Delaware | 001-13958 | 13-3317783 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
The Hartford Financial Services Group, Inc. One Hartford Plaza Hartford, Connecticut |
06155 |
|
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | ||||
99.1 | Press Release of The Hartford Financial Services Group, Inc. dated November 2, 2011 |
|||
99.2 | Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the fiscal
quarter ended September 30, 2011 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
||||
Date: November 2, 2011 | By: | /s/ Beth A. Bombara | ||
Name: | Beth A. Bombara | |||
Title: | Senior Vice President and Controller | |||
| Third quarter core earnings* of $33 million or $0.05 per diluted share, including previously disclosed deferred acquisition cost (DAC) unlock and catastrophe losses |
| Net income of $0 million, or $(0.02) per diluted share, including DAC unlock charge of $516 million |
| Current accident year catastrophe losses of $134 million after tax |
| P&C Commercial written premiums increased 7% |
| Book value per diluted common share increased 11% to $46.72 compared with September 30, 2010 |
Three Months Ended | ||||||||||||
Sept. 30, | Sept. 30, | |||||||||||
($ in millions, except per share data) | 2011 | 2010 | Change | |||||||||
Net income |
$ | 0 | $ | 666 | (100 | %) | ||||||
Net income (loss) available to common shareholders
per diluted share |
$ | (0.02 | ) | $ | 1.34 | NM | ||||||
Core earnings |
$ | 33 | $ | 705 | (95 | %) | ||||||
Core earnings available to
common shareholders per diluted
share* |
$ | 0.05 | $ | 1.42 | (96 | %) | ||||||
Book value per diluted common share |
$ | 46.72 | $ | 42.11 | 11 | % | ||||||
Book value per diluted common share
(ex. accumulated other comprehensive income (AOCI))* |
$ | 44.54 | $ | 41.72 | 7 | % |
| A negative DAC unlock charge of $227 million after tax, included in core earnings. This charge includes the companys annual assumptions review and the impact of lower estimated future gross profits due to lower account values resulting from the decline in global equity market values. The DAC unlock charge reduced net income by $516 million after tax; |
| Current accident year catastrophe losses of $134 million after tax, or 8.3 points on the property and casualty combined ratio for P&C Commercial and Consumer Markets; |
| Reestimation of current accident year losses in Commercial Markets of $31 million after tax, or 3.0 points on the P&C Commercial combined ratio; |
| A $14 million after-tax charge related to assessments in connection with the liquidation of Executive Life Insurance Company of New York; and |
| Prior year reserve strengthening of $2 million after tax, including a $12 million after-tax charge due to environmental reserve strengthening resulting from the companys annual review of its legacy environmental liabilities. |
2
| P&C Commercial written premiums increased 7% from the third quarter of 2010, reflecting renewal written price increases, strong retention and increased exposures; |
| P&C Commercial combined ratio of 99.4% included 3.0 points for reestimation of current accident losses for the first half of 2011; and |
| Group Benefits loss ratio of 80.1% compared with 77.1% in the third quarter of 2010, reflecting less favorable life mortality and continued elevated disability claims incidence. |
Three Months Ended | ||||||||||||
P&C COMMERCIAL | Sept. 30, | Sept. 30, | ||||||||||
($ in millions) | 2011 | 2010 | Change | |||||||||
Written premiums |
$ | 1,551 | $ | 1,447 | 7 | % | ||||||
Combined ratio1 |
99.4 | % | 92.2 | % | (7.2 | ) |
[1] | Excludes catastrophes and prior year development* |
Three Months Ended | ||||||||||||
GROUP BENEFITS | Sept. 30, | Sept. 30, | ||||||||||
($ in millions) | 2011 | 2010 | Change | |||||||||
Fully insured premiums2 |
$ | 1,000 | $ | 1,043 | (4 | %) | ||||||
Loss ratio2 |
80.1 | % | 77.1 | % | 3.0 |
[2] | Excludes buyout premiums |
3
| New business premiums increased by 8% in auto as a result of improved direct marketing responses and policy conversions in AARP; |
| Policy retention for auto improved 1 point to 83%, reflecting moderating renewal written price increases of 4% in the third quarter of 2011 compared with 8% in the third quarter of 2010; and |
| Announced new affinity partnership with the National Wildlife Federation, an organization with over 4 million members, partners and supporters, resulting in a marketing base of more than 10 million new affinity members generated over the past twelve months. |
Three Months Ended | ||||||||||||
CONSUMER MARKETS | Sept. 30, | Sept. 30, | ||||||||||
($ in millions) | 2011 | 2010 | Change | |||||||||
Written premiums |
$ | 964 | $ | 1,014 | (5 | %) | ||||||
Combined ratio1 |
95.6 | % | 93.3 | % | (2.3 | ) |
[1] | Excludes catastrophes and prior year development* |
4
| Individual Life sales increased 9% in the third quarter of 2011 and 12% in the first nine months of 2011 compared with the third quarter and nine months of 2010, respectively, due to expanded distribution channels; |
| Retirement Plans deposits rose 22% in the quarter and 13% year-to-date compared with the third quarter of 2010 reflecting stronger 401(k) flows; and |
| Assets under management were $277.7 billion as of September 30, 2011, 7% lower than in the third quarter of 2010, reflecting net outflows in Global Annuity and Mutual Funds, as well as the impact of the decline in global equity market levels on assets under management during the quarter. |
WEALTH MANAGEMENT | Sept. 30, | Sept. 30, | ||||||||||
($ in billions) | 2011 | 2010 | Change | |||||||||
Assets Under Management as of: |
||||||||||||
Global Annuity |
$ | 132.9 | $ | 149.1 | (11 | %) | ||||||
Non-Proprietary Mutual Funds |
47.3 | 51.7 | (9 | %) | ||||||||
Retirement Plans |
49.7 | 49.3 | 1 | % | ||||||||
Life Insurance |
47.8 | 47.3 | 1 | % | ||||||||
Total |
$ | 277.7 | $ | 297.4 | (7 | %) | ||||||
5
| Net investment income, excluding trading securities, decreased 1% in the third quarter of 2011 compared with the third quarter of 2010; |
| Net impairment losses totaled $60 million before tax; and |
| Net unrealized gains after tax were $1.6 billion as of September 30, 2011. |
6
Media Contact:
|
Investor Contact: | |
Dave Snowden
|
Sabra Purtill | |
860-547-3397
|
860-547-8691 | |
david.snowden@thehartford.com
|
sabra.purtill@thehartford.com | |
Ryan Greenier | ||
860-547-8844 | ||
ryan.greenier@thehartford.com |
7
Commercial | Consumer | Wealth | Corporate & | |||||||||||||||||
Markets | Markets | Management | Other | Consolidated | ||||||||||||||||
Earned premiums |
$ | 2,553 | $ | 930 | $ | 35 | $ | | $ | 3,518 | ||||||||||
Fee income |
16 | | 1,121 | 55 | 1,192 | |||||||||||||||
Net investment income (loss) |
||||||||||||||||||||
Securities available-for-sale and other |
319 | 46 | 659 | 38 | 1,062 | |||||||||||||||
Equity securities held for trading [1] |
| | (1,890 | ) | | (1,890 | ) | |||||||||||||
Total net investment income (loss) |
319 | 46 | (1,231 | ) | 38 | (828 | ) | |||||||||||||
Other revenues |
28 | 35 | | | 63 | |||||||||||||||
Net realized capital gains (losses) |
(45 | ) | (10 | ) | 686 | (56 | ) | 635 | ||||||||||||
Total revenues |
2,871 | 1,001 | 611 | 37 | 4,520 | |||||||||||||||
Benefits, losses, and loss adjustment expenses |
1,983 | 767 | 1,241 | 15 | 4,006 | |||||||||||||||
Benefits, losses, and loss adjustment expenses returns credited on
International variable annuities [1] |
| | (1,889 | ) | | (1,889 | ) | |||||||||||||
Amortization of deferred policy acquisition costs |
354 | 159 | 807 | | 1,320 | |||||||||||||||
Insurance operating costs and other expenses |
451 | 106 | 440 | 62 | 1,059 | |||||||||||||||
Interest expense |
| | | 128 | 128 | |||||||||||||||
Total benefits and expenses |
2,788 | 1,032 | 599 | 205 | 4,624 | |||||||||||||||
Income (loss) from continuing operations before income taxes |
83 | (31 | ) | 12 | (168 | ) | (104 | ) | ||||||||||||
Income tax expense (benefit) |
4 | (15 | ) | (26 | ) | (64 | ) | (101 | ) | |||||||||||
Income (loss) from continuing operations |
79 | (16 | ) | 38 | (104 | ) | (3 | ) | ||||||||||||
Income(loss) from discontinued operations, net of tax |
(2 | ) | | | 5 | 3 | ||||||||||||||
Net income (loss) |
77 | (16 | ) | 38 | (99 | ) | | |||||||||||||
Less: Income (loss )from discontinued operations, net of tax |
(2 | ) | | | 5 | 3 | ||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
(27 | ) | (6 | ) | 27 | (30 | ) | (36 | ) | |||||||||||
Core earnings (loss) |
$ | 106 | $ | (10 | ) | $ | 11 | $ | (74 | ) | $ | 33 | ||||||||
Commercial | Consumer | Wealth | Corporate & | |||||||||||||||||
Markets | Markets | Management | Other | Consolidated | ||||||||||||||||
Earned premiums |
$ | 2,482 | $ | 985 | $ | 45 | $ | 1 | $ | 3,513 | ||||||||||
Fee income |
15 | | 1,103 | 46 | 1,164 | |||||||||||||||
Net investment income |
||||||||||||||||||||
Securities available-for-sale and other |
333 | 46 | 649 | 45 | 1,073 | |||||||||||||||
Equity securities held for trading [1] |
| | 1,043 | | 1,043 | |||||||||||||||
Total net investment income |
333 | 46 | 1,692 | 45 | 2,116 | |||||||||||||||
Other revenues |
26 | 40 | | | 66 | |||||||||||||||
Net realized capital gains (losses) |
4 | 1 | (309 | ) | 47 | (257 | ) | |||||||||||||
Total revenues |
2,860 | 1,072 | 2,531 | 139 | 6,602 | |||||||||||||||
Benefits, losses, and loss adjustment expenses |
1,599 | 689 | 685 | 64 | 3,037 | |||||||||||||||
Benefits, losses, and loss adjustment expenses
returns credited on International variable annuities
[1] |
| | 1,043 | | 1,043 | |||||||||||||||
Amortization of deferred policy acquisition costs |
353 | 167 | (89 | ) | | 431 | ||||||||||||||
Insurance operating costs and other expenses |
427 | 118 | 442 | 59 | 1,046 | |||||||||||||||
Interest expense |
| | | 128 | 128 | |||||||||||||||
Total benefits and expenses |
2,379 | 974 | 2,081 | 251 | 5,685 | |||||||||||||||
Income (loss) from continuing operations before
income taxes |
481 | 98 | 450 | (112 | ) | 917 | ||||||||||||||
Income tax expense (benefit) |
136 | 28 | 127 | (39 | ) | 252 | ||||||||||||||
Income (loss) from continuing operations |
345 | 70 | 323 | (73 | ) | 665 | ||||||||||||||
Income (loss) from discontinued operations, net of tax |
7 | | (3 | ) | (3 | ) | 1 | |||||||||||||
Net income (loss) |
352 | 70 | 320 | (76 | ) | 666 | ||||||||||||||
Less: Income (loss) from discontinued operations,
net of tax |
7 | | (3 | ) | (3 | ) | 1 | |||||||||||||
Less: Net realized gains (losses), net of tax and
DAC, excluded from core earnings |
7 | 1 | (79 | ) | 31 | (40 | ) | |||||||||||||
Core earnings (loss) |
$ | 338 | $ | 69 | $ | 402 | $ | (104 | ) | $ | 705 | |||||||||
[1] | Includes investment income and mark-to-market effects of equity securities, 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. |
8
THREE MONTHS ENDED | ||||||||||||
Sept. 30, | Sept. 30, | |||||||||||
2011 | 2010 | Change | ||||||||||
Property & Casualty Commercial |
$ | 86 | $ | 294 | (71 | %) | ||||||
Group Benefits |
20 | 44 | (55 | %) | ||||||||
Commercial Markets core earnings |
106 | 338 | (69 | %) | ||||||||
Consumer Markets core earnings (losses) |
(10 | ) | 69 | NM | ||||||||
Global Annuity |
146 | 146 | | |||||||||
Life Insurance |
56 | 57 | (2 | %) | ||||||||
Retirement Plans |
12 | 10 | 20 | % | ||||||||
Mutual Funds |
24 | 20 | 20 | % | ||||||||
Wealth Management core earnings,
Excluding DAC unlock |
238 | 233 | 2 | % | ||||||||
DAC unlock |
(227 | ) | 169 | NM | ||||||||
Wealth Management core earnings |
11 | 402 | (97 | %) | ||||||||
Corporate and Other core losses |
(74 | ) | (104 | ) | 29 | % | ||||||
Core earnings |
33 | 705 | (95 | %) | ||||||||
Add: Net realized capital losses, net
of Tax and DAC, excluded from core
earnings |
(36 | ) | (40 | ) | 10 | % | ||||||
Add: Income from discontinued operations |
3 | 1 | NM | |||||||||
Net Income |
$ | | $ | 666 | (100 | %) | ||||||
PER DILUTED COMMON SHARE DATA: |
||||||||||||
Core earnings |
$ | 0.05 | $ | 1.42 | (96 | %) | ||||||
Add: Net realized capital losses, net
of tax and DAC, excluded from core
earnings |
(0.08 | ) | (0.08 | ) | | |||||||
Add: Income from discontinued operations |
0.01 | | 100 | % | ||||||||
Net income (loss) available to common
shareholders |
$ | (0.02 | ) | $ | 1.34 | NM | ||||||
[1] | NM: The Hartford defines increases or decreases greater than or equity to 200% or changes from a net gain to a net loss position, or vice versa, as NM or not meaningful. |
9
Commercial Markets | ||
P&C Commercial |
||
Combined Ratio1 |
95.5% 96.5%* | |
Written Premium Growth |
5.0% 8.0% | |
Group Benefits |
||
Loss Ratio |
76.0% 79.0% | |
Fully Insured Ongoing Premiums2 |
$3.9 $4.1 Billion |
[1] | Excludes catastrophes and prior year development | |
[2] | Guidance for fully insured ongoing premiums excludes buyout premiums and premium equivalents |
Consumer Markets | ||
Consumer Markets |
||
Combined Ratio3 |
89.0% 92.0% | |
Written Premium Growth |
(5.5%) (2.5%) |
[3] | Excludes catastrophes and prior year development |
Wealth Management | ||||||
Deposits | Net Flows | Core Earnings ROA4 | ||||
Global Annuity |
| | 45 50 bps* | |||
U.S. Fixed and Variable Annuity |
$1.0 $1.5 Billion* | ($13.0) ($12.0) Billion* | | |||
Retirement Plans |
$9.5 $10.0 Billion* | $1.0 $1.5 Billion* | 10 12 bps* | |||
Mutual Funds5 |
$15.0 $17.0 Billion* | $(5.0) $(3.0) Billion* | 9 11 bps* | |||
Life Insurance |
||||||
Sales |
$210 $260 Million | |||||
After-tax Margin, excl. DAC
Unlocks6 |
12.0% 15.0% |
[4] | ROA outlooks exclude impact of DAC unlocks | |
[5] | Mutual Fund Deposits and Net Flows guidance excludes proprietary mutual funds | |
[6] | Guidance on after-tax margin is core earnings divided by total core revenue |
*Reflects updated guidance metric
10
THREE MONTHS ENDED | ||||||||||||
Sept. 30, | Sept. 30, | |||||||||||
2011 | 2010 | Change | ||||||||||
Shareholders equity per
diluted common share, including
AOCI |
$ | 46.72 | $ | 42.11 | 11 | % | ||||||
Less: Per share impact of AOCI |
2.18 | 0.39 | NM | |||||||||
Book value per diluted common
share, excluding AOCI |
$ | 44.54 | $ | 41.72 | 7 | % | ||||||
11
THREE MONTHS | ||||||||
ENDED | ||||||||
Sept. 30, 2011 | Sept. 30, 2010 | |||||||
P&C Commercial |
||||||||
Combined ratio |
104.8 | % | 84.9 | % | ||||
Less: Prior year reserve development |
(0.6 | ) | (8.2 | ) | ||||
Less: Current year catastrophe losses |
6.0 | 0.9 | ||||||
Combined ratio before prior year development & catastrophes |
99.4 | % | 92.2 | % | ||||
Consumer Markets |
||||||||
Combined ratio |
106.8 | % | 94.1 | % | ||||
Less: Prior year reserve development |
(1.0 | ) | (3.5 | ) | ||||
Less: Current year catastrophe losses |
12.2 | 4.3 | ||||||
Combined ratio before prior year development & catastrophes |
95.6 | % | 93.3 | % |
12
13
THREE MONTHS ENDED | ||||||||
Sept. 30, | Sept. 30, | |||||||
2011 | 2010 | |||||||
($ in millions) | ||||||||
P&C Commercial |
||||||||
Net income |
$ | 52 | $ | 306 | ||||
Less: Income (loss) from discontinued operations, after tax |
(2 | ) | 7 | |||||
Less: Net realized capital gains (Losses) after tax |
(32 | ) | 5 | |||||
Less: Income tax expense |
(19 | ) | (121 | ) | ||||
Less: Other expenses |
(37 | ) | (29 | ) | ||||
Less: Net investment income |
217 | 226 | ||||||
Underwriting results |
$ | (75 | ) | $ | 218 | |||
Consumer Markets |
||||||||
Net income (loss) |
$ | (16 | ) | $ | 70 | |||
Less: Net realized capital gains (losses) after tax |
(6 | ) | 1 | |||||
Less: Income tax benefit (expense) |
11 | (28 | ) | |||||
Less: Other expenses |
(4 | ) | (7 | ) | ||||
Less: Net investment income |
46 | 46 | ||||||
Underwriting results |
$ | (63 | ) | $ | 58 |
14
15
16
A.M. Best | Fitch | Standard & Poors | Moodys | |||||
Insurance Financial Strength Ratings: |
||||||||
Hartford Fire Insurance Company |
A | A+ | A | A2 | ||||
Hartford Life Insurance Company |
A | A- | A | A3 | ||||
Hartford Life and Accident Insurance Company |
A | A- | A | A3 | ||||
Hartford Life and Annuity Insurance Company |
A | A- | A | A3 | ||||
Other Ratings: |
||||||||
The Hartford Financial Services Group, Inc.: |
||||||||
Senior debt |
bbb+ | BBB- | BBB | Baa3 | ||||
Commercial paper |
AMB-2 | F2 | A-2 | P-3 |
Basis of Presentation |
i, ii, iii | |||
CONSOLIDATED |
||||
Consolidated Financial Results |
1 | |||
Operating Results by Segment |
2 | |||
Consolidated Statements of Operations |
3 | |||
Consolidating Balance Sheets |
4 | |||
Capital Structure |
5 | |||
Statutory Surplus to GAAP Stockholders Equity Reconciliation |
6 | |||
Accumulated Other Comprehensive Loss |
7 | |||
Computation of Basic and Diluted Earnings (Losses) Per Common Share |
8 | |||
Analysis of Net Realized Capital Gains (Losses) After-tax and DAC |
9 | |||
Computation of Return-on-Equity Measures |
10 | |||
Components of Net Realized Capital Gains (Losses) After-tax and DAC
and Excluded From Core Earnings |
||||
Three Months Ended September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011 |
11 | |||
Nine Months Ended September 30, 2010 and 2011 |
12 | |||
COMMERCIAL MARKETS |
||||
Income Statements |
13 | |||
Property & Casualty Commercial |
||||
Operating Results |
14 | |||
Underwriting Results |
15 | |||
Group Benefits |
||||
Income Statements |
16 | |||
Supplemental Data |
17 | |||
CONSUMER MARKETS |
||||
Income Statements |
18 | |||
Operating Results |
19 | |||
Underwriting Results |
20 | |||
Written and Earned Premiums |
21 | |||
WEALTH MANAGEMENT |
||||
Operating Results |
22 | |||
Financial Highlights Excluding Impacts of DAC Unlocks |
23 | |||
Deferred Policy Acquisition Costs and Present Value of Future Profits |
24 | |||
Supplemental Data- Annuity Death and Income Benefits |
25 | |||
Global Annuity |
||||
Income Statements |
26 | |||
Supplemental Data |
||||
U.S.-Account Value Rollforward |
27 | |||
International-Account Value Rollforward |
28 | |||
Other-Account Value and Asset Rollforward |
29 | |||
Life Insurance |
||||
Income Statements |
30 | |||
Supplemental Data Individual Life |
31 | |||
Account Value Rollforward Individual Life |
32 | |||
Account Value and Account Value Rollforward-Private Placement Life Insurance |
33 | |||
Retirement Plans |
||||
Income Statements |
34 | |||
Supplemental Data |
||||
Assets Under Management |
35 | |||
Account Value and Asset Rollforward |
36 | |||
Mutual Funds |
||||
Income Statements |
37 | |||
Supplemental Data |
||||
Deposits and Assets Under Management |
38 | |||
Asset Rollforward |
39 | |||
CORPORATE AND OTHER |
||||
Income Statements |
40 | |||
Other Operations |
||||
Operating Results |
41 | |||
INVESTMENTS |
||||
Investment Earnings Before-tax |
42 | |||
Composition of Invested Assets |
||||
Consolidated |
43 | |||
Life |
44 | |||
Property & Casualty |
45 | |||
Unrealized Loss Aging |
46 | |||
Invested Asset Exposures |
||||
As of September 30, 2011 |
47 |
| All amounts are in millions, except for per share and ratio information unless
otherwise stated. |
| The Hartford Financial Services Group, Inc. (The Hartford or the Company) is
organized into three customer-oriented divisions, Commercial Markets, Consumer Markets and
Wealth Management, conducting business principally in seven reporting segments. |
| The Commercial Markets division consists of the reporting segments of Property
& Casualty Commercial and Group Benefits. Property & Casualty Commercial provides
workers compensation, property, automobile, liability and umbrella coverages, primarily
throughout the United States (U.S.), along with a variety of customized insurance
products and risk management services including professional liability, fidelity, surety,
specialty casualty coverages and third-party administrator services. |
| Group Benefits provides employers, associations, affinity groups and financial
institutions with group life, accident and disability coverage, along with other products
and services, including voluntary benefits and group retiree health. |
| Consumer Markets provides standard automobile, homeowners and home-based
business coverages to individuals across the U.S., including a special program designed
exclusively for members of AARP. Consumer Markets also operates a member contact center
for health insurance products offered through the AARP Health program. |
| The Wealth Management division includes the reporting segments of Global Annuity, Life
Insurance, Retirement Plans and Mutual Funds. Global Annuity offers individual variable,
fixed market value adjusted, and single premium immediate annuities in the U.S. and
administers investments, retirement savings and other insurance and savings products to
individuals and groups outside of the U.S., primarily in Japan and Europe. Life insurance
sells a variety of life insurance products, including variable universal life, universal
life, and term life, as well as variable private placement life insurance owned by
corporations and high net worth individuals. Retirement Plans provides products and
services to corporations pursuant to Section 401(k)of the Internal Revenue Code of 1986,
as amended (IRS code) and products and services to municipalities and not-for-profit
organizations under Sections 457 and 403(b) of the IRS code. Mutual Funds offers retail,
proprietary and investment-only mutual funds and 529 college savings plans. |
| The Hartford includes in Corporate and Other the Companys debt financing and related
interest expense, as well as other capital raising activities, certain property and
casualty insurance operations of The Hartford that have discontinued writing new business
and includes substantially all of the Companys asbestos and environmental exposures and
certain purchase accounting adjustments and other charges not allocated to the segments. |
| The balance sheet and certain balance sheet measures incorporated herein are presented
in the statutory legal entity views for Life and Property & Casualty. Life consists of
the Wealth Management division, Group Benefits and an Other category. Property & Casualty
consists of the of Property & Casualty Commercial, Other Operations and the Consumer
Markets Division. Corporate primarily includes the Companys debt financing and related
interest expense, as well as other capital raising, banking operations and certain
purchase accounting adjustment activities. |
| Certain operating and statistical measures have been incorporated herein to provide
supplemental data that indicate current trends in The Hartfords 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 segments 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, other than temporary impairment
losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign
currency translation adjustments and pension and other postretirement adjustments. |
| 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 funds
assets are not included on the balance sheet. |
| Return on assets (ROA) is calculated using annualized earnings divided by a
two-point average of assets under management. |
| Assets under management (AUM) is a measure used by the Company because a significant
portion of the Companys 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 capital markets or through net flow. |
| Assets under administration (AUA) represents the client asset base of the Companys
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 Companys
revenues. |
| Yields are calculated using annualized net investment income (excluding income related
to equity securities, trading) divided by the monthly average invested assets at cost,
amortized cost, or adjusted carrying value, as applicable, excluding equity securities,
trading, and consolidated variable interest entity non-controlling interests. |
| 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 uses non-GAAP and other financial measures in this Investor Financial
Supplement to assist investors in analyzing the Companys operating performance for the
periods presented herein. Because The Hartfords calculation of these measures may
differ from similar measures used by other companies, investors should be careful when
comparing The Hartfords 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 Companys operating performance. The Hartford believes that the measure core
earnings provides investors with a valuable measure of the performance of the Companys
ongoing businesses because it reveals trends in our insurance and financial services
businesses that may be obscured by including the net effect of certain realized capital
gains and losses and discontinued operations. 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 the Companys 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 the Companys business. Therefore, The Hartford
believes that it is useful for investors to evaluate both net income and core earnings
when reviewing the Companys performance. A reconciliation of net income to core
earnings for the periods presented herein is set forth on page 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 Companys 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 the Companys 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 8. |
| Written premiums is a statutory accounting financial measure used by The Hartford as
an important indicator of the operating performance of the Companys Property & Casualty
Commercial and Consumer Markets 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 Hartfords 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 Property & Casualty Commercial
and Consumer Markets is set forth at pages 14 and 19, respectively. |
| The Hartfords management evaluates profitability of the Property & Casualty
Commercial and Consumer Markets 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 Hartfords pricing. Underwriting
profitability over time is also greatly influenced by The Hartfords 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
Companys investing activities. A reconciliation of underwriting results to net income
for Property & Casualty Commercial and Consumer Markets is set forth at pages 14 and 19,
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. |
| ROA, excluding net realized gains (losses), net of tax and DAC, excluded from core
earnings, and excluding discontinued operations, is a non-GAAP financial measure that the
Company uses to evaluate, and believes is an important measure of, segment operating
performance. ROA is the most directly comparable U.S. GAAP measure. The Hartford
believes that the measure ROA, excluding net realized gains (losses), net of tax and DAC,
excluded from core earnings, and excluding discontinued operations, provides investors
with a valuable measure of the performance of the Companys on-going businesses because
it reveals trends in our businesses that may be obscured by the effect of including net
realized gains (losses), net of tax and DAC, excluded from core earnings, and the effect
of including discontinued operations. 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 insurance aspects of our businesse that some
realized capital gains and losses are integrally related to our insurance operations, so
ROA, excluding net realized gains (losses), net of tax and DAC, excluded from core
earnings, and excluding discontinued operations, should include net realized gains and
losses on 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
statement of operations such as net investment income. ROA, excluding net realized gains
(losses), net of tax and DAC, excluded from core earnings, and excluding discontinued
operations, should not be considered as a substitute for ROA and does not reflect the
overall profitability of our businesses. Therefore, the Company believes it is important
for investors to evaluate both ROA, excluding net realized gains (losses), net of tax and
DAC, excluded from core earnings, and excluding discontinued operations, and ROA when
reviewing the Companys performance. A quantitative reconciliation of The
Hartfords ROA, excluding net realized gains (losses), net of tax and DAC, excluded
from core earnings, and excluding discontinued operations, to ROA is not calculable on a
forward-looking basis because it is not possible to provide a reliable forecast of
realized capital gains and losses, which typically vary substantially from period
to period. |
ii
| After-tax margin, excluding net realized gains (losses), net of tax and DAC,
excluded from core earnings, is a non-GAAP financial measure that the Company uses to
evaluate, and believes is an important measure of, segment operating performance.
