurance Company	A+	AA	—	—
Hartford Life and Annuity Insurance Company	A+	AA	AA-	Aa3
Hartford Life Insurance K.K. (Japan)	—	—	AA-	—
Hartford Life Limited (Ireland)	—	—	AA-	—
*Other Ratings*
Hartford Life, Inc.
Senior debt	a-	A	A-	A3
Commercial paper	AMB-1	F1	A-2	P-2
Hartford Life, Inc.
Capital II Trust preferred securities	bbb	A-	BBB	Baa1
Hartford Life Insurance Company:
Short Term Rating	—	—	A-1+	P-1

The agencies consider many factors in determining the final rating of an insurance company. One consideration is the relative level of statutory surplus necessary to support the business written. Statutory surplus represents the capital of the insurance company reported in accordance with accounting practices prescribed by the applicable state insurance department.

Contingencies

Legal Proceedings— For a discussion regarding contingencies related to the Company’s legal proceedings, please see Part II, Item 1, “Legal Proceedings”.

Dependence on Certain Third Party Relationships—The Company distributes its annuity and life insurance products through a variety of distribution channels, including broker-dealers, banks, wholesalers, its own internal sales force and other third party organizations. The Company periodically negotiates provisions and renewals of these relationships and there can be no assurance that such terms will remain acceptable to the Company or such third parties. An interruption in the Company’s continuing relationship with certain of these third parties could materially affect the Company’s ability to market its products.

For a discussion regarding contingencies related to the manner in which the Company compensates brokers and other producers, please see “Overview—Broker Compensation” above.

Regulatory Developments— For a discussion regarding contingencies related to regulatory developments that affect the Company, please see “Overview—Regulatory Developments” above.

For further information on other contingencies, see Note 12 of Notes to Consolidated Financial Statements in Hartford Life’s 2005 Form 10-K.

ACCOUNTING STANDARDS

For a discussion of accounting standards, see Note 1 of Notes to Condensed Consolidated Financial Statements.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company’s principal executive officer and its principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) have concluded that the Company’s disclosure controls and procedures are effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e) as of March 31, 2006.

Changes in internal control over financial reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s first fiscal quarter of 2006 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Item 1A. RISK FACTORS

Investing in the securities of the Company involves risk. In deciding whether to invest in the securities of the Company, you should carefully consider the following risk factors, any of which could have a significant or material adverse effect on the business, financial condition, operating results or liquidity of the Company. This information should be considered carefully together with the other information contained in this report and the other reports and materials filed by the Company with the Securities and Exchange Commission. The risks described below are not the only ones facing the Company. Additional risks may also have a significant or material adverse effect on the business, financial condition, operating results or liquidity of the Company.

The occurrence of one or more terrorist attacks in the geographic areas we serve or the threat of terrorism in general may have a material adverse effect on our business, consolidated operating results, financial condition or liquidity.

The occurrence of one or more terrorist attacks in the geographic areas we serve could result in substantially higher losses under our insurance policies than we have anticipated. Further, the continued threat of terrorism and the occurrence of terrorist attacks, as well as heightened security measures and military action in response to these threats and attacks, may cause significant volatility in global financial markets, disruptions to commerce and reduced economic activity. These consequences could have an adverse effect on the value of the assets in our investment portfolio. Terrorist attacks also could disrupt our operations centers in the U.S. or abroad. As a result, it is possible that any, or a combination of all, of these factors may have a material adverse effect on our business, consolidated operating results, financial condition and liquidity.

We are exposed to significant capital markets risk related to changes in interest rates, equity prices and foreign exchange rates which may adversely affect our results of operations, financial condition or cash flows.

We are exposed to significant capital markets risk related to changes in interest rates, equity prices and foreign currency exchange rates. Our exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates will reduce the net unrealized gain position of our investment portfolio, increase interest expense on our variable rate debt obligations and, if long-term interest rates rise dramatically within a six to twelve month time period, certain of our Life businesses may be exposed to disintermediation risk. Disintermediation risk refers to the risk that our policyholders may surrender their contracts in a rising interest rate environment, requiring us to liquidate assets in an unrealized loss position. Our primary exposure to equity risk relates to the potential for lower earnings associated with certain of our businesses, such as variable annuities, where fee income is earned based upon the fair value of the assets under management. In addition, certain of our products offer guaranteed benefits which increase our potential benefit exposure should equity markets decline. We are also exposed to interest rate and equity risk based upon the discount rate and expected long-term rate of return assumptions associated with our pension and other post-retirement benefit obligations. Sustained declines in long-term interest rates or equity returns likely would have a negative effect on the funded status of these plans. Our primary foreign currency exchange risks are related to net income from foreign operations, non–U.S. dollar denominated investments, investments in foreign subsidiaries, the yen denominated individual fixed annuity product, and certain guaranteed benefits associated with the Japan variable annuity. These risks relate to the potential decreases in value and income resulting from a strengthening or weakening in foreign exchange rates verses the U.S. dollar. In general, the weakening of foreign currencies versus the U.S. dollar will unfavorably affect net income from foreign operations, the value of non-U.S. dollar denominated

