Exhibit 99.1
INVESTOR FINANCIAL SUPPLEMENT
DECEMBER 31, 2008
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Address:
One Hartford Plaza
Hartford, CT 06155
One Hartford Plaza
Hartford, CT 06155
Internet address:
http://www.thehartford.com
http://www.thehartford.com
Contacts:
Rick Costello
Senior Vice President
Investor Relations
Phone (860) 547-8480
Senior Vice President
Investor Relations
Phone (860) 547-8480
JR (John) Reilly
Vice President
Investor Relations
Phone (860) 547-9140
Vice President
Investor Relations
Phone (860) 547-9140
Margaret Mann
Program Assistant
Investor Relations
Phone (860) 547-3800
Program Assistant
Investor Relations
Phone (860) 547-3800
As of January 30, 2009
A.M. Best | Fitch | Standard & Poor’s | Moody’s | |||||
Insurance Financial Strength Ratings: | ||||||||
Hartford Fire Insurance Company | A+ | AA- | AA- | Aa3 | ||||
Hartford Life Insurance Company | A+ | AA- | AA- | Aa3 | ||||
Hartford Life and Accident Insurance Company | A+ | AA- | AA- | Aa3 | ||||
Hartford Life and Annuity Insurance Company | A+ | AA- | AA- | Aa3 | ||||
Hartford Life Insurance KK (Japan) | — | — | AA- | — | ||||
Hartford Life Limited (Ireland) | — | — | AA- | — | ||||
Other Ratings: | ||||||||
The Hartford Financial Services Group, Inc.: | ||||||||
Senior debt | a- | A- | A | A3 | ||||
Commercial paper | AMB-1 | F1 | A-1 | P-2 | ||||
Junior subordinated debentures | bbb | BBB+ | BBB+ | Baa1 | ||||
Hartford Life, Inc.: | ||||||||
Senior debt | a- | A- | A | A3 | ||||
Hartford Life Insurance Company: | ||||||||
Short term rating | — | — | A-1+ | P-1 | ||||
Consumer notes | a+ | A+ | AA- | A1 |
TRANSFER AGENT
The Bank of New York Mellon
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
1 (877) 272-7740
The Bank of New York Mellon
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
1 (877) 272-7740
COMMON STOCK
Common stock of The Hartford Financial Services Group, Inc. is traded on the New York Stock Exchange under the symbol “HIG”.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
Basis of Presentation | i, ii, iii | |||||
CONSOLIDATED | Consolidated Financial Results | C-1 | ||||
Operating Results by Segment | C-2 | |||||
Analysis of Operating Results by Segment | C-2 | a | ||||
Consolidating Statements of Operations | ||||||
Three Months Ended December 31, 2007 and 2008 | C-3 | |||||
Year Ended December 31, 2007 and 2008 | C-4 | |||||
Consolidating Balance Sheets | ||||||
As of December 31, 2007 and December 31, 2008 | C-5 | |||||
Capital Structure | C-6 | |||||
Accumulated Other Comprehensive Loss | C-7 | |||||
Computation of Basic and Diluted Earnings (Losses) Per Share | C-8 | |||||
Analysis of Net Realized Capital Losses | ||||||
Three Months Ended December 31, 2007 and 2008 After Tax and DAC | C-9 | |||||
Year Ended December 31, 2007 and 2008 After Tax and DAC | C-10 | |||||
Computation of Return-on-Equity Measures | C-11 | |||||
LIFE | Financial Highlights | L-1 | ||||
Financial Highlights Excluding Impacts of the Unlock | L-1a | |||||
Operating Results | L-2 | |||||
Total Assets Under Management | L-3 | |||||
Consolidated Balance Sheets | L-4 | |||||
Deferred Policy Acquisition Costs and Present Value of Future Profits | L-5 | |||||
Supplemental Data — Annuity Death and Income Benefits | L-6 | |||||
Reinsurance Recoverable Analysis | ||||||
As of December 31, 2008 | L-7 | |||||
Statutory Surplus to GAAP Stockholders’ Equity Reconciliation | L-8 | |||||
Retail Products Group | ||||||
Income Statements | ||||||
Individual Annuity | L-9 | |||||
Other | L-10 | |||||
Supplemental Data | ||||||
Deposits | L-11 | |||||
Assets Under Management | L-12 | |||||
Individual Annuity — Account Value Rollforward | L-13 | |||||
Other Retail — Asset Rollforward | L-14 | |||||
Individual Life | ||||||
Income Statements | L-15 | |||||
Supplemental Data | L-16 | |||||
Account Value Rollforward | L-17 | |||||
Retirement Plans | ||||||
Income Statements | L-18 | |||||
Supplemental Data | ||||||
Deposits | L-19 | |||||
Assets Under Management and Administration | L-20 | |||||
Account Value and Asset Rollforward | L-21 | |||||
Group Benefits | ||||||
Income Statements | L-22 | |||||
Supplemental Data | L-23 | |||||
International | ||||||
Highlights | L-24 | |||||
Japan | ||||||
Income Statements | L-25 | |||||
Supplemental Data — Account Value Rollforward in Dollars | L-26 | |||||
Supplemental Data — Account Value Rollforward in Yen | L-27 | |||||
Institutional Solutions Group | ||||||
Income Statements | L-28 | |||||
Supplemental Data | ||||||
Assets Under Management | L-29 | |||||
Deposits | L-30 | |||||
Account Value and Asset Rollforward | L-31 | |||||
PROPERTY & CASUALTY | Financial Highlights | PC-1 | ||||
Operating Results | PC-2 | |||||
Ongoing Operations Operating Results | PC-3 | |||||
Ongoing Operations Consolidating Underwriting Results | ||||||
Three Months Ended December 31, 2008 | PC-4 | |||||
Year Ended December 31, 2008 | PC-5 | |||||
Ongoing Operations Underwriting Results | PC-6 | |||||
Personal Lines Underwriting Results | PC-7 | |||||
Personal Lines Written and Earned Premiums | PC-8 | |||||
Small Commercial Underwriting Results | PC-9 | |||||
Middle Market Underwriting Results | PC-10 | |||||
Specialty Commercial Underwriting Results | PC-11 | |||||
Specialty Commercial Written and Earned Premiums | PC-12 | |||||
Other Operations Operating Results | PC-13 | |||||
Other Operations Losses and Loss Adjustment Expenses | PC-14 | |||||
Paid and Incurred Loss and Loss Adjustment Expense Development — A&E | PC-15 | |||||
Unpaid Loss and Loss Adjustment Expense Reserve Rollforward | ||||||
Three Months Ended December 31, 2008 | PC-16 | |||||
Year Ended December 31, 2008 | PC-17 | |||||
Reinsurance Recoverable Analysis | PC-18 | |||||
Consolidated Income Statements | PC-19 | |||||
Consolidated Balance Sheets | PC-20 | |||||
Statutory Surplus to GAAP Stockholders’ Equity Reconciliation | PC-21 | |||||
INVESTMENTS | Investment Earnings Before-tax | |||||
Consolidated | I-1 | |||||
Life | I-2 | |||||
Property & Casualty | I-3 | |||||
Corporate | I-4 | |||||
Net Realized Capital Gains (Losses), After-tax/DAC | ||||||
Three Months Ended December 31, 2008 and 2007 | I-5 | |||||
Year Ended December 31, 2008 and 2007 | I-6 | |||||
Composition of Invested Assets | ||||||
Consolidated | I-7 | |||||
Life | I-8 | |||||
Property & Casualty | I-9 | |||||
Unrealized Loss Aging | ||||||
Consolidated | I-10 | |||||
Life | I-11 | |||||
Property & Casualty | I-12 | |||||
Invested Asset Exposures | ||||||
As of December 31, 2008 | I-13 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
• | All amounts are in millions, except for per share and ratio information unless otherwise stated. | |
• | Life is organized into four groups which are comprised of six reporting segments: The Retail Products Group (“Retail”) and Individual Life segments make up the Individual Markets Group. The Retirement Plans and Group Benefits segments make up the Employer Markets Group. The Institutional Solutions Group (“Institutional”) and International segments each make up their own group. Life also includes in an Other category its leveraged PPLI product line of business; corporate items not directly allocated to any of its reportable operating segments; the mark-to-market adjustment for the equity securities held for trading reported in net investment income and the related change in interest credited reported as a component of benefits, losses and loss adjustment expenses because these items are not considered by Life’s chief operating decision maker in evaluating the International results of operations; and inter-segment eliminations. | |
• | Property & Casualty includes Ongoing Operations and Other Operations. Ongoing Operations includes the underwriting results of Personal Lines, Small Commercial, Middle Market and Specialty Commercial segments. Other Operations includes the underwriting results of certain property and casualty insurance operations that have discontinued writing new business and substantially all of the Company’s asbestos and environmental exposures. The profitability of the Personal Lines, Small Commercial, Middle Market and Specialty Commercial segments are evaluated primarily based on underwriting results. The Company allocates income and expense items not directly attributed to the underwriting segments, such as net investment income, net realized capital gains and losses, other expenses and income taxes, to Ongoing Operations and Other Operations, respectively. The profitability of Ongoing Operations and the Other Operations segment is evaluated based on net income. | |
• | Corporate primarily includes the Company’s debt financing and related interest expense, as well as other capital raising and purchase accounting adjustment activities. | |
• | Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in The Hartford’s business. These measures include sales, deposits, net flows, account value, insurance in-force and premium retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. | |
• | The Hartford, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs, as well as other underwriting expenses) to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums. | |
• | The Hartford, along with others in the life insurance industry, uses underwriting ratios as measures of the Group Benefits segment’s performance. The loss ratio is the ratio of total benefits, losses and loss adjustment expenses, excluding buyouts, to total premiums and other considerations excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses to total premiums and other considerations excluding buyout premiums. | |
• | Accumulated other comprehensive income (“AOCI”) represents net of tax unrealized gain (loss) on available-for-sale securities; net gain (loss) on cash-flow hedging instruments; foreign currency translation adjustments; and pension and other postretirement adjustments. | |
• | Assets under management is a measure used by the Company because a significant portion of the Company’s revenues are based upon asset values. These revenues increase or decrease with a rise or fall in the amount of assets under management whether caused by changes in the market or through net flow. | |
• | Assets under administration represents the client asset base of the Company’s recordkeeping business for which revenues are predominately based on the number of plan participants. Unlike assets under management, increases or decreases in assets under administration do not have a direct corresponding increase or decrease to the Company’s revenues. | |
• | Annualized investment yield, before- or after-tax, is calculated by dividing before- or after-tax, respectively, annualized net investment income (excluding net realized capital gains (losses) and change in fair value of trading securities) by average invested assets at cost (fixed maturities at amortized cost, excluding trading securities). | |
• | Certain reclassifications have been made to the prior periods to conform to the December 31, 2008 presentation. | |
• | NM — Not meaningful means increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa. |
i
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
• | The Hartford uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company’s operating performance for the periods presented herein. Because The Hartford’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford’s non-GAAP and other financial measures to those of other companies. | |
• | The Hartford uses the non-GAAP financial measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that the measure core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by the net effect of certain realized capital gains and losses. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax and the effects of deferred policy acquisition costs (“DAC”)) that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives and net periodic settlements on the Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Core earnings is also used by management to assess our operating performance and is one of the measures considered in determining incentive compensation for our managers. Net income is the most directly comparable GAAP measure. Core earnings should not be considered as a substitute for net income and does not reflect the overall profitability of our business. Therefore, The Hartford believes that it is useful for investors to evaluate both net income and core earnings when reviewing the Company’s performance. A reconciliation of net income to core earnings for the periods presented herein is set forth on page C-2. | |
• | Core earnings per share is calculated based on the non-GAAP financial measure core earnings. The Hartford believes that the measure core earnings per share provides investors with a valuable measure of the Company’s operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of our business. Therefore, the Hartford believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance. A reconciliation of net income per share to core earnings per share for the periods presented herein is set forth on page C-8. | |
• | Written premiums is a statutory accounting financial measure used by The Hartford as an important indicator of the operating performance of the Company’s property and casualty operations. Because written premiums represents the amount of premium charged for policies issued, net of reinsurance, during a fiscal period, The Hartford believes it is useful to investors because it reflects current trends in The Hartford’s sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves. A reconciliation of written premiums to earned premiums for the periods presented herein is set forth at page PC-2. | |
• | The Hartford’s management evaluates profitability of the Personal Lines, Small Commercial, Middle Market and Specialty Commercial underwriting segments primarily on the basis of underwriting results. Underwriting results is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income is the most directly comparable GAAP measure. Underwriting results are influenced significantly by earned premium growth and the adequacy of The Hartford’s pricing. Underwriting profitability over time is also greatly influenced by The Hartford’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. The Hartford believes that underwriting results provides investors with a valuable measure of before-tax profitability derived from underwriting activities, which are managed separately from the Company’s investing activities. Underwriting results is also presented for Ongoing Operations, Other Operations and total Property & Casualty. A reconciliation of underwriting results to net income for total Property & Casualty, Ongoing Operations and Other Operations is set forth on pages PC-2, PC-3 and PC-13, respectively. | |
• | A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Hartford believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings. | |
• | Underwriting results before catastrophes and prior year development is a non-GAAP financial measure because it excludes the effects of catastrophes, prior year development and the reduction in earned premiums relating to retrospectively rated policies. The Company believes that this measure is useful to investors as an additional measure of Property & Casualty’s current operations, because it excludes the effect of items relating to prior periods. Net income is the most directly comparable GAAP measure. A reconciliation of the adjusted underwriting results to underwriting results and net income for the periods presented herein are set forth on page C-2a. |
ii
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES (CONTINUED)
• | Book value per share excluding accumulated other comprehensive income (“AOCI”) is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) stockholders’ equity excluding AOCI, net of tax, by (b) common shares outstanding plus assumed conversion of preferred shares to common. The Hartford provides book value per share excluding AOCI to enable investors to analyze the amount of the Company’s net worth that is primarily attributable to the Company’s business operations. The Hartford believes book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per share is the most directly comparable GAAP measure. A reconciliation of book value per share to book value per share excluding AOCI for the periods presented herein is set forth at page C-1. | |
• | The Hartford provides different measures of the return on equity (“ROE”) of the Company. ROE (core earnings last twelve months to equity excluding AOCI), is calculated based on non-GAAP financial measures. ROE (core earnings last twelve months to equity excluding AOCI) is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average stockholders’ equity excluding AOCI. The Hartford provides to investors return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above. The Hartford excludes AOCI in the calculation of these return-on-equity measures to provide investors with a measure of how effectively the Company is investing the portion of the Company’s net worth that is primarily attributable to the Company’s business operations. ROE (net income last twelve months to equity including AOCI) is the most directly comparable GAAP measure. A reconciliation of the non-GAAP return-on-equity measures for the periods presented herein to ROE (net income last twelve months to equity including AOCI) is set forth at page C-11. |
iii
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
CONSOLIDATED FINANCIAL RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
HIGHLIGHTS | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 595 | $ | 145 | $ | 543 | $ | (2,631 | ) | $ | (806 | ) | NM | 69 | % | $ | 2,949 | $ | (2,749 | ) | NM | |||||||||||||||||||
Core earnings (losses) | $ | 840 | $ | 792 | $ | 696 | $ | (422 | ) | $ | (208 | ) | NM | 51 | % | $ | 3,507 | $ | 858 | (76 | %) | |||||||||||||||||||
Total revenues [1] | $ | 5,674 | $ | 1,544 | $ | 7,503 | $ | (393 | ) | $ | 565 | (90 | %) | NM | $ | 25,916 | $ | 9,219 | (64 | %) | ||||||||||||||||||||
Total assets | $ | 360,361 | $ | 344,168 | $ | 333,840 | $ | 311,485 | $ | 287,583 | (20 | %) | (8 | %) | ||||||||||||||||||||||||||
Total assets under management [2] | $ | 426,764 | $ | 424,193 | $ | 416,269 | $ | 384,981 | $ | 346,916 | (19 | %) | (10 | %) | ||||||||||||||||||||||||||
PER SHARE AND SHARES DATA [3] | ||||||||||||||||||||||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 1.90 | $ | 0.46 | $ | 1.74 | $ | (8.74 | ) | $ | (2.71 | ) | NM | 69 | % | $ | 9.32 | $ | (8.99 | ) | NM | |||||||||||||||||||
Core earnings (losses) | $ | 2.68 | $ | 2.52 | $ | 2.23 | $ | (1.40 | ) | $ | (0.72 | ) | NM | 49 | % | $ | 11.09 | $ | 2.75 | (75 | %) | |||||||||||||||||||
Diluted earnings (losses) per share | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 1.88 | $ | 0.46 | $ | 1.73 | $ | (8.74 | ) | $ | (2.71 | ) | NM | 69 | % | $ | 9.24 | $ | (8.99 | ) | NM | |||||||||||||||||||
Core earnings (losses) | $ | 2.66 | $ | 2.51 | $ | 2.22 | $ | (1.40 | ) | $ | (0.72 | ) | NM | 49 | % | $ | 10.99 | $ | 2.74 | (75 | %) | |||||||||||||||||||
Weighted average common shares outstanding (basic) | 313.4 | 313.8 | 311.7 | 301.1 | 300.2 | (13.2 | )sh | (0.9 | )sh | 316.3 | 306.7 | (9.6 | )sh | |||||||||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 316.1 | 315.7 | 313.1 | 302.1 | 320.9 | 4.8 | sh | 18.8 | sh | 319.1 | 313.0 | (6.1 | )sh | |||||||||||||||||||||||||||
Common shares outstanding assuming conversion of outstanding preferred shares to common [4] | 313.8 | 314.5 | 303.1 | 300.4 | 324.8 | 11.0 | sh | 24.4 | sh | 313.8 | 324.8 | 11.0 | sh | |||||||||||||||||||||||||||
Book value per share | $ | 61.20 | $ | 56.71 | $ | 55.51 | $ | 41.80 | $ | 28.53 | (53 | %) | (32 | %) | ||||||||||||||||||||||||||
Per share impact of AOCI | $ | (2.73 | ) | $ | (7.08 | ) | $ | (9.17 | ) | $ | (13.83 | ) | $ | (23.16 | ) | NM | (67 | %) | ||||||||||||||||||||||
Book value per share (excluding AOCI) | $ | 63.93 | $ | 63.79 | $ | 64.68 | $ | 55.63 | $ | 51.69 | (19 | %) | (7 | %) | ||||||||||||||||||||||||||
FINANCIAL RATIOS | ||||||||||||||||||||||||||||||||||||||||
ROE (net income last 12 months to equity including AOCI) [5] | 15.5 | % | 12.1 | % | 12.0 | % | (8.6 | %) | (19.3 | %) | (34.8 | ) | (10.7 | ) | ||||||||||||||||||||||||||
ROE (core earnings last 12 months to equity excluding AOCI) [5] | 18.1 | % | 17.8 | % | 17.4 | % | 10.5 | % | 4.7 | % | (13.4 | ) | (5.8 | ) | ||||||||||||||||||||||||||
Debt to capitalization including AOCI | 19.0 | % | 21.8 | % | 26.2 | % | 30.6 | % | 40.2 | % | 21.2 | 9.6 | ||||||||||||||||||||||||||||
Annualized investment yield, after-tax | 4.0 | % | 3.6 | % | 3.6 | % | 3.2 | % | 2.2 | % | (1.8 | ) | (1.0 | ) | 4.1 | % | 3.2 | % | (0.9 | ) | ||||||||||||||||||||
Ongoing Property & Casualty GAAP combined ratio | 91.1 | 87.8 | 95.8 | 101.7 | 77.6 | 13.5 | 24.1 | 90.8 | 90.7 | 0.1 |
[1] | Total revenues of The Hartford are impacted by net investment income and mark-to-market effects of equity securities held for trading supporting the international variable annuity business, which have corresponding amounts credited to policyholders within benefits losses and loss adjustment expenses. See pages C-3 and C-4 for the impact to total revenues along with the corresponding amounts in benefits losses and loss adjustment expenses in the three months and year ended December 31, 2007 and 2008. | |
[2] | Includes mutual fund assets (see page L-3) and third party assets managed by HIMCO (see page I-7). | |
[3] | See page C-8 for computation of basic and diluted earnings (losses) per share. | |
[4] | All conditions have been met to exchange Allianz preferred shares to common. Shares were exchanged effective January 9, 2009. | |
[5] | See page C-11 for a computation of return-on-equity measures. |
C-1
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
Year over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
LIFE | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | $ | 192 | $ | 174 | $ | 189 | $ | (552 | ) | $ | (198 | ) | NM | 64 | % | $ | 918 | $ | (387 | ) | NM | |||||||||||||||||||
Other Retail | 17 | 13 | 14 | 13 | (2 | ) | NM | NM | 65 | 38 | (42 | %) | ||||||||||||||||||||||||||||
Total Retail Products Group | 209 | 187 | 203 | (539 | ) | (200 | ) | NM | 63 | % | 983 | (349 | ) | NM | ||||||||||||||||||||||||||
Individual Life | 40 | 41 | 43 | 8 | 26 | (35 | %) | NM | 196 | 118 | (40 | %) | ||||||||||||||||||||||||||||
Total Individual Markets Group | 249 | 228 | 246 | (531 | ) | (174 | ) | NM | 67 | % | 1,179 | (231 | ) | NM | ||||||||||||||||||||||||||
Retirement Plans | 22 | 17 | 33 | (36 | ) | (3 | ) | NM | 92 | % | 89 | 11 | (88 | %) | ||||||||||||||||||||||||||
Group Benefits | 92 | 70 | 85 | 100 | 90 | (2 | %) | (10 | %) | 338 | 345 | 2 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 114 | 87 | 118 | 64 | 87 | (24 | %) | 36 | % | 427 | 356 | (17 | %) | |||||||||||||||||||||||||||
International Markets Group | 61 | 67 | 64 | (75 | ) | (110 | ) | NM | (47 | %) | 254 | (54 | ) | NM | ||||||||||||||||||||||||||
Institutional Solutions Group | 35 | 22 | 27 | 1 | (40 | ) | NM | NM | 140 | 10 | (93 | %) | ||||||||||||||||||||||||||||
Other | (2 | ) | (11 | ) | (5 | ) | — | (24 | ) | NM | NM | (8 | ) | (40 | ) | NM | ||||||||||||||||||||||||
Total Life core earnings (losses) [1][2][3] | 457 | 393 | 450 | (541 | ) | (261 | ) | NM | 52 | % | 1,992 | 41 | (98 | %) | ||||||||||||||||||||||||||
PROPERTY & CASUALTY | ||||||||||||||||||||||||||||||||||||||||
Ongoing Operations Underwriting Results | ||||||||||||||||||||||||||||||||||||||||
Personal Lines | 30 | 105 | 18 | (45 | ) | 202 | NM | NM | 322 | 280 | (13 | %) | ||||||||||||||||||||||||||||
Small Commercial | 204 | 119 | 69 | 82 | 167 | (18 | %) | 104 | % | 508 | 437 | (14 | %) | |||||||||||||||||||||||||||
Middle Market | 58 | 55 | 3 | (37 | ) | 148 | 155 | % | NM | 157 | 169 | 8 | % | |||||||||||||||||||||||||||
Specialty Commercial | (58 | ) | 39 | 18 | (44 | ) | 58 | NM | NM | (18 | ) | 71 | NM | |||||||||||||||||||||||||||
Total Ongoing Operations underwriting results | 234 | 318 | 108 | (44 | ) | 575 | 146 | % | NM | 969 | 957 | (1 | %) | |||||||||||||||||||||||||||
Net servicing income | 11 | (1 | ) | 8 | 14 | 10 | (9 | %) | (29 | %) | 52 | 31 | (40 | %) | ||||||||||||||||||||||||||
Net investment income (loss) | 357 | 310 | 334 | 285 | 127 | (64 | %) | (55 | %) | 1,439 | 1,056 | (27 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax | 4 | 2 | 1 | 2 | (3 | ) | NM | NM | 15 | 2 | (87 | %) | ||||||||||||||||||||||||||||
Other expenses | (69 | ) | (57 | ) | (65 | ) | (58 | ) | (39 | ) | 43 | % | 33 | % | (248 | ) | (219 | ) | 12 | % | ||||||||||||||||||||
Income tax expense | (155 | ) | (172 | ) | (105 | ) | (39 | ) | (236 | ) | (52 | %) | NM | (636 | ) | (552 | ) | 13 | % | |||||||||||||||||||||
Ongoing Operations core earnings | 382 | 400 | 281 | 160 | 434 | 14 | % | 171 | % | 1,591 | 1,275 | (20 | %) | |||||||||||||||||||||||||||
Other Operations core earnings (losses) [4] | 32 | 26 | 2 | (4 | ) | 18 | (44 | %) | NM | 38 | 42 | 11 | % | |||||||||||||||||||||||||||
Total Property & Casualty core earnings | 414 | 426 | 283 | 156 | 452 | 9 | % | 190 | % | 1,629 | 1,317 | (19 | %) | |||||||||||||||||||||||||||
Total Corporate core losses [1][3] | (31 | ) | (27 | ) | (37 | ) | (37 | ) | (399 | ) | NM | NM | (114 | ) | (500 | ) | NM | |||||||||||||||||||||||
CONSOLIDATED | ||||||||||||||||||||||||||||||||||||||||
Core earnings (losses) | 840 | 792 | 696 | (422 | ) | (208 | ) | NM | 51 | % | 3,507 | 858 | (76 | %) | ||||||||||||||||||||||||||
Add: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) [1][5] | (245 | ) | (647 | ) | (153 | ) | (2,209 | ) | (598 | ) | (144 | %) | 73 | % | (558 | ) | (3,607 | ) | NM | |||||||||||||||||||||
Net income (loss) | $ | 595 | $ | 145 | $ | 543 | $ | (2,631 | ) | $ | (806 | ) | NM | 69 | % | $ | 2,949 | $ | (2,749 | ) | NM | |||||||||||||||||||
PER SHARE DATA [6] | ||||||||||||||||||||||||||||||||||||||||
Diluted earnings (losses) per share | ||||||||||||||||||||||||||||||||||||||||
Core earnings (losses) available to common shareholders | $ | 2.66 | $ | 2.51 | $ | 2.22 | $ | (1.40 | ) | $ | (0.72 | ) | NM | 49 | % | $ | 10.99 | $ | 2.74 | (75 | %) | |||||||||||||||||||
Net income (loss) available to common shareholders | $ | 1.88 | $ | 0.46 | $ | 1.73 | $ | (8.74 | ) | $ | (2.71 | ) | NM | 69 | % | $ | 9.24 | $ | (8.99 | ) | NM |
[1] | Included in the year ended December 31, 2007 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $227, $3, and $(17), respectively, related to the effect of the unlock of deferred acquisition costs. Included in the three months ended September 30, 2008 and year ended December 31, 2008 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $(932), $9, and $(9), respectively, related to the effect of the unlock of deferred acquisition costs. See page L-1 for further details by Life segment. | |
[2] | Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits. | |
[3] | As a result of the goodwill testing performed during the three months ended December 31, 2008, The Company has written off goodwill of $274 and $323, after-tax, in Life and Corporate, respectively. | |
[4] | The year ended December 31, 2007 included a charge of $64, after-tax, principally as a result of an adverse arbitration decision and an environmental reserve increase of $16, after-tax. The three months ended June 30, 2008 included an asbestos reserve increase of $33, after-tax. The three months ended September 30, 2008 included an environmental reserve increase of $34, after-tax. | |
[5] | Includes those net realized capital losses not included in core earnings (losses). See pages C-9 and C-10 for further analysis. | |
[6] | See page C-8 for reconciliation of net income (loss) per share to core earnings (losses) per share. |
C-2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF OPERATING RESULTS BY SEGMENT
ANALYSIS OF OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
LIFE | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | $ | 192 | $ | 174 | $ | 189 | $ | (552 | ) | $ | (198 | ) | NM | 64 | % | $ | 918 | $ | (387 | ) | NM | |||||||||||||||||||
Other Retail | 17 | 13 | 14 | 13 | (2 | ) | NM | NM | 65 | 38 | (42 | %) | ||||||||||||||||||||||||||||
Total Retail Products Group | 209 | 187 | 203 | (539 | ) | (200 | ) | NM | 63 | % | 983 | (349 | ) | NM | ||||||||||||||||||||||||||
Individual Life | 40 | 41 | 43 | 8 | 26 | (35 | %) | NM | 196 | 118 | (40 | %) | ||||||||||||||||||||||||||||
Total Individual Markets Group | 249 | 228 | 246 | (531 | ) | (174 | ) | NM | 67 | % | 1,179 | (231 | ) | NM | ||||||||||||||||||||||||||
Retirement Plans | 22 | 17 | 33 | (36 | ) | (3 | ) | NM | 92 | % | 89 | 11 | (88 | %) | ||||||||||||||||||||||||||
Group Benefits | 92 | 70 | 85 | 100 | 90 | (2 | %) | (10 | %) | 338 | 345 | 2 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 114 | 87 | 118 | 64 | 87 | (24 | %) | 36 | % | 427 | 356 | (17 | %) | |||||||||||||||||||||||||||
International Markets Group | 61 | 67 | 64 | (75 | ) | (110 | ) | NM | (47 | %) | 254 | (54 | ) | NM | ||||||||||||||||||||||||||
Institutional Solutions Group | 35 | 22 | 27 | 1 | (40 | ) | NM | NM | 140 | 10 | (93 | %) | ||||||||||||||||||||||||||||
Other | (2 | ) | (11 | ) | (5 | ) | — | (24 | ) | NM | NM | (8 | ) | (40 | ) | NM | ||||||||||||||||||||||||
Total Life core earnings (losses) [1][2][3] | 457 | 393 | 450 | (541 | ) | (261 | ) | NM | 52 | % | 1,992 | 41 | (98 | %) | ||||||||||||||||||||||||||
PROPERTY & CASUALTY | ||||||||||||||||||||||||||||||||||||||||
Ongoing Operations Underwriting Results Before Catastrophes and Prior Year Development: | ||||||||||||||||||||||||||||||||||||||||
Personal Lines | 61 | 127 | 116 | 126 | 130 | 113 | % | 3 | % | 443 | 499 | 13 | % | |||||||||||||||||||||||||||
Small Commercial | 77 | 126 | 102 | 93 | 157 | 104 | % | 69 | % | 327 | 478 | 46 | % | |||||||||||||||||||||||||||
Middle Market | 23 | 48 | 15 | 12 | 79 | NM | NM | 156 | 154 | (1 | %) | |||||||||||||||||||||||||||||
Specialty Commercial | 12 | 16 | 7 | 4 | 11 | (8 | %) | 175 | % | 75 | 38 | (49 | %) | |||||||||||||||||||||||||||
Total Ongoing Operations underwriting results before catastrophes and prior year development | 173 | 317 | 240 | 235 | 377 | 118 | % | 60 | % | 1,001 | 1,169 | 17 | % | |||||||||||||||||||||||||||
Catastrophes, excluding prior year development [4] | (65 | ) | (50 | ) | (171 | ) | (356 | ) | 3 | NM | NM | (177 | ) | (574 | ) | NM | ||||||||||||||||||||||||
Prior year reserve development: | ||||||||||||||||||||||||||||||||||||||||
Catastrophe loss and loss adjustment expenses | (4 | ) | 11 | 1 | 11 | 6 | NM | (45 | %) | (10 | ) | 29 | NM | |||||||||||||||||||||||||||
Other loss and loss adjustment expenses | 130 | 40 | 38 | 66 | 189 | 45 | % | 186 | % | 155 | 333 | 115 | % | |||||||||||||||||||||||||||
Total Ongoing Operations underwriting results | 234 | 318 | 108 | (44 | ) | 575 | 146 | % | NM | 969 | 957 | (1 | %) | |||||||||||||||||||||||||||
Net servicing income (loss) | 11 | (1 | ) | 8 | 14 | 10 | (9 | %) | (29 | %) | 52 | 31 | (40 | %) | ||||||||||||||||||||||||||
Net investment income | 357 | 310 | 334 | 285 | 127 | (64 | %) | (55 | %) | 1,439 | 1,056 | (27 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax | 4 | 2 | 1 | 2 | (3 | ) | NM | NM | 15 | 2 | (87 | %) | ||||||||||||||||||||||||||||
Other expenses | (69 | ) | (57 | ) | (65 | ) | (58 | ) | (39 | ) | 43 | % | 33 | % | (248 | ) | (219 | ) | 12 | % | ||||||||||||||||||||
Income tax expense | (155 | ) | (172 | ) | (105 | ) | (39 | ) | (236 | ) | (52 | %) | NM | (636 | ) | (552 | ) | 13 | % | |||||||||||||||||||||
Ongoing Operations core earnings | 382 | 400 | 281 | 160 | 434 | 14 | % | 171 | % | 1,591 | 1,275 | (20 | %) | |||||||||||||||||||||||||||
Other Operations core earnings (losses) [5] | 32 | 26 | 2 | (4 | ) | 18 | (44 | %) | NM | 38 | 42 | 11 | % | |||||||||||||||||||||||||||
Total Property & Casualty core earnings | 414 | 426 | 283 | 156 | 452 | 9 | % | 190 | % | 1,629 | 1,317 | (19 | %) | |||||||||||||||||||||||||||
CORPORATE | ||||||||||||||||||||||||||||||||||||||||
Total Corporate core losses [1][3] | (31 | ) | (27 | ) | (37 | ) | (37 | ) | (399 | ) | NM | NM | (114 | ) | (500 | ) | NM | |||||||||||||||||||||||
CONSOLIDATED | ||||||||||||||||||||||||||||||||||||||||
Core earnings (losses) | 840 | 792 | 696 | (422 | ) | (208 | ) | NM | 51 | % | 3,507 | 858 | (76 | %) | ||||||||||||||||||||||||||
Add: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) [1][6] | (245 | ) | (647 | ) | (153 | ) | (2,209 | ) | (598 | ) | (144 | %) | 73 | % | (558 | ) | (3,607 | ) | NM | |||||||||||||||||||||
Net income (loss) | $ | 595 | $ | 145 | $ | 543 | $ | (2,631 | ) | $ | (806 | ) | NM | 69 | % | $ | 2,949 | $ | (2,749 | ) | NM | |||||||||||||||||||
[1] | Included in the year ended December 31, 2007 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $227, $3, and $(17), respectively, related to the effect of the unlock of deferred acquisition costs. Included in the three months ended September 30, 2008 and year ended December 31, 2008 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $(932), $9, and $(9), respectively, related to the effect of the unlock of deferred acquisition costs. See page L-1 for further details by Life segment. | |
[2] | Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits. | |
[3] | As a result of the goodwill testing performed during the three months ended December 31, 2008, The Company has written off goodwill of $274 and $323, after-tax, in Life and Corporate, respectively. | |
[4] | The year ended December 31, 2008 included catastrophe treaty reinstatement premium, catastrophe losses, and assessments from the Texas Windstorm Insurance Association, totaling $258, including $277 for the three months ended September 30, 2008, primarily related to hurricane Ike. | |
[5] | The year ended December 31, 2007 included a charge of $64, after-tax, principally as a result of an adverse arbitration decision and an environmental reserve increase of $16, after-tax. The three months ended June 30, 2008 included an asbestos reserve increase of $33, after-tax. The three months ended September 30, 2008 included an environmental reserve increase of $34, after-tax. | |
[6] | Includes those net realized capital losses not included in core earnings (losses). See pages C-9 and C-10 for further analysis. |
C-2a
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
LIFE | PROPERTY & CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Earned premiums | $ | 1,236 | $ | 1,296 | 5 | % | $ | 2,623 | $ | 2,570 | (2 | %) | $ | — | $ | — | — | $ | 3,859 | $ | 3,866 | — | ||||||||||||||||||||||||||
Fee income | 1,407 | 1,076 | (24 | %) | — | — | — | 3 | 3 | — | 1,410 | 1,079 | (23 | %) | ||||||||||||||||||||||||||||||||||
Net investment income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale and other | 878 | 638 | (27 | %) | 421 | 162 | (62 | %) | 8 | 9 | 13 | % | 1,307 | 809 | (38 | %) | ||||||||||||||||||||||||||||||||
Equity securities held for trading [1] | (601 | ) | (4,500 | ) | NM | — | — | — | — | — | — | (601 | ) | (4,500 | ) | NM | ||||||||||||||||||||||||||||||||
Total net investment income (loss) | 277 | (3,862 | ) | NM | 421 | 162 | (62 | %) | 8 | 9 | 13 | % | 706 | (3,691 | ) | NM | ||||||||||||||||||||||||||||||||
Other revenues | — | — | — | 128 | 127 | (1 | %) | — | — | — | 128 | 127 | (1 | %) | ||||||||||||||||||||||||||||||||||
Net realized capital gains (losses) | (333 | ) | (678 | ) | (104 | %) | (96 | ) | (246 | ) | (156 | %) | — | 108 | NM | (429 | ) | (816 | ) | (90 | %) | |||||||||||||||||||||||||||
Total revenues | 2,587 | (2,168 | ) | NM | 3,076 | 2,613 | (15 | %) | 11 | 120 | NM | 5,674 | 565 | (90 | %) | |||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses | 1,709 | 1,858 | 9 | % | 1,667 | 1,293 | (22 | %) | — | — | — | 3,376 | 3,151 | (7 | %) | |||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities [1] | (601 | ) | (4,500 | ) | NM | — | — | — | — | — | — | (601 | ) | (4,500 | ) | NM | ||||||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 280 | 542 | 94 | % | 523 | 528 | 1 | % | 1 | — | (100 | %) | 804 | 1,070 | 33 | % | ||||||||||||||||||||||||||||||||
Insurance operating costs and expenses | 846 | 786 | (7 | %) | 222 | 181 | (18 | %) | — | — | — | 1,068 | 967 | (9 | %) | |||||||||||||||||||||||||||||||||
Interest expense | 2 | — | (100 | %) | — | — | — | 65 | 115 | 77 | % | 67 | 115 | 72 | % | |||||||||||||||||||||||||||||||||
