Hartford Life 10Q 2006 Q3 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 September 30, 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 (State or other jurisdiction of incorporation or organization)		06-1470915 (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 October 20, 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

Report of Independent Registered Public Accounting Firm		3

Condensed Consolidated Statements of Operations – For the Three and Nine Months Ended September 30, 2006 and 2005		4

Condensed Consolidated Balance Sheets – As of September 30, 2006 and December 31, 2005		5

Condensed Consolidated Statements of Changes in Stockholder’s Equity – For the Nine Months Ended September 30, 2006 and 2005		6

Condensed Consolidated Statements of Cash Flows – For the Nine Months Ended September 30, 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		22

Item 4. Controls and Procedures		51

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		51

Item 1A. Risk Factors		52

Item 6. Exhibits		57

Signature		58

Exhibits Index		59
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 September 30, 2006, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended September 30, 2006 and 2005, and changes in stockholder’s equity, and cash flows for the nine-month periods ended September 30, 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 Hartford Life, Inc. and subsidiaries as of December 31, 2005, and the related consolidated statements of income, 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
October 26, 2006

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
(In millions)	2006		2005			2006			2005
	(Unaudited)					(Unaudited)
*Revenues*
Fee income	$	1,149	$	1,026		$	3,423		$	2,936
Earned premiums		1,129		1,045			3,483			3,091
Net investment income
Securities available-for-sale and other		802		771			2,359			2,233
Equity securities held for trading		1,185		1,500			669			2,024

Total net investment income		1,987		2,271			3,028			4,257
Net realized capital (losses) gains		11		(26	)		(265	)		57

Total revenues		4,276		4,316			9,669			10,341

*Benefits, claims and expenses*
Benefits, claims and claim adjustment expenses		2,738		2,926			5,384			6,421
Insurance expenses and other		680		607			1,953			1,802
Amortization of deferred policy acquisition costs and present value of future profits		308		321			913			887
Dividends to policyholders		1		14			19			35
Interest expense		22		20			62			60

Total benefits, claims and expenses		3,749		3,888			8,331			9,205

Income before income tax expense		527		428			1,338			1,136
Income tax expense		113		95			294			262

Net income	$	414	$	333		$	1,044		$	874

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	September 30,			December 31,
	2006			2005
(In millions, except for share data)	(Unaudited)

*Assets*
Investments
Fixed maturities, available-for-sale, at fair value (amortized cost of $50,944 and $49,615)	$	51,909		$	50,812
Equity securities, available-for-sale, at fair value (cost of $757 and $781)		771			800
Equity securities, trading securities, at fair value (cost of $23,071 and $19,570)		27,863			24,034
Policy loans, at outstanding balance		2,057			2,016
Mortgage loans on real estate		2,451			1,513
Other investments		920			609

Total investments		85,971			79,784
Cash		1,198			1,001
Premiums receivable and agents’ balances		378			426
Reinsurance recoverables		805			800
Deferred policy acquisition costs and present value of future profits		9,125			8,567
Deferred income taxes		(685	)		(633	)
Goodwill		796			796
Other assets		2,596			2,146
Separate account assets		162,901			150,875

Total assets	$	263,085		$	243,762


*Liabilities*
Reserve for future policy benefits	$	13,662		$	12,777
Other policyholder funds and benefits payable		69,296			64,452
Short-term debt		200			—
Long-term debt		648			1,048
Other liabilities		5,999			5,251
Separate account liabilities		162,901			150,875

Total liabilities		252,706			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		3,303			3,094
Accumulated other comprehensive income
Net unrealized capital gains on securities and hedging instruments, net of tax		425			608
Foreign currency translation adjustments		(43	)		(79	)

Total accumulated other comprehensive income		382			529
Retained earnings		6,694			5,736

Total stockholder’s equity		10,379			9,359

Total liabilities and stockholder’s equity	$	263,085		$	243,762

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholder’s Equity

Nine Months Ended September 30, 2006


	Accumulated Other Comprehensive Income
								Net Gain
					Net Unrealized			(Loss) on
					Capital			Cash Flow			Foreign
					Gains (Losses)			Hedging			Currency						Total
	Common				on Securities,			Instruments,			Translation			Retained			Stockholder’s
(In millions) (Unaudited)	Stock		Capital 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															1,044			1,044
Other comprehensive income, net of tax (1)
Net change in unrealized capital gains on securities (2)						(108	)											(108	)
Net loss on cash flow hedging instruments									(75	)								(75	)
Cumulative translation adjustments												36						36

Total other comprehensive income																		(147	)

Total comprehensive income																		897
Capital contribution				209														209
Dividends declared															(86	)		(86	)

Balance, September 30, 2006	$	—	$	3,303	$	601		$	(176	)	$	(43	)	$	6,694		$	10,379

Nine Months Ended September 30, 2005


	Accumulated Other Comprehensive Income
								Net Gain
					Net Unrealized			(Loss) on
					Capital			Cash Flow			Foreign
					Gains (Losses)			Hedging			Currency						Total
	Common				on Securities,			Instruments,			Translation			Retained			Stockholder’s
(In millions) (Unaudited)	Stock		Capital 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															874			874
Other comprehensive income, net of tax (1)
Net change in unrealized capital gains on securities (2)						(504	)											(504	)
Net gain on cash flow hedging instruments									66									66
Cumulative translation adjustments												(47	)					(47	)

Total other comprehensive income																		(485	)

Total comprehensive income																		389
Dividends declared															(258	)		(258	)

Balance, September 30, 2005	$	—	$	3,094	$	844		$	(104	)	$	(31	)	$	5,500		$	9,303

(1)		Net change in unrealized capital gains on securities is reflected net of tax benefit and other items of $ 58 and $271 for the nine months ended September 30, 2006 and 2005, respectively. Net gain (loss) on cash flow hedging instruments is net of tax (benefit) provision of $(40) and $36 for the nine months ended September 30, 2006 and 2005, respectively. Cumulative translation adjustments is net of tax benefit of $21 and $0 for the nine months ended September 30, 2006 and 2005, respectively.

(2)		There were reclassification adjustments for after-tax (losses) gains realized in net income of $(101) and $24 for the nine months ended September 30, 2006 and 2005, respectively.

See Notes to Condensed Consolidated Financial Statements.

HARTFORD LIFE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


	Nine Months Ended
	September 30,
(In millions) (Unaudited)	2006			2005

*Operating Activities*
Net income	$	1,044		$	874
*Adjustments to reconcile net income to net cash provided by operating activities*
Amortization of deferred policy acquisition costs and present value of future profits		913			887
Additions to deferred policy acquisition costs and present value of future profits		(1,420	)		(1,564	)
Change in:
Reserve for future policy benefits		729			345
Reinsurance recoverables		(8	)		51
Receivables		(56	)		2
Payables, accruals and other liabilities		(277	)		127
Accrued and deferred income taxes		480			42
Net realized capital losses (gains)		265			(57	)
Net increase in equity securities, held for trading		(3,875	)		(9,297	)
Net receipts from investment contracts credited to policyholder accounts associated with equity securities, held for trading		3,871			9,477
Depreciation and amortization		284			209
Other, net		109			(32	)

Net cash provided by operating activities		2,059			1,064

*Investing Activities*
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale		18,477			20,780
Equity securities, available-for-sale		130			18
Mortgage loans		232			321
Partnerships		75			56
Payments for the purchase of:
Fixed maturities, available-for-sale		(20,062	)		(22,421	)
Equity securities, available-for-sale		(203	)		(197	)
Mortgage loans		(1,167	)		(576	)
Partnerships		(427	)		(181	)
Change in policy loans, net		(42	)		653
Change in payables for collateral under securities lending, net		419			(211	)
Change in other investments, net		(453	)		984
Additions to property and equipment, net		(51	)		(1,007	)

Net cash used for investing activities		(3,072	)		(1,781	)

*Financing Activities*
Net receipts from investment and universal life-type contracts		1,274			1,301
Repayment of debt		(200	)		—
Proceeds from issuance of consumer notes		41			—
Capital contribution		209
Dividends paid		(127	)		(226	)

Net cash provided by financing activities		1,197			1,075

Foreign exchange rate effect on cash		13			(68	)
Net increase in cash		197			290
Cash- beginning of period		1,001			933

Cash- end of period	$	1,198		$	1,223

*Supplemental Disclosure of Cash Flow Information — Net cash paid during the period for*

Income taxes (received) paid	$	(196	)	$	198
Interest	$	61		$	59

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 financial services and insurance organization which provides investment products and life insurance to both individual and business customers in the United States and internationally. 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 prescribed by various insurance regulatory authorities.

The accompanying condensed consolidated financial statements and notes as of September 30, 2006, and for the three and nine months ended September 30, 2006 and 2005 are unaudited. These 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.

Consolidation

The condensed consolidated financial statements include the accounts of Hartford Life in which the Company directly or indirectly has a controlling financial interest and those variable interest entities (“VIE”) in which the Company is the primary beneficiary. Entities in which Hartford Life does not have a controlling financial interest but in which the Company has significant influence over the operating and financing decisions are reported using the equity method. All material intercompany transactions and balances between Hartford Life and its subsidiaries and affiliates have been eliminated. During the three months ended June 30, 2006, the Company sponsored and purchased an investment interest in a newly established floating rate bank loan fund, a VIE for which the Company determined itself to be the primary beneficiary. For further discussion see Note 3.

Reclassifications

Certain reclassifications have been made to prior period financial information, including segment disclosures, to conform to the current period presentation.

Use of Estimates

The preparation of financial statements, in conformity with 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 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 benefit derivatives; and contingencies relating to corporate litigation and regulatory matters.

Significant Accounting Policies

For a description of significant 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 September 30, 2006 and 2005 was 21% and 22%, respectively. The effective tax rate for the nine months ended September 30, 2006 and 2005 was 22% and 23%, respectively. The principal causes of the difference between the effective rates 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 equity market performance. The current estimated DRD will be appropriately adjusted as underlying factors change, including known actual 2006 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 carry forwards at the mutual fund level. The Company’s DRD increased $5 and $27 for the three and nine months ended September 30, 2006 over the respective prior year periods including a tax benefit of $6 for the three and nine months ended September 30, 2006 and $3 in the three and nine months ended September 30, 2005, resulting from true-ups related to prior years’ tax returns. For the three months ended September 30, 2005, the Company’s DRD included an additional tax benefit of $6 related to the 2005 year.

The Company receives a credit against its U.S. tax liability for foreign taxes paid by the Company from its separate account assets. The increased allocation of separate account investments to the international equity markets during 2005 and 2006 has increased the amount of these foreign tax credits (“FTC”). In the three and nine months ended September 30, 2006, the Company reported a net benefit of $13 for the separate account FTC, comprised of a $7 true up related to a prior year tax return and $6 related to the 2006 year.

Based on current projections, it is management’s intent that the undistributed earnings of Hartford Life Insurance, K.K. will be repatriated to the U.S. in the future. Therefore, the Company no longer meets the indefinite reversal criteria of Accounting Principles Board (“APB”) Opinion No. 23, “Accounting for Income Taxes – Special Areas”, with respect to Hartford Life Insurance, K.K. As a result of this change, the Company has recorded a tax benefit of $4 and $6 for the three and nine months ended September 30, 2006 respectively, due to the expected utilization of foreign tax credits from Hartford Life Insurance, K.K.

Prior to the Tax Reform Act of 1984, the Life Insurance Company Income Tax Act of 1959 permitted the deferral from taxation of a portion of statutory income under certain circumstances. In these situations, the deferred income was accumulated in a “Policyholders’ Surplus Account” and would be taxable only under conditions which management considered to be remote; therefore, no federal income taxes have been provided on the balance in this account, which for tax return purposes was $88 as of December 31, 2005. The American Jobs Creation Act of 2004, which was enacted in October 2004, allows distributions to be made from the Policyholders’ Surplus Account free of tax in 2005 and 2006. The Company has distributed the entire balance in the second quarter of 2006, thereby permanently eliminating the potential tax of $31.

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 Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), which replaced SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) and superseded 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. 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 adopted SFAS 123R effective January 1, 2006 using the modified prospective method and therefore prior period amounts have not been restated. 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.