investments, investments in foreign subsidiaries and realized gains or losses on the yen denominated individual fixed annuity product. In comparison, a strengthening of the Japanese yen in comparison to the U.S. dollar and other currencies may increase our exposure to the guarantee benefits associated with the Japan variable annuity. If significant, declines in equity prices, changes in U.S. interest rates and the strengthening or weakening of foreign currencies against the U.S. dollar, individually or in tandem, could have a material adverse effect on our consolidated results of operations, financial condition or cash flows.

We may be unable to effectively mitigate the impact of equity market volatility on our financial position and results of operations arising from obligations under annuity product guarantees, which may affect our consolidated results of operations, financial condition or cash flows.

Our primary exposure to equity risk relates to the potential for lower earnings associated with certain of our life businesses where fee income is earned based upon the fair value of the assets under management. In addition, some of the products offered by these businesses, especially variable annuities, offer certain guaranteed benefits which increase our potential benefit exposure as the equity markets decline. We are subject to equity market volatility related to these benefits, especially the guaranteed minimum death benefit (“GMDB”), guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum income benefit (“GMIB”) offered with variable annuity products. We use reinsurance structures and have modified benefit features to mitigate the exposure associated with GMDB. We also use reinsurance in combination with derivative instruments to minimize the claim exposure and the volatility of net income associated with the GMWB liability. While we believe that these and other actions we have taken mitigate the risks related to these benefits, we are subject to the risks that reinsurers are unable or unwilling to pay, that other risk management procedures prove ineffective or that unanticipated policyholder behavior, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed, which individually or collectively may have a material adverse effect on our consolidated results of operations, financial condition or cash flows.

Regulatory proceedings or private claims relating to incentive compensation or payments made to brokers or other producers, alleged anti-competitive conduct and other sales practices could have a material adverse effect on us.

The Hartford has received multiple regulatory inquiries regarding our compensation arrangements with brokers and other producers. For example, in June 2004, The Hartford received a subpoena from the New York Attorney General’s Office in connection with its inquiry into compensation arrangements between brokers and carriers. In mid-September 2004 and subsequently, The Hartford has received additional subpoenas from the New York Attorney General’s Office, which relate more specifically to possible anti-competitive activity among brokers and insurers. On October 14, 2004, the New York Attorney General’s Office filed a civil complaint against Marsh & McLennan Companies, Inc., and Marsh, Inc. (collectively, “Marsh”). The complaint alleges, among other things, that certain insurance companies, including The Hartford, participated with Marsh in arrangements to submit inflated bids for business insurance and paid contingent commissions to ensure that Marsh would direct business to them. The Hartford was not joined as a defendant in the action, which has since settled.

Since the beginning of October 2004, The Hartford has received subpoenas or other information requests from Attorneys General and regulatory agencies in more than a dozen jurisdictions regarding broker compensation, possible anti-competitive activity and sales practices. The Hartford may continue to receive additional subpoenas and other information requests from Attorneys General or other regulatory agencies regarding similar issues. The Hartford intends to continue cooperating fully with these investigations, and is conducting an internal review, with the assistance of outside counsel, regarding broker compensation issues. Although no regulatory action has been initiated against the Company in connection with the allegations described in the civil complaint, it is possible that one or more other regulatory agencies may pursue action against the Company or one or more of its employees in the future on this matter or on other similar matters. If such an action is brought, it could have a material adverse effect on the Company.

Regulatory and market-driven changes may affect our practices relating to the payment of incentive compensation to brokers and other producers, including changes that have been announced and those which may occur in the future, and could have a material adverse effect on us in the future.

We pay brokers and independent agents commissions and other forms of incentive compensation in connection with the sale of many of our insurance products. Since the New York Attorney General’s Office filed a civil complaint against Marsh on October 14, 2004, several of the largest national insurance brokers, including Marsh, Aon Corporation and Willis Group Holdings Limited, have announced that they have discontinued the use of contingent compensation arrangements. Other industry participants may make similar, or different, determinations in the future. In addition, legal, legislative, regulatory, business or other developments may require changes to industry practices relating to incentive compensation. At this time, it is not possible to predict the effect of these announced or potential changes on our business or distribution strategies, but such changes could have a material adverse effect on us in the future.

Competitive activity may adversely affect our market share and profitability, which could have an adverse effect on our business, results of operations or financial condition.