Goodwill impairment | — | 422 | NM | — | — | — | — | 323 | NM | — | 745 | NM | ||||||||||||||||||||||||||||||||||||
Other expenses [2] | 3 | (4 | ) | NM | 184 | 158 | (14 | %) | (8 | ) | 14 | NM | 179 | 168 | (6 | %) | ||||||||||||||||||||||||||||||||
Total benefits and expenses | 2,239 | (896 | ) | NM | 2,596 | 2,160 | (17 | %) | 58 | 452 | NM | 4,893 | 1,716 | (65 | %) | |||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 348 | (1,272 | ) | NM | 480 | 453 | (6 | %) | (47 | ) | (332 | ) | NM | 781 | (1,151 | ) | NM | |||||||||||||||||||||||||||||||
Income tax expense (benefit) | 71 | (465 | ) | NM | 131 | 162 | 24 | % | (16 | ) | (42 | ) | (163 | %) | 186 | (345 | ) | NM | ||||||||||||||||||||||||||||||
Net income (loss) | 277 | (807 | ) | NM | 349 | 291 | (17 | %) | (31 | ) | (290 | ) | NM | 595 | (806 | ) | NM | |||||||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) | (180 | ) | (546 | ) | NM | (65 | ) | (161 | ) | (148 | %) | — | 109 | NM | (245 | ) | (598 | ) | (144 | %) | ||||||||||||||||||||||||||||
Core earnings (losses) | $ | 457 | $ | (261 | ) | NM | $ | 414 | $ | 452 | 9 | % | $ | (31 | ) | $ | (399 | ) | NM | $ | 840 | $ | (208 | ) | NM | |||||||||||||||||||||||
[1] | ncludes 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, losses and loss adjustment expenses. | |
[2] | The three months ended December 31, 2007 included $5, $11, and $(16) in Life, Property & Casualty and Corporate, respectively, of interest charged by Corporate on the amount of capital held by the Life and Property & Casualty operations in excess of the amount needed to support the capital requirements of the Life and Property & Casualty operations. The three months ended December 31, 2008 included $(22), $(6), and $28 in Life, Property & Casualty and Corporate, respectively, of interest charged or credited, as applicable, by Corporate to the extent that the amount of capital held by the Life and Property & Casualty operations is greater than or less than the amount of capital allocated to support the capital requirements of the Life and Property & Casualty operations. |
C-3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 AND 2008
CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 AND 2008
LIFE | PROPERTY & CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Earned premiums | $ | 5,123 | $ | 5,165 | 1 | % | $ | 10,496 | $ | 10,338 | (2 | %) | $ | — | $ | — | — | $ | 15,619 | $ | 15,503 | (1 | %) | |||||||||||||||||||||||||
Fee income | 5,420 | 5,118 | (6 | %) | — | — | — | 16 | 17 | 6 | % | 5,436 | 5,135 | (6 | %) | |||||||||||||||||||||||||||||||||
Net investment income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale and other | 3,497 | 3,045 | (13 | %) | 1,687 | 1,253 | (26 | %) | 30 | 37 | 23 | % | 5,214 | 4,335 | (17 | %) | ||||||||||||||||||||||||||||||||
Equity securities held for trading [1] | 145 | (10,340 | ) | NM | — | — | — | — | — | — | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||||||||||||
Total net investment income (loss) | 3,642 | (7,295 | ) | NM | 1,687 | 1,253 | (26 | %) | 30 | 37 | 23 | % | 5,359 | (6,005 | ) | NM | ||||||||||||||||||||||||||||||||
Other revenues | — | — | — | 496 | 504 | 2 | % | — | — | — | 496 | 504 | 2 | % | ||||||||||||||||||||||||||||||||||
Net realized capital gains (losses) | (819 | ) | (4,138 | ) | NM | (172 | ) | (1,877 | ) | NM | (3 | ) | 97 | NM | (994 | ) | (5,918 | ) | NM | |||||||||||||||||||||||||||||
Total revenues | 13,366 | (1,150 | ) | NM | 12,507 | 10,218 | (18 | %) | 43 | 151 | NM | 25,916 | 9,219 | (64 | %) | |||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses | 7,002 | 7,381 | 5 | % | 6,917 | 6,707 | (3 | %) | — | — | — | 13,919 | 14,088 | 1 | % | |||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities [1] | 145 | (10,340 | ) | NM | — | — | — | — | — | — | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 884 | 2,176 | 146 | % | 2,104 | 2,095 | — | 1 | — | (100 | %) | 2,989 | 4,271 | 43 | % | |||||||||||||||||||||||||||||||||
Insurance operating costs and expenses | 3,178 | 3,269 | 3 | % | 716 | 724 | 1 | % | — | — | — | 3,894 | 3,993 | 3 | % | |||||||||||||||||||||||||||||||||
Interest expense | 4 | 2 | (50 | %) | — | — | — | 259 | 341 | 32 | % | 263 | 343 | 30 | % | |||||||||||||||||||||||||||||||||
Goodwill impairment | — | 422 | NM | — | — | — | — | 323 | NM | — | 745 | NM | ||||||||||||||||||||||||||||||||||||
Other expenses [2] | 48 | 29 | (40 | %) | 693 | 695 | — | (40 | ) | (14 | ) | 65 | % | 701 | 710 | 1 | % | |||||||||||||||||||||||||||||||
Total benefits and expenses | 11,261 | 2,939 | (74 | %) | 10,430 | 10,221 | (2 | %) | 220 | 650 | 195 | % | 21,911 | 13,810 | (37 | %) | ||||||||||||||||||||||||||||||||
Income (loss) before income taxes | 2,105 | (4,089 | ) | NM | 2,077 | (3 | ) | NM | (177 | ) | (499 | ) | (182 | %) | 4,005 | (4,591 | ) | NM | ||||||||||||||||||||||||||||||
Income tax expense (benefit) | 547 | (1,646 | ) | NM | 570 | (95 | ) | NM | (61 | ) | (101 | ) | (65 | %) | 1,056 | (1,842 | ) | NM | ||||||||||||||||||||||||||||||
Net income (loss) | 1,558 | (2,443 | ) | NM | 1,507 | 92 | (94 | %) | (116 | ) | (398 | ) | NM | 2,949 | (2,749 | ) | NM | |||||||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) | (434 | ) | (2,484 | ) | NM | (122 | ) | (1,225 | ) | NM | (2 | ) | 102 | NM | (558 | ) | (3,607 | ) | NM | |||||||||||||||||||||||||||||
Core earnings (losses) | $ | 1,992 | $ | 41 | (98 | %) | $ | 1,629 | $ | 1,317 | (19 | %) | $ | (114 | ) | $ | (500 | ) | NM | $ | 3,507 | $ | 858 | (76 | %) | |||||||||||||||||||||||
[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, losses and loss adjustment expenses. | |
[2] | The year ended December 31, 2007 included $28, $49, and $(77) in Life, Property & Casualty and Corporate, respectively, of interest charged by Corporate on the amount of capital held by the Life and Property & Casualty operations in excess of the amount needed to support the capital requirements of the Life and Property & Casualty operations. The year ended December 31, 2008 included $(10), $25, and $(15) in Life, Property & Casualty and Corporate, respectively, of interest charged or credited, as applicable, by Corporate to the extent that the amount of capital held by the Life and Property & Casualty operations is greater than or less than the amount of capital allocated to support the capital requirements of the Life and Property & Casualty operations. |
C-4
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2008
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2008
LIFE | PROPERTY & CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 52,542 | $ | 45,182 | (14 | %) | $ | 27,205 | $ | 19,775 | (27 | %) | $ | 308 | $ | 155 | (50 | %) | $ | 80,055 | $ | 65,112 | (19 | %) | ||||||||||||||||||||||||
Equity securities, trading, at fair value | 36,182 | 30,820 | (15 | %) | — | — | — | — | — | — | 36,182 | 30,820 | (15 | %) | ||||||||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value | 1,284 | 711 | (45 | %) | 1,208 | 674 | (44 | %) | 103 | 73 | (29 | %) | 2,595 | 1,458 | (44 | %) | ||||||||||||||||||||||||||||||||
Policy loans, at outstanding balance | 2,061 | 2,208 | 7 | % | — | — | — | — | — | — | 2,061 | 2,208 | 7 | % | ||||||||||||||||||||||||||||||||||
Mortgage loans on real estate | 4,739 | 5,684 | 20 | % | 671 | 785 | 17 | % | — | — | — | 5,410 | 6,469 | 20 | % | |||||||||||||||||||||||||||||||||
Limited partnerships and other alternative investments | 1,306 | 1,129 | (14 | %) | 1,260 | 1,166 | (7 | %) | — | — | — | 2,566 | 2,295 | (11 | %) | |||||||||||||||||||||||||||||||||
Other investments | 534 | 1,473 | 176 | % | 38 | 207 | NM | 43 | 43 | — | 615 | 1,723 | 180 | % | ||||||||||||||||||||||||||||||||||
Short-term investments | 1,158 | 6,937 | NM | 284 | 1,597 | NM | 160 | 1,488 | NM | 1,602 | 10,022 | NM | ||||||||||||||||||||||||||||||||||||
Total investments | 99,806 | 94,144 | (6 | %) | 30,666 | 24,204 | (21 | %) | 614 | 1,759 | 186 | % | 131,086 | 120,107 | (8 | %) | ||||||||||||||||||||||||||||||||
Cash | 1,770 | 1,648 | (7 | %) | 241 | 162 | (33 | %) | — | 1 | NM | 2,011 | 1,811 | (10 | %) | |||||||||||||||||||||||||||||||||
Premiums receivable and agents’ balances | 427 | 407 | (5 | %) | 3,254 | 3,197 | (2 | %) | — | — | — | 3,681 | 3,604 | (2 | %) | |||||||||||||||||||||||||||||||||
Reinsurance recoverables | 1,419 | 2,918 | 106 | % | 3,731 | 3,439 | (8 | %) | — | — | — | 5,150 | 6,357 | 23 | % | |||||||||||||||||||||||||||||||||
Deferred policy acquisition costs and present value of future profits | 10,514 | 11,988 | 14 | % | 1,228 | 1,260 | 3 | % | — | — | — | 11,742 | 13,248 | 13 | % | |||||||||||||||||||||||||||||||||
Deferred income taxes | (754 | ) | 2,183 | NM | 662 | 2,435 | NM | 400 | 621 | 55 | % | 308 | 5,239 | NM | ||||||||||||||||||||||||||||||||||
Goodwill | 805 | 462 | (43 | %) | 149 | 149 | — | 772 | 449 | (42 | %) | 1,726 | 1,060 | (39 | %) | |||||||||||||||||||||||||||||||||
Property and equipment, net | 374 | 400 | 7 | % | 598 | 675 | 13 | % | — | — | — | 972 | 1,075 | 11 | % | |||||||||||||||||||||||||||||||||
Other assets | 1,869 | 3,557 | 90 | % | 1,312 | 1,159 | (12 | %) | 558 | 182 | (67 | %) | 3,739 | 4,898 | 31 | % | ||||||||||||||||||||||||||||||||
Separate account assets | 199,946 | 130,184 | (35 | %) | — | — | — | — | — | — | 199,946 | 130,184 | (35 | %) | ||||||||||||||||||||||||||||||||||
Total assets | $ | 316,176 | $ | 247,891 | (22 | %) | $ | 41,841 | $ | 36,680 | (12 | %) | $ | 2,344 | $ | 3,012 | 28 | % | $ | 360,361 | $ | 287,583 | (20 | %) | ||||||||||||||||||||||||
Future policy benefits, unpaid losses and loss adjustment expenses | $ | 15,331 | $ | 16,747 | 9 | % | $ | 22,153 | $ | 21,933 | (1 | %) | $ | — | $ | — | — | $ | 37,484 | $ | 38,680 | 3 | % | |||||||||||||||||||||||||
Other policyholder funds and benefits payable | 44,190 | 53,753 | 22 | % | — | — | — | — | — | — | 44,190 | 53,753 | 22 | % | ||||||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable — International variable annuities | 36,152 | 30,799 | (15 | %) | — | — | — | — | — | — | 36,152 | 30,799 | (15 | %) | ||||||||||||||||||||||||||||||||||
Unearned premiums | 147 | 138 | (6 | %) | 5,402 | 5,244 | (3 | %) | (4 | ) | (3 | ) | 25 | % | 5,545 | 5,379 | (3 | %) | ||||||||||||||||||||||||||||||
Debt | 115 | 92 | (20 | %) | 13 | — | (100 | %) | 4,379 | 6,129 | 40 | % | 4,507 | 6,221 | 38 | % | ||||||||||||||||||||||||||||||||
Consumer notes | 809 | 1,210 | 50 | % | — | — | — | — | — | — | 809 | 1,210 | 50 | % | ||||||||||||||||||||||||||||||||||
Other liabilities | 8,045 | 7,389 | (8 | %) | 4,855 | 2,914 | (40 | %) | (376 | ) | 1,786 | NM | 12,524 | 12,089 | (3 | %) | ||||||||||||||||||||||||||||||||
Separate account liabilities | 199,946 | 130,184 | (35 | %) | — | — | — | — | — | — | 199,946 | 130,184 | (35 | %) | ||||||||||||||||||||||||||||||||||
Total liabilities | 304,735 | 240,312 | (21 | %) | 32,423 | 30,091 | (7 | %) | 3,999 | 7,912 | 98 | % | 341,157 | 278,315 | (18 | %) | ||||||||||||||||||||||||||||||||
Equity excluding AOCI, net of tax | 11,868 | 12,095 | 2 | % | 9,428 | 8,675 | (8 | %) | (1,234 | ) | (3,982 | ) | NM | 20,062 | 16,788 | (16 | %) | |||||||||||||||||||||||||||||||
AOCI, net of tax | (427 | ) | (4,516 | ) | NM | (10 | ) | (2,086 | ) | NM | (421 | ) | (918 | ) | (118 | %) | (858 | ) | (7,520 | ) | NM | |||||||||||||||||||||||||||
Total stockholders’ equity | 11,441 | 7,579 | (34 | %) | 9,418 | 6,589 | (30 | %) | (1,655 | ) | (4,900 | ) | (196 | %) | 19,204 | 9,268 | (52 | %) | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 316,176 | $ | 247,891 | (22 | %) | $ | 41,841 | $ | 36,680 | (12 | %) | $ | 2,344 | $ | 3,012 | 28 | % | $ | 360,361 | $ | 287,583 | (20 | %) | ||||||||||||||||||||||||
C-5
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
CAPITAL STRUCTURE
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
DEBT | ||||||||||||||||||||||||||||
Short-term debt (includes current maturities of long-term debt and capital lease obligations) | $ | 1,365 | $ | 1,364 | $ | 1,353 | $ | 927 | $ | 398 | (71 | %) | (57 | %) | ||||||||||||||
Capital lease obligations | 91 | 67 | 67 | 68 | 68 | (25 | %) | — | ||||||||||||||||||||
Senior notes | 3,051 | 3,551 | 4,051 | 4,052 | 4,052 | 33 | % | — | ||||||||||||||||||||
Junior subordinated debentures | — | — | 500 | 500 | 1,703 | NM | NM | |||||||||||||||||||||
Total debt [1] | $ | 4,507 | $ | 4,982 | $ | 5,971 | $ | 5,547 | $ | 6,221 | 38 | % | 12 | % | ||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Equity excluding AOCI, net of tax | $ | 20,062 | $ | 20,061 | $ | 19,604 | $ | 16,712 | $ | 16,788 | (16 | %) | — | |||||||||||||||
AOCI, net of tax | (858 | ) | (2,225 | ) | (2,780 | ) | (4,155 | ) | (7,520 | ) | NM | (81 | %) | |||||||||||||||
Total stockholders’ equity | $ | 19,204 | $ | 17,836 | $ | 16,824 | $ | 12,557 | $ | 9,268 | (52 | %) | (26 | %) | ||||||||||||||
CAPITALIZATION | ||||||||||||||||||||||||||||
Total capitalization including AOCI, net of tax | $ | 23,711 | $ | 22,818 | $ | 22,795 | $ | 18,104 | $ | 15,489 | (35 | %) | (14 | %) | ||||||||||||||
Total capitalization excluding AOCI, net of tax | $ | 24,569 | $ | 25,043 | $ | 25,575 | $ | 22,259 | $ | 23,009 | (6 | %) | 3 | % | ||||||||||||||
DEBT TO CAPITALIZATION RATIOS [1] | ||||||||||||||||||||||||||||
Ratio Including AOCI | ||||||||||||||||||||||||||||
Total debt to capitalization | 19.0 | % | 21.8 | % | 26.2 | % | 30.6 | % | 40.2 | % | 21.2 | 9.6 | ||||||||||||||||
Ratios Excluding AOCI | ||||||||||||||||||||||||||||
Total debt to capitalization | 18.3 | % | 19.9 | % | 23.3 | % | 24.9 | % | 27.0 | % | 8.7 | 2.1 | ||||||||||||||||
Total adjusted debt to capitalization [2] [3] [4] [5] | 21.8 | % | 23.1 | % | 25.0 | % | 27.0 | % | 27.7 | % | 5.9 | 0.7 |
[1] | The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $809, $971, $1,113, $1,225, and $1,210 as of December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively. | |
[2] | Reflects a rating agency assignment in the leverage calculation of an estimate of the adjusted unfunded pension liability of the Company’s defined benefit plans and six times the Company’s rental expense on operating leases for total adjustments of $1.0 billion, $0.9 billion, $0.9 billion, $1.0 billion, and $1.5 billion for the three months ended December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively. | |
[3] | Reflects the assignment by certain rating agencies in the leverage calculation of 75% equity credit for the $500 junior subordinated debentures as of June 30, 2008, and September 30, 2008. | |
[4] | Reflects the assignment by certain rating agencies in the leverage calculation of 75% equity credit for the $1,703 junior subordinated debentures and $547 warrants as of December 31, 2008. | |
[5] | Reflects a rating agency assignment to adjust equity for pension related amounts that are included in AOCI. |
C-6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE LOSS
ACCUMULATED OTHER COMPREHENSIVE LOSS
PROPERTY & | ||||||||||||||||
LIFE | CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||
As of December 31, 2008 | ||||||||||||||||
Fixed maturities net unrealized loss | $ | (5,196 | ) | $ | (2,221 | ) | $ | (2 | ) | $ | (7,419 | ) | ||||
Equities net unrealized gain (loss) | (148 | ) | 85 | (4 | ) | (67 | ) | |||||||||
Net deferred gain on cash-flow hedging instruments | 611 | 31 | 2 | 644 | ||||||||||||
Total net unrealized loss | (4,733 | ) | (2,105 | ) | (4 | ) | (6,842 | ) | ||||||||
Foreign currency translation adjustments | 217 | 5 | — | 222 | ||||||||||||
Pension and other postretirement adjustment | — | 14 | (914 | ) | (900 | ) | ||||||||||
Total accumulated other comprehensive loss | $ | (4,516 | ) | $ | (2,086 | ) | $ | (918 | ) | $ | (7,520 | ) | ||||
As of December 31, 2007 | ||||||||||||||||
Fixed maturities net unrealized loss | $ | (293 | ) | $ | (67 | ) | $ | — | $ | (360 | ) | |||||
Equities net unrealized gain (loss) | (58 | ) | 51 | 8 | 1 | |||||||||||
Net deferred loss on cash-flow hedging instruments | (115 | ) | (25 | ) | — | (140 | ) | |||||||||
Total net unrealized gain (loss) | (466 | ) | (41 | ) | 8 | (499 | ) | |||||||||
Foreign currency translation adjustments | 39 | (13 | ) | — | 26 | |||||||||||
Pension and other postretirement adjustment | — | 44 | (429 | ) | (385 | ) | ||||||||||
Total accumulated other comprehensive loss | $ | (427 | ) | $ | (10 | ) | $ | (421 | ) | $ | (858 | ) | ||||
C-7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER SHARE
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER SHARE
THREE MONTHS ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | 2007 | 2008 | ||||||||||||||||||||||
Numerator: | ||||||||||||||||||||||||||||
Net income (loss) | $ | 595 | $ | 145 | $ | 543 | $ | (2,631 | ) | $ | (806 | ) | $ | 2,949 | $ | (2,749 | ) | |||||||||||
Less: preferred dividends | — | — | — | — | 8 | — | 8 | |||||||||||||||||||||
Net income (loss) available to common shareholders | 595 | 145 | 543 | (2,631 | ) | (814 | ) | 2,949 | (2,757 | ) | ||||||||||||||||||
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) | (245 | ) | (647 | ) | (153 | ) | (2,209 | ) | (598 | ) | (558 | ) | (3,607 | ) | ||||||||||||||
Add: preferred dividends | — | — | — | — | — | — | 8 | |||||||||||||||||||||
Core earnings (losses) available to common shareholders | 840 | 792 | 696 | (422 | ) | (216 | ) | 3,507 | 858 | |||||||||||||||||||
Denominator: | ||||||||||||||||||||||||||||
Weighted average common shares outstanding (basic) | 313.4 | 313.8 | 311.7 | 301.1 | 300.2 | 316.3 | 306.7 | |||||||||||||||||||||
Add: Weighted average common shares assuming conversion of outstanding preferred shares to common | — | — | — | — | 20.1 | — | 5.0 | |||||||||||||||||||||
Weighted average common assuming conversion of outstanding preferred shares to common (Core basic) | 313.4 | 313.8 | 311.7 | 301.1 | 320.3 | 316.3 | 311.7 | |||||||||||||||||||||
Dilutive effect of stock compensation | 2.7 | 1.9 | 1.4 | 1.0 | 0.6 | 2.8 | 1.3 | |||||||||||||||||||||
Dilutive effect of warrants [1] | — | — | — | — | — | — | — | |||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 316.1 | 315.7 | 313.1 | 302.1 | 320.9 | 319.1 | 313.0 | |||||||||||||||||||||
Basic earnings (losses) per share | ||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 1.90 | $ | 0.46 | $ | 1.74 | $ | (8.74 | ) | $ | (2.71 | ) | $ | 9.32 | $ | (8.99 | ) | |||||||||||
Less: Difference arising from shares used for the denominator between net loss and core earnings | — | — | — | — | — | — | (0.14 | ) | ||||||||||||||||||||
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) | (0.78 | ) | (2.06 | ) | (0.49 | ) | (7.34 | ) | (1.99 | ) | (1.77 | ) | (11.57 | ) | ||||||||||||||
Add: preferred dividends | — | — | — | — | — | — | 0.03 | |||||||||||||||||||||
Core earnings (losses) available to common shareholders [2] | 2.68 | 2.52 | 2.23 | (1.40 | ) | (0.72 | ) | 11.09 | 2.75 | |||||||||||||||||||
Diluted earnings (losses) per share [3] | ||||||||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | 1.88 | $ | 0.46 | $ | 1.73 | $ | (8.74 | ) | $ | (2.71 | ) | $ | 9.24 | $ | (8.99 | ) | |||||||||||
Less: Difference arising from shares used for the denominator between net loss and core earnings | — | — | — | — | — | — | (0.18 | ) | ||||||||||||||||||||
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) | (0.78 | ) | (2.05 | ) | (0.49 | ) | (7.34 | ) | (1.99 | ) | (1.75 | ) | (11.52 | ) | ||||||||||||||
Add: preferred dividends | — | — | — | — | — | — | 0.03 | |||||||||||||||||||||
Core earnings (losses) available to common shareholders | 2.66 | 2.51 | 2.22 | (1.40 | ) | (0.72 | ) | 10.99 | 2.74 | |||||||||||||||||||
[1] | The Hartford issued 69.1 million warrants to purchase The Hartford Common Stock to Allianz on October 17, 2008 at a strike price of $25.32. There is no dilutive effect as the warrants were not in-the-money for the period. | |
[2] | Due to the core loss for the quarter ended December 31, 2008, weighted average common shares outstanding of 300.2 are used in the calculation of Core-Basic loss per share, since the preferred shareholders do not have a contractual oblgation to fund the net losses of the Company. | |
[3] | As a result of anti-dilutive impact, in periods of a loss, weighted average common shares are used in the calculation of diluted earnings per share. |
C-8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
LIFE | PROPERTY & CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Net Realized Capital Gains (Losses), After Tax and DAC | ||||||||||||||||||||||||||||||||||||||||||||||||
Gains/losses on sales, net | $ | 31 | $ | 89 | 187 | % | $ | 10 | $ | (109 | ) | NM | $ | — | $ | (1 | ) | NM | $ | 41 | $ | (21 | ) | NM | ||||||||||||||||||||||||
Impairments | (163 | ) | (196 | ) | (20 | %) | (45 | ) | (70 | ) | (56 | %) | — | (1 | ) | NM | (208 | ) | (267 | ) | (28 | %) | ||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [1] | 10 | 34 | NM | — | — | — | — | — | — | 10 | 34 | NM | ||||||||||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net [2] | 15 | (384 | ) | NM | — | — | — | — | — | — | 15 | (384 | ) | NM | ||||||||||||||||||||||||||||||||||
Macro hedge | — | 28 | NM | — | — | — | — | — | — | — | 28 | NM | ||||||||||||||||||||||||||||||||||||
Total results of variable annuity hedge program | 15 | (356 | ) | NM | — | — | — | — | — | — | 15 | (356 | ) | NM | ||||||||||||||||||||||||||||||||||
Other net gain (loss) [3] | (61 | ) | (128 | ) | (110 | %) | (27 | ) | 17 | NM | — | 111 | NM | (88 | ) | — | 100 | % | ||||||||||||||||||||||||||||||
Total net realized capital gains (losses), after tax and DAC | (168 | ) | (557 | ) | NM | (62 | ) | (162 | ) | (161 | %) | — | 109 | NM | (230 | ) | (610 | ) | (165 | %) | ||||||||||||||||||||||||||||
Reconciliation of Net Realized Capital Gains (Losses), net of tax and DAC, excluded from Core Earnings (Losses) to Total Net Realized Capital Gains (Losses) — After Tax and DAC | ||||||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (168 | ) | $ | (557 | ) | NM | $ | (62 | ) | $ | (162 | ) | (161 | %) | $ | — | $ | 109 | NM | $ | (230 | ) | $ | (610 | ) | (165 | %) | ||||||||||||||||||||
Less: total net realized capital losses included in core earnings (losses) | 12 | (11 | ) | NM | 3 | (1 | ) | NM | — | — | — | 15 | (12 | ) | NM | |||||||||||||||||||||||||||||||||
Total net realized capital gains (losses), after tax and DAC, excluded from core earnings (losses) | $ | (180 | ) | $ | (546 | ) | NM | $ | (65 | ) | $ | (161 | ) | (148 | %) | $ | — | $ | 109 | NM | $ | (245 | ) | $ | (598 | ) | (144 | %) | ||||||||||||||||||||
[1] | Represents realized gains and losses related to currency remeasurement on yen denominated fixed annuity liabilities and changes in fair value of the associated foreign currency swaps. While economically hedged, volatility exists due to a difference in the basis of accounting between the yen liabilities (historical cost) and the currency swaps (fair value). The primary difference relates to changes in Japan interest rates which are included in the fair value of the currency swaps but not the yen liabilities. If the economic impact of the change in Japan interest rates was permitted to be reflected in the value of the yen denominated fixed annuity liabilities, an estimated realized loss of $14 and $33 would have been recognized as an adjustment to this amount in the three months ended December 31, 2007 and 2008, respectively. | |
[2] | Represents the net activity associated with the guaranteed minimum withdrawal benefit (“GMWB”) feature in certain of the Company’s life products. The net activity includes the fair value of the embedded derivatives associated with these products, related reinsurance and the fair value of the derivatives used to hedge this exposure. | |
[3] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Also included for the three months ended December 31, 2008, are gains of $110 related to a decrease in the liability related to warrants associated with the Allianz transaction. |
C-9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
YEAR ENDED DECEMBER 31, 2007 AND 2008
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
YEAR ENDED DECEMBER 31, 2007 AND 2008
LIFE | PROPERTY & CASUALTY | CORPORATE | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Net Realized Capital Gains (Losses), After Tax and DAC | ||||||||||||||||||||||||||||||||||||||||||||||||
Gains/losses on sales, net | $ | 26 | $ | 16 | (38 | %) | $ | 25 | $ | (175 | ) | NM | $ | — | $ | (3 | ) | NM | $ | 51 | $ | (162 | ) | NM | ||||||||||||||||||||||||
Impairments | (227 | ) | (1,537 | ) | NM | (82 | ) | (996 | ) | NM | — | (4 | ) | NM | (309 | ) | (2,537 | ) | NM | |||||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [1] | 12 | 42 | NM | — | — | — | — | — | — | 12 | 42 | NM | ||||||||||||||||||||||||||||||||||||
SFAS 157 transition impact [3] | — | (220 | ) | NM | — | — | — | — | — | — | — | (220 | ) | NM | ||||||||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net [2] | (112 | ) | (488 | ) | NM | — | — | — | — | — | — | (112 | ) | (488 | ) | NM | ||||||||||||||||||||||||||||||||
Macro hedge | (5 | ) | 38 | NM | — | — | — | — | — | — | (5 | ) | 38 | NM | ||||||||||||||||||||||||||||||||||
Total results of variable annuity hedge program | (117 | ) | (450 | ) | NM | — | — | — | — | — | — | (117 | ) | (450 | ) | NM | ||||||||||||||||||||||||||||||||
Other net gain (loss) [4] | (140 | ) | (355 | ) | (154 | %) | (55 | ) | (52 | ) | 5 | % | (2 | ) | 109 | NM | (197 | ) | (298 | ) | (51 | %) | ||||||||||||||||||||||||||
Total net realized capital gains (losses), after tax and DAC | (446 | ) | (2,504 | ) | NM | (112 | ) | (1,223 | ) | NM | (2 | ) | 102 | NM | (560 | ) | (3,625 | ) | NM | |||||||||||||||||||||||||||||
Reconciliation of Net Realized Capital Gains (Losses), net of tax and DAC, excluded from Core Earnings (Losses) to Total Net Realized Capital Gains (Losses) — After Tax and DAC | ||||||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (446 | ) | $ | (2,504 | ) | NM | $ | (112 | ) | $ | (1,223 | ) | NM | $ | (2 | ) | $ | 102 | NM | $ | (560 | ) | $ | (3,625 | ) | NM | |||||||||||||||||||||
Less: total net realized capital losses included in core earnings (losses) | (12 | ) | (20 | ) | (67 | %) | 10 | 2 | (80 | %) | — | — | — | (2 | ) | (18 | ) | NM | ||||||||||||||||||||||||||||||
Total net realized capital gains (losses), after tax and DAC, excluded from core earnings (losses) | $ | (434 | ) | $ | (2,484 | ) | NM | $ | (122 | ) | $ | (1,225 | ) | NM | $ | (2 | ) | $ | 102 | NM | $ | (558 | ) | $ | (3,607 | ) | NM | |||||||||||||||||||||
[1] | Represents realized gains and losses related to currency remeasurement on yen denominated fixed annuity liabilities and changes in fair value of the associated foreign currency swaps. While economically hedged, volatility exists due to a difference in the basis of accounting between the yen liabilities (historical cost) and the currency swaps (fair value). The primary difference relates to changes in Japan interest rates which are included in the fair value of the currency swaps but not the yen liabilities. If the economic impact of the change in Japan interest rates was permitted to be reflected in the value of the yen denominated fixed annuity liabilities, an estimated realized loss of $12 and $23 would have been recognized as an adjustment to this amount in the year ended December 31, 2007 and 2008, respectively. | |
[2] | Represents the net activity associated with the guaranteed minimum withdrawal benefit (“GMWB”) feature in certain of the Company’s life products. The net activity includes the fair value of the embedded derivatives associated with these products, related reinsurance and the fair value of the derivatives used to hedge this exposure. | |
[3] | Includes SFAS 157 implementation losses related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively. | |
[4] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Also included for the year ended December 31, 2008, are gains of $110 related to a decrease in the liability related to warrants associated with the Allianz transaction. |
C-10
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF RETURN-ON-EQUITY MEASURES
COMPUTATION OF RETURN-ON-EQUITY MEASURES
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||
Numerator [1]: | ||||||||||||||||||||
Net income (loss) — last 12 months | $ | 2,949 | $ | 2,218 | $ | 2,134 | $ | (1,348 | ) | $ | (2,749 | ) | ||||||||
Core earnings — last 12 months | $ | 3,507 | $ | 3,456 | $ | 3,388 | $ | 1,906 | $ | 858 | ||||||||||
Denominator [2]: | ||||||||||||||||||||
Average equity, including AOCI | 19,040.0 | 18,344.0 | 17,736.0 | 15,753.5 | 14,236.0 | |||||||||||||||
Less: Average AOCI | (340.0 | ) | (1,024.0 | ) | (1,690.5 | ) | (2,410.5 | ) | (4,189.0 | ) | ||||||||||
Average equity, excluding AOCI | 19,380.0 | 19,368.0 | 19,426.5 | 18,164.0 | 18,425.0 | |||||||||||||||
ROE (net income (loss) last 12 months to equity including AOCI) | 15.5 | % | 12.1 | % | 12.0 | % | (8.6 | %) | (19.3 | %) | ||||||||||
ROE (core earnings last 12 months to equity excluding AOCI) | 18.1 | % | 17.8 | % | 17.4 | % | 10.5 | % | 4.7 | % |
[1] | For a reconciliation of net income to core earnings, see page C-2. | |
[2] | Average equity is calculated by taking the sum of equity at the beginning of the twelve month period and equity at the end of the twelve month period and dividing by 2. |
C-11
LIFE
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
FINANCIAL HIGHLIGHTS
LIFE
FINANCIAL HIGHLIGHTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity [1] | $ | 783 | $ | 722 | $ | 721 | $ | 714 | $ | 548 | (30 | %) | (23 | %) | $ | 3,049 | $ | 2,705 | (11 | %) | ||||||||||||||||||||
Other Retail | 223 | 213 | 222 | 205 | 154 | (31 | %) | (25 | %) | 813 | 794 | (2 | %) | |||||||||||||||||||||||||||
Total Retail | ||||||||||||||||||||||||||||||||||||||||
Products Group | 1,006 | 935 | 943 | 919 | 702 | (30 | %) | (24 | %) | 3,862 | 3,499 | (9 | %) | |||||||||||||||||||||||||||
Individual Life [1] | 304 | 291 | 310 | 288 | 275 | (10 | %) | (5 | %) | 1,166 | 1,164 | — | ||||||||||||||||||||||||||||
Total Individual Markets Group | 1,310 | 1,226 | 1,253 | 1,207 | 977 | (25 | %) | (19 | %) | 5,028 | 4,663 | (7 | %) | |||||||||||||||||||||||||||
Retirement Plans | 152 | 157 | 188 | 182 | 149 | (2 | %) | (18 | %) | 597 | 676 | 13 | % | |||||||||||||||||||||||||||
Group Benefits | 1,183 | 1,180 | 1,213 | 1,219 | 1,197 | 1 | % | (2 | %) | 4,773 | 4,809 | 1 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 1,335 | 1,337 | 1,401 | 1,401 | 1,346 | 1 | % | (4 | %) | 5,370 | 5,485 | 2 | % | |||||||||||||||||||||||||||
International Markets Group [1] | 241 | 258 | 264 | 249 | 267 | 11 | % | 7 | % | 895 | 1,038 | 16 | % | |||||||||||||||||||||||||||
Institutional Solutions Group | 580 | 523 | 559 | 522 | 441 | (24 | %) | (16 | %) | 2,481 | 2,045 | (18 | %) | |||||||||||||||||||||||||||
Other | 53 | 40 | 38 | 39 | (24 | ) | NM | NM | 234 | 93 | (60 | %) | ||||||||||||||||||||||||||||
Core revenues before net investment income (loss) on equity securities held for trading | 3,519 | 3,384 | 3,515 | 3,418 | 3,007 | (15 | %) | (12 | %) | 14,008 | 13,324 | (5 | %) | |||||||||||||||||||||||||||
Net investment income (loss) on equity securities held for trading [2] | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total core revenues | $ | 2,918 | $ | (194 | ) | $ | 4,668 | $ | 3 | $ | (1,493 | ) | NM | NM | $ | 14,153 | $ | 2,984 | (79 | %) | ||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues | (331 | ) | (1,224 | ) | (228 | ) | (2,007 | ) | (675 | ) | (104 | %) | 66 | % | (787 | ) | (4,134 | ) | NM | |||||||||||||||||||||
Total revenues | $ | 2,587 | $ | (1,418 | ) | $ | 4,440 | $ | (2,004 | ) | $ | (2,168 | ) | NM | (8 | %) | $ | 13,366 | $ | (1,150 | ) | NM | ||||||||||||||||||
CORE EARNINGS BY SEGMENT | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity [3] [4] | $ | 192 | $ | 174 | $ | 189 | $ | (552 | ) | $ | (198 | ) | NM | 64 | % | $ | 918 | $ | (387 | ) | NM | |||||||||||||||||||
Other Retail [3] | 17 | 13 | 14 | 13 | (2 | ) | NM | NM | 65 | 38 | (42 | %) | ||||||||||||||||||||||||||||
Total Retail Products Group | 209 | 187 | 203 | (539 | ) | (200 | ) | NM | 63 | % | 983 | (349 | ) | NM | ||||||||||||||||||||||||||
Individual Life [3] | 40 | 41 | 43 | 8 | 26 | (35 | %) | NM | 196 | 118 | (40 | %) | ||||||||||||||||||||||||||||
Total Individual Markets Group | 249 | 228 | 246 | (531 | ) | (174 | ) | NM | 67 | % | 1,179 | (231 | ) | NM | ||||||||||||||||||||||||||
Retirement Plans [3] | 22 | 17 | 33 | (36 | ) | (3 | ) | NM | 92 | % | 89 | 11 | (88 | %) | ||||||||||||||||||||||||||
Group Benefits | 92 | 70 | 85 | 100 | 90 | (2 | %) | (10 | %) | 338 | 345 | 2 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 114 | 87 | 118 | 64 | 87 | (24 | %) | 36 | % | 427 | 356 | (17 | %) | |||||||||||||||||||||||||||
International Markets Group [3] [5] | 61 | 67 | 64 | (75 | ) | (110 | ) | NM | (47 | %) | 254 | (54 | ) | NM | ||||||||||||||||||||||||||
Institutional Solutions Group [3] | 35 | 22 | 27 | 1 | (40 | ) | NM | NM | 140 | 10 | (93 | %) | ||||||||||||||||||||||||||||
Other [6] | (2 | ) | (11 | ) | (5 | ) | — | (24 | ) | NM | — | (8 | ) | (40 | ) | NM | ||||||||||||||||||||||||
Core earnings | 457 | 393 | 450 | (541 | ) | (261 | ) | NM | 52 | % | 1,992 | 41 | (98 | %) | ||||||||||||||||||||||||||
Net realized losses and other, net of tax and DAC, excluded from core earnings [3] | (180 | ) | (548 | ) | (116 | ) | (1,274 | ) | (546 | ) | NM | 57 | % | (434 | ) | (2,484 | ) | NM | ||||||||||||||||||||||
Net income (loss) | $ | 277 | $ | (155 | ) | $ | 334 | $ | (1,815 | ) | $ | (807 | ) | NM | 56 | % | $ | 1,558 | $ | (2,443 | ) | NM | ||||||||||||||||||
ROE (core earnings last 12 months to equity excluding AOCI) [7] | 21.4 | % | 21.8 | % | 20.6 | % | 7.5 | % | (0.6 | %) | (22.0 | ) | (8.1 | ) | ||||||||||||||||||||||||||
Assets under management | $ | 371,707 | $ | 370,290 | $ | 362,509 | $ | 333,305 | $ | 298,017 | (20 | %) | (11 | %) | ||||||||||||||||||||||||||
DAC capitalization | $ | 489 | $ | 428 | $ | 413 | $ | 397 | $ | 310 | (22 | %) | ||||||||||||||||||||||||||||
DAC amortization | $ | 280 | $ | (55 | ) | $ | 285 | $ | 1,404 | $ | 542 | (61 | %) | |||||||||||||||||||||||||||
DAC and PVFP assets | $ | 10,514 | $ | 11,586 | $ | 11,706 | $ | 11,012 | $ | 11,988 | 9 | % | ||||||||||||||||||||||||||||
United States Statutory surplus ($ in billions) [8] | $ | 5.8 | $ | 5.7 | $ | 5.4 | $ | 4.7 | $ | 5.1 |
[1] | Includes benefits (charges) of ($5) and ($8), after tax, recorded in the year ended December 31, 2007 for the unlock of unearned revenue reserves in Individual Annuity and Individual Life, respectively and benefits (charges) of $19, ($17) and ($5), after tax, recorded in the three months ended September 30, 2008 for the unlock of unearned revenue reserves and reinsurance premiums in Individual Annuity, Individual Life and International, respectively. The 2008 after-tax unlock benefit recorded in the three months ended September 30, 2008, in net realized gains (losses) excluded from core earnings, was $8. | |
[2] | These revenues will fluctuate principally due to the investment income and the mark-to-market adjustment of the trading investment portfolio supporting the variable annuity business in the international operations, principally in Japan. An equal and offsetting amount is recorded in benefits, losses and loss adjustment expenses, and as such has no impact on core earnings or net income. | |
[3] | Includes the effect of the unlock on amortization of deferred policy acquisition costs and present value of future profits, death benefits, sales inducements and mutual fund and other fees recorded in the year ended December 31, 2007 and the three months ended September 30, 2008. The 2007 after-tax benefits (charges) recorded in Individual Annuity, Retail Other, Retirement Plans, Institutional Solutions Group, Individual Life and International Markets Group were $198, ($1), ($9), $1, $16 and $22, respectively. The 2007 after-tax charge recorded in net realized gains (losses) excluded from core earnings was ($17). The 2008 after-tax (charges) recorded in Individual Annuity, Retail Other, Retirement Plans, Individual Life and International Markets Group were ($721), ($1), ($48), ($37) and ($125), respectively. The 2008 after-tax unlock (charge) recorded in net realized gains (losses) excluded from core earnings was ($9). | |
[4] | As a result of the goodwill testing performed during the three months ended, December 31, 2008, Individual Annuity wrote-off goodwill of $274, after-tax. | |