Future Adoption of New Accounting Standards

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”). This statement requires an entity to: (a) recognize an asset for the funded status of defined benefit postretirement plans that are overfunded and a liability for plans that are underfunded, measured as of the employer’s fiscal year end; and (b) recognize changes in the funded status of defined benefit postretirement plans, other than for the net periodic benefit cost included in net income, in accumulated other comprehensive income. For pension plans the funded status must be based on the projected benefit obligation which includes an assumption for future salary increases. SFAS 158 is effective for public entities’ with years ending after December 15, 2006, with certain exceptions not applicable to The Hartford, through an adjustment to the ending balance of accumulated other comprehensive income, net of tax. Hartford Life’s employees are included in The Hartford’s defined benefit pension and postretirement and healthcare and life insurance benefit plans for

which the benefit plan assets or liabilities are recognized on The Hartford’s balance sheet. Therefore, SFAS 158 will not impact Hartford Life’s consolidated financial statements.

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides guidance for how errors should be evaluated to assess materiality from a quantitative perspective. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording the cumulative effect of initially applying the approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings. SAB 108 is required to be adopted by December 31, 2006 and is not expected to have an effect on the Company’s financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). This statement defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States, and enhances disclosures about fair value measurements. SFAS 157 provides guidance on how to measure fair value when required under existing accounting standards. The statement establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (“Level 1, 2 and 3”). Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets the Company has the ability to access at the measurement date. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability. Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Quantitative and qualitative disclosures will focus on the inputs used to measure fair value for both recurring and non-recurring fair value measurements and the effects of the measurements in the financial statements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, with earlier application encouraged only in the initial quarter of an entity’s fiscal year. Adoption of this statement is expected to have an impact on the Company’s consolidated financial statements; however, the timing for adoption and impact has not yet been determined.

The FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes , an interpretation of FASB Statement No. 109” (“FIN 48”), dated June 2006. The interpretation requires public companies to recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The amount recognized would be the amount that represents the largest amount of tax benefit that is greater than 50% likely of being ultimately realized. A liability would be recognized for any benefit claimed, or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements, along with any interest and penalty (if applicable) on the excess. FIN 48 will require a tabular reconciliation of the change in the aggregate unrecognized tax benefits claimed, or expected to be claimed, in tax returns and disclosure relating to accrued interest and penalties for unrecognized tax benefits. Discussion will also be required for those uncertain tax positions where it is reasonably possible that the estimate of the tax benefit will change significantly in the next 12 months. FIN 48 is effective for fiscal years beginning after December 15, 2006. Adoption of FIN 48 is not expected to have a material impact on the Company’s consolidated financial statements.

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 in the segments, for allocated realized gains and losses and credit-risk charges were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005

Retail
Realized gains (losses)	$	7		$	9		$	24		$	27
Credit risk charge		(6	)		(6	)		(19	)		(19	)
Retirement Plans
Realized gains (losses)		2			1			7			4
Credit risk charge		(3	)		(2	)		(7	)		(6	)
Institutional
Realized gains (losses)		4			4			12			10
Credit risk charge		(6	)		(5	)		(17	)		(14	)
Individual Life
Realized gains (losses)		3			2			8			8
Credit risk charge		(2	)		(2	)		(5	)		(5	)
Group Benefits
Realized gains (losses)		—			2			2			7
Credit risk charge		(2	)		(2	)		(7	)		(7	)
International
Realized gains (losses)		1			—			1			—
Credit risk charge		(1	)		—			(2	)		—
Other
Realized gains (losses)		(17	)		(18	)		(54	)		(56	)
Credit risk charge		20			17			57			51

Total	$	—		$	—		$	—		$	—

The measure of profit or loss used by Hartford Life management in evaluating the performance of its segments is net income. For a full discussion of each segment, please refer to Hartford Life’s 2005 Form 10-K Annual Report.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2006		2005		2006			2005

Revenues

Retail	$	849	$	810	$	2,566		$	2,399
Retirement Plans		131		118		399			348
Institutional		429		358		1,314			997
Individual Life		271		278		817			799
Group Benefits		1,137		1,049		3,398			3,143
International		194		141		558			356
Other		80		62		(52	)		275

Total segment revenues		3,091		2,816		9,000			8,317
Net investment income on equity securities held for trading [1]		1,185		1,500		669			2,024

Total revenues	$	4,276	$	4,316	$	9,669		$	10,341

[1]

Management does not include dividend income and mark-to-market effects of trading securities supporting the international variable annuity business in its segment revenues since corresponding amounts credited to policyholders are included within benefits, claims and claim adjustment expenses.


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2006		2005			2006			2005

Net Income (Loss)

Retail	$	184	$	172		$	526		$	447
Retirement Plans		21		20			64			54
Institutional		24		24			75			66
Individual Life		46		45			139			123
Group Benefits		74		68			216			191
International		47		28			145			63
Other		18		(24	)		(121	)		(70	)

Total net income	$	414	$	333		$	1,044		$	874

3. Investments and Derivative Instruments


	September 30, 2006									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”)	$	6,580	$	49	$	(55	)	$	6,574	$	6,819	$	48	$	(75	)	$	6,792
Collateralized mortgage obligations (“CMOs”)
Agency backed		904		12		(5	)		911		758		3		(5	)		756
Non-agency backed		100		—		(1	)		99		106		—		—			106
Commercial mortgage-backed securities (“CMBS”)
Agency backed		356		7		(1	)		362		70		1		—			71
Non-agency backed		10,207		168		(77	)		10,298		9,219		174		(97	)		9,296
Corporate		24,501		963		(258	)		25,206		23,893		1,178		(259	)		24,812
Government/Government agencies
Foreign		467		25		(4	)		488		719		50		(4	)		765
United States		1,006		11		(6	)		1,011		630		24		(5	)		649
Mortgage-backed securities (“MBS”)		2,004		4		(39	)		1,969		2,794		6		(43	)		2,757
States, municipalities and political subdivisions		3,372		186		(15	)		3,543		3,256		210		(9	)		3,457
Redeemable preferred stock		15		1		—			16		17		—		—			17
Short-term		1,432		—		—			1,432		1,334		—		—			1,334

Total fixed maturities	$	50,944	$	1,426	$	(461	)	$	51,909	$	49,615	$	1,694	$	(497	)	$	50,812

Variable Interest Entities

In May 2006, the Company purchased a majority interest in a newly established floating rate bank loan fund (the “Fund”). The Fund was sponsored by Hartford Investment Management Company (“HIMCO”), an affiliate of the Company, who will also serve as the investment manager for this Fund. As of September 30, 2006, total assets in the Fund were approximately $122. The Company’s investment in the Fund as of September 30, 2006, was $70 with the remaining interest owned by a related party.

As the majority interest holder, the Company is required to consolidate this Fund under the requirements of the FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN 46R”). Accordingly, the assets and liabilities of the Fund are included in the Company’s consolidated financial statements. As of September 30, 2006, the Company recorded in the condensed consolidated balance sheet $122 of primarily fixed maturities (including its own investment in the Fund) and $52 of other liabilities representing affiliates’ investments in the Fund.

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 1 and 3 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:


	September 30, 2006				December 31, 2005
			Liability				Liability
	Asset Values		Values		Asset Values		Values

Other investments	$	266	$	—	$	179	$	—
Reinsurance recoverables		—		26		—		17
Other policyholder funds and benefits payable		35		—		8		—
Other liabilities		—		501		—		420

Total	$	301	$	527	$	187	$	437

The following table summarizes the notional amount and fair value of derivatives by hedge designation as of September 30, 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.


	September 30, 2006					December 31, 2005
	Notional					Notional
	Amount		Fair Value			Amount		Fair Value

Cash flow hedge	$	6,922	$	(297	)	$	7,197	$	(242	)
Fair value hedge		2,618		1			1,707		(1	)
Other investment and risk management activities		64,136		70			54,161		(7	)

Total	$	73,676	$	(226	)	$	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 and additional options purchased to hedge the GMWB, as well as an increase in interest rate swap derivatives used to assist in the matching of duration between certain assets and liabilities. The increase in net fair value of derivative instruments since December 31, 2005, was primarily related to additional options purchased to hedge GMWB, partially offset by declines in fair value of derivatives hedging foreign bonds, the Japanese fixed annuity fund hedging instruments, and

derivatives hedging changes in interest rates. Derivatives hedging foreign bonds declined in value primarily as a result of the weakening of the U.S. dollar in comparison to certain foreign currencies while the Japanese fixed annuity hedging instruments and derivatives hedging changes in interest rates declined in value primarily due to rising interest rates. For further discussion on the GMWB product, which is accounted for as an embedded derivative, refer to Note 5 of Notes to Condensed Consolidated Financial Statements.

For the three and nine months ended September 30, 2006, after-tax net gains (losses) representing the total ineffectiveness of cash flow hedges were $(3) and $(13), respectively. For the three and nine months ended September 30, 2005, after-tax net gains (losses) representing the total ineffectiveness of cash flow hedges were $(5) and $(9), respectively. For the three and nine months ended September 30, 2006, after-tax net gains (losses) representing the total ineffectiveness of fair value hedges were $1. For the three and nine months ended September 30, 2005, after-tax net gains (losses) representing the total ineffectiveness of fair value hedges were $3.

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 and nine months ended September 30, 2006, these strategies resulted in the recognition of after-tax net gains (losses) of $(5) and $(81), respectively. Net realized capital losses for the three months ended September 30, 2006, were primarily comprised of losses on the Japanese fixed annuity hedging instruments, partially offset by net gains on GMWB related derivatives. The net losses on the Japanese fixed annuity hedging instruments were primarily due to the weakening of the Yen in comparison to the U.S. dollar, partially offset by gains due to a decline in Japanese interest rates. The net gains on GMWB related derivatives were driven by net changes in policyholder behavior assumptions made in the third quarter. For the nine months ended September 30, 2006, net realized capital losses were primarily driven by losses on the Japanese fixed annuity hedging instruments due to an increase in Japanese interest rates, GMWB related derivatives primarily driven by liability model refinements and assumption updates reflecting in-force demographics, and derivatives hedging changes in interest rates primarily due to rising interest rates. For the three and nine months ended September 30, 2005, these derivative-based strategies resulted in the recognition of after-tax net gains (losses) of $(43) and $(84), respectively, which were predominantly comprised of net losses on the Japanese fixed annuity hedging instruments primarily due to the weakening of the Yen in comparison to the U.S. dollar as well as an increase in interest rates.

As of September 30, 2006, the after-tax deferred net gains (losses) 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 $(7). 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 and nine months ended September 30, 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		1,420			1,564
Amortization – Deferred policy acquisition costs and present value of future profits		(913	)		(887	)
Adjustments to unrealized gains and losses on securities available-for-sale and other		54			239
Effect of currency translation adjustment		(3	)		(103	)

Balance, September 30	$	9,125		$	8,250

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. Effective April 1, 2006, the Company began reinsuring certain of its death benefit guarantees associated with the inforce block of variable annuity products offered in Japan. 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 [1]

Liability balance as of January 1, 2006	$	158		$	50
Incurred		92			24
Paid		(84	)		(1	)
Currency translation adjustment		—			—

Liability balance as of September 30, 2006	$	166		$	73

[1]

The reinsurance recoverable asset related to the U.S. GMDB was $32 as of September 30, 2006. The reinsurance recoverable asset related to the Japan GMDB was $3 as of September 30, 2006.


	U.S. GMDB [1]			Japan GMDB/GMIB

Liability balance as of January 1, 2005	$	174		$	28
Incurred		96			23
Paid		(111	)		(1	)
Currency translation adjustment		—			(4	)

Liability balance as of September 30, 2005	$	159		$	46

[1]

The reinsurance recoverable asset related to the U.S. GMDB was $42 as of September 30, 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 Reserve for 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 statements of operations. In a manner consistent with the Company’s accounting policy for deferred acquisition costs, the Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense if actual experience or other evidence suggests that earlier assumptions should be revised.

The following table provides details concerning GMDB and GMIB exposure as of September 30, 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	$	52,640	$	4,271	$	431		64
With 5% rollup [2]		3,763		433		82		63
With Earnings Protection Benefit Rider (EPB) [3]		5,382		374		64		61
With 5% rollup & EPB		1,382		135		25		63

Total MAV		63,167		5,213		602
Asset Protection Benefit (APB) [4]		33,561		59		31		61
Lifetime Income Benefit (LIB) – Death Benefit [5]		2,535		3		3		59
Reset [6] (5-7 years)		6,764		319		319		65
Return of Premium [7]/Other		9,583		32		30		53

Subtotal U.S. Guaranteed Minimum Death Benefits		115,610		5,626		985		62
Japan Guaranteed Minimum Death and Income Benefit [8]		28,265		113		53		66

Total at September 30, 2006	$	143,875	$	5,739	$	1,038


[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]		Death benefits include a Return of Premium and MAV (before age 75) death benefit and income benefits include a guarantee to return initial investment, which is adjusted for earnings liquidity or a maximum annual withdrawal of 3% of premiums, depending on the product, 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 $19.4 billion and $15.2 billion as of September 30, 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 introduced features for contracts issued beginning in the fourth quarter of 2005, that allows the policyholder 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. As markets change, mature and evolve and actual policyholder behavior emerges, management continually evaluates the appropriateness of its assumptions. In addition, management regularly evaluates the valuation model, incorporating emerging valuation techniques where appropriate, including drawing on the expertise of market participants and valuation experts.