After-tax margin is the most directly comparable U.S. GAAP measure. The Hartford
believes that the measure after-tax margin, excluding net realized gains (losses), net of
tax and DAC, excluded from core earnings, provides investors with a valuable measure of
the performance of the Companys on-going businesses because it reveals trends in our
businesses that may be obscured by the effect of including certain realized gains
(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 insurance aspects of our businesses. Accordingly, these non-GAAP measures
exclude the effect of all realized gains and losses 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 after-tax margin, excluding net realized gains (losses), net of tax and
DAC, excluded from core earnings, should include net realized gains and losses on net
periodic settlements on credit derivatives. These net realized gains and losses are
directly related to an offsetting item included in the statement of operations such as
net investment income. After-tax margin, excluding net realized gains (losses), net of
tax and DAC, excluded from core earnings, should not be considered as a substitute for
after-tax margin and does not reflect the overall profitability of our businesses.
Therefore, the Company believes it is important for investors to evaluate both after-tax
margin, excluding net realized gains (losses), net of tax and DAC, excluded from core
earnings, and after-tax margin when reviewing the Companys
performance. A quantitative reconciliation of The Hartfords after-tax margin,
excluding net realized gains (losses), net of tax and DAC, excluded from core
earnings to after-tax margin is not calculable on a forward-looking basis because
it is not possible to provide a reliable forecast of realized capital gains and losses,
which typically vary substantially from period to period. |
| Book value per common share excluding AOCI is calculated based upon a non-GAAP
financial measure. It is calculated by dividing (a) common stockholders equity,
excluding AOCI, net of tax, by (b) common shares outstanding. The Hartford provides book
value per common share excluding AOCI to enable investors to analyze the amount of the
Companys net worth that is primarily attributable to the Companys business operations.
The Hartford believes book value per common 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 common share is
the most directly comparable GAAP measure. A reconciliation of book value per common
share to book value per common share, excluding AOCI, for the periods presented herein is
set forth at page 1. |
| Book value per diluted share, excluding AOCI, is calculated based upon a non-GAAP
financial measure. It is calculated by dividing (a) total stockholders equity,
excluding AOCI, net of tax, by (b) common shares outstanding and dilutive potential
common shares. The Hartford provides book value per diluted share excluding AOCI to
enable investors to analyze the amount of the Companys net worth that is primarily
attributable to the Companys business operations. The Hartford believes book value per
diluted 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 diluted share is the most directly comparable GAAP
measure. A reconciliation of book value per diluted share to book value per diluted
share, excluding AOCI, for the periods presented herein is set forth at page 1. |
| The Hartford provides different measures of the return on common equity (ROE) of the
Company. ROE (core earnings last twelve months to common equity, excluding AOCI), is
calculated based on non-GAAP financial measures. ROE (core earnings last twelve months
to common equity, excluding AOCI) is calculated by dividing (a) core earnings for the
prior four fiscal quarters by (b) average common stockholders equity, excluding AOCI.
When calculating ROE, the Mandatory Convertible preferred stock (MCP) is included in
average common stockholders equity and MCP dividends are added back to net income (loss)
available to common shareholders and core earnings (losses) available to common
shareholders. 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 Companys net worth that is primarily
attributable to the Companys business operations. ROE (net income last twelve months to
common 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 common equity, including AOCI) is set forth at
page 10. |
iii
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
HIGHLIGHTS |
||||||||||||||||||||||||||||||||||||||||
Net income |
$ | 666 | $ | 619 | $ | 511 | $ | 24 | $ | | (100 | %) | (100 | %) | $ | 1,061 | $ | 535 | (50 | %) | ||||||||||||||||||||
Core earnings |
$ | 705 | $ | 529 | $ | 586 | $ | 12 | $ | 33 | (95 | %) | 175 | % | $ | 1,443 | $ | 631 | (56 | %) | ||||||||||||||||||||
Total revenues [1] |
$ | 6,602 | $ | 5,930 | $ | 6,300 | $ | 5,401 | $ | 4,520 | (32 | %) | (16 | %) | $ | 16,119 | $ | 16,221 | 1 | % | ||||||||||||||||||||
Total assets |
$ | 313,926 | $ | 318,346 | $ | 322,538 | $ | 317,469 | $ | 305,598 | (3 | %) | (4 | %) | ||||||||||||||||||||||||||
PER SHARE AND SHARES DATA [2] |
||||||||||||||||||||||||||||||||||||||||
Basic earnings (losses) per common share |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.48 | $ | 1.37 | $ | 1.13 | $ | 0.03 | $ | (0.02 | ) | NM | NM | $ | 1.30 | $ | 1.13 | (13 | %) | |||||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.56 | $ | 1.17 | $ | 1.30 | $ | 0.00 | $ | 0.05 | (97 | %) | NM | $ | 2.20 | $ | 1.35 | (39 | %) | |||||||||||||||||||||
Diluted earnings (losses) per common share |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.34 | $ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | NM | NM | $ | 1.21 | $ | 1.05 | (13 | %) | |||||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.42 | $ | 1.06 | $ | 1.15 | $ | 0.00 | $ | 0.05 | (96 | %) | NM | $ | 2.02 | $ | 1.25 | (38 | %) | |||||||||||||||||||||
Weighted average common shares outstanding (basic) |
444.1 | 444.3 | 444.6 | 445.1 | 445.3 | 1.2 | sh | 0.2 | sh | 427.2 | 445.0 | 17.8 | sh | |||||||||||||||||||||||||||
Weighted average common shares outstanding
and dilutive potential common shares (diluted) |
495.3 | 497.8 | 508.2 | 482.4 | 473.4 | (21.9 | )sh | (9.0 | )sh | 461.1 | 481.0 | 19.9 | sh | |||||||||||||||||||||||||||
Common shares outstanding |
444.4 | 444.5 | 445.1 | 445.3 | 445.5 | 1.1 | sh | 0.2 | sh | 444.4 | 445.5 | 1.1 | sh | |||||||||||||||||||||||||||
Book value per common share |
$ | 45.80 | $ | 44.44 | $ | 45.93 | $ | 47.43 | $ | 49.89 | 9 | % | 5 | % | ||||||||||||||||||||||||||
Per common share impact of AOCI |
$ | 0.44 | $ | (2.26 | ) | $ | (1.72 | ) | $ | (0.17 | ) | $ | 2.39 | NM | NM | |||||||||||||||||||||||||
Book value per common share (excluding AOCI) |
$ | 45.36 | $ | 46.70 | $ | 47.65 | $ | 47.60 | $ | 47.50 | 5 | % | | |||||||||||||||||||||||||||
Book value per diluted share |
$ | 42.11 | $ | 40.40 | $ | 41.57 | $ | 43.11 | $ | 46.72 | 11 | % | 8 | % | ||||||||||||||||||||||||||
Per diluted share impact of AOCI |
$ | 0.39 | $ | (2.00 | ) | $ | (1.52 | ) | $ | (0.15 | ) | $ | 2.18 | NM | NM | |||||||||||||||||||||||||
Book value per diluted share (excluding AOCI) |
$ | 41.72 | $ | 42.40 | $ | 43.09 | $ | 43.26 | $ | 44.54 | 7 | % | 3 | % | ||||||||||||||||||||||||||
Common shares outstanding and dilutive potential common shares |
496.5 | 502.7 | 505.1 | 502.8 | 487.6 | (8.9 | )sh | (15.2 | )sh | |||||||||||||||||||||||||||||||
FINANCIAL RATIOS |
||||||||||||||||||||||||||||||||||||||||
ROE (net income last 12 months to common stockholder equity including AOCI) [3] |
6.1 | % | 6.8 | % | 9.6 | % | 9.0 | % | 5.3 | % | (0.8 | ) | (3.7 | ) | ||||||||||||||||||||||||||
ROE (core earnings last 12 months to common stockholder equity excluding AOCI) [3] |
8.3 | % | 7.5 | % | 9.6 | % | 8.7 | % | 5.5 | % | (2.8 | ) | (3.2 | ) | ||||||||||||||||||||||||||
Debt to capitalization, including AOCI |
24.0 | % | 24.5 | % | 23.9 | % | 23.4 | % | 22.5 | % | (1.5 | ) | (0.9 | ) | ||||||||||||||||||||||||||
Annualized investment yield, after-tax |
3.1 | % | 3.1 | % | 3.2 | % | 3.1 | % | 2.9 | % | (0.2 | ) | (0.2 | ) | 3.1 | % | 3.1 | % | |
[1] | Total revenues of The Hartford are impacted by net investment income and mark-to-market
effects of equity securities, trading, supporting the international variable annuity business,
which have corresponding amounts credited to policyholders within benefits, losses and loss
adjustment expenses. See page 3 for the
impact to total revenues along with the corresponding amounts in benefits, losses and loss
adjustment expenses in the three months ended September 30, 2010, December 31, 2010, March 31,
2011, June 30, 2011 and September 30, 2011, respectively. |
|
[2] | See page 8 for computation of basic and diluted earnings (losses) per common share. |
|
[3] | See page 10 for a computation of ROE measures. |
1
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Property & Casualty Commercial |
$ | 294 | $ | 201 | $ | 181 | $ | 99 | $ | 86 | (71 | %) | (13 | %) | $ | 790 | $ | 366 | (54 | %) | ||||||||||||||||||||
Group Benefits |
44 | 30 | 19 | 30 | 20 | (55 | %) | (33 | %) | 128 | 69 | (46 | %) | |||||||||||||||||||||||||||
Commercial Markets core earnings |
338 | 231 | 200 | 129 | 106 | (69 | %) | (18 | %) | 918 | 435 | (53 | %) | |||||||||||||||||||||||||||
Consumer Markets core earnings (losses) |
69 | 28 | 113 | (179 | ) | (10 | ) | NM | 94 | % | 117 | (76 | ) | NM | ||||||||||||||||||||||||||
Global Annuity [1] |
262 | 238 | 228 | 209 | 22 | (92 | %) | (89 | %) | 462 | 459 | -1 | % | |||||||||||||||||||||||||||
Life Insurance [1] |
85 | 50 | 53 | 60 | (9 | ) | NM | NM | 193 | 104 | (46 | %) | ||||||||||||||||||||||||||||
Retirement Plans [1] |
35 | 14 | 21 | 16 | (26 | ) | NM | NM | 56 | 11 | -80 | % | ||||||||||||||||||||||||||||
Mutual Funds |
20 | 24 | 27 | 27 | 24 | 20 | % | (11 | %) | 70 | 78 | 11 | % | |||||||||||||||||||||||||||
Wealth Management core earnings [1] |
402 | 326 | 329 | 312 | 11 | (97 | %) | (96 | %) | 781 | 652 | (17 | %) | |||||||||||||||||||||||||||
Corporate and Other core losses |
(104 | ) | (56 | ) | (56 | ) | (250 | ) | (74 | ) | 29 | % | 70 | % | (373 | ) | (380 | ) | (2 | %) | ||||||||||||||||||||
CONSOLIDATED |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
705 | 529 | 586 | 12 | 33 | (95 | %) | 175 | % | 1,443 | 631 | (56 | %) | |||||||||||||||||||||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1][2][3] |
(40 | ) | 55 | (237 | ) | 92 | (36 | ) | 10 | % | NM | (283 | ) | (181 | ) | 36 | % | |||||||||||||||||||||||
Add: Income (loss) from discontinued operations |
1 | 35 | 162 | (80 | ) | 3 | NM | NM | (99 | ) | 85 | NM | ||||||||||||||||||||||||||||
Net income |
$ | 666 | $ | 619 | $ | 511 | $ | 24 | $ | | (100 | %) | (100 | %) | $ | 1,061 | $ | 535 | (50 | %) | ||||||||||||||||||||
PER SHARE DATA [4] |
||||||||||||||||||||||||||||||||||||||||
Diluted earnings (losses) per common share |
||||||||||||||||||||||||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.42 | $ | 1.06 | $ | 1.15 | $ | 0.00 | $ | 0.05 | (96 | %) | NM | $ | 2.02 | $ | 1.25 | (38 | %) | |||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.34 | $ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | NM | NM | $ | 1.21 | $ | 1.05 | (13 | %) |
[1] | See page 23 for the impacts of DAC unlock by segment. |
|
[2] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses),
net of tax and DAC, for the periods presented herein. |
|
[3] | Includes those net realized capital losses excluded from core earnings (losses). See page 9
for further analysis. |
|
[4] | See page 8 for the reconciliation of net income (loss) per common share to core earnings
(losses) per common share. |
2
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 3,513 | $ | 3,509 | $ | 3,519 | $ | 3,545 | $ | 3,518 | | (1 | %) | $ | 10,546 | $ | 10,582 | | ||||||||||||||||||||||
Fee income |
1,164 | 1,218 | 1,209 | 1,219 | 1,192 | 2 | % | (2 | %) | 3,530 | 3,620 | 3 | % | |||||||||||||||||||||||||||
Net investment income (loss): |
||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale and other |
1,073 | 1,089 | 1,108 | 1,104 | 1,062 | (1 | %) | (4 | %) | 3,275 | 3,274 | | ||||||||||||||||||||||||||||
Equity securities, trading [1] |
1,043 | 131 | 803 | (597 | ) | (1,890 | ) | NM | NM | (905 | ) | (1,684 | ) | (86 | %) | |||||||||||||||||||||||||
Total net investment income (loss) |
2,116 | 1,220 | 1,911 | 507 | (828 | ) | NM | NM | 2,370 | 1,590 | (33 | %) | ||||||||||||||||||||||||||||
Realized capital gains (losses): |
||||||||||||||||||||||||||||||||||||||||
Total other-than-temporary impairment (OTTI) losses |
(146 | ) | (74 | ) | (119 | ) | (31 | ) | (71 | ) | 51 | % | (129 | %) | (778 | ) | (221 | ) | 72 | % | ||||||||||||||||||||
OTTI losses recognized in other comprehensive income |
31 | 15 | 64 | 8 | 11 | (65 | %) | 38 | % | 403 | 83 | (79 | %) | |||||||||||||||||||||||||||
Net OTTI losses recognized in earnings |
(115 | ) | (59 | ) | (55 | ) | (23 | ) | (60 | ) | 48 | % | (161 | %) | (375 | ) | (138 | ) | 63 | % | ||||||||||||||||||||
Net realized capital gains (losses), excluding OTTI losses recognized in earnings |
(142 | ) | (30 | ) | (348 | ) | 92 | 635 | NM | NM | (147 | ) | 379 | NM | ||||||||||||||||||||||||||
Total net realized capital gains (losses) |
(257 | ) | (89 | ) | (403 | ) | 69 | 575 | NM | NM | (522 | ) | 241 | NM | ||||||||||||||||||||||||||
Other revenues |
66 | 72 | 64 | 61 | 63 | (5 | %) | 3 | % | 195 | 188 | (4 | %) | |||||||||||||||||||||||||||
Total revenues |
6,602 | 5,930 | 6,300 | 5,401 | 4,520 | (32 | %) | (16 | %) | 16,119 | 16,221 | 1 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
3,037 | 3,263 | 3,178 | 3,976 | 4,006 | 32 | % | 1 | % | 9,762 | 11,160 | 14 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses returns credited
on International variable annuities [1] |
1,043 | 131 | 803 | (597 | ) | (1,889 | ) | NM | NM | (905 | ) | (1,683 | ) | (86 | %) | |||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and
present value of future profits |
431 | 514 | 664 | 835 | 1,320 | NM | 58 | % | 2,013 | 2,819 | 40 | % | ||||||||||||||||||||||||||||
Insurance operating costs and expenses |
1,046 | 1,135 | 1,120 | 1,224 | 1,059 | 1 | % | (13 | %) | 3,272 | 3,403 | 4 | % | |||||||||||||||||||||||||||
Interest expense |
128 | 128 | 128 | 128 | 128 | | | 380 | 384 | 1 | % | |||||||||||||||||||||||||||||
Total benefits and expenses |
5,685 | 5,171 | 5,893 | 5,566 | 4,624 | (19 | %) | (17 | %) | 14,522 | 16,083 | 11 | % | |||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
917 | 759 | 407 | (165 | ) | (104 | ) | NM | 37 | % | 1,597 | 138 | (91 | %) | ||||||||||||||||||||||||||
Income tax expense (benefit) |
252 | 175 | 58 | (269 | ) | (101 | ) | NM | 62 | % | 437 | (312 | ) | NM | ||||||||||||||||||||||||||
Income (loss) from continuing operations |
665 | 584 | 349 | 104 | (3 | ) | NM | NM | 1,160 | 450 | (61 | %) | ||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
1 | 35 | 162 | (80 | ) | 3 | NM | NM | (99 | ) | 85 | NM | ||||||||||||||||||||||||||||
Net income |
666 | 619 | 511 | 24 | | (100 | %) | (100 | %) | 1,061 | 535 | (50 | %) | |||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
1 | 35 | 162 | (80 | ) | 3 | NM | NM | (99 | ) | 85 | NM | ||||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from
core earnings [2] |
(40 | ) | 55 | (237 | ) | 92 | (36 | ) | 10 | % | NM | (283 | ) | (181 | ) | 36 | % | |||||||||||||||||||||||
Core earnings |
$ | 705 | $ | 529 | $ | 586 | $ | 12 | $ | 33 | (95 | %) | 175 | % | $ | 1,443 | $ | 631 | (56 | %) | ||||||||||||||||||||
[1] | Includes investment income and mark-to-market effects of equity securities, 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] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses),
net of tax and DAC, for the periods presented herein. |
3
LIFE [1] | PROPERTY & CASUALTY [1] | CORPORATE [1] | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, | Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | Sept. 30, | Dec. 31, | Sept. 30, | |||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | Change | 2010 | 2011 | Change | 2010 | 2011 | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||||||||
Investments |
||||||||||||||||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 52,429 | $ | 54,329 | 4 | % | $ | 25,114 | $ | 25,933 | 3 | % | $ | 277 | $ | 1 | (100 | %) | $ | 77,820 | $ | 80,263 | 3 | % | ||||||||||||||||||||||||
Fixed maturities, at fair value using the fair value option |
639 | 1,314 | 106 | % | 10 | 9 | (10 | %) | | | | 649 | 1,323 | 104 | % | |||||||||||||||||||||||||||||||||
Equity securities, trading, at fair value |
32,820 | 30,770 | (6 | %) | | | | | | | 32,820 | 30,770 | (6 | %) | ||||||||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
502 | 563 | 12 | % | 374 | 330 | (12 | %) | 97 | 96 | (1 | %) | 973 | 989 | 2 | % | ||||||||||||||||||||||||||||||||
Mortgage loans |
3,915 | 4,779 | 22 | % | 372 | 683 | 84 | % | 202 | 128 | (37 | %) | 4,489 | 5,590 | 25 | % | ||||||||||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,181 | 2,176 | | | | | | | | 2,181 | 2,176 | | ||||||||||||||||||||||||||||||||||||
Limited partnerships and other alternative investments |
957 | 1,320 | 38 | % | 961 | 1,186 | 23 | % | | | | 1,918 | 2,506 | 31 | % | |||||||||||||||||||||||||||||||||
Other investments |
1,486 | 2,717 | 83 | % | 83 | 113 | 36 | % | 48 | 27 | (44 | %) | 1,617 | 2,857 | 77 | % | ||||||||||||||||||||||||||||||||
Short-term investments |
5,631 | 6,619 | 18 | % | 1,117 | 792 | (29 | %) | 1,780 | 2,293 | 29 | % | 8,528 | 9,704 | 14 | % | ||||||||||||||||||||||||||||||||
Total investments |
100,560 | 104,587 | 4 | % | 28,031 | 29,046 | 4 | % | 2,404 | 2,545 | 6 | % | 130,995 | 136,178 | 4 | % | ||||||||||||||||||||||||||||||||
Cash |
1,809 | 2,394 | 32 | % | 250 | 188 | (25 | %) | 3 | 7 | 133 | % | 2,062 | 2,589 | 26 | % | ||||||||||||||||||||||||||||||||
Premiums receivable and agents balances |
362 | 333 | (8 | %) | 2,911 | 3,192 | 10 | % | | | | 3,273 | 3,525 | 8 | % | |||||||||||||||||||||||||||||||||
Reinsurance recoverables |
1,991 | 2,395 | 20 | % | 2,871 | 2,858 | | | | | 4,862 | 5,253 | 8 | % | ||||||||||||||||||||||||||||||||||
Deferred policy acquisition costs and present
value of future profits |
8,594 | 7,450 | (13 | %) | 1,263 | 1,279 | 1 | % | | | | 9,857 | 8,729 | (11 | %) | |||||||||||||||||||||||||||||||||
Deferred income taxes |
1,786 | (137 | ) | NM | 966 | 661 | (32 | %) | 973 | 1,087 | 12 | % | 3,725 | 1,611 | (57 | %) | ||||||||||||||||||||||||||||||||
Goodwill |
470 | 470 | | 149 | 149 | | 432 | 417 | (3 | %) | 1,051 | 1,036 | (1 | %) | ||||||||||||||||||||||||||||||||||
Property and equipment, net |
398 | 387 | (3 | %) | 729 | 628 | (14 | %) | 23 | 14 | (39 | %) | 1,150 | 1,029 | (11 | %) | ||||||||||||||||||||||||||||||||
Other assets |
573 | 356 | (38 | %) | 952 | 1,351 | 42 | % | 104 | 18 | (83 | %) | 1,629 | 1,725 | 6 | % | ||||||||||||||||||||||||||||||||
Separate account assets |
159,742 | 143,923 | (10 | %) | | | | | | | 159,742 | 143,923 | (10 | %) | ||||||||||||||||||||||||||||||||||
Total assets |
$ | 276,285 | $ | 262,158 | (5 | %) | $ | 38,122 | $ | 39,352 | 3 | % | $ | 3,939 | $ | 4,088 | 4 | % | $ | 318,346 | $ | 305,598 | (4 | %) | ||||||||||||||||||||||||
Future policy benefits, unpaid losses and
loss adjustment expenses |
18,573 | 19,417 | 5 | % | 21,025 | 21,617 | 3 | % | | | | $ | 39,598 | $ | 41,034 | 4 | % | |||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable |
44,550 | 45,868 | 3 | % | | | | | | | 44,550 | 45,868 | 3 | % | ||||||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable -
International variable annuities |
32,793 | 30,734 | (6 | %) | | | | | | | 32,793 | 30,734 | (6 | %) | ||||||||||||||||||||||||||||||||||
Unearned premiums |
173 | 181 | 5 | % | 5,005 | 5,230 | 4 | % | (2 | ) | (2 | ) | | 5,176 | 5,409 | 5 | % | |||||||||||||||||||||||||||||||
Debt |
| | | | | | 6,607 | 6,617 | | 6,607 | 6,617 | | ||||||||||||||||||||||||||||||||||||
Consumer notes |
382 | 349 | (9 | %) | | | | | | | 382 | 349 | (9 | %) | ||||||||||||||||||||||||||||||||||
Other liabilities |
5,604 | 5,124 | (9 | %) | 1,756 | 2,047 | 17 | % | 1,827 | 1,712 | (6 | %) | 9,187 | 8,883 | (3 | %) | ||||||||||||||||||||||||||||||||
Separate account liabilities |
159,742 | 143,923 | (10 | %) | | | | | | | 159,742 | 143,923 | (10 | %) | ||||||||||||||||||||||||||||||||||
Total liabilities |
261,817 | 245,596 | (6 | %) | 27,786 | 28,894 | 4 | % | 8,432 | 8,327 | (1 | %) | 298,035 | 282,817 | (5 | %) | ||||||||||||||||||||||||||||||||
Common equity, excluding AOCI |
14,247 | 14,929 | 5 | % | 10,379 | 9,917 | (4 | %) | (3,870 | ) | (3,686 | ) | 5 | % | 20,756 | 21,160 | 2 | % | ||||||||||||||||||||||||||||||
Preferred stock |
| | | | | | 556 | 556 | | 556 | 556 | | ||||||||||||||||||||||||||||||||||||
AOCI, net of tax |
221 | 1,633 | NM | (43 | ) | 541 | NM | (1,179 | ) | (1,109 | ) | 6 | % | (1,001 | ) | 1,065 | NM | |||||||||||||||||||||||||||||||
Total stockholders equity |
14,468 | 16,562 | 14 | % | 10,336 | 10,458 | 1 | % | (4,493 | ) | (4,239 | ) | 6 | % | 20,311 | 22,781 | 12 | % | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 276,285 | $ | 262,158 | (5 | %) | $ | 38,122 | $ | 39,352 | 3 | % | $ | 3,939 | $ | 4,088 | 4 | % | $ | 318,346 | $ | 305,598 | (4 | %) | ||||||||||||||||||||||||
[1] | Please refer to the basis of presentation on page i for a description of Life, Property &
Casualty and Corporate. |
4
Year Over | ||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | ||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
DEBT |
||||||||||||||||||||||||||||
Short-term debt (includes current maturities of long-term debt and capital lease obligations) |
$ | | $ | 400 | $ | 400 | $ | 400 | $ | 400 | NM | | ||||||||||||||||
Senior notes |
4,880 | 4,480 | 4,480 | 4,480 | 4,480 | (8 | %) | | ||||||||||||||||||||
Junior subordinated debentures |
1,723 | 1,727 | 1,730 | 1,734 | 1,737 | 1 | % | | ||||||||||||||||||||
Total debt [1] |
$ | 6,603 | $ | 6,607 | $ | 6,610 | $ | 6,614 | $ | 6,617 | | | ||||||||||||||||
STOCKHOLDERS EQUITY |
||||||||||||||||||||||||||||
Common stockholders equity, excluding AOCI, net of tax |
$ | 20,159 | $ | 20,756 | $ | 21,207 | $ | 21,196 | $ | 21,160 | 5 | % | | |||||||||||||||
Preferred stock |
556 | 556 | 556 | 556 | 556 | | | |||||||||||||||||||||
AOCI, net of tax |
194 | (1,001 | ) | (764 | ) | (77 | ) | 1,065 | NM | NM | ||||||||||||||||||
Total stockholders equity |
$ | 20,909 | $ | 20,311 | $ | 21,000 | $ | 21,675 | $ | 22,781 | 9 | % | 5 | % | ||||||||||||||
CAPITALIZATION |
||||||||||||||||||||||||||||
Total capitalization, including AOCI, net of tax |
$ | 27,512 | $ | 26,918 | $ | 27,610 | $ | 28,289 | $ | 29,398 | 7 | % | 4 | % | ||||||||||||||
Total capitalization, excluding AOCI, net of tax |
$ | 27,318 | $ | 27,919 | $ | 28,373 | $ | 28,366 | $ | 28,333 | 4 | % | | |||||||||||||||
DEBT TO CAPITALIZATION RATIOS [1] |
||||||||||||||||||||||||||||
Total debt to capitalization, including AOCI |
24.0 | % | 24.5 | % | 23.9 | % | 23.4 | % | 22.5 | % | (1.5 | ) | (0.9 | ) | ||||||||||||||
Total debt to capitalization, excluding AOCI |
24.2 | % | 23.7 | % | 23.3 | % | 23.3 | % | 23.4 | % | (0.8 | ) | 0.1 | |||||||||||||||
Total rating agency adjusted debt to capitalization [2] [3] |
27.6 | % | 28.5 | % | 27.9 | % | 27.2 | % | 26.2 | % | (1.4 | ) | (1.0 | ) |
[1] | The Hartford excludes consumer notes from total debt for capital structure analysis.