[5] | Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and policyholder benefits. | |
[6] | Included in the year ended December 31, 2007 is a charge of $21, after-tax, to reserve for regulatory matters. | |
[7] | Core earnings return on equity is calculated using equity attributed to Life using the Company’s capital attribution methodology. | |
[8] | Estimated United States statutory surplus at December 31, 2008. |
L-1
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
FINANCIAL HIGHLIGHTS EXCLUDING IMPACTS OF THE UNLOCK [1]
LIFE
FINANCIAL HIGHLIGHTS EXCLUDING IMPACTS OF THE UNLOCK [1]
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 [1] | 2008 | Change | Change | 2007 [1] | 2008 [1] | Change | |||||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | $ | 783 | $ | 722 | $ | 721 | $ | 685 | $ | 548 | (30 | %) | (20 | %) | $ | 3,057 | $ | 2,676 | (12 | %) | ||||||||||||||||||||
Other Retail | 223 | 213 | 222 | 205 | 154 | (31 | %) | (25 | %) | 813 | 794 | (2 | %) | |||||||||||||||||||||||||||
Total Retail Products Group | 1,006 | 935 | 943 | 890 | 702 | (30 | %) | (21 | %) | 3,870 | 3,470 | (10 | %) | |||||||||||||||||||||||||||
Individual Life | 304 | 291 | 310 | 314 | 275 | (10 | %) | (12 | %) | 1,179 | 1,190 | 1 | % | |||||||||||||||||||||||||||
Total Individual Markets Group | 1,310 | 1,226 | 1,253 | 1,204 | 977 | (25 | %) | (19 | %) | 5,049 | 4,660 | (8 | %) | |||||||||||||||||||||||||||
Retirement Plans | 152 | 157 | 188 | 182 | 149 | (2 | %) | (18 | %) | 597 | 676 | 13 | % | |||||||||||||||||||||||||||
Group Benefits | 1,183 | 1,180 | 1,213 | 1,219 | 1,197 | 1 | % | (2 | %) | 4,773 | 4,809 | 1 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 1,335 | 1,337 | 1,401 | 1,401 | 1,346 | 1 | % | (4 | %) | 5,370 | 5,485 | 2 | % | |||||||||||||||||||||||||||
International Markets Group | 241 | 258 | 264 | 256 | 267 | 11 | % | 4 | % | 895 | 1,045 | 17 | % | |||||||||||||||||||||||||||
Institutional Solutions Group | 580 | 523 | 559 | 522 | 441 | (24 | %) | (16 | %) | 2,481 | 2,045 | (18 | %) | |||||||||||||||||||||||||||
Other | 53 | 40 | 38 | 39 | (24 | ) | NM | NM | 234 | 93 | (60 | %) | ||||||||||||||||||||||||||||
Core revenues before net investment income (loss) on equity securities held for trading | 3,519 | 3,384 | 3,515 | 3,422 | 3,007 | (15 | %) | (12 | %) | 14,029 | 13,328 | (5 | %) | |||||||||||||||||||||||||||
Net investment income (loss) on equity securities held for trading | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total core revenues | $ | 2,918 | $ | (194 | ) | $ | 4,668 | $ | 7 | (1,493 | ) | NM | NM | $ | 14,174 | 2,988 | (79 | %) | ||||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues | (331 | ) | (1,224 | ) | (228 | ) | (2,019 | ) | (675 | ) | (104 | %) | 67 | % | (787 | ) | (4,146 | ) | NM | |||||||||||||||||||||
Total revenues | $ | 2,587 | $ | (1,418 | ) | $ | 4,440 | $ | (2,012 | ) | $ | (2,168 | ) | NM | (8 | %) | $ | 13,387 | $ | (1,158 | ) | NM | ||||||||||||||||||
CORE EARNINGS BY SEGMENT | ||||||||||||||||||||||||||||||||||||||||
Retail Products Group | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | $ | 192 | $ | 174 | $ | 189 | $ | 169 | $ | (198 | ) | NM | NM | 720 | $ | 334 | (54 | %) | ||||||||||||||||||||||
Other Retail | 17 | 13 | 14 | 14 | (2 | ) | NM | NM | 66 | 39 | (41 | %) | ||||||||||||||||||||||||||||
Total Retail Products Group | 209 | 187 | 203 | 183 | (200 | ) | NM | NM | 786 | 373 | (53 | %) | ||||||||||||||||||||||||||||
Individual Life | 40 | 41 | 43 | 45 | 26 | (35 | %) | (42 | %) | 180 | 155 | (14 | %) | |||||||||||||||||||||||||||
Total Individual Markets Group | 249 | 228 | 246 | 228 | (174 | ) | NM | NM | 966 | 528 | (45 | %) | ||||||||||||||||||||||||||||
Retirement Plans | 22 | 17 | 33 | 12 | (3 | ) | NM | NM | 98 | 59 | (40 | %) | ||||||||||||||||||||||||||||
Group Benefits | 92 | 70 | 85 | 100 | 90 | (2 | %) | (10 | %) | 338 | 345 | 2 | % | |||||||||||||||||||||||||||
Total Employer Markets Group | 114 | 87 | 118 | 112 | 87 | (24 | %) | (22 | %) | 436 | 404 | (7 | %) | |||||||||||||||||||||||||||
International Markets Group | 61 | 67 | 64 | 50 | (110 | ) | NM | NM | 232 | 71 | (69 | %) | ||||||||||||||||||||||||||||
Institutional Solutions Group | 35 | 22 | 27 | 1 | (40 | ) | NM | NM | 139 | 10 | (93 | %) | ||||||||||||||||||||||||||||
Other | (2 | ) | (11 | ) | (5 | ) | — | (24 | ) | NM | — | (8 | ) | (40 | ) | NM | ||||||||||||||||||||||||
Core earnings | 457 | 393 | 450 | 391 | (261 | ) | NM | NM | 1,765 | 973 | (45 | %) | ||||||||||||||||||||||||||||
Net realized losses and other, net of tax and DAC, excluded from core earnings | (180 | ) | (548 | ) | (116 | ) | (1,265 | ) | (546 | ) | NM | 57 | % | (417 | ) | (2,475 | ) | NM | ||||||||||||||||||||||
Net income (loss) | $ | 277 | $ | (155 | ) | $ | 334 | $ | (874 | ) | $ | (807 | ) | NM | 8 | % | $ | 1,348 | $ | (1,502 | ) | NM | ||||||||||||||||||
[1] | This page represents financial results as reported on page L-1 excluding the impacts of the unlock recorded in the year ended December 31, 2007 and the three months ended September 30, 2008. |
L-1A
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
OPERATING RESULTS
LIFE
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
REVENUES | ||||||||||||||||||||||||||||||||||||||||
Earned premiums | $ | 1,236 | $ | 1,229 | $ | 1,305 | $ | 1,335 | $ | 1,296 | 5 | % | (3 | %) | $ | 5,123 | $ | 5,165 | 1 | % | ||||||||||||||||||||
Fee income | 1,407 | 1,339 | 1,390 | 1,332 | 1,081 | (23 | %) | (19 | %) | 5,420 | 5,142 | (5 | %) | |||||||||||||||||||||||||||
Net investment income (loss) | ||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale and other | 878 | 819 | 829 | 759 | 638 | (27 | %) | (16 | %) | 3,497 | 3,045 | (13 | %) | |||||||||||||||||||||||||||
Equity securities held for trading [1] | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total net investment income (loss) | 277 | (2,759 | ) | 1,982 | (2,656 | ) | (3,862 | ) | NM | (45 | %) | 3,642 | (7,295 | ) | NM | |||||||||||||||||||||||||
Net realized capital losses — core | (2 | ) | (3 | ) | (9 | ) | (8 | ) | (8 | ) | NM | — | (32 | ) | (28 | ) | 13 | % | ||||||||||||||||||||||
Total core revenues | 2,918 | (194 | ) | 4,668 | 3 | (1,493 | ) | NM | NM | 14,153 | 2,984 | (79 | %) | |||||||||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues | (331 | ) | (1,224 | ) | (228 | ) | (2,007 | ) | (675 | ) | (104 | %) | 66 | % | (787 | ) | (4,134 | ) | NM | |||||||||||||||||||||
Total revenues | 2,587 | (1,418 | ) | 4,440 | (2,004 | ) | (2,168 | ) | NM | (8 | %) | 13,366 | (1,150 | ) | NM | |||||||||||||||||||||||||
BENEFITS AND EXPENSES | ||||||||||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses | 1,709 | 1,729 | 1,771 | 2,095 | 1,829 | 7 | % | (13 | %) | 7,002 | 7,424 | 6 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses — Returns credited on International variable annuities [1] | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits | 339 | 317 | 321 | 1,408 | 424 | 25 | % | (70 | %) | 1,007 | 2,470 | 145 | % | |||||||||||||||||||||||||||
Goodwill impairment [2] | — | — | — | — | 422 | — | — | — | 422 | — | ||||||||||||||||||||||||||||||
Insurance operating costs and other expenses | 851 | 817 | 863 | 838 | 782 | (8 | %) | (7 | %) | 3,230 | 3,300 | 2 | % | |||||||||||||||||||||||||||
Total benefits and expenses | 2,298 | (715 | ) | 4,108 | 926 | (1,043 | ) | NM | NM | 11,384 | 3,276 | (71 | %) | |||||||||||||||||||||||||||
CORE EARNINGS | ||||||||||||||||||||||||||||||||||||||||
Core earnings before income taxes | 620 | 521 | 560 | (923 | ) | (450 | ) | NM | 51 | % | 2,769 | (292 | ) | NM | ||||||||||||||||||||||||||
Income tax expense (benefit) | 163 | 128 | 110 | (382 | ) | (189 | ) | NM | 51 | % | 777 | (333 | ) | NM | ||||||||||||||||||||||||||
Core earnings | 457 | 393 | 450 | (541 | ) | (261 | ) | NM | 52 | % | 1,992 | 41 | (98 | %) | ||||||||||||||||||||||||||
Net realized losses and other, net of tax and DAC, excluded from core earnings | (180 | ) | (548 | ) | (116 | ) | (1,274 | ) | (546 | ) | NM | 57 | % | (434 | ) | (2,484 | ) | NM | ||||||||||||||||||||||
Net income (loss) | 277 | (155 | ) | 334 | (1,815 | ) | (807 | ) | NM | 56 | % | 1,558 | (2,443 | ) | NM | |||||||||||||||||||||||||
[1] | Includes dividend income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within interest credited. | |
[2] | As a result of the goodwill testing performed during the three months ended, December 31, 2008, the Company wrote-off goodwill of $274, after-tax. |
L-2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
TOTAL ASSETS UNDER MANAGEMENT
LIFE
TOTAL ASSETS UNDER MANAGEMENT
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
TOTAL ASSETS UNDER MANAGEMENT | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||
General account | $ | 116,230 | $ | 118,697 | $ | 118,455 | $ | 114,838 | $ | 117,707 | 1 | % | 2 | % | ||||||||||||||
Separate account | 199,946 | 181,273 | 170,841 | 154,029 | 130,184 | (35 | %) | (15 | %) | |||||||||||||||||||
Total assets | 316,176 | 299,970 | 289,296 | 268,867 | 247,891 | (22 | %) | (8 | %) | |||||||||||||||||||
Mutual fund assets [1] | 55,531 | 70,320 | 73,213 | 64,438 | 50,126 | (10 | %) | (22 | %) | |||||||||||||||||||
Total assets under management | $ | 371,707 | $ | 370,290 | $ | 362,509 | $ | 333,305 | $ | 298,017 | (20 | %) | (11 | %) | ||||||||||||||
[1] | During the three months ended March 31, 2008, the Company acquired the rights to service $18.7 billion of mutual fund assets from Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29, and March 28, 2008, respectively. |
L-3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
CONSOLIDATED BALANCE SHEETS
LIFE
CONSOLIDATED BALANCE SHEETS
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 52,542 | $ | 50,615 | $ | 49,683 | $ | 46,292 | $ | 45,182 | (14 | %) | (2 | %) | ||||||||||||||
Equity securities, trading, at fair value | 36,182 | 37,406 | 36,853 | 33,655 | 30,820 | (15 | %) | (8 | %) | |||||||||||||||||||
Equity securities, available-for-sale, at fair value | 1,284 | 1,202 | 1,194 | 908 | 711 | (45 | %) | (22 | %) | |||||||||||||||||||
Policy loans, at outstanding balance | 2,061 | 2,118 | 2,146 | 2,159 | 2,208 | 7 | % | 2 | % | |||||||||||||||||||
Mortgage loans on real estate | 4,739 | 4,821 | 5,135 | 5,460 | 5,684 | 20 | % | 4 | % | |||||||||||||||||||
Limited partnerships and other alternative investments | 1,306 | 1,329 | 1,407 | 1,410 | 1,129 | (14 | %) | (20 | %) | |||||||||||||||||||
Short term Investments | 1,158 | 1,807 | 2,756 | 3,793 | 6,937 | NM | 83 | % | ||||||||||||||||||||
Other investments | 534 | 1,086 | 894 | 1,308 | 1,473 | 176 | % | 13 | % | |||||||||||||||||||
Total investments | 99,806 | 100,384 | 100,068 | 94,985 | 94,144 | (6 | %) | (1 | %) | |||||||||||||||||||
Cash | 1,770 | 2,016 | 1,842 | 1,683 | 1,648 | (7 | %) | (2 | %) | |||||||||||||||||||
Premiums receivable and agents’ balances | 427 | 395 | 392 | 390 | 407 | (5 | %) | 4 | % | |||||||||||||||||||
Reinsurance recoverables | 1,419 | 1,599 | 1,535 | 2,103 | 2,918 | 106 | % | 39 | % | |||||||||||||||||||
Deferred policy acquisition costs and present value of future profits | 10,514 | 11,586 | 11,706 | 11,012 | 11,988 | 14 | % | 9 | % | |||||||||||||||||||
Deferred income taxes | (754 | ) | (373 | ) | (135 | ) | 1,324 | 2,183 | NM | 65 | % | |||||||||||||||||
Goodwill | 805 | 867 | 867 | 880 | 462 | (43 | %) | (48 | %) | |||||||||||||||||||
Property and equipment, net | 374 | 393 | 383 | 380 | 400 | 7 | % | 5 | % | |||||||||||||||||||
Other assets | 1,869 | 1,830 | 1,797 | 2,081 | 3,557 | 90 | % | 71 | % | |||||||||||||||||||
Separate account assets | 199,946 | 181,273 | 170,841 | 154,029 | 130,184 | (35 | %) | (15 | %) | |||||||||||||||||||
Total assets | $ | 316,176 | $ | 299,970 | $ | 289,296 | $ | 268,867 | $ | 247,891 | (22 | %) | (8 | %) | ||||||||||||||
Future policy benefits, unpaid losses and loss adjustment expenses | $ | 15,331 | $ | 15,544 | $ | 15,772 | $ | 16,602 | $ | 16,747 | 9 | % | 1 | % | ||||||||||||||
Other policyholder funds and benefits payable | 44,190 | 46,460 | 46,563 | 47,208 | 53,753 | 22 | % | 14 | % | |||||||||||||||||||
Other policyholder funds payable — International variable annuities | 36,152 | 37,376 | 36,822 | 33,629 | 30,799 | (15 | %) | (8 | %) | |||||||||||||||||||
Unearned premiums | 147 | 167 | 161 | 163 | 138 | (6 | %) | (15 | %) | |||||||||||||||||||
Consumer Notes | 809 | 971 | 1,113 | 1,225 | 1,210 | 50 | % | (1 | %) | |||||||||||||||||||
Debt | 115 | 91 | 91 | 92 | 92 | (20 | %) | — | ||||||||||||||||||||
Other liabilities | 8,045 | 8,286 | 7,712 | 7,816 | 7,389 | (8 | %) | (5 | %) | |||||||||||||||||||
Separate account liabilities | 199,946 | 181,273 | 170,841 | 154,029 | 130,184 | (35 | %) | (15 | %) | |||||||||||||||||||
Total liabilities | 304,735 | 290,168 | 279,075 | 260,764 | 240,312 | (21 | %) | (8 | %) | |||||||||||||||||||
Equity excluding AOCI, net of tax | 11,868 | 11,059 | 11,888 | 10,752 | 12,095 | 2 | % | 12 | % | |||||||||||||||||||
AOCI, net of tax | (427 | ) | (1,257 | ) | (1,667 | ) | (2,649 | ) | (4,516 | ) | NM | (70 | %) | |||||||||||||||
Total stockholders’ equity | 11,441 | 9,802 | 10,221 | 8,103 | 7,579 | (34 | %) | (6 | %) | |||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 316,176 | $ | 299,970 | $ | 289,296 | $ | 268,867 | $ | 247,891 | (22 | %) | (8 | %) | ||||||||||||||
Hartford Life and Accident Insurance Company NAIC RBC | 416.1 | % | ||||||||||||||||||||||||||
Hartford Life Insurance Company NAIC RBC | 513.2 | % | ||||||||||||||||||||||||||
Hartford Life and Annuity Insurance Company NAIC RBC | 1309.9 | % |
L-4
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (“DAC”)
LIFE
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (“DAC”)
Institutional | ||||||||||||||||||||||||||||||||
Individual | Other | Retirement | Solutions | Individual | Group | |||||||||||||||||||||||||||
Annuity | Retail | Plans | Group | Life | Benefits | International | Total | |||||||||||||||||||||||||
YEAR-TO-DATE | ||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | $ | 5,179 | $ | 136 | $ | 658 | $ | 143 | $ | 2,406 | $ | 69 | $ | 1,923 | $ | 10,514 | ||||||||||||||||
Adjustments to unrealized gains and losses on securities available — for — sale and other | (92 | ) | (2 | ) | (41 | ) | — | (2 | ) | — | (22 | ) | (159 | ) | ||||||||||||||||||
Balance excluding adjustments to unrealized gains and losses on securities available — for — sale and other | 5,087 | 134 | 617 | 143 | 2,404 | 69 | 1,901 | 10,355 | ||||||||||||||||||||||||
Capitalization | 577 | 74 | 142 | 31 | 362 | 69 | 293 | 1,548 | ||||||||||||||||||||||||
Amortization — Deferred Policy Acquisition Costs | (538 | ) | (94 | ) | (25 | ) | (19 | ) | (125 | ) | (57 | ) | (452 | ) | (1,310 | ) | ||||||||||||||||
Amortization — Present Value of Future Profits | (6 | ) | — | — | — | (16 | ) | — | — | (22 | ) | |||||||||||||||||||||
Amortization — Realized Capital Gains / Losses | 291 | — | 10 | — | 16 | — | (8 | ) | 309 | |||||||||||||||||||||||
Amortization — Unlock — Core | (959 | ) | (2 | ) | (75 | ) | — | (26 | ) | — | (44 | ) | (1,106 | ) | ||||||||||||||||||
Amortization — Unlock — Non-core | (36 | ) | — | (1 | ) | — | (18 | ) | — | 8 | (47 | ) | ||||||||||||||||||||
Effect of Currency Translation Adjustment | — | — | — | — | — | — | 348 | 348 | ||||||||||||||||||||||||
Balance, December 31, 2008 | 4,416 | 112 | 668 | 155 | 2,597 | 81 | 2,046 | 10,075 | ||||||||||||||||||||||||
Adjustments to unrealized gains and losses on securities available — for — sale and other | 1,277 | (4 | ) | 209 | 1 | 430 | — | — | 1,913 | |||||||||||||||||||||||
Balance, December 31, 2008 including adjustments to unrealized gains and losses on securities available-for-sale and other | $ | 5,693 | $ | 108 | $ | 877 | $ | 156 | $ | 3,027 | $ | 81 | $ | 2,046 | $ | 11,988 | ||||||||||||||||
Institutional | ||||||||||||||||||||||||||||||||||||||||
Individual | Other | Retirement | Solutions | Individual | Group | HFSG | Total | |||||||||||||||||||||||||||||||||
Effect of Unlock [2] — September 30, 2008 | Annuity | Retail | Plans | Group | Life | Benefits | International | Total Life | Corporate [1] | Company | ||||||||||||||||||||||||||||||
Mutual Fund and Other Fees | $ | 24 | $ | — | $ | — | $ | — | $ | (26 | ) | $ | — | $ | (7 | ) | $ | (9 | ) | $ | — | $ | (9 | ) | ||||||||||||||||
Reinsurance Premiums | 5 | — | — | — | — | — | — | 5 | — | 5 | ||||||||||||||||||||||||||||||
Death Benefits | 116 | — | 1 | — | — | — | 139 | 256 | — | 256 | ||||||||||||||||||||||||||||||
Change in Reserves | — | — | — | — | 5 | — | — | 5 | — | 5 | ||||||||||||||||||||||||||||||
Sales Inducements | 62 | — | 1 | — | — | — | 1 | 64 | — | 64 | ||||||||||||||||||||||||||||||
Amortization of DAC | 959 | 2 | 75 | — | 26 | — | 44 | 1,106 | — | 1,106 | ||||||||||||||||||||||||||||||
Other Expenses | — | — | — | — | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||
Effect of Unlock on Earnings before income taxes | (1,108 | ) | (2 | ) | (77 | ) | — | (57 | ) | — | (191 | ) | (1,435 | ) | 13 | (1,422 | ) | |||||||||||||||||||||||
Income tax (benefit) expense | (387 | ) | (1 | ) | (29 | ) | — | (20 | ) | — | (66 | ) | (503 | ) | 4 | (499 | ) | |||||||||||||||||||||||
Effect of Unlock on Core Earnings | (721 | ) | (1 | ) | (48 | ) | — | (37 | ) | — | (125 | ) | (932 | ) | 9 | (923 | ) | |||||||||||||||||||||||
Net realized gains (losses), net of tax, excluded from core earnings | (10 | ) | — | (1 | ) | — | (7 | ) | — | 9 | (9 | ) | — | (9 | ) | |||||||||||||||||||||||||
Effect of Unlock on Net Income | $ | (731 | ) | $ | (1 | ) | $ | (49 | ) | $ | — | $ | (44 | ) | $ | — | $ | (116 | ) | $ | (941 | ) | $ | 9 | $ | (932 | ) | |||||||||||||
[1] | In HFSG Corporate, revisions to estimated gross profits affect the purchase accounting adjustments made in connection with the buyback of Hartford Life, Inc. shares in 2000. | |
[2] | For purposes of this schedule increases to revenue amounts are positive numbers; increases to expense amounts are positive numbers; and increases to income before taxes, net income and core earnings are positive numbers. |
L-5
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
SUPPLEMENTAL DATA — ANNUITY DEATH AND INCOME BENEFITS
LIFE
SUPPLEMENTAL DATA — ANNUITY DEATH AND INCOME BENEFITS
As of December 31, 2008 | ||||||||||||||||
ACCOUNT | NET AMT AT | % of NAR | ||||||||||||||
VALUE | RISK | REINSURED | RETAINED NAR | |||||||||||||
BREAKDOWN OF INDIVIDUAL VARIABLE AND GROUP ANNUITY ACCOUNT VALUE BY BENEFIT TYPE | ||||||||||||||||
Maximum anniversary value (MAV) [1] | ||||||||||||||||
MAV only | $ | 25,961 | $ | 14,743 | 66 | % | $ | 5,019 | ||||||||
with 5% rollup [2] | 1,858 | 1,153 | 58 | % | 481 | |||||||||||
with Earnings Protection Benefit Rider (EPB) [3] | 5,068 | 2,447 | 90 | % | 241 | |||||||||||
with 5% rollup & EPB | 742 | 400 | 81 | % | 75 | |||||||||||
Total MAV | 33,629 | 18,743 | 69 | % | 5,816 | |||||||||||
Asset Protection Benefit (APB) [4] | 25,601 | 11,985 | 45 | % | 6,634 | |||||||||||
Lifetime Income Benefit (LIB) — Death Benefit [5] | 1,137 | 487 | — | % | 487 | |||||||||||
Reset [6] (5-7 years) | 3,440 | 1,190 | — | % | 1,189 | |||||||||||
Return of Premium [7]/Other | 17,321 | 3,889 | 6 | % | 3,638 | |||||||||||
SUBTOTAL U.S. GUARANTEED MINIMUM DEATH BENEFITS | $ | 81,128 | $ | 36,294 | 51 | % | $ | 17,764 | ||||||||
JAPAN GUARANTEED MINIMUM DEATH AND INCOME BENEFITS [8] | 29,726 | 9,151 | 15 | % | 7,761 | |||||||||||
TOTAL | $ | 110,854 | $ | 45,445 | 44 | % | $ | 25,525 | ||||||||
As of | As of | As of | As of | As of | ||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||
OTHER DATA | ||||||||||||||||||||
U.S. VARIABLE ANNUITY BUSINESS | ||||||||||||||||||||
S&P 500 Index Value at end of period | 1,468.36 | 1,322.70 | 1,280.00 | 1,164.74 | 903.25 | |||||||||||||||
Total Account Value | $ | 126,834 | $ | 115,212 | $ | 112,786 | $ | 99,118 | $ | 81,128 | ||||||||||
Retained net amount of risk | 976 | 3,633 | 4,067 | 8,565 | 17,764 | |||||||||||||||
GMDB net GAAP liability [9] | 202 | 203 | 208 | 304 | 275 | |||||||||||||||
JAPAN VARIABLE ANNUITY BUSINESS | ||||||||||||||||||||
Total Account Value | $ | 35,793 | $ | 36,777 | $ | 35,910 | $ | 32,706 | $ | 29,726 | ||||||||||
Retained net amount of risk | 419 | 2,151 | 1,706 | 3,716 | 7,761 | |||||||||||||||
GMDB/GMIB net GAAP liability [9] | 34 | 39 | 37 | 178 | 198 |
[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 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 greatest of current account value, net premiums paid, or for certain contracts 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 80) paid in a single lump sum. The income benefit is a guarantee to return initial investment, which is adjusted for earnings liquidity, paid 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 $30.6 billion and $26.8 billion as of December 31, 2008 and December 31, 2007, respectively. | |
[9] | Includes the increase (decrease) to GMDB/GMIB liability as a result of the unlock recorded in the year ended December 31, 2007 for U.S. and Japan variable annuity business of $6 and ($9), respectively. For the three months ended September 30, 2008 there was an increase to GMDB/GMIB liability, as a result of the unlock, for U.S. and Japan variable annuity business of $116 and $139, respectively. |
L-6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
REINSURANCE RECOVERABLE ANALYSIS
As of December 31, 2008
LIFE
REINSURANCE RECOVERABLE ANALYSIS
As of December 31, 2008
Statutory Reserve Credit and Amounts Recoverable
Gross statutory reinsurance reserve credit | $ | 2,835 | ||
Liability for reinsurance in unauthorized companies | (2 | ) | ||
Net statutory reinsurance reserve credit | $ | 2,833 | ||
Statutory amounts recoverable from reinsurers | $ | 229 | ||
The top ten reinsurers represent $2,741 or 90% of the total statutory reserve credit and amounts recoverable.
• | 55% of this amount is with reinsurers rated “A+” by A.M. Best at January 23, 2009. | ||
• | 33% of this amount is with reinsurers rated “A” by A.M. Best at January 23, 2009. | ||
• | 4% of this amount is with reinsurers rated “A-” by A.M. Best at January 23, 2009. | ||
• | 8% of this amount is with reinsurers rated “B++” by A.M. Best at January 23, 2009. |
L-7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
LIFE
STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
December 31, 2008 | December 31, 2007 | |||||||
Statutory Capital and Surplus [1] | $ | 5,060 | $ | 5,786 | ||||
GAAP Adjustments | ||||||||
Investment in subsidiaries | 2,960 | 230 | ||||||
Deferred policy acquisition costs | 11,988 | 10,514 | ||||||
Deferred taxes | 1,885 | (1,155 | ) | |||||
Benefit reserves | (6,663 | ) | (4,240 | ) | ||||
Unrealized losses on investments, net of impairments | (8,465 | ) | (513 | ) | ||||
Asset valuation reserve and interest maintenance reserve | 177 | 626 | ||||||
Goodwill | 376 | 662 | ||||||
Other, net | 261 | (469 | ) | |||||
GAAP Stockholders’ Equity | $ | 7,579 | $ | 11,441 | ||||
Certain Reclassifications have been made to prior year financial information to conform to current year presentation.
[1] | Estimated United States statutory surplus at December 31, 2008. |
L-8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP — INDIVIDUAL ANNUITY
INCOME STATEMENTS
LIFE
RETAIL PRODUCTS GROUP — INDIVIDUAL ANNUITY
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable annuity fees | $ | 554 | $ | 497 | $ | 495 | $ | 454 | $ | 335 | (40 | %) | (26 | %) | $ | 2,151 | $ | 1,781 | (17 | %) | ||||||||||||||||||||
Mutual fund and other fees [2] | 37 | 33 | 34 | 59 | 31 | (16 | %) | (47 | %) | 138 | 157 | 14 | % | |||||||||||||||||||||||||||
Total fee income | 591 | 530 | 529 | 513 | 366 | (38 | %) | (29 | %) | 2,289 | 1,938 | (15 | %) | |||||||||||||||||||||||||||
Direct premiums | 22 | 24 | 24 | 29 | 22 | — | (24 | %) | 81 | 99 | 22 | % | ||||||||||||||||||||||||||||
Reinsurance premiums [2] | (36 | ) | (30 | ) | (31 | ) | (18 | ) | (24 | ) | 33 | % | (33 | %) | (143 | ) | (103 | ) | 28 | % | ||||||||||||||||||||
Net premiums | (14 | ) | (6 | ) | (7 | ) | 11 | (2 | ) | 86 | % | NM | (62 | ) | (4 | ) | 94 | % | ||||||||||||||||||||||
Total premiums and other considerations | 577 | 524 | 522 | 524 | 364 | (37 | %) | (31 | %) | 2,227 | 1,934 | (13 | %) | |||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 226 | 209 | 210 | 198 | 162 | (28 | %) | (18 | %) | 919 | 779 | (15 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 12 | 19 | 20 | 22 | 31 | 158 | % | 41 | % | 47 | 92 | 96 | % | |||||||||||||||||||||||||||
Charge for invested capital | (35 | ) | (33 | ) | (32 | ) | (30 | ) | (7 | ) | 80 | % | 77 | % | (150 | ) | (102 | ) | 32 | % | ||||||||||||||||||||
Total net investment income | 203 | 195 | 198 | 190 | 186 | (8 | %) | (2 | %) | 816 | 769 | (6 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) — core | 3 | 3 | 1 | — | (2 | ) | NM | — | 6 | 2 | (67 | %) | ||||||||||||||||||||||||||||
Total core revenues | 783 | 722 | 721 | 714 | 548 | (30 | %) | (23 | %) | 3,049 | 2,705 | (11 | %) | |||||||||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues | (81 | ) | (759 | ) | (71 | ) | (483 | ) | (595 | ) | NM | (23 | %) | (387 | ) | (1,908 | ) | NM | ||||||||||||||||||||||
Total revenues | 702 | (37 | ) | 650 | 231 | (47 | ) | NM | NM | 2,662 | 797 | (70 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death benefits [2] | 11 | 13 | 13 | 131 | 35 | NM | (73 | %) | 49 | 192 | NM | |||||||||||||||||||||||||||||
Other contract benefits | 17 | 18 | 18 | 24 | 27 | 59 | % | 13 | % | 65 | 87 | 34 | % | |||||||||||||||||||||||||||
Change in reserve | 12 | 14 | 13 | 14 | 11 | (8 | %) | (21 | %) | 45 | 52 | 16 | % | |||||||||||||||||||||||||||
Sales inducements [2] | 16 | 13 | 12 | 73 | 2 | (88 | %) | (97 | %) | 47 | 100 | 113 | % | |||||||||||||||||||||||||||
Interest credited on G/A assets | 155 | 150 | 148 | 159 | 162 | 5 | % | 2 | % | 614 | 619 | 1 | % | |||||||||||||||||||||||||||
Total benefits and losses | 211 | 208 | 204 | 401 | 237 | 12 | % | (41 | %) | 820 | 1,050 | 28 | % | |||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 282 | 253 | 242 | 214 | 175 | (38 | %) | (18 | %) | 1,198 | 884 | (26 | %) | |||||||||||||||||||||||||||
Operating expenses | 61 | 52 | 62 | 56 | 56 | (8 | %) | — | 227 | 226 | — | |||||||||||||||||||||||||||||
Premium taxes and other expenses | 4 | 3 | 2 | 3 | 5 | 25 | % | 67 | % | 14 | 13 | (7 | %) | |||||||||||||||||||||||||||
Subtotal — expenses before deferral | 347 | 308 | 306 | 273 | 236 | (32 | %) | (14 | %) | 1,439 | 1,123 | (22 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (190 | ) | (167 | ) | (157 | ) | (144 | ) | (109 | ) | 43 | % | 24 | % | (844 | ) | (577 | ) | 32 | % | ||||||||||||||||||||
Total other insurance expense | 157 | 141 | 149 | 129 | 127 | (19 | %) | (2 | %) | 595 | 546 | (8 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [2] | 178 | 164 | 157 | 1,096 | 86 | (52 | %) | (92 | %) | 438 | 1,503 | NM | ||||||||||||||||||||||||||||
Goodwill impairment [4] | — | — | — | — | 422 | — | — | — | 422 | — | ||||||||||||||||||||||||||||||
Total benefits and expenses | 546 | 513 | 510 | 1,626 | 872 | 60 | % | (46 | %) | 1,853 | 3,521 | 90 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes | 237 | 209 | 211 | (912 | ) | (324 | ) | NM | 64 | % | 1,196 | (816 | ) | NM | ||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] | 45 | 35 | 22 | (360 | ) | (126 | ) | NM | 65 | % | 278 | (429 | ) | NM | ||||||||||||||||||||||||||
Core earnings (loss) [2] | 192 | 174 | 189 | (552 | ) | (198 | ) | NM | 64 | % | 918 | (387 | ) | NM | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [2] [3] | (13 | ) | (264 | ) | (33 | ) | (282 | ) | (470 | ) | NM | (67 | %) | (171 | ) | (1,049 | ) | NM | ||||||||||||||||||||||
Net income (loss) [2] | $ | 179 | $ | (90 | ) | $ | 156 | $ | (834 | ) | $ | (668 | ) | NM | 20 | % | $ | 747 | $ | (1,436 | ) | NM | ||||||||||||||||||
RETURN ON ASSETS (After-tax bps) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 58.5 | 56.3 | 64.7 | (202.0 | ) | (83.9 | ) | NM | 58 | % | 72.4 | (36.0 | ) | NM | ||||||||||||||||||||||||||
Net income (loss) | 54.5 | (29.1 | ) | 53.4 | (305.1 | ) | (283.1 | ) | NM | 7 | % | 58.9 | (133.5 | ) | NM |
[1] | The year ended December 31, 2007 includes an additional $12 tax charge related to DRD and the three months ended June 30, 2008 includes a tax benefit of $16 related to DRD and FTC. | |
[2] | The DAC unlock included in the year ended December 31, 2007 increased core earnings and net income by $198 and $181, respectively. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $721 and $731, respectively. The effect on each income statement line item is as follows: |
December 31, 2007 | September 30, 2008 | |||||||
Mutual Fund and Other Fees | $ | (8 | ) | $ | 24 | |||
Reinsurance Premiums | — | 5 | ||||||
Death Benefits | 6 | 116 | ||||||
Sales Inducements | (14 | ) | 62 | |||||
Amortization of deferred policy acquisition costs | (305 | ) | 959 | |||||
Income tax expense (benefit) | 107 | (387 | ) | |||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings | (17 | ) | (10 | ) |
[3] | Included in the three months ended December 31, 2007 are guaranteed minimum withdrawal benefit (“GMWB”) net realized gains (losses), net of tax and DAC, excluded from core earnings of $(13). Included in the three months ended March 31, June 30, September 30, and December 31, 2008 the amounts are $(251), $(7), ($45) and ($254), respectively. | |
[4] | As a result of the goodwill testing performed during the three months ended, December 31, 2008, Individual Annuity wrote-off goodwill of $274, after-tax. |
L-9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP — OTHER
INCOME STATEMENTS
LIFE
RETAIL PRODUCTS GROUP — OTHER
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable annuity fees | $ | 4 | $ | 4 | $ | 4 | $ | 3 | $ | 2 | (50 | %) | (33 | %) | $ | 15 | $ | 13 | (13 | %) | ||||||||||||||||||||
Mutual fund and other fees | 223 | 213 | 224 | 208 | 158 | (29 | %) | (24 | %) | 813 | 803 | (1 | %) | |||||||||||||||||||||||||||
Total fee income | 227 | 217 | 228 | 211 | 160 | (30 | %) | (24 | %) | 828 | 816 | (1 | %) | |||||||||||||||||||||||||||
Net investment loss | ||||||||||||||||||||||||||||||||||||||||
Net investment loss on G/A assets | — | (1 | ) | (3 | ) | (3 | ) | (4 | ) | — | (33 | %) | (3 | ) | (11 | ) | NM | |||||||||||||||||||||||
Net investment loss on assigned capital | (4 | ) | (3 | ) | (3 | ) | (3 | ) | (2 | ) | 50 | % | 33 | % | (12 | ) | (11 | ) | 8 | % | ||||||||||||||||||||
Total net investment loss | (4 | ) | (4 | ) | (6 | ) | (6 | ) | (6 | ) | (50 | %) | — | (15 | ) | (22 | ) | (47 | %) | |||||||||||||||||||||
Total core revenues | 223 | 213 | 222 | 205 | 154 | (31 | %) | (25 | %) | 813 | 794 | (2 | %) | |||||||||||||||||||||||||||
Net realized losses, before tax and DAC, excluded from core revenues | — | — | — | (1 | ) | — | — | 100 | % | — | (1 | ) | — | |||||||||||||||||||||||||||
Total revenues | 223 | 213 | 222 | 204 | 154 | (31 | %) | (25 | %) | 813 | 793 | (2 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 156 | 149 | 158 | 143 | 103 | (34 | %) | (28 | %) | 578 | 553 | (4 | %) | |||||||||||||||||||||||||||
Operating expenses | 41 | 40 | 40 | 34 | 30 | (27 | %) | (12 | %) | 137 | 144 | 5 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses | 3 | 4 | 3 | 5 | 6 | 100 | % | 20 | % | 12 | 18 | 50 | % | |||||||||||||||||||||||||||
Subtotal — expenses before deferral | 200 | 193 | 201 | 182 | 139 | (31 | %) | (24 | %) | 727 | 715 | (2 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (25 | ) | (22 | ) | (23 | ) | (17 | ) | (12 | ) | 52 | % | 29 | % | (101 | ) | (74 | ) | 27 | % | ||||||||||||||||||||
Total other insurance expense | 175 | 171 | 178 | 165 | 127 | (27 | %) | (23 | %) | 626 | 641 | 2 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] | 23 | 22 | 22 | 22 | 30 | 30 | % | 36 | % | 88 | 96 | 9 | % | |||||||||||||||||||||||||||
Total benefits and expenses | 198 | 193 | 200 | 187 | 157 | (21 | %) | (16 | %) | 714 | 737 | 3 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes | 25 | 20 | 22 | 18 | (3 | ) | NM | NM | 99 | 57 | (42 | %) | ||||||||||||||||||||||||||||
Income tax expense (benefit) [1] | 8 | 7 | 8 | 5 | (1 | ) | NM | NM | 34 | 19 | (44 | %) | ||||||||||||||||||||||||||||
Core earnings (loss) [1] | 17 | 13 | 14 | 13 | (2 | ) | NM | NM | 65 | 38 | (42 | %) | ||||||||||||||||||||||||||||
Net realized losses, net of tax and DAC, excluded from core earnings | — | — | — | (1 | ) | — | — | 100 | % | — | (1 | ) | — | |||||||||||||||||||||||||||
Net income (loss) [1] | $ | 17 | $ | 13 | $ | 14 | $ | 12 | $ | (2 | ) | NM | NM | $ | 65 | $ | 37 | (43 | %) | |||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 13.4 | 10.6 | 11.5 | 11.1 | (2.1 | ) | NM | NM | 14.2 | 9.0 | (37 | %) | ||||||||||||||||||||||||||||
Net income | 13.4 | 10.6 | 11.5 | 10.3 | (2.1 | ) | NM | NM | 14.2 | 8.8 | (38 | %) |
[1] | The DAC unlock included in the year ended December 31, 2007 increased amortization of deferred policy acquisition costs by $1, after-tax. The DAC unlock recorded in the three months ended September 30, 2008 increased amortization of deferred policy acquisition costs by $1, after-tax. |
L-10
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — DEPOSITS
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — DEPOSITS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Broker-dealer | $ | 2,106 | $ | 1,677 | $ | 1,574 | $ | 1,502 | $ | 1,266 | (40 | %) | (16 | %) | $ | 8,775 | $ | 6,019 | (31 | %) | ||||||||||||||||||||
Banks | 1,148 | 938 | 982 | 832 | 742 | (35 | %) | (11 | %) | 5,549 | 3,494 | (37 | %) | |||||||||||||||||||||||||||
Total deposits by distribution | 3,254 | 2,615 | 2,556 | 2,334 | 2,008 | (38 | %) | (14 | %) | 14,324 | 9,513 | (34 | %) | |||||||||||||||||||||||||||
Variable | 3,126 | 2,546 | 2,233 | 1,948 | 1,160 | (63 | %) | (40 | %) | 13,197 | 7,887 | (40 | %) | |||||||||||||||||||||||||||
Fixed MVA/other | 128 | 69 | 323 | 386 | 848 | NM | 120 | % | 1,127 | 1,626 | 44 | % | ||||||||||||||||||||||||||||
Total deposits by product | 3,254 | 2,615 | 2,556 | 2,334 | 2,008 | (38 | %) | (14 | %) | 14,324 | 9,513 | (34 | %) | |||||||||||||||||||||||||||
Retail Mutual Funds | 3,549 | 3,966 | 3,967 | 3,614 | 2,565 | (28 | %) | (29 | %) | 14,356 | 14,112 | (2 | %) | |||||||||||||||||||||||||||
529 College Savings Plan/Specialty Products/Other | 180 | 183 | 153 | 141 | 80 | (56 | %) | (43 | %) | 721 | 557 | (23 | %) | |||||||||||||||||||||||||||
Total Retail Products Group | $ | 6,983 | $ | 6,764 | $ | 6,676 | $ | 6,089 | $ | 4,653 | (33 | %) | (24 | %) | $ | 29,401 | $ | 24,182 | (18 | %) | ||||||||||||||||||||
L-11
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
INDIVIDUAL ANNUITY | ||||||||||||||||||||||||||||
General account | $ | 15,100 | $ | 15,126 | $ | 15,275 | $ | 15,650 | $ | 16,051 | 6 | % | 3 | % | ||||||||||||||
Non-guaranteed separate account | 114,214 | 102,924 | 100,436 | 87,287 | 69,805 | (39 | %) | (20 | %) | |||||||||||||||||||
Total Individual Annuity | $ | 129,314 | $ | 118,050 | $ | 115,711 | $ | 102,937 | $ | 85,856 | (34 | %) | (17 | %) | ||||||||||||||
BY PRODUCT | ||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||
Individual Variable Annuities | ||||||||||||||||||||||||||||
General account | $ | 4,995 | $ | 5,126 | $ | 5,039 | $ | 5,081 | $ | 4,866 | (3 | %) | (4 | %) | ||||||||||||||
Non-guaranteed separate account | 114,076 | 102,794 | 100,306 | 87,169 | 69,712 | (39 | %) | (20 | %) | |||||||||||||||||||
Total individual variable annuities | 119,071 | 107,920 | 105,345 | 92,250 | 74,578 | (37 | %) | (19 | %) | |||||||||||||||||||
Fixed MVA & other individual annuities | 10,243 | 10,130 | 10,366 | 10,687 | 11,278 | 10 | % | 6 | % | |||||||||||||||||||
Total Individual Annuity | 129,314 | 118,050 | 115,711 | 102,937 | 85,856 | (34 | %) | (17 | %) | |||||||||||||||||||
Specialty Products/Other — Segregated Assets | 677 | 604 | 578 | 500 | 398 | (41 | %) | (20 | %) | |||||||||||||||||||
Mutual Fund Assets | ||||||||||||||||||||||||||||
Retail mutual fund assets | 48,383 | 44,617 | 47,239 | 40,903 | 31,032 | (36 | %) | (24 | %) | |||||||||||||||||||
Specialty Product/Other mutual fund assets | 937 | 1,022 | 1,126 | 1,071 | 826 | (12 | %) | (23 | %) | |||||||||||||||||||
529 College Savings Plan assets | 1,176 | 1,121 | 1,150 | 1,013 | 852 | (28 | %) | (16 | %) | |||||||||||||||||||
Total Mutual Fund Assets | 50,496 | 46,760 | 49,515 | 42,987 | 32,710 | (35 | %) | (24 | %) | |||||||||||||||||||
Total Retail Products Group Assets Under Management | $ | 180,487 | $ | 165,414 | $ | 165,804 | $ | 146,424 | $ | 118,964 | (34 | %) | (19 | %) | ||||||||||||||