As of September 30, 2006 and December 31, 2005, the embedded derivative asset recorded for GMWB, before reinsurance or hedging, was $35 and $8, respectively. For the three and nine months ended September 30, 2006, the change in value of the GMWB, before reinsurance and hedging, reported as a realized gain (loss) was $(12) and $83, respectively. Included in the realized gain (loss) were liability model refinements and changes in policyholder behavior assumptions for the three and nine months ended September 30, 2006 of a net $14 and $(4), respectively. For the three and nine months ended September 30, 2005, the change in value of the GMWB, before reinsurance and hedging, reported as a realized gain (loss) was $55 and $11, respectively. There were no benefit payments made for the GMWB during 2006 or 2005.

As of September 30, 2006 and December 31, 2005, $33.4 billion, or 76%, 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 swaps, 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 total (reinsured and unreinsured) GRB as of September 30, 2006 and December 31, 2005 was $35.8 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 September 30, 2006 and December 31, 2005, was $12 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 or a period certain plus life contingent annuity. 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 $12.

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 and structured settlements. 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, on July 13, 2006, the district court granted the motion. The plaintiffs have noticed an appeal of the dismissal.

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. Various Hartford Life subsidiaries are named in the group benefits complaint. 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. On October 3, 2006, the court denied in part the defendants’ motions to dismiss the two consolidated amended complaints but found the complaints deficient in other respects and ordered the plaintiffs to file supplemental pleadings. The plaintiffs’ motions for class certification are pending. In addition, Hartford Life subsidiaries were joined as defendants 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 terminal and maturity 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.

reimbursement agreements in its terminal and maturity funding group annuity line of business. Under the terms of the Agreement, the Hartford will pay $20, of which $16.1 will be paid to certain plan sponsors that purchased terminal or maturity funding annuities between January 1, 1998 and December 31, 2004, with the balance of $3.9 to be divided equally between the states of New York and Connecticut. Also pursuant to the terms of the Agreement, the Hartford will accept a three-year prohibition on the use of contingent compensation in its terminal and maturity funding group annuity line of business. The costs associated with the settlement had already been accounted for in reserves established by the Hartford as of March 31, 2006.

To date, neither the SEC’s and New York Attorney General’s market timing investigation nor the SEC’s directed brokerage investigation has resulted in the initiation of any formal action against The Hartford by these regulators. However, The Hartford believes that the SEC and the New York 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 and the New York 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 in these matters is difficult to predict. As of March 31, 2006, the Company had recorded aggregate charges of $109, after-tax, to establish a reserve for the market timing, directed brokerage and single premium group annuity matters. The after-tax cost of the single premium group annuity matter settlement was $14. Hartford Life’s remaining reserve for the market timing and directed brokerage matters 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 of stock-based compensation. Hartford Life was allocated compensation expense of $22 million and $17 million for the nine months ended September 30, 2006 and 2005, respectively. Hartford Life’s income tax benefit recognized for stock-based compensation plans was $8 million and $6 million for the nine months ended September 30, 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 422 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 nine months ended September 30, 2005, the Company would have recognized an immaterial increase in net income 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. Certain options become exercisable over a three year period commencing one year from the date of grant, while certain other options become exercisable at the later of the three years from the date of grant or upon the attainment of specified market 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.

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. 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 the quarter. The 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 its wholly-owned subsidiary, Servus Life Insurance Company, to XL Life and Annuity Holding Company and received cash in the amount of approximately $15.

On April 28, 2006, HLA completed the sale of its wholly-owned subsidiary, Hart Life Insurance Company, to Ace Group Holdings, Inc. and received cash in the amount of approximately $14.

10. Debt

On July 14, 2006, the Company retired its $200 of 7.625% junior subordinated debentures underlying the trust preferred securities due 2050 issued by Hartford Life Capital II at par. The retirement was funded by a $200 capital contribution.

extinguished. The Company expects to record a capital contribution from The Hartford for the full fair value of the extinguished notes and a loss for the fair value in excess of the recorded value, estimated to be $91 before tax. As a result, the transaction will increase the total equity of Hartford Life by the fair value of the extinguished notes less the after-tax loss on extinguishment.

Consumer Notes

On September 8, 2006, Hartford Life Insurance Company filed a shelf registration statement with the SEC (Registration Statement No. 333-137215), effective immediately, for the offering and sale of Hartford Life IncomeNotes^SM and Hartford Life medium-term notes (collectively called “Consumer Notes”). There are no limitations on the ability to issue additional indebtedness in the form of Hartford Life IncomeNotes^SM and Hartford Life medium-term notes.

Institutional Solutions Group began issuing Consumer Notes through its Retail Investor Notes Program in September 2006. A Consumer Note is an investment product distributed through broker-dealers directly to retail investors as medium-term, publicly traded fixed or floating rate, or a combination of fixed and floating rate, notes. In addition, discount notes, amortizing notes and indexed notes may also be offered and issued. Consumer Notes are part of the Company’s spread-based business and proceeds are used to purchase investment products, primarily fixed rate bonds. Proceeds are not used for general operating purposes. Consumer Notes are offered weekly with maturities up to 30 years and varying interest rates and may include a call provision. Certain Consumer Notes may be redeemed by the holder in the event of death. Redemptions are subject to certain limitations, including calendar year aggregate and individual limits equal to the greater of $1 or 1% of the aggregate principal amount of the notes and $250 thousand per individual, respectively. Derivative instruments will be utilized to hedge the Company’s exposure to interest rate risk in accordance with Company policy.

As of September 30, 2006, $41 of Consumer Notes had been issued. These notes have interest rates ranging from 5% to 6% for fixed notes and consumer price index plus 2.05% to 2.20% for variable notes. The aggregate maturities of Consumer Notes are as follows: 2009 $3 and $38 for 2011 and thereafter. The Consumer Notes are reported in other liabilities. For the three and nine months ended September 30, 2006 interest credited to holders of Consumer Notes was immaterial and is included in benefits, claims and claim adjustment expenses.

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 September 30, 2006, compared with December 31, 2005, and its results of operations for the three and nine months ended September 30, 2006 compared with the equivalent periods 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 incidence and severity of catastrophes, both natural and man-made; 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; 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; potential changes in Federal or State tax laws; and other factors described in such forward-looking statements.

INDEX


Overview			23
Critical Accounting Estimates			25
Consolidated Results of Operations			27
Retail			33
Retirement Plans			34
Institutional			35
Individual Life			36
Group Benefits			37
International			38
Other			39
Investments			40
Investment Credit Risk			44
Capital Markets Risk Management			45
Capital Resources and Liquidity			48
Accounting Standards			50

OVERVIEW

The Company is a diversified insurance and financial services company. The Company is headquartered in Connecticut and is organized into six reporting segments.

Many of the principal factors that drive the profitability of the Company’s operations are separate and distinct. Management considers this diversification to be a strength that distinguishes the Company from its peers.

Regulatory Developments

On May 10, 2006, the Hartford entered into an agreement (the “Agreement”) with the New York Attorney General’s Office and the Connecticut Attorney General’s Office to resolve the outstanding investigations by these parties regarding the Hartford’s use of expense reimbursement agreements in its terminal and maturity funding group annuity line of business. Under the terms of the agreement, the Hartford will pay $20, of which $16.1 will be paid to certain plan sponsors that purchased terminal or maturity funding annuities between January 1, 1998 and December 31, 2004, with the balance of $3.9 to be divided equally between the states of New York and Connecticut. Also pursuant to the terms of the Agreement, the Hartford will accept a three-year prohibition on the use of contingent compensation in its terminal and maturity funding group annuity line of business. The costs associated with the settlement had already been accounted for in reserves established by the Hartford as of March 31, 2006.

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. Pursuant to settlement agreements reached with regulators, several insurance companies have agreed to restrictions on the payment of contingent compensation relating to the placement of excess casualty insurance policies. These insurers have agreed that the restrictions may be extended in time, and to other property and casualty lines, if insurers in a given line or segment, that together represent more than 65% of the market share in the insurance line (based upon national gross written premiums) do not pay contingent compensation. These insurers have also agreed to support legislation and regulations to abolish contingent compensation and to require

greater disclosure of 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, 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 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 benefit derivatives; 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 those critical accounting estimates not disclosed below, see MD&A in The Hartford’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. Within the following discussion, deferred policy acquisition costs and the present value of future profits intangible asset will be referred to as “DAC”. At September 30, 2006 and December 31, 2005, the carrying value of the Company’s DAC asset was $9.1 billion and $8.6 billion, respectively. Of those amounts, $4.5 billion and $4.5 billion related to individual variable annuities sold in the U.S., $1.4 billion and $1.2 billion related to individual variable annuities sold in Japan and $2.1 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 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”). For most contracts, the Company evaluates EGPs over a 20 year horizon as estimated profits emerging subsequent to year 20 are immaterial. 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 three months ended September 30, 2006 and 2005 was an increase to amortization of $21 and $0, respectively. The true-up recorded for the nine months ended September 30, 2006 and 2005 was an increase to amortization of $36 and $9, 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, 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. The overall actual 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 1,336 on September 29, 2006), although no assurance can be provided that this correlation will continue in the future.

Unlock and Sensitivity Analysis

Estimating future gross profits is a complex process requiring considerable judgment and the forecasting of events well into the future. The estimation process, the underlying assumptions and the resulting EGPs, are evaluated regularly.

The Company’s quantitative process to determine the reasonable range of EGPs is performed quarterly and 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 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 original best estimate 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.

The original best estimate assumptions used to estimate future gross profits have not historically been revised unless the EGPs in the DAC amortization model fell outside of a reasonable range of EGPs. Notwithstanding the statistical ranges described above, future refinements to the estimation process for DAC amortization and modifications of underlying assumptions based on future studies could result in revisions to EGPs. In addition, aside from absolute levels and timing of market performance, additional factors that might influence revisions to previously projected EGPs include the degree of volatility in separate account fund performance and policyholder shifts in asset allocation within the separate account as well as surrenders and lapses. In the event that the Company were to revise its original best estimate assumptions used for prior year cohorts to its current best estimate assumptions, 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”.

As of September 30, 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 for reasonableness. After considering this quantitative assessment and other factors, the Company did not revise the separate account return assumption, the account value or any other assumptions in those DAC amortization models for 2006 and prior cohorts.

The Company performs analyses with respect to the potential impact of an unlock. To illustrate the effects of an unlock on DAC, unearned revenue liabilities and sales inducement assets, assume the Company had concluded that a revision to previously projected account values and the related EGPs was required as of September 30, 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, including lapse, mortality and expense assumptions, for all products to project account values forward from the current account value to reproject future EGPs the estimated (decrease) to net income for all businesses would be approximately $(4)-$(24). 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 (decrease) increase in net income for all businesses would have been $13-$22 and $(45)-$(55), respectively. If the Company were to unlock, as of September 30, 2006 the future periodic amortization of DAC related to the in-force block of business would likely decrease in the U.S. and increase in Japan.

For the Japan individual variable annuity business, favorable experience in the returns of the underlying funds over the past four quarters has resulted in actual account values and EGPs exceeding the projected account value and EGPs in the DAC amortization model, however the EGP’s in the DAC amortization model continue to fall within the Company’s parameters. Continued favorable experience on key assumptions for the Japan variable annuity business, which could include increasing fund return performance, decreasing lapses or decreasing mortality, could result in the DAC amortization model EGPs falling outside of the Company’s parameters, resulting in a necessary unlock, a decrease to DAC amortization and an increase to the DAC asset. If the Company had unlocked as of September 30, 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 increase to net income for Japan variable annuities would be approximately $25-35, after-tax.

The impact on guaranteed minimum death and income benefit liabilities, which use EGPs or components of EGPs in their periodic determination, as a result of the hypothetical unlock scenarios described above as of September 30, 2006, is not likely to be material in the U.S., but would result in a decrease to those liabilities, which would result in an increase to net income of $22-$32, in Japan.

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 September 30, 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 43% and 68%, respectively, before portions of its DAC asset would be unrecoverable.

CONSOLIDATED RESULTS OF OPERATIONS

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.

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.

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 and universal life 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.