Consumer notes were $384, $382, $382, $368 and $349 as of September 30, 2010, December 31, 2010,
March 31, 2011, June 30, 2011 and September 30, 2011, respectively. |
|
[2] | Reflects a rating agency assignment in the leverage calculation of an estimate of the adjusted
unfunded pension liability of the Companys defined benefit plans and six times the Companys
rental expense on operating leases for total adjustments of $1.4 billion, $1.5 billion, $1.6
billion, $1.5 billion and $1.5 billion for the three months ended September 30, 2010, December 31,
2010, March 31, 2011, June 30, 2011 and September 30, 2011, respectively. |
|
[3] | Reflects 25% equity credit for the junior subordinated debentures and the discount value of
the Allianz transaction. Reflects 100% equity credit for the MCP stock. |
5
September 30, 2011 | December 31, 2010 | |||||||
P&C U.S. Statutory Capital and Surplus [1] |
$ | 7,392 | $ | 7,721 | ||||
GAAP Adjustments |
||||||||
Deferred policy acquisition costs |
1,279 | 1,263 | ||||||
Benefit reserves |
(62 | ) | (70 | ) | ||||
GAAP
unrealized gains (losses) on investments, net of tax |
542 | (57 | ) | |||||
Goodwill |
149 | 149 | ||||||
Non-admitted assets |
1,181 | 1,247 | ||||||
Other, net |
(23 | ) | 83 | |||||
P&C GAAP
Stockholders Equity |
$ | 10,458 | $ | 10,336 | ||||
Life U.S. Statutory Capital and Surplus [1] |
$ | 7,414 | $ | 7,731 | ||||
GAAP Adjustments |
||||||||
Investment in subsidiaries |
3,456 | 2,699 | ||||||
Deferred policy acquisition costs |
7,450 | 8,594 | ||||||
Deferred taxes |
(2,192 | ) | (777 | ) | ||||
Benefit reserves |
(2,580 | ) | (4,097 | ) | ||||
Unrealized losses on investments, net of impairments |
2,452 | 306 | ||||||
Asset valuation reserve and interest maintenance
reserve |
684 | 420 | ||||||
Goodwill |
470 | 461 | ||||||
Other, net |
(592 | ) | (869 | ) | ||||
Life GAAP
Stockholders Equity |
$ | 16,562 | $ | 14,468 | ||||
[1] | Please refer to the basis of presentation on page i for a description of Life and
Property & Casualty. |
6
Year Over | ||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | ||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
Fixed maturities net unrealized gain (loss) |
$ | 389 | $ | (562 | ) | $ | (306 | ) | $ | 251 | $ | 1,197 | NM | NM | ||||||||||||||
Equities net unrealized gain (loss) |
(42 | ) | (26 | ) | 28 | 7 | (68 | ) | (62 | %) | NM | |||||||||||||||||
Other-than-temporary impairment losses recognized in AOCI |
(127 | ) | (108 | ) | (103 | ) | (107 | ) | (97 | ) | 24 | % | 9 | % | ||||||||||||||
Net deferred gain on cash-flow hedging instruments |
565 | 385 | 317 | 388 | 542 | (4 | %) | 40 | % | |||||||||||||||||||
Total net unrealized gain (loss) |
785 | (311 | ) | (64 | ) | 539 | 1,574 | 101 | % | 192 | % | |||||||||||||||||
Foreign currency translation adjustments |
404 | 488 | 456 | 514 | 597 | 48 | % | 16 | % | |||||||||||||||||||
Pension and other postretirement adjustment |
(995 | ) | (1,178 | ) | (1,156 | ) | (1,130 | ) | (1,106 | ) | (11 | %) | 2 | % | ||||||||||||||
Total accumulated other comprehensive income (loss) |
$ | 194 | $ | (1,001 | ) | $ | (764 | ) | $ | (77 | ) | $ | 1,065 | NM | NM | |||||||||||||
7
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Numerator: |
||||||||||||||||||||||||||||
Net income |
$ | 666 | $ | 619 | $ | 511 | $ | 24 | $ | | $ | 1,061 | $ | 535 | ||||||||||||||
Less: MCP dividends |
10 | 11 | 10 | 11 | 10 | 22 | 31 | |||||||||||||||||||||
Less: Capital Purchase Program (CPP) preferred dividends and accretion of discount |
| | | | | 482 | | |||||||||||||||||||||
Net income (loss) available to common shareholders |
656 | 608 | 501 | 13 | (10 | ) | 557 | 504 | ||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
10 | 11 | 10 | | | | | |||||||||||||||||||||
Net income (loss) available to common shareholders and assumed conversion of preferred shares |
666 | 619 | 511 | 13 | (10 | ) | 557 | 504 | ||||||||||||||||||||
Net income (loss) available to common shareholders |
656 | 608 | 501 | 13 | (10 | ) | 557 | 504 | ||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1] |
(40 | ) | 55 | (237 | ) | 92 | (36 | ) | (283 | ) | (181 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
1 | 35 | 162 | (80 | ) | 3 | (99 | ) | 85 | |||||||||||||||||||
Core earnings available to common shareholders |
695 | 518 | 576 | 1 | 23 | 939 | 600 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
10 | 11 | 10 | | | 22 | | |||||||||||||||||||||
Core earnings available to common shareholders and assumed conversion of preferred shares |
$ | 705 | $ | 529 | $ | 586 | $ | 1 | $ | 23 | $ | 961 | $ | 600 | ||||||||||||||
Denominator: |
||||||||||||||||||||||||||||
Weighted average common shares outstanding (basic) |
444.1 | 444.3 | 444.6 | 445.1 | 445.3 | 427.2 | 445.0 | |||||||||||||||||||||
Dilutive effect of stock compensation |
1.4 | 1.3 | 1.8 | 1.0 | 0.7 | 1.3 | 1.2 | |||||||||||||||||||||
Dilutive effect of CPP Warrants [2] |
29.0 | 31.4 | 34.0 | 32.9 | 27.4 | 31.3 | 31.4 | |||||||||||||||||||||
Dilutive effect of Allianz warrants [3] |
| | 7.1 | 3.4 | | 1.3 | 3.4 | |||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted),
before assumed conversion of preferred shares |
474.5 | 477.0 | 487.5 | 482.4 | 473.4 | 461.1 | 481.0 | |||||||||||||||||||||
Dilutive effect of assumed conversion of MCP [4] |
20.8 | 20.8 | 20.7 | | | 14.9 | | |||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) and
assumed conversion of preferred shares |
495.3 | 497.8 | 508.2 | 482.4 | 473.4 | 476.0 | 481.0 | |||||||||||||||||||||
Basic earnings (losses) per common share |
||||||||||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.48 | $ | 1.37 | $ | 1.13 | $ | 0.03 | $ | (0.02 | ) | $ | 1.30 | $ | 1.13 | |||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
(0.08 | ) | 0.12 | (0.53 | ) | 0.21 | (0.08 | ) | (0.67 | ) | (0.41 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
| 0.08 | 0.36 | (0.18 | ) | 0.01 | (0.23 | ) | 0.19 | |||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.56 | $ | 1.17 | $ | 1.30 | $ | 0.00 | $ | 0.05 | $ | 2.20 | $ | 1.35 | ||||||||||||||
Diluted earnings (losses) per common share [5] |
||||||||||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.38 | $ | 1.27 | $ | 1.03 | $ | 0.03 | $ | (0.02 | ) | $ | 1.21 | $ | 1.05 | |||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
(0.04 | ) | (0.03 | ) | (0.02 | ) | | | | | ||||||||||||||||||
Net income (loss) available to common shareholders and assumed conversion of preferred shares |
$ | 1.34 | $ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | $ | 1.21 | $ | 1.05 | |||||||||||||
Net income (loss) available to common shareholders |
$ | 1.38 | $ | 1.27 | $ | 1.03 | $ | 0.03 | $ | (0.02 | ) | $ | 1.21 | $ | 1.05 | |||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
(0.08 | ) | 0.11 | (0.47 | ) | 0.19 | (0.08 | ) | (0.61 | ) | (0.38 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
| 0.07 | 0.32 | (0.16 | ) | 0.01 | (0.21 | ) | 0.18 | |||||||||||||||||||
Core earnings available to common shareholders |
1.46 | 1.09 | 1.18 | 0.00 | 0.05 | 2.04 | 1.25 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
(0.04 | ) | (0.03 | ) | (0.03 | ) | | | (0.02 | ) | | |||||||||||||||||
Core earnings available to common shareholders and assumed conversion of preferred shares |
$ | 1.42 | $ | 1.06 | $ | 1.15 | $ | 0.00 | 0.05 | $ | 2.02 | $ | 1.25 | |||||||||||||||
[1] | See pages 11 and 12 for disclosure of the components of net realized capital gains
(losses), net of tax and DAC, for the periods presented herein. |
|
[2] | The Hartford issued 52.1 million warrants to purchase The Hartford Common Stock to the U.S.
Department of the Treasury on June 26, 2009 at a strike price of $9.79. The declaration of a
quarterly common stock dividend of $0.10 during the third quarter of 2011 triggered a provision in
The Hartfords Warrant Agreement with The Bank of New York Mellon resulting in an adjustment to
the warrant exercise price to $9.729 from $9.754. |
|
[3] | The Hartford issued 69.4 million warrants to purchase The Hartford Common Stock to Allianz on
October 17, 2008 at a strike price of $25.23. |
|
[4] | The Hartford issued $575 of mandatory convertible preferred stock which, at June 30, 2010,
June 30, 2011 and September 30, 2011, would have been convertible into 20.8 million, 20.7 million
and 20.8 million weighted average shares of common stock, respectively. However, the impact of
applying the if-converted method to these shares was anti-dilutive and, therefore, the shares
were not included in core earnings available to common shareholders and assumed conversion of
preferred shares. |
|
[5] | As a result of anti-dilutive impact, in periods of a loss, weighted average common shares
outstanding (basic) are used in the calculation of diluted earnings per share. |
8
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Net Realized Capital Gains (Losses), After-Tax and DAC |
||||||||||||||||||||||||||||||||||||||||
Gains/losses on sales, net |
$ | 88 | $ | (29 | ) | $ | (49 | ) | $ | 151 | $ | 73 | (17 | %) | (52 | %) | $ | 209 | $ | 175 | (16 | %) | ||||||||||||||||||
Net impairment (gains) losses |
(104 | ) | (38 | ) | (29 | ) | (1 | ) | (42 | ) | 60 | % | NM | (282 | ) | (72 | ) | 74 | % | |||||||||||||||||||||
Japanese fixed annuity contract hedges, net |
7 | 4 | (11 | ) | 15 | (5 | ) | NM | NM | 14 | (1 | ) | NM | |||||||||||||||||||||||||||
Results of variable annuity hedge program |
||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net |
132 | 126 | 33 | (70 | ) | (178 | ) | NM | (154 | %) | (19 | ) | (215 | ) | NM | |||||||||||||||||||||||||
Macro hedge program |
(187 | ) | (79 | ) | (196 | ) | 56 | 365 | NM | NM | (69 | ) | 225 | NM | ||||||||||||||||||||||||||
Total results of variable annuity hedge program |
(55 | ) | 47 | (163 | ) | (14 | ) | 187 | NM | NM | (88 | ) | 10 | NM | ||||||||||||||||||||||||||
Other net gain (loss) [1] |
24 | 80 | 20 | (59 | ) | (245 | ) | NM | NM | (136 | ) | (284 | ) | (109 | %) | |||||||||||||||||||||||||
Total net realized capital gains (losses), after-tax and DAC |
$ | (40 | ) | $ | 64 | $ | (232 | ) | $ | 92 | $ | (32 | ) | 20 | % | NM | $ | (283 | ) | $ | (172 | ) | 39 | % | ||||||||||||||||
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 losses |
$ | (40 | ) | $ | 64 | $ | (232 | ) | $ | 92 | $ | (32 | ) | 20 | % | NM | $ | (283 | ) | $ | (172 | ) | 39 | % | ||||||||||||||||
Less: total net realized capital gains (losses) included in core earnings (losses) |
| 9 | 5 | | 4 | NM | NM | | 9 | NM | ||||||||||||||||||||||||||||||
Total net realized capital losses, after tax and DAC, excluded from core earnings
(losses) |
$ | (40 | ) | $ | 55 | $ | (237 | ) | $ | 92 | $ | (36 | ) | 10 | % | NM | $ | (283 | ) | $ | (181 | ) | 36 | % | ||||||||||||||||
[1] | Other net gain (loss) primarily represents income from derivatives that qualify for hedge
accounting and hedge fixed maturities. |
9
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
Numerator [1]: |
||||||||||||||||||||
Net income available to common shareholders last 12 months |
$ | 1,074 | $ | 1,198 | $ | 1,872 | $ | 1,820 | $ | 1,154 | ||||||||||
Core earnings available to common shareholders last 12 months |
$ | 1,588 | $ | 1,490 | $ | 2,013 | $ | 1,832 | $ | 1,160 | ||||||||||
Denominator [2]: |
||||||||||||||||||||
Average common stockholders equity, including AOCI |
17,712.5 | 17,608.0 | 19,419.5 | 20,283.0 | 21,845.0 | |||||||||||||||
Less: Average AOCI |
(1,511.5 | ) | (2,156.5 | ) | (1,570.5 | ) | (728.0 | ) | 629.0 | |||||||||||
Average common stockholders equity, excluding AOCI |
19,224.0 | 19,764.5 | 20,990.0 | 21,011.0 | 21,216.0 | |||||||||||||||
ROE (net income last 12 months to common stockholders equity, including AOCI) [3] |
6.1 | % | 6.8 | % | 9.6 | % | 9.0 | % | 5.3 | % | ||||||||||
ROE (core earnings last 12 months to common stockholders equity, excluding AOCI) [3] |
8.3 | % | 7.5 | % | 9.6 | % | 8.7 | % | 5.5 | % |
[1] | For a reconciliation of net income to core earnings, see page 8. |
|
[2] | Average equity is calculated by taking the sum of common stockholders equity at the beginning
of the twelve month period and common stockholders equity at the end of the twelve month period
and dividing by 2. |
|
[3] | When calculating return-on-equity, the MCP preferred stock is included in average common
stockholders equity and MCP preferred dividends are added back to net income available to common
shareholders and core earnings available to common shareholders. |
10
Property & | Total | Total | ||||||||||||||||||||||||||||||||||||||||||
Casualty | Commercial | Consumer | Retirement | Mutual | Total Wealth | Corporate and | ||||||||||||||||||||||||||||||||||||||
Commercial | Group Benefits | Markets | Markets | Global Annuity | Life Insurance | Plans | Funds | Management | Other | Consolidated | ||||||||||||||||||||||||||||||||||
Three months ended September 30, 2010 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other, before-tax and DAC,
excluded from core earnings (losses) |
$ | 8 | $ | | $ | 8 | $ | 1 | $ | (329 | ) | $ | 11 | $ | 2 | $ | (1 | ) | $ | (317 | ) | $ | 48 | $ | (260 | ) | ||||||||||||||||||
Less: Impacts of DAC |
| | | | (202 | ) | (8 | ) | 10 | | (200 | ) | 2 | (198 | ) | |||||||||||||||||||||||||||||
Less: Impacts of tax |
3 | (2 | ) | 1 | | (42 | ) | 7 | (3 | ) | | (38 | ) | 15 | (22 | ) | ||||||||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | 5 | $ | 2 | $ | 7 | $ | 1 | $ | (85 | ) | $ | 12 | $ | (5 | ) | $ | (1 | ) | $ | (79 | ) | $ | 31 | $ | (40 | ) | |||||||||||||||||
Three months ended December 31, 2010 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other, before-tax and DAC,
excluded from core earnings (losses) |
$ | 16 | $ | 16 | $ | 32 | $ | 3 | $ | (143 | ) | $ | (21 | ) | $ | (7 | ) | $ | | $ | (171 | ) | $ | 37 | $ | (99 | ) | |||||||||||||||||
Less: Impacts of DAC |
| | | | (192 | ) | (2 | ) | 1 | | (193 | ) | 2 | (191 | ) | |||||||||||||||||||||||||||||
Less: Impacts of tax |
5 | 6 | 11 | 1 | 20 | (7 | ) | (3 | ) | (1 | ) | 9 | 16 | 37 | ||||||||||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | 11 | $ | 10 | $ | 21 | $ | 2 | $ | 29 | $ | (12 | ) | $ | (5 | ) | $ | 1 | $ | 13 | $ | 19 | $ | 55 | ||||||||||||||||||||
Three months ended March 31, 2011 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other, before-tax and DAC,
excluded from core earnings (losses) |
$ | (21 | ) | $ | (13 | ) | $ | (34 | ) | $ | (4 | ) | $ | (312 | ) | $ | (32 | ) | $ | (9 | ) | $ | 1 | $ | (352 | ) | $ | (15 | ) | $ | (405 | ) | ||||||||||||
Less: Impacts of DAC |
| | | | (34 | ) | (3 | ) | (1 | ) | | (38 | ) | 1 | (37 | ) | ||||||||||||||||||||||||||||
Less: Impacts of tax |
(7 | ) | (5 | ) | (12 | ) | (1 | ) | (100 | ) | (11 | ) | (2 | ) | | (113 | ) | (5 | ) | (131 | ) | |||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | (14 | ) | $ | (8 | ) | $ | (22 | ) | $ | (3 | ) | $ | (178 | ) | $ | (18 | ) | $ | (6 | ) | $ | 1 | $ | (201 | ) | $ | (11 | ) | $ | (237 | ) | ||||||||||||
Three months ended June 30, 2011 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other, before-tax and DAC,
excluded from core earnings (losses) |
$ | 14 | $ | 10 | $ | 24 | $ | 3 | $ | 13 | $ | 10 | $ | 11 | $ | | $ | 34 | $ | 12 | $ | 73 | ||||||||||||||||||||||
Less: Impacts of DAC |
| | | | 51 | 9 | 6 | | 66 | 1 | 67 | |||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(11 | ) | (1 | ) | (12 | ) | (2 | ) | (57 | ) | (5 | ) | (9 | ) | | (71 | ) | (1 | ) | (86 | ) | |||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | 25 | $ | 11 | $ | 36 | $ | 5 | $ | 19 | $ | 6 | $ | 14 | $ | | $ | 39 | $ | 12 | $ | 92 | ||||||||||||||||||||||
Three months ended September 30, 2011 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other, before-tax and DAC,
excluded from core earnings (losses) |
$ | (49 | ) | $ | 7 | $ | (43 | ) | $ | (10 | ) | $ | 660 | $ | 23 | $ | (2 | ) | $ | | $ | 681 | $ | (55 | ) | $ | 574 | |||||||||||||||||
Less: Impacts of DAC |
| | | | 591 | 16 | 7 | | 614 | (6 | ) | 608 | ||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(17 | ) | 2 | (16 | ) | (4 | ) | 42 | 1 | (3 | ) | | 40 | (19 | ) | 2 | ||||||||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | (32 | ) | $ | 5 | $ | (27 | ) | $ | (6 | ) | $ | 27 | $ | 6 | $ | (6 | ) | $ | | $ | 27 | $ | (30 | ) | $ | (36 | ) | ||||||||||||||||
[1] | The above tables show the components of net realized capital gains (losses), net of tax
and DAC, excluded from core earnings (losses). The impacts of DAC are calculated consistent with
the Companys accounting policy on amortization of DAC. |
11
Property & | Total | Total | ||||||||||||||||||||||||||||||||||||||||||
Casualty | Group | Commercial | Consumer | Retirement | Mutual | Total Wealth | Corporate and | |||||||||||||||||||||||||||||||||||||
Commercial | Benefits | Markets | Markets | Global Annuity | Life Insurance | Plans | Funds | Management | Other | Consolidated | ||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2010 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other,
before-tax and DAC,
excluded from core earnings (losses) |
$ | (4 | ) | $ | 33 | $ | 29 | $ | (1 | ) | $ | (637 | ) | $ | 43 | $ | (5 | ) | $ | | $ | (599 | ) | $ | 55 | $ | (516 | ) | ||||||||||||||||
Less: Impacts of DAC |
| | | | (210 | ) | (15 | ) | 7 | | (218 | ) | 4 | (214 | ) | |||||||||||||||||||||||||||||
Less: Impacts of tax |
15 | 16 | 31 | 3 | (108 | ) | 27 | 6 | | (75 | ) | 22 | (19 | ) | ||||||||||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | (19 | ) | $ | 17 | $ | (2 | ) | $ | (4 | ) | $ | (319 | ) | $ | 31 | $ | (18 | ) | $ | | $ | (306 | ) | $ | 29 | $ | (283 | ) | |||||||||||||||
Nine months ended September 30, 2011 |
||||||||||||||||||||||||||||||||||||||||||||
Total net realized capital gains (losses) and other,
before-tax and DAC,
excluded from core earnings (losses) |
$ | (56 | ) | $ | 4 | $ | (52 | ) | $ | (11 | ) | $ | 361 | $ | 1 | $ | | $ | 1 | $ | 363 | $ | (58 | ) | $ | 242 | ||||||||||||||||||
Less: Impacts of DAC |
| | | | 608 | 22 | 12 | | 642 | (4 | ) | 638 | ||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(35 | ) | (4 | ) | (39 | ) | (7 | ) | (115 | ) | (15 | ) | (14 | ) | | (144 | ) | (25 | ) | (215 | ) | |||||||||||||||||||||||
Total net realized capital gains (losses), net of tax and DAC,
excluded from core earnings (losses) |
$ | (21 | ) | $ | 8 | $ | (13 | ) | $ | (4 | ) | $ | (132 | ) | $ | (6 | ) | $ | 2 | $ | 1 | $ | (135 | ) | $ | (29 | ) | $ | (181 | ) | ||||||||||||||
[1] | The above tables show the components of net realized capital gains (losses), net of tax
and DAC, excluded from core earnings (losses). The impacts of DAC are calculated consistent with
the Companys accounting policy on amortization of DAC. |
12
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 2,482 | $ | 2,496 | $ | 2,526 | $ | 2,579 | $ | 2,553 | 3 | % | (1 | %) | $ | 7,472 | $ | 7,658 | 2 | % | ||||||||||||||||||||
Fee income |
15 | 14 | 16 | 14 | 16 | 7 | % | 14 | % | 40 | 46 | 15 | % | |||||||||||||||||||||||||||
Net investment income |
333 | 347 | 346 | 345 | 319 | (4 | %) | (8 | %) | 1,017 | 1,010 | (1 | %) | |||||||||||||||||||||||||||
Other revenues |
26 | 24 | 23 | 26 | 28 | 8 | % | 8 | % | 72 | 77 | 7 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
4 | 29 | (37 | ) | 23 | (45 | ) | NM | NM | 20 | (59 | ) | NM | |||||||||||||||||||||||||||
Total revenues |
2,860 | 2,910 | 2,874 | 2,987 | 2,871 | | (4 | %) | 8,621 | 8,732 | 1 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
1,599 | 1,767 | 1,830 | 1,997 | 1,983 | 24 | % | (1 | %) | 4,934 | 5,810 | 18 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
353 | 350 | 350 | 353 | 354 | | | 1,064 | 1,057 | (1 | %) | |||||||||||||||||||||||||||||
Insurance operating costs and other expenses |
427 | 454 | 472 | 461 | 451 | 6 | % | (2 | %) | 1,322 | 1,384 | 5 | % | |||||||||||||||||||||||||||
Total benefits and expenses |
2,379 | 2,571 | 2,652 | 2,811 | 2,788 | 17 | % | (1 | %) | 7,320 | 8,251 | 13 | % | |||||||||||||||||||||||||||
Income from continuing operations before income taxes |
481 | 339 | 222 | 176 | 83 | (83 | %) | (53 | %) | 1,301 | 481 | (63 | %) | |||||||||||||||||||||||||||
Income tax expense [1] |
136 | 87 | 44 | 11 | 4 | (97 | %) | (64 | %) | 385 | 59 | (85 | %) | |||||||||||||||||||||||||||
Income from continuing operations |
345 | 252 | 178 | 165 | 79 | (77 | %) | (52 | %) | 916 | 422 | (54 | %) | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
7 | 1 | 160 | (3 | ) | (2 | ) | NM | 33 | % | 11 | 155 | NM | |||||||||||||||||||||||||||
Net income |
352 | 253 | 338 | 162 | 77 | (78 | %) | (52 | %) | 927 | 577 | (38 | %) | |||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
7 | 1 | 160 | (3 | ) | (2 | ) | NM | 33 | % | 11 | 155 | NM | |||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings [1][2] |
7 | 21 | (22 | ) | 36 | (27 | ) | NM | NM | (2 | ) | (13 | ) | NM | ||||||||||||||||||||||||||
Core earnings |
$ | 338 | $ | 231 | $ | 200 | $ | 129 | $ | 106 | (69 | %) | (18 | %) | $ | 918 | $ | 435 | (53 | %) | ||||||||||||||||||||
[1] | The three months ended June 30, 2011 includes a benefit of $21, related to the release of a tax valuation allowance. | |
[2] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
13
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
$ | 1,447 | $ | 1,449 | $ | 1,645 | $ | 1,498 | $ | 1,551 | 7 | % | 4 | % | $ | 4,347 | $ | 4,694 | 8 | % | ||||||||||||||||||||
Change in unearned premium reserve |
8 | (17 | ) | 147 | (19 | ) | (2 | ) | NM | 89 | % | 69 | 126 | 83 | % | |||||||||||||||||||||||||
Earned premiums |
1,439 | 1,466 | 1,498 | 1,517 | 1,553 | 8 | % | 2 | % | 4,278 | 4,568 | 7 | % | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] |
888 | 945 | 962 | 950 | 1,085 | 22 | % | 14 | % | 2,634 | 2,997 | 14 | % | |||||||||||||||||||||||||||