L-12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — INDIVIDUAL ANNUITY — ACCOUNT VALUE ROLLFORWARD [1]
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — INDIVIDUAL ANNUITY — ACCOUNT VALUE ROLLFORWARD [1]
THREE MONTHS ENDED | ||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||
VARIABLE ANNUITIES | Beginning balance | $ | 123,051 | $ | 119,071 | $ | 107,920 | $ | 105,345 | $ | 92,250 | |||||||||||
Deposits | 3,126 | 2,546 | 2,233 | 1,948 | 1,160 | |||||||||||||||||
Surrenders | (3,810 | ) | (3,338 | ) | (3,331 | ) | (3,058 | ) | (2,671 | ) | ||||||||||||
Death benefits/annuity payouts | (418 | ) | (445 | ) | (460 | ) | (404 | ) | (342 | ) | ||||||||||||
Transfers [2] | 4 | (2 | ) | (20 | ) | (26 | ) | (25 | ) | |||||||||||||
Net Flows | (1,098 | ) | (1,239 | ) | (1,578 | ) | (1,540 | ) | (1,878 | ) | ||||||||||||
Change in market value/change in reserve/interest credited | (2,882 | ) | (9,911 | ) | (1,016 | ) | (11,544 | ) | (15,778 | ) | ||||||||||||
Other [3] | — | (1 | ) | 19 | (11 | ) | (16 | ) | ||||||||||||||
Ending balance | $ | 119,071 | $ | 107,920 | $ | 105,345 | $ | 92,250 | $ | 74,578 | ||||||||||||
FIXED MVA AND OTHER | Beginning balance | $ | 10,263 | $ | 10,243 | $ | 10,130 | $ | 10,366 | $ | 10,687 | |||||||||||
Deposits | 128 | 69 | 323 | 386 | 848 | |||||||||||||||||
Surrenders | (201 | ) | (219 | ) | (175 | ) | (131 | ) | (308 | ) | ||||||||||||
Death benefits/annuity payouts | (106 | ) | (118 | ) | (102 | ) | (101 | ) | (112 | ) | ||||||||||||
Transfers [2] | 42 | 49 | 71 | 57 | 55 | |||||||||||||||||
Net Flows | (137 | ) | (219 | ) | 117 | 211 | 483 | |||||||||||||||
Change in market value/change in reserve/interest credited | 117 | 106 | 119 | 110 | 108 | |||||||||||||||||
Ending balance | $ | 10,243 | $ | 10,130 | $ | 10,366 | $ | 10,687 | $ | 11,278 | ||||||||||||
TOTAL INDIVIDUAL ANNUITY | Beginning balance | $ | 133,314 | $ | 129,314 | $ | 118,050 | $ | 115,711 | $ | 102,937 | |||||||||||
Deposits | 3,254 | 2,615 | 2,556 | 2,334 | 2,008 | |||||||||||||||||
Surrenders | (4,011 | ) | (3,557 | ) | (3,506 | ) | (3,189 | ) | (2,979 | ) | ||||||||||||
Death benefits/annuity payouts | (524 | ) | (563 | ) | (562 | ) | (505 | ) | (454 | ) | ||||||||||||
Transfers [2] | 46 | 47 | 51 | 31 | 30 | |||||||||||||||||
Net Flows | (1,235 | ) | (1,458 | ) | (1,461 | ) | (1,329 | ) | (1,395 | ) | ||||||||||||
Change in market value/change in reserve/interest credited | (2,765 | ) | (9,805 | ) | (897 | ) | (11,434 | ) | (15,670 | ) | ||||||||||||
Other [3] | — | (1 | ) | 19 | (11 | ) | (16 | ) | ||||||||||||||
Ending balance | $ | 129,314 | $ | 118,050 | $ | 115,711 | $ | 102,937 | $ | 85,856 |
[1] | Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts. | |
[2] | Includes internal product exchanges, policyholder balance transfers from the accumulation phase to the annuitization phase, and death benefits remaining on deposit. | |
[3] | Includes a bonus on certain products, front end loads on A share products and annual maintenance fees. The three months ended June 30, 2008 also includes the crediting of policyholder account balances associated with the settlement of the New York Attorney General’s investigation related to market timing. |
L-13
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — OTHER RETAIL — ASSET ROLLFORWARD
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — OTHER RETAIL — ASSET ROLLFORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||
RETAIL MUTUAL FUNDS | ||||||||||||||||||||
Beginning balance | $ | 47,785 | $ | 48,383 | $ | 44,617 | $ | 47,239 | $ | 40,903 | ||||||||||
Deposits | 3,549 | 3,966 | 3,967 | 3,614 | 2,565 | |||||||||||||||
Redemptions | (2,289 | ) | (2,845 | ) | (2,066 | ) | (2,798 | ) | (3,563 | ) | ||||||||||
Net Sales | 1,260 | 1,121 | 1,901 | 816 | (998 | ) | ||||||||||||||
Change in market value | (626 | ) | (4,854 | ) | 761 | (7,117 | ) | (8,852 | ) | |||||||||||
Other [1] | (36 | ) | (33 | ) | (40 | ) | (35 | ) | (21 | ) | ||||||||||
Ending balance | $ | 48,383 | $ | 44,617 | $ | 47,239 | $ | 40,903 | $ | 31,032 |
[1] | Includes front end loads on A share products. |
L-14
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
INCOME STATEMENTS
LIFE
INDIVIDUAL LIFE
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
Year | Sequential | YEAR ENDED | ||||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable life fees | $ | 20 | $ | 18 | $ | 19 | $ | 16 | $ | 12 | (40 | %) | (25 | %) | $ | 75 | $ | 65 | (13 | %) | ||||||||||||||||||||
Cost of insurance charges | 137 | 140 | 143 | 145 | 150 | 9 | % | 3 | % | 533 | 578 | 8 | % | |||||||||||||||||||||||||||
Other fees [1] | 75 | 63 | 75 | 59 | 59 | (21 | %) | — | 262 | 256 | (2 | %) | ||||||||||||||||||||||||||||
Total fee income | 232 | 221 | 237 | 220 | 221 | (5 | %) | — | 870 | 899 | 3 | % | ||||||||||||||||||||||||||||
Direct premiums | 30 | 28 | 30 | 31 | 32 | 7 | % | 3 | % | 111 | 121 | 9 | % | |||||||||||||||||||||||||||
Reinsurance premiums | (50 | ) | (46 | ) | (49 | ) | (46 | ) | (51 | ) | (2 | %) | (11 | %) | (173 | ) | (192 | ) | (11 | %) | ||||||||||||||||||||
Net premiums | (20 | ) | (18 | ) | (19 | ) | (15 | ) | (19 | ) | 5 | % | (27 | %) | (62 | ) | (71 | ) | (15 | %) | ||||||||||||||||||||
Total premiums and other considerations | 212 | 203 | 218 | 205 | 202 | (5 | %) | (1 | %) | 808 | 828 | 2 | % | |||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 94 | 92 | 95 | 87 | 77 | (18 | %) | (11 | %) | 366 | 351 | (4 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 3 | 4 | 4 | 5 | 3 | — | (40 | %) | 12 | 16 | 33 | % | ||||||||||||||||||||||||||||
Charge for invested capital | (5 | ) | (8 | ) | (7 | ) | (8 | ) | (6 | ) | (20 | %) | 25 | % | (19 | ) | (29 | ) | (53 | %) | ||||||||||||||||||||
Total net investment income | 92 | 88 | 92 | 84 | 74 | (20 | %) | (12 | %) | 359 | 338 | (6 | %) | |||||||||||||||||||||||||||
Net realized capital losses — core | — | — | — | (1 | ) | (1 | ) | — | — | (1 | ) | (2 | ) | (100 | %) | |||||||||||||||||||||||||
Total core revenues | 304 | 291 | 310 | 288 | 275 | (10 | %) | (5 | %) | 1,166 | 1,164 | — | ||||||||||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues | (18 | ) | (35 | ) | (25 | ) | (169 | ) | (21 | ) | (17 | %) | 88 | % | (27 | ) | (250 | ) | NM | |||||||||||||||||||||
Total revenues | 286 | 256 | 285 | 119 | 254 | (11 | %) | 113 | % | 1,139 | 914 | (20 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death benefits | 76 | 91 | 88 | 86 | 94 | 24 | % | 9 | % | 298 | 359 | 20 | % | |||||||||||||||||||||||||||
Other contract benefits | 6 | 5 | 5 | 5 | 5 | (17 | %) | — | 24 | 20 | (17 | %) | ||||||||||||||||||||||||||||
Change in reserve [1] [2] | 1 | (4 | ) | (3 | ) | 4 | (3 | ) | NM | NM | (11 | ) | (6 | ) | 45 | % | ||||||||||||||||||||||||
Interest credited on G/A assets | 64 | 62 | 63 | 64 | 65 | 2 | % | 2 | % | 251 | 254 | 1 | % | |||||||||||||||||||||||||||
Total benefits and losses | 147 | 154 | 153 | 159 | 161 | 10 | % | 1 | % | 562 | 627 | 12 | % | |||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 69 | 59 | 57 | 60 | 67 | (3 | %) | 12 | % | 245 | 243 | (1 | %) | |||||||||||||||||||||||||||
Operating expenses | 71 | 64 | 70 | 66 | 69 | (3 | %) | 5 | % | 263 | 269 | 2 | % | |||||||||||||||||||||||||||
Dividends to policyholders | 1 | 1 | 1 | — | — | (100 | %) | — | 3 | 2 | (33 | %) | ||||||||||||||||||||||||||||
Premium taxes and other expenses | 16 | 11 | 12 | 14 | 13 | (19 | %) | (7 | %) | 49 | 50 | 2 | % | |||||||||||||||||||||||||||
Subtotal — expenses before deferral | 157 | 135 | 140 | 140 | 149 | (5 | %) | 6 | % | 560 | 564 | 1 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (105 | ) | (88 | ) | (89 | ) | (91 | ) | (94 | ) | 10 | % | (3 | %) | (367 | ) | (362 | ) | 1 | % | ||||||||||||||||||||
Total other insurance expense | 52 | 47 | 51 | 49 | 55 | 6 | % | 12 | % | 193 | 202 | 5 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits [1] | 48 | 32 | 44 | 74 | 21 | (56 | %) | (72 | %) | 127 | 171 | 35 | % | |||||||||||||||||||||||||||
Total benefits and expenses | 247 | 233 | 248 | 282 | 237 | (4 | %) | (16 | %) | 882 | 1,000 | 13 | % | |||||||||||||||||||||||||||
Core earnings before income taxes | 57 | 58 | 62 | 6 | 38 | (33 | %) | NM | 284 | 164 | (42 | %) | ||||||||||||||||||||||||||||
Income tax expense (benefit) [1] | 17 | 17 | 19 | (2 | ) | 12 | (29 | %) | NM | 88 | 46 | (48 | %) | |||||||||||||||||||||||||||
Core earnings [1] [2] | 40 | 41 | 43 | 8 | 26 | (35 | %) | NM | 196 | 118 | (40 | %) | ||||||||||||||||||||||||||||
Net realized losses and other, net of tax and DAC, excluded from core earnings | (9 | ) | (21 | ) | (13 | ) | (110 | ) | (17 | ) | (89 | %) | 85 | % | (14 | ) | (161 | ) | NM | |||||||||||||||||||||
Net income (loss) [1] [2] | $ | 31 | $ | 20 | $ | 30 | $ | (102 | ) | $ | 9 | (71 | %) | NM | $ | 182 | $ | (43 | ) | NM | ||||||||||||||||||||
Earnings Margin (After-tax) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 13.2 | % | 14.1 | % | 13.9 | % | 2.8 | % | 9.5 | % | (3.7 | ) | 6.7 | 16.8 | % | 10.1 | % | (6.7 | ) | |||||||||||||||||||||
Net income | 10.8 | % | 7.8 | % | 10.5 | % | (85.7 | %) | 3.5 | % | (7.3 | ) | 89.2 | 16.0 | % | (4.7 | %) | (20.7 | ) |
[1] | The DAC unlock included in the year ended December 31, 2007 increased both core earnings and net income by $16. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $37 and $44, respectively. The effect on each income statement line item is as follows: |
December 31, 2007 | September 30, 2008 | |||||||
Other Fees | $ | (13 | ) | $ | (26 | ) | ||
Change in Reserves | — | 5 | ||||||
Amortization of deferred policy acquisition costs | (37 | ) | 26 | |||||
Income tax expense (benefit) | 8 | (20 | ) | |||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings | — | (7 | ) |
[2] | The three months ended December 31, 2007 includes an additional SOP 03-1 reserve of $5, after the effects of DAC amortization and taxes, related to the implementation of the Company’s AG38 capital solution. |
L-15
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
SUPPLEMENTAL DATA
LIFE
INDIVIDUAL LIFE
SUPPLEMENTAL DATA
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
SALES BY DISTRIBUTION | ||||||||||||||||||||||||||||||||||||||||
Wirehouse | $ | 30 | $ | 24 | $ | 25 | $ | 24 | $ | 22 | (27 | %) | (8 | %) | $ | 103 | $ | 95 | (8 | %) | ||||||||||||||||||||
Banks | 13 | 9 | 9 | 9 | 8 | (38 | %) | (11 | %) | 44 | 35 | (20 | %) | |||||||||||||||||||||||||||
Independent | 41 | 29 | 32 | 31 | 36 | (12 | %) | 16 | % | 124 | 128 | 3 | % | |||||||||||||||||||||||||||
Other | 5 | 3 | 4 | 5 | 4 | (20 | %) | (20 | %) | 15 | 16 | 7 | % | |||||||||||||||||||||||||||
Total sales by distribution | $ | 89 | $ | 65 | $ | 70 | $ | 69 | $ | 70 | (21 | %) | 1 | % | $ | 286 | $ | 274 | (4 | %) | ||||||||||||||||||||
SALES BY PRODUCT | ||||||||||||||||||||||||||||||||||||||||
Variable Life | 38 | 28 | 23 | 22 | 18 | (53 | %) | (18 | %) | $ | 130 | $ | 91 | (30 | %) | |||||||||||||||||||||||||
Universal life/whole life | 46 | 32 | 40 | 41 | 45 | (2 | %) | 10 | % | 136 | 158 | 16 | % | |||||||||||||||||||||||||||
Term life/other | 5 | 5 | 7 | 6 | 7 | 40 | % | 17 | % | 20 | 25 | 25 | % | |||||||||||||||||||||||||||
Total sales by product | $ | 89 | $ | 65 | $ | 70 | $ | 69 | $ | 70 | (21 | %) | 1 | % | $ | 286 | $ | 274 | (4 | %) | ||||||||||||||||||||
ACCOUNT VALUE | ||||||||||||||||||||||||||||||||||||||||
General account | $ | 5,591 | $ | 5,688 | $ | 5,768 | $ | 5,863 | $ | 5,926 | 6 | % | 1 | % | ||||||||||||||||||||||||||
Separate account | 6,758 | 6,091 | 6,090 | 5,308 | 4,256 | (37 | %) | (20 | %) | |||||||||||||||||||||||||||||||
Total account value | $ | 12,349 | $ | 11,779 | $ | 11,858 | $ | 11,171 | $ | 10,182 | (18 | %) | (9 | %) | ||||||||||||||||||||||||||
ACCOUNT VALUE BY PRODUCT | ||||||||||||||||||||||||||||||||||||||||
Variable life | $ | 7,284 | $ | 6,620 | $ | 6,625 | $ | 5,848 | $ | 4,802 | (34 | %) | (18 | %) | ||||||||||||||||||||||||||
Universal life/interest sensitive whole life | 4,388 | 4,485 | 4,569 | 4,663 | 4,727 | 8 | % | 1 | % | |||||||||||||||||||||||||||||||
Modified guaranteed life | 555 | 551 | 542 | 537 | 529 | (5 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Other | 122 | 123 | 122 | 123 | 124 | 2 | % | 1 | % | |||||||||||||||||||||||||||||||
Total account value by product | $ | 12,349 | $ | 11,779 | $ | 11,858 | $ | 11,171 | $ | 10,182 | (18 | %) | (9 | %) | ||||||||||||||||||||||||||
LIFE INSURANCE IN-FORCE | ||||||||||||||||||||||||||||||||||||||||
Variable life | $ | 77,566 | $ | 78,145 | $ | 78,557 | $ | 78,809 | $ | 78,853 | 2 | % | — | |||||||||||||||||||||||||||
Universal life/interest sensitive whole life | 48,636 | 49,415 | 50,298 | 51,355 | 52,356 | 8 | % | 2 | % | |||||||||||||||||||||||||||||||
Term life | 52,298 | 54,369 | 57,371 | 60,261 | 63,334 | 21 | % | 5 | % | |||||||||||||||||||||||||||||||
Modified guaranteed life | 671 | 662 | 648 | 637 | 624 | (7 | %) | (2 | %) | |||||||||||||||||||||||||||||||
Other | 312 | 307 | 299 | 299 | 297 | (5 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Total life insurance in-force | $ | 179,483 | $ | 182,898 | $ | 187,173 | $ | 191,361 | $ | 195,464 | 9 | % | 2 | % | ||||||||||||||||||||||||||
L-16
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
ACCOUNT VALUE ROLLFORWARD
LIFE
INDIVIDUAL LIFE
ACCOUNT VALUE ROLLFORWARD
THREE MONTHS ENDED | ||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||
VARIABLE LIFE | Beginning balance | $ | 7,402 | $ | 7,284 | $ | 6,620 | $ | 6,625 | $ | 5,848 | |||||||||||
First year & single premiums | 93 | 74 | 74 | 63 | 63 | |||||||||||||||||
Renewal premiums | 155 | 142 | 140 | 139 | 149 | |||||||||||||||||
Premiums and deposits | 248 | 216 | 214 | 202 | 212 | |||||||||||||||||
Surrenders | (91 | ) | (90 | ) | (99 | ) | (76 | ) | (79 | ) | ||||||||||||
Death benefits | (13 | ) | (16 | ) | (20 | ) | (20 | ) | (13 | ) | ||||||||||||
Net Flows | 144 | 110 | 95 | 106 | 120 | |||||||||||||||||
Policy fees | (130 | ) | (131 | ) | (123 | ) | (128 | ) | (137 | ) | ||||||||||||
Change in market value/interest credited | (132 | ) | (643 | ) | 33 | (755 | ) | (1,029 | ) | |||||||||||||
Ending balance | $ | 7,284 | $ | 6,620 | $ | 6,625 | $ | 5,848 | $ | 4,802 | ||||||||||||
OTHER [1] | Beginning balance | $ | 4,968 | $ | 5,065 | $ | 5,159 | $ | 5,233 | $ | 5,323 | |||||||||||
First year & single premiums | 111 | 117 | 108 | 125 | 145 | |||||||||||||||||
Renewal premiums | 126 | 121 | 120 | 123 | 136 | |||||||||||||||||
Premiums and deposits | 237 | 238 | 228 | 248 | 281 | |||||||||||||||||
Surrenders | (43 | ) | (46 | ) | (54 | ) | (53 | ) | (76 | ) | ||||||||||||
Death benefits | (25 | ) | (21 | ) | (24 | ) | (22 | ) | (55 | ) | ||||||||||||
Net Flows | 169 | 171 | 150 | 173 | 150 | |||||||||||||||||
Policy fees | (129 | ) | (132 | ) | (133 | ) | (139 | ) | (152 | ) | ||||||||||||
Change in market value/interest credited | 57 | 55 | 57 | 56 | 59 | |||||||||||||||||
Ending balance | $ | 5,065 | $ | 5,159 | $ | 5,233 | $ | 5,323 | $ | 5,380 | ||||||||||||
TOTAL INDIVIDUAL LIFE | Beginning balance | $ | 12,370 | $ | 12,349 | $ | 11,779 | $ | 11,858 | $ | 11,171 | |||||||||||
First year & single premiums | 204 | 191 | 182 | 188 | 208 | |||||||||||||||||
Renewal premiums | 281 | 263 | 260 | 262 | 285 | |||||||||||||||||
Premiums and deposits | 485 | 454 | 442 | 450 | 493 | |||||||||||||||||
Surrenders | (134 | ) | (136 | ) | (153 | ) | (129 | ) | (155 | ) | ||||||||||||
Death benefits | (38 | ) | (37 | ) | (44 | ) | (42 | ) | (68 | ) | ||||||||||||
Net Flows | 313 | 281 | 245 | 279 | 270 | |||||||||||||||||
Policy fees | (259 | ) | (263 | ) | (256 | ) | (267 | ) | (289 | ) | ||||||||||||
Change in market value/interest credited | (75 | ) | (588 | ) | 90 | (699 | ) | (970 | ) | |||||||||||||
Ending balance | $ | 12,349 | $ | 11,779 | $ | 11,858 | $ | 11,171 | $ | 10,182 |
[1] | Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and other. |
L-17
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS [1]
INCOME STATEMENTS
LIFE
RETIREMENT PLANS [1]
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable annuity and life fees | $ | 59 | $ | 56 | $ | 57 | $ | 55 | $ | 41 | (31 | %) | (25 | %) | $ | 223 | $ | 209 | (6 | %) | ||||||||||||||||||||
Mutual fund and other fees | 4 | 12 | 40 | 39 | 34 | NM | (13 | %) | 15 | 125 | NM | |||||||||||||||||||||||||||||
Total fee income | 63 | 68 | 97 | 94 | 75 | 19 | % | (20 | %) | 238 | 334 | 40 | % | |||||||||||||||||||||||||||
Direct premiums | 1 | 1 | 1 | 1 | 1 | — | — | 4 | 4 | — | ||||||||||||||||||||||||||||||
Total premiums and other considerations | 64 | 69 | 98 | 95 | 76 | 19 | % | (20 | %) | 242 | 338 | 40 | % | |||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 85 | 85 | 88 | 83 | 72 | (15 | %) | (13 | %) | 343 | 328 | (4 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 3 | 4 | 4 | 4 | 3 | — | (25 | %) | 13 | 15 | 15 | % | ||||||||||||||||||||||||||||
Charge for invested capital | — | — | (1 | ) | — | — | — | — | (1 | ) | (1 | ) | — | |||||||||||||||||||||||||||
Total net investment income | 88 | 89 | 91 | 87 | 75 | (15 | %) | (14 | %) | 355 | 342 | (4 | %) | |||||||||||||||||||||||||||
Net realized losses — core | — | (1 | ) | (1 | ) | — | (2 | ) | — | — | — | (4 | ) | — | ||||||||||||||||||||||||||
Total core revenues | 152 | 157 | 188 | 182 | 149 | (2 | %) | (18 | %) | 597 | 676 | 13 | % | |||||||||||||||||||||||||||
Net realized losses, before tax and DAC, excluded from core revenues | (22 | ) | (35 | ) | (18 | ) | (181 | ) | (34 | ) | (55 | %) | 81 | % | (41 | ) | (268 | ) | NM | |||||||||||||||||||||
Total revenues | 130 | 122 | 170 | 1 | 115 | (12 | %) | NM | 556 | 408 | (27 | %) | ||||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death benefits [2] | — | — | — | 1 | — | — | (100 | %) | (1 | ) | 1 | NM | ||||||||||||||||||||||||||||
Other contract benefits | 12 | 11 | 12 | 11 | 11 | (8 | %) | — | 48 | 45 | (6 | %) | ||||||||||||||||||||||||||||
Change in reserve | (6 | ) | (5 | ) | (5 | ) | (6 | ) | (5 | ) | 17 | % | 17 | % | (23 | ) | (21 | ) | 9 | % | ||||||||||||||||||||
Sales inducements [2] | 1 | — | — | 2 | (1 | ) | NM | NM | 1 | 1 | — | |||||||||||||||||||||||||||||
Interest credited on G/A assets | 56 | 59 | 59 | 62 | 66 | 18 | % | 6 | % | 224 | 246 | 10 | % | |||||||||||||||||||||||||||
Total benefits and losses | 63 | 65 | 66 | 70 | 71 | 13 | % | 1 | % | 249 | 272 | 9 | % | |||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 24 | 30 | 36 | 34 | 31 | 29 | % | (9 | %) | 95 | 131 | 38 | % | |||||||||||||||||||||||||||
Operating expenses | 61 | 68 | 88 | 89 | 82 | 34 | % | (8 | %) | 214 | 327 | 53 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses | (1 | ) | 1 | 6 | 7 | 5 | NM | (29 | %) | — | 19 | — | ||||||||||||||||||||||||||||
Subtotal — expenses before deferral | 84 | 99 | 130 | 130 | 118 | 40 | % | (9 | %) | 309 | 477 | 54 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (39 | ) | (38 | ) | (38 | ) | (35 | ) | (31 | ) | 21 | % | 11 | % | (139 | ) | (142 | ) | (2 | %) | ||||||||||||||||||||
Total other insurance expense | 45 | 61 | 92 | 95 | 87 | 93 | % | (8 | %) | 170 | 335 | 97 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [2] | 12 | 9 | 7 | 83 | 1 | (92 | %) | (99 | %) | 55 | 100 | 82 | % | |||||||||||||||||||||||||||
Total benefits and expenses | 120 | 135 | 165 | 248 | 159 | 33 | % | (36 | %) | 474 | 707 | 49 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes | 32 | 22 | 23 | (66 | ) | (10 | ) | NM | 85 | % | 123 | (31 | ) | NM | ||||||||||||||||||||||||||
Income tax expense (benefit) [2] [3] | 10 | 5 | (10 | ) | (30 | ) | (7 | ) | NM | 77 | % | 34 | (42 | ) | NM | |||||||||||||||||||||||||
Core earnings (loss) [2] | 22 | 17 | 33 | (36 | ) | (3 | ) | NM | 92 | % | 89 | 11 | (88 | %) | ||||||||||||||||||||||||||
Net realized losses, net of tax and DAC, excluded from core earnings [2] | (15 | ) | (22 | ) | (2 | ) | (124 | ) | (20 | ) | (33 | %) | 84 | % | (28 | ) | (168 | ) | NM | |||||||||||||||||||||
Net income (loss) [2] | $ | 7 | $ | (5 | ) | $ | 31 | $ | (160 | ) | $ | (23 | ) | NM | 86 | % | $ | 61 | $ | (157 | ) | NM | ||||||||||||||||||
RETURN ON ASSETS (After-tax bps) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 30.8 | 18.1 | 28.3 | (31.9 | ) | (3.0 | ) | NM | 91 | % | 33.4 | 3.4 | (90 | %) | ||||||||||||||||||||||||||
Net income (loss) | 9.8 | (5.3 | ) | 26.6 | (141.9 | ) | (22.9 | ) | NM | 84 | % | 22.9 | (47.9 | ) | NM |
[1] | Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively. | |
[2] | The DAC unlock included in the year ended December 31, 2007 decreased both core earnings and net income by $9. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $48 and $49, respectively. The effect on each income statement line item is as follows: |
December 31, 2007 | September 30, 2008 | |||||||
Death Benefits | $ | — | $ | 1 | ||||
Sales Inducements | $ | — | $ | 1 | ||||
Amortization of deferred policy acquisition costs | 14 | 75 | ||||||
Income tax expense (benefit) | (5 | ) | (29 | ) | ||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings | — | (1 | ) |
[3] | The three months ended June 30, 2008 includes a tax benefit related to DRD of $15. |
L-18
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — DEPOSITS
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — DEPOSITS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
401(k) | ||||||||||||||||||||||||||||||||||||||||
Annuity — plan/participant rollovers | $ | 460 | $ | 739 | $ | 506 | $ | 487 | $ | 418 | (9 | %) | (14 | %) | $ | 2,134 | $ | 2,150 | 1 | % | ||||||||||||||||||||
Annuity — ongoing contributions | 511 | 643 | 569 | 579 | 555 | 9 | % | (4 | %) | 2,065 | 2,346 | 14 | % | |||||||||||||||||||||||||||
Total 401(k) Annuity | 971 | 1,382 | 1,075 | 1,066 | 973 | — | (9 | %) | 4,199 | 4,496 | 7 | % | ||||||||||||||||||||||||||||
Mutual funds [1] | 108 | 441 | 836 | 862 | 687 | NM | (20 | %) | 418 | 2,826 | NM | |||||||||||||||||||||||||||||
Total 401(k) | 1,079 | 1,823 | 1,911 | 1,928 | 1,660 | 54 | % | (14 | %) | 4,617 | 7,322 | 59 | % | |||||||||||||||||||||||||||
403(b)/457 | ||||||||||||||||||||||||||||||||||||||||
Annuity — plan/participant rollovers | 102 | 143 | 57 | 79 | 38 | (63 | %) | (52 | %) | 342 | 317 | (7 | %) | |||||||||||||||||||||||||||
Annuity — ongoing contributions | 235 | 257 | 339 | 314 | 285 | 21 | % | (9 | %) | 940 | 1,195 | 27 | % | |||||||||||||||||||||||||||
Total 403(b)/457 Annuity | 337 | 400 | 396 | 393 | 323 | (4 | %) | (18 | %) | 1,282 | 1,512 | 18 | % | |||||||||||||||||||||||||||
Mutual funds | 7 | 26 | 43 | 13 | 13 | 86 | % | — | 19 | 95 | NM | |||||||||||||||||||||||||||||
Total 403(b)/457 | 344 | 426 | 439 | 406 | 336 | (2 | %) | (17 | %) | 1,301 | 1,607 | 24 | % | |||||||||||||||||||||||||||
Total Retirement | ||||||||||||||||||||||||||||||||||||||||
401(k) Annuity | 971 | 1,382 | 1,075 | 1,066 | 973 | — | (9 | %) | 4,199 | 4,496 | 7 | % | ||||||||||||||||||||||||||||
403(b)/457 Annuity | 337 | 400 | 396 | 393 | 323 | (4 | %) | (18 | %) | 1,282 | 1,512 | 18 | % | |||||||||||||||||||||||||||
Total Retirememt Plans Annuity deposits | 1,308 | 1,782 | 1,471 | 1,459 | 1,296 | (1 | %) | (11 | %) | 5,481 | 6,008 | 10 | % | |||||||||||||||||||||||||||
Mutual funds [1] | 115 | 467 | 879 | 875 | 700 | NM | (20 | %) | 437 | 2,921 | NM | |||||||||||||||||||||||||||||
Total Retirement Plans Deposits | 1,423 | 2,249 | 2,350 | 2,334 | 1,996 | 40 | % | (14 | %) | 5,918 | 8,929 | 51 | % | |||||||||||||||||||||||||||
[1] | Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively. |
L-19
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT AND ADMINISTRATION
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT AND ADMINISTRATION
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
401(k) | ||||||||||||||||||||||||||||
General account | $ | 1,298 | $ | 1,354 | $ | 1,365 | $ | 1,446 | $ | 1,499 | 15 | % | 4 | % | ||||||||||||||
Non-guaranteed separate account | 13,433 | 13,059 | 13,467 | 12,290 | 10,457 | (22 | %) | (15 | %) | |||||||||||||||||||
Total 401(k) — Annuity account value | $ | 14,731 | $ | 14,413 | $ | 14,832 | $ | 13,736 | $ | 11,956 | (19 | %) | (13 | %) | ||||||||||||||
Mutual fund assets [1] | 1,428 | 20,005 | 19,748 | 18,022 | 14,739 | NM | (18 | %) | ||||||||||||||||||||
Total 401(k) Assets Under Management | $ | 16,159 | $ | 34,418 | $ | 34,580 | $ | 31,758 | $ | 26,695 | 65 | % | (16 | %) | ||||||||||||||
403(b)/457 | ||||||||||||||||||||||||||||
General account | $ | 4,627 | $ | 4,850 | $ | 5,022 | $ | 5,238 | $ | 5,292 | 14 | % | 1 | % | ||||||||||||||
Non-guaranteed separate account | 7,736 | 7,076 | 7,175 | 6,194 | 4,950 | (36 | %) | (20 | %) | |||||||||||||||||||
Total 403(b)/457 - Annuity account value | $ | 12,363 | $ | 11,926 | $ | 12,197 | $ | 11,432 | $ | 10,242 | (17 | %) | (10 | %) | ||||||||||||||
Mutual fund assets | 26 | 66 | 106 | 104 | 99 | NM | (5 | %) | ||||||||||||||||||||
Total 403(b)/457 Assets Under Management | $ | 12,389 | $ | 11,992 | $ | 12,303 | $ | 11,536 | $ | 10,341 | (17 | %) | (10 | %) | ||||||||||||||
TOTAL RETIREMENT | ||||||||||||||||||||||||||||
General account | $ | 5,925 | $ | 6,204 | $ | 6,387 | $ | 6,684 | $ | 6,791 | 15 | % | 2 | % | ||||||||||||||
Non-guaranteed separate account | 21,169 | 20,135 | 20,642 | 18,484 | 15,407 | (27 | %) | (17 | %) | |||||||||||||||||||
Total Retirement Plans account value | $ | 27,094 | $ | 26,339 | $ | 27,029 | $ | 25,168 | $ | 22,198 | (18 | %) | (12 | %) | ||||||||||||||
Mutual fund assets [1] | 1,454 | 20,071 | 19,854 | 18,126 | 14,838 | NM | (18 | %) | ||||||||||||||||||||
Total Retirement Plans Assets Under Management | $ | 28,548 | $ | 46,410 | $ | 46,883 | $ | 43,294 | $ | 37,036 | 30 | % | (14 | %) | ||||||||||||||
RECORDKEEPING ONLY BUSINESS | ||||||||||||||||||||||||||||
Assets Under Administration [2] | $ | — | $ | 5,666 | $ | 6,282 | $ | 5,853 | $ | 5,122 | — | (12 | %) | |||||||||||||||
Number of Participants [3] | — | 142,537 | 155,618 | 155,373 | 155,914 | — | — | |||||||||||||||||||||
[1] | Prior to March 31, 2008, 401(k) mutual fund assets were predominantly comprised of The Hartford’s 401(k) plan. During the three months ended March 31, 2008, the Company acquired the rights to service $18.7 billion of mutual fund assets from Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29, and March 28, 2008, respectively. | |
[2] | Assets under administration are not included when calculating return on assets measures for the Retirement Plans segment and are not included in Retirement Plans Assets Under Management. | |
[3] | Earnings for assets under administration are predominantly driven by participant count. The participant count represents the actual number of participants. |
L-20
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1] [2]
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1] [2]
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||
401(k) GROUP ANNUITY ACCOUNT VALUE [1] | Beginning balance | $ | 14,685 | $ | 14,731 | $ | 14,413 | $ | 14,832 | $ | 13,736 | |||||||||||
Deposits | 971 | 1,382 | 1,075 | 1,066 | 973 | |||||||||||||||||
Surrenders | (673 | ) | (617 | ) | (591 | ) | (610 | ) | (625 | ) | ||||||||||||
Death benefits/annuity payouts | (8 | ) | (9 | ) | (11 | ) | (10 | ) | (9 | ) | ||||||||||||
Net Flows | 290 | 756 | 473 | 446 | 339 | |||||||||||||||||
Change in market value/change in reserve/interest credited | (244 | ) | (1,074 | ) | (54 | ) | (1,542 | ) | (2,119 | ) | ||||||||||||
Ending balance | $ | 14,731 | $ | 14,413 | $ | 14,832 | $ | 13,736 | $ | 11,956 | ||||||||||||
403(b)/457 GROUP ANNUITY ACCOUNT VALUE [1] | Beginning balance | $ | 12,486 | $ | 12,363 | $ | 11,926 | $ | 12,197 | $ | 11,432 | |||||||||||
Deposits | 337 | 400 | 396 | 393 | 323 | |||||||||||||||||
Surrenders | (393 | ) | (244 | ) | (245 | ) | (240 | ) | (330 | ) | ||||||||||||
Death benefits/annuity payouts | (12 | ) | (12 | ) | (13 | ) | (12 | ) | (12 | ) | ||||||||||||
Net Flows | (68 | ) | 144 | 138 | 141 | (19 | ) | |||||||||||||||
Change in market value/change in reserve/interest credited | (55 | ) | (581 | ) | 133 | (906 | ) | (1,171 | ) | |||||||||||||
Ending balance | $ | 12,363 | $ | 11,926 | $ | 12,197 | $ | 11,432 | $ | 10,242 | ||||||||||||
MUTUAL FUND ASSETS [2] [3] | Beginning balance | $ | 1,409 | $ | 1,454 | $ | 20,071 | $ | 19,854 | $ | 18,126 | |||||||||||
Deposits | 115 | 467 | 879 | 875 | 700 | |||||||||||||||||
Surrenders | (83 | ) | (345 | ) | (1,109 | ) | (836 | ) | (1,077 | ) | ||||||||||||
Net Flows | 32 | 122 | (230 | ) | 39 | (377 | ) | |||||||||||||||
Acquisitions [4] | — | 18,725 | — | — | — | |||||||||||||||||
Change in market value/change in reserve/interest credited | 13 | (230 | ) | 13 | (1,767 | ) | (2,911 | ) | ||||||||||||||
Ending balance | $ | 1,454 | $ | 20,071 | $ | 19,854 | $ | 18,126 | $ | 14,838 | ||||||||||||
TOTAL RETIREMENT | Beginning balance | $ | 28,580 | $ | 28,548 | $ | 46,410 | $ | 46,883 | $ | 43,294 | |||||||||||
Deposits | 1,423 | 2,249 | 2,350 | 2,334 | 1,996 | |||||||||||||||||
Surrenders | (1,149 | ) | (1,206 | ) | (1,945 | ) | (1,686 | ) | (2,032 | ) | ||||||||||||
Death benefits/annuity payouts | (20 | ) | (21 | ) | (24 | ) | (22 | ) | (21 | ) | ||||||||||||
Net Flows | 254 | 1,022 | 381 | 626 | (57 | ) | ||||||||||||||||
Acquisitions [4] | — | 18,725 | — | — | — | |||||||||||||||||
Change in market value/change in reserve/interest credited | (286 | ) | (1,885 | ) | 92 | (4,215 | ) | (6,201 | ) | |||||||||||||
Ending balance | $ | 28,548 | $ | 46,410 | $ | 46,883 | $ | 43,294 | $ | 37,036 | ||||||||||||
[1] | Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts. | |
[2] | Excludes Assets Under Administration. | |
[3] | Mutual Fund assets are an internal measure of assets under management used by the Company because a portion of revenues are based upon asset levels. Mutual Fund assets are not included on the balance sheet. | |
[4] | Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively. |
L-21
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
GROUP BENEFITS
INCOME STATEMENTS
LIFE
GROUP BENEFITS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
Year | Sequential | YEAR ENDED | ||||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
ASO fees | $ | 9 | $ | 9 | $ | 9 | $ | 9 | $ | 9 | — | — | $ | 34 | $ | 36 | 6 | % | ||||||||||||||||||||||
Other fees | 1 | (1 | ) | 1 | — | (1 | ) | NM | — | 1 | (1 | ) | NM | |||||||||||||||||||||||||||
Total fee income | 10 | 8 | 10 | 9 | 8 | (20 | %) | (11 | %) | 35 | 35 | — | ||||||||||||||||||||||||||||
— | ||||||||||||||||||||||||||||||||||||||||
Direct premiums | 1,015 | 1,031 | 1,060 | 1,061 | 1,055 | 4 | % | (1 | %) | 4,068 | 4,207 | 3 | % | |||||||||||||||||||||||||||
Reinsurance premiums | 39 | 35 | 30 | 39 | 45 | 15 | % | 15 | % | 198 | 149 | (25 | %) | |||||||||||||||||||||||||||
Net premiums | 1,054 | 1,066 | 1,090 | 1,100 | 1,100 | 4 | % | — | 4,266 | 4,356 | 2 | % | ||||||||||||||||||||||||||||
Total premiums and other considerations | 1,064 | 1,074 | 1,100 | 1,109 | 1,108 | 4 | % | — | 4,301 | 4,391 | 2 | % | ||||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 96 | 88 | 95 | 92 | 71 | (26 | %) | (23 | %) | 389 | 346 | (11 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 19 | 18 | 18 | 19 | 18 | (5 | %) | (5 | %) | 76 | 73 | (4 | %) | |||||||||||||||||||||||||||
Total net investment income | 115 | 106 | 113 | 111 | 89 | (23 | %) | (20 | %) | 465 | 419 | (10 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) — core | 4 | — | — | (1 | ) | — | (100 | %) | 100 | % | 7 | (1 | ) | NM | ||||||||||||||||||||||||||
Total core revenues | 1,183 | 1,180 | 1,213 | 1,219 | 1,197 | 1 | % | (2 | %) | 4,773 | 4,809 | 1 | % | |||||||||||||||||||||||||||
Net realized losses, before tax and DAC, excluded from core revenues | (20 | ) | (36 | ) | (37 | ) | (440 | ) | (26 | ) | (30 | %) | 94 | % | (37 | ) | (539 | ) | NM | |||||||||||||||||||||
Total revenues | 1,163 | 1,144 | 1,176 | 779 | 1,171 | 1 | % | 50 | % | 4,736 | 4,270 | (10 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death benefits | 261 | 290 | 316 | 321 | 284 | 9 | % | (12 | %) | 1,059 | 1,211 | 14 | % | |||||||||||||||||||||||||||
Other contract benefits [1] | 497 | 475 | 469 | 463 | 460 | (7 | %) | (1 | %) | 1,930 | 1,867 | (3 | %) | |||||||||||||||||||||||||||
Change in reserve [1] | (13 | ) | 23 | 26 | (4 | ) | 21 | NM | NM | 120 | 66 | (45 | %) | |||||||||||||||||||||||||||
Total benefits and losses | 745 | 788 | 811 | 780 | 765 | 3 | % | (2 | %) | 3,109 | 3,144 | 1 | % | |||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 144 | 148 | 128 | 144 | 146 | 1 | % | 1 | % | 582 | 566 | (3 | %) | |||||||||||||||||||||||||||
Operating expenses | 150 | 135 | 145 | 134 | 145 | (3 | %) | 8 | % | 549 | 559 | 2 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses | 22 | 19 | 12 | 21 | 20 | (9 | %) | (5 | %) | 73 | 72 | (1 | %) | |||||||||||||||||||||||||||
Subtotal — expenses before deferral | 316 | 302 | 285 | 299 | 311 | (2 | %) | 4 | % | 1,204 | 1,197 | (1 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (21 | ) | (17 | ) | (15 | ) | (16 | ) | (21 | ) | — | (31 | %) | (73 | ) | (69 | ) | 5 | % | |||||||||||||||||||||
Total other insurance expense | 295 | 285 | 270 | 283 | 290 | (2 | %) | 2 | % | 1,131 | 1,128 | — | ||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs | 14 | 13 | 14 | 15 | 15 | 7 | % | — | 62 | 57 | (8 | %) | ||||||||||||||||||||||||||||
Total benefits and expenses | 1,054 | 1,086 | 1,095 | 1,078 | 1,070 | 2 | % | (1 | %) | 4,302 | 4,329 | 1 | % | |||||||||||||||||||||||||||
Core earnings before income taxes | 129 | 94 | 118 | 141 | 127 | (2 | %) | (10 | %) | 471 | 480 | 2 | % | |||||||||||||||||||||||||||
Income tax expense | 37 | 24 | 33 | 41 | 37 | — | (10 | %) | 133 | 135 | 2 | % | ||||||||||||||||||||||||||||
Core earnings | 92 | 70 | 85 | 100 | 90 | (2 | %) | (10 | %) | 338 | 345 | 2 | % | |||||||||||||||||||||||||||
Net realized losses, net of tax and DAC, excluded from core earnings | (12 | ) | (24 | ) | (23 | ) | (286 | ) | (18 | ) | (50 | %) | 94 | % | (23 | ) | (351 | ) | NM | |||||||||||||||||||||
Net income (loss) | $ | 80 | $ | 46 | $ | 62 | $ | (186 | ) | $ | 72 | (10 | %) | NM | $ | 315 | $ | (6 | ) | NM | ||||||||||||||||||||
After-Tax Profit as % of Revenues | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 7.8 | % | 5.9 | % | 7.0 | % | 8.2 | % | 7.5 | % | (0.3 | ) | (0.7 | ) | 7.1 | % | 7.2 | % | 0.1 | |||||||||||||||||||||
Net income | 6.9 | % | 4.0 | % | 5.3 | % | (23.9 | %) | 6.1 | % | (0.8 | ) | 30.0 | 6.7 | % | (0.1 | %) | (6.8 | ) |
[1] | During the three months ended December 31, 2007, a reserve commutation of approximately $30 reduced change in reserve and correspondingly increased other contract benefits upon settlement. |
L-22
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
GROUP BENEFITS
SUPPLEMENTAL DATA
LIFE
GROUP BENEFITS
SUPPLEMENTAL DATA
Year Over | ||||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||
PREMIUMS | Fully Insured - Ongoing Premiums | |||||||||||||||||||||||||||||||||||||||||
Group disability | $ | 466 | $ | 480 | $ | 497 | $ | 490 | $ | 517 | 11 | % | 6 | % | $ | 1,858 | $ | 1,984 | 7 | % | ||||||||||||||||||||||
Group life | 488 | 508 | 526 | 534 | 516 | 6 | % | (3 | %) | 1,926 | 2,084 | 8 | % | |||||||||||||||||||||||||||||
Other | 99 | 78 | 67 | 75 | 67 | (32 | %) | (11 | %) | 455 | 287 | (37 | %) | |||||||||||||||||||||||||||||
Total fully insured - ongoing premiums | 1,053 | 1,066 | 1,090 | 1,099 | 1,100 | 4 | % | — | 4,239 | 4,355 | 3 | % | ||||||||||||||||||||||||||||||
Total buyouts [1] | 1 | — | — | 1 | — | (100 | %) | (100 | %) | 27 | 1 | (96 | %) | |||||||||||||||||||||||||||||
Total premiums | 1,054 | 1,066 | 1,090 | 1,100 | 1,100 | 4 | % | — | 4,266 | 4,356 | 2 | % | ||||||||||||||||||||||||||||||
Group disability - premium equivalents [2] | 78 | 85 | 85 | 85 | 83 | 6 | % | (2 | %) | 332 | 338 | 2 | % | |||||||||||||||||||||||||||||
Total premiums and premium equivalent | $ | 1,132 | $ | 1,151 | $ | 1,175 | $ | 1,185 | $ | 1,183 | 5 | % | — | $ | 4,598 | $ | 4,694 | 2 | % | |||||||||||||||||||||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | Fully Insured — Ongoing Sales | |||||||||||||||||||||||||||||||||||||||||
Group disability | $ | 54 | $ | 190 | $ | 54 | $ | 66 | $ | 65 | 20 | % | (2 | %) | $ | 325 | $ | 375 | 15 | % | ||||||||||||||||||||||
Group life | 75 | 186 | 76 | 87 | 75 | — | (14 | %) | 364 | 424 | 16 | % | ||||||||||||||||||||||||||||||
Other | 11 | 5 | 5 | 5 | 6 | (45 | %) | 20 | % | 81 | 21 | (74 | %) | |||||||||||||||||||||||||||||
Total fully insured - ongoing sales | 140 | 381 | 135 | 158 | 146 | 4 | % | (8 | %) | 770 | 820 | 6 | % | |||||||||||||||||||||||||||||