	As of and For the Three						As of and For the Nine
	Months Ended						Months Ended
	September 30,						September 30,
Product/Key Indicator Information	2006			2005			2006			2005

U.S. Variable Annuities
Account value, beginning of period	$	106,224		$	99,747		$	105,314		$	99,617
Net flows		(988	)		(348	)		(2,454	)		(1	)
Change in market value and other		3,253			4,193			5,629			3,976

Account value, end of period	$	108,489		$	103,592		$	108,489		$	103,592


Retail Mutual Funds
Assets under management, beginning of period	$	32,611		$	25,958		$	29,063		$	25,240
Net sales		1,195			73			4,112			776
Change in market value and other		914			1,491			1,545			1,506

Assets under management, end of period	$	34,720		$	27,522		$	34,720		$	27,522


Retirement Plans
Account value, beginning of period	$	20,740		$	17,592		$	19,317		$	16,493
Net flows		442			200			1,837			1,226
Change in market value and other		513			673			541			746

Account value, end of period	$	21,695		$	18,465		$	21,695		$	18,465


Individual Life Insurance
Variable universal life account value, end of period	$	6,242		$	5,700		$	6,242		$	5,700
Total life insurance inforce	$	160,010		$	147,278		$	160,010		$	147,278


S&P500 Index
Period end closing value		1,336			1,229			1,336			1,229
Daily average value		1,288			1,224			1,284			1,200


Japan Annuities
Account value, beginning of period	$	28,990		$	19,726		$	26,104		$	14,631
Net flows		877			2,704			3,675			8,815
Change in market value and other		74			869			162			(147	)

Account value, end of period	$	29,941		$	23,299		$	29,941		$	23,299

•

The increase in U.S. variable annuity account values from September 30, 2005 to September 30, 2006 can be attributed to market growth over the past four quarters. Net flows for the U.S. variable annuity business are negative and have decreased from prior year levels resulting from higher surrenders and lower sales due to increased competition.

•

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

•

The increase in Retirement Plan account values from September 30, 2005 to September 30, 2006 can be mainly attributed to positive net flows over the past four quarters and market appreciation.

•

Individual Life account value increased from September 30, 2005 due primarily to premiums and deposits. Life insurance inforce increased from September 30, 2005 due to business growth.

•

Japan annuity account values as of September 30, 2006 continue to grow as a result of positive net flows and fund performance, offset by a decline due to the effects of currency translation. However, 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. The volatile nature in Other is due to 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. 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. Group Benefits does not record interest credited since the interest component of reserve changes are recorded within benefits, claims and claim adjustment expenses.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Net Investment Income	2006		2005		2006		2005

Retail	$	208	$	229	$	639	$	709
Retirement Plans		82		78		242		231
Institutional		256		207		729		581
Individual Life		81		77		240		226
Group Benefits		106		99		310		297
International		32		19		91		49
Other		1,222		1,562		777		2,164

Total net investment income	$	1,987	$	2,271	$	3,028	$	4,257


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Interest Credited on General Account Assets	2006		2005		2006		2005

Retail	$	158	$	177	$	481	$	546
Retirement Plans		52		50		154		146
Institutional		135		99		377		273
Individual Life		59		57		175		167
International		6		3		16		10
Other		1,209		1,526		751		2,216

Total interest credited on general account assets	$	1,619	$	1,912	$	1,954	$	3,358

•		Net investment income and interest credited in Other decreased for the three and nine months ended September 30, 2006 due to a decrease 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 and nine months ended September 30, 2006 due to lower assets under management as a result of surrenders on market value adjusted (“MVA”) fixed annuity products at the end of their guarantee period. Also contributing to the decline in assets under management 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 sales in the Company’s funding agreement backed Investor Notes program.

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.


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
Group Benefits	2006		2005		2006		2005

Total premiums and other considerations	$	1,032	$	950	$	3,092	$	2,846
Fully insured ongoing sales (excluding buyouts)	$	175	$	157	$	750	$	643

•

Earned premiums and other considerations include $0 and $1 and $5 and $26 in buyout premiums for the three and nine months ended September 30, 2006 and 2005, respectively. The increase in premiums and other considerations for Group Benefits in 2006 compared to 2005 was driven by sales growth of 17%.

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						For the Nine Months Ended
	September 30,						September 30,
Retail	2006			2005			2006			2005

General insurance expense ratio (individual annuity)	18.1 bps			16.8 bps			17.1 bps			17.7 bps
DAC amortization ratio (individual annuity)		50.1	%		48.5	%		50.4	%		48.9	%

Individual Life
Death benefits	$	62		$	54		$	194		$	183
Insurance expenses, net of deferrals	$	44		$	43		$	132		$	125

Group Benefits
Total benefits, claims and claim adjustment expenses	$	745		$	688		$	2,252		$	2,106
Loss ratio (excluding buyout premiums)		72.2	%		72.4	%		72.8	%		73.8	%
Insurance expenses, net of deferrals	$	281		$	258		$	819		$	752
Expense ratio, (excluding buyout premiums)		28.2	%		28.0	%		27.5	%		27.4	%

•

Individual annuity’s expense ratio increased for the three months ended September 30, 2006 primarily due to higher technology and service costs. Asset growth for the nine months ended September 30, 2006 decreased individual annuity’s expense ratio to a level lower than prior year periods. Management expects the 2006 full year ratio to be between 17-18 bps.

•

The ratio of individual annuity DAC amortization over income before taxes and DAC amortization, while relatively stable, was influenced by “true-ups” recorded in the respective periods as actual gross profits emerged.

•

Individual Life death benefits increased for the three months ended September 30, 2006 primarily due to unusually favorable mortality experience in the third quarter of 2005, and increased 6% for the nine months ended September 30, 2006 primarily due to a larger insurance inforce.

•

The Group Benefits loss ratio, excluding buyouts, for the three and nine months ended September 30, 2006 was relatively stable. Movements in the loss ratio were caused by period over period minor fluctuations in mortality and morbidity experience.

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 return on assets for the individual annuity business for evaluating profitability. In Group Benefits, after-tax margin is a key indicator of overall profitability.

Three Months Ended

Nine Months Ended

September 30,

Ratios

2006

2005

2006

2005

Retail

Individual annuity return on assets (“ROA”)

58.0 bps

56.7 bps

55.3 bps

52.0 bps

Group Benefits

After-tax margin (excluding buyouts)

7.2

7.0

6.8

•		Individual annuity’s ROA increased for the three and nine months ended September 30, 2006 compared to the prior year periods. In particular, variable annuity fees and the DRD and other tax benefits each increased for the three and nine months ended September 30, 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 nine months ended September 30, 2006 was primarily due to an improvement in the expense ratio excluding the financial institution business. (Financial institution business is experience rated. Under the terms of this business, loss experience will inversely affect the commission expenses incurred.)


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Operating Summary	2006		2005			Change			2006			2005		Change

Fee income	$	1,149	$	1,026			12	%	$	3,423		$	2,936		17	%
Earned premiums		1,129		1,045			8	%		3,483			3,091		13	%
Net investment income
Securities available-for-sale and other		802		771			4	%		2,359			2,233		6	%
Equity securities held for trading [1]		1,185		1,500			(21	%)		669			2,024		(67	%)

Total net investment income		1,987		2,271			(13	%)		3,028			4,257		(29	%)
Net realized capital (losses) gains		11		(26	)	NM				(265	)		57	NM

Total revenues		4,276		4,316			(1	%)		9,669			10,341		(6	%)
Benefits, claims and claim adjustment expenses [1]		2,738		2,926			(6	%)		5,384			6,421		(16	%)
Amortization of deferred policy acquisition costs and present value of future profits		308		321			(4	%)		913			887		3	%
Insurance operating costs and other expenses		703		641			10	%		2,034			1,897		7	%

Total benefits, claims and expenses		3,749		3,888			(4	%)		8,331			9,205		(10	%)

Income before income tax expense		527		428			23	%		1,338			1,136		18	%
Income tax expense		113		95			19	%		294			262		12	%

Net income	$	414	$	333			24	%	$	1,044		$	874		19	%


[1]		Includes investment income and mark-to-market effects of equity securities held for trading 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 and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

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

•		Net income increased primarily due to growth in assets under management resulting from market growth and sales, along with higher earned premiums in Group Benefits.

•		Net realized capital gains occurred in the third quarter of 2006 compared to net realized capital losses in the prior year period due to realized gains from the Japan fixed annuity contract hedges due to movements in interest rates and net realized gains on GMWB derivatives, primarily driven by net changes in policyholder behavior assumptions made in the third quarter, partially offset by losses on non-qualifying derivatives due to rising interest rates in 2006 and other than temporary impairments. Net realized capital losses occurred in the first nine months of 2006 compared to net realized capital gains in the prior year period due to increased other-than-temporary impairments (see the Other-Than-Temporary Impairments discussion within Investment Results for more information on the increase in impairments), realized losses associated with GMWB derivatives, primarily driven by liability modeling refinements and assumption updates reflecting in-force demographics, losses on non-qualifying derivatives and net losses on sales of investments, both due to rising interest rates in 2006.

•		During the first quarter of 2006 and 2005, the Company recorded a $7 after-tax reserve and a $66 after-tax reserve, respectively for regulatory investigations.

•		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 during the three months ended March 31, 2006. This reserve reduction, recorded in insurance operating costs and other expenses, resulted in an after-tax benefit of $34 in the three months ended March 31, 2006.

•		During the second quarter of 2005, the Company recorded an after-tax expense of $24, which was, at the time, an estimate of the termination value of a provision of an agreement with a distribution partner of the Company’s retail mutual funds. The agreement was ultimately terminated in late 2005.

Income Taxes

RETAIL


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Operating Summary	2006			2005			Change			2006			2005			Change

Fee income	$	663		$	594			12	%	$	1,981		$	1,717			15	%
Earned premiums		(23	)		(15	)		(53	%)		(58	)		(35	)		(66	%)
Net investment income		208			229			(9	%)		639			709			(10	%)
Net realized capital gains		1			2			(50	%)		4			8			(50	%)

Total revenues		849			810			(5	%)		2,566			2,399			7	%
Benefits, claims and claim adjustment expenses		197			218			(10	%)		611			689			(11	%)
Insurance operating costs and other expenses		245			199			23	%		729			621			17	%
Amortization of deferred policy acquisition costs and present value of future profits		201			187			7	%		607			546			11	%

Total benefits, claims and expenses		643			604			6	%		1,947			1,856			5	%

Income before income tax expense		206			206			—			619			543			14	%
Income tax expense		22			34			(35	%)		93			96			(3	%)

Net income	$	184		$	172			7	%	$	526		$	447			18	%


Assets Under Management

Individual variable annuity account values										$	108,489		$	103,592			5	%
Individual fixed annuity and other account values											9,888			10,323			(4	%)
Other retail products account values											454			286			59	%

Total account values[1]											118,831			114,201			4	%

Retail mutual fund assets under management											34,720			27,522			26	%
Other mutual fund assets under management											1,314			901			46	%

Total mutual fund assets under management											36,034			28,423			27	%

Total assets under management										$	154,865		$	142,624			9	%


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

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income in the Retail segment for the three and nine months ended September 30, 2006 increased primarily due to certain tax benefits recorded in the three months ended September 30, 2006 and improved fee income for the nine months ended September 30, 2006. Higher fee income was driven by higher assets under management resulting primarily from market growth. A more expanded discussion of earnings can be found below:

•

The increase in fee income in the variable annuity business for the three and nine months ended September 30, 2006 occurred primarily as the result of growth in average account values. The year-over-year increase in average account values can be attributed to market appreciation of $8.2 billion over the past four quarters. Variable annuity had net outflows of $2.5 billion for the nine months ended September 30, 2006 compared to net outflows of $1 for the prior year period. Net outflows from additional surrender activity were due to increased sales competition, particularly from competitors offering variable annuity products with guaranteed living benefits.

•

Mutual fund fee income increased 21% and 25% for the three and nine months ended September 30, 2006, respectively, due to increased assets under management driven by market appreciation of $2.6 billion and net sales of $4.7 billion during the past four quarters. Net sales grew to $4.1 billion for the nine months ended September 30, 2006 compared to $776 for the prior year period. This increase was primarily attributable to focused wholesaling efforts.

•

Despite stable general account investment spread over the past four quarters, net investment income has steadily declined for the three and nine months ended September 30, 2006 due to variable annuity transfers from the fixed account to the separate account combined with surrenders in the fixed MVA contracts. Despite these outflows, a more favorable interest rate environment throughout 2006 has resulted in increased sales and a lower surrender rate resulting in net outflows for the nine months ended September 30, 2006 decreasing $1.1 billion compared to the same prior year period. Benefits, claims and claim adjustment expenses have decreased for the three and nine months ended September 30, 2006 due to a decline in interest credited also due to a decline in fixed annuity account values.