Current accident year catastrophes |
13 | 18 | 46 | 166 | 93 | NM | (44 | %) | 134 | 305 | 128 | % | ||||||||||||||||||||||||||||
Prior accident years [2] |
(118 | ) | (22 | ) | (6 | ) | 31 | (9 | ) | 92 | % | NM | (339 | ) | 16 | NM | ||||||||||||||||||||||||
Total losses and loss adjustment expenses |
783 | 941 | 1,002 | 1,147 | 1,169 | 49 | % | 2 | % | 2,429 | 3,318 | 37 | % | |||||||||||||||||||||||||||
Underwriting expenses [3] |
434 | 443 | 455 | 455 | 454 | 5 | % | | 1,336 | 1,364 | 2 | % | ||||||||||||||||||||||||||||
Dividends to policyholders |
4 | 5 | 4 | 4 | 5 | 25 | % | 25 | % | | 13 | | ||||||||||||||||||||||||||||
Underwriting results |
218 | 77 | 37 | (89 | ) | (75 | ) | NM | 16 | % | 513 | (127 | ) | NM | ||||||||||||||||||||||||||
Net investment income |
226 | 242 | 242 | 239 | 217 | (4 | %) | (9 | %) | 693 | 698 | 1 | % | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
(3 | ) | (2 | ) | (2 | ) | (1 | ) | (2 | ) | 33 | % | (100 | %) | (7 | ) | (5 | ) | 29 | % | ||||||||||||||||||||
Other expenses |
(26 | ) | (45 | ) | (40 | ) | (34 | ) | (35 | ) | (35 | %) | (3 | %) | (93 | ) | (109 | ) | (17 | %) | ||||||||||||||||||||
Income tax expense |
121 | 71 | 56 | 16 | 19 | (84 | %) | 19 | % | 316 | 91 | (71 | %) | |||||||||||||||||||||||||||
Core earnings |
294 | 201 | 181 | 99 | 86 | (71 | %) | (13 | %) | 790 | 366 | (54 | %) | |||||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax [4] |
5 | 11 | (14 | ) | 25 | (32 | ) | NM | NM | (19 | ) | (21 | ) | (11 | %) | |||||||||||||||||||||||||
Income from continuing operations, net of tax |
299 | 212 | 167 | 124 | 54 | (82 | %) | (56 | %) | 771 | 345 | (55 | %) | |||||||||||||||||||||||||||
Add: Income (loss) from discontinued operations, net of tax |
7 | 1 | 160 | (3 | ) | (2 | ) | NM | 33 | % | 11 | 155 | NM | |||||||||||||||||||||||||||
Net Income |
$ | 306 | $ | 213 | $ | 327 | $ | 121 | $ | 52 | (83 | %) | (57 | %) | $ | 782 | $ | 500 | (36 | %) | ||||||||||||||||||||
[1] | The three months ended December 31, 2010 included current accident year reserve strengthening of $44 primarily driven by workers compensation and programs business. The three months ended September 30, 2011 included current accident year reserve strengthening of $47 predominantly related to workers compensation business. | |
[2] | Included within prior accident years development were the following reserve strengthenings (releases): |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Auto liability |
(26 | ) | (3 | ) | (1 | ) | | (4 | ) | (51 | ) | (5 | ) | |||||||||||||||
Workers compensation |
(34 | ) | (17 | ) | (1 | ) | 4 | 7 | (53 | ) | 10 | |||||||||||||||||
Package business |
(11 | ) | 1 | (7 | ) | 3 | (42 | ) | (20 | ) | (46 | ) | ||||||||||||||||
General liability |
(47 | ) | (14 | ) | 6 | 6 | (8 | ) | (94 | ) | 4 | |||||||||||||||||
Professional liability |
(8 | ) | (1 | ) | (9 | ) | 2 | 29 | (87 | ) | 22 | |||||||||||||||||
Fidelity & Surety |
| 4 | | (2 | ) | (7 | ) | (9 | ) | (9 | ) | |||||||||||||||||
Commercial Property |
1 | (3 | ) | 2 | (7 | ) | 1 | (13 | ) | (4 | ) | |||||||||||||||||
Uncollectible reinsurance |
| | | | | (30 | ) | | ||||||||||||||||||||
Discount accretion on workers compensation |
7 | 6 | 7 | 10 | 15 | 20 | 32 | |||||||||||||||||||||
Catastrophes |
1 | | (5 | ) | 10 | 2 | 1 | 7 | ||||||||||||||||||||
Other reserve re-estimates, net |
(1 | ) | 5 | 2 | 5 | (2 | ) | (3 | ) | 5 | ||||||||||||||||||
Total prior accident years development |
(118 | ) | (22 | ) | (6 | ) | 31 | (9 | ) | (339 | ) | 16 |
[3] | The nine months ended September 30, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes. | |
[4] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
14
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
$ | 1,447 | $ | 1,449 | $ | 1,645 | $ | 1,498 | $ | 1,551 | 7 | % | 4 | % | $ | 4,347 | $ | 4,694 | 8 | % | ||||||||||||||||||||
Change in unearned premium reserve |
8 | (17 | ) | 147 | (19 | ) | (2 | ) | NM | 89 | % | 69 | 126 | 83 | % | |||||||||||||||||||||||||
Earned premiums |
1,439 | 1,466 | 1,498 | 1,517 | 1,553 | 8 | % | 2 | % | 4,278 | 4,568 | 7 | % | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] |
888 | 945 | 962 | 950 | 1,085 | 22 | % | 14 | % | 2,634 | 2,997 | 14 | % | |||||||||||||||||||||||||||
Current accident year catastrophes |
13 | 18 | 46 | 166 | 93 | NM | (44 | %) | 134 | 305 | 128 | % | ||||||||||||||||||||||||||||
Prior accident years [2] |
(118 | ) | (22 | ) | (6 | ) | 31 | (9 | ) | 92 | % | NM | (339 | ) | 16 | NM | ||||||||||||||||||||||||
Total losses and loss adjustment expenses |
783 | 941 | 1,002 | 1,147 | 1,169 | 49 | % | 2 | % | 2,429 | 3,318 | 37 | % | |||||||||||||||||||||||||||
Underwriting expenses [3] |
434 | 443 | 455 | 455 | 454 | 5 | % | | 1,336 | 1,364 | 2 | % | ||||||||||||||||||||||||||||
Dividends to policyholders |
4 | 5 | 4 | 4 | 5 | 25 | % | 25 | % | | 13 | | ||||||||||||||||||||||||||||
Underwriting results |
218 | 77 | 37 | (89 | ) | (75 | ) | NM | 16 | % | 513 | (127 | ) | NM | ||||||||||||||||||||||||||
UNDERWRITING RATIOS |
||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] |
61.8 | 64.4 | 64.3 | 62.6 | 69.9 | (8.1 | ) | (7.3 | ) | 61.6 | 65.6 | (4.0 | ) | |||||||||||||||||||||||||||
Current accident year catastrophes |
0.9 | 1.2 | 3.1 | 11.0 | 6.0 | (5.1 | ) | 5.0 | 3.1 | 6.7 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior accident years [2] [4] |
(8.2 | ) | (1.5 | ) | (0.4 | ) | 2.1 | (0.6 | ) | (7.6 | ) | 2.7 | (7.9 | ) | 0.4 | (8.3 | ) | |||||||||||||||||||||||
Total losses and loss adjustment expenses |
54.5 | 64.2 | 66.9 | 75.6 | 75.3 | (20.8 | ) | 0.3 | 56.8 | 72.6 | (15.8 | ) | ||||||||||||||||||||||||||||
Expenses |
30.1 | 30.2 | 30.4 | 30.0 | 29.2 | 0.9 | 0.8 | 31.2 | 29.9 | 1.3 | ||||||||||||||||||||||||||||||
Policyholder dividends |
0.3 | 0.3 | 0.3 | 0.3 | 0.3 | | | | 0.3 | (0.3 | ) | |||||||||||||||||||||||||||||
Combined ratio |
84.9 | 94.7 | 97.5 | 105.8 | 104.8 | (19.9 | ) | 1.0 | 88.0 | 102.8 | (14.8 | ) | ||||||||||||||||||||||||||||
Catastrophes |
||||||||||||||||||||||||||||||||||||||||
Current year |
0.9 | 1.2 | 3.0 | 11.0 | 6.0 | (5.1 | ) | 5.0 | 3.1 | 6.7 | (3.6 | ) | ||||||||||||||||||||||||||||
Prior year |
| | (0.3 | ) | 0.7 | 0.1 | (0.1 | ) | 0.6 | | 0.2 | (0.2 | ) | |||||||||||||||||||||||||||
Catastrophe ratio |
0.9 | 1.3 | 2.7 | 11.6 | 6.1 | (5.2 | ) | 5.5 | 3.1 | 6.8 | (3.7 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes |
84.0 | 93.5 | 94.8 | 94.2 | 98.7 | (14.7 | ) | (4.5 | ) | 84.9 | 96.0 | (11.1 | ) | |||||||||||||||||||||||||||
Combined ratio before catastrophes and prior
year development |
92.2 | 95.0 | 94.9 | 92.8 | 99.4 | (7.2 | ) | (6.6 | ) | 92.8 | 95.8 | (3.0 | ) | |||||||||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) |
||||||||||||||||||||||||||||||||||||||||
Standard Commercial Lines Renewal Written Price Increases [5] |
1 | % | 1 | % | 3 | % | 3 | % | 4 | % | 3 | % | 1 | % | 1 | % | 3 | % | 2 | % | ||||||||||||||||||||
Standard Commercial Lines Policy Count Retention [5] |
83 | % | 83 | % | 83 | % | 82 | % | 82 | % | (1 | %) | | 84 | % | 82 | % | (2 | %) | |||||||||||||||||||||
New Business Premium $ |
$ | 279 | $ | 270 | $ | 303 | $ | 286 | $ | 271 | (3 | %) | (5 | %) | $ | 852 | $ | 860 | 1 | % | ||||||||||||||||||||
Standard Commercial Lines Policies in Force [5] |
1,201,862 | 1,211,047 | 1,229,758 | 1,250,152 | 1,256,229 | 5 | % | |
[1] | The three months ended December 31, 2010 included current accident year reserve strengthening of $44, or 3 points, primarily driven by workers compensation and programs business. The three months ended September 30, 2011 included current accident year reserve strengthening of $47, or 3.0 points, predominantly related to workers compensation business. | |
[2] | Refer to footnote 1 on page 14 for a summary of reserve strengthenings (releases) that are included within prior accident years development. | |
[3] | The nine months ended September 30, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes. | |
[4] | Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses. | |
[5] | Standard commercial lines consist of The Hartfords small commercial and middle market lines of business. |
15
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
||||||||||||||||||||||||||||||||||||||||
Direct premiums |
$ | 1,036 | $ | 1,025 | $ | 1,024 | $ | 1,058 | $ | 996 | (4 | %) | (6 | %) | $ | 3,175 | $ | 3,078 | (3 | %) | ||||||||||||||||||||
Reinsurance premiums |
7 | 5 | 4 | 4 | 4 | (43 | %) | | 19 | 12 | (37 | %) | ||||||||||||||||||||||||||||
Net premiums |
1,043 | 1,030 | 1,028 | 1,062 | 1,000 | (4 | %) | (6 | %) | 3,194 | 3,090 | (3 | %) | |||||||||||||||||||||||||||
Administrative Services Only (ASO) fees |
10 | 10 | 11 | 11 | 11 | 10 | % | | 29 | 33 | 14 | % | ||||||||||||||||||||||||||||
Other fees |
5 | 4 | 5 | 3 | 5 | | 67 | % | 11 | 13 | 18 | % | ||||||||||||||||||||||||||||
Total fee income |
15 | 14 | 16 | 14 | 16 | 7 | % | 14 | % | 40 | 46 | 15 | % | |||||||||||||||||||||||||||
Total premiums and other considerations |
1,058 | 1,044 | 1,044 | 1,076 | 1,016 | (4 | %) | (6 | %) | 3,234 | 3,136 | (3 | %) | |||||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
96 | 95 | 95 | 96 | 92 | (4 | %) | (4 | %) | 296 | 283 | (4 | %) | |||||||||||||||||||||||||||
Net investment income on assigned capital |
11 | 10 | 9 | 10 | 10 | (9 | %) | | 28 | 29 | 4 | % | ||||||||||||||||||||||||||||
Total net investment income |
107 | 105 | 104 | 106 | 102 | (5 | %) | (4 | %) | 324 | 312 | (4 | %) | |||||||||||||||||||||||||||
Net realized capital losses core |
(1 | ) | (1 | ) | (1 | ) | | (1 | ) | | | (2 | ) | (2 | ) | | ||||||||||||||||||||||||
Total core revenues |
1,164 | 1,148 | 1,147 | 1,182 | 1,117 | (4 | %) | (5 | %) | 3,556 | 3,446 | (3 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), before tax and DAC, excluded from core revenues |
| 16 | (13 | ) | 10 | 7 | | (30 | %) | 33 | 4 | (88 | %) | |||||||||||||||||||||||||||
Total revenues |
1,164 | 1,164 | 1,134 | 1,192 | 1,124 | (3 | %) | (6 | %) | 3,589 | 3,450 | (4 | %) | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
||||||||||||||||||||||||||||||||||||||||
Death benefits |
296 | 286 | 340 | 319 | 300 | 1 | % | (6 | %) | 931 | 959 | 3 | % | |||||||||||||||||||||||||||
Other contract benefits |
479 | 481 | 488 | 478 | 486 | 1 | % | 2 | % | 1,384 | 1,452 | 5 | % | |||||||||||||||||||||||||||
Change in reserve |
41 | 59 | | 53 | 28 | (32 | %) | (47 | %) | 190 | 81 | (57 | %) | |||||||||||||||||||||||||||
Total benefits and losses |
816 | 826 | 828 | 850 | 814 | | (4 | %) | 2,505 | 2,492 | (1 | %) | ||||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
139 | 125 | 136 | 136 | 125 | (10 | %) | (8 | %) | 421 | 397 | (6 | %) | |||||||||||||||||||||||||||
Operating expenses |
127 | 133 | 133 | 135 | 135 | 6 | % | | 389 | 403 | 4 | % | ||||||||||||||||||||||||||||
Premium taxes and other expenses [1] |
22 | 25 | 31 | 23 | 21 | (5 | %) | (9 | %) | 68 | 75 | 10 | % | |||||||||||||||||||||||||||
Subtotal expenses before deferral |
288 | 283 | 300 | 294 | 281 | (2 | %) | (4 | %) | 878 | 875 | | ||||||||||||||||||||||||||||
Deferred policy acquisition costs |
(13 | ) | (11 | ) | (14 | ) | (13 | ) | (13 | ) | | | (39 | ) | (40 | ) | (3 | %) | ||||||||||||||||||||||
Total other insurance expense |
275 | 272 | 286 | 281 | 268 | (3 | %) | (5 | %) | 839 | 835 | | ||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
15 | 15 | 14 | 14 | 14 | (7 | %) | | 46 | 42 | (9 | %) | ||||||||||||||||||||||||||||
Total benefits and expenses |
1,106 | 1,113 | 1,128 | 1,145 | 1,096 | (1 | %) | (4 | %) | 3,390 | 3,369 | (1 | %) | |||||||||||||||||||||||||||
Core earnings before income taxes |
58 | 35 | 19 | 37 | 21 | (64 | %) | (43 | %) | 166 | 77 | (54 | %) | |||||||||||||||||||||||||||
Income tax expense |
14 | 5 | | 7 | 1 | (93 | %) | (86 | %) | 38 | 8 | (79 | %) | |||||||||||||||||||||||||||
Core Earnings |
44 | 30 | 19 | 30 | 20 | (55 | %) | (33 | %) | 128 | 69 | (46 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core
earnings [2] |
2 | 10 | (8 | ) | 11 | 5 | 150 | % | (55 | %) | 17 | 8 | (53 | %) | ||||||||||||||||||||||||||
Net income |
46 | 40 | 11 | 41 | 25 | (46 | %) | (39 | %) | 145 | 77 | (47 | %) | |||||||||||||||||||||||||||
After-Tax Profit as % of Revenues |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
3.8 | % | 2.6 | % | 1.7 | % | 2.6 | % | 1.8 | % | (2.0 | ) | (0.8 | ) | 3.7 | % | 2.0 | % | (1.7 | ) | ||||||||||||||||||||
Net income |
4.0 | % | 3.4 | % | 1.0 | % | 3.6 | % | 2.2 | % | (1.8 | ) | (1.4 | ) | 4.1 | % | 2.3 | % | (1.8 | ) |
[1] | The three months ended March 31, 2011 includes a one-time payment to a third-party administrator of $8, before-tax. | |
[2] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. |
16
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
PREMIUMS |
||||||||||||||||||||||||||||||||||||||||
Fully Insured Ongoing Premiums |
||||||||||||||||||||||||||||||||||||||||
Group disability |
$ | 472 | $ | 470 | $ | 462 | $ | 452 | $ | 452 | (4 | %) | | $ | 1,422 | $ | 1,366 | (4 | %) | |||||||||||||||||||||
Group life |
513 | 513 | 516 | 512 | 501 | (2 | %) | (2 | %) | 1,539 | 1,529 | (1 | %) | |||||||||||||||||||||||||||
Other |
58 | 47 | 50 | 49 | 47 | (19 | %) | (4 | %) | 175 | 146 | (17 | %) | |||||||||||||||||||||||||||
Total fully insured ongoing premiums |
$ | 1,043 | $ | 1,030 | $ | 1,028 | $ | 1,013 | $ | 1,000 | (4 | %) | (1 | %) | $ | 3,136 | $ | 3,041 | (3 | %) | ||||||||||||||||||||
Total buyouts [1] |
| | | 49 | | | (100 | %) | 58 | 49 | (16 | %) | ||||||||||||||||||||||||||||
Total premiums |
1,043 | 1,030 | 1,028 | 1,062 | $ | 1,000 | (4 | %) | (6 | %) | 3,194 | 3,090 | (3 | %) | ||||||||||||||||||||||||||
Group disability premium equivalents [2] |
101 | 99 | 105 | 107 | 109 | 8 | % | 2 | % | 295 | 321 | 9 | % | |||||||||||||||||||||||||||
Total premiums and premium equivalent |
$ | 1,144 | $ | 1,129 | $ | 1,133 | $ | 1,169 | $ | 1,109 | (3 | %) | (5 | %) | $ | 3,489 | $ | 3,411 | (2 | %) | ||||||||||||||||||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) |
||||||||||||||||||||||||||||||||||||||||
Fully Insured Ongoing Sales |
||||||||||||||||||||||||||||||||||||||||
Group disability |
$ | 37 | $ | 37 | $ | 109 | $ | 41 | $ | 36 | (3 | %) | (12 | %) | $ | 200 | $ | 186 | (7 | %) | ||||||||||||||||||||
Group life |
58 | 47 | 128 | 48 | 53 | (9 | %) | 10 | % | 285 | 229 | (20 | %) | |||||||||||||||||||||||||||
Other |
5 | 2 | 7 | 3 | 2 | (60 | %) | (33 | %) | 12 | 12 | | ||||||||||||||||||||||||||||
Total fully insured ongoing sales |
100 | 86 | 244 | 92 | 91 | (9 | %) | (1 | %) | 497 | 427 | (14 | %) | |||||||||||||||||||||||||||
Total buyouts [1] |
| | | 49 | (1 | ) | | NM | 58 | 48 | (17 | %) | ||||||||||||||||||||||||||||
Total sales |
100 | 86 | 244 | 141 | 90 | (10 | %) | (36 | %) | 555 | 475 | (14 | %) | |||||||||||||||||||||||||||
Group disability
premium equivalents [2] |
18 | 8 | 47 | 22 | 23 | 28 | % | 5 | % | 84 | 92 | 10 | % | |||||||||||||||||||||||||||
Total sales and premium equivalents |
$ | 118 | $ | 94 | $ | 291 | $ | 163 | $ | 113 | (4 | %) | (31 | %) | $ | 639 | $ | 567 | (11 | %) | ||||||||||||||||||||
RATIOS [3] |
||||||||||||||||||||||||||||||||||||||||
Loss Ratio |
77.1 | % | 79.1 | % | 79.3 | % | 78.0 | % | 80.1 | % | 3.0 | 2.1 | 77.0 | % | 79.1 | % | 2.1 | |||||||||||||||||||||||
Expense Ratio [4] |
27.4 | % | 27.5 | % | 28.7 | % | 28.7 | % | 27.8 | % | 0.4 | (0.9 | ) | 27.9 | % | 28.4 | % | 0.5 | ||||||||||||||||||||||
GAAP RESERVES [5] |
||||||||||||||||||||||||||||||||||||||||
Group disability |
$ | 5,069 | $ | 5,127 | $ | 5,164 | $ | 5,225 | 5,259 | 4 | % | 1 | % | |||||||||||||||||||||||||||
Group life |
1,244 | 1,250 | 1,217 | 1,210 | 1,206 | (3 | %) | | ||||||||||||||||||||||||||||||||
Other |
82 | 79 | 76 | 75 | 75 | (9 | %) | | ||||||||||||||||||||||||||||||||
Total GAAP reserves |
$ | 6,395 | $ | 6,456 | $ | 6,457 | $ | 6,510 | $ | 6,540 | 2 | % | | |||||||||||||||||||||||||||
[1] | Takeover of open claim liabilities and other non-recurring premium amounts. | |
[2] | ASO fees and claims under claim management agreements. | |
[3] | Ratios calculated excluding the effects of buyout premiums. | |
[4] | The three months ended March 31, 2011 includes a one-time payment to a third-party administrator totaling 0.7 points. | |
[5] | Reserve balances for the three months ended September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011 are net of reinsurance recoverables of $200, $209, $212, $219 and $225, respectively. |
17
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 985 | $ | 971 | $ | 956 | $ | 939 | $ | 930 | (6 | %) | (1 | %) | $ | 2,976 | $ | 2,825 | (5 | %) | ||||||||||||||||||||
Net investment income |
46 | 48 | 50 | 49 | 46 | | (6 | %) | 139 | 145 | 4 | % | ||||||||||||||||||||||||||||
Other revenues |
40 | 49 | 40 | 36 | 35 | (13 | %) | (3 | %) | 123 | 111 | (10 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
1 | 2 | (4 | ) | 2 | (10 | ) | NM | NM | (2 | ) | (12 | ) | NM | ||||||||||||||||||||||||||
Total revenues |
1,072 | 1,070 | 1,042 | 1,026 | 1,001 | (7 | %) | (2 | %) | 3,236 | 3,069 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
689 | 739 | 599 | 904 | 767 | 11 | % | (15 | %) | 2,212 | 2,270 | 3 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
167 | 164 | 161 | 160 | 159 | (5 | %) | (1 | %) | 503 | 480 | (5 | %) | |||||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
118 | 128 | 120 | 240 | 106 | (10 | %) | (56 | %) | 365 | 466 | 28 | % | |||||||||||||||||||||||||||
Total benefits and expenses |
974 | 1,031 | 880 | 1,304 | 1,032 | 6 | % | (21 | %) | 3,080 | 3,216 | 4 | % | |||||||||||||||||||||||||||
Income (loss) before income taxes |
98 | 39 | 162 | (278 | ) | (31 | ) | NM | 89 | % | 156 | (147 | ) | NM | ||||||||||||||||||||||||||
Income tax expense (benefit) |
28 | 9 | 52 | (104 | ) | (15 | ) | NM | 86 | % | 43 | (67 | ) | NM | ||||||||||||||||||||||||||
Net income (loss) |
70 | 30 | 110 | (174 | ) | (16 | ) | NM | 91 | % | 113 | (80 | ) | NM | ||||||||||||||||||||||||||
Less: Net realized capital gains
(losses), after-tax, excluded
from core earnings (losses) [2] |
1 | 2 | (3 | ) | 5 | (6 | ) | NM | NM | (4 | ) | (4 | ) | | ||||||||||||||||||||||||||
Core earnings (losses) |
$ | 69 | $ | 28 | $ | 113 | $ | (179 | ) | $ | (10 | ) | NM | 94 | % | $ | 117 | $ | (76 | ) | NM | |||||||||||||||||||
[1] | The three months ended June 30, 2011 includes a charge of $113, before-tax, related to a discontinued software program. | |
[2] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
18
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
$ | 1,014 | $ | 896 | $ | 884 | $ | 969 | $ | 964 | (5 | %) | (1 | %) | $ | 2,990 | $ | 2,817 | (6 | %) | ||||||||||||||||||||
Change in unearned premium reserve |
29 | (75 | ) | (72 | ) | 30 | 34 | 17 | % | 13 | % | 14 | (8 | ) | NM | |||||||||||||||||||||||||
Earned premiums |
985 | 971 | 956 | 939 | 930 | (6 | %) | (1 | %) | 2,976 | 2,825 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes |
681 | 703 | 616 | 623 | 663 | (3 | %) | 6 | % | 2,034 | 1,902 | (6 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes |
42 | 71 | 32 | 281 | 113 | 169 | % | (60 | %) | 229 | 426 | 86 | % | |||||||||||||||||||||||||||
Prior accident years [1] |
(34 | ) | (35 | ) | (49 | ) | | (9 | ) | 74 | % | | (51 | ) | (58 | ) | (14 | %) | ||||||||||||||||||||||
Total losses and loss adjustment expenses |
689 | 739 | 599 | 904 | 767 | 11 | % | (15 | %) | 2,212 | 2,270 | 3 | % | |||||||||||||||||||||||||||
Underwriting expenses |
238 | 237 | 233 | 236 | 226 | (5 | %) | (4 | %) | 720 | 695 | (3 | %) | |||||||||||||||||||||||||||
Underwriting results |
58 | (5 | ) | 124 | (201 | ) | (63 | ) | NM | 69 | % | 44 | (140 | ) | NM | |||||||||||||||||||||||||
Net investment income |
46 | 48 | 50 | 49 | 46 | | (6 | %) | 139 | 145 | 4 | % | ||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
| (1 | ) | | (1 | ) | | | 100 | % | (1 | ) | (1 | ) | | |||||||||||||||||||||||||
Other expenses [2] |
(7 | ) | (6 | ) | (8 | ) | (128 | ) | (4 | ) | 43 | % | 97 | % | (25 | ) | (140 | ) | NM | |||||||||||||||||||||
Income tax benefit (expense) |
28 | 8 | 53 | (102 | ) | (11 | ) | NM | 89 | % | 40 | (60 | ) | NM | ||||||||||||||||||||||||||
Core earnings (losses) |
69 | 28 | 113 | (179 | ) | (10 | ) | NM | 94 | % | 117 | (76 | ) | NM | ||||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax [3] |
1 | 2 | (3 | ) | 5 | (6 | ) | NM | NM | (4 | ) | (4 | ) | | ||||||||||||||||||||||||||
Net income (loss) |
$ | 70 | $ | 30 | $ | 110 | $ | (174 | ) | $ | (16 | ) | NM | 91 | % | $ | 113 | $ | (80 | ) | NM | |||||||||||||||||||
[1] | Included within prior accident years development were the following reserve strengthenings (releases): |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Auto liability |
$ | (41 | ) | $ | (33 | ) | $ | (55 | ) | $ | (9 | ) | $ | (19 | ) | $ | (82 | ) | $ | (83 | ) | |||||||
Homeowners |
3 | (4 | ) | (14 | ) | 1 | 14 | 27 | 1 | |||||||||||||||||||
Catastrophes |
8 | (1 | ) | 19 | 9 | | 11 | 28 | ||||||||||||||||||||
Other reserve re-estimates, net |
(4 | ) | 3 | 1 | (1 | ) | (4 | ) | (7 | ) | (4 | ) | ||||||||||||||||
Total prior accident years development |
$ | (34 | ) | $ | (35 | ) | $ | (49 | ) | $ | | $ | (9 | ) | $ | (51 | ) | $ | (58 | ) |
[2] | The three months ended June 30, 2011 includes a charge of $113, before-tax, related to a discontinued software program. | |
[3] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
19
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
$ | 1,014 | $ | 896 | $ | 884 | $ | 969 | $ | 964 | (5 | %) | (1 | %) | $ | 2,990 | $ | 2,817 | (6 | %) | ||||||||||||||||||||
Change in unearned premium reserve |
29 | (75 | ) | (72 | ) | 30 | 34 | 17 | % | 13 | % | 14 | (8 | ) | NM | |||||||||||||||||||||||||