Total buyouts [1] | — | — | — | 1 | — | — | (100 | %) | 26 | 1 | (96 | %) | ||||||||||||||||||||||||||||||
Total sales | 140 | 381 | 135 | 159 | 146 | 4 | % | (8 | %) | 796 | 821 | 3 | % | |||||||||||||||||||||||||||||
Group disability premium equivalents [2] | 17 | 95 | 6 | 7 | 24 | 41 | % | NM | 106 | 132 | 25 | % | ||||||||||||||||||||||||||||||
Total sales and premium equivalents | $ | 157 | $ | 476 | $ | 141 | $ | 166 | $ | 170 | 8 | % | 2 | % | $ | 902 | $ | 953 | 6 | % | ||||||||||||||||||||||
RATIOS [3] | Loss Ratio | 70.0 | % | 73.4 | % | 73.7 | % | 70.3 | % | 69.0 | % | (1.0 | ) | (1.3 | ) | 72.1 | % | 71.6 | % | (0.5 | ) | |||||||||||||||||||||
Expense Ratio | 29.1 | % | 27.7 | % | 25.8 | % | 26.9 | % | 27.5 | % | (1.6 | ) | 0.6 | 27.9 | % | 27.0 | % | (0.9 | ) | |||||||||||||||||||||||
GAAP RESERVES [4] | Group disability | $ | 4,616 | $ | 4,657 | $ | 4,699 | $ | 4,717 | $ | 4,727 | 2 | % | — | ||||||||||||||||||||||||||||
Group life | 1,315 | 1,320 | 1,331 | 1,319 | 1,333 | 1 | % | 1 | % | |||||||||||||||||||||||||||||||||
Other | 176 | 146 | 112 | 98 | 100 | (43 | %) | 2 | % | |||||||||||||||||||||||||||||||||
Total GAAP reserves | $ | 6,107 | $ | 6,123 | $ | 6,142 | $ | 6,134 | $ | 6,160 | 1 | % | — | |||||||||||||||||||||||||||||
[1] | Takeover of open claim liabilities and other non-recurring premium amounts. | |
[2] | Administrative services only (ASO) fees and claims under claim management agreements. | |
[3] | Ratios calculated excluding the effects of buyout premiums. | |
[4] | Reserve balances for the three months ended December 31, 2007, March 31, June 30 and September 30, and December 31, 2008 are net of reinsurance recoverables of $261, $252, $ 241, $243 and $231, respectively. |
L-23
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL
HIGHLIGHTS
LIFE
INTERNATIONAL
HIGHLIGHTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Months | 3 Months | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
CORE EARNINGS | ||||||||||||||||||||||||||||||||||||||||
Japan operations | $ | 68 | $ | 70 | $ | 64 | $ | (59 | ) | $ | (111 | ) | NM | (88 | %) | $ | 281 | $ | (36 | ) | NM | |||||||||||||||||||
Other international operations | (7 | ) | (3 | ) | — | (16 | ) | 1 | — | NM | (27 | ) | (18 | ) | 33 | % | ||||||||||||||||||||||||
Core earnings (loss) | $ | 61 | $ | 67 | $ | 64 | $ | (75 | ) | $ | (110 | ) | NM | (47 | %) | $ | 254 | $ | (54 | ) | NM | |||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings | (23 | ) | (59 | ) | 8 | (32 | ) | (188 | ) | NM | NM | (31 | ) | (271 | ) | NM | ||||||||||||||||||||||||
Net income (loss) | $ | 38 | $ | 8 | $ | 72 | $ | (107 | ) | $ | (298 | ) | NM | (179 | %) | $ | 223 | $ | (325 | ) | NM | |||||||||||||||||||
JAPAN DEPOSITS — Dollars | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | $ | 1,086 | $ | 944 | $ | 863 | $ | 868 | $ | 291 | (73 | %) | (66 | %) | $ | 6,321 | $ | 2,966 | (53 | %) | ||||||||||||||||||||
Fixed MVA and other | 20 | 172 | 149 | 231 | 43 | 115 | % | (81 | %) | 84 | 595 | NM | ||||||||||||||||||||||||||||
Total deposits by product | $ | 1,106 | $ | 1,116 | $ | 1,012 | $ | 1,099 | $ | 334 | (70 | %) | (70 | %) | $ | 6,405 | $ | 3,561 | (44 | %) | ||||||||||||||||||||
JAPAN DEPOSITS — Yen | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | ¥ | 122,808 | ¥ | 99,140 | ¥ | 90,334 | ¥ | 93,342 | ¥ | 28,200 | (77 | %) | (70 | %) | ¥ | 746,707 | ¥ | 311,016 | (58 | %) | ||||||||||||||||||||
Fixed MVA and other | 2,293 | 17,558 | 15,609 | 24,985 | 4,016 | 75 | % | (84 | %) | 9,869 | 62,168 | NM | ||||||||||||||||||||||||||||
Total deposits by product | ¥ | 125,101 | ¥ | 116,698 | ¥ | 105,943 | ¥ | 118,327 | ¥ | 32,216 | (74 | %) | (73 | %) | ¥ | 756,576 | ¥ | 373,184 | (51 | %) | ||||||||||||||||||||
JAPAN NET FLOWS — Dollars | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | $ | 646 | $ | 520 | $ | 469 | $ | 383 | $ | (3,087 | ) | NM | NM | $ | 4,498 | $ | (1,715 | ) | NM | |||||||||||||||||||||
Fixed MVA and other | 5 | 143 | 128 | 196 | 1,962 | NM | NM | 27 | 2,429 | NM | ||||||||||||||||||||||||||||||
Total net flows by product | $ | 651 | $ | 663 | $ | 597 | $ | 579 | $ | (1,125 | ) | NM | NM | $ | 4,525 | $ | 714 | (84 | %) | |||||||||||||||||||||
JAPAN NET FLOWS — Yen | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | ¥ | 73,035 | ¥ | 54,447 | ¥ | 49,111 | ¥ | 41,213 | ¥ | (309,214 | ) | NM | NM | ¥ | 531,470 | ¥ | (164,443 | ) | NM | |||||||||||||||||||||
Fixed MVA and other | 636 | 14,580 | 13,396 | 21,193 | 177,526 | NM | NM | 3,168 | 226,695 | NM | ||||||||||||||||||||||||||||||
Total net flows by product | ¥ | 73,671 | ¥ | 69,027 | ¥ | 62,507 | ¥ | 62,406 | ¥ | (131,688 | ) | NM | NM | ¥ | 534,638 | ¥ | 62,252 | (88 | %) | |||||||||||||||||||||
JAPAN AUM — Dollars | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | $ | 35,793 | $ | 36,777 | $ | 35,910 | $ | 32,706 | $ | 29,726 | (17 | %) | (9 | %) | ||||||||||||||||||||||||||
Fixed MVA and other | 1,844 | 2,198 | 2,212 | 2,416 | 4,769 | 159 | % | 97 | % | |||||||||||||||||||||||||||||||
Total AUM by product | $ | 37,637 | $ | 38,975 | $ | 38,122 | $ | 35,122 | $ | 34,495 | (8 | %) | (2 | %) | ||||||||||||||||||||||||||
JAPAN AUM — Yen | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity | ||||||||||||||||||||||||||||||||||||||||
Variable | ¥ | 3,998,563 | ¥ | 3,660,549 | ¥ | 3,806,639 | ¥ | 3,472,208 | ¥ | 2,694,696 | (33 | %) | (22 | %) | ||||||||||||||||||||||||||
Fixed MVA and other | 206,028 | 218,854 | 234,442 | 256,542 | 432,267 | 110 | % | 68 | % | |||||||||||||||||||||||||||||||
Total AUM by product | ¥ | 4,204,591 | ¥ | 3,879,403 | ¥ | 4,041,081 | ¥ | 3,728,750 | ¥ | 3,126,963 | (26 | %) | (16 | %) | ||||||||||||||||||||||||||
L-24
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
INCOME STATEMENTS
LIFE
INTERNATIONAL — JAPAN
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable annuity fees | $ | 209 | $ | 209 | $ | 214 | $ | 205 | $ | 170 | (19 | %) | (17 | %) | $ | 765 | $ | 798 | 4 | % | ||||||||||||||||||||
Other fees | 15 | 18 | 16 | 10 | 25 | 67 | % | 150 | % | 60 | 69 | 15 | % | |||||||||||||||||||||||||||
Total fee income | 224 | 227 | 230 | 215 | 195 | (13 | %) | (9 | %) | 825 | 867 | 5 | % | |||||||||||||||||||||||||||
Reinsurance premiums | (3 | ) | (2 | ) | (3 | ) | (2 | ) | (2 | ) | 33 | % | — | (11 | ) | (9 | ) | 18 | % | |||||||||||||||||||||
Total premiums and other considerations | 221 | 225 | 227 | 213 | 193 | (13 | %) | (9 | %) | 814 | 858 | 5 | % | |||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 29 | 25 | 24 | 27 | 30 | 3 | % | 11 | % | 117 | 106 | (9 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 1 | 1 | 1 | 2 | 21 | NM | NM | 3 | 25 | NM | ||||||||||||||||||||||||||||||
Total net investment income | 30 | 26 | 25 | 29 | 51 | 70 | % | 76 | % | 120 | 131 | 9 | % | |||||||||||||||||||||||||||
Net realized capital losses — core | (16 | ) | (7 | ) | (11 | ) | (8 | ) | (2 | ) | 88 | % | 75 | % | (68 | ) | (28 | ) | 59 | % | ||||||||||||||||||||
Total core revenues | 235 | 244 | 241 | 234 | 242 | 3 | % | 3 | % | 866 | 961 | 11 | % | |||||||||||||||||||||||||||
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues | (33 | ) | (108 | ) | 3 | (43 | ) | (218 | ) | NM | NM | (43 | ) | (366 | ) | NM | ||||||||||||||||||||||||
Total revenues | 202 | 136 | 244 | 191 | 24 | (88 | %) | (87 | %) | 823 | 595 | (28 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death and other benefits [1] | 6 | 8 | 6 | 146 | 70 | NM | (52 | %) | 4 | 230 | NM | |||||||||||||||||||||||||||||
Sales inducements | — | — | — | 1 | — | — | (100 | %) | 1 | 1 | — | |||||||||||||||||||||||||||||
Interest credited on G/A assets | 7 | 8 | 8 | 9 | 11 | 57 | % | 22 | % | 25 | 36 | 44 | % | |||||||||||||||||||||||||||
Total benefits and losses | 13 | 16 | 14 | 156 | 81 | NM | (48 | %) | 30 | 267 | NM | |||||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 78 | 73 | 70 | 73 | 32 | (59 | %) | (56 | %) | 423 | 248 | (41 | %) | |||||||||||||||||||||||||||
Operating expenses | 50 | 40 | 46 | 43 | 49 | (2 | %) | 14 | % | 167 | 178 | 7 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses | 7 | 9 | 5 | 11 | 7 | — | (36 | %) | 31 | 32 | 3 | % | ||||||||||||||||||||||||||||
Subtotal — expenses before deferral | 135 | 122 | 121 | 127 | 88 | (35 | %) | (31 | %) | 621 | 458 | (26 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (80 | ) | (69 | ) | (63 | ) | (67 | ) | (22 | ) | 73 | % | 67 | % | (429 | ) | (221 | ) | 48 | % | ||||||||||||||||||||
Total other insurance expense | 55 | 53 | 58 | 60 | 66 | 20 | % | 10 | % | 192 | 237 | 23 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] | 62 | 68 | 70 | 109 | 265 | NM | 143 | % | 211 | 512 | 143 | % | ||||||||||||||||||||||||||||
Total benefits and expenses | 130 | 137 | 142 | 325 | 412 | NM | 27 | % | 433 | 1,016 | 135 | % | ||||||||||||||||||||||||||||
Core earnings (loss) before income taxes | 105 | 107 | 99 | (91 | ) | (170 | ) | NM | (87 | %) | 433 | (55 | ) | NM | ||||||||||||||||||||||||||
Income tax expense (benefit) [1] | 37 | 37 | 35 | (32 | ) | (59 | ) | NM | (84 | %) | 152 | (19 | ) | NM | ||||||||||||||||||||||||||
Core earnings (loss) [1] [2] | 68 | 70 | 64 | (59 | ) | (111 | ) | NM | (88 | %) | 281 | (36 | ) | NM | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings | (20 | ) | (56 | ) | 5 | (22 | ) | (154 | ) | NM | NM | (28 | ) | (227 | ) | NM | ||||||||||||||||||||||||
Net Income (loss) [1] | $ | 48 | $ | 14 | $ | 69 | $ | (81 | ) | $ | (265 | ) | NM | NM | $ | 253 | $ | (263 | ) | NM | ||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 73.2 | 73.1 | 66.4 | (64.4 | ) | (127.6 | ) | NM | (98 | %) | 81.5 | (10.0 | ) | NM | ||||||||||||||||||||||||||
Net income | 51.7 | 14.6 | 71.6 | (88.5 | ) | (304.5 | ) | NM | 1 | % | 73.4 | (72.9 | ) | NM |
[1] | The DAC unlock included in the year ended December 31, 2007 increased both core earnings and net income by $22. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $123 and $115, respectively. The effect on each income statement line item is as follows: |
December 31, 2007 | September 30, 2008 | |||||||
Other Fees | $ | — | $ | (7 | ) | |||
Death and other benefits | (9 | ) | 139 | |||||
Sales Inducements | — | 1 | ||||||
Amortization of deferred policy acquisition costs | (25 | ) | 42 | |||||
Income tax expense (benefit) | 12 | (66 | ) | |||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings | — | 8 |
[2] | Includes the after-tax charge of ($152) recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits. |
L-25
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Dollars
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Dollars
THREE MONTHS ENDED | ||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||
VARIABLE ANNUITIES | Beginning balance | $ | 34,888 | $ | 35,793 | $ | 36,777 | $ | 35,910 | $ | 32,706 | |||||||||||||
Deposits/Premiums/other | 1,086 | 944 | 863 | 868 | 291 | |||||||||||||||||||
Surrenders | (321 | ) | (298 | ) | (272 | ) | (370 | ) | (297 | ) | ||||||||||||||
Death benefits/annuitizations/other [1] | (119 | ) | (126 | ) | (122 | ) | (115 | ) | (910 | ) | ||||||||||||||
Transfers — 3 Win [1] | — | — | — | — | (2,171 | ) | ||||||||||||||||||
Net Flows | 646 | 520 | 469 | 383 | (3,087 | ) | ||||||||||||||||||
Change in market value/currency/change in reserve/interest credited | (801 | ) | (3,722 | ) | 976 | (3,508 | ) | (4,662 | ) | |||||||||||||||
Effect of currency translation | 1,060 | 4,186 | (2,312 | ) | (79 | ) | 4,769 | |||||||||||||||||
Ending balance | $ | 35,793 | $ | 36,777 | $ | 35,910 | $ | 32,706 | $ | 29,726 | ||||||||||||||
FIXED MVA AND OTHER | Beginning balance | $ | 1,785 | $ | 1,844 | $ | 2,198 | $ | 2,212 | $ | 2,416 | |||||||||||||
Deposits/Premiums/other | 20 | 172 | 149 | 231 | 43 | |||||||||||||||||||
Surrenders | (8 | ) | (12 | ) | (7 | ) | (17 | ) | (62 | ) | ||||||||||||||
Death benefits/annuitizations/other [1] | (7 | ) | (17 | ) | (14 | ) | (18 | ) | (190 | ) | ||||||||||||||
Transfers — 3 Win [1] | — | — | — | — | 2,171 | |||||||||||||||||||
Net Flows | 5 | 143 | 128 | 196 | 1,962 | |||||||||||||||||||
Change in market value/currency/change in reserve/interest credited | 1 | (17 | ) | 21 | 9 | (18 | ) | |||||||||||||||||
Effect of currency translation | 53 | 228 | (135 | ) | (1 | ) | 409 | |||||||||||||||||
Ending balance | $ | 1,844 | $ | 2,198 | $ | 2,212 | $ | 2,416 | $ | 4,769 | ||||||||||||||
TOTAL JAPAN | Beginning balance | $ | 36,673 | $ | 37,637 | $ | 38,975 | $ | 38,122 | $ | 35,122 | |||||||||||||
Deposits/Premiums/other | 1,106 | 1,116 | 1,012 | 1,099 | 334 | |||||||||||||||||||
Surrenders | (329 | ) | (310 | ) | (279 | ) | (387 | ) | (359 | ) | ||||||||||||||
Death benefits/annuitizations/other [1] | (126 | ) | (143 | ) | (136 | ) | (133 | ) | (1,100 | ) | ||||||||||||||
Transfers — 3 Win [1] | — | — | — | — | — | |||||||||||||||||||
Net Flows | 651 | 663 | 597 | 579 | (1,125 | ) | ||||||||||||||||||
Change in market value/change in reserve/interest credited | (800 | ) | (3,739 | ) | 997 | (3,499 | ) | (4,680 | ) | |||||||||||||||
Effect of currency translation | 1,113 | 4,414 | (2,447 | ) | (80 | ) | 5,178 | |||||||||||||||||
Ending balance | $ | 37,637 | $ | 38,975 | $ | 38,122 | $ | 35,122 | $ | 34,495 |
[1] | The three months ended, December 31, 2008, includes the effect of the triggering of the guaranteed minimum income benefit (“GMIB”) for the 3 Win product. This GMIB required the policyholder to elect one of two options; either (1) receive 80% of their initial deposit without surrender penalty or (2) receive 100% of the initial deposit via a 15 year pay out annuity. For those policyholders that elected option (1), $(809) is included in variable annuity — death benefits/annuitizations/other. For those policyholders that elected option (2) a reserve of $2,171 was established which is reflected as a transfer out of variable annuity account value and a transfer into the fixed MVA and other account value. Additionally the current period annuity payments were of $(181) and related interest credited of $11 associated with option (2) are included in the fixed MVA and other — death benefits/annuitizations/other and change in market value/change in reserve/interest credited. |
L-26
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Yen
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Yen
THREE MONTHS ENDED | ||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||
VARIABLE ANNUITIES | Beginning balance | ¥ | 4,012,693 | ¥ | 3,998,563 | ¥ | 3,660,549 | ¥ | 3,806,639 | ¥ | 3,472,208 | |||||||||||
Deposits/Premiums/other | 122,808 | 99,140 | 90,334 | 93,342 | 28,200 | |||||||||||||||||
Surrenders | (36,261 | ) | (31,364 | ) | (28,471 | ) | (39,753 | ) | (28,757 | ) | ||||||||||||
Death benefits/annuitizations/other [1] | (13,512 | ) | (13,329 | ) | (12,752 | ) | (12,376 | ) | (111,840 | ) | ||||||||||||
Transfers - 3 Win [1] | — | — | — | — | (196,817 | ) | ||||||||||||||||
Net Flows | 73,035 | 54,447 | 49,111 | 41,213 | (309,214 | ) | ||||||||||||||||
Change in market value/change in reserve/interest credited | (87,165 | ) | (392,461 | ) | 96,979 | (375,644 | ) | (468,298 | ) | |||||||||||||
Ending balance | 3,998,563 | 3,660,549 | 3,806,639 | 3,472,208 | 2,694,696 | |||||||||||||||||
FIXED MVA AND OTHER | Beginning balance | 205,275 | 206,028 | 218,854 | 234,442 | 256,542 | ||||||||||||||||
Deposits/Premiums/other | 2,293 | 17,558 | 15,609 | 24,985 | 4,016 | |||||||||||||||||
Surrenders | (904 | ) | (1,245 | ) | (744 | ) | (1,845 | ) | (5,921 | ) | ||||||||||||
Death benefits/annuitizations/other [1] | (753 | ) | (1,733 | ) | (1,469 | ) | (1,947 | ) | (17,386 | ) | ||||||||||||
Transfers - 3 Win [1] | — | — | — | — | 196,817 | |||||||||||||||||
Net Flows | 636 | 14,580 | 13,396 | 21,193 | 177,526 | |||||||||||||||||
Change in market value/change in reserve/interest credited | 767 | 790 | 884 | 1,011 | 725 | |||||||||||||||||
Effect of currency translation on USD Fixed Annuity products | (650 | ) | (2,544 | ) | 1,308 | (104 | ) | (2,526 | ) | |||||||||||||
Ending balance | 206,028 | 218,854 | 234,442 | 256,542 | 432,267 | |||||||||||||||||
TOTAL JAPAN | Beginning balance | 4,217,968 | 4,204,591 | 3,879,403 | 4,041,081 | 3,728,750 | ||||||||||||||||
Deposits/Premiums/other | 125,101 | 116,698 | 105,943 | 118,327 | 32,216 | |||||||||||||||||
Surrenders | (37,165 | ) | (32,609 | ) | (29,215 | ) | (41,598 | ) | (34,678 | ) | ||||||||||||
Death benefits/annuitizations/other [1] | (14,265 | ) | (15,062 | ) | (14,221 | ) | (14,323 | ) | (129,226 | ) | ||||||||||||
Transfers - 3 Win [1] | — | — | — | — | — | |||||||||||||||||
Net Flows | 73,671 | 69,027 | 62,507 | 62,406 | (131,688 | ) | ||||||||||||||||
Change in market value/change in reserve/interest credited | (86,398 | ) | (391,671 | ) | 97,863 | (374,633 | ) | (467,573 | ) | |||||||||||||
Effect of currency translation on USD Fixed Annuity products | (650 | ) | (2,544 | ) | 1,308 | (104 | ) | (2,526 | ) | |||||||||||||
Ending balance | ¥ | $4,204,591 | ¥ | 3,879,403 | ¥ | 4,041,081 | ¥ | 3,728,750 | ¥ | 3,126,963 |
[1] | The three months ended, December 31, 2008, includes the effect of the triggering of the guaranteed minimum income benefit (“GMIB”) for the 3 Win product. This GMIB required the policyholder to elect one of two options; either (1) receive 80% of their initial deposit without surrender penalty or (2) receive 100% of the initial deposit via a 15 year pay out annuity. Included in variable annuity death benefits/annuitizations/other is ¥(102,143) for those policyholders that elected option (1). For those policyholders that elected option (2) a reserve of ¥(196,817) was established which is reflected as a transfer out of variable annuity account value and a transfer into the fixed MVA and other account value. Additionally the current period annuity payments and related interest credited associated with option (2) are included in the fixed MVA and other — death benefits/annuitizations/other and change in market value/change in reserve/interest credited, respectively. |
L-27
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
INCOME STATEMENTS
LIFE
INSTITUTIONAL SOLUTIONS GROUP
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations | ||||||||||||||||||||||||||||||||||||||||
Variable annuity fees | $ | 21 | $ | 19 | $ | 20 | $ | 18 | $ | 13 | (38 | %) | (28 | %) | $ | 73 | $ | 70 | (4 | %) | ||||||||||||||||||||
Cost of insurance charges | 10 | 17 | 16 | 13 | 16 | 60 | % | 23 | % | 62 | 62 | — | ||||||||||||||||||||||||||||
Mutual fund and other fees | 9 | 5 | 2 | 9 | 4 | (56 | %) | (56 | %) | 116 | 20 | (83 | %) | |||||||||||||||||||||||||||
Total fee income | 40 | 41 | 38 | 40 | 33 | (18 | %) | (18 | %) | 251 | 152 | (39 | %) | |||||||||||||||||||||||||||
Direct premiums | 217 | 188 | 242 | 241 | 218 | — | (10 | %) | 987 | 889 | (10 | %) | ||||||||||||||||||||||||||||
Total premiums and other considerations | 257 | 229 | 280 | 281 | 251 | (2 | %) | (11 | %) | 1,238 | 1,041 | (16 | %) | |||||||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets | 312 | 284 | 269 | 231 | 180 | (42 | %) | (22 | %) | 1,206 | 964 | (20 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital | 9 | 9 | 9 | 8 | 9 | — | 13 | % | 34 | 35 | 3 | % | ||||||||||||||||||||||||||||
Charge for invested capital | 1 | 1 | 1 | 1 | 2 | 100 | % | 100 | % | 1 | 5 | NM | ||||||||||||||||||||||||||||
Total net investment income | 322 | 294 | 279 | 240 | 191 | (41 | %) | (20 | %) | 1,241 | 1,004 | (19 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) — core | 1 | — | — | 1 | (1 | ) | NM | NM | 2 | — | (100 | %) | ||||||||||||||||||||||||||||
Total core revenues | 580 | 523 | 559 | 522 | 441 | (24 | %) | (16 | %) | 2,481 | 2,045 | (18 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), before tax and DAC, excluded from core revenues | (120 | ) | (219 | ) | (87 | ) | (606 | ) | 123 | NM | NM | (190 | ) | (789 | ) | NM | ||||||||||||||||||||||||
Total revenues | 460 | 304 | 472 | (84 | ) | 564 | 23 | % | NM | 2,291 | 1,256 | (45 | %) | |||||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||||||
Benefits and losses | ||||||||||||||||||||||||||||||||||||||||
Death benefits | 11 | 17 | 13 | 12 | 15 | 36 | % | 25 | % | 71 | 57 | (20 | %) | |||||||||||||||||||||||||||
Other contract benefits | 117 | 113 | 120 | 120 | 130 | 11 | % | 8 | % | 424 | 483 | 14 | % | |||||||||||||||||||||||||||
Change in reserve | 192 | 177 | 220 | 221 | 198 | 3 | % | (10 | %) | 916 | 816 | (11 | %) | |||||||||||||||||||||||||||
Interest credited on G/A assets | 171 | 151 | 135 | 132 | 133 | (22 | %) | 1 | % | 663 | 551 | (17 | %) | |||||||||||||||||||||||||||
Total benefits and losses | 491 | 458 | 488 | 485 | 476 | (3 | %) | (2 | %) | 2,074 | 1,907 | (8 | %) | |||||||||||||||||||||||||||
Other insurance expenses | ||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses | 15 | 14 | 15 | 19 | 11 | (27 | %) | (42 | %) | 63 | 59 | (6 | %) | |||||||||||||||||||||||||||
Operating expenses | 23 | 20 | 25 | 22 | 18 | (22 | %) | (18 | %) | 79 | 85 | 8 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses | 7 | 3 | (1 | ) | 2 | 3 | (57 | %) | 50 | % | 93 | 7 | (92 | %) | ||||||||||||||||||||||||||
Subtotal — expenses before deferral | 45 | 37 | 39 | 43 | 32 | (29 | %) | (26 | %) | 235 | 151 | (36 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs | (9 | ) | (9 | ) | (9 | ) | (8 | ) | (5 | ) | 44 | % | 38 | % | (50 | ) | (31 | ) | 38 | % | ||||||||||||||||||||
Total other insurance expense | 36 | 28 | 30 | 35 | 27 | (25 | %) | (23 | %) | 185 | 120 | (35 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] | 4 | 6 | 5 | 5 | 3 | (25 | %) | (40 | %) | 23 | 19 | (17 | %) | |||||||||||||||||||||||||||
Total benefits and expenses | 531 | 492 | 523 | 525 | 506 | (5 | %) | (4 | %) | 2,282 | 2,046 | (10 | %) | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes | 49 | 31 | 36 | (3 | ) | (65 | ) | NM | NM | 199 | (1 | ) | NM | |||||||||||||||||||||||||||
Income tax expense (benefit) | 14 | 9 | 9 | (4 | ) | (25 | ) | NM | NM | 59 | (11 | ) | NM | |||||||||||||||||||||||||||
Core earnings (loss) [1] | 35 | 22 | 27 | 1 | (40 | ) | NM | NM | 140 | 10 | (93 | %) | ||||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings | (78 | ) | (142 | ) | (57 | ) | (394 | ) | 81 | NM | NM | (123 | ) | (512 | ) | NM | ||||||||||||||||||||||||
Net income (loss) [1] | $ | (43 | ) | $ | (120 | ) | $ | (30 | ) | $ | (393 | ) | $ | 41 | NM | NM | $ | 17 | $ | (502 | ) | NM | ||||||||||||||||||
RETURN ON ASSETS (After-tax bps) | ||||||||||||||||||||||||||||||||||||||||
Core earnings | 23.0 | 14.3 | 17.4 | 0.7 | (26.7 | ) | NM | NM | 24.9 | 1.7 | (93 | %) | ||||||||||||||||||||||||||||
Net income (loss) | (28.2 | ) | (78.0 | ) | (19.4 | ) | (255.6 | ) | 27.4 | NM | NM | 3.0 | (83.3 | ) | NM |
[1] | The DAC unlock included in the year ended December 31, 2007 decreased amortization of deferred policy acquisition costs by $1, after-tax. There was no DAC unlock impact in the three months ended, September 30, 2008. |
L-28
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
INSTITUTIONAL | ||||||||||||||||||||||||||||
General account | $ | 19,731 | $ | 20,197 | $ | 20,593 | $ | 19,923 | $ | 19,771 | — | (1 | %) | |||||||||||||||
Guaranteed separate account | 421 | 412 | 402 | 384 | 393 | (7 | %) | 2 | % | |||||||||||||||||||
Non-guaranteed separate account | 4,951 | 4,675 | 4,551 | 4,189 | 3,917 | (21 | %) | (6 | %) | |||||||||||||||||||
Total Institutional account value | 25,103 | 25,284 | 25,546 | 24,496 | 24,081 | (4 | %) | (2 | %) | |||||||||||||||||||
Mutual fund assets | 3,581 | 3,489 | 3,844 | 3,325 | 2,578 | (28 | %) | (22 | %) | |||||||||||||||||||
Total Institutional Assets Under Management | $ | 28,684 | $ | 28,773 | $ | 29,390 | $ | 27,821 | $ | 26,659 | (7 | %) | (4 | %) | ||||||||||||||
PRIVATE PLACEMENT LIFE INSURANCE | ||||||||||||||||||||||||||||
General account | $ | 4 | $ | 5 | $ | 5 | $ | 6 | $ | 46 | NM | NM | ||||||||||||||||
Non-guaranteed separate account | 32,788 | 32,779 | 32,939 | 32,860 | 32,413 | (1 | %) | (1 | %) | |||||||||||||||||||
Total Private Placement Life Insurance account value | 32,792 | 32,784 | 32,944 | 32,866 | 32,459 | (1 | %) | (1 | %) | |||||||||||||||||||
TOTAL INSTITUTIONAL SOLUTIONS GROUP | ||||||||||||||||||||||||||||
General account | $ | 19,735 | $ | 20,202 | $ | 20,598 | $ | 19,929 | $ | 19,817 | — | (1 | %) | |||||||||||||||
Guaranteed separate account | 421 | 412 | 402 | 384 | 393 | (7 | %) | 2 | % | |||||||||||||||||||
Non-guaranteed separate account | 37,739 | 37,454 | 37,490 | 37,049 | 36,330 | (4 | %) | (2 | %) | |||||||||||||||||||
Total Institutional Solutions Group account value | 57,895 | 58,068 | 58,490 | 57,362 | 56,540 | (2 | %) | (1 | %) | |||||||||||||||||||
Mutual fund assets | 3,581 | 3,489 | 3,844 | 3,325 | 2,578 | (28 | %) | (22 | %) | |||||||||||||||||||
Total Institutional Solutions Group Assets Under Management | $ | 61,476 | $ | 61,557 | $ | 62,334 | $ | 60,687 | $ | 59,118 | (4 | %) | (3 | %) | ||||||||||||||
BY PRODUCT | ||||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||
Structured settlements | $ | 6,322 | $ | 6,530 | $ | 6,729 | $ | 6,962 | $ | 7,137 | 13 | % | 3 | % | ||||||||||||||
Institutional annuities | 3,113 | 3,108 | 3,118 | 3,089 | 3,067 | (1 | %) | (1 | %) | |||||||||||||||||||
Guaranteed interest products | 10,421 | 10,644 | 10,741 | 9,760 | 9,353 | (10 | %) | (4 | %) | |||||||||||||||||||
Other | 5,247 | 5,002 | 4,958 | 4,685 | 4,524 | (14 | %) | (3 | %) | |||||||||||||||||||
Total Institutional | 25,103 | 25,284 | 25,546 | 24,496 | 24,081 | (4 | %) | (2 | %) | |||||||||||||||||||
Private Placement Life Insurance | 32,792 | 32,784 | 32,944 | 32,866 | 32,459 | (1 | %) | (1 | %) | |||||||||||||||||||
Total Institutional Solutions Group account value | 57,895 | 58,068 | 58,490 | 57,362 | 56,540 | (2 | %) | (1 | %) | |||||||||||||||||||
Institutional Mutual Fund Assets | 3,581 | 3,489 | 3,844 | 3,325 | 2,578 | (28 | %) | (22 | %) | |||||||||||||||||||
Total Institutional Solutions Group Assets Under Management | $ | 61,476 | $ | 61,557 | $ | 62,334 | $ | 60,687 | $ | 59,118 | (4 | %) | (3 | %) | ||||||||||||||
L-29
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — DEPOSITS
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — DEPOSITS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||||||||||||||
Structured settlements | 267 | $ | 211 | $ | 200 | $ | 231 | $ | 170 | (36 | %) | (26 | %) | 1,066 | $ | 812 | (24 | %) | ||||||||||||||||||||||
Institutional annuities | 10 | 23 | 38 | 25 | 10 | — | (60 | %) | 315 | 96 | (70 | %) | ||||||||||||||||||||||||||||
Guaranteed interest products | 115 | 721 | 552 | 168 | 254 | 121 | % | 51 | % | 2,585 | 1,695 | (34 | %) | |||||||||||||||||||||||||||
Other | 114 | 53 | 119 | 111 | 127 | 11 | % | 14 | % | 381 | 410 | 8 | % | |||||||||||||||||||||||||||
Subtotal | 506 | 1,008 | 909 | 535 | 561 | 11 | % | 5 | % | 4,347 | 3,013 | (31 | %) | |||||||||||||||||||||||||||
Mutual funds | 504 | 583 | 383 | 282 | 309 | (39 | %) | 10 | % | 1,682 | 1,557 | (7 | %) | |||||||||||||||||||||||||||
Total Institutional | 1,010 | 1,591 | 1,292 | 817 | 870 | (14 | %) | 6 | % | 6,029 | 4,570 | (24 | %) | |||||||||||||||||||||||||||
Private Placement Life Insurance | ||||||||||||||||||||||||||||||||||||||||
Corporate owned | 450 | 57 | 64 | 17 | 45 | (90 | %) | 165 | % | 5,195 | 183 | (96 | %) | |||||||||||||||||||||||||||
Private clients | 4 | 13 | 22 | 16 | 13 | NM | (19 | %) | 24 | 64 | 167 | % | ||||||||||||||||||||||||||||
Total Private Placement Life Insurance | 454 | 70 | 86 | 33 | 58 | (87 | %) | 76 | % | 5,219 | 247 | (95 | %) | |||||||||||||||||||||||||||
Total Institutional Solutions Group | $ | 1,464 | $ | 1,661 | $ | 1,378 | $ | 850 | $ | 928 | (37 | %) | 9 | % | $ | 11,248 | $ | 4,817 | (57 | %) | ||||||||||||||||||||
L-30
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1]
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1]
THREE MONTHS ENDED | ||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||
INSTITUTIONAL INVESTMENT PRODUCTS ACCOUNT VALUE [1] | Beginning balance | $ | 25,041 | $ | 25,103 | $ | 25,284 | $ | 25,546 | $ | 24,496 | |||||||||||
Deposits | 506 | 1,008 | 909 | 535 | 561 | |||||||||||||||||
Surrenders | (572 | ) | (695 | ) | (626 | ) | (1,294 | ) | (810 | ) | ||||||||||||
Death benefits/annuity payouts | (161 | ) | (160 | ) | (171 | ) | (201 | ) | (193 | ) | ||||||||||||
Net Flows | (227 | ) | 153 | 112 | (960 | ) | (442 | ) | ||||||||||||||
Change in market value/change in reserve/interest credited | 289 | 28 | 150 | (90 | ) | 27 | ||||||||||||||||
Ending balance | $ | 25,103 | $ | 25,284 | $ | 25,546 | $ | 24,496 | $ | 24,081 | ||||||||||||
INSTITUTIONAL MUTUAL FUND ASSETS [2] | Beginning balance | $ | 3,398 | $ | 3,581 | $ | 3,489 | $ | 3,844 | $ | 3,325 | |||||||||||
Deposits | 504 | 583 | 383 | 282 | 309 | |||||||||||||||||
Surrenders | (273 | ) | (285 | ) | (201 | ) | (228 | ) | (243 | ) | ||||||||||||
Net Flows | 231 | 298 | 182 | 54 | 66 | |||||||||||||||||
Change in market value/change in reserve/interest credited | (48 | ) | (390 | ) | 173 | (573 | ) | (813 | ) | |||||||||||||
Ending balance | $ | 3,581 | $ | 3,489 | $ | 3,844 | $ | 3,325 | $ | 2,578 | ||||||||||||
PRIVATE PLACEMENT LIFE INSURANCE ACCOUNT VALUE [1] | Beginning balance | $ | 32,041 | $ | 32,792 | $ | 32,784 | $ | 32,944 | $ | 32,866 | |||||||||||
Deposits | 454 | 70 | 86 | 33 | 58 | |||||||||||||||||
Surrenders | (29 | ) | (17 | ) | (20 | ) | (27 | ) | (2 | ) | ||||||||||||
Death benefits/annuity payouts | (27 | ) | (25 | ) | (47 | ) | (16 | ) | (17 | ) | ||||||||||||
Net Flows | 398 | 28 | 19 | (10 | ) | 39 | ||||||||||||||||
Change in market value/change in reserve/interest credited | 372 | 18 | 197 | (42 | ) | (419 | ) | |||||||||||||||
Other [3] | (19 | ) | (54 | ) | (56 | ) | (26 | ) | (27 | ) | ||||||||||||
Ending balance | $ | 32,792 | $ | 32,784 | $ | 32,944 | $ | 32,866 | $ | 32,459 | ||||||||||||
INSTITUTIONAL SOLUTIONS GROUP | ||||||||||||||||||||||
Beginning balance | $ | 60,480 | $ | 61,476 | $ | 61,557 | $ | 62,334 | $ | 60,687 | ||||||||||||
Deposits | 1,464 | 1,661 | 1,378 | 850 | 928 | |||||||||||||||||
Surrenders | (874 | ) | (997 | ) | (847 | ) | (1,549 | ) | (1,055 | ) | ||||||||||||
Death benefits/annuity payouts | (188 | ) | (185 | ) | (218 | ) | (217 | ) | (210 | ) | ||||||||||||
Net Flows | 402 | 479 | 313 | (916 | ) | (337 | ) | |||||||||||||||
Change in market value/change in reserve/interest credited | 613 | (344 | ) | 520 | (705 | ) | (1,205 | ) | ||||||||||||||
Other [3] | (19 | ) | (54 | ) | (56 | ) | (26 | ) | (27 | ) | ||||||||||||
Ending balance | $ | 61,476 | $ | 61,557 | $ | 62,334 | $ | 60,687 | $ | 59,118 |
[1] | Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts. | |
[2] | Mutual Fund assets are an internal measure used by the company because a portion of revenues are based upon asset levels. Mutual Fund assets are not included on the balance sheet. | |
[3] | Primarily consists of cost of insurance and M&E charges. |
L -31
PROPERTY & CASUALTY
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
FINANCIAL HIGHLIGHTS
PROPERTY & CASUALTY
FINANCIAL HIGHLIGHTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
TOTAL PROPERTY & CASUALTY PREMIUMS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 2,513 | $ | 2,586 | $ | 2,585 | $ | 2,593 | $ | 2,467 | (2 | %) | (5 | %) | $ | 10,440 | $ | 10,231 | (2 | %) | ||||||||||||||||||||
Earned premiums | 2,623 | 2,614 | 2,586 | 2,568 | 2,570 | (2 | %) | — | 10,496 | 10,338 | (2 | %) | ||||||||||||||||||||||||||||
TOTAL PROPERTY & CASUALTY UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Personal Lines | 30 | 105 | 18 | (45 | ) | 202 | NM | NM | 322 | 280 | (13 | %) | ||||||||||||||||||||||||||||
Small Commercial | 204 | 119 | 69 | 82 | 167 | (18 | %) | 104 | % | 508 | 437 | (14 | %) | |||||||||||||||||||||||||||
Middle Market | 58 | 55 | 3 | (37 | ) | 148 | 155 | % | NM | 157 | 169 | 8 | % | |||||||||||||||||||||||||||
Specialty Commercial | (58 | ) | 39 | 18 | (44 | ) | 58 | NM | NM | (18 | ) | 71 | NM | |||||||||||||||||||||||||||
Ongoing Operations underwriting results | 234 | 318 | 108 | (44 | ) | 575 | 146 | % | NM | 969 | 957 | (1 | %) | |||||||||||||||||||||||||||
Other Operations [1] | (23 | ) | (19 | ) | (58 | ) | (61 | ) | (7 | ) | 70 | % | 89 | % | (210 | ) | (145 | ) | 31 | % | ||||||||||||||||||||
Total Property & Casualty underwriting results | $ | 211 | $ | 299 | $ | 50 | $ | (105 | ) | $ | 568 | 169 | % | NM | $ | 759 | $ | 812 | 7 | % | ||||||||||||||||||||
ONGOING OPERATIONS UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [2] | 65.2 | 62.2 | 63.4 | 63.8 | 58.0 | 7.2 | 5.8 | 63.8 | 61.9 | 1.9 | ||||||||||||||||||||||||||||||
Current accident year catastrophes [3] | 2.5 | 1.9 | 6.6 | 12.7 | (0.1 | ) | 2.6 | 12.8 | 1.7 | 5.3 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior accident years [4] | (4.8 | ) | (2.0 | ) | (1.5 | ) | (2.8 | ) | (7.6 | ) | 2.8 | 4.8 | (1.4 | ) | (3.4 | ) | 2.0 | |||||||||||||||||||||||
Total losses and loss adjustment expenses | 62.8 | 62.2 | 68.5 | 73.7 | 50.3 | 12.5 | 23.4 | 64.1 | 63.7 | 0.4 | ||||||||||||||||||||||||||||||
Expenses [5] | 27.3 | 25.5 | 26.5 | 27.3 | 27.1 | 0.2 | 0.2 | 26.3 | 26.6 | (0.3 | ) | |||||||||||||||||||||||||||||
Policyholder dividends [6] | 0.9 | 0.2 | 0.8 | 0.7 | 0.2 | 0.7 | 0.5 | 0.4 | 0.5 | (0.1 | ) | |||||||||||||||||||||||||||||
Combined ratio | 91.1 | 87.8 | 95.8 | 101.7 | 77.6 | 13.5 | 24.1 | 90.8 | 90.7 | 0.1 | ||||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 2.5 | 1.9 | 6.6 | 12.7 | (0.1 | ) | 2.6 | 12.8 | 1.7 | 5.3 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior year | 0.2 | (0.4 | ) | — | (0.2 | ) | (0.2 | ) | 0.4 | — | 0.1 | (0.2 | ) | 0.3 | ||||||||||||||||||||||||||
Catastrophe ratio | 2.6 | 1.5 | 6.6 | 12.5 | (0.4 | ) | 3.0 | 12.9 | 1.8 | 5.0 | (3.2 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes | 88.4 | 86.4 | 89.2 | 89.2 | 78.0 | 10.4 | 11.2 | 89.0 | 85.7 | 3.3 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 93.4 | 87.9 | 90.7 | 91.8 | 85.3 | 8.1 | 6.5 | 90.5 | 88.9 | 1.6 | ||||||||||||||||||||||||||||||
Total Property & Casualty Income and ROE | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | 349 | $ | 326 | $ | 249 | $ | (774 | ) | $ | 291 | (17 | %) | NM | $ | 1,507 | $ | 92 | (94 | %) | ||||||||||||||||||||
Core earnings | $ | 414 | $ | 426 | $ | 283 | $ | 156 | $ | 452 | 9 | % | 190 | % | $ | 1,629 | $ | 1,317 | (19 | %) | ||||||||||||||||||||
Core earnings ROE (rolling 12 months income) [7] | ||||||||||||||||||||||||||||||||||||||||
Ongoing Operations | 23.2 | % | 22.7 | % | 20.0 | % | 18.1 | % | 17.1 | % | (6.1 | ) | (1.0 | ) | ||||||||||||||||||||||||||
Other Operations | 4.4 | % | 4.6 | % | 10.7 | % | 7.9 | % | 5.7 | % | 1.3 | (2.2 | ) | |||||||||||||||||||||||||||
Total Property & Casualty | 21.4 | % | 21.1 | % | 19.2 | % | 17.2 | % | 16.2 | % | (5.2 | ) | (1.0 | ) |
PROPERTY & CASUALTY | ||||||||||||
Dec. 31, | Dec. 31, | |||||||||||
2007 | 2008 | Change | ||||||||||
Selected Financial Data | ||||||||||||
Total Property and Casualty adjusted statutory surplus ($ in billions) [8] | $ | 8.5 | $ | 6.0 | $ | (2.5 | ) | |||||
Total Property and Casualty premium to adjusted surplus ratio | 1.2 | 1.7 | 0.5 |
[1] | The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended June 30, 2008 included net asbestos reserve strengthening of $50. The three months ended September 30, 2008 included environmental reserve strengthening of $53. | |
[2] | The three months ended December 31, 2007 included net current accident year reserve strengthening, totaling 0.5 points, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening, totaling 0.3 points, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release, totaling 0.4 points, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release, totaling 3.7 points, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims. | |
[3] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[4] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. | |
[5] | The three months ended September 30, 2008 included an assessment from the Texas Windstorm Insurance Association totaling 0.8 points, primarily related to hurricane Ike. | |
[6] | Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of 0.8 points, 0.6 points and 0.4 points, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[7] | Core earnings return on equity is calculated using equity attributed to Ongoing Operations, Other Operations and Total Property and Casualty using the Company’s capital attribution methodology. | |
[8] | Estimated statutory surplus as of December 31, 2008. |