•

Insurance operating costs and other expenses increased for the three and nine months ended September 30, 2006 primarily due to an increase in mutual fund commissions due to significant growth in sales. In addition, variable annuity asset based commissions increased due to 5% growth in assets under management, as well as an increase in the number of contracts reaching anniversaries when trail commission payments begin. During the second quarter of 2005, the Company recorded an after-tax expense of $24, which was, at the time, an estimate of the termination value of a provision of an agreement with a distribution partner of the Company’s retail mutual funds. The agreement was ultimately terminated in late 2005.

•

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

•

The effective tax rate decreased for the three and nine months ended September 30, 2006 compared to the prior period due to an increase in the net foreign tax credit estimate from $2 in 2005 to $12 in 2006 as well as an increase in the DRD. The DRD increased $4 and $23 for the three and nine months ended September 30, 2006 over the respective prior year periods, resulting from true-ups related to prior years’ tax returns. For the three months ended September 30, 2005, the Company’s DRD also included a tax benefit of $4 related to the 2005 year.

RETIREMENT PLANS


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Operating Summary	2006		2005			Change			2006		2005			Change

Fee income	$	48	$	40			20	%	$	139	$	111			25	%
Earned premiums		1		1			—			17		8			113	%
Net investment income		82		78			5	%		242		231			5	%
Net realized capital gains (losses)		—		(1	)		100	%		1		(2	)	NM

Total revenues		131		118			11	%		399		348			15	%
Benefits, claims and claim adjustment expenses		61		57			7	%		189		172			10	%
Insurance operating costs and other expenses		36		32			13	%		102		88			16	%
Amortization of deferred policy acquisition costs		6		5			20	%		22		17			29	%

Total benefits, claims and expenses		103		94			10	%		313		277			13	%

Income before income taxes		28		24			17	%		86		71			21	%
Income tax expense		7		4			75	%		22		17			29	%

Net income	$	21	$	20			5	%	$	64	$	54			19	%


Assets Under Management

Governmental account values									$	10,691	$	10,162			5	%
401(k) account values										11,004		8,303			33	%

Total account values[1]										21,695		18,465			17	%

Governmental mutual fund assets under management [2]										—		147			(100	%)
401(k) mutual fund assets under management										1,036		872			19	%

Total mutual fund assets under management										1,036		1,019			2	%

Total assets under management									$	22,731	$	19,484			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 and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 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.

•

Fee income for 401(k) increased 28%, or $8 and 37%, or $28, for the three and nine months ended September 30, 2006, respectively, due to the growth in average account values. This growth is primarily driven by positive net flows of $2.0 billion over the past four quarters resulting from strong sales and increased ongoing deposits. Total 401(k) deposits increased by 14% and 25% for the three and nine months ended September 30, 2006, respectively. The increase in average account values can also be attributed to market appreciation of $699 over the past four quarters.

•

General account spread remained stable for the three and nine months ended September 30, 2006 compared to the respective prior year periods. Overall, net investment income and the associated interest credited within benefits, claims and claim adjustment expenses each increased as a result of the growth in general account assets under management. Additionally, benefits, claims and claim adjustment expenses increased for the nine months ended September 30, 2006 compared to the respective prior year period due to a large case annuitization in the 401(k) business which also resulted in an increase in premiums of $12 for the nine months ended September 30, 2006.

•

Insurance operating costs and other expenses increased for the three and nine months ended September 30, 2006 primarily driven by the 401(k) business. The additional costs can be attributed to greater assets under management resulting in higher trail commissions and maintenance expenses.

•

Higher amortization of DAC resulted from higher actual gross profits due to positive earnings drivers combined with a higher amortization rate for the nine months ended September 30, 2006 compared to the respective prior year period.

INSTITUTIONAL


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Operating Summary	2006			2005			Change			2006			2005			Change

Fee income	$	32		$	26			23	%	$	87		$	96			(9	%)
Earned premiums		143			126			13	%		502			323			55	%
Net investment income		256			207			24	%		729			581			25	%
Net realized capital losses		(2	)		(1	)		(100	%)		(4	)		(3	)		(33	%)

Total revenues		429			358			20	%		1,314			997			32	%
Benefits, claims and claim adjustment expenses		375			300			25	%		1,137			841			35	%
Insurance operating costs and other expenses		18			15			20	%		53			42			26	%
Amortization of deferred policy acquisition costs		6			9			(33	%)		22			23			(4	%)

Total benefits, claims and expenses		399			324			23	%		1,212			906			34	%

Income before income taxes		30			34			(12	%)		102			91			12	%
Income tax expense		6			10			(40	%)		27			25			8	%

Net income	$	24		$	24			—		$	75		$	66			14	%


Assets Under Management

Institutional Investment Product account values [1]										$	21,010		$	17,174			22	%
Private Placement Life Insurance account values											25,125			23,538			7	%
Mutual fund assets under management [2]											2,204			1,324			66	%

Total assets under management										$	48,339		$	42,036			15	%


[1]		Institutional investment product account values include transfers from Retirement Plans of $413 during the three months ended March 31, 2006 and from Retail of $350 during the three months ended September 30, 2006.

[2]		Mutual fund assets under management include transfers from Retirement Plans of $178 during the three months ended March 31, 2006.

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income was flat for the three months ended and increased for the nine months ended September 30, 2006 compared to the respective prior year periods. The income for the nine months ended September 30, 2006 was primarily driven by earnings in institutional investment products (“IIP”), while private placement life insurance (“PPLI”) net income was relatively flat. A more expanded discussion of earnings growth can be found below.

•

Total revenues increased in IIP as a result of higher assets under management, driven by positive net flows of $2.0 billion during the past four quarters. 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 September 30, 2006 were $1.3 billion.

•

General account spread is the main driver of net income for IIP. Spread income declined for the three months ended September 30, 2006 compared to the respective prior period as a result of investment income. For the three months ended September 30, 2006 and 2005, income related to partnership investments was $2 and $3 after-tax, respectively. An increase in spread income for the nine months ended September 30, 2006 compared to the respective prior period was driven by higher assets under management noted above along with favorable investment results. For the nine months ended September 30, 2006 and 2005, income related to partnership investments was $9 and $4 after-tax, respectively.

•

IIP had less favorable mortality experience on structured settlement and terminal funding contracts for both the three months and nine months ended September 30, 2006 compared to the respective prior period.

•

For the nine months ended September 30, 2006, earned premiums increased as a result of two large terminal funding cases that were sold during the period. This increase in earned premiums was offset by a corresponding increase in benefits, claims and claim adjustment expenses.

INDIVIDUAL LIFE


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Operating Summary	2006			2005			Change			2006			2005			Change

Fee income	$	200		$	207			(3	%)	$	610		$	593			3	%
Earned premiums		(11	)		(8	)		(38	%)		(36	)		(23	)		(57	%)
Net investment income		81			77			5	%		240			226			6	%
Net realized capital gains		1			2			(50	%)		3			3			—

Total revenues		271			278			(3	%)		817			799			2	%
Benefits, claims and claim adjustment expenses		124			112			11	%		375			352			7	%
Insurance operating costs and other expenses		44			43			2	%		132			125			6	%
Amortization of deferred policy acquisition costs and present value of future profits		38			59			(36	%)		110			144			(24	%)

Total benefits, claims and expenses		206			214			(4	%)		617			621			(1	%)

Income before income taxes		65			64			2	%		200			178			12	%
Income tax expense		19			19			—			61			55			11	%

Net income	$	46		$	45			2	%	$	139		$	123			13	%


Account Values

Variable universal life insurance										$	6,242		$	5,700			10	%
Universal life/interest sensitive whole life											3,932			3,599			9	%
Modified guaranteed life and other											703			716			(2	%)

Total account values										$	10,877		$	10,015			9	%

Life Insurance Inforce
Variable universal life insurance										$	73,126		$	70,569			4	%
Universal life/interest sensitive whole life											44,069			40,694			8	%
Modified guaranteed life and other											42,815			36,015			19	%

Total life insurance inforce										$	160,010		$	147,278			9	%

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income increased for the three months ended September 30, 2006 due primarily to growth in life insurance inforce and account values, partially offset by unusually favorable mortality in the third quarter of 2005. Net income increased for the nine months ended September 30, 2006 due primarily to growth in life insurance inforce and account values, and revisions to net DAC amortization of $7 after-tax, partially offset by less favorable mortality experience. The following factors contributed to the earnings results:

•

Cost of insurance charges, the largest component of fee income, increased $7 and $22 for the three and nine months ended September 30, 2006, driven by growth in the variable universal, universal, and interest-sensitive whole life insurance inforce. Variable fee income increased, consistent with the growth in the variable universal life insurance account value. Other fee income, another component of total fee income, decreased $15 and $10 for the three and nine months ended September 30, 2006, due primarily to lower amortization of deferred revenues consistent with the mix of products and the level and mix of product profitability. In total, fee income decreased for the three months ended and increased for the nine months ended September 30, 2006.

•

Amortization of DAC decreased for the three and nine months ended September 30, 2006, which includes $13 of revisions (reflected in the first half of 2006) to estimates made at December 31, 2005 and March 31, 2006. Excluding these revisions, the amortization of DAC decreased $21 for both the three and nine months ended September 30, 2006, consistent with the mix of products and the level and mix of product profitability.

•

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

•

Earned premiums, which include premiums for ceded reinsurance, decreased primarily due to increased ceded reinsurance premiums for the three and nine months ended September 30, 2006.

•

Benefits, claims and claim adjustment expenses increased $12 and $23 for the three and nine months ended September 30, 2006 respectively, consistent with the growth in account values and life insurance inforce, and also reflect favorable mortality experience in the third quarter of 2005, the lowest level of mortality since fourth quarter 2003.

GROUP BENEFITS


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
Operating Summary	2006			2005		Change			2006			2005		Change

Earned premiums and other	$	1,032		$	950		9	%	$	3,092		$	2,846		9	%
Net investment income		106			99		7	%		310			297		4	%
Net realized capital losses		(1	)		—		—			(4	)		—		—

Total revenues		1,137			1,049		8	%		3,398			3,143		8	%
Benefits, claims and claim adjustment expenses		745			688		8	%		2,252			2,106		7	%
Insurance operating costs and other expenses		281			258		9	%		819			752		9	%
Amortization of deferred policy acquisition costs		10			8		25	%		30			22		36	%

Total benefits, claims and expenses		1,036			954		9	%		3,101			2,880		8	%

Income before income taxes		101			95		6	%		297			263		13	%
Income tax expense		27			27		—			81			72		13	%

Net income	$	74		$	68		9	%	$	216		$	191		13	%


Earned premiums and other

Fully insured – ongoing premiums	$	1,022		$	940		9	%	$	3,059		$	2,792		10	%
Buyout premiums		—			1		(100	%)		5			26		(81	%)
Other		10			9		11	%		28			28		—

Total earned premiums and other	$	1,032		$	950		9	%	$	3,092		$	2,846		9	%

Group Benefits has a block of financial institution business that is experience rated. Under the terms of this business, the loss experience will inversely affect the commission expenses incurred.

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income increased for the three and nine months ended September 30, 2006, primarily due to higher earned premiums and a lower expense ratio excluding the financial institution business. The results for the three and nine months ended September 30, 2005 included a $4 after-tax provision for Hurricane Katrina. The following factors contributed to the earnings increase:

•

Earned premiums increased driven by year-to-date sales (excluding buyouts) growth of 17%, particularly in group life insurance.

•

The loss ratio (defined as benefits, claims and claim adjustment expenses as a percentage of premiums and other considerations excluding buyouts) was 72.2% for the three months ended September 30, 2006, down from 72.4% in the prior year period. For the nine months ended September 30, 2006, the loss ratio was 72.8%, down from 73.8% in the prior year period. Excluding financial institutions, the loss ratio was 77.5% for the three months ended September 30, 2006 as compared to 77.1% in the prior year period. For the nine months ended September 30, 2006, the loss ratio excluding financial institutions was 77.8% as compared to 77.7% in the prior year period.

•

The expense ratio was 28.2% for the three months ended September 30, 2006 as compared to 28.0% in the prior year period. For the nine months ended September 30, 2006, the expense ratio was 27.5% compared to 27.4% in the prior year period. Excluding financial institutions, the expense ratio for the three months ended September 30, 2006 was 22.9%, down from 23.8% in the prior year period. For the nine months ended September 30, 2006, the expense ratio excluding financial institutions was 22.6% as compared to 23.9% for the prior year period. The decline in expense ratio excluding financial institutions for both the three and nine month periods ended September 30, 2006 was due to growth in premiums outpacing growth in expenses.