Earned premiums |
985 | 971 | 956 | 939 | 930 | (6 | %) | (1 | %) | 2,976 | 2,825 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes |
681 | 703 | 616 | 623 | 663 | (3 | %) | 6 | % | 2,034 | 1,902 | (6 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes |
42 | 71 | 32 | 281 | 113 | 169 | % | (60 | %) | 229 | 426 | 86 | % | |||||||||||||||||||||||||||
Prior accident years [1] |
(34 | ) | (35 | ) | (49 | ) | | (9 | ) | 74 | % | | (51 | ) | (58 | ) | (14 | %) | ||||||||||||||||||||||
Total losses and loss adjustment expenses |
689 | 739 | 599 | 904 | 767 | 11 | % | (15 | %) | 2,212 | 2,270 | 3 | % | |||||||||||||||||||||||||||
Underwriting expenses |
238 | 237 | 233 | 236 | 226 | (5 | %) | (4 | %) | 720 | 695 | (3 | %) | |||||||||||||||||||||||||||
Underwriting results |
58 | (5 | ) | 124 | (201 | ) | (63 | ) | NM | 69 | % | 44 | (140 | ) | NM | |||||||||||||||||||||||||
UNDERWRITING RATIOS |
||||||||||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes |
69.2 | 72.4 | 64.3 | 66.5 | 71.3 | (2.1 | ) | (4.8 | ) | 68.4 | 67.3 | 1.1 | ||||||||||||||||||||||||||||
Current accident year catastrophes |
4.3 | 7.3 | 3.4 | 29.9 | 12.2 | (7.9 | ) | 17.7 | 7.7 | 15.1 | (7.4 | ) | ||||||||||||||||||||||||||||
Prior accident years [1] |
(3.5 | ) | (3.6 | ) | (5.1 | ) | | (1.0 | ) | (2.5 | ) | 1.0 | (1.7 | ) | (2.1 | ) | 0.4 | |||||||||||||||||||||||
Total losses and loss adjustment expenses |
70.0 | 76.0 | 62.6 | 96.4 | 82.5 | (12.5 | ) | 13.9 | 74.4 | 80.4 | (6.0 | ) | ||||||||||||||||||||||||||||
Expenses |
24.1 | 24.4 | 24.4 | 25.1 | 24.3 | (0.2 | ) | 0.8 | 24.2 | 24.6 | (0.4 | ) | ||||||||||||||||||||||||||||
Combined ratio |
94.1 | 100.4 | 87.0 | 121.5 | 106.8 | (12.7 | ) | 14.7 | 98.5 | 105.0 | (6.5 | ) | ||||||||||||||||||||||||||||
Catastrophes |
||||||||||||||||||||||||||||||||||||||||
Current year |
4.3 | 7.3 | 3.4 | 29.9 | 12.2 | (7.9 | ) | 17.7 | 7.7 | 15.1 | (7.4 | ) | ||||||||||||||||||||||||||||
Prior year |
0.7 | | 2.0 | 1.0 | | 0.7 | 1.0 | 0.4 | 1.0 | (0.6 | ) | |||||||||||||||||||||||||||||
Catastrophe ratio |
5.1 | 7.2 | 5.4 | 30.8 | 12.2 | (7.1 | ) | 18.6 | 8.0 | 16.1 | (8.1 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes |
89.1 | 93.2 | 81.6 | 90.6 | 94.6 | (5.5 | ) | (4.0 | ) | 90.5 | 88.9 | 1.6 | ||||||||||||||||||||||||||||
Combined ratio before catastrophes and
prior year development |
93.3 | 96.8 | 88.7 | 91.6 | 95.6 | (2.3 | ) | (4.0 | ) | 92.6 | 91.9 | 0.7 | ||||||||||||||||||||||||||||
PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Automobile |
93.3 | 103.1 | 85.7 | 99.5 | 100.3 | (7.0 | ) | (0.8 | ) | 95.2 | 95.1 | 0.1 | ||||||||||||||||||||||||||||
Homeowners |
96.3 | 94.1 | 89.2 | 172.8 | 122.1 | (25.8 | ) | 50.7 | 107.4 | 127.9 | (20.5 | ) | ||||||||||||||||||||||||||||
Total |
94.1 | 100.4 | 87.0 | 121.5 | 106.8 | (12.7 | ) | 14.7 | 98.5 | 105.0 | (6.5 | ) |
[1] | Refer to footnote 1 on page 19 for a summary of reserve strengthenings (releases) that are included within prior accident years development. |
20
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec, 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
BUSINESS UNIT |
||||||||||||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] |
||||||||||||||||||||||||||||||||||||||||
AARP |
$ | 743 | $ | 653 | $ | 647 | $ | 724 | $ | 717 | (3 | %) | (1 | %) | $ | 2,167 | $ | 2,088 | (4 | %) | ||||||||||||||||||||
Agency |
258 | 231 | 224 | 233 | 232 | (10 | %) | | 783 | 689 | (12 | %) | ||||||||||||||||||||||||||||
Other |
13 | 12 | 13 | 12 | 15 | 15 | % | 25 | % | 40 | 40 | | ||||||||||||||||||||||||||||
Total |
$ | 1,014 | $ | 896 | $ | 884 | $ | 969 | $ | 964 | (5 | %) | (1 | %) | $ | 2,990 | $ | 2,817 | (6 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
||||||||||||||||||||||||||||||||||||||||
AARP |
$ | 712 | $ | 707 | $ | 698 | $ | 694 | $ | 687 | (4 | %) | (1 | %) | $ | 2,144 | $ | 2,079 | (3 | %) | ||||||||||||||||||||
Agency |
259 | 251 | 243 | 234 | 229 | (12 | %) | (2 | %) | 789 | 706 | (11 | %) | |||||||||||||||||||||||||||
Other |
14 | 13 | 15 | 11 | 14 | | 27 | % | 43 | 40 | (7 | %) | ||||||||||||||||||||||||||||
Total |
$ | 985 | $ | 971 | $ | 956 | $ | 939 | $ | 930 | (6 | %) | (1 | %) | $ | 2,976 | $ | 2,825 | (5 | %) | ||||||||||||||||||||
PRODUCT LINE |
||||||||||||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] |
||||||||||||||||||||||||||||||||||||||||
Automobile |
$ | 700 | $ | 630 | $ | 641 | $ | 665 | $ | 657 | (6 | %) | (1 | %) | $ | 2,115 | $ | 1,963 | (7 | %) | ||||||||||||||||||||
Homeowners |
314 | 266 | 243 | 304 | 307 | (2 | %) | 1 | % | 875 | 854 | (2 | %) | |||||||||||||||||||||||||||
Total |
$ | 1,014 | $ | 896 | $ | 884 | $ | 969 | $ | 964 | (5 | %) | (1 | %) | $ | 2,990 | $ | 2,817 | (6 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
||||||||||||||||||||||||||||||||||||||||
Automobile |
$ | 698 | $ | 684 | $ | 672 | $ | 657 | $ | 649 | (7 | %) | (1 | %) | $ | 2,122 | $ | 1,978 | (7 | %) | ||||||||||||||||||||
Homeowners |
287 | 287 | 284 | 282 | 281 | (2 | %) | | 854 | 847 | (1 | %) | ||||||||||||||||||||||||||||
Total |
$ | 985 | $ | 971 | $ | 956 | $ | 939 | $ | 930 | (6 | %) | (1 | %) | $ | 2,976 | $ | 2,825 | (5 | %) | ||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR
OVER YEAR) |
||||||||||||||||||||||||||||||||||||||||
Renewal Written Price Increases |
||||||||||||||||||||||||||||||||||||||||
Automobile |
8 | % | 7 | % | 7 | % | 6 | % | 4 | % | (4 | %) | (2 | %) | 6 | % | 5 | % | (1 | %) | ||||||||||||||||||||
Homeowners |
11 | % | 10 | % | 9 | % | 9 | % | 8 | % | (3 | %) | (1 | %) | 9 | % | 8 | % | (1 | %) | ||||||||||||||||||||
Policy Count Retention |
||||||||||||||||||||||||||||||||||||||||
Automobile |
82 | % | 81 | % | 82 | % | 82 | % | 83 | % | 1 | % | 1 | % | 83 | % | 82 | % | (1 | %) | ||||||||||||||||||||
Homeowners |
84 | % | 84 | % | 83 | % | 84 | % | 84 | % | | | 85 | % | 83 | % | (2 | %) | ||||||||||||||||||||||
New Business Premium $ |
||||||||||||||||||||||||||||||||||||||||
Automobile |
$ | 74 | $ | 62 | $ | 66 | $ | 75 | $ | 80 | 8 | % | 7 | % | $ | 249 | $ | 221 | (11 | %) | ||||||||||||||||||||
Homeowners |
$ | 26 | $ | 20 | $ | 19 | $ | 23 | $ | 26 | | 13 | % | $ | 86 | $ | 68 | (21 | %) | |||||||||||||||||||||
Policies in force |
||||||||||||||||||||||||||||||||||||||||
Automobile |
2,287,845 | 2,226,351 | 2,178,719 | 2,137,351 | 2,106,385 | (8 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Homeowners |
1,455,921 | 1,426,107 | 1,402,264 | 1,380,301 | 1,358,162 | (7 | %) | (2 | %) |
[1] | The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve. |
21
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
REVENUES |
||||||||||||||||||||||||||||||||||||||||
Earned premiums [1] |
$ | 45 | $ | 39 | $ | 38 | $ | 26 | $ | 35 | (22 | %) | 35 | % | $ | 98 | $ | 99 | 1 | % | ||||||||||||||||||||
Fee income [1] |
1,108 | 1,164 | 1,142 | 1,146 | 1,115 | 1 | % | (3 | %) | 3,345 | 3,403 | 2 | % | |||||||||||||||||||||||||||
Net investment income (loss) |
||||||||||||||||||||||||||||||||||||||||
Securities available-for-sale and other |
649 | 640 | 656 | 660 | 659 | 2 | % | | 1,929 | 1,975 | 2 | % | ||||||||||||||||||||||||||||
Equity securities held for trading [2] |
1,043 | 131 | 804 | (597 | ) | (1,890 | ) | NM | NM | (905 | ) | (1,683 | ) | (86 | %) | |||||||||||||||||||||||||
Total net investment income (loss) |
1,692 | 771 | 1,460 | 63 | (1,231 | ) | NM | NM | 1,024 | 292 | (71 | %) | ||||||||||||||||||||||||||||
Net realized capital gains core |
3 | 8 | 2 | 6 | 11 | NM | 83 | % | 10 | 19 | 90 | % | ||||||||||||||||||||||||||||
Total core revenues |
2,848 | 1,982 | 2,642 | 1,241 | (70 | ) | NM | NM | 4,477 | 3,813 | (15 | %) | ||||||||||||||||||||||||||||
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues |
(317 | ) | (171 | ) | (352 | ) | 34 | 681 | NM | NM | (599 | ) | 363 | NM | ||||||||||||||||||||||||||
Total revenues |
2,531 | 1,811 | 2,290 | 1,275 | 611 | (76 | %) | (52 | %) | 3,878 | 4,176 | 8 | % | |||||||||||||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses [1][3] |
706 | 761 | 747 | 780 | 1,238 | 75 | % | 59 | % | 2,400 | 2,765 | 15 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses Returns credited on International variable annuities [2] |
1,043 | 131 | 803 | (597 | ) | (1,889 | ) | NM | NM | (905 | ) | (1,683 | ) | (86 | %) | |||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits [1] |
90 | 176 | 188 | 264 | 196 | 118 | % | (26 | %) | 644 | 648 | 1 | % | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
442 | 468 | 461 | 452 | 442 | | (2 | %) | 1,315 | 1,355 | 3 | % | ||||||||||||||||||||||||||||
Total benefits and expenses |
2,281 | 1,536 | 2,199 | 899 | (13 | ) | NM | NM | 3,454 | 3,085 | (11 | %) | ||||||||||||||||||||||||||||
CORE EARNINGS |
||||||||||||||||||||||||||||||||||||||||
Core earnings before income taxes |
567 | 446 | 443 | 342 | (57 | ) | NM | NM | 1,023 | 728 | (29 | %) | ||||||||||||||||||||||||||||
Income tax expense (benefit) [1][3][4] |
165 | 120 | 114 | 30 | (68 | ) | NM | NM | 242 | 76 | (69 | %) | ||||||||||||||||||||||||||||
Core earnings |
402 | 326 | 329 | 312 | 11 | (97 | %) | (96 | %) | 781 | 652 | (17 | %) | |||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1][4][5] |
(79 | ) | 13 | (201 | ) | 39 | 27 | NM | (31 | %) | (306 | ) | (135 | ) | 56 | % | ||||||||||||||||||||||||
Income (loss) from discontinued operations |
(3 | ) | 36 | | | | 100 | % | | (5 | ) | | 100 | % | ||||||||||||||||||||||||||
Net income |
$ | 320 | $ | 375 | $ | 128 | $ | 351 | $ | 38 | (88 | %) | (89 | %) | $ | 470 | $ | 517 | 10 | % | ||||||||||||||||||||
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Earned Premiums |
$ | (5 | ) | $ | | $ | | $ | 1 | $ | (3 | ) | $ | (6 | ) | $ | (2 | ) | ||||||||||
Fee Income |
5 | | (1 | ) | 2 | 21 | 17 | 22 | ||||||||||||||||||||
Benefits, losses and loss adjustment expense |
(124 | ) | 3 | (49 | ) | 8 | 408 | (40 | ) | 367 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
(136 | ) | (85 | ) | (45 | ) | 27 | (36 | ) | (80 | ) | (54 | ) | |||||||||||||||
Income tax expense (benefit) |
91 | 33 | 32 | (11 | ) | (125 | ) | 51 | (104 | ) | ||||||||||||||||||
Core earnings (loss) |
169 | 49 | 61 | (21 | ) | (227 | ) | 80 | (187 | ) | ||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
27 | 15 | 1 | (56 | ) | (289 | ) | (29 | ) | (344 | ) | |||||||||||||||||
Loss from discontinued operations |
(3 | ) | (1 | ) | | | | (3 | ) | | ||||||||||||||||||
Net income (loss) |
$ | 193 | $ | 63 | $ | 62 | $ | (77 | ) | $ | (516 | ) | $ | 48 | $ | (531 | ) |
[2] | 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. | |
[3] | The three and six months ended June 30, 2011 includes a tax benefit of $52 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001. | |
[4] | The three and six months ended June 30, 2011 includes a benefit of $55 related to the release of a deferred tax valuation allowance. | |
[5] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. |
22
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
CORE EARNINGS BY SEGMENT |
||||||||||||||||||||||||||||||||||||||||
Global Annuity |
$ | 146 | $ | 191 | $ | 169 | $ | 224 | $ | 146 | | (35 | %) | $ | 429 | $ | 539 | 26 | % | |||||||||||||||||||||
Life Insurance |
57 | 51 | 55 | 62 | 56 | (2 | %) | (10 | %) | 169 | 173 | 2 | % | |||||||||||||||||||||||||||
Retirement Plans |
10 | 11 | 17 | 20 | 12 | 20 | % | (40 | %) | 33 | 49 | 48 | % | |||||||||||||||||||||||||||
Mutual Funds |
20 | 24 | 27 | 27 | 24 | 20 | % | (11 | %) | 70 | 78 | 11 | % | |||||||||||||||||||||||||||
Wealth Management core earnings, excluding
DAC Unlock |
233 | 277 | 268 | 333 | 238 | 2 | % | (29 | %) | 701 | 839 | 20 | % | |||||||||||||||||||||||||||
DAC unlock impacts on net income |
193 | 63 | 62 | (77 | ) | (516 | ) | NM | NM | 48 | (531 | ) | NM | |||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
(106 | ) | (2 | ) | (202 | ) | 95 | 316 | NM | NM | (277 | ) | 209 | NM | ||||||||||||||||||||||||||
Income (loss) from discontinued operations |
| 37 | | | | | | (2 | ) | | 100 | % | ||||||||||||||||||||||||||||
Wealth Management net income |
320 | 375 | 128 | 351 | 38 | (88 | %) | (89 | %) | 470 | 517 | 10 | % | |||||||||||||||||||||||||||
DAC UNLOCK IMPACT ON REVENUES |
||||||||||||||||||||||||||||||||||||||||
Global Annuity |
3 | (2 | ) | (1 | ) | 2 | | (100 | %) | (100 | %) | 3 | 1 | (67 | %) | |||||||||||||||||||||||||
Life Insurance |
(3 | ) | 2 | | 1 | 19 | NM | NM | 8 | 20 | 150 | % | ||||||||||||||||||||||||||||
Total DAC unlock impact on core revenues |
| | (1 | ) | 3 | 19 | NM | NM | 11 | 21 | 91 | % | ||||||||||||||||||||||||||||
DAC unlock impact on net realized gains (losses), before tax and DAC, excluded from core
earnings |
(1 | ) | (1 | ) | | 3 | | 100 | % | (100 | %) | 1 | 3 | NM | ||||||||||||||||||||||||||
Total DAC unlock impact on revenues |
(1 | ) | (1 | ) | (1 | ) | 6 | 19 | NM | NM | 12 | 24 | 100 | % | ||||||||||||||||||||||||||
DAC UNLOCK IMPACT ON CORE EARNINGS (LOSSES) BY SEGMENT |
||||||||||||||||||||||||||||||||||||||||
Global Annuity |
116 | 47 | 59 | (15 | ) | (124 | ) | NM | NM | 33 | (80 | ) | NM | |||||||||||||||||||||||||||
Life Insurance |
28 | (1 | ) | (2 | ) | (2 | ) | (65 | ) | NM | NM | 24 | (69 | ) | NM | |||||||||||||||||||||||||
Retirement Plans |
25 | 3 | 4 | (4 | ) | (38 | ) | NM | NM | 23 | (38 | ) | NM | |||||||||||||||||||||||||||
DAC unlock impact on core earnings (losses) [1] |
169 | 49 | 61 | (21 | ) | (227 | ) | NM | NM | 80 | (187 | ) | NM | |||||||||||||||||||||||||||
DAC unlock impact on net realized gains (losses), net of tax and DAC, excluded from core
earnings [2] [3] |
27 | 15 | 1 | (56 | ) | (289 | ) | NM | NM | (29 | ) | (344 | ) | NM | ||||||||||||||||||||||||||
DAC unlock impact from discontinued operations |
(3 | ) | (1 | ) | | | | 100 | % | | (3 | ) | | 100 | % | |||||||||||||||||||||||||
DAC unlock impact on net income (loss) |
$ | 193 | $ | 63 | $ | 62 | $ | (77 | ) | $ | (516 | ) | NM | NM | $ | 48 | $ | (531 | ) | NM | ||||||||||||||||||||
[1] | Included in the three months ended September 30, 2010 are the impacts of assumption updates of $(31), $28 and $18 for Global Annuity, Life Insurance and Retirement Plans, respectively. Included in the three months ended September 30, 2011 are the impacts of assumption updates of $115, $(63) and $(36) for Global Annuity, Life Insurance and Retirement Plans, respectively. | |
[2] | Included in the three months ended September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011 and September 30, 2011 are income tax expense (benefits) of $13, $11, $0, $(28) and $(157), respectively. Included in the nine months ended September 30, 2010 and 2011 are income tax benefits of $(22) and $(185), respectively. | |
[3] | Included in the three months ended September 30, 2010 are the impacts of assumption updates of $24, $1 and $(5) for Global Annuity, Life Insurance and Retirement Plans, respectively. Included in the three months ended September 30, 2011 are the impacts of assumption updates of $(256) and $(1) for Global Annuity and Retirement Plans, respectively. |
23
Total | ||||||||||||||||||||||||||||
U.S. | International | Other | Life | Retirement | Mutual | Wealth | ||||||||||||||||||||||
YEAR-TO-DATE | Annuity | Annuity | Annuity | Insurance | Plans | Funds | Management | |||||||||||||||||||||
Balance, December 31, 2010 |
$ | 3,216 | $ | 1,680 | $ | 85 | $ | 2,661 | $ | 842 | $ | 43 | $ | 8,527 | ||||||||||||||
Adjustments to unrealized gains and losses on
securities available for sale and other |
240 | (63 | ) | 1 | 99 | (25 | ) | 1 | 253 | |||||||||||||||||||
Balance excluding adjustments to unrealized gains and losses on
securities available for sale and other |
3,456 | 1,617 | 86 | 2,760 | 817 | 44 | 8,780 | |||||||||||||||||||||
Capitalization |
47 | | | 239 | 97 | 26 | 409 | |||||||||||||||||||||
Amortization Deferred Policy Acquisition Costs |
(325 | ) | (183 | ) | (5 | ) | (88 | ) | (49 | ) | (36 | ) | (686 | ) | ||||||||||||||
Amortization Present Value of Future Profits |
(3 | ) | | | (12 | ) | | | (15 | ) | ||||||||||||||||||
Amortization Realized Capital Gains / Losses |
15 | (101 | ) | | (22 | ) | (5 | ) | | (113 | ) | |||||||||||||||||
Amortization Unlock Core |
(150 | ) | 326 | (5 | ) | (60 | ) | (57 | ) | | 54 | |||||||||||||||||
Amortization Unlock Non-core |
(90 | ) | (424 | ) | | 1 | (9 | ) | | (522 | ) | |||||||||||||||||
Effect of Currency Translation Adjustment |
| 83 | | | | | 83 | |||||||||||||||||||||
Balance, September 30, 2011 |
2,950 | 1,318 | 76 | 2,818 | 794 | 34 | 7,990 | |||||||||||||||||||||
Adjustments to unrealized gains and losses on
securities available for sale and other |
(289 | ) | 68 | (1 | ) | (282 | ) | (99 | ) | (2 | ) | (605 | ) | |||||||||||||||
Balance, September 30, 2011 including adjustments to unrealized
gains and losses on securities available-for-sale and other |
$ | 2,661 | $ | 1,386 | $ | 75 | $ | 2,536 | $ | 695 | $ | 32 | $ | 7,385 | ||||||||||||||
24
As of | As of | As of | As of | As of | ||||||||||||||||
September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
U.S. VARIABLE ANNUITY BUSINESS |
||||||||||||||||||||
S&P 500 Index Value at end of period |
1,141.20 | 1,257.64 | 1,325.83 | 1,320.64 | 1,131.42 | |||||||||||||||
Total Account Value with Guaranteed Minimum Death Benefits (GMDB) |
$ | 87,742 | $ | 90,831 | $ | 90,968 | $ | 87,303 | $ | 73,831 | ||||||||||
GMDB Gross net amount of risk |
15,148 | 10,746 | 8,616 | 8,598 | 15,934 | |||||||||||||||
% of GMDB NAR reinsured |
55 | % | 60 | % | 63 | % | 64 | % | 54 | % | ||||||||||
GMDB Retained net amount of risk |
6,756 | 4,331 | 3,152 | 3,136 | 7,306 | |||||||||||||||
GMDB net GAAP liability [1] |
407 | 367 | 348 | 347 | 441 | |||||||||||||||
Total Account Value with Guaranteed Minimum Withdrawal Benefits (GMWB) |
41,085 | 43,504 | 44,803 | 42,501 | 35,566 | |||||||||||||||
GMWB Gross net amount of risk |
4,090 | 2,321 | 1,296 | 745 | 3,025 | |||||||||||||||
% of GMWB NAR reinsured |
17 | % | 16 | % | 17 | % | 21 | % | 16 | % | ||||||||||
GMWB Retained net amount of risk |
3,392 | 1,941 | 1,080 | 592 | 2,533 | |||||||||||||||
GMWB Net GAAP Liability [2] |
2,597 | 2,083 | 1,330 | 1,176 | 2,276 | |||||||||||||||
JAPAN VARIABLE ANNUITY BUSINESS |
||||||||||||||||||||
Yen / $ |
83.5 | 81.1 | 82.9 | 80.8 | 77.1 | |||||||||||||||
Total Account Value with GMDB |
$ | 30,912 | $ | 31,249 | $ | 30,778 | $ | 30,785 | $ | 29,522 | ||||||||||
GMDB Gross net amount of risk |
8,569 | 8,847 | 7,962 | 8,469 | 11,035 | |||||||||||||||
% of GMDB NAR reinsured |
16 | % | 14 | % | 15 | % | 15 | % | 13 | % | ||||||||||
GMDB Retained net amount of risk |
7,233 | 7,593 | 6,750 | 7,233 | 9,583 | |||||||||||||||
Total Account Value with Guaranteed Minimum Income Benefits (GMIB) |
26,731 | 28,655 | 28,835 | 28,526 | 27,471 | |||||||||||||||
GMIB Retained net amount of risk [2] |
5,846 | 5,410 | 5,777 | 5,442 | 7,662 | |||||||||||||||
GMDB/GMIB net GAAP liability [1] |
592 | 652 | 607 | 635 | 907 |
[1] | For the three months ended September 30, 2010, there was a (decrease) to the GMDB/GMIB liability as a result of the unlock, for U.S. and Japan variable annuity businesses of $(69) and $(59), respectively. For the three months ended December 31, 2010 the amounts were $(51) and $(46), respectively. For the three months ended March 31, 2011 the amounts were $(25) and $(21), respectively. For the three months ended June 30, 2011, the amounts were $(10) and $17, respectively. For the three months ended September 30, 2011, the amounts were $89 and $249, respectively. | |
[2] | Policies with a guaranteed living benefit (a GMWB in the US or a GMIB in Japan) also have a guaranteed death benefit. The net amount at risk (NAR) for each benefit is shown, however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to $0. When a policy goes into benefit status on a GMIB, its GMDB NAR is released. |
25
Year Over | |||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | ||||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | ||||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | ||||||||||||||||||||||||||||||||
Revenues |
|||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
|||||||||||||||||||||||||||||||||||||||||
Variable annuity fees |
$ | 533 | $ | 553 | $ | 545 | $ | 541 | $ | 510 | (4 | %) | (6 | %) | $ | 1,609 | $ | 1,596 | (1 | %) | |||||||||||||||||||||
Other fees [1] |
58 | 55 | 47 | 51 | 52 | (10 | %) | 2 | % | 148 | 150 | 1 | % | ||||||||||||||||||||||||||||
Total fee income |
591 | 608 | 592 | 592 | 562 | (5 | %) | (5 | %) | 1,757 | 1,746 | (1 | %) | ||||||||||||||||||||||||||||
Direct premiums |
97 | 86 | 81 | 70 | 82 | (15 | %) | 17 | % | 239 | 233 | (3 | %) | ||||||||||||||||||||||||||||
Reinsurance premiums [1] |
(28 | ) | (23 | ) | (22 | ) | (21 | ) | (23 | ) | 18 | % | (10 | %) | (76 | ) | (66 | ) | 13 | % | |||||||||||||||||||||
Net premiums |
69 | 63 | 59 | 49 | 59 | (14 | %) | 20 | % | 163 | 167 | 2 | % | ||||||||||||||||||||||||||||
Total premiums and other considerations |
660 | 671 | 651 | 641 | 621 | (6 | %) | (3 | %) | 1,920 | 1,913 | | |||||||||||||||||||||||||||||
Net investment income |
|||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
377 | 369 | 381 | 380 | 373 | (1 | %) | (2 | %) | 1,192 | 1,134 | (5 | %) | ||||||||||||||||||||||||||||
Net investment income on equity securities held for trading |
1,043 | 131 | 803 | (597 | ) | (1,889 | ) | NM | NM | (905 | ) | (1,683 | ) | (86 | %) | ||||||||||||||||||||||||||
Other net investment income |
49 | 45 | 36 | 34 | 39 | (20 | %) | 15 | % | 85 | 109 | 28 | % | ||||||||||||||||||||||||||||
Total net investment income |
1,469 | 545 | 1,220 | (183 | ) | (1,477 | ) | NM | NM | 372 | (440 | ) | NM | ||||||||||||||||||||||||||||
Net realized capital gains core |