PC-1
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OPERATING RESULTS
PROPERTY & CASUALTY
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
TOTAL PROPERTY & CASUALTY UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 2,513 | $ | 2,586 | $ | 2,585 | $ | 2,593 | $ | 2,467 | (2 | %) | (5 | %) | $ | 10,440 | $ | 10,231 | (2 | %) | ||||||||||||||||||||
Change in unearned premium reserve | (110 | ) | (28 | ) | (1 | ) | 25 | (103 | ) | 6 | % | NM | (56 | ) | (107 | ) | (91 | %) | ||||||||||||||||||||||
Earned premiums | 2,623 | 2,614 | 2,586 | 2,568 | 2,570 | (2 | %) | — | 10,496 | 10,338 | (2 | %) | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 1,708 | 1,625 | 1,639 | 1,638 | 1,488 | (13 | %) | (9 | %) | 6,692 | 6,390 | (5 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [2] | 65 | 50 | 171 | 325 | (3 | ) | NM | NM | 177 | 543 | NM | |||||||||||||||||||||||||||||
Prior accident years [3] | (106 | ) | (36 | ) | 16 | (14 | ) | (192 | ) | (81 | %) | NM | 48 | (226 | ) | NM | ||||||||||||||||||||||||
Total losses and loss adjustment expenses | 1,667 | 1,639 | 1,826 | 1,949 | 1,293 | (22 | %) | (34 | %) | 6,917 | 6,707 | (3 | %) | |||||||||||||||||||||||||||
Underwriting expenses [4] | 721 | 671 | 690 | 707 | 704 | (2 | %) | — | 2,777 | 2,772 | — | |||||||||||||||||||||||||||||
Dividends to policyholders [5] | 24 | 5 | 20 | 17 | 5 | (79 | %) | (71 | %) | 43 | 47 | 9 | % | |||||||||||||||||||||||||||
Underwriting results | 211 | 299 | 50 | (105 | ) | 568 | 169 | % | NM | 759 | 812 | 7 | % | |||||||||||||||||||||||||||
Net servicing income | 11 | (1 | ) | 8 | 14 | 10 | (9 | %) | (29 | %) | 52 | 31 | (40 | %) | ||||||||||||||||||||||||||
Net investment income [6] | 421 | 365 | 391 | 335 | 162 | (62 | %) | (52 | %) | 1,687 | 1,253 | (26 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax | 4 | 2 | 1 | 2 | (3 | ) | NM | NM | 15 | 2 | (87 | %) | ||||||||||||||||||||||||||||
Other expenses | (67 | ) | (59 | ) | (65 | ) | (57 | ) | (41 | ) | 39 | % | 28 | % | (249 | ) | (222 | ) | 11 | % | ||||||||||||||||||||
Income tax expense | (166 | ) | (180 | ) | (102 | ) | (33 | ) | (244 | ) | (47 | %) | NM | (635 | ) | (559 | ) | 12 | % | |||||||||||||||||||||
Core earnings | 414 | 426 | 283 | 156 | 452 | 9 | % | 190 | % | 1,629 | 1,317 | (19 | %) | |||||||||||||||||||||||||||
Add: Net realized capital losses, after-tax, excluded from core earnings | (65 | ) | (100 | ) | (34 | ) | (930 | ) | (161 | ) | (148 | %) | 83 | % | (122 | ) | (1,225 | ) | NM | |||||||||||||||||||||
Net income (loss) | $ | 349 | $ | 326 | $ | 249 | $ | (774 | ) | $ | 291 | (17 | %) | NM | $ | 1,507 | $ | 92 | (94 | %) | ||||||||||||||||||||
Total Property & Casualty effective tax rate — net income | 27.4 | % | 27.9 | % | 25.1 | % | 37.6 | % | 35.7 | % | 8.3 | (1.9 | ) | 27.5 | % | NM | NM | |||||||||||||||||||||||
Total Property & Casualty effective tax rate — core earnings | 28.7 | % | 29.7 | % | 26.4 | % | 17.6 | % | 35.1 | % | 6.4 | 17.5 | 28.0 | % | 29.8 | % | 1.8 | |||||||||||||||||||||||
[1] | The three months ended December 31, 2007 included current accident year reserve strengthening of $13, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening of $7, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release of $9, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims. | |
[2] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[3] | The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims, $70 of reserve releases related to Personal Lines auto liability claims, $53 of environmental reserve strengthening and $50 of net asbestos reserve strengthening. | |
[4] | The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[5] | Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[6] | The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships. |
PC-2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS
OPERATING RESULTS
PROPERTY & CASUALTY
ONGOING OPERATIONS
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
ONGOING OPERATIONS UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 2,511 | $ | 2,584 | $ | 2,583 | $ | 2,592 | $ | 2,465 | (2 | %) | (5 | %) | $ | 10,435 | $ | 10,224 | (2 | %) | ||||||||||||||||||||
Change in unearned premium reserve | (110 | ) | (29 | ) | (1 | ) | 25 | (102 | ) | 7 | % | NM | (56 | ) | (107 | ) | (91 | %) | ||||||||||||||||||||||
Earned premiums | 2,621 | 2,613 | 2,584 | 2,567 | 2,567 | (2 | %) | — | 10,491 | 10,331 | (2 | %) | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 1,708 | 1,625 | 1,639 | 1,638 | 1,488 | (13 | %) | (9 | %) | 6,692 | 6,390 | (5 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [2] | 65 | 50 | 171 | 325 | (3 | ) | NM | NM | 177 | 543 | NM | |||||||||||||||||||||||||||||
Prior accident years [3] | (126 | ) | (51 | ) | (39 | ) | (70 | ) | (195 | ) | (55 | %) | (179 | %) | (145 | ) | (355 | ) | (145 | %) | ||||||||||||||||||||
Total losses and loss adjustment expenses | 1,647 | 1,624 | 1,771 | 1,893 | 1,290 | (22 | %) | (32 | %) | 6,724 | 6,578 | (2 | %) | |||||||||||||||||||||||||||
Underwriting expenses [4] | 716 | 666 | 685 | 701 | 697 | (3 | %) | (1 | %) | 2,755 | 2,749 | — | ||||||||||||||||||||||||||||
Dividends to policyholders [5] | 24 | 5 | 20 | 17 | 5 | (79 | %) | (71 | %) | 43 | 47 | 9 | % | |||||||||||||||||||||||||||
Underwriting results | 234 | 318 | 108 | (44 | ) | 575 | 146 | % | NM | 969 | 957 | (1 | %) | |||||||||||||||||||||||||||
Net servicing income | 11 | (1 | ) | 8 | 14 | 10 | (9 | %) | (29 | %) | 52 | 31 | (40 | %) | ||||||||||||||||||||||||||
Net investment income [6] | 357 | 310 | 334 | 285 | 127 | (64 | %) | (55 | %) | 1,439 | 1,056 | (27 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax | 4 | 2 | 1 | 2 | (3 | ) | NM | NM | 15 | 2 | (87 | %) | ||||||||||||||||||||||||||||
Other expenses | (69 | ) | (57 | ) | (65 | ) | (58 | ) | (39 | ) | 43 | % | 33 | % | (248 | ) | (219 | ) | 12 | % | ||||||||||||||||||||
Income tax expense | (155 | ) | (172 | ) | (105 | ) | (39 | ) | (236 | ) | (52 | %) | NM | (636 | ) | (552 | ) | 13 | % | |||||||||||||||||||||
Core earnings | 382 | 400 | 281 | 160 | 434 | 14 | % | 171 | % | 1,591 | 1,275 | (20 | %) | |||||||||||||||||||||||||||
Add: Net realized capital losses, after-tax, excluded from core earnings | (59 | ) | (88 | ) | (35 | ) | (826 | ) | (137 | ) | (132 | %) | 83 | % | (114 | ) | (1,086 | ) | NM | |||||||||||||||||||||
Net income (loss) | $ | 323 | $ | 312 | $ | 246 | $ | (666 | ) | $ | 297 | (8 | %) | NM | $ | 1,477 | $ | 189 | (87 | %) | ||||||||||||||||||||
Ongoing Operations effective tax rate — net income | 27.6 | % | 28.4 | % | 26.0 | % | 37.8 | % | 35.4 | % | 7.8 | (2.4 | ) | 28.0 | % | NM | NM | |||||||||||||||||||||||
Ongoing Operations effective tax rate — core earnings | 28.9 | % | 30.0 | % | 27.3 | % | 19.8 | % | 35.3 | % | 6.4 | 15.5 | 28.6 | % | 30.2 | % | 1.6 | |||||||||||||||||||||||
[1] | The three months ended December 31, 2007 included current accident year reserve strengthening of $13, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening of $7, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release of $9, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims. | |
[2] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[3] | The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims and $70 of reserve releases related to Personal Lines auto liability claims. | |
[4] | The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[5] | Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[6] | The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships. |
PC-3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008
Personal | Small | Middle | Specialty | Ongoing | ||||||||||||||||
Lines | Commercial | Market | Commercial | Operations | ||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||
Written premiums | $ | 936 | $ | 622 | $ | 577 | $ | 330 | $ | 2,465 | ||||||||||
Change in unearned premium reserve | (49 | ) | (54 | ) | 15 | (14 | ) | (102 | ) | |||||||||||
Earned premiums | 985 | 676 | 562 | 344 | 2,567 | |||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||
Current accident year before catastrophes | 628 | 317 | 314 | 229 | 1,488 | |||||||||||||||
Current accident year catastrophes | (37 | ) | 29 | 10 | (5 | ) | (3 | ) | ||||||||||||
Prior accident years | (35 | ) | (39 | ) | (79 | ) | (42 | ) | (195 | ) | ||||||||||
Total losses and loss adjustment expenses | 556 | 307 | 245 | 182 | 1,290 | |||||||||||||||
Underwriting expenses | 227 | 201 | 167 | 102 | 697 | |||||||||||||||
Dividends to policyholders | — | 1 | 2 | 2 | 5 | |||||||||||||||
Underwriting results | $ | 202 | $ | 167 | $ | 148 | $ | 58 | $ | 575 | ||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||
Current accident year before catastrophes | 63.8 | 46.8 | 56.0 | 66.4 | 58.0 | |||||||||||||||
Current accident year catastrophes | (3.8 | ) | 4.4 | 1.8 | (1.7 | ) | (0.1 | ) | ||||||||||||
Prior accident years [1] | (3.5 | ) | (5.8 | ) | (14.1 | ) | (12.0 | ) | (7.6 | ) | ||||||||||
Total losses and loss adjustment expenses | 56.5 | 45.4 | 43.7 | 52.7 | 50.3 | |||||||||||||||
Expenses | 23.0 | 29.7 | 29.7 | 29.7 | 27.1 | |||||||||||||||
Policyholder dividends | — | 0.2 | 0.3 | 0.5 | 0.2 | |||||||||||||||
Combined ratio | 79.5 | 75.4 | 73.7 | 83.0 | 77.6 | |||||||||||||||
Catastrophes | ||||||||||||||||||||
Current year | (3.8 | ) | 4.4 | 1.8 | (1.7 | ) | (0.1 | ) | ||||||||||||
Prior year | 0.3 | — | (0.8 | ) | (1.5 | ) | (0.2 | ) | ||||||||||||
Catastrophe ratio | (3.5 | ) | 4.4 | 1.1 | (3.2 | ) | (0.4 | ) | ||||||||||||
Combined ratio before catastrophes | 82.9 | 71.0 | 72.7 | 86.1 | 78.0 | |||||||||||||||
Combined ratio before catastrophes and prior year development | 86.8 | 76.8 | 86.0 | 96.7 | 85.3 | |||||||||||||||
[1] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-4
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2008
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2008
Personal | Small | Middle | Specialty | Ongoing | ||||||||||||||||
Lines | Commercial | Market | Commercial | Operations | ||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||
Written premiums | $ | 3,925 | $ | 2,696 | $ | 2,242 | $ | 1,361 | $ | 10,224 | ||||||||||
Change in unearned premium reserve | (1 | ) | (28 | ) | (57 | ) | (21 | ) | (107 | ) | ||||||||||
Earned premiums | 3,926 | 2,724 | 2,299 | 1,382 | 10,331 | |||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||
Current accident year before catastrophes | 2,542 | 1,447 | 1,460 | 941 | 6,390 | |||||||||||||||
Current accident year catastrophes | 258 | 122 | 116 | 47 | 543 | |||||||||||||||
Prior accident years | (51 | ) | (89 | ) | (134 | ) | (81 | ) | (355 | ) | ||||||||||
Total losses and loss adjustment expenses | 2,749 | 1,480 | 1,442 | 907 | 6,578 | |||||||||||||||
Underwriting expenses | 897 | 793 | 667 | 392 | 2,749 | |||||||||||||||
Dividends to policyholders | — | 14 | 21 | 12 | 47 | |||||||||||||||
Underwriting results | $ | 280 | $ | 437 | $ | 169 | $ | 71 | $ | 957 | ||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||
Current accident year before catastrophes | 64.8 | 53.1 | 63.5 | 68.1 | 61.9 | |||||||||||||||
Current accident year catastrophes | 6.6 | 4.5 | 5.1 | 3.4 | 5.3 | |||||||||||||||
Prior accident years [1] | (1.3 | ) | (3.3 | ) | (5.9 | ) | (5.8 | ) | (3.4 | ) | ||||||||||
Total losses and loss adjustment expenses | 70.0 | 54.3 | 62.7 | 65.6 | 63.7 | |||||||||||||||
Expenses | 22.8 | 29.1 | 29.0 | 28.3 | 26.6 | |||||||||||||||
Policyholder dividends | — | 0.5 | 0.9 | 0.9 | 0.5 | |||||||||||||||
Combined ratio | 92.9 | 84.0 | 92.6 | 94.8 | 90.7 | |||||||||||||||
Catastrophes | ||||||||||||||||||||
Current year | 6.6 | 4.5 | 5.1 | 3.4 | 5.3 | |||||||||||||||
Prior year | 0.2 | (0.1 | ) | (0.5 | ) | (1.2 | ) | (0.2 | ) | |||||||||||
Catastrophe ratio | 6.8 | 4.4 | 4.6 | 2.2 | 5.0 | |||||||||||||||
Combined ratio before catastrophes | 86.1 | 79.6 | 88.1 | 92.6 | 85.7 | |||||||||||||||
Combined ratio before catastrophes and prior year development | 87.6 | 82.8 | 93.4 | 97.3 | 88.9 | |||||||||||||||
[1] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-5
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS
UNDERWRITING RESULTS
PROPERTY & CASUALTY
ONGOING OPERATIONS
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 2,511 | $ | 2,584 | $ | 2,583 | $ | 2,592 | $ | 2,465 | (2 | %) | (5 | %) | $ | 10,435 | $ | 10,224 | (2 | %) | ||||||||||||||||||||
Change in unearned premium reserve | (110 | ) | (29 | ) | (1 | ) | 25 | (102 | ) | 7 | % | NM | (56 | ) | (107 | ) | (91 | %) | ||||||||||||||||||||||
Earned premiums | 2,621 | 2,613 | 2,584 | 2,567 | 2,567 | (2 | %) | — | 10,491 | 10,331 | (2 | %) | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 1,708 | 1,625 | 1,639 | 1,638 | 1,488 | (13 | %) | (9 | %) | 6,692 | 6,390 | (5 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [2] | 65 | 50 | 171 | 325 | (3 | ) | NM | NM | 177 | 543 | NM | |||||||||||||||||||||||||||||
Prior accident years [3] | (126 | ) | (51 | ) | (39 | ) | (70 | ) | (195 | ) | (55 | %) | (179 | %) | (145 | ) | (355 | ) | (145 | %) | ||||||||||||||||||||
Total losses and loss adjustment expenses | 1,647 | 1,624 | 1,771 | 1,893 | 1,290 | (22 | %) | (32 | %) | 6,724 | 6,578 | (2 | %) | |||||||||||||||||||||||||||
Underwriting expenses [4] | 716 | 666 | 685 | 701 | 697 | (3 | %) | (1 | %) | 2,755 | 2,749 | — | ||||||||||||||||||||||||||||
Dividends to policyholders [5] | 24 | 5 | 20 | 17 | 5 | (79 | %) | (71 | %) | 43 | 47 | 9 | % | |||||||||||||||||||||||||||
Underwriting results | $ | 234 | $ | 318 | $ | 108 | $ | (44 | ) | $ | 575 | 146 | % | NM | $ | 969 | $ | 957 | (1 | %) | ||||||||||||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 65.2 | 62.2 | 63.4 | 63.8 | 58.0 | 7.2 | 5.8 | 63.8 | 61.9 | 1.9 | ||||||||||||||||||||||||||||||
Current accident year catastrophes [2] | 2.5 | 1.9 | 6.6 | 12.7 | (0.1 | ) | 2.6 | 12.8 | 1.7 | 5.3 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior accident years [3] [6] | (4.8 | ) | (2.0 | ) | (1.5 | ) | (2.8 | ) | (7.6 | ) | 2.8 | 4.8 | (1.4 | ) | (3.4 | ) | 2.0 | |||||||||||||||||||||||
Total losses and loss adjustment expenses | 62.8 | 62.2 | 68.5 | 73.7 | 50.3 | 12.5 | 23.4 | 64.1 | 63.7 | 0.4 | ||||||||||||||||||||||||||||||
Expenses | 27.3 | 25.5 | 26.5 | 27.3 | 27.1 | 0.2 | 0.2 | 26.3 | 26.6 | (0.3 | ) | |||||||||||||||||||||||||||||
Policyholder dividends | 0.9 | 0.2 | 0.8 | 0.7 | 0.2 | 0.7 | 0.5 | 0.4 | 0.5 | (0.1 | ) | |||||||||||||||||||||||||||||
Combined ratio | 91.1 | 87.8 | 95.8 | 101.7 | 77.6 | 13.5 | 24.1 | 90.8 | 90.7 | 0.1 | ||||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 2.5 | 1.9 | 6.6 | 12.7 | (0.1 | ) | 2.6 | 12.8 | 1.7 | 5.3 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior year | 0.2 | (0.4 | ) | — | (0.2 | ) | (0.2 | ) | 0.4 | — | 0.1 | (0.2 | ) | 0.3 | ||||||||||||||||||||||||||
Catastrophe ratio | 2.6 | 1.5 | 6.6 | 12.5 | (0.4 | ) | 3.0 | 12.9 | 1.8 | 5.0 | (3.2 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes | 88.4 | 86.4 | 89.2 | 89.2 | 78.0 | 10.4 | 11.2 | 89.0 | 85.7 | 3.3 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 93.4 | 87.9 | 90.7 | 91.8 | 85.3 | 8.1 | 6.5 | 90.5 | 88.9 | 1.6 | ||||||||||||||||||||||||||||||
[1] | The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $13, or 0.5 points, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included a current accident year reserve strengthening, totaling $7, or 0.3 points, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release, totaling $9, or 0.4 points, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release, totaling $95, or 3.7 points, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims. | |
[2] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[3] | The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims and $70 of reserve releases related to Personal Lines auto liability claims. | |
[4] | The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[5] | Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[6] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PERSONAL LINES
UNDERWRITING RESULTS
PROPERTY & CASUALTY
PERSONAL LINES
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 934 | $ | 936 | $ | 1,029 | $ | 1,024 | $ | 936 | — | (9 | %) | $ | 3,947 | $ | 3,925 | (1 | %) | |||||||||||||||||||||
Change in unearned premium reserve | (51 | ) | (47 | ) | 49 | 46 | (49 | ) | 4 | % | NM | 58 | (1 | ) | NM | |||||||||||||||||||||||||
Earned premiums | 985 | 983 | 980 | 978 | 985 | — | 1 | % | 3,889 | 3,926 | 1 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 696 | 635 | 645 | 634 | 628 | (10 | %) | (1 | %) | 2,576 | 2,542 | (1 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [2] | 50 | 30 | 97 | 168 | (37 | ) | NM | NM | 125 | 258 | 106 | % | ||||||||||||||||||||||||||||
Prior accident years [3] | (19 | ) | (8 | ) | 1 | (9 | ) | (35 | ) | (84 | %) | NM | (4 | ) | (51 | ) | NM | |||||||||||||||||||||||
Total losses and loss adjustment expenses | 727 | 657 | 743 | 793 | 556 | (24 | %) | (30 | %) | 2,697 | 2,749 | 2 | % | |||||||||||||||||||||||||||
Underwriting expenses [4] | 228 | 221 | 219 | 230 | 227 | — | (1 | %) | 870 | 897 | 3 | % | ||||||||||||||||||||||||||||
Underwriting results | $ | 30 | $ | 105 | $ | 18 | $ | (45 | ) | $ | 202 | NM | NM | $ | 322 | $ | 280 | (13 | %) | |||||||||||||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 70.5 | 64.6 | 65.9 | 64.7 | 63.8 | 6.7 | 0.9 | 66.2 | 64.8 | 1.4 | ||||||||||||||||||||||||||||||
Current accident year catastrophes [2] | 5.1 | 3.1 | 9.8 | 17.2 | (3.8 | ) | 8.9 | 21.0 | 3.2 | 6.6 | (3.4 | ) | ||||||||||||||||||||||||||||
Prior accident years [3] [5] | (1.9 | ) | (0.8 | ) | — | (0.9 | ) | (3.5 | ) | 1.6 | 2.6 | (0.1 | ) | (1.3 | ) | 1.2 | ||||||||||||||||||||||||
Total losses and loss adjustment expenses | 73.8 | 66.9 | 75.8 | 81.1 | 56.5 | 17.3 | 24.6 | 69.3 | 70.0 | (0.7 | ) | |||||||||||||||||||||||||||||
Expenses | 23.2 | 22.4 | 22.4 | 23.5 | 23.0 | 0.2 | 0.5 | 22.4 | 22.8 | (0.4 | ) | |||||||||||||||||||||||||||||
Combined ratio | 97.0 | 89.4 | 98.1 | 104.6 | 79.5 | 17.5 | 25.1 | 91.7 | 92.9 | (1.2 | ) | |||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 5.1 | 3.1 | 9.8 | 17.2 | (3.8 | ) | 8.9 | 21.0 | 3.2 | 6.6 | (3.4 | ) | ||||||||||||||||||||||||||||
Prior year | 0.1 | (0.7 | ) | 0.3 | 0.8 | 0.3 | (0.2 | ) | 0.5 | 0.2 | 0.2 | — | ||||||||||||||||||||||||||||
Catastrophe ratio | 5.2 | 2.5 | 10.1 | 18.1 | (3.5 | ) | 8.7 | 21.6 | 3.4 | 6.8 | (3.4 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes | 91.7 | 86.9 | 88.0 | 86.5 | 82.9 | 8.8 | 3.6 | 88.3 | 86.1 | 2.2 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 93.7 | 87.0 | 88.3 | 88.3 | 86.8 | 6.9 | 1.5 | 88.6 | 87.6 | 1.0 | ||||||||||||||||||||||||||||||
COMBINED RATIO | ||||||||||||||||||||||||||||||||||||||||
Automobile | 102.3 | 92.6 | 94.3 | 90.5 | 86.5 | 15.8 | 4.0 | 96.2 | 91.0 | 5.2 | ||||||||||||||||||||||||||||||
Homeowners | 83.1 | 81.1 | 107.9 | 141.2 | 61.7 | 21.4 | 79.5 | 79.8 | 97.6 | (17.8 | ) | |||||||||||||||||||||||||||||
Total | 97.0 | 89.4 | 98.1 | 104.6 | 79.5 | 17.5 | 25.1 | 91.7 | 92.9 | (1.2 | ) | |||||||||||||||||||||||||||||
[1] | The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $19, or 1.9 points, related to auto liability claims. The three months ended September 30, 2008 included a current accident year reserve release of $9, or 1.0 point, related to auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $33, or 3.4 points, primarily related to auto liability claims. | |
[2] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. The estimate of hurricane Ike losses was reduced by $42 during the fourth quarter of 2008. | |
[3] | The three months ended December 31, 2007 included a reserve release of $16 related to auto liability claims. The three months and year ended December 31, 2008 included reserve releases of $38 and $70, respectively, related to auto liability claims. | |
[4] | The three months ended September 30, 2008 included an assessment of $10 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[5] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PERSONAL LINES
WRITTEN AND EARNED PREMIUMS
PROPERTY & CASUALTY
PERSONAL LINES
WRITTEN AND EARNED PREMIUMS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
BUSINESS UNIT | ||||||||||||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
AARP | $ | 649 | $ | 662 | $ | 741 | $ | 741 | $ | 669 | 3 | % | (10 | %) | $ | 2,750 | $ | 2,813 | 2 | % | ||||||||||||||||||||
Agency | 267 | 258 | 271 | 269 | 252 | (6 | %) | (6 | %) | 1,123 | 1,050 | (7 | %) | |||||||||||||||||||||||||||
Other | 18 | 16 | 17 | 14 | 15 | (17 | %) | 7 | % | 74 | 62 | (16 | %) | |||||||||||||||||||||||||||
Total | $ | 934 | $ | 936 | $ | 1,029 | $ | 1,024 | $ | 936 | — | (9 | %) | $ | 3,947 | $ | 3,925 | (1 | %) | |||||||||||||||||||||
EARNED PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
AARP | $ | 685 | $ | 687 | $ | 691 | $ | 695 | $ | 705 | 3 | % | 1 | % | $ | 2,681 | $ | 2,778 | 4 | % | ||||||||||||||||||||
Agency | 281 | 277 | 273 | 266 | 264 | (6 | %) | (1 | %) | 1,123 | 1,080 | (4 | %) | |||||||||||||||||||||||||||
Other | 19 | 19 | 16 | 17 | 16 | (16 | %) | (6 | %) | 85 | 68 | (20 | %) | |||||||||||||||||||||||||||
Total | $ | 985 | $ | 983 | $ | 980 | $ | 978 | $ | 985 | — | 1 | % | $ | 3,889 | $ | 3,926 | 1 | % | |||||||||||||||||||||
PRODUCT LINE | ||||||||||||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
Automobile | $ | 678 | $ | 698 | $ | 729 | $ | 726 | $ | 676 | — | (7 | %) | $ | 2,848 | $ | 2,829 | (1 | %) | |||||||||||||||||||||
Homeowners | 256 | 238 | 300 | 298 | 260 | 2 | % | (13 | %) | 1,099 | 1,096 | — | ||||||||||||||||||||||||||||
Total | $ | 934 | $ | 936 | $ | 1,029 | $ | 1,024 | $ | 936 | — | (9 | %) | $ | 3,947 | $ | 3,925 | (1 | %) | |||||||||||||||||||||
EARNED PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
Automobile | $ | 712 | $ | 706 | $ | 707 | $ | 707 | $ | 704 | (1 | %) | — | $ | 2,822 | $ | 2,824 | — | ||||||||||||||||||||||
Homeowners | 273 | 277 | 273 | 271 | 281 | 3 | % | 4 | % | 1,067 | 1,102 | 3 | % | |||||||||||||||||||||||||||
Total | $ | 985 | $ | 983 | $ | 980 | $ | 978 | $ | 985 | — | 1 | % | $ | 3,889 | $ | 3,926 | 1 | % | |||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||||||||||||||
Written Price Increases/(Decreases) | ||||||||||||||||||||||||||||||||||||||||
Automobile | — | 3 | % | 3 | % | 2 | % | 1 | % | 1 | % | (1 | %) | — | 2 | % | 2 | % | ||||||||||||||||||||||
Homeowners | 3 | % | 3 | % | 2 | % | 3 | % | 3 | % | — | — | 5 | % | 2 | % | (3 | %) | ||||||||||||||||||||||
Premium Retention | ||||||||||||||||||||||||||||||||||||||||
Automobile | 87 | % | 88 | % | 87 | % | 86 | % | 86 | % | (1 | %) | — | 88 | % | 87 | % | (1 | %) | |||||||||||||||||||||
Homeowners | 93 | % | 88 | % | 91 | % | 90 | % | 88 | % | (5 | %) | (2 | %) | 96 | % | 89 | % | (7 | %) | ||||||||||||||||||||
New Business Premium $ | ||||||||||||||||||||||||||||||||||||||||
Automobile | $ | 84 | $ | 84 | $ | 87 | $ | 97 | $ | 96 | 14 | % | (1 | %) | $ | 424 | $ | 364 | (14 | %) | ||||||||||||||||||||
Homeowners | $ | 28 | $ | 24 | $ | 27 | $ | 29 | $ | 26 | (7 | %) | (10 | %) | $ | 140 | $ | 106 | (24 | %) | ||||||||||||||||||||
Policies in force | ||||||||||||||||||||||||||||||||||||||||
Automobile | 2,349,402 | 2,339,871 | 2,326,188 | 2,324,124 | 2,323,882 | (1 | %) | — | ||||||||||||||||||||||||||||||||
Homeowners | 1,481,542 | 1,477,335 | 1,471,920 | 1,465,907 | 1,455,954 | (2 | %) | (1 | %) | |||||||||||||||||||||||||||||||
[1] | The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve. |
PC-8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SMALL COMMERCIAL
UNDERWRITING RESULTS
PROPERTY & CASUALTY
SMALL COMMERCIAL
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 649 | $ | 743 | $ | 679 | $ | 652 | $ | 622 | (4 | %) | (5 | %) | $ | 2,747 | $ | 2,696 | (2 | %) | ||||||||||||||||||||
Change in unearned premium reserve | (39 | ) | 56 | (4 | ) | (26 | ) | (54 | ) | (38 | %) | (108 | %) | 11 | (28 | ) | NM | |||||||||||||||||||||||
Earned premiums | 688 | 687 | 683 | 678 | 676 | (2 | %) | — | 2,736 | 2,724 | — | |||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 392 | 370 | 380 | 380 | 317 | (19 | %) | (17 | %) | 1,594 | 1,447 | (9 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [2] | 3 | 9 | 35 | 49 | 29 | NM | (41 | %) | 28 | 122 | NM | |||||||||||||||||||||||||||||
Prior accident years [3] | (130 | ) | (2 | ) | (2 | ) | (46 | ) | (39 | ) | 70 | % | 15 | % | (209 | ) | (89 | ) | 57 | % | ||||||||||||||||||||
Total losses and loss adjustment expenses | 265 | 377 | 413 | 383 | 307 | 16 | % | (20 | %) | 1,413 | 1,480 | 5 | % | |||||||||||||||||||||||||||
Underwriting expenses [4] | 208 | 190 | 198 | 204 | 201 | (3 | %) | (1 | %) | 799 | 793 | (1 | %) | |||||||||||||||||||||||||||
Dividends to policyholders [5] | 11 | 1 | 3 | 9 | 1 | (91 | %) | (89 | %) | 16 | 14 | (13 | %) | |||||||||||||||||||||||||||
Underwriting results | $ | 204 | $ | 119 | $ | 69 | $ | 82 | $ | 167 | (18 | %) | 104 | % | $ | 508 | $ | 437 | (14 | %) | ||||||||||||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 56.9 | 53.8 | 55.5 | 56.3 | 46.8 | 10.1 | 9.5 | 58.3 | 53.1 | 5.2 | ||||||||||||||||||||||||||||||
Current accident year catastrophes [2] | 0.4 | 1.3 | 5.2 | 7.0 | 4.4 | (4.0 | ) | 2.6 | 1.0 | 4.5 | (3.5 | ) | ||||||||||||||||||||||||||||
Prior accident years [3] [6] | (18.8 | ) | (0.3 | ) | (0.3 | ) | (6.8 | ) | (5.8 | ) | (13.0 | ) | (1.0 | ) | (7.6 | ) | (3.3 | ) | (4.3 | ) | ||||||||||||||||||||
Total losses and loss adjustment expenses | 38.6 | 54.8 | 60.4 | 56.5 | 45.4 | (6.8 | ) | 11.1 | 51.6 | 54.3 | (2.7 | ) | ||||||||||||||||||||||||||||
Expenses | 30.2 | 27.7 | 29.0 | 30.1 | 29.7 | 0.5 | 0.4 | 29.2 | 29.1 | 0.1 | ||||||||||||||||||||||||||||||
Policyholder dividends | 1.6 | 0.2 | 0.5 | 1.3 | 0.2 | 1.4 | 1.1 | 0.6 | 0.5 | 0.1 | ||||||||||||||||||||||||||||||
Combined ratio | 70.4 | 82.7 | 89.8 | 87.9 | 75.4 | (5.0 | ) | 12.5 | 81.4 | 84.0 | (2.6 | ) | ||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 0.4 | 1.3 | 5.2 | 7.0 | 4.4 | (4.0 | ) | 2.6 | 1.0 | 4.5 | (3.5 | ) | ||||||||||||||||||||||||||||
Prior year | — | — | 0.1 | (0.5 | ) | — | — | (0.5 | ) | 0.2 | (0.1 | ) | 0.3 | |||||||||||||||||||||||||||
Catastrophe ratio | 0.5 | 1.3 | 5.3 | 6.5 | 4.4 | (3.9 | ) | 2.1 | 1.2 | 4.4 | (3.2 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes | 69.9 | 81.3 | 84.5 | 81.4 | 71.0 | (1.1 | ) | 10.4 | 80.3 | 79.6 | 0.7 | |||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 88.8 | 81.7 | 84.9 | 87.7 | 76.8 | 12.0 | 10.9 | 88.0 | 82.8 | 5.2 | ||||||||||||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||||||||||||||
Written Price Increases/(Decreases) | (3 | %) | (2 | %) | (3 | %) | (2 | %) | 1 | % | 4 | % | 3 | % | (2 | %) | (2 | %) | — | |||||||||||||||||||||
Premium Retention | 83 | % | 83 | % | 81 | % | 83 | % | 81 | % | (2 | %) | (2 | %) | 84 | % | 82 | % | (2 | %) | ||||||||||||||||||||
New Business Premium $ | $ | 110 | $ | 127 | $ | 117 | $ | 105 | $ | 97 | (12 | %) | (8 | %) | $ | 481 | $ | 446 | (7 | %) | ||||||||||||||||||||
Policies in force | 1,038,542 | 1,048,057 | 1,057,058 | 1,062,291 | 1,055,463 | 2 | % | (1 | %) |
[1] | The three months ended December 31, 2007 included a current accident year reserve release, totaling $24, or 3.5 points, related to workers’ compensation business, substantially offset by current accident year reserve strengthening, totaling $18, or 2.6 points, related to package business. The three months ended June 30, 2008 included current accident year reserve strengthening, totaling $7, or 1.0 point, primarily related to liability claims under package business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $30, or 4.4 points, primarily related to workers’ compensation business. | |
[2] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. The estimate of hurricane Ike losses was increased by $31 during the fourth quarter of 2008. | |
[3] | The three months and year ended December 31, 2007 included reserve releases of $110, and $184, respectively, related to workers’ compensation business. The three months ended September 30, 2008 included a reserve release of $33 related to workers’ compensation business. The three months and year ended December 31, 2008 included reserve releases of $20, and $92, respectively, related to workers’ compensation business. | |
[4] | The three months ended September 30, 2008 included an assessment of $7 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[5] | Included in policyholder dividends for the three months ended December 31, 2007, the three months ended September 30, 2008 and year ended December 31, 2008 were increases of $10, $6 and $8, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[6] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
MIDDLE MARKET
UNDERWRITING RESULTS
PROPERTY & CASUALTY
MIDDLE MARKET
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums [1] | $ | 609 | $ | 565 | $ | 529 | $ | 571 | $ | 577 | (5 | %) | 1 | % | $ | 2,326 | $ | 2,242 | (4 | %) | ||||||||||||||||||||
Change in unearned premium reserve | 19 | (28 | ) | (46 | ) | 2 | 15 | (21 | %) | NM | (94 | ) | (57 | ) | 39 | % | ||||||||||||||||||||||||
Earned premiums | 590 | 593 | 575 | 569 | 562 | (5 | %) | (1 | %) | 2,420 | 2,299 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [2] | 388 | 380 | 377 | 389 | 314 | (19 | %) | (19 | %) | 1,561 | 1,460 | (6 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [3] | 6 | 9 | 33 | 64 | 10 | 67 | % | (84 | %) | 15 | 116 | NM | ||||||||||||||||||||||||||||
Prior accident years [4] | (41 | ) | (16 | ) | (21 | ) | (18 | ) | (79 | ) | (93 | %) | NM | (16 | ) | (134 | ) | NM | ||||||||||||||||||||||
Total losses and loss adjustment expenses | 353 | 373 | 389 | 435 | 245 | (31 | %) | (44 | %) | 1,560 | 1,442 | (8 | %) | |||||||||||||||||||||||||||
Underwriting expenses [5] | 174 | 163 | 170 | 167 | 167 | (4 | %) | — | 689 | 667 | (3 | %) | ||||||||||||||||||||||||||||
Dividends to policyholders [6] | 5 | 2 | 13 | 4 | 2 | (60 | %) | (50 | %) | 14 | 21 | 50 | % | |||||||||||||||||||||||||||
Underwriting results | $ | 58 | $ | 55 | $ | 3 | $ | (37 | ) | $ | 148 | 155 | % | NM | $ | 157 | $ | 169 | 8 | % | ||||||||||||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [2] | 65.8 | 64.1 | 65.7 | 68.1 | 56.0 | 9.8 | 12.1 | 64.5 | 63.5 | 1.0 | ||||||||||||||||||||||||||||||
Current accident year catastrophes [3] | 1.0 | 1.6 | 5.7 | 11.2 | 1.8 | (0.8 | ) | 9.4 | 0.6 | 5.1 | (4.5 | ) | ||||||||||||||||||||||||||||
Prior accident years [4] [7] | (6.9 | ) | (2.6 | ) | (3.7 | ) | (3.2 | ) | (14.1 | ) | 7.2 | 10.9 | (0.7 | ) | (5.9 | ) | 5.2 | |||||||||||||||||||||||
Total losses and loss adjustment expenses | 59.8 | 63.0 | 67.7 | 76.1 | 43.7 | 16.1 | 32.4 | 64.5 | 62.7 | 1.8 | ||||||||||||||||||||||||||||||
Expenses | 29.5 | 27.5 | 29.4 | 29.6 | 29.7 | (0.2 | ) | (0.1 | ) | 28.5 | 29.0 | (0.5 | ) | |||||||||||||||||||||||||||
Policyholder dividends | 0.8 | 0.3 | 2.3 | 0.7 | 0.3 | 0.5 | 0.4 | 0.6 | 0.9 | (0.3 | ) | |||||||||||||||||||||||||||||
Combined ratio | 90.1 | 90.8 | 99.4 | 106.4 | 73.7 | 16.4 | 32.7 | 93.5 | 92.6 | 0.9 | ||||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 1.0 | 1.6 | 5.7 | 11.2 | 1.8 | (0.8 | ) | 9.4 | 0.6 | 5.1 | (4.5 | ) | ||||||||||||||||||||||||||||
Prior year | 0.5 | 0.3 | (0.4 | ) | (1.1 | ) | (0.8 | ) | 1.3 | (0.3 | ) | (0.1 | ) | (0.5 | ) | 0.4 | ||||||||||||||||||||||||
Catastrophe ratio | 1.4 | 1.8 | 5.3 | 10.1 | 1.1 | 0.3 | 9.0 | 0.5 | 4.6 | (4.1 | ) | |||||||||||||||||||||||||||||
Combined ratio before catastrophes | 88.7 | 89.0 | 94.1 | 96.3 | 72.7 | 16.0 | 23.6 | 93.0 | 88.1 | 4.9 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development [1] | 96.1 | 91.9 | 97.4 | 98.4 | 86.0 | 10.1 | 12.4 | 93.5 | 93.4 | 0.1 | ||||||||||||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||||||||||||||
Written Price Increases/(Decreases) | (6 | %) | (6 | %) | (7 | %) | (5 | %) | (3 | %) | 3 | % | 2 | % | (5 | %) | (5 | %) | — | |||||||||||||||||||||
Premium Retention | 79 | % | 80 | % | 78 | % | 79 | % | 77 | % | (2 | %) | (2 | %) | 78 | % | 79 | % | 1 | % | ||||||||||||||||||||
New Business Premium $ | $ | 95 | $ | 105 | $ | 101 | $ | 111 | $ | 103 | 8 | % | (7 | %) | $ | 394 | $ | 420 | 7 | % | ||||||||||||||||||||
Policies in force | 88,254 | 89,179 | 90,212 | 90,796 | 90,478 | 3 | % | — |
[1] | During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial to Middle Market. As such, underwriting results for all prior periods presented above have been restated to reflect this change. The following table shows written premium and combined ratios before catastrophes and prior year development before giving effect to the resegmentation: |
Written premiums | $ | 591 | $ | 548 | $ | 513 | $ | 555 | $ | 561 | (5 | %) | 1 | % | $ | 2,257 | $ | 2,177 | (4 | %) | ||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 96.4 | 92.3 | 97.9 | 98.5 | 85.9 | 10.5 | 12.6 | 93.8 | 93.7 | 0.1 |
[2] | The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $7, or 1.2 points, related to general liability, substantially offset by a current accident year reserve release, totaling $4, or 0.7 points, related to workers’ compensation business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $28, or 5.1 points, primarily related to workers’ compensation business. | |
[3] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[4] | The three months ended December 31, 2007 included a $39 release of general liability reserves for recent accident years. The three months and year ended December 31, 2008 included net reserve releases of $48 and $40, respectively, related to general liability claims and reserve releases of $30, and $64, respectively, related to workers’ compensation business. | |
[5] | The three months ended September 30, 2008 included an assessment of $3 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. | |
[6] | Included in policyholder dividends for the three months ended June 30, 2008 and year ended December 31, 2008 were increases of $11 and $14, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[7] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-10
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
UNDERWRITING RESULTS
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums [1] | $ | 319 | $ | 340 | $ | 346 | $ | 345 | $ | 330 | 3 | % | (4 | %) | $ | 1,415 | $ | 1,361 | (4 | %) | ||||||||||||||||||||
Change in unearned premium reserve | (39 | ) | (10 | ) | — | 3 | (14 | ) | 64 | % | NM | (31 | ) | (21 | ) | 32 | % | |||||||||||||||||||||||
Earned premiums | 358 | 350 | 346 | 342 | 344 | (4 | %) | 1 | % | 1,446 | 1,382 | (4 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [2] | 232 | 240 | 237 | 235 | 229 | (1 | %) | (3 | %) | 961 | 941 | (2 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes [3] | 6 | 2 | 6 | 44 | (5 | ) | NM | NM | 9 | 47 | NM | |||||||||||||||||||||||||||||
Prior accident years [4] | 64 | (25 | ) | (17 | ) | 3 | (42 | ) | NM | NM | 84 | (81 | ) | NM | ||||||||||||||||||||||||||
Total losses and loss adjustment expenses | 302 | 217 | 226 | 282 | 182 | (40 | %) | (35 | %) | 1,054 | 907 | (14 | %) | |||||||||||||||||||||||||||
Underwriting expenses | 106 | 92 | 98 | 100 | 102 | (4 | %) | 2 | % | 397 | 392 | (1 | %) | |||||||||||||||||||||||||||
Dividends to policyholders [5] | 8 | 2 | 4 | 4 | 2 | (75 | %) | (50 | %) | 13 | 12 | (8 | %) | |||||||||||||||||||||||||||
Underwriting results | $ | (58 | ) | $ | 39 | $ | 18 | $ | (44 | ) | $ | 58 | NM | NM | $ | (18 | ) | $ | 71 | NM | ||||||||||||||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [2] | 65.3 | 68.7 | 68.4 | 68.7 | 66.4 | (1.1 | ) | 2.3 | 66.6 | 68.1 | (1.5 | ) | ||||||||||||||||||||||||||||
Current accident year catastrophes [3] | 1.6 | 0.3 | 1.9 | 13.2 | (1.7 | ) | 3.3 | 14.9 | 0.6 | 3.4 | (2.8 | ) | ||||||||||||||||||||||||||||
Prior accident years [4] [6] | 17.5 | (7.2 | ) | (4.6 | ) | 0.6 | (12.0 | ) | 29.5 | 12.6 | 5.8 | (5.8 | ) | 11.6 | ||||||||||||||||||||||||||
Total losses and loss adjustment expenses | 84.3 | 61.7 | 65.7 | 82.5 | 52.7 | 31.6 | 29.8 | 73.0 | 65.6 | 7.4 | ||||||||||||||||||||||||||||||
Expenses | 29.5 | 26.3 | 28.4 | 29.0 | 29.7 | (0.2 | ) | (0.7 | ) | 27.4 | 28.3 | (0.9 | ) | |||||||||||||||||||||||||||
Policyholder dividends | 2.5 | 0.5 | 1.1 | 1.3 | 0.5 | 2.0 | 0.8 | 0.9 | 0.9 | — | ||||||||||||||||||||||||||||||
Combined ratio | 116.3 | 88.6 | 95.2 | 112.8 | 83.0 | 33.3 | 29.8 | 101.3 | 94.8 | 6.5 | ||||||||||||||||||||||||||||||
Catastrophes | ||||||||||||||||||||||||||||||||||||||||
Current year | 1.6 | 0.3 | 1.9 | 13.2 | (1.7 | ) | 3.3 | 14.9 | 0.6 | 3.4 | (2.8 | ) | ||||||||||||||||||||||||||||