INTERNATIONAL


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Operating Summary	2006			2005			Change			2006			2005			Change

Fee income	$	181		$	129			40	%	$	519		$	329			58	%
Earned premiums		(3	)		—		NM				(6	)		—		NM
Net investment income		32			19			68	%		91			49			86	%
Net realized capital losses		(16	)		(7	)		(129	%)		(46	)		(22	)		(109	%)

Total revenues		194			141			38	%		558			356			57	%
Benefits, claims and claim adjustment expenses		11			12			8	%		35			32			9	%
Insurance operating costs and other expenses		55			43			28	%		149			121			23	%
Amortization of deferred policy acquisition costs		54			42			29	%		151			105			44	%

Total benefits, claims and expenses		120			97			24	%		335			258			30	%

Income before income taxes		74			44			68	%		223			98			128	%
Income tax expense		27			16			69	%		78			35			123	%

Net income	$	47		$	28			68	%	$	145		$	63			130	%


Assets Under Management

Japan variable annuity assets under management										$	28,265		$	21,892			29	%
Japan MVA fixed annuity assets under management											1,676			1,407			19	%

Total assets under management										$	29,941		$	23,299			29	%

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income in International increased for the three and nine months ended September 30, 2006, principally driven by higher fee income in Japan, which was derived from an increase in assets under management. A more expanded discussion of earnings growth can be found below:

•

Fee income increased $52 or 40%, and $190 or 58%, for the three and nine months ended September 30, 2006, respectively. As of September 30, 2006, Japan’s variable annuity assets under management were $28.3 billion, a 29% increase from the prior year period. The increase in assets under management was driven by positive net flows of $5.4 billion and market appreciation of $1.9 billion, partially offset by ($922) of foreign currency exchange over the past four quarters. The amount of variable annuity sales has declined for the three and nine months ended September 30, 2006, by 58% and 44%, respectively, compared to the prior year periods primarily due to increased competition and changes in key distribution relationships.

•

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 three and nine months ended September 30, 2006, surrender fees increased by $2 and $20, respectively, from the prior year periods.

•

The increase in fixed annuity assets under management can be attributed to positive net flows of $305 over the past four quarters.

•

Further contributing to higher net income in the three and nine months ended September 30, 2006 was a cumulative benefit of $2 and $6, respectively, due to a change in the effective tax rate on Japan earnings resulting from a change in management’s intent under APB 23. For a further discussion of this change, see Note 1 of Notes to Condensed Consolidated Financial Statements and Other section of Management’s Discussion and Analysis.

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

•

DAC amortization was higher due to higher actual gross profits consistent with growth in the Japan operation.

•

Insurance operating costs and other expenses increased for the three and nine months ended September 30, 2006 by 28% and 23%, respectively. These increases are due to higher maintenance costs and asset-based commissions resulting from the growth in the Japan operation.

OTHER


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
Operating Summary	2006			2005			Change			2006			2005			Change

Fee income	$	15		$	21			(29	%)	$	59		$	62			(5	%)
Net investment income
Securities available-for-sale and other		37			62			(40	%)		108			140			(23	%)
Equity securities held for trading		1,185			1,500			(21	%)		669			2,024			(67	%)

Total net investment income		1,222			1,562			(22	%)		777			2,164			(64	%)
Net realized capital (losses) gains		28			(21	)	NM				(219	)		73		NM

Total revenues		1,265			1,562			(19	%)		617			2,299			(73	%)
Benefits, claims and claim adjustment expenses		1,225			1,539			(20	%)		785			2,229			(65	%)
Insurance operating costs and other expenses		24			51			(53	%)		50			148			(66	%)
Amortization of deferred policy acquisition costs		(7	)		11		NM				(29	)		30		NM

Total benefits, claims and expenses		1,242			1,601			(22	%)		806			2,407			(67	%)

Loss before income taxes		23			(39	)	NM				(189	)		(108	)		(75	%)
Income tax expense (benefit)		5			(15	)	NM				(68	)		(38	)		(79	%)

Net income (loss)	$	18		$	(24	)	NM			$	(121	)	$	(70	)		(73	%)

Three and nine months ended September 30, 2006 compared to the three and nine months ended September 30, 2005

Net income changed due to the following factors:

•		Net realized capital gains occurred in the third quarter of 2006 compared to net realized capital losses in the prior year period due to realized gains from the Japan fixed annuity contract hedges due to movements in interest rates and net realized gains on GMWB derivatives, primarily driven by net changes in policyholder behavior assumptions made in the third quarter, partially offset by losses on non-qualifying derivatives due to rising interest rates in 2006 and other than temporary impairments. Net realized capital losses occurred in the first nine months of 2006 compared to net realized capital gains in the prior year period due to increased other-than-temporary impairments (see the Other-Than-Temporary Impairments discussion within Investment Results for more information on the increase in impairments), realized losses associated with GMWB derivatives, primarily driven by liability modeling refinements and assumption updates reflecting in-force demographics, losses on non-qualifying derivatives and net losses on sales of investments, both due to rising interest rates in 2006.

•		During the first quarter of 2006 and 2005, the Company recorded a $7 after-tax reserve and a $66 after-tax reserve, respectively for regulatory investigations.

•		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 during the three months ended March 31, 2006. This reserve reduction, recorded in insurance operating costs and other expenses, resulted in an after-tax benefit of $34 in the three months ended March 31, 2006.

•		Also contributing to the insurance operating costs and other expenses decreases for the three and nine months ended September 30, 2006 was a lower level of dividends to leveraged COLI policyholders.

•		During the second quarter of 2006, the Company concluded that it no longer met the indefinite reversal criteria of APB Opinion No. 23 with respect to undistributed earnings associated with Hartford Life K.K. The impact in Other, due to losses on Japan activities reported in Other, was a tax benefit of $2 and $0 for the three and nine months ended September 30, 2006, respectively.

INVESTMENTS

General

The investment portfolios of the Company are managed by Hartford Investment Management Company (“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 47% and 52% of the Company’s consolidated revenues for the three months ended September 30, 2006 and 2005, respectively. For the nine months ended September 30, 2006 and 2005, net investment income and net realized capital gains and losses accounted for approximately 29% and 42%, respectively, of the Company’s consolidated revenues. The decrease in the percentage of consolidated revenues for the three and nine months ended September 30, 2006, as compared to the prior year periods, is primarily due to lower net investment income on equity securities held for trading.

Fluctuations in interest rates affect the Company’s return on, and the fair value of, fixed maturity investments, which comprised approximately 60% and 64% of the fair value of its invested assets as of September 30, 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 September 30, 2006, and December 31, 2005.

Composition of Invested Assets


	September 30, 2006					December 31, 2005
	Amount		Percent			Amount		Percent

Fixed maturities, available-for-sale, at fair value	$	51,909		60.3	%	$	50,812		63.7	%
Equity securities, available-for-sale, at fair value		771		0.9	%		800		1.0	%
Equity securities held for trading, at fair value		27,863		32.4	%		24,034		30.1	%
Policy loans, at outstanding balance		2,057		2.4	%		2,016		2.5	%
Mortgage loans, at amortized cost		2,451		2.9	%		1,513		1.9	%
Limited partnerships, at fair value		679		0.8	%		431		0.6	%
Other investments		241		0.3	%		178		0.2	%

Total investments	$	85,971		100.0	%	$	79,784		100.0	%

Fixed maturity investments increased approximately $1.1 billion, or 2%, since December 31, 2005, primarily due to positive operating cash flows and product sales, partially offset by an increase in interest rates. Equity securities held for trading increased $3.8 billion, or 16%, since December 31, 2005, due to positive cash flows primarily generated from sales and deposits related to variable annuity products sold in Japan as well as an increase in the value of the underlying investment funds supporting the Japanese variable annuity product. Mortgage loans and limited partnerships increased $938, or 62%, and $248, or 58%, respectively, since December 31, 2005, as a result of a decision to increase the Company’s investment in these asset classes primarily due to their attractive returns and diversification opportunities. The majority of the increase in the Company’s limited partnerships was driven by direct investments in hedge funds as well as hedge fund of funds investments. These hedge funds employ various investment strategies in both domestic and international markets.

Investment Results

The following table summarizes the Company’s investment results.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(before-tax)	2006			2005			2006			2005

Net Investment Income
Net investment income – excluding equity securities held for trading and policy loans	$	765		$	735		$	2,253		$	2,125
Equity securities held for trading [1]		1,185			1,500			669			2,024
Policy loan income		37			36			106			108

Total net investment income	$	1,987		$	2,271		$	3,028		$	4,257
Yield on average invested assets [2]		5.8	%		5.8	%		5.7	%		5.7	%

Net Realized Capital Gains (Losses)
Gross gains on sale	$	61		$	89		$	150		$	310
Gross losses on sale		(66	)		(72	)		(207	)		(204	)
Impairments
Credit related		(3	)		(12	)		(3	)		(17	)
Other [3]		(14	)		(4	)		(66	)		(5	)

Total impairments		(17	)		(16	)		(69	)		(22	)
Japanese fixed annuity contract hedges, net [4]		38			(32	)		(20	)		(36	)
Periodic net coupon settlements on credit derivatives/Japan		(12	)		(8	)		(34	)		(21	)
GMWB derivatives, net		9			(1	)		(26	)		7
Other, net [5]		(2	)		14			(59	)		23

Net realized capital gains (losses), before-tax	$	11		$	(26	)	$	(265	)	$	57


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

[2]		Represents annualized net investment income (excluding equity securities held for trading) divided by the monthly weighted average invested assets primarily 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]		Primarily relates to fixed maturity impairments for which the Company was uncertain of its intent to retain the investment for a period of time sufficient to allow for a recovery to amortized cost. These impairments do not relate to security issuers for which the Company has current concerns regarding their ability to pay future interest and principal amounts based upon the securities’ contractual terms.

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

[5]		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 and nine months ended September 30, 2006, net investment income, excluding equity securities held for trading, and policy loans increased $30, or 4%, and $128, or 6%, compared to the prior year periods. The increases in net investment income were primarily due to income earned on a higher average invested assets base partially offset by lower partnership income for the three months ended September 30, 2006. 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. The lower partnership income for the three months ended September 30, 2006, in comparison to the prior year period, was primarily driven by certain of the Company’s partnerships writing down the values of their underlying investments in the current quarter of 2006 while in the prior year period certain partnerships reported higher market values resulting from the liquidation of their underlying investments. Included in these write-downs for the three and nine months ended September 30, 2006, was a loss of $3, before-tax, related to an indirect investment in a hedge fund that realized substantial losses on natural gas investments in September 2006.

Net investment income on equity securities held for trading for the three and nine months ended September 30, 2006, was primarily generated by an increase in the value of the underlying investment funds supporting the Japanese variable annuity product. For the three months ended September 30, 2006, this increase was partially offset by a decline in the value of the Yen in comparison to the U.S. dollar. Net investment income on equity securities held for trading for the three and nine months ended September 30, 2005, was primarily generated by 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 as well as changes in foreign currency exchange rates.

For the three months ended September 30, 2006, the yield on average invested assets remained flat compared to the prior year period. An increase in the yield on fixed maturities due to higher rates on both variable and fixed rate securities was offset by lower partnership income.

During the three months ended September 30, 2006, the significant components of net realized capital gains and losses included other-than-temporary impairments, net gains associated with the Japanese fixed annuity contract hedges and net gains associated with the

GMWB derivatives. During the nine months ended September 30, 2006, the significant components of net realized capital gains and losses included net losses on sales of fixed maturity securities, other-than-temporary impairments, losses associated with the Japanese fixed annuity contract hedges including the periodic net coupon settlements, losses associated with GMWB derivatives and losses in Other, net which primarily relate to changes in market value of non-qualifying derivatives due to changes in interest rates and foreign currency exchange rates. The circumstances giving rise to these components are as follows:

•

The net losses on fixed maturity sales for the three and nine months ended September 30, 2006, were primarily the result of rising interest rates from the date of security purchase and, to a lesser extent, credit spread widening on certain issuers that were sold. For further discussion of gross gains and losses, see below.

•

See the Other-Than-Temporary Impairments section that follows for information on impairment losses.

•

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 gains and 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 gains for the three months ended September 30, 2006, resulted primarily from a decline in Japanese interest rates and the net realized capital losses for the nine months ended September 30, 2006, resulted primarily 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 the three and nine months ended September 30, 2006, is primarily associated with the Japan fixed annuity cross currency swaps and resulted from the interest rate differential between U.S. and Japanese interest rates.