5 | 10 | 2 | 6 | 11 | 120 | % | 83 | % | 16 | 19 | 19 | % | ||||||||||||||||||||||||||||
Total core revenues |
2,134 | 1,226 | 1,873 | 464 | (845 | ) | NM | NM | 2,308 | 1,492 | (35 | %) | |||||||||||||||||||||||||||||
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues |
(329 | ) | (143 | ) | (312 | ) | 13 | 660 | NM | NM | (637 | ) | 361 | NM | |||||||||||||||||||||||||||
Total revenues |
1,805 | 1,083 | 1,561 | 477 | (185 | ) | NM | NM | 1,671 | 1,853 | 11 | % | |||||||||||||||||||||||||||||
Benefits and Expenses |
|||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
|||||||||||||||||||||||||||||||||||||||||
Death benefits [1] |
(56 | ) | 79 | 19 | 42 | 393 | NM | NM | 172 | 454 | 164 | % | |||||||||||||||||||||||||||||
Other contract benefits |
146 | 148 | 145 | 143 | 150 | 3 | % | 5 | % | 423 | 438 | 4 | % | ||||||||||||||||||||||||||||
Change in reserve [2] |
64 | 61 | 50 | 17 | 58 | (9 | %) | NM | 169 | 125 | (26 | %) | |||||||||||||||||||||||||||||
Sales inducements [1] |
11 | 3 | 8 | 14 | 18 | 64 | % | 29 | % | 37 | 40 | 8 | % | ||||||||||||||||||||||||||||
Interest credited on G/A assets [3] |
243 | 192 | 217 | 252 | 229 | (6 | %) | (9 | %) | 749 | 698 | (7 | %) | ||||||||||||||||||||||||||||
Interest credited on International variable annuities |
1,043 | 131 | 803 | (597 | ) | (1,889 | ) | NM | NM | (905 | ) | (1,683 | ) | (86 | %) | ||||||||||||||||||||||||||
Total benefits and losses |
1,451 | 614 | 1,242 | (129 | ) | (1,041 | ) | NM | NM | 645 | 72 | (89 | %) | ||||||||||||||||||||||||||||
Other insurance expenses |
|||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
117 | 108 | 114 | 111 | 100 | (15 | %) | (10 | %) | 364 | 325 | (11 | %) | ||||||||||||||||||||||||||||
Operating expenses |
83 | 98 | 87 | 88 | 87 | 5 | % | (1 | %) | 247 | 262 | 6 | % | ||||||||||||||||||||||||||||
Premium taxes and other expenses [4] |
12 | 6 | 10 | 6 | 26 | 117 | % | NM | 35 | 42 | 20 | % | |||||||||||||||||||||||||||||
Subtotal expenses before deferral |
212 | 212 | 211 | 205 | 213 | | 4 | % | 646 | 629 | (3 | %) | |||||||||||||||||||||||||||||
Deferred policy acquisition costs |
(14 | ) | (18 | ) | (15 | ) | (16 | ) | (16 | ) | (14 | %) | | (78 | ) | (47 | ) | 40 | % | ||||||||||||||||||||||
Total other insurance expense |
198 | 194 | 196 | 189 | 197 | (1 | %) | 4 | % | 568 | 582 | 2 | % | ||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
112 | 99 | 132 | 194 | 18 | (84 | %) | (91 | %) | 514 | 344 | (33 | %) | ||||||||||||||||||||||||||||
Total benefits and expenses |
1,761 | 907 | 1,570 | 254 | (826 | ) | NM | NM | 1,727 | 998 | (42 | %) | |||||||||||||||||||||||||||||
Core earnings (loss) before income taxes |
373 | 319 | 303 | 210 | (19 | ) | NM | NM | 581 | 494 | (15 | %) | |||||||||||||||||||||||||||||
Income tax expense (benefit) [1] [5] |
111 | 81 | 75 | 1 | (41 | ) | NM | NM | 119 | 35 | (71 | %) | |||||||||||||||||||||||||||||
Core earnings [1] |
262 | 238 | 228 | 209 | 22 | (92 | %) | (89 | %) | 462 | 459 | (1 | %) | ||||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core
earnings [6] |
(85 | ) | 29 | (178 | ) | 19 | 27 | NM | 42 | % | (319 | ) | (132 | ) | 59 | % | |||||||||||||||||||||||||
Loss from discontinued operations |
(2 | ) | (4 | ) | | | | 100 | % | | (2 | ) | | 100 | % | ||||||||||||||||||||||||||
Net income [1] |
$ | 175 | $ | 263 | $ | 50 | $ | 228 | $ | 49 | (72 | %) | (79 | %) | $ | 141 | $ | 327 | 132 | % | |||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) |
|||||||||||||||||||||||||||||||||||||||||
Core earnings |
71.1 | 63.0 | 60.4 | 56.2 | 6.3 | (91 | %) | (89 | %) | 40.1 | 43.0 | 7 | % | ||||||||||||||||||||||||||||
Net income (loss) |
47.4 | 69.5 | 13.2 | 61.3 | 14.0 | (70 | %) | NM | 12.2 | 30.7 | 152 | % |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Other Fees |
$ | 8 | $ | (2 | ) | $ | (1 | ) | $ | 1 | $ | 2 | $ | 9 | $ | 2 | ||||||||||||
Reinsurance Premiums |
(5 | ) | | | 1 | (3 | ) | (6 | ) | (2 | ) | |||||||||||||||||
Death Benefits |
(123 | ) | 9 | (46 | ) | 6 | 332 | (42 | ) | 292 | ||||||||||||||||||
Sales Inducements |
| (6 | ) | (3 | ) | 2 | 7 | 3 | 6 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
(53 | ) | (84 | ) | (42 | ) | 17 | (146 | ) | (16 | ) | (171 | ) | |||||||||||||||
Income tax expense (benefit) |
63 | 32 | 31 | (8 | ) | (69 | ) | 25 | (46 | ) | ||||||||||||||||||
Core earnings (loss) |
116 | 47 | 59 | (15 | ) | (124 | ) | 33 | (80 | ) | ||||||||||||||||||
Net realized gains (losses) and other, net of
tax and DAC, excluded from core earnings |
32 | 15 | | (55 | ) | (283 | ) | (26 | ) | (338 | ) | |||||||||||||||||
Loss from discontinued operations |
(3 | ) | (1 | ) | | | | (3 | ) | | ||||||||||||||||||
Net income (loss) |
145 | 61 | 59 | (70 | ) | (407 | ) | 4 | (418 | ) |
[2] | The three months ended June 30, 2011 include a benefit of $28, before-tax, related to the release of reserves associated with the 3 Win product. | |
[3] | Included in the three months ended, December 31, 2010 is a benefit of $36, before-tax, related to a true-up of reserves associated with certain non-dollar denominated investor notes. | |
[4] | The three and nine months ended September 30, 2011 includes $22, before-tax, of costs associated with expected assessments related to the Executive Life Insurance Company of New York (ELNY) insolvency. | |
[5] | The three months ended June 30, 2011 include a tax benefit of $45 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001. | |
[6] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. |
26
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
VARIABLE ANNUITIES |
||||||||||||||||||||
Beginning balance |
$ | 75,961 | $ | 80,357 | $ | 83,013 | $ | 82,977 | $ | 79,347 | ||||||||||
Deposits |
297 | 286 | 250 | 227 | 192 | |||||||||||||||
Surrenders |
(2,275 | ) | (2,723 | ) | (2,963 | ) | (3,141 | ) | (2,445 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(361 | ) | (398 | ) | (419 | ) | (392 | ) | (344 | ) | ||||||||||
Transfers |
(16 | ) | (3 | ) | (47 | ) | (44 | ) | (45 | ) | ||||||||||
Net Flows |
(2,355 | ) | (2,838 | ) | (3,179 | ) | (3,350 | ) | (2,642 | ) | ||||||||||
Change in market value/change in reserve/interest
credited |
6,757 | 5,498 | 3,142 | (281 | ) | (9,989 | ) | |||||||||||||
Other [2] |
(6 | ) | (4 | ) | 1 | 1 | | |||||||||||||
Ending balance |
$ | 80,357 | $ | 83,013 | $ | 82,977 | $ | 79,347 | $ | 66,716 | ||||||||||
FIXED MARKET VALUE ADJUSTED (MVA) AND OTHER |
||||||||||||||||||||
Beginning balance |
$ | 12,579 | $ | 12,397 | $ | 12,223 | $ | 12,136 | $ | 11,978 | ||||||||||
Deposits |
16 | 19 | 13 | 20 | 36 | |||||||||||||||
Surrenders |
(256 | ) | (241 | ) | (173 | ) | (203 | ) | (301 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(136 | ) | (150 | ) | (152 | ) | (167 | ) | (165 | ) | ||||||||||
Transfers |
39 | 51 | 66 | 68 | 73 | |||||||||||||||
Net Flows |
(337 | ) | (321 | ) | (246 | ) | (282 | ) | (357 | ) | ||||||||||
Change in market value/change in reserve/interest
credited |
155 | 147 | 159 | 124 | 106 | |||||||||||||||
Ending balance |
$ | 12,397 | $ | 12,223 | $ | 12,136 | $ | 11,978 | $ | 11,727 | ||||||||||
TOTAL U.S. ANNUITY |
||||||||||||||||||||
Beginning balance |
$ | 88,540 | $ | 92,754 | $ | 95,236 | $ | 95,113 | $ | 91,325 | ||||||||||
Deposits |
313 | 305 | 263 | 247 | 228 | |||||||||||||||
Surrenders |
(2,531 | ) | (2,964 | ) | (3,136 | ) | (3,344 | ) | (2,746 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(497 | ) | (548 | ) | (571 | ) | (559 | ) | (509 | ) | ||||||||||
Transfers |
23 | 48 | 19 | 24 | 28 | |||||||||||||||
Net Flows |
(2,692 | ) | (3,159 | ) | (3,425 | ) | (3,632 | ) | (2,999 | ) | ||||||||||
Change in market value/change in reserve/interest
credited |
6,912 | 5,645 | 3,301 | (157 | ) | (9,883 | ) | |||||||||||||
Other [2] |
(6 | ) | (4 | ) | 1 | 1 | | |||||||||||||
Ending balance |
$ | 92,754 | $ | 95,236 | $ | 95,113 | $ | 91,325 | $ | 78,443 | ||||||||||
[1] | Includes transfers from the accumulation phase to the annuitization phase. | |
[2] | Includes a bonus on certain products, front end loads on A share products and annual maintenance fees. |
27
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
VARIABLE ANNUITIES |
||||||||||||||||||||
Beginning balance |
$ | 30,973 | $ | 33,177 | $ | 33,507 | $ | 33,027 | $ | 32,981 | ||||||||||
Deposits/Premiums/other |
2 | 1 | 1 | 1 | | |||||||||||||||
Surrenders |
(337 | ) | (363 | ) | (285 | ) | (291 | ) | (296 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(145 | ) | (159 | ) | (192 | ) | (166 | ) | (165 | ) | ||||||||||
Net Flows |
(480 | ) | (521 | ) | (476 | ) | (456 | ) | (461 | ) | ||||||||||
Change in market value/currency/change in
reserve/interest credited |
850 | (57 | ) | 610 | (404 | ) | (2,477 | ) | ||||||||||||
Effect of currency translation |
1,834 | 908 | (614 | ) | 814 | 1,395 | ||||||||||||||
Ending balance |
$ | 33,177 | $ | 33,507 | $ | 33,027 | $ | 32,981 | $ | 31,438 | ||||||||||
FIXED MVA AND OTHER [2] |
||||||||||||||||||||
Beginning balance |
$ | 4,488 | $ | 4,703 | $ | 4,596 | $ | 4,463 | $ | 4,824 | ||||||||||
Surrenders |
(35 | ) | (58 | ) | (43 | ) | (31 | ) | (44 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(28 | ) | (209 | ) | (23 | ) | 246 | (16 | ) | |||||||||||
Net Flows |
(63 | ) | (267 | ) | (66 | ) | 215 | (60 | ) | |||||||||||
Change in market value/currency/change in
reserve/interest credited |
13 | 23 | 31 | 22 | 19 | |||||||||||||||
Effect of currency translation |
265 | 137 | (98 | ) | 124 | 230 | ||||||||||||||
Ending balance |
$ | 4,703 | $ | 4,596 | $ | 4,463 | $ | 4,824 | $ | 5,013 | ||||||||||
TOTAL INTERNATIONAL ANNUITY |
||||||||||||||||||||
Beginning balance |
$ | 35,461 | $ | 37,880 | $ | 38,103 | $ | 37,490 | $ | 37,805 | ||||||||||
Deposits/Premiums/other |
2 | 1 | 1 | 1 | | |||||||||||||||
Surrenders |
(372 | ) | (421 | ) | (328 | ) | (322 | ) | (340 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(173 | ) | (368 | ) | (215 | ) | 80 | (181 | ) | |||||||||||
Net Flows |
(543 | ) | (788 | ) | (542 | ) | (241 | ) | (521 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
863 | (34 | ) | 641 | (382 | ) | (2,458 | ) | ||||||||||||
Effect of currency translation |
2,099 | 1,045 | (712 | ) | 938 | 1,625 | ||||||||||||||
Ending balance |
$ | 37,880 | $ | 38,103 | $ | 37,490 | $ | 37,805 | $ | 36,451 | ||||||||||
[1] | Included in the three months ended September 30, 2011 are current period payments of $5.9 and interest credited of $16.9 related to 3 Win GMIB policies that annuitized in fourth quarter 2008 and first quarter 2009, which are included in the fixed MVA and other death benefits/annuitizations/other and change in market value/change in reserve/interest credited. The 3 Win guaranteed minimum benefit GMIB requires the policyholder to elect one of the 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. | |
[2] | Of the total ending fixed MVA and other balance as of September 30, 2011 of $5.0 billion, approximately $2.7 billion is related to the triggering of the guaranteed minimum income benefit for the 3 Win product. This account value is not expected to generate material future profit or loss to the Company. |
28
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
INSTITUTIONAL INVESTMENT PRODUCTS
ACCOUNT VALUE [1] |
||||||||||||||||||||
Beginning balance |
$ | 19,950 | $ | 20,086 | $ | 19,674 | $ | 19,326 | $ | 19,230 | ||||||||||
Deposits |
132 | 87 | 5 | 4 | 125 | |||||||||||||||
Surrenders |
(250 | ) | (478 | ) | (455 | ) | (234 | ) | (197 | ) | ||||||||||
Death benefits/annuity payouts |
(260 | ) | (169 | ) | (179 | ) | (171 | ) | (175 | ) | ||||||||||
Net Flows |
(378 | ) | (560 | ) | (629 | ) | (401 | ) | (247 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
514 | 148 | 281 | 305 | 494 | |||||||||||||||
Ending balance |
$ | 20,086 | $ | 19,674 | $ | 19,326 | $ | 19,230 | $ | 19,477 |
[1] | Included in the balance is approximately $1.6 billion for the three months ended September 30, 2010, approximately $1.4 billion for the three months ended December 31, 2010 and March 31, 2011 and approximately $1.5 billion for the three months ended June 30, 2011 and September 30, 2011 related to an intrasegment funding agreement which is eliminated in consolidation. |
29
Year Over | ||||||||||||||||||||||||||||||||||||||||
Year | Sequential | NINE MONTHS ENDED | ||||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
||||||||||||||||||||||||||||||||||||||||
Variable life fees |
$ | 22 | $ | 25 | $ | 25 | $ | 25 | $ | 24 | 9 | % | (4 | %) | $ | 70 | $ | 74 | 6 | % | ||||||||||||||||||||
Cost of insurance charges |
194 | 194 | 194 | 197 | 198 | 2 | % | 1 | % | 565 | 589 | 4 | % | |||||||||||||||||||||||||||
Other fees [1] |
54 | 74 | 59 | 58 | 86 | 59 | % | 48 | % | 200 | 203 | 2 | % | |||||||||||||||||||||||||||
Total fee income |
270 | 293 | 278 | 280 | 308 | 14 | % | 10 | % | 835 | 866 | 4 | % | |||||||||||||||||||||||||||
Direct premiums |
35 | 37 | 35 | 38 | 38 | 9 | % | | 103 | 111 | 8 | % | ||||||||||||||||||||||||||||
Reinsurance premiums |
(60 | ) | (63 | ) | (59 | ) | (63 | ) | (63 | ) | (5 | %) | | (173 | ) | (185 | ) | (7 | %) | |||||||||||||||||||||
Net premiums |
(25 | ) | (26 | ) | (24 | ) | (25 | ) | (25 | ) | | | (70 | ) | (74 | ) | (6 | %) | ||||||||||||||||||||||
Total premiums and other considerations |
245 | 267 | 254 | 255 | 283 | 16 | % | 11 | % | 765 | 792 | 4 | % | |||||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
131 | 128 | 137 | 138 | 138 | 5 | % | | 395 | 413 | 5 | % | ||||||||||||||||||||||||||||
Other net investment income (loss) |
1 | 3 | 5 | 9 | 8 | NM | (11 | %) | (4 | ) | 22 | NM | ||||||||||||||||||||||||||||
Total net investment income |
132 | 131 | 142 | 147 | 146 | 11 | % | (1 | %) | 391 | 435 | 11 | % | |||||||||||||||||||||||||||
Net realized capital losses core |
| (1 | ) | | | | | | (1 | ) | | 100 | % | |||||||||||||||||||||||||||
Total core revenues |
377 | 397 | 396 | 402 | 429 | 14 | % | 7 | % | 1,155 | 1,227 | 6 | % | |||||||||||||||||||||||||||
Net realized gains (losses) and other, before tax and DAC, excluded from core
revenues |
11 | (21 | ) | (32 | ) | 10 | 23 | 109 | % | 130 | % | 43 | 1 | (98 | %) | |||||||||||||||||||||||||
Total revenues |
388 | 376 | 364 | 412 | 452 | 16 | % | 10 | % | 1,198 | 1,228 | 3 | % | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
||||||||||||||||||||||||||||||||||||||||
Death benefits |
134 | 113 | 129 | 134 | 130 | (3 | %) | (3 | %) | 348 | 393 | 13 | % | |||||||||||||||||||||||||||
Other contract benefits |
8 | 6 | 8 | 10 | 12 | 50 | % | 20 | % | 29 | 30 | 3 | % | |||||||||||||||||||||||||||
Change in reserve [1] |
(1 | ) | (4 | ) | 7 | 5 | 78 | NM | NM | 3 | 90 | NM | ||||||||||||||||||||||||||||
Sales inducements |
2 | 1 | | 1 | | (100 | %) | (100 | %) | 3 | 1 | (67 | %) | |||||||||||||||||||||||||||
Interest credited on G/A assets |
85 | 87 | 92 | 87 | 89 | 5 | % | 2 | % | 264 | 268 | 2 | % | |||||||||||||||||||||||||||
Total benefits and losses |
228 | 203 | 236 | 237 | 309 | 36 | % | 30 | % | 647 | 782 | 21 | % | |||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
48 | 51 | 44 | 46 | 56 | 17 | % | 22 | % | 128 | 146 | 14 | % | |||||||||||||||||||||||||||
Operating expenses |
65 | 77 | 64 | 68 | 69 | 6 | % | 1 | % | 196 | 201 | 3 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses |
10 | 26 | 14 | 17 | 18 | 80 | % | 6 | % | 41 | 49 | 20 | % | |||||||||||||||||||||||||||
Subtotal expenses before deferral |
123 | 154 | 122 | 131 | 143 | 16 | % | 9 | % | 365 | 396 | 8 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(79 | ) | (85 | ) | (70 | ) | (78 | ) | (91 | ) | (15 | %) | (17 | %) | (211 | ) | (239 | ) | (13 | %) | ||||||||||||||||||||
Total other insurance expense |
44 | 69 | 52 | 53 | 52 | 18 | % | (2 | %) | 154 | 157 | 2 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future
profits [1] |
(13 | ) | 52 | 34 | 34 | 92 | NM | 171 | % | 85 | 160 | 88 | % | |||||||||||||||||||||||||||
Total benefits and expenses |
259 | 324 | 322 | 324 | 453 | 75 | % | 40 | % | 886 | 1,099 | 24 | % | |||||||||||||||||||||||||||
Core earnings before income taxes |
118 | 73 | 74 | 78 | (24 | ) | NM | NM | 269 | 128 | (52 | %) | ||||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
33 | 23 | 21 | 18 | (15 | ) | NM | NM | 76 | 24 | (68 | %) | ||||||||||||||||||||||||||||
Core earnings (loss) [1] |
85 | 50 | 53 | 60 | (9 | ) | NM | NM | 193 | 104 | (46 | %) | ||||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings [3] |
12 | (12 | ) | (18 | ) | 6 | 6 | (50 | %) | | 31 | (6 | ) | NM | ||||||||||||||||||||||||||
Net income (loss) [1] |
$ | 97 | $ | 38 | $ | 35 | $ | 66 | $ | (3 | ) | NM | NM | $ | 224 | $ | 98 | (56 | %) | |||||||||||||||||||||
Earnings Margin (After-tax) |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
22.5 | % | 12.6 | % | 13.4 | % | 14.9 | % | (2.1 | %) | (24.6 | ) | (17.0 | ) | 16.7 | % | 8.5 | % | (8.2 | ) | ||||||||||||||||||||
Net income |
25.0 | % | 10.1 | % | 9.6 | % | 16.0 | % | (0.7 | %) | (25.7 | ) | (16.7 | ) | 18.7 | % | 8.0 | % | (10.7 | ) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Other Fees |
$ | (3 | ) | $ | 2 | $ | | $ | 1 | $ | 19 | $ | 8 | $ | 20 | |||||||||||||
Change in reserve |
(2 | ) | | | | 66 | (2 | ) | 66 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
(46 | ) | 3 | 3 | 4 | 53 | (29 | ) | 60 | |||||||||||||||||||
Income tax expense (benefit) |
15 | | (1 | ) | (1 | ) | (35 | ) | 13 | (37 | ) | |||||||||||||||||
Core earnings (loss) |
28 | (1 | ) | (2 | ) | (2 | ) | (65 | ) | 24 | (69 | ) | ||||||||||||||||
Net realized gains (losses) and other, net of
tax and DAC, excluded from core earnings
(losses) |
1 | | 1 | | (1 | ) | 5 | | ||||||||||||||||||||
Net income (loss) |
29 | (1 | ) | (1 | ) | (2 | ) | (66 | ) | 29 | (69 | ) |
[2] | The three and six months ended June 30, 2011 include a tax benefit of $3 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001. | |
[3] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. |
30
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
SALES BY DISTRIBUTION |
||||||||||||||||||||||||||||||||||||||||
National Accounts |
$ | 26 | $ | 26 | $ | 22 | $ | 28 | $ | 29 | 12 | % | 2 | % | $ | 72 | $ | 80 | 10 | % | ||||||||||||||||||||
Independent |
28 | 25 | 28 | 25 | 31 | 10 | % | 23 | % | 72 | 84 | 16 | % | |||||||||||||||||||||||||||
Other |
3 | 3 | 4 | 3 | 2 | (26 | %) | (17 | %) | 9 | 9 | (2 | %) | |||||||||||||||||||||||||||
Total sales by distribution |
$ | 57 | $ | 54 | $ | 54 | $ | 56 | $ | 62 | 9 | % | 11 | % | $ | 153 | $ | 172 | 12 | % | ||||||||||||||||||||
SALES BY PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Variable Life |
$ | 8 | $ | 7 | $ | 7 | $ | 8 | $ | 6 | (25 | %) | (25 | %) | $ | 24 | $ | 21 | (13 | %) | ||||||||||||||||||||
Universal life |
45 | 43 | 43 | 43 | 52 | 16 | % | 21 | % | 116 | 138 | 19 | % | |||||||||||||||||||||||||||
Term/other life |
4 | 4 | 4 | 5 | 4 | | (20 | %) | 13 | 13 | | |||||||||||||||||||||||||||||
Total sales by product |
$ | 57 | $ | 54 | $ | 54 | $ | 56 | $ | 62 | 9 | % | 11 | % | $ | 153 | $ | 172 | 12 | % | ||||||||||||||||||||
PREMIUMS & DEPOSITS |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 136 | $ | 148 | $ | 127 | $ | 130 | $ | 134 | (1 | %) | 3 | % | $ | 409 | $ | 391 | (4 | %) | ||||||||||||||||||||
Universal life/other life |
294 | 329 | 288 | 318 | 378 | 29 | % | 19 | % | 814 | 984 | 21 | % | |||||||||||||||||||||||||||
Term/other |
37 | 42 | 37 | 39 | 43 | 16 | % | 10 | % | 110 | 119 | 8 | % | |||||||||||||||||||||||||||
Total Premiums & Deposits |
$ | 467 | $ | 519 | $ | 452 | $ | 487 | $ | 555 | 19 | % | 14 | % | $ | 1,333 | $ | 1,494 | 12 | % | ||||||||||||||||||||
ACCOUNT VALUE |
||||||||||||||||||||||||||||||||||||||||
General account |
$ | 6,551 | $ | 6,690 | $ | 6,808 | $ | 6,954 | $ | 7,126 | 9 | % | 2 | % | ||||||||||||||||||||||||||
Separate account |
5,201 | 5,553 | 5,662 | 5,412 | 4,682 | (10 | %) | (13 | %) | |||||||||||||||||||||||||||||||
Total account value |
$ | 11,752 | $ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | | (5 | %) | |||||||||||||||||||||||||||
ACCOUNT VALUE BY PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 5,757 | $ | 6,115 | $ | 6,235 | $ | 5,993 | $ | 5,259 | (9 | %) | (12 | %) | ||||||||||||||||||||||||||
Universal life/other life |
5,995 | 6,128 | 6,235 | 6,373 | 6,549 | 9 | % | 3 | % | |||||||||||||||||||||||||||||||
Total account value by product |
$ | 11,752 | $ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | | (5 | %) | |||||||||||||||||||||||||||
LIFE INSURANCE IN-FORCE |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 75,399 | $ | 74,044 | $ | 72,946 | $ | 71,977 | $ | 70,926 | (6 | %) | (1 | %) | ||||||||||||||||||||||||||
Universal life |
57,734 | 58,789 | 59,613 | 60,759 | 62,052 | 7 | % | 2 | % | |||||||||||||||||||||||||||||||
Term |
73,959 | 75,797 | 77,138 | 78,714 | 80,249 | 9 | % | 2 | % | |||||||||||||||||||||||||||||||
Total life insurance in-force |
$ | 207,092 | $ | 208,630 | $ | 209,697 | $ | 211,450 | $ | 213,227 | 3 | % | 1 | % | ||||||||||||||||||||||||||
31
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
VARIABLE LIFE |
||||||||||||||||||||
Beginning balance |
$ | 5,507 | $ | 5,757 | $ | 6,115 | $ | 6,235 | $ | 5,993 | ||||||||||
First year & single premiums |
18 | 15 | 13 | 16 | 15 | |||||||||||||||
Renewal premiums |
118 | 133 | 114 | 114 | 119 | |||||||||||||||
Premiums and deposits |
136 | 148 | 127 | 130 | 134 | |||||||||||||||
Surrenders |
(93 | ) | (106 | ) | (98 | ) | (102 | ) | (91 | ) | ||||||||||
Death benefits |
(18 | ) | (14 | ) | (19 | ) | (17 | ) | (20 | ) | ||||||||||
Net Flows |
25 | 28 | 10 | 11 | 23 | |||||||||||||||
Policy fees |
(118 | ) | (123 | ) | (108 | ) | (111 | ) | (120 | ) | ||||||||||
Change in market value/interest credited |
343 | 453 | 218 | (142 | ) | (637 | ) | |||||||||||||
Ending balance |