Prior year | 0.1 | (1.9 | ) | (0.5 | ) | (0.8 | ) | (1.5 | ) | 1.6 | 0.7 | 0.1 | (1.2 | ) | 1.3 | |||||||||||||||||||||||||
Catastrophe ratio | 1.7 | (1.6 | ) | 1.4 | 12.4 | (3.2 | ) | 4.9 | 15.6 | 0.7 | 2.2 | (1.5 | ) | |||||||||||||||||||||||||||
Combined ratio before catastrophes | 114.6 | 90.2 | 93.8 | 100.4 | 86.1 | 28.5 | 14.3 | 100.6 | 92.6 | 8.0 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development [1] | 97.3 | 95.5 | 97.9 | 99.0 | 96.7 | 0.6 | 2.3 | 94.9 | 97.3 | (2.4 | ) | |||||||||||||||||||||||||||||
[1] | During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial to Middle Market. As such, underwriting results for all prior periods presented above have been restated to reflect this change. The following table shows written premium and combined ratios before catastrophes and prior year development before giving effect to the resegmentation: |
Written premiums | $ | 337 | $ | 357 | $ | 362 | $ | 361 | $ | 346 | 3 | % | (4 | %) | $ | 1,484 | $ | 1,426 | (4 | %) | ||||||||||||||||||||
Combined ratio before catastrophes and prior year development | 96.6 | 94.7 | 97.0 | 98.8 | 96.3 | 0.3 | 2.5 | 94.4 | 96.7 | (2.3 | ) | |||||||||||||||||||||||||||||
[2] | The three months ended December 31, 2007 included a current accident year reserve release, totaling $3, or 0.8 points, related to workers’ compensation business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $3, or 0.9 points, primarily related to programs business. | |
[3] | Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. | |
[4] | The three months ended December 31, 2007 included a $35 strengthening of workers’ compensation reserves and a $34 strengthening of general liability reserves, each primarily for older accident years, partially offset by a $15 reserve release for professional liability claims. The three months and year ended December 31, 2008 included reserve releases of $30, and $75, respectively, related to professional liability claims. | |
[5] | Included in policyholder dividends for the three months ended December 31, 2007 and year ended December 31, 2008 were increases of $7 and $5, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. | |
[6] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. |
PC-11
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
WRITTEN AND EARNED PREMIUMS
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
WRITTEN AND EARNED PREMIUMS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
Property [2] | $ | 18 | $ | 7 | $ | 14 | $ | 14 | $ | 15 | (17 | %) | 7 | % | $ | 111 | $ | 50 | (55 | %) | ||||||||||||||||||||
Casualty | 103 | 159 | 135 | 134 | 110 | 7 | % | (18 | %) | 534 | 538 | 1 | % | |||||||||||||||||||||||||||
Professional Liability, Fidelity and Surety | 179 | 152 | 176 | 178 | 185 | 3 | % | 4 | % | 689 | 691 | — | ||||||||||||||||||||||||||||
Other | 19 | 22 | 21 | 19 | 20 | 5 | % | 5 | % | 81 | 82 | 1 | % | |||||||||||||||||||||||||||
Total | $ | 319 | $ | 340 | $ | 346 | $ | 345 | $ | 330 | 3 | % | (4 | %) | $ | 1,415 | $ | 1,361 | (4 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] | ||||||||||||||||||||||||||||||||||||||||
Property [2] | $ | 31 | $ | 27 | $ | 24 | $ | 19 | $ | 17 | (45 | %) | (11 | %) | $ | 133 | $ | 87 | (35 | %) | ||||||||||||||||||||
Casualty | 134 | 132 | 132 | 131 | 131 | (2 | %) | — | 543 | 526 | (3 | %) | ||||||||||||||||||||||||||||
Professional Liability, Fidelity and Surety | 171 | 170 | 169 | 173 | 173 | 1 | % | — | 685 | 685 | — | |||||||||||||||||||||||||||||
Other | 22 | 21 | 21 | 19 | 23 | 5 | % | 21 | % | 85 | 84 | (1 | %) | |||||||||||||||||||||||||||
Total | $ | 358 | $ | 350 | $ | 346 | $ | 342 | $ | 344 | (4 | %) | 1 | % | $ | 1,446 | $ | 1,382 | (4 | %) | ||||||||||||||||||||
[1] | The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve. | |
[2] | During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial Property to Middle Market. As such, written and earned premium for all prior periods presented above have been restated to reflect this change. The following table shows Specialty Commercial Property written premium and earned premium before giving effect to the resegmentation: |
Written premiums | $ | 36 | $ | 24 | $ | 30 | $ | 30 | $ | 31 | (14 | %) | 3 | % | $ | 180 | $ | 115 | (36 | %) | ||||||||||||||||||||
Earned premiums | $ | 49 | $ | 44 | $ | 40 | $ | 35 | $ | 34 | (31 | %) | (3 | %) | $ | 202 | $ | 153 | (24 | %) | ||||||||||||||||||||
PC-12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OTHER OPERATIONS
OPERATING RESULTS
PROPERTY & CASUALTY
OTHER OPERATIONS
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS | ||||||||||||||||||||||||||||||||||||||||
Written premiums | $ | 2 | $ | 2 | $ | 2 | $ | 1 | $ | 2 | — | 100 | % | $ | 5 | $ | 7 | 40 | % | |||||||||||||||||||||
Change in unearned premium reserve | — | 1 | — | — | (1 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
Earned premiums | 2 | 1 | 2 | 1 | 3 | 50 | % | NM | 5 | 7 | 40 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Current accident year catastrophes | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Prior accident years [1] | 20 | 15 | 55 | 56 | 3 | (85 | %) | (95 | %) | 193 | 129 | (33 | %) | |||||||||||||||||||||||||||
Total losses and loss adjustment expenses | 20 | 15 | 55 | 56 | 3 | (85 | %) | (95 | %) | 193 | 129 | (33 | %) | |||||||||||||||||||||||||||
Underwriting expenses | 5 | 5 | 5 | 6 | 7 | 40 | % | 17 | % | 22 | 23 | 5 | % | |||||||||||||||||||||||||||
Underwriting results | $ | (23 | ) | $ | (19 | ) | $ | (58 | ) | $ | (61 | ) | $ | (7 | ) | 70 | % | 89 | % | $ | (210 | ) | $ | (145 | ) | 31 | % | |||||||||||||
Net investment income | 64 | 55 | 57 | 50 | 35 | (45 | %) | (30 | %) | 248 | 197 | (21 | %) | |||||||||||||||||||||||||||
Other expenses | 2 | (2 | ) | — | 1 | (2 | ) | NM | NM | (1 | ) | (3 | ) | NM | ||||||||||||||||||||||||||
Income tax (expense) benefit | (11 | ) | (8 | ) | 3 | 6 | (8 | ) | 27 | % | NM | 1 | (7 | ) | NM | |||||||||||||||||||||||||
Core earnings | 32 | 26 | 2 | (4 | ) | 18 | (44 | %) | NM | 38 | 42 | 11 | % | |||||||||||||||||||||||||||
Add: Net realized capital (losses) gains, after-tax | (6 | ) | (12 | ) | 1 | (104 | ) | (24 | ) | NM | 77 | % | (8 | ) | (139 | ) | NM | |||||||||||||||||||||||
Net income (loss) | $ | 26 | $ | 14 | $ | 3 | $ | (108 | ) | $ | (6 | ) | NM | 94 | % | $ | 30 | $ | (97 | ) | NM | |||||||||||||||||||
[1] | The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended June 30, 2008 included net asbestos reserve strengthening of $50. The three months ended September 30, 2008 included environmental reserve strengthening of $53. |
PC-13
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OTHER OPERATIONS LOSSES AND LOSS ADJUSTMENT EXPENSES
PROPERTY & CASUALTY
OTHER OPERATIONS LOSSES AND LOSS ADJUSTMENT EXPENSES
For the Three Months Ended December 31, 2008 | Asbestos | Environmental | All Other [1] | Total | ||||||||||||
Beginning liability — net [2] [3] | $ | 1,935 | $ | 281 | $ | 1,744 | $ | 3,960 | ||||||||
Losses and loss adjustment expenses incurred | 9 | 1 | (7 | ) | 3 | |||||||||||
Losses and loss adjustment expenses paid | (60 | ) | (13 | ) | (109 | ) | (182 | ) | ||||||||
Ending liability — net [2] [3] | $ | 1,884 | [4] | $ | 269 | $ | 1,628 | $ | 3,781 | |||||||
For the Year Ended December 31, 2008 | Asbestos | Environmental | All Other [1] | Total | ||||||||||||
Beginning liability — net [2] [3] | $ | 1,998 | $ | 251 | $ | 1,888 | $ | 4,137 | ||||||||
Losses and loss adjustment expenses incurred | 68 | 54 | 7 | 129 | ||||||||||||
Losses and loss adjustment expenses paid | (182 | ) | (36 | ) | (267 | ) | (485 | ) | ||||||||
Ending liability — net [2] [3] | $ | 1,884 | [4] | $ | 269 | $ | 1,628 | $ | 3,781 | |||||||
[1] | “All Other” also includes unallocated loss adjustment expense reserves and the allowance for uncollectible reinsurance. | |
[2] | Excludes asbestos and environmental net liabilities reported in Ongoing Operations of $12 and $6, respectively, as of December 31, 2008, $15 and $6, respectively, as of September 30, 2008, and $9 and $6, respectively, as of December 31, 2007. Total net losses and loss adjustment expenses incurred in Ongoing Operations for the three months and year ended December 31, 2008 includes $3 and $16, respectively, related to asbestos and environmental claims. Total net losses and loss adjustment expenses paid in Ongoing Operations for the three months and year ended December 31, 2008 includes $6 and $13, respectively, related to asbestos and environmental claims. | |
[3] | Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,498 and $309, respectively, as of December 31, 2008, $2,625 and $323, respectively, as of September 30, 2008, and $2,707 and $290, respectively, as of December 31, 2007. | |
[4] | The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $189 and $283, respectively, resulting in a one year net survival ratio of 10.0 and a three year net survival ratio of 6.7. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average. |
PC-14
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PAID AND INCURRED LOSSES AND LOSS ADJUSTMENT EXPENSES (“LAE”)
DEVELOPMENT — ASBESTOS AND ENVIRONMENTAL
PROPERTY & CASUALTY
PAID AND INCURRED LOSSES AND LOSS ADJUSTMENT EXPENSES (“LAE”)
DEVELOPMENT — ASBESTOS AND ENVIRONMENTAL
Asbestos [1] | Environmental [1] | |||||||||||||||
Paid | Incurred | Paid | Incurred | |||||||||||||
For the Three Months Ended December 31, 2008 | Losses & LAE | Losses & LAE | Losses & LAE | Losses & LAE | ||||||||||||
Gross | ||||||||||||||||
Direct | $ | 110 | $ | — | $ | 9 | $ | — | ||||||||
Assumed — Domestic | 10 | — | 4 | — | ||||||||||||
London Market | 3 | — | 3 | — | ||||||||||||
Total | 123 | — | 16 | — | ||||||||||||
Ceded | (63 | ) | 9 | (3 | ) | 1 | ||||||||||
Net | $ | 60 | $ | 9 | $ | 13 | $ | 1 | ||||||||
Asbestos [1] | Environmental [1] | |||||||||||||||
Paid | Incurred | Paid | Incurred | |||||||||||||
For the Year Ended December 31, 2008 | Loss & LAE | Loss & LAE | Loss & LAE | Loss & LAE | ||||||||||||
Gross | ||||||||||||||||
Direct | $ | 207 | $ | 76 | $ | 32 | $ | 69 | ||||||||
Assumed — Domestic | 61 | — | 9 | (17 | ) | |||||||||||
London Market | 19 | — | 6 | 13 | ||||||||||||
Total | 287 | 76 | 47 | 65 | ||||||||||||
Ceded | (105 | ) | (8 | ) | (11 | ) | (11 | ) | ||||||||
Net | $ | 182 | $ | 68 | $ | 36 | $ | 54 | ||||||||
[1] | Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations. | |
Total gross loss and LAE incurred in Ongoing Operations for the three months and year ended December 31, 2008 includes $3 and $15, respectively, related to asbestos and environmental claims. Total gross loss and LAE paid in Ongoing Operations for the three months and year ended December 31, 2008 includes $5 and $12, respectively, related to asbestos and environmental claims. |
PC-15
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
For the Three Months Ended December 31, 2008 | ||||||||||||||||||||||||||||||||
Personal | Small | Middle | Specialty | Ongoing | Other | Total | ||||||||||||||||||||||||||
Lines | Commercial | Market | Commercial | Operations | Operations | P&C | ||||||||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 10/1/08 - gross | $ | 2,205 | $ | 3,646 | $ | 4,861 | $ | 7,029 | $ | 17,741 | $ | 4,864 | $ | 22,605 | ||||||||||||||||||
Reinsurance and other recoverables | 87 | 189 | 424 | 2,157 | 2,857 | 904 | 3,761 | |||||||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 10/1/08 - net | 2,118 | 3,457 | 4,437 | 4,872 | 14,884 | 3,960 | 18,844 | |||||||||||||||||||||||||
Provision for unpaid losses and loss adjustment expenses | ||||||||||||||||||||||||||||||||
Current accident year before catastrophes | 628 | 317 | 314 | 229 | 1,488 | — | 1,488 | |||||||||||||||||||||||||
Current accident year catastrophes | (37 | ) | 29 | 10 | (5 | ) | (3 | ) | — | (3 | ) | |||||||||||||||||||||
Prior accident years | (35 | ) | (39 | ) | (79 | ) | (42 | ) | (195 | ) | 3 | (192 | ) | |||||||||||||||||||
Total provision for unpaid losses and loss adjustment expenses | 556 | 307 | 245 | 182 | 1,290 | 3 | 1,293 | |||||||||||||||||||||||||
Payments | (682 | ) | (368 | ) | (375 | ) | (183 | ) | (1,608 | ) | (182 | ) | (1,790 | ) | ||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - net | 1,992 | 3,396 | 4,307 | 4,871 | 14,566 | 3,781 | 18,347 | |||||||||||||||||||||||||
Reinsurance and other recoverables | 60 | 176 | 437 | 2,110 | 2,783 | 803 | 3,586 | |||||||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - gross | $ | 2,052 | $ | 3,572 | $ | 4,744 | $ | 6,981 | $ | 17,349 | $ | 4,584 | $ | 21,933 | ||||||||||||||||||
Earned premiums | $ | 985 | $ | 676 | $ | 562 | $ | 344 | $ | 2,567 | $ | 3 | $ | 2,570 | ||||||||||||||||||
Loss and loss expense paid ratio | 69.2 | 54.4 | 66.7 | 52.7 | 62.6 | |||||||||||||||||||||||||||
Loss and loss expense incurred ratio | 56.5 | 45.4 | 43.7 | 52.7 | 50.3 | |||||||||||||||||||||||||||
Prior accident year development (pts.) | (3.5 | ) | (5.8 | ) | (14.1 | ) | (12.0 | ) | (7.6 | ) | ||||||||||||||||||||||
PC-16
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
Personal | Small | Middle | Specialty | Ongoing | Other | Total | ||||||||||||||||||||||
Lines | Commercial | Market | Commercial | Operations | Operations | P&C | ||||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 1/1/08 - gross | $ | 2,042 | $ | 3,470 | $ | 4,697 | $ | 6,873 | $ | 17,082 | $ | 5,071 | $ | 22,153 | ||||||||||||||
Reinsurance and other recoverables | 81 | 177 | 414 | 2,316 | 2,988 | 934 | 3,922 | |||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 1/1/08 - net | 1,961 | 3,293 | 4,283 | 4,557 | 14,094 | 4,137 | 18,231 | |||||||||||||||||||||
Provision for unpaid losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 2,542 | 1,447 | 1,460 | 941 | 6,390 | — | 6,390 | |||||||||||||||||||||
Current accident year catastrophes | 258 | 122 | 116 | 47 | 543 | — | 543 | |||||||||||||||||||||
Prior accident years | (51 | ) | (89 | ) | (134 | ) | (81 | ) | (355 | ) | 129 | (226 | ) | |||||||||||||||
Total provision for unpaid losses and loss adjustment expenses | 2,749 | 1,480 | 1,442 | 907 | 6,578 | 129 | 6,707 | |||||||||||||||||||||
Payments | (2,718 | ) | (1,377 | ) | (1,418 | ) | (593 | ) | (6,106 | ) | (485 | ) | (6,591 | ) | ||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - net | 1,992 | 3,396 | 4,307 | 4,871 | 14,566 | 3,781 | 18,347 | |||||||||||||||||||||
Reinsurance and other recoverables | 60 | 176 | 437 | 2,110 | 2,783 | 803 | 3,586 | |||||||||||||||||||||
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - gross | $ | 2,052 | $ | 3,572 | $ | 4,744 | $ | 6,981 | $ | 17,349 | $ | 4,584 | $ | 21,933 | ||||||||||||||
Earned premiums | $ | 3,926 | $ | 2,724 | $ | 2,299 | $ | 1,382 | $ | 10,331 | $ | 7 | $ | 10,338 | ||||||||||||||
Loss and loss expense paid ratio | 69.2 | 50.5 | 61.6 | 42.8 | 59.1 | |||||||||||||||||||||||
Loss and loss expense incurred ratio | 70.0 | 54.3 | 62.7 | 65.6 | 63.7 | |||||||||||||||||||||||
Prior accident year development (pts.) | (1.3 | ) | (3.3 | ) | (5.9 | ) | (5.8 | ) | (3.4 | ) | ||||||||||||||||||
PC-17
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
REINSURANCE RECOVERABLE ANALYSIS
PROPERTY & CASUALTY
REINSURANCE RECOVERABLE ANALYSIS
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Gross Reinsurance Recoverables | ||||||||
Paid Loss and Loss Adjustment Expenses | $ | 326 | $ | 347 | ||||
Unpaid Loss and Loss Adjustment Expenses | 3,492 | 3,788 | ||||||
Subtotal Gross Reinsurance Recoverables | 3,818 | 4,135 | ||||||
Less: Allowance for Uncollectible Reinsurance | (379 | ) | (404 | ) | ||||
Net Reinsurance Recoverables | $ | 3,439 | $ | 3,731 | ||||
As of December 31, 2008 | As of December 31, 2007 | |||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Distribution of Gross Reinsurance Recoverables | ||||||||||||||||
Gross Reinsurance Recoverables | $ | 3,818 | $ | 4,135 | ||||||||||||
Less: Mandatory (Assigned Risk) Pools & Structured Settlements | (638 | ) | (635 | ) | ||||||||||||
Gross Reinsurance Recoverables Excluding Mandatory Pools & Structured Settlements | $ | 3,180 | $ | 3,500 | ||||||||||||
Rated A- (Excellent) or better by A.M. Best [1] | $ | 2,426 | 76.3 | % | $ | 2,614 | 74.7 | % | ||||||||
Other Rated by A.M. Best | 52 | 1.6 | % | 90 | 2.6 | % | ||||||||||
Total Rated Companies | 2,478 | 77.9 | % | 2,704 | 77.3 | % | ||||||||||
Voluntary Pools | 181 | 5.7 | % | 195 | 5.6 | % | ||||||||||
Captives | 220 | 6.9 | % | 231 | 6.6 | % | ||||||||||
Other Not Rated Companies | 301 | 9.5 | % | 370 | 10.5 | % | ||||||||||
Total | $ | 3,180 | 100.0 | % | $ | 3,500 | 100.0 | % | ||||||||
[1] | Based on A.M. Best ratings as of December 31, 2008 and 2007, respectively. |
PC-18
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
CONSOLIDATED INCOME STATEMENTS
PROPERTY & CASUALTY
CONSOLIDATED INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Earned premiums | $ | 2,623 | $ | 2,614 | $ | 2,586 | $ | 2,568 | $ | 2,570 | (2 | %) | — | $ | 10,496 | $ | 10,338 | (2 | %) | |||||||||||||||||||||
Net investment income [1] | 421 | 365 | 391 | 335 | 162 | (62 | %) | (52 | %) | 1,687 | 1,253 | (26 | %) | |||||||||||||||||||||||||||
Other revenues | 128 | 120 | 125 | 132 | 127 | (1 | %) | (4 | %) | 496 | 504 | 2 | % | |||||||||||||||||||||||||||
Net realized capital losses | (96 | ) | (152 | ) | (51 | ) | (1,428 | ) | (246 | ) | (156 | %) | 83 | % | (172 | ) | (1,877 | ) | NM | |||||||||||||||||||||
Total revenues | 3,076 | 2,947 | 3,051 | 1,607 | 2,613 | (15 | %) | 63 | % | 12,507 | 10,218 | (18 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses [2] | 1,667 | 1,639 | 1,826 | 1,949 | 1,293 | (22 | %) | (34 | %) | 6,917 | 6,707 | (3 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs | 523 | 523 | 521 | 523 | 528 | 1 | % | 1 | % | 2,104 | 2,095 | — | ||||||||||||||||||||||||||||
Insurance operating costs and expenses [3] | 222 | 153 | 189 | 201 | 181 | (18 | %) | (10 | %) | 716 | 724 | 1 | % | |||||||||||||||||||||||||||
Other expenses | 184 | 180 | 182 | 175 | 158 | (14 | %) | (10 | %) | 693 | 695 | — | ||||||||||||||||||||||||||||
Total benefits and expenses | 2,596 | 2,495 | 2,718 | 2,848 | 2,160 | (17 | %) | (24 | %) | 10,430 | 10,221 | (2 | %) | |||||||||||||||||||||||||||
Income (loss) before income taxes | 480 | 452 | 333 | (1,241 | ) | 453 | (6 | %) | NM | 2,077 | (3 | ) | NM | |||||||||||||||||||||||||||
Income tax expense (benefit) | 131 | 126 | 84 | (467 | ) | 162 | 24 | % | NM | 570 | (95 | ) | NM | |||||||||||||||||||||||||||
Net income (loss) | 349 | 326 | 249 | (774 | ) | 291 | (17 | %) | NM | 1,507 | 92 | (94 | %) | |||||||||||||||||||||||||||
Less: Net realized capital losses, after-tax, excluded from core earnings | (65 | ) | (100 | ) | (34 | ) | (930 | ) | (161 | ) | (148 | %) | 83 | % | (122 | ) | (1,225 | ) | NM | |||||||||||||||||||||
Core earnings | $ | 414 | $ | 426 | $ | 283 | $ | 156 | $ | 452 | 9 | % | 190 | % | $ | 1,629 | $ | 1,317 | (19 | %) | ||||||||||||||||||||
Total Property & Casualty effective tax rate — net income | 27.4 | % | 27.9 | % | 25.1 | % | 37.6 | % | 35.7 | % | 8.3 | (1.9 | ) | 27.5 | % | NM | NM | |||||||||||||||||||||||
Total Property & Casualty effective tax rate — core earnings | 28.7 | % | 29.7 | % | 26.4 | % | 17.6 | % | 35.1 | % | 6.4 | 17.5 | 28.0 | % | 29.8 | % | 1.8 |
[1] | The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships. | |
[2] | The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision, $25 of environmental reserve strengthening and, in the three months ended December 31, 2007, included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended September 30, 2008 included catastophe losses from hurricane Ike. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims, $70 of reserve releases related to Personal Lines auto liability claims, $53 of environmental reserve strengthening and $50 of net asbestos reserve strengthening. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims. | |
[3] | Included in insurance operating costs and expenses for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike. |
PC-19
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
CONSOLIDATED BALANCE SHEETS
PROPERTY & CASUALTY
CONSOLIDATED BALANCE SHEETS
AS OF | Year Over | |||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | Year | Sequential | ||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | ||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||
Fixed maturities, available for sale, at fair value | $ | 27,205 | $ | 25,683 | $ | 25,234 | $ | 23,727 | $ | 19,775 | (27 | %) | (17 | %) | ||||||||||||||
Equity securities, available for sale, at fair value | 1,208 | 1,162 | 1,327 | 741 | 674 | (44 | %) | (9 | %) | |||||||||||||||||||
Mortgage loans | 671 | 682 | 747 | 762 | 785 | 17 | % | 3 | % | |||||||||||||||||||
Limited partnerships and other alternative investments [1] | 1,260 | 1,290 | 1,398 | 1,407 | 1,166 | (7 | %) | (17 | %) | |||||||||||||||||||
Short term investments | 284 | 711 | 1,073 | 827 | 1,597 | NM | 93 | % | ||||||||||||||||||||
Other investments | 38 | 58 | 58 | 62 | 207 | NM | NM | |||||||||||||||||||||
Total investments | 30,666 | 29,586 | 29,837 | 27,526 | 24,204 | (21 | %) | (12 | %) | |||||||||||||||||||
Cash | 241 | 232 | 241 | 278 | 162 | (33 | %) | (42 | %) | |||||||||||||||||||
Premiums receivable and agents’ balances | 3,254 | 3,281 | 3,233 | 3,237 | 3,197 | (2 | %) | (1 | %) | |||||||||||||||||||
Reinsurance recoverables | 3,731 | 3,611 | 3,613 | 3,572 | 3,439 | (8 | %) | (4 | %) | |||||||||||||||||||
Deferred policy acquisition costs | 1,228 | 1,233 | 1,246 | 1,260 | 1,260 | 3 | % | — | ||||||||||||||||||||
Deferred income tax | 662 | 947 | 1,013 | 1,819 | 2,435 | NM | 34 | % | ||||||||||||||||||||
Goodwill | 149 | 149 | 149 | 149 | 149 | — | — | |||||||||||||||||||||
Property and equipment, net | 598 | 601 | 639 | 658 | 675 | 13 | % | 3 | % | |||||||||||||||||||
Other assets | 1,312 | 1,318 | 1,194 | 1,460 | 1,159 | (12 | %) | (21 | %) | |||||||||||||||||||
Total assets | $ | 41,841 | $ | 40,958 | $ | 41,165 | $ | 39,959 | $ | 36,680 | (12 | %) | (8 | %) | ||||||||||||||
Unpaid losses and loss adjustment expenses | $ | 22,153 | $ | 22,150 | $ | 22,315 | $ | 22,605 | $ | 21,933 | (1 | %) | (3 | %) | ||||||||||||||
Unearned premiums | 5,402 | 5,388 | 5,372 | 5,363 | 5,244 | (3 | %) | (2 | %) | |||||||||||||||||||
Debt | 13 | 11 | — | — | — | (100 | %) | — | ||||||||||||||||||||
Other liabilities | 4,855 | 4,589 | 4,647 | 4,729 | 2,914 | (40 | %) | (38 | %) | |||||||||||||||||||
Total liabilities | 32,423 | 32,138 | 32,334 | 32,697 | 30,091 | (7 | %) | (8 | %) | |||||||||||||||||||
Equity, x-AOCI, net of tax | 9,428 | 9,372 | 9,536 | 8,364 | 8,675 | (8 | %) | 4 | % | |||||||||||||||||||
AOCI, net of tax | (10 | ) | (552 | ) | (705 | ) | (1,102 | ) | (2,086 | ) | NM | (89 | %) | |||||||||||||||
Total stockholders’ equity | 9,418 | 8,820 | 8,831 | 7,262 | 6,589 | (30 | %) | (9 | %) | |||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 41,841 | $ | 40,958 | $ | 41,165 | $ | 39,959 | $ | 36,680 | (12 | %) | (8 | %) | ||||||||||||||
Hartford Fire NAIC RBC | 606 | % | ||||||||||||||||||||||||||
[1] | Other alternative investments include hedge fund investments outside limited partnerships and real estate joint ventures. |
PC-20
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ADJUSTED STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
PROPERTY & CASUALTY
ADJUSTED STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
Dec. 31, | Dec. 31, | |||||||
2008 | 2007 | |||||||
Adjusted Statutory Capital and Surplus [1] | $ | 6,012 | $ | 8,509 | ||||
GAAP Adjustments | ||||||||
Deferred policy acquisition costs | 1,260 | 1,228 | ||||||
Deferred taxes | (196 | ) | (304 | ) | ||||
Benefit reserves | (90 | ) | (100 | ) | ||||
Unrealized losses on investments | (2,136 | ) | (16 | ) | ||||
Goodwill | 149 | 149 | ||||||
Non-admitted assets | 1,754 | 1,085 | ||||||
Other, net | (164 | ) | (1,133 | ) | ||||
GAAP Stockholders’ Equity | $ | 6,589 | $ | 9,418 | ||||
[1] | Estimated statutory surplus as of December 31, 2008. |
PC-21
INVESTMENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CONSOLIDATED
INVESTMENT EARNINGS BEFORE-TAX
CONSOLIDATED
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEARS ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||||||||||||||
Taxable | $ | 1,051 | $ | 992 | $ | 936 | $ | 949 | $ | 878 | (16 | %) | (7 | %) | $ | 4,105 | $ | 3,755 | (9 | %) | ||||||||||||||||||||
Tax-exempt | 141 | 142 | 141 | 141 | 131 | (7 | %) | (7 | %) | 548 | 555 | 1 | % | |||||||||||||||||||||||||||
Total fixed maturities | 1,192 | 1,134 | 1,077 | 1,090 | 1,009 | (15 | %) | (7 | %) | 4,653 | 4,310 | (7 | %) | |||||||||||||||||||||||||||
Equities | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | 41 | 46 | 51 | 34 | 36 | (12 | %) | 6 | % | 139 | 167 | 20 | % | |||||||||||||||||||||||||||
Held for trading | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total equities | (560 | ) | (3,532 | ) | 1,204 | (3,381 | ) | (4,464 | ) | NM | (32 | %) | 284 | (10,173 | ) | NM | ||||||||||||||||||||||||
Mortgage loans | 81 | 79 | 83 | 82 | 89 | 10 | % | 9 | % | 293 | 333 | 14 | % | |||||||||||||||||||||||||||
Policy loans | 33 | 33 | 34 | 34 | 38 | 15 | % | 12 | % | 135 | 139 | 3 | % | |||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] | 40 | (36 | ) | 25 | (101 | ) | (333 | ) | NM | NM | 255 | (445 | ) | NM | ||||||||||||||||||||||||||
Other [3] | (53 | ) | (44 | ) | (12 | ) | (10 | ) | (6 | ) | 89 | % | 40 | % | (161 | ) | (72 | ) | 55 | % | ||||||||||||||||||||
Subtotal | 733 | (2,366 | ) | 2,411 | (2,286 | ) | (3,667 | ) | NM | (60 | %) | 5,459 | (5,908 | ) | NM | |||||||||||||||||||||||||
Less: Investment expense | 27 | 19 | 28 | 26 | 24 | (11 | %) | (8 | %) | 100 | 97 | (3 | %) | |||||||||||||||||||||||||||
Total net investment income (loss) | $ | 706 | $ | (2,385 | ) | $ | 2,383 | $ | (2,312 | ) | $ | (3,691 | ) | NM | (60 | %) | $ | 5,359 | $ | (6,005 | ) | NM | ||||||||||||||||||
Less: Securities held for trading | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total net investment income excluding trading securities | $ | 1,307 | $ | 1,193 | $ | 1,230 | $ | 1,103 | $ | 809 | (38 | %) | (27 | %) | $ | 5,214 | $ | 4,335 | (17 | %) | ||||||||||||||||||||
Annualized investment yield, before-tax [4] | 5.8 | % | 5.2 | % | 5.3 | % | 4.7 | % | 3.3 | % | (2.5 | ) | (1.4 | ) | 5.9 | % | 4.6 | % | (1.3 | ) | ||||||||||||||||||||
Annualized investment yield, after-tax [4] | 4.0 | % | 3.6 | % | 3.6 | % | 3.2 | % | 2.2 | % | (1.8 | ) | (1.0 | ) | 4.1 | % | 3.2 | % | (0.9 | ) | ||||||||||||||||||||
Net Realized Capital Gains (Losses) | ||||||||||||||||||||||||||||||||||||||||
Gross gains on sale | $ | 120 | $ | 95 | $ | 73 | $ | 58 | $ | 381 | NM | NM | $ | 374 | $ | 607 | 62 | % | ||||||||||||||||||||||
Gross losses on sale | (56 | ) | (211 | ) | (59 | ) | (175 | ) | (411 | ) | NM | (135 | %) | (291 | ) | (856 | ) | (194 | %) | |||||||||||||||||||||
Impairments [5] | (318 | ) | (304 | ) | (164 | ) | (3,077 | ) | (419 | ) | (32 | %) | 86 | % | (483 | ) | (3,964 | ) | NM | |||||||||||||||||||||
Japanese fixed annuity contract hedges, net [6] | 15 | (14 | ) | (9 | ) | 36 | 51 | NM | 42 | % | 18 | 64 | NM | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [7] | (2 | ) | (5 | ) | (10 | ) | (6 | ) | (12 | ) | NM | (100 | %) | (25 | ) | (33 | ) | (32 | %) | |||||||||||||||||||||
SFAS 157 transition impact [8] | — | (650 | ) | — | — | — | — | — | — | (650 | ) | — | ||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net [9] | (34 | ) | (110 | ) | (13 | ) | (133 | ) | (457 | ) | NM | NM | (286 | ) | (713 | ) | (149 | %) | ||||||||||||||||||||||
Macro hedge | — | 9 | (4 | ) | 24 | 45 | — | 88 | % | (12 | ) | 74 | NM | |||||||||||||||||||||||||||
Total results of variable annuity hedge program | (34 | ) | (101 | ) | (17 | ) | (109 | ) | (412 | ) | (298 | ) | (639 | ) | ||||||||||||||||||||||||||
Other net gain (loss) [10] | (154 | ) | (181 | ) | (96 | ) | (176 | ) | 6 | NM | NM | (289 | ) | (447 | ) | (55 | %) | |||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (429 | ) | $ | (1,371 | ) | $ | (282 | ) | $ | (3,449 | ) | $ | (816 | ) | (90 | %) | 76 | % | $ | (994 | ) | $ | (5,918 | ) | NM | ||||||||||||||
[1] | Includes income on short-term bonds. | |
[2] | Includes income on hedge fund investments outside of limited partnerships and real estate joint ventures. | |
[3] | Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities. | |
[4] | Yields calculated using net investment income (excluding income related to equity securities held for trading) divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities held for trading, collateral received associated with the securities lending program and consolidated variable interest entity minority interests. | |
[5] | Includes $23 and $808 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $125 and $896 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security. | |
[6] | Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements). | |
[7] | Included in core earnings. | |
[8] | Includes SFAS 157 implementation losses of $616, $10 and $24 related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively. | |
[9] | The net loss on GMWB rider embedded derivatives for the three months and year ended December 31, 2008 was primarily related to liability model assumption updates for mortality in the first quarter and market-based hedge ineffectiveness in the third and fourth quarters due to extremely volatile capital markets, partially offset by gains in the fourth quarter related to liability model assumption updates for lapse rates. | |
[10] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. The net gain and loss for the three months and year ended December 31, 2008 included losses of $294 and $291, respectively, related to transactional foreign currency losses on the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, resulting from the appreciation of the Yen. Also included in the three months and year ended December 31, 2008, are gains of $119 and losses of $312, respectively, on credit derivatives, as well as gains of $110 related to a decrease in the liability related to the warrants associated with the Allianz transaction. |
I-1
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
LIFE
INVESTMENT EARNINGS BEFORE-TAX
LIFE
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEARS ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||||||||||||||
Taxable | $ | 769 | $ | 723 | $ | 679 | $ | 686 | $ | 644 | (16 | %) | (6 | %) | $ | 2,989 | $ | 2,732 | (9 | %) | ||||||||||||||||||||
Tax-exempt | 32 | 32 | 32 | 32 | 30 | (6 | %) | (6 | %) | 125 | 126 | 1 | % | |||||||||||||||||||||||||||
Total fixed maturities | 801 | 755 | 711 | 718 | 674 | (16 | %) | (6 | %) | 3,114 | 2,858 | (8 | %) | |||||||||||||||||||||||||||
Equities | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | 23 | 25 | 31 | 17 | 23 | — | 35 | % | 86 | 96 | 12 | % | ||||||||||||||||||||||||||||
Held for trading | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total equities | (578 | ) | (3,553 | ) | 1,184 | (3,398 | ) | (4,477 | ) | NM | (32 | %) | 231 | (10,244 | ) | NM | ||||||||||||||||||||||||
Mortgage loans | 71 | 69 | 74 | 71 | 79 | 11 | % | 11 | % | 255 | 293 | 15 | % | |||||||||||||||||||||||||||
Policy loans | 33 | 33 | 34 | 34 | 38 | 15 | % | 12 | % | 135 | 139 | 3 | % | |||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] | 14 | (17 | ) | 9 | (59 | ) | (166 | ) | NM | (181 | %) | 115 | (233 | ) | NM | |||||||||||||||||||||||||
Other [3] | (43 | ) | (32 | ) | (9 | ) | (3 | ) | 8 | NM | NM | (133 | ) | (36 | ) | 73 | % | |||||||||||||||||||||||
Subtotal | 298 | (2,745 | ) | 2,003 | (2,637 | ) | (3,844 | ) | NM | (46 | %) | 3,717 | (7,223 | ) | NM | |||||||||||||||||||||||||
Less: Investment expense | 21 | 14 | 21 | 19 | 18 | (14 | %) | (5 | %) | 75 | 72 | (4 | %) | |||||||||||||||||||||||||||
Total net investment income (loss) | $ | 277 | $ | (2,759 | ) | $ | 1,982 | $ | (2,656 | ) | $ | (3,862 | ) | NM | (45 | %) | $ | 3,642 | $ | (7,295 | ) | NM | ||||||||||||||||||
Less: Securities held for trading | (601 | ) | (3,578 | ) | 1,153 | (3,415 | ) | (4,500 | ) | NM | (32 | %) | 145 | (10,340 | ) | NM | ||||||||||||||||||||||||
Total net investment income excluding trading securities | $ | 878 | $ | 819 | $ | 829 | $ | 759 | $ | 638 | (27 | %) | (16 | %) | $ | 3,497 | $ | 3,045 | (13 | %) | ||||||||||||||||||||
Annualized investment yield, before-tax [4] | 5.8 | % | 5.3 | % | 5.3 | % | 4.8 | % | 3.8 | % | (2.0 | ) | (1.0 | ) | 6.0 | % | 4.8 | % | (1.2 | ) | ||||||||||||||||||||
Annualized investment yield, after-tax [4] | 3.9 | % | 3.5 | % | 3.6 | % | 3.2 | % | 2.5 | % | (1.4 | ) | (0.7 | ) | 4.0 | % | 3.2 | % | (0.8 | ) | ||||||||||||||||||||
Net Realized Capital Gains (Losses) | ||||||||||||||||||||||||||||||||||||||||
Gross gains on sale | $ | 80 | $ | 43 | $ | 41 | $ | 44 | $ | 294 | NM | NM | $ | 213 | $ | 422 | 98 | % | ||||||||||||||||||||||
Gross losses on sale | (31 | ) | (110 | ) | (45 | ) | (89 | ) | (155 | ) | NM | (74 | %) | (168 | ) | (399 | ) | (138 | %) | |||||||||||||||||||||
Impairments [5] | (249 | ) | (231 | ) | (124 | ) | (1,760 | ) | (309 | ) | (24 | %) | 82 | % | (358 | ) | (2,424 | ) | NM | |||||||||||||||||||||
Japanese fixed annuity contract hedges, net [6] | 15 | (14 | ) | (9 | ) | 36 | 51 | NM | 42 | % | 18 | 64 | NM | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [7] | (6 | ) | (7 | ) | (11 | ) | (8 | ) | (9 | ) | (50 | %) | (13 | %) | (40 | ) | (35 | ) | 13 | % | ||||||||||||||||||||
SFAS 157 transition impact [8] | — | (650 | ) | — | — | — | — | — | — | (650 | ) | — | ||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net [9] | (34 | ) | (110 | ) | (13 | ) | (133 | ) | (457 | ) | NM | NM | (286 | ) | (713 | ) | (149 | %) | ||||||||||||||||||||||
Macro hedge | — | 9 | (4 | ) | 24 | 45 | — | 88 | % | (12 | ) | 74 | NM | |||||||||||||||||||||||||||
Total results of variable annuity hedge program | (34 | ) | (101 | ) | (17 | ) | (109 | ) | (412 | ) | NM | NM | (298 | ) | (639 | ) | (114 | %) | ||||||||||||||||||||||
Other net gain (loss) [10] | (108 | ) | (150 | ) | (63 | ) | (126 | ) | (138 | ) | (28 | %) | (10 | %) | (186 | ) | (477 | ) | (156 | %) | ||||||||||||||||||||
Total net realized capital gains (losses) | $ | (333 | ) | $ | (1,220 | ) | $ | (228 | ) | $ | (2,012 | ) | $ | (678 | ) | (104 | %) | 66 | % | $ | (819 | ) | $ | (4,138 | ) | NM | ||||||||||||||
[1] | Includes income on short-term bonds. | |
[2] | Includes income on a real estate joint venture. | |
[3] | Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities. | |
[4] | Yields calculated using net investment income (excluding income related to equity securities held for trading) divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities held for trading, collateral received associated with the securities lending program and consolidated variable interest entity minority interests. | |
[5] | Includes $8 and $439 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $98 and $651 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security. | |
[6] | Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements). | |
[7] | Included in core earnings. | |
[8] | Includes SFAS 157 implementation losses of $616, $10 and $24 related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively. | |
[9] | The net loss on GMWB rider embedded derivatives for the three months and year ended December 31, 2008 was primarily related to liability model assumption updates for mortality in the first quarter and market-based hedge ineffectiveness in the third and fourth quarters due to extremely volatile capital markets, partially offset by gains in the fourth quarter related to liability model assumption updates for lapse rates. | |
[10] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. The net gain and loss for the three months and year ended December 31, 2008 included losses of $294 and $291, respectively, related to transactional foreign currency losses on the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, resulting from the appreciation of the Yen. Also included in the three months and year ended December 31, 2008, are gains of $91 and losses of $222, respectively, on credit derivatives. |
I-2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
PROPERTY & CASUALTY
INVESTMENT EARNINGS BEFORE-TAX
PROPERTY & CASUALTY
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEARS ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||||||||||||||
Taxable | $ | 276 | $ | 261 | $ | 248 | $ | 255 | $ | 225 | (18 | %) | (12 | %) | $ | 1,088 | $ | 989 | (9 | %) | ||||||||||||||||||||