•

The gains for the three months ended September 30, 2006, associated with the GMWB derivatives, were primarily driven by net changes in policyholder behavior assumptions made in the third quarter of 2006. The losses for the nine months ended September 30, 2006, associated with the GMWB derivatives were primarily driven by liability model refinements and assumption updates reflecting in-force demographics.

Gross gains on sales for the three and nine months ended September 30, 2006, were primarily within fixed maturities and were concentrated in U.S. government, corporate and foreign government securities. Certain sales were made to reposition the portfolio to a shorter duration due to the flatness of the yield curve and the lack of market compensation for longer duration assets. Also, certain sales were made as the Company continues to reposition the portfolio to higher quality fixed maturity investments and increase investments in mortgage loans and limited partnerships. The gains on sales were primarily the result of changes in interest rates from the date of security purchase.

Gross losses on sales for the three and nine months ended September 30, 2006, were primarily within fixed maturities and were concentrated in the corporate and commercial mortgage-backed securities (“CMBS”) sectors with no single security sold at a loss in excess of $4 and $5, respectively, and an average loss as a percentage of the fixed maturity’s amortized cost of less than 4% and 3%, respectively, which, under the Company’s impairment policy was deemed to be depressed only to a minor extent.

For the three and nine months ended September 30, 2005, net realized capital losses and gains, respectively, were primarily comprised of net gains on sales of fixed maturity securities, losses associated with the Japanese fixed annuity contract hedges including the periodic net coupon settlements and other-than-temporary impairments.

Gross gains on sales for the three and nine months ended September 30, 2005, were primarily within fixed maturities and included corporate and foreign government securities. In addition, gross gains on sales for the nine months ended September 30, 2005, included gains from sales of CMBS. Corporate securities were sold primarily to reduce the Company’s exposure to certain lower credit quality issuers. The sale proceeds were primarily reinvested into higher credit quality securities. The gains on sales of corporate securities were primarily the result of credit spread tightening since the date of purchase. Foreign securities were sold primarily to reduce the foreign currency exposure in the portfolio due to the expected near term volatility in foreign exchange rates and to capture gains resulting from credit spread tightening since the date of purchase. 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 at the end of 2005, which was subsequently extended, in modified form, through the Terrorism Risk Insurance Act of 2005, through the end of 2007. Gains on these sales were realized as a result of an improved credit environment and interest rate declines from the date of security purchase.

Gross losses on sales for the three and nine months ended September 30, 2005, were primarily within the corporate sector. Gross losses on sales for the nine months ended September 30, 2005, included $27 of losses on sales of securities related to a major automotive manufacturer, that primarily occurred during the second quarter. Sales related to actions taken to reduce issuer exposure in light of a downward adjustment in earnings and cash flow guidance primarily due to sluggish sales, rising employee and retiree benefit costs and an increased debt service interest burden, and to reposition the portfolio into higher quality securities. For the three and nine months ended September 30, 2005, excluding sales related to the automotive manufacturer noted above, there was no single security sold at a loss in excess of $3 and $6, respectively, and the average loss as a percentage of the fixed maturity’s amortized cost was less than 2%,

which under the Company’s impairment policy were deemed to be depressed only to a minor extent.

Other-Than-Temporary Impairments

The following table identifies the Company’s other-than-temporary impairments by type.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(before-tax)	2006		2005		2006		2005

Asset-backed securities (“ABS”)	$	3	$	1	$	3	$	2
CMBS		—		—		1		—
Corporate
Basic industry		4		3		13		5
Capital goods		—		—		6		—
Consumer cyclical		2		—		13		1
Consumer non-cyclical		2		4		9		4
Energy		—		—		5		—
Technology and communications		6		—		13		2
Utilities		—		—		4		—

Total Corporate		14		7		63		12
Equity		—		8		2		8

Total other-than-temporary impairments	$	17	$	16	$	69	$	22

For the three and nine months ended September 30, 2006, other-than-temporary impairments were primarily recorded on corporate fixed maturities and ABS. The other-than-temporary impairments recorded on corporate fixed maturities primarily related to securities that had declined in value and for which the Company was uncertain of its intent to retain the investment for a period of time sufficient to allow recovery to cost or amortized cost. These impairments do not relate to security issuers for which the Company currently has concerns regarding the ability to pay future interest and principal amounts based upon the securities’ contractual terms. Prior to the other-than-temporary impairments, for the three and nine months ended September 30, 2006, these securities had an average market value as a percentage of amortized cost of 85%. The ABS other-than-temporary impairment related to one aircraft lease receivable security and was recorded based upon the requirements of Emerging Issues Task Force Issue No. 99-20, “Recognition of Interest Income and Impairments on Purchased and Retained Beneficial Interests in Securitized Financial Assets” due to a significant and continued decline in market price. However, the Company expects to recover principal and interest substantially greater than what the market price indicates.

During the three and nine months ended September 30, 2005, other-than-temporary impairments were recorded on certain corporate fixed maturities 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. Other-than-temporary impairments recorded on equity securities primarily related to variable rate perpetual preferred securities issued by one financial services company. These securities had sustained a decline in market value for an extended period of time as a result of issuer credit spread widening. Other-than-temporary impairments recorded on ABS primarily related to deterioration of the underlying collateral supporting the securities.

The increase in impairments during the three and nine months ended September 30, 2006, as compared to the respective prior year periods, is primarily due to an increase in interest rates from the date of security purchase as well as the decline in market value of certain issuers that may be adversely impacted by recapitalizations, pushing the Company’s interests lower in the repayment priority (e.g., leveraged buy-outs) or issuers using capital that would not benefit the company’s debt holders’ position (e.g., share repurchase programs). Future other-than-temporary impairment levels will depend primarily on economic fundamentals, political stability, issuer and/or collateral performance and future movements in interest rates. If interest rates increase during the fourth quarter of 2006 or credit spreads widen, other-than-temporary impairments for the full year of 2006 will most likely be higher than the nine months ended September 30, 2006.

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.

Variable Interest Entities

In May 2006, the Company purchased a majority interest in a newly established floating rate bank loan fund (the “Fund”). The Fund was sponsored by HIMCO, who will also serve as the investment manager for this Fund. As of September 30, 2006, total assets in the Fund were approximately $122. The Company’s investment in the Fund as of September 30, 2006, was $70 with the remaining interest owned by a related party.

Accordingly, the assets and liabilities of the Fund are included in the Company’s consolidated financial statements. As of September 30, 2006, the Company recorded in the condensed consolidated balance sheet $122 of primarily fixed maturities (including its own investment in the Fund) and $52 of other liabilities representing affiliates’ investments in the Fund.

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 stockholder’s 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 September 30, 2006, and December 31, 2005.

Fixed Maturities by Type


	September 30, 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	$	6,580	$	49	$	(55	)	$	6,574		12.7	%	$	6,819	$	48	$	(75	)	$	6,792		13.4	%
CMBS		10,563		175		(78	)		10,660		20.5	%		9,289		175		(97	)		9,367		18.4	%
Collateralized mortgage obligations (“CMOs”)		1,004		12		(6	)		1,010		1.9	%		864		3		(5	)		862		1.7	%
Corporate
Basic industry		1,974		62		(19	)		2,017		3.9	%		2,296		87		(36	)		2,347		4.6	%
Capital goods		1,793		91		(14	)		1,870		3.6	%		1,701		91		(18	)		1,774		3.5	%
Consumer cyclical		2,238		70		(32	)		2,276		4.4	%		2,186		71		(37	)		2,220		4.4	%
Consumer non-cyclical		2,311		78		(28	)		2,361		4.5	%		2,294		124		(24	)		2,394		4.7	%
Energy		1,125		67		(9	)		1,183		2.3	%		1,068		104		(7	)		1,165		2.3	%
Financial services		7,358		248		(58	)		7,548		14.4	%		6,768		302		(54	)		7,016		13.8	%
Technology and communications		2,886		152		(33	)		3,005		5.8	%		2,982		193		(32	)		3,143		6.2	%
Transportation		645		19		(8	)		656		1.3	%		638		29		(6	)		661		1.3	%
Utilities		2,897		146		(40	)		3,003		5.8	%		2,804		154		(30	)		2,928		5.7	%
Other		1,274		30		(17	)		1,287		2.5	%		1,156		23		(15	)		1,164		2.3	%
Government/Government agencies
Foreign		467		25		(4	)		488		0.9	%		719		50		(4	)		765		1.5	%
United States		1,006		11		(6	)		1,011		2.0	%		630		24		(5	)		649		1.3	%
MBS		2,004		4		(39	)		1,969		3.8	%		2,794		6		(43	)		2,757		5.4	%
Municipal
Taxable		1,055		26		(14	)		1,067		2.1	%		948		47		(4	)		991		2.0	%
Tax-exempt		2,317		160		(1	)		2,476		4.8	%		2,308		163		(5	)		2,466		4.9	%
Redeemable preferred stock		15		1		��			16		—			17		—		—			17		—
Short-term		1,432		—		—			1,432		2.8	%		1,334		—		—			1,334		2.6	%

Total fixed maturities	$	50,944	$	1,426	$	(461	)	$	51,909		100.0	%	$	49,615	$	1,694	$	(497	)	$	50,812		100.0	%

The Company’s fixed maturity portfolio gross unrealized gains and losses as of September 30, 2006, in comparison to December 31, 2005, were primarily impacted by changes in interest rates, asset sales and other-than-temporary impairments. The Company’s fixed maturity gross unrealized gains decreased $268 from December 31, 2005 to September 30, 2006, primarily due to an increase in interest rates. The Company’s fixed maturity gross unrealized losses decreased $36 from December 31, 2005 to September 30, 2006, primarily due to other-than-temporary impairments offset in part by an increase in interest rates. Gross unrealized gains and losses as of September 30, 2006, were also reduced by securities sold in a gain or loss position, respectively.

The sectors with the most significant concentration of unrealized losses were CMBS and corporate fixed maturities most significantly within the financial services sector. Also, ABS supported by aircraft lease receivables, although improving, continues to be a sector within the Company’s portfolios that contains the most significant concentration of credit risk. The Company’s current view of risk factors relative to these fixed maturity types is as follows:

CMBS— As of September 30, 2006, the Company held approximately 670 different securities that were in an unrealized loss position. The unrealized loss 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 September 30, 2006. Additional changes in fair value of these securities are primarily dependent on future changes in interest rates.

Financial services— As of September 30, 2006, the Company held approximately 330 different securities in the financial services sector that were in an unrealized loss position. Substantially all of these securities are investment grade securities priced at, or greater than, 90% of amortized cost as of September 30, 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.

ABS— As of September 30, 2006, $33 of the Company’s total unrealized losses in asset backed securities is 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.

For further discussion of risk factors associated with securities with significant 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 CMBS and MBS. During the nine months ended September 30, 2006, the Company increased its allocation to CMBS due to the securities’ attractive spread levels and underlying asset diversification and quality. The decrease in MBS, as of September 30, 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 Consolidated Fixed Maturities by Type table above.

As of September 30, 2006, 28% of the fixed maturities were invested in private placement securities, including 19% 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 ratings agencies.

At the September 2006 Federal Open Market Committee (“FOMC”) meeting, the Federal Reserve maintained the target federal funds rate at 5.25%, a 100 basis point increase from year-end 2005 levels. Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year although readings on core inflation have been elevated in recent months. While the Federal Reserve continues to express concern over inflation, the chairman has indicated that inflation pressures seem likely to moderate over time, noting that energy prices have fallen and the lagged effects of monetary policy and other factors are restraining aggregate demand. The extent and timing of future rate increases or decreases will depend on forthcoming economic data related to inflation and economic growth. The risk of inflation could increase if energy and commodity prices 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

The Company has a disciplined approach to managing risks associated with its capital markets and asset/liability management activities. Investment portfolio management is organized to focus investment management expertise on the specific classes of investments, while asset/liability management is the responsibility of a dedicated risk management unit supporting the Company’s operations. Derivative instruments are utilized in compliance with established Company policy and regulatory requirements and are monitored internally and reviewed by senior management.

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, equity market, price or foreign currency rate risk or 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.)

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.)

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 to moderate 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 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 in the 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 that the Company expects to use to combat competitive sales pressure. 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, absent an unlocking event, 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 $166, as of September 30, 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, Hartford Life 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 Company 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. Under certain of these reinsurance agreements, the reinsurers exposure is subject to an annual cap.