The insurance industry is highly competitive. Our competitors include other insurers and, because many of our products include an investment component, securities firms, investment advisers, mutual funds, banks and other financial institutions. In recent years, there has been substantial consolidation and convergence among companies in the insurance and financial services industries resulting in increased competition from large, well-capitalized insurance and financial services firms that market products and services similar to ours. Many of these firms also have been able to increase their distribution systems through mergers or contractual arrangements. These competitors compete with us for producers such as brokers and independent agents. Larger competitors may have lower operating costs and an ability to absorb greater risk while maintaining their financial strength ratings, thereby allowing them to price their products more competitively. These competitive pressures could result in increased pricing pressures on a number of our products and services, particularly as competitors seek to win market share, and may harm our ability to maintain or increase our profitability. Because of the competitive nature of the insurance industry, there can be no assurance that we will continue to effectively compete with our industry rivals, or that competitive pressure will not have a material adverse effect on our business, results of operations or financial condition.

We may experience unfavorable judicial or legislative developments that would adversely affect our results of operations or liquidity.

We are involved in legal actions which do not arise in the ordinary course of business, some of which assert claims for substantial amounts. These actions include, among others, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with life insurance policies; improper sales practices in connection with the sale of life insurance and other investment products; and improper fee arrangements in connection with mutual funds. We are also involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. Given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

Potential changes in domestic and foreign regulation may increase our business costs and required capital levels, which could adversely affect our business, consolidated operating results, financial condition or liquidity.

We are subject to extensive laws and regulations. These laws and regulations are complex and subject to change. Moreover, they are administered and enforced by a number of different governmental authorities, including foreign regulators, state insurance regulators, state securities administrators, the Securities and Exchange Commission, the National Association of Securities Dealers, the U.S. Department of Justice, and state attorneys general, each of which exercises a degree of interpretive latitude. Consequently, we are subject to the risk that compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another regulator’s or enforcement authority’s interpretation of the same issue, particularly when compliance is judged in hindsight. In addition, there is risk that any particular regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or that changes in the overall legal environment may, even absent any particular regulator’s or enforcement authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need to take from a legal risk management perspective, thus necessitating changes to our practices that may, in some cases, limit our ability to grow and improve the profitability of our business.

State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are regulated by the insurance departments of the states in which they are domiciled and licensed. State laws in the U.S. grant insurance regulatory authorities broad administrative powers with respect to, among other things:

•		Licensing companies and agents to transact business;

•		calculating the value of assets to determine compliance with statutory requirements;

•		mandating certain insurance benefits;

•		regulating certain premium rates;

•		reviewing and approving policy forms;

•		regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements;

•		establishing statutory capital and reserve requirements and solvency standards;

•

fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts;

•		approving changes in control of insurance companies;

•		restricting the payment of dividends and other transactions between affiliates; and

•		regulating the types, amounts and valuation of investments.

State insurance regulators and the National Association of Insurance Commissioners, or NAIC, regularly re-examine existing laws and regulations applicable to insurance companies and their products. Our international operations are subject to regulation in the relevant jurisdictions in which they operate, which in many ways is similar to the state regulation outlined above, with similar related restrictions. Our asset management operations are also subject to extensive regulation in the various jurisdictions where they operate. These regulations are primarily intended to protect investors in the securities markets or investment advisory clients and generally grant supervisory authorities broad administrative powers. Changes in all of these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer at the expense of the insurer and thus could have a material adverse effect on our business, consolidated operating results, financial condition and liquidity. Compliance with these laws and regulations is also time consuming and personnel-intensive, and changes in these laws and regulations may increase materially our direct and indirect compliance costs and other expenses of doing business, thus having an adverse effect on our business, consolidated operating results, financial condition and liquidity.

Our business, results of operations and financial condition may be adversely affected by general domestic and international economic and business conditions that are less favorable than anticipated.

Factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets, and inflation all affect the business and economic environment and, ultimately, the amount and profitability of business we conduct. For example, in an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and consumer spending, the demand for financial and insurance products could be adversely affected. Further, given that we offer our products and services in North America, Japan, Europe and South America, we are exposed to these risks in multiple geographic locations. Our operations are subject to different local political, regulatory, business and financial risks and challenges which may affect the demand for our products and services, the value of our investment portfolio, the required levels of our capital and surplus, and the credit quality of local counterparties. These risks include, for example, political, social or economic instability in countries in which we operate, fluctuations in foreign currency exchange rates, credit risks of our local borrowers and counterparties, lack of local business experience in certain markets, and, in certain cases, risks associated with the potential incompatibility with partners. Additionally, much of our overall growth is due to our expansion into new markets for our investment products, primarily in Japan. Our expansion in these new markets requires us to respond to rapid changes in market conditions in these areas. Accordingly, our overall success depends, in part, upon our ability to succeed despite these differing and dynamic economic, social and political conditions. We may not succeed in developing and implementing policies and strategies that are effective in each location where we do business and we cannot guarantee that the inability to successfully address the risks related to economic conditions in all of the geographic locations where we conduct business will not have a material adverse effect on our business, results of operations or financial condition.