$ | 5,757 | $ | 6,115 | $ | 6,235 | $ | 5,993 | $ | 5,259 | ||||||||||
UNIVERSAL LIFE [1] |
||||||||||||||||||||
Beginning balance |
$ | 5,873 | $ | 5,995 | $ | 6,128 | $ | 6,235 | $ | 6,373 | ||||||||||
First year & single premiums |
154 | 165 | 143 | 165 | 210 | |||||||||||||||
Renewal premiums |
140 | 164 | 145 | 153 | 168 | |||||||||||||||
Premiums and deposits |
294 | 329 | 288 | 318 | 378 | |||||||||||||||
Surrenders |
(43 | ) | (49 | ) | (43 | ) | (36 | ) | (44 | ) | ||||||||||
Death benefits |
(25 | ) | (30 | ) | (35 | ) | (29 | ) | (29 | ) | ||||||||||
Net Flows |
226 | 250 | 210 | 253 | 305 | |||||||||||||||
Policy fees |
(161 | ) | (177 | ) | (160 | ) | (173 | ) | (193 | ) | ||||||||||
Change in market value/interest credited |
57 | 60 | 57 | 58 | 64 | |||||||||||||||
Ending balance |
$ | 5,995 | $ | 6,128 | $ | 6,235 | $ | 6,373 | $ | 6,549 | ||||||||||
INDIVIDUAL LIFE |
||||||||||||||||||||
Beginning balance |
$ | 11,380 | $ | 11,752 | $ | 12,243 | $ | 12,470 | $ | 12,366 | ||||||||||
First year & single premiums |
172 | 180 | 156 | 181 | 225 | |||||||||||||||
Renewal premiums |
258 | 297 | 259 | 267 | 287 | |||||||||||||||
Premiums and deposits |
430 | 477 | 415 | 448 | 512 | |||||||||||||||
Surrenders |
(136 | ) | (155 | ) | (141 | ) | (138 | ) | (135 | ) | ||||||||||
Death benefits |
(43 | ) | (44 | ) | (54 | ) | (46 | ) | (49 | ) | ||||||||||
Net Flows |
251 | 278 | 220 | 264 | 328 | |||||||||||||||
Policy fees |
(279 | ) | (300 | ) | (268 | ) | (284 | ) | (313 | ) | ||||||||||
Change in market value/interest credited |
400 | 513 | 275 | (84 | ) | (573 | ) | |||||||||||||
Ending balance |
$ | 11,752 | $ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | ||||||||||
[1] | Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and Other. |
32
Year Over | ||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | ||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
PRIVATE PLACEMENT LIFE INSURANCE ACCOUNT VALUE |
||||||||||||||||||||||||||||
General account |
$ | 1,743 | $ | 1,756 | $ | 1,757 | $ | 1,760 | $ | 1,771 | 2 | % | 1 | % | ||||||||||||||
Non-guaranteed separate account |
33,815 | 34,286 | 34,667 | 34,940 | 34,218 | 1 | % | (2 | %) | |||||||||||||||||||
Total Private Placement Life Insurance account value |
$ | 35,558 | $ | 36,042 | $ | 36,424 | $ | 36,700 | $ | 35,989 | 1 | % | (2 | %) | ||||||||||||||
PRIVATE PLACEMENT LIFE INSURANCE
ACCOUNT VALUE ROLL FORWARD |
||||||||||||||||||||||||||||
Beginning balance |
$ | 35,049 | $ | 35,558 | $ | 36,042 | $ | 36,424 | $ | 36,700 | ||||||||||||||||||
Premiums and Deposits |
29 | 66 | 20 | 40 | 8 | |||||||||||||||||||||||
Surrenders |
(11 | ) | 1 | (4 | ) | (8 | ) | (557 | ) | |||||||||||||||||||
Death benefits/annuity payouts |
(35 | ) | (37 | ) | (38 | ) | (49 | ) | (37 | ) | ||||||||||||||||||
Net Flows |
(17 | ) | 30 | (22 | ) | (17 | ) | (586 | ) | |||||||||||||||||||
Change in market value/change in reserve/interest credited |
575 | 477 | 458 | 348 | (78 | ) | ||||||||||||||||||||||
Other [1] |
(49 | ) | (23 | ) | (54 | ) | (55 | ) | (47 | ) | ||||||||||||||||||
Ending balance |
$ | 35,558 | $ | 36,042 | $ | 36,424 | $ | 36,700 | $ | 35,989 | ||||||||||||||||||
[1] | Primarily consists of cost of insurance and mortality & expense charges. |
33
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
||||||||||||||||||||||||||||||||||||||||
Variable annuity and life fees |
$ | 57 | $ | 63 | $ | 65 | $ | 67 | $ | 63 | 11 | % | (6 | %) | $ | 167 | $ | 195 | 17 | % | ||||||||||||||||||||
Mutual fund and other fees |
31 | 29 | 29 | 32 | 29 | (6 | %) | (9 | %) | 93 | 90 | (3 | %) | |||||||||||||||||||||||||||
Total fee income |
88 | 92 | 94 | 99 | 92 | 5 | % | (7 | %) | 260 | 285 | 10 | % | |||||||||||||||||||||||||||
Direct premiums |
1 | 2 | 3 | 2 | 1 | | (50 | %) | 5 | 6 | 20 | % | ||||||||||||||||||||||||||||
Total premiums and other considerations |
89 | 94 | 97 | 101 | 93 | 4 | % | (8 | %) | 265 | 291 | 10 | % | |||||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
92 | 94 | 96 | 96 | 97 | 5 | % | 1 | % | 262 | 289 | 10 | % | |||||||||||||||||||||||||||
Other net investment income |
1 | 3 | 3 | 4 | 3 | NM | (25 | %) | 5 | 10 | 100 | % | ||||||||||||||||||||||||||||
Total net investment income |
93 | 97 | 99 | 100 | 100 | 8 | % | | 267 | 299 | 12 | % | ||||||||||||||||||||||||||||
Net realized losses core |
(2 | ) | (1 | ) | | | | 100 | % | | (5 | ) | | 100 | % | |||||||||||||||||||||||||
Total core revenues |
180 | 190 | 196 | 201 | 193 | 7 | % | (4 | %) | 527 | 590 | 12 | % | |||||||||||||||||||||||||||
Net realized gains (losses), before tax and DAC, excluded from core revenues |
2 | (7 | ) | (9 | ) | 11 | (2 | ) | NM | NM | (5 | ) | | 100 | % | |||||||||||||||||||||||||
Total revenues |
182 | 183 | 187 | 212 | 191 | 5 | % | (10 | %) | 522 | 590 | 13 | % | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
||||||||||||||||||||||||||||||||||||||||
Death benefits [1] |
(1 | ) | | 1 | (2 | ) | 2 | NM | NM | (0 | ) | 1 | | |||||||||||||||||||||||||||
Other contract benefits |
15 | 15 | 16 | 15 | 15 | | | 45 | 46 | 2 | % | |||||||||||||||||||||||||||||
Change in reserve |
(6 | ) | (5 | ) | (7 | ) | (5 | ) | (7 | ) | (17 | %) | (40 | %) | (23 | ) | (19 | ) | 17 | % | ||||||||||||||||||||
Sales inducements [1] |
| | | 1 | 1 | | | | 2 | | ||||||||||||||||||||||||||||||
Interest credited on G/A assets |
63 | 64 | 62 | 66 | 70 | 11 | % | 6 | % | 182 | 198 | 9 | % | |||||||||||||||||||||||||||
Total benefits and losses |
71 | 74 | 72 | 75 | 81 | 14 | % | 8 | % | 204 | 228 | 12 | % | |||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
44 | 48 | 49 | 46 | 46 | 5 | % | | 129 | 141 | 9 | % | ||||||||||||||||||||||||||||
Operating expenses |
67 | 72 | 70 | 68 | 68 | 1 | % | | 206 | 206 | | |||||||||||||||||||||||||||||
Premium taxes and other expenses |
6 | 6 | 7 | 6 | 5 | (17 | %) | (17 | %) | 16 | 18 | 13 | % | |||||||||||||||||||||||||||
Subtotal expenses before deferral |
117 | 126 | 126 | 120 | 119 | 2 | % | (1 | %) | 351 | 365 | 4 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(33 | ) | (36 | ) | (36 | ) | (30 | ) | (31 | ) | 6 | % | (3 | %) | (101 | ) | (97 | ) | 4 | % | ||||||||||||||||||||
Total other insurance expense |
84 | 90 | 90 | 90 | 88 | 5 | % | (2 | %) | 250 | 268 | 7 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
(22 | ) | 12 | 10 | 24 | 74 | NM | NM | 7 | 108 | NM | |||||||||||||||||||||||||||||
Total benefits and expenses |
133 | 176 | 172 | 189 | 243 | 83 | % | 29 | % | 461 | 604 | 31 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes |
47 | 14 | 24 | 12 | (50 | ) | NM | NM | 66 | (14 | ) | NM | ||||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
12 | | 3 | (4 | ) | (24 | ) | NM | NM | 10 | (25 | ) | NM | |||||||||||||||||||||||||||
Core earnings (loss) [2] |
35 | 14 | 21 | 16 | (26 | ) | NM | NM | 56 | 11 | (80 | %) | ||||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core
earnings [3] |
(5 | ) | (5 | ) | (6 | ) | 14 | (6 | ) | (20 | %) | NM | (18 | ) | 2 | NM | ||||||||||||||||||||||||
Net income (loss) [1] |
$ | 30 | $ | 9 | $ | 15 | $ | 30 | $ | (32 | ) | NM | NM | $ | 38 | $ | 13 | (66 | %) | |||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
29.7 | 11.0 | 15.6 | 11.5 | (19.8 | ) | NM | NM | 16.0 | 2.9 | (82 | %) | ||||||||||||||||||||||||||||
Net income (loss) |
25.4 | 7.1 | 11.1 | 21.6 | (24.3 | ) | NM | NM | 10.8 | 3.4 | (69 | %) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | SEPTEMBER 30, | |||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Death Benefits |
$ | | $ | | $ | | $ | | $ | 1 | $ | | $ | 1 | ||||||||||||||
Sales Inducements |
(1 | ) | | | | 1 | (1 | ) | 1 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
(37 | ) | (4 | ) | (6 | ) | 6 | 57 | (35 | ) | 57 | |||||||||||||||||
Income tax expense (benefit) |
13 | 1 | 2 | (2 | ) | (21 | ) | 13 | (21 | ) | ||||||||||||||||||
Core earnings (loss) |
25 | 3 | 4 | (4 | ) | (38 | ) | 23 | (38 | ) | ||||||||||||||||||
Less: Net realized gains (losses), net of tax
and DAC, excluded from core earnings |
(6 | ) | | | (1 | ) | (5 | ) | (8 | ) | (6 | ) | ||||||||||||||||
Net income (loss) |
19 | 3 | 4 | (5 | ) | (43 | ) | 15 | (44 | ) |
[2] | The three and six months ended June 30, 2011 include a tax benefit of $4 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001. | |
[3] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. |
34
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
RETIREMENT PLANS TOTAL |
||||||||||||||||||||||||||||
General account |
$ | 7,171 | $ | 7,280 | $ | 7,502 | $ | 7,638 | $ | 8,042 | 12 | % | 5 | % | ||||||||||||||
Guaranteed separate account |
3 | 6 | | | | (100 | %) | | ||||||||||||||||||||
Non-guaranteed separate account |
23,464 | 25,654 | 27,522 | 27,443 | 23,799 | 1 | % | (13 | %) | |||||||||||||||||||
Total Retirement Plans account value |
$ | 30,638 | $ | 32,940 | $ | 35,024 | $ | 35,081 | $ | 31,841 | 4 | % | (9 | %) | ||||||||||||||
401(k)/403(b)/457 mutual funds |
18,602 | 19,578 | 20,324 | 20,474 | 17,844 | (4 | %) | (13 | %) | |||||||||||||||||||
Total Retirement Plans Assets Under
Management |
$ | 49,240 | $ | 52,518 | $ | 55,348 | $ | 55,555 | $ | 49,685 | 1 | % | (11 | %) | ||||||||||||||
35
THREE MONTHS ENDED, | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
401(k) GROUP ANNUITY ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 16,926 | $ | 18,764 | $ | 20,291 | $ | 21,891 | $ | 21,963 | ||||||||||
Deposits |
1,108 | 1,211 | 1,807 | 1,194 | 1,425 | |||||||||||||||
Surrenders |
(688 | ) | (874 | ) | (921 | ) | (1,049 | ) | (911 | ) | ||||||||||
Death benefits/annuity payouts |
(15 | ) | (18 | ) | (18 | ) | (20 | ) | (19 | ) | ||||||||||
Transfers [1] |
| | (26 | ) | 1 | 11 | ||||||||||||||
Net Flows |
405 | 319 | 842 | 126 | 506 | |||||||||||||||
Change in market value/change in reserve/interest credited |
1,415 | 1,209 | 758 | (54 | ) | (2,700 | ) | |||||||||||||
Other |
18 | (1 | ) | | | | ||||||||||||||
Ending balance |
$ | 18,764 | $ | 20,291 | $ | 21,891 | $ | 21,963 | $ | 19,769 | ||||||||||
403(b)/457 GROUP ANNUITY ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 11,017 | $ | 11,874 | $ | 12,649 | $ | 13,133 | $ | 13,118 | ||||||||||
Deposits |
395 | 369 | 359 | 326 | 330 | |||||||||||||||
Surrenders |
(210 | ) | (239 | ) | (255 | ) | (347 | ) | (259 | ) | ||||||||||
Death benefits/annuity payouts |
(11 | ) | (12 | ) | (12 | ) | (12 | ) | (12 | ) | ||||||||||
Transfers [1] |
| | | (0 | ) | 3 | ||||||||||||||
Net Flows |
174 | 118 | 92 | (33 | ) | 62 | ||||||||||||||
Change in market value/change in reserve/interest credited |
680 | 658 | 392 | 18 | (1,108 | ) | ||||||||||||||
Other |
3 | (1 | ) | | | | ||||||||||||||
Ending balance |
$ | 11,874 | $ | 12,649 | $ | 13,133 | $ | 13,118 | $ | 12,072 | ||||||||||
401(k)/403(b)/457 MUTUAL FUNDS ASSETS |
||||||||||||||||||||
Beginning balance |
$ | 15,848 | $ | 18,602 | $ | 19,578 | $ | 20,324 | $ | 20,474 | ||||||||||
Reclassificiation of AUA to AUM [2] |
1,294 | | | 267 | (0 | ) | ||||||||||||||
Deposits |
525 | 491 | 697 | 549 | 715 | |||||||||||||||
Surrenders |
(596 | ) | (825 | ) | (995 | ) | (814 | ) | (511 | ) | ||||||||||
Death benefits/annuity payouts |
| | | (2 | ) | 2 | ||||||||||||||
Transfers [1] |
| | 26 | (1 | ) | (14 | ) | |||||||||||||
Net Flows |
(71 | ) | (334 | ) | (272 | ) | (268 | ) | 192 | |||||||||||
Change in market value/change in reserve/interest credited |
1,552 | 1,308 | 1,018 | 151 | (2,822 | ) | ||||||||||||||
Other |
(21 | ) | 2 | | | | ||||||||||||||
Ending balance |
$ | 18,602 | $ | 19,578 | $ | 20,324 | $ | 20,474 | $ | 17,844 | ||||||||||
TOTAL RETIREMENT |
||||||||||||||||||||
Beginning balance |
$ | 43,791 | $ | 49,240 | $ | 52,518 | $ | 55,348 | $ | 55,555 | ||||||||||
Reclassificiation of AUA to AUM [2] |
1,294 | | | 267 | | |||||||||||||||
Deposits |
2,028 | 2,071 | 2,863 | 2,069 | 2,470 | |||||||||||||||
Surrenders |
(1,494 | ) | (1,938 | ) | (2,171 | ) | (2,210 | ) | (1,681 | ) | ||||||||||
Death benefits/annuity payouts |
(26 | ) | (30 | ) | (30 | ) | (34 | ) | (29 | ) | ||||||||||
Net Flows |
508 | 103 | 662 | (175 | ) | 760 | ||||||||||||||
Change in market value/change in reserve/interest credited |
3,647 | 3,175 | 2,168 | 115 | (6,630 | ) | ||||||||||||||
Ending balance |
$ | 49,240 | $ | 52,518 | $ | 55,348 | $ | 55,555 | $ | 49,685 |
[1] | Includes internal product exchanges, policyholder balance transfers from the accumulation phase to the annuitization phase, and death benefit remaining on deposit. | |
[2] | Specific plans were identified that required reclassification from AUA to AUM. |
36
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||||||||||
Fee income |
$ | 159 | $ | 171 | $ | 178 | $ | 175 | $ | 153 | (4 | %) | (13 | %) | $ | 493 | $ | 506 | 3 | % | ||||||||||||||||||||
Net investment income |
(2 | ) | (2 | ) | (1 | ) | (1 | ) | | 100 | % | 100 | % | (6 | ) | (2 | ) | 67 | % | |||||||||||||||||||||
Total core revenues |
157 | 169 | 177 | 174 | 153 | (3 | %) | (12 | %) | 487 | 504 | 3 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses), before tax
and DAC, excluded from core revenues |
(1 | ) | | 1 | | | 100 | % | | | 1 | | ||||||||||||||||||||||||||||
Total revenues |
156 | 169 | 178 | 174 | 153 | (2 | %) | (12 | %) | 487 | 505 | 4 | % | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and claims |
||||||||||||||||||||||||||||||||||||||||
Total benefits and claims |
(1 | ) | 1 | | | | 100 | % | | (1 | ) | | 100 | % | ||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
81 | 95 | 101 | 94 | 75 | (7 | %) | (20 | %) | 261 | 270 | 3 | % | |||||||||||||||||||||||||||
Operating expenses |
29 | 31 | 29 | 31 | 31 | 7 | % | | 87 | 91 | 5 | % | ||||||||||||||||||||||||||||
Premium taxes and other expenses |
13 | (1 | ) | 4 | 4 | 5 | (62 | %) | 25 | % | 22 | 13 | (41 | %) | ||||||||||||||||||||||||||
Subtotal expenses before deferral |
123 | 125 | 134 | 129 | 111 | (10 | %) | (14 | %) | 370 | 374 | 1 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(7 | ) | (10 | ) | (11 | ) | (9 | ) | (6 | ) | 14 | % | 33 | % | (27 | ) | (26 | ) | 4 | % | ||||||||||||||||||||
Total other insurance expense |
116 | 115 | 123 | 120 | 105 | (9 | %) | (13 | %) | 343 | 348 | 1 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
13 | 13 | 12 | 12 | 12 | (8 | %) | | 38 | 36 | (5 | %) | ||||||||||||||||||||||||||||
Total benefits and expenses |
128 | 129 | 135 | 132 | 117 | (9 | %) | (11 | %) | 380 | 384 | 1 | % | |||||||||||||||||||||||||||
Core earnings before income taxes |
29 | 40 | 42 | 42 | 36 | 24 | % | (14 | %) | 107 | 120 | 12 | % | |||||||||||||||||||||||||||
Income tax expense |
9 | 16 | 15 | 15 | 12 | 33 | % | (20 | %) | 37 | 42 | 14 | % | |||||||||||||||||||||||||||
Core earnings |
20 | 24 | 27 | 27 | 24 | 20 | % | (11 | %) | 70 | 78 | 11 | % | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC,
excluded from core earnings [1] |
(1 | ) | 1 | 1 | | | 100 | % | | | 1 | | ||||||||||||||||||||||||||||
Income (Loss) from discontinued operations [2] |
(1 | ) | 40 | | | | 100 | % | | (3 | ) | | 100 | % | ||||||||||||||||||||||||||
Net income |
$ | 18 | $ | 65 | $ | 28 | $ | 27 | $ | 24 | 33 | % | (11 | %) | $ | 67 | $ | 79 | 18 | % | ||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
8.9 | 9.9 | 10.6 | 10.6 | 10.5 | 18 | % | (1 | %) | 10.1 | 11.3 | 12 | % | |||||||||||||||||||||||||||
Net income |
7.9 | 26.6 | 11.0 | 10.6 | 10.5 | 33 | % | (1 | %) | 9.5 | 11.5 | 21 | % |
[1] | See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein. | |
[2] | Included in the three months ended December 31, 2010 is a gain of $41, after-tax, from the sale of the Canadian mutual funds business. |
37
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS DEPOSITS |
||||||||||||||||||||||||||||||||||||||||
Retail Mutual Funds |
$ | 2,505 | $ | 3,355 | $ | 3,934 | $ | 3,131 | $ | 2,051 | (18 | %) | (34 | %) | $ | 9,377 | $ | 9,116 | (3 | %) | ||||||||||||||||||||
Investment Only Mutual Funds |
424 | 604 | 807 | 676 | 2,228 | NM | NM | 1,902 | 3,711 | 95 | % | |||||||||||||||||||||||||||||
529 College Savings Plan |
52 | 71 | 80 | 65 | 59 | 13 | % | (9 | %) | 142 | 204 | 44 | % | |||||||||||||||||||||||||||
Total Non-Proprietary Mutual
Funds Deposits |
$ | 2,981 | $ | 4,030 | $ | 4,821 | $ | 3,872 | $ | 4,338 | 46 | % | 12 | % | $ | 11,421 | $ | 13,031 | 14 | % | ||||||||||||||||||||
ASSETS UNDER MANAGEMENT |
||||||||||||||||||||||||||||||||||||||||
Retail mutual fund assets |
$ | 44,788 | $ | 48,753 | $ | 51,064 | $ | 49,584 | $ | 39,258 | (12 | %) | (21 | %) | ||||||||||||||||||||||||||
Investment Only mutual fund assets |
5,570 | 6,659 | 7,298 | 6,954 | 6,625 | 19 | % | (5 | %) | |||||||||||||||||||||||||||||||
Proprietary mutual fund assets [2] |
41,778 | 43,602 | 44,044 | 42,204 | 35,494 | (15 | %) | (16 | %) | |||||||||||||||||||||||||||||||
529 College Savings Plan assets |
1,328 | 1,472 | 1,583 | 1,612 | 1,424 | 7 | % | (12 | %) | |||||||||||||||||||||||||||||||
Total Mutual Fund Assets |
$ | 93,464 | $ | 100,486 | $ | 103,989 | $ | 100,354 | $ | 82,801 | (11 | %) | (17 | %) | ||||||||||||||||||||||||||
[1] | Supplemental data related to the Canadian business was removed from this schedule for all periods presented herein as a result of the sale of this business which occurred in the three months ended, December 31, 2010. Approximately $1.8 billion of AUM were transferred out to a third party as a result of the sale. | |
[2] | Includes Company sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products. |
38
THREE MONTHS ENDED | ||||||||||||||||||||
Sept. 30, | Dec. 31, | March 31, | June 30, | Sept. 30, | ||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS |
||||||||||||||||||||
Beginning balance |
$ | 47,283 | $ | 51,686 | $ | 56,884 | $ | 59,945 | $ | 58,150 | ||||||||||
Deposits |
2,981 | 4,030 | 4,821 | 3,872 | 4,338 | |||||||||||||||
Redemptions |
(3,180 | ) | (3,471 | ) | (3,827 | ) | (5,054 | ) | (6,734 | ) | ||||||||||
Net Flows |
(199 | ) | 559 | 994 | (1,182 | ) | (2,396 | ) | ||||||||||||
Change in market value |
4,623 | 4,749 | 2,095 | (635 | ) | (8,430 | ) | |||||||||||||
Other [1] |
(21 | ) | (110 | ) | (28 | ) | 22 | (17 | ) | |||||||||||
Ending balance |
$ | 51,686 | $ | 56,884 | $ | 59,945 | $ | 58,150 | $ | 47,307 | ||||||||||
PROPRIETARY MUTUAL FUNDS [2] |
||||||||||||||||||||
Beginning balance |
$ | 39,402 | $ | 41,778 | $ | 43,602 | $ | 44,044 | $ | 42,204 | ||||||||||
Net Flows |
(1,299 | ) | (1,571 | ) | (1,507 | ) | (1,604 | ) | (1,244 | ) | ||||||||||
Change in market value |
3,675 | 3,395 | 1,949 | (236 | ) | (5,466 | ) | |||||||||||||
Ending balance |
$ | 41,778 | $ | 43,602 | $ | 44,044 | $ | 42,204 | $ | 35,494 | ||||||||||
[1] | Includes front end loads on A share products. | |
[2] | Includes Company sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products. |
39
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 1 | $ | 3 | $ | (1 | ) | $ | 1 | $ | | (100 | %) | (100 | %) | $ | | $ | | | ||||||||||||||||||||
Fee income |
46 | 44 | 53 | 53 | 55 | 20 | % | 4 | % | 143 | 161 | 13 | % | |||||||||||||||||||||||||||
Net investment income |
45 | 54 | 55 | 50 | 38 | (16 | %) | (24 | %) | 190 | 143 | (25 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
47 | 39 | (14 | ) | 10 | (56 | ) | NM | NM | 51 | (60 | ) | NM | |||||||||||||||||||||||||||
Other revenues |
| (1 | ) | 1 | (1 | ) | | | 100 | % | | | | |||||||||||||||||||||||||||
Total revenues |
139 | 139 | 94 | 113 | 37 | (73 | %) | (67 | %) | 384 | 244 | (36 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
64 | 13 | 5 | 287 | 15 | (77 | %) | (95 | %) | 236 | 307 | 30 | % | |||||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
59 | 85 | 67 | 71 | 62 | 5 | % | (13 | %) | 270 | 200 | (26 | %) | |||||||||||||||||||||||||||
Interest expense |
128 | 128 | 128 | 128 | 128 | | | 380 | 384 | 1 | % | |||||||||||||||||||||||||||||
Total benefits and expenses |
251 | 226 | 200 | 486 | 205 | (18 | %) | (58 | %) | 886 | 891 | 1 | % | |||||||||||||||||||||||||||
Loss from continuing operations before income taxes |
(112 | ) | (87 | ) | (106 | ) | (373 | ) | (168 | ) | (50 | %) | 55 | % | (502 | ) | (647 | ) | (29 | %) | ||||||||||||||||||||
Income tax benefit [2] |
(39 | ) | (50 | ) | (39 | ) | (135 | ) | (64 | ) | (64 | %) | 53 | % | (158 | ) | (238 | ) | (51 | %) | ||||||||||||||||||||
Loss from continuing operations |
(73 | ) | (37 | ) | (67 | ) | (238 | ) | (104 | ) | (42 | %) | 56 | % | (344 | ) | (409 | ) | (19 | %) | ||||||||||||||||||||
Add: Income (loss) from discontinued operations [3] |
(3 | ) | (2 | ) | 2 | (77 | ) | 5 | NM | NM | (105 | ) | (70 | ) | 33 | % | ||||||||||||||||||||||||
Net Loss |
(76 | ) | (39 | ) | (65 | ) | (315 | ) | (99 | ) | (30 | %) | 69 | % | (449 | ) | (479 | ) | (7 | %) | ||||||||||||||||||||
Less: Net realized capital gains (losses), net of
tax and DAC, excluded from core losses [4] |
31 | 19 | (11 | ) | 12 | (30 | ) | NM | NM | 29 | (29 | ) | NM | |||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations [3] |
(3 | ) | (2 | ) | 2 | (77 | ) | 5 | NM | NM | (105 | ) | (70 | ) | 33 | % | ||||||||||||||||||||||||
Core losses |
$ | (104 | ) | $ | (56 | ) | $ | (56 | ) | $ | (250 | ) | $ | (74 | ) | 29 | % | 70 | % | $ | (373 | ) | $ | (380 | ) | (2 | %) | |||||||||||||
[1] | Includes a before-tax charge of $73 for a litigation settlement in the nine months ended September 30, 2010. | |
[2] | The nine months ended September 30, 2010 included a tax charge of $19 related to a decrease in deferred tax assets as a result of recent federal legislation that will reduce the tax deduction available to the Company related to retiree health care costs beginning in 2013. | |
[3] | The nine months ended September 30, 2010 includes a goodwill impairment of $101, after-tax, related to the purchase of the Federal Trust Corporation. Additionally, the three months ended June 30, 2011 includes an after-tax charge of $74 related to the disposition of Federal Trust Corporation. | |