The Company’s total gross exposure (i.e. before reinsurance) to these guaranteed death benefits as of September 30, 2006 is $5.6 billion. Due to the fact that 82% of this amount is reinsured, the Company’s net exposure is $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 $73 as of September 30, 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 account value at death or 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 or liquidity 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.

Effective April 1, 2006, the Company entered into an indemnity reinsurance agreement with an unrelated party. Under this agreement, the reinsurer will reimburse the Company for death benefit claims, up to an annual cap, incurred for certain death benefit guarantees associated with an in-force block of variable annuity products offered in Japan with an account value of $2.5 billion as of September 30, 2006.

The Company’s net amount at risk related to the guaranteed death and income benefits offered in Japan, before and after reinsurance, was $113 and $53, respectively, as of September 30, 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.

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. Substantially all of the Company’s reinsurance capacity was utilized as of the third quarter of 2003. The remaining capacity was exhausted during the first quarter of 2004. Substantially all U.S. GMWB riders sold since July 2003, 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, and swaps 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 for the three and nine months ended September 30, 2006 was a $9 gain and a $26 loss, before deferred policy acquisition costs and tax effects (included in these amounts were liability model refinements and changes in policyholder behavior assumptions made by the Company during the three months and nine months ended September 30, 2006, of a net $14 and ($4), respectively). For the three and nine months ended September 30, 2005, the gain (loss) was $(1) and $7, respectively, before deferred policy acquisition costs and tax effects. As of September 30, 2006, the notional and fair value related to the embedded derivatives, the hedging strategy and reinsurance was $51.1 billion and $331, 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 September 30, 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 $3 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 (“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.

CAPITAL RESOURCES AND LIQUIDITY

Capital resources and liquidity represent the overall financial strength of the Company and its ability to generate strong cash flows from each of the business segments.

Liquidity Requirements

The liquidity requirements of Hartford Life have been and will continue to be met by funds from operations as well as contributions from The Hartford. 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-month period ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. 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 $202 and $157 for the nine months ended September 30, 2006 and 2005, respectively. The statutory net gain was $308 and $403 for the three months ended September 30, 2006 and 2005, respectively and $834 and $668 for the nine months ended

September 30, 2006 and 2005, respectively. U.S. statutory capital and surplus as of September 30, 2006 and December 31, 2005 was $4.6 billion and $4.3 billion, respectively.

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 principal sources of operating funds are premiums and investment income, while investing cash flows originate from maturities and sales of invested assets. 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.)

Debt

On July 14, 2006, the Company retired its $200, 7.625% junior subordinated debentures underlying the trust preferred securities due 2050 issued by Hartford Life Capital II at par. The retirement was funded by a $200 capital contribution.

On October 10, 2006, The Hartford successfully completed offers to exchange existing senior unsecured notes comprising the $250 of 7.65% notes due 2027 and the $400 of 7.375% notes due 2031 issued by Hartford Life (‘‘HLI notes’’) for up to $650 in new senior unsecured notes of The Hartford and a cash payment, in order to consolidate debt at The Hartford holding company. The Company will not pay any cash as part of the transaction. The existing notes that are exchanged will be effectively extinguished for Hartford Life. On October 10, 2006, the exchange closed and $101 of the 7.65% notes due 2027 and $308 of the 7.375% notes due 2031 were extinguished. The Company expects to record a capital contribution from The Hartford for the full fair value of the extinguished notes and a loss for the fair value in excess of the recorded value, estimated to be $91 before tax. As a result, the transaction will increase the total equity of Hartford Life by the fair value of the extinguished notes less the after-tax loss on extinguishment.

Consumer Notes

Sources of Capital

Revolving Credit Facilities

As of September 30, 2006, the Company’s Japanese operation has a ¥5 billion, 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.

On May 9, 2006, Standard & Poor’s raised its long-term and short-term counterparty credit ratings on Hartford Life Inc. to A/A-1 from A-/A-2. In addition, Standard & Poor’s affirmed its ‘AA-’ counterparty credit and financial strength ratings on the insurance operating

companies. The outlook is stable.

On September 27, 2006, Moody’s Investors Service upgraded the senior debt ratings of Hartford Life, Inc. from “A3” to “A2” and the commercial paper ratings from “P-2” to “P-1”. In addition, Moody’s Investor Services affirmed its “Aa3” insurance financial strength ratings on the insurance operating companies. The outlook is stable.

The following table summarizes Hartford Life’s significant member companies’ financial ratings from the major independent rating organizations as of October 24, 2006,

Standard &

A.M. Best

Fitch

Poor’s

Moody’s

Insurance Ratings

Hartford Life Insurance Company

A+

AA-

Aa3

Hartford Life and Accident Insurance Company

A+

AA-

Aa3

Hartford Life Group Insurance Company

A+

—

Hartford Life and Annuity Insurance Company

A+

AA-

Aa3

Hartford Life Insurance KK (Japan)

—

AA-

—

Hartford Life Limited (Ireland)

—

AA-

—

Other Ratings

Hartford Life, Inc.

Senior debt

Commercial paper

AMB-1

A-1

-1

Hartford Life Insurance Company:

Short Term Rating

—

A-1+

-1

These ratings are not a recommendation to buy or hold any of the Company’s securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

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. U.S. statutory capital and surplus as of September 30, 2006 was $4.6 billion.

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.

Legislative Initiatives

Legislation introduced in Congress would provide for new retirement and savings vehicles designed to simplify retirement plan administration and expand individual participation in retirement savings plans. If enacted, these proposals could have a material effect on sales of the Company’s life insurance and investment products. Prospects for enactment of this legislation in 2006 are uncertain.

On May 17, 2006, the President signed into law the Tax Increase Prevention and Reconciliation Act of 2005, which is not expected to be material to the Company. In addition, other tax proposals and regulatory initiatives which have been or are being considered by Congress could have a material effect on the insurance business. These proposals and initiatives include changes pertaining to the tax treatment of insurance companies and life insurance products and annuities, repeal or reform of the estate tax and comprehensive federal tax reform. The nature and timing of any Congressional action with respect to these efforts is unclear.

On August 17, 2006, the President signed into law the Pension Protection Act of 2006, which, among other items, addressed age discrimination in defined benefit pension plans and revised pension plan funding requirements. The Act is not expected to materially affect The Hartford’s retirement plans.

ACCOUNTING STANDARDS

For a discussion of accounting standards, see Note 2 of Notes to Consolidated Financial Statements included in the Company’s 2005 Form 10-K and 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 September 30, 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 third 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

subsidiaries are named in the group benefits complaint. 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. On October 3, 2006, the court denied in part the defendants’ motions to dismiss the two consolidated amended complaints but found the complaints deficient in other respects and ordered the plaintiffs to file supplemental pleadings. The plaintiffs’ motions for class certification are pending. In addition, Hartford Life subsidiaries were joined as defendants 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.

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 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 claims under our insurance policies than we have anticipated. Private sector catastrophe reinsurance is extremely limited and generally unavailable for terrorism losses caused by attacks with nuclear, biological, chemical or radiological weapons. Reinsurance coverage from the federal government under the Terrorism Risk Insurance Act of 2002, as extended through 2007, is also limited. Accordingly, the effects of a terrorist attack in the geographic areas we serve may result in claims and related losses for which we do not have adequate reinsurance. This would likely cause us to increase our reserves, adversely affect our earnings during the period or periods affected and, if significant enough, could adversely affect our liquidity and financial condition. 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 as well as those in our separate accounts. The continued threat of terrorism also could result in increased reinsurance prices and potentially cause us to retain more risk than we otherwise would retain if we were able to obtain reinsurance at lower prices. 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 may incur losses due to our reinsurers being unwilling or unable to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance may not be sufficient to protect us against losses.

As an insurer, we frequently seek to reduce the losses that may arise from catastrophes, or other events that can cause unfavorable results of operations, through reinsurance. Under these reinsurance arrangements, other insurers assume a portion of our losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, ceded reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. Although we evaluate periodically the financial condition of our reinsurers to minimize our exposure to significant losses from reinsurer insolvencies, our reinsurers may become financially unsound or choose to dispute their contractual obligations by the time their financial obligations become due. The inability or unwillingness of any reinsurer to meet its financial obligations to us could negatively affect our consolidated operating results. In addition, market conditions beyond our control determine the availability and cost of the reinsurance we are able to purchase. Recently, the price of reinsurance has increased significantly, and may continue to increase. No assurances can be made that reinsurance will remain continuously available to us to the same extent and on the same terms and rates as are currently available. If we were unable to maintain our current level of reinsurance or purchase new reinsurance protection in amounts that we consider sufficient and at prices that we consider acceptable, we would have

to either accept an increase in our net liability exposure, reduce the amount of business we write, or develop other alternatives to reinsurance.

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 or derivative counterparties 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. Pursuant to settlement agreements reached with regulators, several insurance companies have agreed to restrictions on the payment of contingent compensation relating to the placement of excess casualty insurance policies. These insurers have agreed that the restrictions may be extended in time, and to other property and casualty lines, if insurers in a given line or segment, that together represent more than 65% of the market share in the insurance line (based upon national gross written premiums) do not pay contingent compensation. These insurers have also agreed to support legislation and regulations to abolish contingent compensation and to require greater disclosure of 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 business, results of operations, financial condition 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 New York Stock Exchange, 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.

Limits on the ability of our insurance subsidiaries to pay dividends to us may adversely affect our liquidity.

Hartford Life, Inc. is a holding company with no significant operations. Our principal asset is the stock of our insurance subsidiaries. State insurance regulatory authorities limit the payment of dividends by insurance subsidiaries. In addition, competitive pressures generally require certain of our insurance subsidiaries to maintain financial strength ratings. These restrictions and other regulatory requirements affect the ability of our insurance subsidiaries to make dividend payments. Limits on the ability of the insurance subsidiaries to pay dividends could adversely affect our liquidity, including our ability to pay dividends to shareholders and service our debt.

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.

We are particularly vulnerable to losses from the incidence and severity of catastrophes, both natural and man-made, the occurrence of which may have a material adverse effect on our financial condition, consolidated results of operations or cash flows in a particular quarterly or annual period.

Our life insurance operations are exposed to risk of loss from catastrophes. For example, natural or man-made disasters or a disease pandemic such as could arise from the avian flu, could significantly increase our mortality and morbidity experience. Policyholders may be unable to meet their obligations to pay premiums on our insurance policies or make deposits on our investment products.

Our liquidity could be constrained by a catastrophe, or multiple catastrophes, which result in extraordinary losses or a downgrade of our debt or financial strength ratings. In addition, in part because accounting rules do not permit insurers to reserve for such catastrophic events until they occur, claims from catastrophic events could have a material adverse effect on our financial condition, consolidated results of operations or cash flows in a particular quarterly or annual period.

Potential changes in Federal or State tax laws could adversely affect our business, consolidated operating results or financial condition.

Many of the products that the Company sells currently benefit from one or more forms of tax-favored status under current federal and state income tax regimes. For example, the Company sells life insurance policies which benefit from the deferral or elimination of taxation on earnings accrued under the policy, as well as permanent exclusion of certain death benefits that may be paid to policyholders’ beneficiaries. We also sell annuity contracts which allow the policyholders to defer the recognition of taxable income earned within the contract. Other products that the Company sells also enjoy similar, as well as other, types of tax advantages. The Company also benefits from certain tax benefits, including but not limited to, tax-exempt bond interest, dividends-received deductions, tax credits (such as foreign tax credits), and insurance reserve deductions.

There is risk that federal and/or state tax legislation could be enacted that would lessen or eliminate some or all of the tax advantages currently benefits the Company or its policyholders. This could occur in the context of deficit reduction or several types of fundamental tax reform. The effects of any such changes could result in materially lower product sales, lapses of policies currently held, and/or materially higher corporate taxes that would be incurred by the Company.

Item 6. EXHIBITS

See Exhibits Index on page 59.

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

October 26, 2006

HARTFORD LIFE, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

EXHIBITS INDEX

Exhibit #

	10.01		First Amendment, dated September 7, 2006, among the Company, Hartford Life, Inc., the lenders named therein, and BANK OF AMERICA, N.A., as administrative agent for the lenders, to the Five-Year Competitive Advance and Revolving Credit Facility Agreement dated as of September 7, 2005, among the Company, Hartford Life, Inc. and a syndicate of financial institutions, including Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A. and Citibank, N.A., as syndication agents, and Wachovia Bank, N.A., as Documentation Agent (incorporated herein by reference to Exhibit 10.08 of the Company’s Current Report on Form 8-K filed September 12, 2006).

	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 Glenn D. Lammey 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 Glenn D. Lammey 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 Q3 Quarterly report

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