We may experience difficulty in marketing and distributing products through our current and future distribution channels.

We distribute our annuity and life insurance products through a variety of distribution channels, including brokers, independent agents, broker-dealers, banks, wholesalers, affinity partners, our own internal sales force and other third party organizations. In some areas of our business, we generate a significant portion of our business through individual third party arrangements. We periodically negotiate provisions and renewals of these relationships and there can be no assurance that such terms will remain acceptable to us or such third parties. An interruption in our continuing relationship with certain of these third parties could materially affect our ability to market our products.

We may experience a downgrade in our financial strength or credit ratings which may make our products less attractive, increase our cost of capital, and inhibit our ability to refinance our debt, which would have an adverse effect on our business, consolidated operating results, financial condition and liquidity.

Financial strength and credit ratings, including commercial paper ratings, have become an increasingly important factor in establishing the competitive position of insurance companies. Rating organizations assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to the views of the rating organization, general economic conditions, and circumstances outside the rated company’s control. In addition, rating organizations may employ different models and formulas to assess the financial strength of a rated company, and from time to time rating organizations have, in their discretion, altered these models. Changes to the models, general economic conditions, or circumstances outside our control could impact a rating organization’s judgment of its rating and the subsequent rating it assigns us. We cannot predict what actions rating organizations may take, or what actions we may be required to take in response to the actions of rating organizations, which may adversely affect us. Our financial strength ratings, which are intended to measure our ability to meet policyholder obligations, are an important factor affecting public confidence in most of our products and, as a result, our competitiveness. A downgrade in our financial strength ratings, or an announced potential downgrade,

of one of our principal insurance subsidiaries could affect our competitive position in the insurance industry and make it more difficult for us to market our products, as potential customers may select companies with higher financial strength ratings. The interest rates we pay on our borrowings are largely dependent on our credit ratings. A downgrade of our credit ratings, or an announced potential downgrade, could affect our ability to raise additional debt with terms and conditions similar to our current debt, and accordingly, likely increase our cost of capital. In addition, a downgrade of our credit ratings could make it more difficult to raise capital to refinance any maturing debt obligations, to support business growth at our insurance subsidiaries and to maintain or improve the current financial strength ratings of our principal insurance subsidiaries described above. As a result, it is possible that any, or a combination of all, of these factors may have a material adverse effect on our business, consolidated operating results, financial condition and liquidity.

If we are unable to maintain the availability of our systems and safeguard the security of our data due to the occurrence of disasters or other unanticipated events, our ability to conduct business may be compromised, which may have a material adverse effect on our business, consolidated results of operations, financial condition or cash flows.

We use computer systems to store, retrieve, evaluate and utilize customer and company data and information. Our computer, information technology and telecommunications systems, in turn, interface with and rely upon third-party systems. Our business is highly dependent on our ability, and the ability of certain affiliated third parties, to access these systems to perform necessary business functions, such as providing insurance quotes, processing premium payments, making changes to existing policies, filing and paying claims, and providing customer support. Systems failures or outages could compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business and hurt our relationships with our business partners and customers. In the event of a disaster such as a natural catastrophe, an industrial accident, a blackout, a computer virus, a terrorist attack or war, our systems may be inaccessible to our employees, customers or business partners for an extended period of time. Even if our employees are able to report to work, they may be unable to perform their duties for an extended period of time if our data or systems are disabled or destroyed. Our systems could also be subject to physical and electronic break-ins, and subject to similar disruptions from unauthorized tampering with our systems. This may impede or interrupt our business operations and may have a material adverse effect on our business, consolidated operating results, financial condition or liquidity.

Item 5. OTHER INFORMATION

None.

Item 6. EXHIBITS

See Exhibits Index on page 51.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	HARTFORD LIFE, INC.
	/s/ Ernest M. McNeill Jr.
	Ernest M. McNeill Jr.
	Senior Vice President and Chief Accounting Officer

April 27, 2006

HARTFORD LIFE, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2006

EXHIBITS INDEX


Exhibit #
15.01		Deloitte & Touche LLP Letter of Awareness

31.01		Certification of Thomas M. Marra pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02		Certification of David A. Carlson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01		Certification of Thomas M. Marra pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02		Certification of David A. Carlson pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. sophomore Avg

Hartford Life Inactive 10-Q2006 Q1 Quarterly report

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