Tax-exempt | 109 | 110 | 109 | 109 | 101 | (7 | %) | (7 | %) | 423 | 429 | 1 | % | |||||||||||||||||||||||||||
Total fixed maturities | 385 | 371 | 357 | 364 | 326 | (15 | %) | (10 | %) | 1,511 | 1,418 | (6 | %) | |||||||||||||||||||||||||||
Equities — available-for-sale | 16 | 20 | 19 | 17 | 12 | (25 | %) | (29 | %) | 50 | 68 | 36 | % | |||||||||||||||||||||||||||
Mortgage loans | 10 | 10 | 9 | 11 | 10 | — | (9 | %) | 38 | 40 | 5 | % | ||||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] | 26 | (19 | ) | 16 | (42 | ) | (167 | ) | NM | NM | 140 | (212 | ) | NM | ||||||||||||||||||||||||||
Other [3] | (10 | ) | (12 | ) | (3 | ) | (8 | ) | (13 | ) | (30 | %) | (63 | %) | (27 | ) | (36 | ) | (33 | %) | ||||||||||||||||||||
Subtotal | 427 | 370 | 398 | 342 | 168 | (61 | %) | (51 | %) | 1,712 | 1,278 | (25 | %) | |||||||||||||||||||||||||||
Less: Investment expense | 6 | 5 | 7 | 7 | 6 | — | (14 | %) | 25 | 25 | — | |||||||||||||||||||||||||||||
Total net investment income (loss) | $ | 421 | $ | 365 | $ | 391 | $ | 335 | $ | 162 | (62 | %) | (52 | %) | $ | 1,687 | $ | 1,253 | (26 | %) | ||||||||||||||||||||
Annualized investment yield, before-tax [4] | 5.8 | % | 5.0 | % | 5.3 | % | 4.6 | % | 2.4 | % | (3.4 | ) | (2.2 | ) | 5.9 | % | 4.4 | % | (1.5 | ) | ||||||||||||||||||||
Annualized investment yield, after-tax [4] | 4.3 | % | 3.7 | % | 3.9 | % | 3.4 | % | 1.6 | % | (2.7 | ) | (1.8 | ) | 4.4 | % | 3.2 | % | (1.2 | ) | ||||||||||||||||||||
Net Realized Capital Gains (Losses) | ||||||||||||||||||||||||||||||||||||||||
Gross gains on sale | $ | 38 | $ | 52 | $ | 31 | $ | 12 | $ | 85 | 124 | % | NM | $ | 159 | $ | 180 | 13 | % | |||||||||||||||||||||
Gross losses on sale | (23 | ) | (100 | ) | (13 | ) | (82 | ) | (253 | ) | NM | NM | (121 | ) | (448 | ) | NM | |||||||||||||||||||||||
Impairments [5] | (69 | ) | (73 | ) | (40 | ) | (1,312 | ) | (108 | ) | (57 | %) | 92 | % | (125 | ) | (1,533 | ) | NM | |||||||||||||||||||||
Periodic net coupon settlements on credit derivatives [6] | 4 | 2 | 1 | 2 | (3 | ) | NM | NM | 15 | 2 | (87 | %) | ||||||||||||||||||||||||||||
Other net gain (loss) [7] | (46 | ) | (33 | ) | (30 | ) | (48 | ) | 33 | NM | NM | (100 | ) | (78 | ) | 22 | % | |||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (96 | ) | $ | (152 | ) | $ | (51 | ) | $ | (1,428 | ) | $ | (246 | ) | (156 | %) | 83 | % | $ | (172 | ) | $ | (1,877 | ) | NM | ||||||||||||||
[1] | Includes income on short-term bonds. | |
[2] | Includes income on hedge fund investments outside of limited partnerships and a real estate joint venture. | |
[3] | Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities. | |
[4] | Yields calculated using net investment income divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding collateral received associated with the securities lending program. | |
[5] | Includes $15 and $366 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $27 and $245 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security. | |
[6] | Included in core earnings. | |
[7] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Included in the three months and year ended December 31, 2008, are gains of $28 and losses of $90, respectively, on credit derivatives. |
I-3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CORPORATE
INVESTMENT EARNINGS BEFORE-TAX
CORPORATE
Year Over | |||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEARS ENDED | ||||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | ||||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | Change | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||||||
Net Investment Income | |||||||||||||||||||||||||||||||||||||||||
Fixed maturities [1] | |||||||||||||||||||||||||||||||||||||||||
Taxable | $ | 6 | $ | 8 | $ | 9 | $ | 8 | $ | 9 | 50 | % | 13 | % | $ | 28 | $ | 34 | 21 | % | |||||||||||||||||||||
Total fixed maturities | 6 | 8 | 9 | 8 | 9 | 50 | % | 13 | % | 28 | 34 | 21 | % | ||||||||||||||||||||||||||||
Equities — available-for-sale | 2 | 1 | 1 | — | 1 | (50 | %) | — | 3 | 3 | — | ||||||||||||||||||||||||||||||
Other | — | — | — | 1 | (1 | ) | — | NM | (1 | ) | — | 100 | % | ||||||||||||||||||||||||||||
Total net investment income | $ | 8 | $ | 9 | $ | 10 | $ | 9 | $ | 9 | 13 | % | — | 30 | $ | 37 | 23 | % | |||||||||||||||||||||||
Net Realized Capital Gains (Losses) | |||||||||||||||||||||||||||||||||||||||||
Gross gains on sale | 2 | — | 1 | 2 | 2 | — | — | 2 | 5 | 150 | % | ||||||||||||||||||||||||||||||
Gross losses on sale | (2 | ) | (1 | ) | (1 | ) | (4 | ) | (3 | ) | (50 | %) | 25 | % | (2 | ) | (9 | ) | NM | ||||||||||||||||||||||
Impairments [2] | — | — | — | (5 | ) | (2 | ) | — | 60 | % | — | (7 | ) | — | |||||||||||||||||||||||||||
Other net gain (loss) [3] | — | 2 | (3 | ) | (2 | ) | 111 | — | NM | (3 | ) | 108 | NM | ||||||||||||||||||||||||||||
Total net realized capital gains (losses) | $ | — | $ | 1 | $ | (3 | ) | $ | (9 | ) | $ | 108 | — | NM | $ | (3 | ) | $ | 97 | NM | |||||||||||||||||||||
[1] | Includes income on short-term bonds. | |
[2] | Includes $3 for three months and year ended December 31, 2008 of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security. | |
[3] | Primarily consists of changes in fair value on non-qualifying derivatives. Also included for three months and year ended December 31, 2008, are gains of $110 related to a decrease in the liability related to the warrants associated with the Allianz transaction. |
I-4
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
Life | P&C | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Gains/losses on sales, net | 31 | 89 | 187 | % | 10 | (109 | ) | NM | — | (1 | ) | — | 41 | (21 | ) | NM | ||||||||||||||||||||||||||||||||
Impairments | (163 | ) | (196 | ) | (20 | %) | (45 | ) | (70 | ) | (56 | %) | — | (1 | ) | — | (208 | ) | (267 | ) | (28 | %) | ||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [1] | 10 | 34 | NM | — | — | — | — | — | — | 10 | 34 | NM | ||||||||||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [2] | (4 | ) | (6 | ) | (50 | %) | 3 | (2 | ) | NM | — | — | — | (1 | ) | (8 | ) | NM | ||||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net | 15 | (384 | ) | NM | — | — | — | — | — | — | 15 | (384 | ) | NM | ||||||||||||||||||||||||||||||||||
Macro hedge | — | 28 | — | — | — | — | — | — | — | — | 28 | — | ||||||||||||||||||||||||||||||||||||
Total results of variable annuity hedge program | 15 | (356 | ) | NM | — | — | — | — | — | — | 15 | (356 | ) | NM | ||||||||||||||||||||||||||||||||||
Other net gain (loss) [3] | (57 | ) | (122 | ) | (114 | %) | (30 | ) | 19 | NM | — | 111 | — | (87 | ) | 8 | NM | |||||||||||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (168 | ) | $ | (557 | ) | NM | $ | (62 | ) | $ | (162 | ) | (161 | %) | $ | — | $ | 109 | — | $ | (230 | ) | $ | (610 | ) | (165 | %) | ||||||||||||||||||||
[1] | Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements). | |
[2] | Included in core earnings. | |
[3] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. |
I-5
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
YEAR ENDED DECEMBER 31, 2008 AND 2007
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
YEAR ENDED DECEMBER 31, 2008 AND 2007
Life | P&C | Corporate | Consolidated | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||||||||||
Gains/losses on sales, net | 26 | 16 | (38 | %) | 25 | (175 | ) | NM | — | (3 | ) | — | 51 | (162 | ) | NM | ||||||||||||||||||||||||||||||||
Impairments | (227 | ) | (1,537 | ) | NM | (82 | ) | (996 | ) | NM | — | (4 | ) | — | (309 | ) | (2,537 | ) | NM | |||||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [1] | 12 | 42 | NM | — | — | — | — | — | — | 12 | 42 | NM | ||||||||||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [2] | (25 | ) | (23 | ) | 8 | % | 10 | 1 | (90 | %) | — | — | — | (15 | ) | (22 | ) | (47 | %) | |||||||||||||||||||||||||||||
SFAS 157 transition impact [3] | — | (220 | ) | — | — | — | — | — | — | — | — | (220 | ) | — | ||||||||||||||||||||||||||||||||||
Results of variable annuity hedge program | ||||||||||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net | (112 | ) | (488 | ) | NM | — | — | — | — | — | — | (112 | ) | (488 | ) | NM | ||||||||||||||||||||||||||||||||
Macro hedge | (5 | ) | 38 | NM | — | — | — | — | — | — | (5 | ) | 38 | NM | ||||||||||||||||||||||||||||||||||
Total results of variable annuity hedge program | (117 | ) | (450 | ) | NM | — | — | — | — | — | — | (117 | ) | (450 | ) | NM | ||||||||||||||||||||||||||||||||
Other net gain (loss) [4] | (115 | ) | (332 | ) | (189 | %) | (65 | ) | (53 | ) | 18 | % | (2 | ) | 109 | NM | (182 | ) | (276 | ) | (52 | %) | ||||||||||||||||||||||||||
Total net realized capital gains (losses) | $ | (446 | ) | $ | (2,504 | ) | NM | $ | (112 | ) | $ | (1,223 | ) | NM | $ | (2 | ) | $ | 102 | NM | $ | (560 | ) | $ | (3,625 | ) | NM | |||||||||||||||||||||
[1] | Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements). | |
[2] | Included in core earnings. | |
[3] | Includes SFAS 157 implementation losses related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively. | |
[4] | Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. |
I-6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
�� | ||||||||||||||||||||||||||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value [1] | $ | 80,055 | 61.1 | % | $ | 76,611 | 58.3 | % | $ | 75,068 | 57.1 | % | $ | 70,091 | 56.8 | % | $ | 65,112 | 54.2 | % | ||||||||||||||||||||
Equity securities, at fair value | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale [2] | 2,595 | 2.0 | % | 2,463 | 1.9 | % | 2,619 | 2.0 | % | 1,730 | 1.4 | % | 1,458 | 1.2 | % | |||||||||||||||||||||||||
Held for trading [3] | 36,182 | 27.6 | % | 37,406 | 28.5 | % | 36,853 | 28.0 | % | 33,655 | 27.3 | % | 30,820 | 25.7 | % | |||||||||||||||||||||||||
Total equity securities, at fair value | 38,777 | 29.6 | % | 39,869 | 30.3 | % | 39,472 | 30.0 | % | 35,385 | 28.7 | % | 32,278 | 26.9 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance | 2,061 | 1.5 | % | 2,118 | 1.6 | % | 2,146 | 1.6 | % | 2,159 | 1.7 | % | 2,208 | 1.8 | % | |||||||||||||||||||||||||
Mortgage loans, at cost | 5,410 | 4.1 | % | 5,503 | 4.2 | % | 5,882 | 4.5 | % | 6,222 | 5.0 | % | 6,469 | 5.4 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [4] | 2,566 | 2.0 | % | 2,619 | 2.0 | % | 2,805 | 2.1 | % | 2,817 | 2.3 | % | 2,295 | 1.9 | % | |||||||||||||||||||||||||
Short-term [5] | 1,602 | 1.2 | % | 3,568 | 2.7 | % | 5,127 | 3.9 | % | 5,353 | 4.3 | % | 10,022 | 8.4 | % | |||||||||||||||||||||||||
Other investments [6] | 615 | 0.5 | % | 1,187 | 0.9 | % | 993 | 0.8 | % | 1,410 | 1.2 | % | 1,723 | 1.4 | % | |||||||||||||||||||||||||
Total investments | $ | 131,086 | 100.0 | % | $ | 131,475 | 100.0 | % | $ | 131,493 | 100.0 | % | $ | 123,437 | 100.0 | % | $ | 120,107 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities held for trading | 36,182 | 27.6 | % | 37,406 | 28.5 | % | 36,853 | 28.0 | % | 33,655 | 27.3 | % | 30,820 | 25.7 | % | |||||||||||||||||||||||||
Total investments excluding trading securities | $ | 94,904 | 72.4 | % | $ | 94,069 | 71.5 | % | $ | 94,640 | 72.0 | % | $ | 89,782 | 72.7 | % | $ | 89,287 | 74.3 | % | ||||||||||||||||||||
HIMCO managed third party accounts | $ | 10,872 | $ | 9,705 | $ | 9,216 | $ | 9,058 | $ | 9,207 | ||||||||||||||||||||||||||||||
Asset-backed securities (“ABS”) | $ | 8,915 | 11.1 | % | $ | 8,374 | 10.9 | % | $ | 8,182 | 10.9 | % | $ | 7,624 | 10.9 | % | $ | 6,268 | 9.6 | % | ||||||||||||||||||||
Commercial mortgage-backed securities (“CMBS”) | 17,031 | 21.3 | % | 15,056 | 19.6 | % | 14,028 | 18.7 | % | 12,282 | 17.5 | % | 8,776 | 13.5 | % | |||||||||||||||||||||||||
Collateralized mortgage obligation (“CMO”) | 1,745 | 2.2 | % | 1,534 | 2.0 | % | 1,326 | 1.8 | % | 1,235 | 1.8 | % | 1,177 | 1.8 | % | |||||||||||||||||||||||||
Corporate | 34,198 | 42.7 | % | 34,027 | 44.4 | % | 34,381 | 45.7 | % | 31,532 | 45.0 | % | 27,181 | 41.7 | % | |||||||||||||||||||||||||
Government/Government agencies — Foreign | 1,053 | 1.3 | % | 1,048 | 1.4 | % | 979 | 1.3 | % | 875 | 1.2 | % | 2,821 | 4.3 | % | |||||||||||||||||||||||||
Government/Government agencies — U.S. | 855 | 1.1 | % | 1,350 | 1.8 | % | 1,383 | 1.8 | % | 1,852 | 2.6 | % | 5,956 | 9.2 | % | |||||||||||||||||||||||||
Mortgage-backed securities (“MBS”) — agency | 2,763 | 3.5 | % | 2,290 | 3.0 | % | 2,372 | 3.2 | % | 2,722 | 3.9 | % | 2,278 | 3.5 | % | |||||||||||||||||||||||||
Municipal — taxable | 1,386 | 1.7 | % | 1,374 | 1.8 | % | 1,017 | 1.4 | % | 1,029 | 1.5 | % | 894 | 1.4 | % | |||||||||||||||||||||||||
Municipal — tax-exempt | 12,103 | 15.1 | % | 11,558 | 15.1 | % | 11,400 | 15.2 | % | 10,940 | 15.6 | % | 9,761 | 15.0 | % | |||||||||||||||||||||||||
Redeemable preferred stock | 6 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total fixed maturities [1] | $ | 80,055 | 100.0 | % | $ | 76,611 | 100.0 | % | $ | 75,068 | 100.0 | % | $ | 70,091 | 100.0 | % | $ | 65,112 | 100.0 | % | ||||||||||||||||||||
AAA | $ | 28,318 | 35.4 | % | $ | 24,418 | 31.9 | % | $ | 19,238 | 25.6 | % | $ | 17,613 | 25.1 | % | $ | 13,489 | 20.7 | % | ||||||||||||||||||||
AA | 10,999 | 13.7 | % | 10,932 | 14.3 | % | 13,717 | 18.3 | % | 12,410 | 17.7 | % | 11,646 | 17.9 | % | |||||||||||||||||||||||||
A | 17,030 | 21.3 | % | 17,325 | 22.6 | % | 18,344 | 24.4 | % | 17,069 | 24.3 | % | 15,831 | 24.4 | % | |||||||||||||||||||||||||
BBB | 14,974 | 18.7 | % | 15,319 | 20.0 | % | 14,909 | 19.9 | % | 13,794 | 19.7 | % | 12,794 | 19.6 | % | |||||||||||||||||||||||||
U.S. Government/Government agencies | 5,229 | 6.5 | % | 5,071 | 6.6 | % | 5,005 | 6.7 | % | 5,785 | 8.3 | % | 9,568 | 14.7 | % | |||||||||||||||||||||||||
BB & below | 3,505 | 4.4 | % | 3,546 | 4.6 | % | 3,855 | 5.1 | % | 3,420 | 4.9 | % | 1,784 | 2.7 | % | |||||||||||||||||||||||||
Total fixed maturities [1] | $ | 80,055 | 100.0 | % | $ | 76,611 | 100.0 | % | $ | 75,068 | 100.0 | % | $ | 70,091 | 100.0 | % | $ | 65,112 | 100.0 | % | ||||||||||||||||||||
[1] | Includes $308, $313, $151, $72 and $155 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively, of which $303, $208, $126, $51 and $149 respectively, were investments held by The Hartford Financial Services Group, Inc. | |
[2] | Includes $103, $99, $98, $81 and $73 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively. | |
[3] | These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities. | |
[4] | Includes hedge fund investments outside of limited partnerships and real estate joint ventures. | |
[5] | Includes $160, $1,050, $1,298, $733 and $1,488 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively, of which $154, $1,046, $1,261, $692, and $1,484, respectively, were investments held by The Hartford Financial Services Group, Inc. | |
[6] | Primarily relates to derivative instruments. Additionally, includes $43, $43, $41, $40 and $43 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008 respectively. |
I-7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
LIFE
COMPOSITION OF INVESTED ASSETS
LIFE
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 52,542 | 52.6 | % | $ | 50,615 | 50.4 | % | $ | 49,683 | 49.7 | % | $ | 46,292 | 48.7 | % | $ | 45,182 | 48.0 | % | ||||||||||||||||||||
Equity securities, at fair value | ||||||||||||||||||||||||||||||||||||||||
Available-for-sale | 1,284 | 1.3 | % | 1,202 | 1.2 | % | 1,194 | 1.2 | % | 908 | 1.0 | % | 711 | 0.8 | % | |||||||||||||||||||||||||
Held for trading [1] | 36,182 | 36.3 | % | 37,406 | 37.3 | % | 36,853 | 36.8 | % | 33,655 | 35.4 | % | 30,820 | 32.7 | % | |||||||||||||||||||||||||
Total equity securities, at fair value | 37,466 | 37.6 | % | 38,608 | 38.5 | % | 38,047 | 38.0 | % | 34,563 | 36.4 | % | 31,531 | 33.5 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance | 2,061 | 2.1 | % | 2,118 | 2.1 | % | 2,146 | 2.1 | % | 2,159 | 2.3 | % | 2,208 | 2.3 | % | |||||||||||||||||||||||||
Mortgage loans, at cost | 4,739 | 4.7 | % | 4,821 | 4.8 | % | 5,135 | 5.1 | % | 5,460 | 5.7 | % | 5,684 | 6.0 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] | 1,306 | 1.3 | % | 1,329 | 1.3 | % | 1,407 | 1.4 | % | 1,410 | 1.5 | % | 1,129 | 1.2 | % | |||||||||||||||||||||||||
Short-term | 1,158 | 1.2 | % | 1,807 | 1.8 | % | 2,756 | 2.8 | % | 3,793 | 4.0 | % | 6,937 | 7.4 | % | |||||||||||||||||||||||||
Other investments [3] | 534 | 0.5 | % | 1,086 | 1.1 | % | 894 | 0.9 | % | 1,308 | 1.4 | % | 1,473 | 1.6 | % | |||||||||||||||||||||||||
Total investments | $ | 99,806 | 100.0 | % | $ | 100,384 | 100.0 | % | $ | 100,068 | 100.0 | % | $ | 94,985 | 100.0 | % | $ | 94,144 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities held for trading | 36,182 | 36.3 | % | 37,406 | 37.3 | % | 36,853 | 36.8 | % | 33,655 | 35.4 | % | 30,820 | 32.7 | % | |||||||||||||||||||||||||
Total investments excluding trading securities | $ | 63,624 | 63.7 | % | $ | 62,978 | 62.7 | % | $ | 63,215 | 63.2 | % | $ | 61,330 | 64.6 | % | $ | 63,324 | 67.3 | % | ||||||||||||||||||||
ABS | $ | 7,556 | 14.4 | % | $ | 6,948 | 13.7 | % | $ | 6,920 | 13.9 | % | $ | 6,453 | 13.9 | % | $ | 5,401 | 12.0 | % | ||||||||||||||||||||
CMBS | 12,056 | 22.9 | % | 10,679 | 21.1 | % | 10,006 | 20.1 | % | 8,666 | 18.7 | % | 6,248 | 13.8 | % | |||||||||||||||||||||||||
CMO | 1,366 | 2.6 | % | 1,215 | 2.4 | % | 1,014 | 2.0 | % | 932 | 2.0 | % | 882 | 2.0 | % | |||||||||||||||||||||||||
Corporate | 24,583 | 46.8 | % | 24,739 | 48.9 | % | 25,131 | 50.6 | % | 23,292 | 50.3 | % | 20,630 | 45.6 | % | |||||||||||||||||||||||||
Government/Government agencies — Foreign | 571 | 1.1 | % | 563 | 1.1 | % | 537 | 1.1 | % | 493 | 1.1 | % | 2,236 | 4.9 | % | |||||||||||||||||||||||||
Government/Government agencies — U.S. | 616 | 1.2 | % | 994 | 2.0 | % | 1,048 | 2.1 | % | 1,466 | 3.2 | % | 5,156 | 11.4 | % | |||||||||||||||||||||||||
MBS — agency | 1,913 | 3.6 | % | 1,738 | 3.4 | % | 1,633 | 3.3 | % | 1,747 | 3.8 | % | 1,535 | 3.4 | % | |||||||||||||||||||||||||
Municipal — taxable | 1,244 | 2.4 | % | 1,219 | 2.4 | % | 883 | 1.8 | % | 890 | 1.9 | % | 758 | 1.7 | % | |||||||||||||||||||||||||
Municipal — tax-exempt | 2,634 | 5.0 | % | 2,520 | 5.0 | % | 2,511 | 5.1 | % | 2,353 | 5.1 | % | 2,336 | 5.2 | % | |||||||||||||||||||||||||
Redeemable preferred stock | 3 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total fixed maturities | $ | 52,542 | 100.0 | % | $ | 50,615 | 100.0 | % | $ | 49,683 | 100.0 | % | $ | 46,292 | 100.0 | % | $ | 45,182 | 100.0 | % | ||||||||||||||||||||
AAA | $ | 16,638 | 31.6 | % | $ | 14,630 | 28.9 | % | $ | 12,386 | 24.9 | % | $ | 11,242 | 24.3 | % | $ | 8,533 | 18.8 | % | ||||||||||||||||||||
AA | 6,914 | 13.2 | % | 6,404 | 12.7 | % | 7,479 | 15.1 | % | 6,663 | 14.4 | % | 7,231 | 16.0 | % | |||||||||||||||||||||||||
A | 12,335 | 23.5 | % | 12,363 | 24.4 | % | 12,926 | 26.0 | % | 11,992 | 25.9 | % | 11,018 | 24.4 | % | |||||||||||||||||||||||||
BBB | 11,070 | 21.1 | % | 11,413 | 22.5 | % | 11,014 | 22.2 | % | 10,245 | 22.1 | % | 9,401 | 20.8 | % | |||||||||||||||||||||||||
U.S. Government/Government agencies | 3,668 | 7.0 | % | 3,755 | 7.4 | % | 3,533 | 7.1 | % | 4,036 | 8.7 | % | 7,614 | 16.9 | % | |||||||||||||||||||||||||
BB & below | 1,917 | 3.6 | % | 2,050 | 4.1 | % | 2,345 | 4.7 | % | 2,114 | 4.6 | % | 1,385 | 3.1 | % | |||||||||||||||||||||||||
Total fixed maturities | $ | 52,542 | 100.0 | % | $ | 50,615 | 100.0 | % | $ | 49,683 | 100.0 | % | $ | 46,292 | 100.0 | % | $ | 45,182 | 100.0 | % | ||||||||||||||||||||
[1] | These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities. | |
[2] | Includes a real estate joint venture. | |
[3] | Primarily relates to derivative instruments. |
I-8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2008 | 2008 | 2008 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 27,205 | 88.8 | % | $ | 25,683 | 86.8 | % | $ | 25,234 | 84.6 | % | $ | 23,727 | 86.2 | % | $ | 19,775 | 81.7 | % | ||||||||||||||||||||
Equity securities, available-for-sale, at fair value | 1,208 | 3.9 | % | 1,162 | 3.9 | % | 1,327 | 4.4 | % | 741 | 2.7 | % | 674 | 2.8 | % | |||||||||||||||||||||||||
Mortgage loans, at cost | 671 | 2.2 | % | 682 | 2.3 | % | 747 | 2.5 | % | 762 | 2.8 | % | 785 | 3.2 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [1] | 1,260 | 4.1 | % | 1,290 | 4.4 | % | 1,398 | 4.7 | % | 1,407 | 5.1 | % | 1,166 | 4.8 | % | |||||||||||||||||||||||||
Short-term | 284 | 0.9 | % | 711 | 2.4 | % | 1,073 | 3.6 | % | 827 | 3.0 | % | 1,597 | 6.6 | % | |||||||||||||||||||||||||
Other investments [2] | 38 | 0.1 | % | 58 | 0.2 | % | 58 | 0.2 | % | 62 | 0.2 | % | 207 | 0.9 | % | |||||||||||||||||||||||||
Total investments | $ | 30,666 | 100.0 | % | $ | 29,586 | 100.0 | % | $ | 29,837 | 100.0 | % | $ | 27,526 | 100.0 | % | $ | 24,204 | 100.0 | % | ||||||||||||||||||||
ABS | $ | 1,359 | 5.0 | % | $ | 1,426 | 5.6 | % | $ | 1,262 | 5.0 | % | $ | 1,171 | 4.9 | % | $ | 867 | 4.4 | % | ||||||||||||||||||||
CMBS | 4,975 | 18.3 | % | 4,377 | 17.0 | % | 4,022 | 16.0 | % | 3,616 | 15.2 | % | 2,528 | 12.8 | % | |||||||||||||||||||||||||
CMO | 379 | 1.4 | % | 319 | 1.2 | % | 312 | 1.3 | % | 303 | 1.3 | % | 295 | 1.5 | % | |||||||||||||||||||||||||
Corporate | 9,307 | 34.2 | % | 8,975 | 34.9 | % | 9,099 | 36.0 | % | 8,168 | 34.5 | % | 6,396 | 32.3 | % | |||||||||||||||||||||||||
Government/Government agencies — Foreign | 482 | 1.8 | % | 485 | 1.9 | % | 442 | 1.8 | % | 382 | 1.6 | % | 585 | 3.0 | % | |||||||||||||||||||||||||
Government/Government agencies — U.S. | 239 | 0.9 | % | 356 | 1.4 | % | 335 | 1.3 | % | 386 | 1.6 | % | 800 | 4.0 | % | |||||||||||||||||||||||||
MBS — agency | 850 | 3.1 | % | 552 | 2.2 | % | 739 | 2.9 | % | 975 | 4.1 | % | 743 | 3.8 | % | |||||||||||||||||||||||||
Municipal — taxable | 142 | 0.5 | % | 155 | 0.6 | % | 134 | 0.5 | % | 139 | 0.6 | % | 136 | 0.7 | % | |||||||||||||||||||||||||
Municipal — tax-exempt | 9,469 | 34.8 | % | 9,038 | 35.2 | % | 8,889 | 35.2 | % | 8,587 | 36.2 | % | 7,425 | 37.5 | % | |||||||||||||||||||||||||
Redeemable preferred stock | 3 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Total fixed maturities | $ | 27,205 | 100.0 | % | $ | 25,683 | 100.0 | % | $ | 25,234 | 100.0 | % | $ | 23,727 | 100.0 | % | $ | 19,775 | 100.0 | % | ||||||||||||||||||||
AAA | $ | 11,660 | 42.9 | % | $ | 9,767 | 38.0 | % | $ | 6,844 | 27.2 | % | $ | 6,366 | 26.8 | % | $ | 4,939 | 25.0 | % | ||||||||||||||||||||
AA | 3,915 | 14.4 | % | 4,354 | 17.1 | % | 6,144 | 24.3 | % | 5,701 | 24.0 | % | 4,346 | 22.0 | % | |||||||||||||||||||||||||
A | 4,586 | 16.9 | % | 4,865 | 18.9 | % | 5,374 | 21.3 | % | 5,057 | 21.3 | % | 4,747 | 24.0 | % | |||||||||||||||||||||||||
BBB | 3,895 | 14.3 | % | 3,885 | 15.1 | % | 3,890 | 15.4 | % | 3,548 | 15.0 | % | 3,390 | 17.1 | % | |||||||||||||||||||||||||
U.S. Government/Government agencies | 1,561 | 5.7 | % | 1,316 | 5.1 | % | 1,472 | 5.8 | % | 1,749 | 7.4 | % | 1,954 | 9.9 | % | |||||||||||||||||||||||||
BB & below | 1,588 | 5.8 | % | 1,496 | 5.8 | % | 1,510 | 6.0 | % | 1,306 | 5.5 | % | 399 | 2.0 | % | |||||||||||||||||||||||||
Total fixed maturities | $ | 27,205 | 100.0 | % | $ | 25,683 | 100.0 | % | $ | 25,234 | 100.0 | % | $ | 23,727 | 100.0 | % | $ | 19,775 | 100.0 | % | ||||||||||||||||||||
[1] | Includes hedge fund investments outside of limited partnerships and a real estate joint venture. | |
[2] | Primarily relates to derivative instruments. |
I-9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
CONSOLIDATED [1] [2]
UNREALIZED LOSS AGING
CONSOLIDATED [1] [2]
December 31, 2008 | September 30, 2008 | |||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||
Cost | Value | Loss | Cost | Value | Loss | |||||||||||||||||||
Total AFS [3] Securities | ||||||||||||||||||||||||
Three months or less | $ | 16,425 | $ | 14,992 | $ | (1,433 | ) | $ | 19,417 | $ | 18,324 | $ | (1,093 | ) | ||||||||||
Greater than three months to six months | 6,533 | 5,247 | (1,286 | ) | 8,280 | 7,575 | (705 | ) | ||||||||||||||||
Greater than six months to nine months | 7,053 | 5,873 | (1,180 | ) | 5,899 | 5,047 | (852 | ) | ||||||||||||||||
Greater than nine months to twelve months | 6,459 | 4,957 | (1,502 | ) | 5,175 | 4,151 | (1,024 | ) | ||||||||||||||||
Greater than twelve months | 25,279 | 16,071 | (9,208 | ) | 20,710 | 16,576 | (4,134 | ) | ||||||||||||||||
Total | $ | 61,749 | $ | 47,140 | $ | (14,609 | ) | $ | 59,481 | $ | 51,673 | $ | (7,808 | ) | ||||||||||
Securitized Assets | ||||||||||||||||||||||||
Three months or less | $ | 2,142 | $ | 1,852 | $ | (290 | ) | $ | 5,518 | $ | 5,164 | $ | (354 | ) | ||||||||||
Greater than three months to six months | 3,052 | 2,256 | (796 | ) | 1,660 | 1,452 | (208 | ) | ||||||||||||||||
Greater than six months to nine months | 1,284 | 910 | (374 | ) | 2,054 | 1,699 | (355 | ) | ||||||||||||||||
Greater than nine months to twelve months | 1,847 | 1,189 | (658 | ) | 3,338 | 2,559 | (779 | ) | ||||||||||||||||
Greater than twelve months | 15,352 | 8,718 | (6,634 | ) | 11,907 | 9,107 | (2,800 | ) | ||||||||||||||||
Total | $ | 23,677 | $ | 14,925 | $ | (8,752 | ) | $ | 24,477 | $ | 19,981 | $ | (4,496 | ) | ||||||||||
BIG [4] and Equity AFS [3] Securities | ||||||||||||||||||||||||
Three months or less | $ | 1,106 | $ | 852 | $ | (254 | ) | $ | 1,461 | $ | 1,345 | $ | (116 | ) | ||||||||||
Greater than three months to six months | 307 | 214 | (93 | ) | 348 | 294 | (54 | ) | ||||||||||||||||
Greater than six months to nine months | 349 | 260 | (89 | ) | 259 | 229 | (30 | ) | ||||||||||||||||
Greater than nine months to twelve months | 204 | 145 | (59 | ) | 284 | 225 | (59 | ) | ||||||||||||||||
Greater than twelve months | 1,044 | 609 | (435 | ) | 813 | 603 | (210 | ) | ||||||||||||||||
Total | $ | 3,010 | $ | 2,080 | $ | (930 | ) | $ | 3,165 | $ | 2,696 | $ | (469 | ) | ||||||||||
[1] | As of December 31, 2008, fixed maturities represented $14,310, or 98%, of the Company’s total unrealized loss of available-for-sale securities. The Company held no securities of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed discussion of the other-than-temporary impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting Estimates section of the Management’s Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements, both of which are included in The Hartford’s 2007 Form 10-K Annual Report. | |
[2] | Includes investments held in Corporate. | |
[3] | Represents available-for-sale (“AFS”) securities. | |
[4] | Represents below investment grade (“BIG”) securities. |
I-10
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
LIFE [1]
UNREALIZED LOSS AGING
LIFE [1]
December 31, 2008 | September 30, 2008 | |||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||
Cost | Value | Loss | Cost | Value | Loss | |||||||||||||||||||
Total AFS Securities | ||||||||||||||||||||||||
Three months or less | $ | 12,857 | $ | 11,776 | $ | (1,081 | ) | $ | 12,335 | $ | 11,639 | $ | (696 | ) | ||||||||||
Greater than three months to six months | 4,100 | 3,235 | (865 | ) | 5,119 | 4,678 | (441 | ) | ||||||||||||||||
Greater than six months to nine months | 5,292 | 4,356 | (936 | ) | 3,790 | 3,205 | (585 | ) | ||||||||||||||||
Greater than nine months to twelve months | 3,503 | 2,504 | (999 | ) | 4,185 | 3,324 | (861 | ) | ||||||||||||||||
Greater than twelve months | 18,034 | 11,149 | (6,885 | ) | 14,208 | 11,171 | (3,037 | ) | ||||||||||||||||
Total | $ | 43,786 | $ | 33,020 | $ | (10,766 | ) | $ | 39,637 | $ | 34,017 | $ | (5,620 | ) | ||||||||||
Securitized Assets | ||||||||||||||||||||||||
Three months or less | $ | 1,848 | $ | 1,614 | $ | (234 | ) | $ | 3,874 | $ | 3,624 | $ | (250 | ) | ||||||||||
Greater than three months to six months | 2,188 | 1,629 | (559 | ) | 1,342 | 1,162 | (180 | ) | ||||||||||||||||
Greater than six months to nine months | 1,063 | 732 | (331 | ) | 1,646 | 1,346 | (300 | ) | ||||||||||||||||
Greater than nine months to twelve months | 1,398 | 908 | (490 | ) | 2,986 | 2,286 | (700 | ) | ||||||||||||||||
Greater than twelve months | 11,890 | 6,727 | (5,163 | ) | 8,765 | 6,588 | (2,177 | ) | ||||||||||||||||
Total | $ | 18,387 | $ | 11,610 | $ | (6,777 | ) | $ | 18,613 | $ | 15,006 | $ | (3,607 | ) | ||||||||||
BIG and Equity AFS Securities | ||||||||||||||||||||||||
Three months or less | $ | 749 | $ | 564 | $ | (185 | ) | $ | 773 | $ | 695 | $ | (78 | ) | ||||||||||
Greater than three months to six months | 218 | 144 | (74 | ) | 256 | 217 | (39 | ) | ||||||||||||||||
Greater than six months to nine months | 238 | 164 | (74 | ) | 170 | 150 | (20 | ) | ||||||||||||||||
Greater than nine months to twelve months | 148 | 105 | (43 | ) | 145 | 107 | (38 | ) | ||||||||||||||||
Greater than twelve months | 757 | 413 | (344 | ) | 547 | 377 | (170 | ) | ||||||||||||||||
Total | $ | 2,110 | $ | 1,390 | $ | (720 | ) | $ | 1,891 | $ | 1,546 | $ | (345 | ) | ||||||||||
[1] | As of December 31, 2008, fixed maturities represented $10,538, or 98%, of Life’s total unrealized loss of available-for-sale securities. Life held no securities of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed discussion of the other-than-temporary impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting Estimates section of the Management’s Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements, both of which are included in The Hartford’s 2007 Form 10-K Annual Report. | |
I-11
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
PROPERTY & CASUALTY
UNREALIZED LOSS AGING
PROPERTY & CASUALTY
December 31, 2008 | September 30, 2008 | |||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||
Cost | Value | Loss | Cost | Value | Loss | |||||||||||||||||||
Total AFS Securities | ||||||||||||||||||||||||
Three months or less | $ | 3,541 | $ | 3,191 | $ | (350 | ) | $ | 7,021 | $ | 6,628 | $ | (393 | ) | ||||||||||
Greater than three months to six months | 2,396 | 1,980 | (416 | ) | 3,153 | 2,889 | (264 | ) | ||||||||||||||||
Greater than six months to nine months | 1,757 | 1,513 | (244 | ) | 2,099 | 1,833 | (266 | ) | ||||||||||||||||
Greater than nine months to twelve months | 2,953 | 2,451 | (502 | ) | 976 | 813 | (163 | ) | ||||||||||||||||
Greater than twelve months | 7,243 | 4,920 | (2,323 | ) | 6,486 | 5,389 | (1,097 | ) | ||||||||||||||||
Total | $ | 17,890 | $ | 14,055 | $ | (3,835 | ) | $ | 19,735 | $ | 17,552 | $ | (2,183 | ) | ||||||||||
Securitized Assets | ||||||||||||||||||||||||
Three months or less | $ | 294 | $ | 238 | $ | (56 | ) | $ | 1,644 | $ | 1,540 | $ | (104 | ) | ||||||||||
Greater than three months to six months | 864 | 627 | (237 | ) | 318 | 290 | (28 | ) | ||||||||||||||||
Greater than six months to nine months | 221 | 178 | (43 | ) | 408 | 353 | (55 | ) | ||||||||||||||||
Greater than nine months to twelve months | 449 | 281 | (168 | ) | 352 | 273 | (79 | ) | ||||||||||||||||
Greater than twelve months | 3,462 | 1,991 | (1,471 | ) | 3,142 | 2,519 | (623 | ) | ||||||||||||||||
Total | $ | 5,290 | $ | 3,315 | $ | (1,975 | ) | $ | 5,864 | $ | 4,975 | $ | (889 | ) | ||||||||||
BIG and Equity AFS Securities | ||||||||||||||||||||||||
Three months or less | $ | 330 | $ | 263 | $ | (67 | ) | $ | 633 | $ | 599 | $ | (34 | ) | ||||||||||
Greater than three months to six months | 52 | 38 | (14 | ) | 90 | 75 | (15 | ) | ||||||||||||||||
Greater than six months to nine months | 107 | 92 | (15 | ) | 85 | 76 | (9 | ) | ||||||||||||||||
Greater than nine months to twelve months | 53 | 38 | (15 | ) | 139 | 118 | (21 | ) | ||||||||||||||||
Greater than twelve months | 285 | 194 | (91 | ) | 264 | 224 | (40 | ) | ||||||||||||||||
Total | $ | 827 | $ | 625 | $ | (202 | ) | $ | 1,211 | $ | 1,092 | $ | (119 | ) | ||||||||||
[1] | As of December 31, 2008, fixed maturities represented $3,772, or 98%, of Property & Casualty’s total unrealized loss of available-for-sale securities. Property & Casualty held no securities of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed discussion of the other-than- temporary impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting Estimates section of the Management’s Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements, both of which are included in The Hartford’s 2007 Form 10-K Annual Report. | |
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF DECEMBER 31, 2008
INVESTED ASSET EXPOSURES
AS OF DECEMBER 31, 2008
LIFE | P&C | CONSOLIDATED [1] | ||||||||||||||||||||||||||||||||||||||
Percent of | Percent of | Percent of | ||||||||||||||||||||||||||||||||||||||
Cost or | Total | Cost or | Total | Cost or | Total | |||||||||||||||||||||||||||||||||||
TOP TEN EXPOSURES | Amortized | Fair | Invested | Amortized | Fair | Invested | Amortized | Fair | Invested | |||||||||||||||||||||||||||||||
BY SECTOR [3] | Cost | Value | Assets [2] | Cost | Value | Assets [2] | Cost | Value | Assets [2] | |||||||||||||||||||||||||||||||
Financial services | $ | 6,762 | $ | 5,683 | 9.0 | % | Financial services | $ | 2,509 | $ | 2,116 | 8.7 | % | Financial services | $ | 9,395 | $ | 7,923 | 8.8 | % | ||||||||||||||||||||
Utilities | 3,642 | 3,307 | 5.2 | % | Utilities | 1,386 | 1,226 | 5.1 | % | Utilities | 5,030 | 4,535 | 5.1 | % | ||||||||||||||||||||||||||
Technology and communications | 2,856 | 2,636 | 4.2 | % | Technology and communications | 915 | 803 | 3.3 | % | Technology and communications | 3,776 | 3,444 | 3.9 | % | ||||||||||||||||||||||||||
Consumer non cyclical | 2,627 | 2,488 | 3.9 | % | Consumer non cyclical | 802 | 749 | 3.1 | % | Consumer non cyclical | 3,437 | 3,245 | 3.6 | % | ||||||||||||||||||||||||||
Capital goods | 1,853 | 1,639 | 2.6 | % | Basic industry | 518 | 636 | 2.6 | % | Basic industry | 2,473 | 2,282 | 2.6 | % | ||||||||||||||||||||||||||
Basic industry | 1,872 | 1,570 | 2.5 | % | Capital goods | 624 | 548 | 2.3 | % | Capital goods | 2,481 | 2,191 | 2.5 | % | ||||||||||||||||||||||||||
Consumer cyclical | 1,840 | 1,567 | 2.5 | % | Consumer cyclical | 504 | 423 | 1.8 | % | Consumer cyclical | 2,353 | 1,999 | 2.2 | % | ||||||||||||||||||||||||||
Energy | 1,382 | 1,279 | 2.0 | % | Energy | 290 | 271 | 1.1 | % | Energy | 1,672 | 1,550 | 1.7 | % | ||||||||||||||||||||||||||
Other | 1,128 | 795 | 1.2 | % | Other | 360 | 249 | 1.0 | % | Other | 1,488 | 1,044 | 1.2 | % | ||||||||||||||||||||||||||
Transportation | 447 | 377 | 0.6 | % | Transportation | 61 | 49 | 0.2 | % | Transportation | 508 | 426 | 0.5 | % | ||||||||||||||||||||||||||
Total | $ | 24,409 | $ | 21,341 | 33.7 | % | Total | $ | 7,969 | $ | 7,070 | 29.2 | % | Total | $ | 32,613 | $ | 28,639 | 32.1 | % | ||||||||||||||||||||
TOP TEN EXPOSURES BY ISSUER [4] | ||||||||||||||||||||||||||||||||||||||||
Government of Japan | $ | 2,280 | $ | 2,330 | 3.6 | % | Government of Canada | $ | 280 | $ | 282 | 1.2 | % | Government of Japan | $ | 2,280 | $ | 2,330 | 2.6 | % | ||||||||||||||||||||
JPMorgan Chase & Co. | 376 | 300 | 0.5 | % | State of Georgia | 203 | 206 | 0.9 | % | Government of Canada | 448 | 450 | 0.5 | % | ||||||||||||||||||||||||||
General Electric Co. | 310 | 239 | 0.4 | % | Federal Republic of Germany | 211 | 205 | 0.8 | % | JPMorgan Chase & Co. | 522 | 438 | 0.5 | % | ||||||||||||||||||||||||||
Credit Suisse Group AG | 280 | 224 | 0.3 | % | State of California | 210 | 192 | 0.8 | % | State of California | 359 | 337 | 0.4 | % | ||||||||||||||||||||||||||
Citigroup Inc. | 250 | 197 | 0.3 | % | New York, NY | 183 | 179 | 0.7 | % | General Electric Co. | 426 | 326 | 0.3 | % | ||||||||||||||||||||||||||
Verizon Communications Inc. | 203 | 193 | 0.3 | % | Insurance Services Office, Inc. | — | 179 | 0.7 | % | State of Massachusetts | 268 | 278 | 0.3 | % | ||||||||||||||||||||||||||
Bank of America Corp. | 276 | 188 | 0.3 | % | Government of United Kingdom | 183 | 175 | 0.7 | % | AT&T Inc. | 258 | 257 | 0.3 | % | ||||||||||||||||||||||||||
AT&T Inc. | 191 | 188 | 0.3 | % | State of Massachusetts | 153 | 159 | 0.7 | % | Citigroup Inc. | 311 | 252 | 0.3 | % | ||||||||||||||||||||||||||
Diageo PLC | 189 | 184 | 0.3 | % | State of Louisiana | 142 | 142 | 0.6 | % | Bank of America Corp. | 344 | 250 | 0.3 | % | ||||||||||||||||||||||||||
Government of Canada | 168 | 168 | 0.3 | % | State of Illinois | 140 | 139 | 0.6 | % | Verizon Communications Inc. | 261 | 248 | 0.3 | % | ||||||||||||||||||||||||||
Total | $ | 4,523 | $ | 4,211 | 6.6 | % | Total | $ | 1,705 | $ | 1,858 | 7.7 | % | Total | $ | 5,477 | $ | 5,166 | 5.8 | % | ||||||||||||||||||||
[1] | Includes investments held in Corporate. | |
[2] | Excludes equity securities, held for trading. | |
[3] | Includes corporate fixed maturities and equity securities, available-for-sale. | |
[4] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions, and securities classified as trading securities. |
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