[4] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax and DAC, for the periods presented herein. |
40
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | NINE MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar, 31 | Jun. 30, | Sept. 30, | 3 Month | 3 Month | SEPTEMBER 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | | $ | | $ | | $ | | $ | | | | $ | 1 | $ | | (100 | %) | ||||||||||||||||||||||
Net investment income |
40 | 40 | 39 | 37 | 37 | (8 | %) | | 123 | 113 | (8 | %) | ||||||||||||||||||||||||||||
Net realized capital gains (losses) |
7 | 1 | (3 | ) | 4 | (5 | ) | NM | NM | 23 | (4 | ) | NM | |||||||||||||||||||||||||||
Other revenues |
| | 1 | (1 | ) | | | 100 | % | | | | ||||||||||||||||||||||||||||
Total revenues |
47 | 41 | 37 | 40 | 32 | (32 | %) | (20 | %) | 147 | 109 | (26 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses [1] |
63 | 15 | 4 | 286 | 21 | (67 | %) | (93 | %) | 236 | 311 | 32 | % | |||||||||||||||||||||||||||
Insurance operating costs and expenses |
5 | 11 | 7 | 6 | 5 | | (17 | %) | 19 | 18 | (5 | %) | ||||||||||||||||||||||||||||
Total benefits and expenses |
68 | 26 | 11 | 292 | 26 | (62 | %) | (91 | %) | 255 | 329 | 29 | % | |||||||||||||||||||||||||||
Income (loss) before income taxes |
(21 | ) | 15 | 26 | (252 | ) | 6 | NM | NM | (108 | ) | (220 | ) | (104 | %) | |||||||||||||||||||||||||
Income tax expense (benefit) |
(9 | ) | 1 | 5 | (88 | ) | (2 | ) | 78 | % | 98 | % | (41 | ) | (85 | ) | (107 | %) | ||||||||||||||||||||||
Net income (loss) |
(12 | ) | 14 | 21 | (164 | ) | 8 | NM | NM | (67 | ) | (135 | ) | (101 | %) | |||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (losses) [2] |
6 | 1 | (2 | ) | 3 | (1 | ) | NM | NM | 15 | | (100 | %) | |||||||||||||||||||||||||||
Core earnings (losses) |
$ | (18 | ) | $ | 13 | $ | 23 | $ | (167 | ) | $ | 9 | NM | NM | $ | (82 | ) | $ | (135 | ) | (65 | %) | ||||||||||||||||||
[1] | The nine months ended September 30, 2010 included net asbestos reserve strengthening of $169. The three months ended September 30, 2010 included net environmental reserve strengthening of $62. The three months ended June 30, 2011 included net asbestos reserve strengthening of $290. The three months ended September 30, 2011 included net environmental reserve strengthening of $19. | |
[2] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
41
Year Over | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year | Sequential | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | 3 Month | 3 Month | September 30, | |||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) |
||||||||||||||||||||||||||||||||||||||||
Fixed maturities [1] |
||||||||||||||||||||||||||||||||||||||||
Taxable |
$ | 739 | $ | 736 | $ | 719 | $ | 744 | $ | 711 | (4 | %) | (4 | %) | $ | 2,236 | $ | 2,174 | (3 | %) | ||||||||||||||||||||
Tax-exempt |
128 | 125 | 127 | 126 | 125 | (2 | %) | (1 | %) | 392 | 378 | (4 | %) | |||||||||||||||||||||||||||
Total fixed maturities |
867 | 861 | 846 | 870 | 836 | (4 | %) | (4 | %) | 2,628 | 2,552 | (3 | %) | |||||||||||||||||||||||||||
Equity securities, trading |
1,043 | 131 | 803 | (597 | ) | (1,890 | ) | NM | NM | (905 | ) | (1,684 | ) | (86 | %) | |||||||||||||||||||||||||
Equity securities,
available-for-sale |
12 | 14 | 11 | 8 | 8 | (33 | %) | | 39 | 27 | (31 | %) | ||||||||||||||||||||||||||||
Mortgage loans |
64 | 67 | 63 | 67 | 75 | 17 | % | 12 | % | 193 | 205 | 6 | % | |||||||||||||||||||||||||||
Policy loans |
33 | 31 | 33 | 34 | 32 | (3 | %) | (6 | %) | 101 | 99 | (2 | %) | |||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
49 | 75 | 100 | 78 | 67 | 37 | % | (14 | %) | 141 | 245 | 74 | % | |||||||||||||||||||||||||||
Other [3] |
77 | 78 | 81 | 77 | 73 | (5 | %) | (5 | %) | 251 | 231 | (8 | %) | |||||||||||||||||||||||||||
Subtotal |
2,145 | 1,257 | 1,937 | 537 | (799 | ) | NM | NM | 2,448 | 1,675 | (32 | %) | ||||||||||||||||||||||||||||
Less: Investment expense |
29 | 37 | 26 | 30 | 29 | | (3 | %) | 78 | 85 | 9 | % | ||||||||||||||||||||||||||||
Total net investment income |
$ | 2,116 | $ | 1,220 | $ | 1,911 | $ | 507 | $ | (828 | ) | NM | NM | $ | 2,370 | $ | 1,590 | (33 | %) | |||||||||||||||||||||
Less: Equity securities, trading |
1,043 | 131 | 803 | (597 | ) | (1,890 | ) | NM | NM | (905 | ) | (1,684 | ) | (86 | %) | |||||||||||||||||||||||||
Total net investment income excluding trading securities |
$ | 1,073 | $ | 1,089 | $ | 1,108 | $ | 1,104 | $ | 1,062 | (1 | %) | (4 | %) | $ | 3,275 | $ | 3,274 | | |||||||||||||||||||||
Annualized investment yield, before-tax [4] |
4.4 | % | 4.5 | % | 4.6 | % | 4.6 | % | 4.3 | % | (0.1 | ) | (0.3 | ) | 4.5 | % | 4.5 | % | | |||||||||||||||||||||
Annualized investment yield, after-tax [4] |
3.1 | % | 3.1 | % | 3.2 | % | 3.1 | % | 2.9 | % | (0.2 | ) | (0.2 | ) | 3.1 | % | 3.1 | % | | |||||||||||||||||||||
Net Realized Capital Gains (Losses) |
||||||||||||||||||||||||||||||||||||||||
Gross gains on sales |
$ | 179 | $ | 182 | $ | 61 | $ | 261 | $ | 197 | 10 | % | (25 | %) | $ | 654 | $ | 519 | (21 | %) | ||||||||||||||||||||
Gross losses on sales |
(88 | ) | (229 | ) | (133 | ) | (98 | ) | (63 | ) | 28 | % | 36 | % | (293 | ) | (294 | ) | | |||||||||||||||||||||
Net impairment losses |
(115 | ) | (59 | ) | (55 | ) | (23 | ) | (60 | ) | 48 | % | (161 | %) | (375 | ) | (138 | ) | 63 | % | ||||||||||||||||||||
Valuation allowances on mortgage loans |
(4 | ) | 2 | (3 | ) | 26 | | 100 | % | (100 | %) | (156 | ) | 23 | NM | |||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [5] |
11 | 5 | (17 | ) | 6 | 9 | (18 | %) | 50 | % | 22 | (2 | ) | NM | ||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [6] |
(4 | ) | (2 | ) | (7 | ) | (2 | ) | 1 | NM | NM | (15 | ) | (8 | ) | 47 | % | |||||||||||||||||||||||
Results of variable annuity hedge program |
||||||||||||||||||||||||||||||||||||||||
GMWB derivatives, net |
170 | 238 | 71 | (37 | ) | (372 | ) | NM | NM | (127 | ) | (338 | ) | (166 | %) | |||||||||||||||||||||||||
Macro hedge |
(443 | ) | (352 | ) | (357 | ) | 35 | 1,237 | NM | NM | (210 | ) | 915 | NM | ||||||||||||||||||||||||||
Total results of variable annuity hedge program |
(273 | ) | (114 | ) | (286 | ) | (2 | ) | 865 | NM | NM | (337 | ) | 577 | NM | |||||||||||||||||||||||||
Other net gain (loss) [7] |
37 | 126 | 37 | (99 | ) | (374 | ) | NM | NM | (22 | ) | (436 | ) | NM | ||||||||||||||||||||||||||
Total net realized capital gains (losses) |
$ | (257 | ) | $ | (89 | ) | $ | (403 | ) | $ | 69 | $ | 575 | NM | NM | $ | (522 | ) | $ | 241 | NM | |||||||||||||||||||
[1] | Includes income on short-term bonds. | |
[2] | Includes income on real estate joint ventures and hedge fund investments outside of limited partnerships. | |
[3] | Primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities. | |
[4] | Yields calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, and consolidated variable interest entity non-controlling interests. | |
[5] | Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding periodic net coupon settlements, and Japan fair value option securities). | |
[6] | Included in core earnings. | |
[7] | Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, Japan 3Win related foreign currency swaps, and other investment gains and losses. |
42
September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value [1] |
$ | 79,736 | 59.7 | % | $ | 77,820 | 59.4 | % | $ | 78,268 | 60.3 | % | $ | 78,132 | 59.3 | % | $ | 80,263 | 59.0 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
564 | 0.4 | % | 649 | 0.5 | % | 1,230 | 0.9 | % | 1,227 | 0.9 | % | 1,323 | 1.0 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,495 | 24.3 | % | 32,820 | 25.1 | % | 32,339 | 24.9 | % | 32,278 | 24.4 | % | 30,770 | 22.6 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value [3] |
1,168 | 0.9 | % | 973 | 0.7 | % | 993 | 0.8 | % | 1,081 | 0.8 | % | 989 | 0.7 | % | |||||||||||||||||||||||||
Mortgage loans [4] |
4,684 | 3.5 | % | 4,489 | 3.4 | % | 4,736 | 3.7 | % | 5,304 | 4.0 | % | 5,590 | 4.1 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,180 | 1.6 | % | 2,181 | 1.7 | % | 2,181 | 1.7 | % | 2,188 | 1.7 | % | 2,176 | 1.6 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments
[5] |
1,819 | 1.4 | % | 1,918 | 1.5 | % | 1,972 | 1.5 | % | 2,028 | 1.5 | % | 2,506 | 1.8 | % | |||||||||||||||||||||||||
Other investments [6] |
1,427 | 1.1 | % | 1,617 | 1.2 | % | 640 | 0.5 | % | 973 | 0.7 | % | 2,857 | 2.1 | % | |||||||||||||||||||||||||
Short-term investments [7] |
9,517 | 7.1 | % | 8,528 | 6.5 | % | 7,330 | 5.7 | % | 8,861 | 6.7 | % | 9,704 | 7.1 | % | |||||||||||||||||||||||||
Total investments |
$ | 133,590 | 100.0 | % | $ | 130,995 | 100.0 | % | $ | 129,689 | 100.0 | % | $ | 132,072 | 100.0 | % | $ | 136,178 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,495 | 24.3 | % | 32,820 | 25.1 | % | 32,339 | 24.9 | % | 32,278 | 24.4 | % | 30,770 | 22.6 | % | |||||||||||||||||||||||||
Total investments excluding trading securities |
$ | 101,095 | 75.7 | % | $ | 98,175 | 74.9 | % | $ | 97,350 | 75.1 | % | $ | 99,794 | 75.6 | % | $ | 105,408 | 77.4 | % | ||||||||||||||||||||
Asset-backed securities (ABS) |
$ | 3,009 | 3.8 | % | $ | 2,889 | 3.7 | % | $ | 3,150 | 4.0 | % | $ | 3,297 | 4.2 | % | $ | 3,504 | 4.4 | % | ||||||||||||||||||||
Collateralized debt obligations (CDOs) |
2,563 | 3.2 | % | 2,611 | 3.4 | % | 2,674 | 3.4 | % | 2,575 | 3.3 | % | 2,465 | 3.1 | % | |||||||||||||||||||||||||
Commercial mortgage-backed securities (CMBS) |
8,160 | 10.2 | % | 7,917 | 10.2 | % | 7,709 | 9.8 | % | 7,277 | 9.3 | % | 6,960 | 8.7 | % | |||||||||||||||||||||||||
Corporate |
40,851 | 51.3 | % | 39,884 | 51.2 | % | 40,913 | 52.3 | % | 41,629 | 53.2 | % | 43,316 | 53.9 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,924 | 2.4 | % | 1,683 | 2.2 | % | 1,802 | 2.3 | % | 1,864 | 2.4 | % | 1,944 | 2.4 | % | |||||||||||||||||||||||||
Municipal taxable |
1,125 | 1.4 | % | 1,199 | 1.5 | % | 1,237 | 1.6 | % | 1,299 | 1.7 | % | 1,649 | 2.1 | % | |||||||||||||||||||||||||
Municipal tax-exempt |
11,598 | 14.5 | % | 10,925 | 14.0 | % | 11,090 | 14.2 | % | 11,482 | 14.7 | % | 11,515 | 14.3 | % | |||||||||||||||||||||||||
Residential mortgage-backed securities (RMBS) |
5,551 | 7.0 | % | 5,683 | 7.3 | % | 5,014 | 6.4 | % | 5,214 | 6.7 | % | 5,336 | 6.6 | % | |||||||||||||||||||||||||
U.S. Treasuries |
4,955 | 6.2 | % | 5,029 | 6.5 | % | 4,679 | 6.0 | % | 3,495 | 4.5 | % | 3,574 | 4.5 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS [8] |
$ | 79,736 | 100.0 | % | $ | 77,820 | 100.0 | % | $ | 78,268 | 100.0 | % | $ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | ||||||||||||||||||||
U.S. government/government agencies |
$ | 9,556 | 12.0 | % | $ | 9,918 | 12.7 | % | $ | 8,947 | 11.5 | % | $ | 8,073 | 10.3 | % | $ | 8,423 | 10.5 | % | ||||||||||||||||||||
AAA |
11,158 | 14.0 | % | 10,174 | 13.1 | % | 10,155 | 13.0 | % | 9,409 | 12.0 | % | 10,497 | 13.1 | % | |||||||||||||||||||||||||
AA |
15,591 | 19.6 | % | 15,554 | 20.0 | % | 15,518 | 19.8 | % | 15,900 | 20.4 | % | 15,921 | 19.8 | % | |||||||||||||||||||||||||
A |
19,922 | 25.0 | % | 19,460 | 25.0 | % | 19,723 | 25.2 | % | 20,470 | 26.2 | % | 21,584 | 26.9 | % | |||||||||||||||||||||||||
BBB |
20,022 | 25.0 | % | 19,153 | 24.6 | % | 20,212 | 25.8 | % | 20,568 | 26.3 | % | 20,626 | 25.7 | % | |||||||||||||||||||||||||
BB & below |
3,487 | 4.4 | % | 3,561 | 4.6 | % | 3,713 | 4.7 | % | 3,712 | 4.8 | % | 3,212 | 4.0 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS [8] |
$ | 79,736 | 100.0 | % | $ | 77,820 | 100.0 | % | $ | 78,268 | 100.0 | % | $ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | ||||||||||||||||||||
[1] | Includes $271, $277, $275, $25, and $1 in Corporate at September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. | |
[2] | These assets support the Global Annuity-International variable annuity business. Changes in these balances are also reflected in the respective liabilities. | |
[3] | Includes $93, $97, $100, $100, and $96 in Corporate at September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. | |
[4] | Includes $225, $202, $194, $138, and $128 in Corporate at September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. | |
[5] | Includes real estate joint ventures and hedge fund investments outside of limited partnerships. | |
[6] | Primarily relates to derivative instruments. Additionally, includes $47, $48, $49, $27, and $27 in Corporate at September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. | |
[7] | Includes $1,890, $1,780, $1,999, $2,274, and $2,293 in the Corporate segment at September 30, 2010, December 31, 2010, March 31, 2011, June 30, 2011, and September 30, 2011, respectively. | |
[8] | Available-for-sale (AFS). |
43
September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 54,253 | 53.0 | % | $ | 52,429 | 52.1 | % | $ | 52,781 | 53.3 | % | $ | 52,834 | 52.3 | % | $ | 54,329 | 51.9 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
554 | 0.5 | % | 639 | 0.6 | % | 1,217 | 1.2 | % | 1,214 | 1.2 | % | 1,314 | 1.3 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,495 | 31.8 | % | 32,820 | 32.6 | % | 32,339 | 32.7 | % | 32,278 | 31.9 | % | 30,770 | 29.4 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
608 | 0.6 | % | 502 | 0.5 | % | 523 | 0.5 | % | 603 | 0.6 | % | 563 | 0.5 | % | |||||||||||||||||||||||||
Mortgage loans |
4,066 | 4.0 | % | 3,915 | 3.9 | % | 4,162 | 4.2 | % | 4,578 | 4.5 | % | 4,779 | 4.6 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,180 | 2.1 | % | 2,181 | 2.2 | % | 2,181 | 2.2 | % | 2,188 | 2.2 | % | 2,176 | 2.1 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments
[3] |
910 | 0.9 | % | 957 | 1.0 | % | 985 | 1.0 | % | 1,024 | 1.0 | % | 1,320 | 1.3 | % | |||||||||||||||||||||||||
Other investments [4] |
1,258 | 1.2 | % | 1,486 | 1.5 | % | 450 | 0.5 | % | 799 | 0.8 | % | 2,717 | 2.6 | % | |||||||||||||||||||||||||
Short-term investments |
6,061 | 5.9 | % | 5,631 | 5.6 | % | 4,398 | 4.4 | % | 5,565 | 5.5 | % | 6,619 | 6.3 | % | |||||||||||||||||||||||||
Total investments |
$ | 102,385 | 100.0 | % | $ | 100,560 | 100.0 | % | $ | 99,036 | 100.0 | % | $ | 101,083 | 100.0 | % | $ | 104,587 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,495 | 31.8 | % | 32,820 | 32.6 | % | 32,339 | 32.7 | % | 32,278 | 31.9 | % | 30,770 | 29.4 | % | |||||||||||||||||||||||||
Total investments excluding trading securities |
$ | 69,890 | 68.2 | % | $ | 67,740 | 67.4 | % | $ | 66,697 | 67.3 | % | $ | 68,805 | 68.1 | % | $ | 73,817 | 70.6 | % | ||||||||||||||||||||
ABS |
$ | 2,505 | 4.6 | % | $ | 2,442 | 4.7 | % | $ | 2,655 | 5.0 | % | $ | 2,732 | 5.2 | % | $ | 2,778 | 5.1 | % | ||||||||||||||||||||
CDOs |
2,043 | 3.8 | % | 2,087 | 4.0 | % | 2,144 | 4.1 | % | 2,047 | 3.9 | % | 1,949 | 3.6 | % | |||||||||||||||||||||||||
CMBS |
5,696 | 10.5 | % | 5,495 | 10.5 | % | 5,364 | 10.2 | % | 4,967 | 9.4 | % | 4,715 | 8.7 | % | |||||||||||||||||||||||||
Corporate |
30,861 | 56.9 | % | 30,204 | 57.6 | % | 31,218 | 59.0 | % | 31,595 | 59.7 | % | 33,007 | 60.7 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,431 | 2.6 | % | 1,160 | 2.2 | % | 1,200 | 2.3 | % | 1,285 | 2.4 | % | 1,409 | 2.6 | % | |||||||||||||||||||||||||
Municipal taxable |
999 | 1.8 | % | 1,068 | 2.0 | % | 1,110 | 2.1 | % | 1,167 | 2.2 | % | 1,508 | 2.8 | % | |||||||||||||||||||||||||
Municipal tax-exempt |
2,526 | 4.7 | % | 2,267 | 4.3 | % | 2,304 | 4.4 | % | 2,417 | 4.6 | % | 2,500 | 4.6 | % | |||||||||||||||||||||||||
RMBS |
4,284 | 7.9 | % | 4,302 | 8.2 | % | 3,779 | 7.2 | % | 3,738 | 7.1 | % | 3,797 | 7.0 | % | |||||||||||||||||||||||||
U.S. Treasuries |
3,908 | 7.2 | % | 3,404 | 6.5 | % | 3,007 | 5.7 | % | 2,886 | 5.5 | % | 2,666 | 4.9 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS |
$ | 54,253 | 100.0 | % | $ | 52,429 | 100.0 | % | $ | 52,781 | 100.0 | % | $ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | ||||||||||||||||||||
U.S. government/government agencies |
$ | 7,174 | 13.2 | % | $ | 6,809 | 13.0 | % | $ | 5,939 | 11.3 | % | $ | 5,869 | 11.1 | % | $ | 5,806 | 10.7 | % | ||||||||||||||||||||
AAA |
7,123 | 13.1 | % | 6,288 | 12.0 | % | 6,174 | 11.7 | % | 5,747 | 10.9 | % | 6,426 | 11.8 | % | |||||||||||||||||||||||||
AA |
8,225 | 15.2 | % | 8,304 | 15.8 | % | 8,208 | 15.6 | % | 8,152 | 15.4 | % | 8,498 | 15.6 | % | |||||||||||||||||||||||||
A |
14,217 | 26.2 | % | 14,177 | 27.1 | % | 14,551 | 27.5 | % | 14,873 | 28.2 | % | 15,798 | 29.1 | % | |||||||||||||||||||||||||
BBB |
14,609 | 26.9 | % | 13,915 | 26.5 | % | 14,854 | 28.1 | % | 15,218 | 28.8 | % | 15,165 | 27.9 | % | |||||||||||||||||||||||||
BB & below |
2,905 | 5.4 | % | 2,936 | 5.6 | % | 3,055 | 5.8 | % | 2,975 | 5.6 | % | 2,636 | 4.9 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS |
$ | 54,253 | 100.0 | % | $ | 52,429 | 100.0 | % | $ | 52,781 | 100.0 | % | $ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | ||||||||||||||||||||
[1] | Please refer to the basis of presentation for a description of the statutory legal entity view for Life. | |
[2] | These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities. | |
[3] | Includes a real estate joint venture. | |
[4] | Primarily relates to derivative instruments. |
44
September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||||||||||||||||
2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 25,212 | 87.9 | % | $ | 25,114 | 89.7 | % | $ | 25,212 | 90.0 | % | $ | 25,273 | 88.9 | % | $ | 25,933 | 89.3 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
10 | | 10 | | 13 | | 13 | 0.1 | % | 9 | | |||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
467 | 1.6 | % | 374 | 1.3 | % | 370 | 1.3 | % | 378 | 1.3 | % | 330 | 1.1 | % | |||||||||||||||||||||||||
Mortgage loans |
393 | 1.4 | % | 372 | 1.3 | % | 380 | 1.4 | % | 588 | 2.1 | % | 683 | 2.4 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
909 | 3.2 | % | 961 | 3.4 | % | 987 | 3.5 | % | 1,004 | 3.5 | % | 1,186 | 4.1 | % | |||||||||||||||||||||||||
Other investments [3] |
122 | 0.4 | % | 83 | 0.3 | % | 141 | 0.5 | % | 147 | 0.5 | % | 113 | 0.4 | % | |||||||||||||||||||||||||
Short-term investments |
1,566 | 5.5 | % | 1,117 | 4.0 | % | 933 | 3.3 | % | 1,022 | 3.6 | % | 792 | 2.7 | % | |||||||||||||||||||||||||
Total investments |
$ | 28,679 | 100.0 | % | $ | 28,031 | 100.0 | % | $ | 28,036 | 100.0 | % | $ | 28,425 | 100.0 | % | $ | 29,046 | 100.0 | % | ||||||||||||||||||||
ABS |
$ | 504 | 2.0 | % | $ | 447 | 1.8 | % | $ | 495 | 2.0 | % | $ | 565 | 2.2 | % | $ | 726 | 2.8 | % | ||||||||||||||||||||
CDOs |
520 | 2.1 | % | 524 | 2.1 | % | 530 | 2.1 | % | 528 | 2.1 | % | 516 | 2.0 | % | |||||||||||||||||||||||||
CMBS |
2,464 | 9.8 | % | 2,422 | 9.6 | % | 2,345 | 9.3 | % | 2,310 | 9.1 | % | 2,245 | 8.7 | % | |||||||||||||||||||||||||
Corporate |
9,990 | 39.5 | % | 9,680 | 38.5 | % | 9,695 | 38.5 | % | 10,034 | 39.7 | % | 10,309 | 39.7 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
493 | 2.0 | % | 523 | 2.1 | % | 602 | 2.4 | % | 579 | 2.3 | % | 535 | 2.1 | % | |||||||||||||||||||||||||
Municipal taxable |
126 | 0.5 | % | 131 | 0.5 | % | 127 | 0.5 | % | 132 | 0.5 | % | 141 | 0.5 | % | |||||||||||||||||||||||||
Municipal tax-exempt |
9,068 | 36.0 | % | 8,654 | 34.5 | % | 8,783 | 34.8 | % | 9,061 | 35.9 | % | 9,015 | 34.8 | % | |||||||||||||||||||||||||
RMBS |
1,253 | 5.0 | % | 1,360 | 5.4 | % | 1,215 | 4.8 | % | 1,456 | 5.8 | % | 1,538 | 5.9 | % | |||||||||||||||||||||||||
U.S. Treasuries |
794 | 3.1 | % | 1,373 | 5.5 | % | 1,420 | 5.6 | % | 608 | 2.4 | % | 908 | 3.5 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS |
$ | 25,212 | 100.0 | % | $ | 25,114 | 100.0 | % | $ | 25,212 | 100.0 | % | $ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | ||||||||||||||||||||
U.S. government/government agencies |
$ | 2,116 | 8.4 | % | $ | 2,837 | 11.3 | % | $ | 2,737 | 10.9 | % | $ | 2,183 | 8.6 | % | $ | 2,617 | 10.1 | % | ||||||||||||||||||||
AAA |
4,035 | 16.0 | % | 3,886 | 15.5 | % | 3,981 | 15.8 | % | 3,662 | 14.5 | % | 4,071 | 15.7 | % | |||||||||||||||||||||||||
AA |
7,364 | 29.2 | % | 7,248 | 28.8 | % | 7,308 | 28.9 | % | 7,745 | 30.7 | % | 7,423 | 28.6 | % | |||||||||||||||||||||||||
A |
5,702 | 22.6 | % | 5,280 | 21.0 | % | 5,170 | 20.5 | % | 5,596 | 22.1 | % | 5,785 | 22.3 | % | |||||||||||||||||||||||||
BBB |
5,413 | 21.5 | % | 5,238 | 20.9 | % | 5,358 | 21.3 | % | 5,350 | 21.2 | % | 5,461 | 21.1 | % | |||||||||||||||||||||||||
BB & below |
582 | 2.3 | % | 625 | 2.5 | % | 658 | 2.6 | % | 737 | 2.9 | % | 576 | 2.2 | % | |||||||||||||||||||||||||
Total fixed maturities, AFS |
$ | 25,212 | 100.0 | % | $ | 25,114 | 100.0 | % | $ | 25,212 | 100.0 | % | $ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | ||||||||||||||||||||
[1] | Please refer to the basis of presentation for a description of the statutory legal entity view for Property & Casualty. | |
[2] | Includes a real estate joint venture and hedge fund investments outside of limited partnerships. | |
[3] | Primarily relates to derivative instruments. |
45
September 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||
Cost | Value | Loss [1] [2] | Cost | Value | Loss [1] [2] | |||||||||||||||||||
Total AFS Securities |
||||||||||||||||||||||||
Three months or less |
$ | 6,170 | $ | 6,013 | $ | (157 | ) | $ | 17,431 | $ | 16,783 | $ | (643 | ) | ||||||||||
Greater than three months to six months |
1,371 | 1,241 | (130 | ) | 732 | 690 | (42 | ) | ||||||||||||||||
Greater than six months to nine months |
267 | 250 | (17 | ) | 438 | 397 | (41 | ) | ||||||||||||||||
Greater than nine months to eleven
months |
857 | 778 | (70 | ) | 185 | 169 | (16 | ) | ||||||||||||||||
Twelve months or more |
12,430 | 10,008 | (2,348 | ) | 15,599 | 12,811 | (2,754 | ) | ||||||||||||||||
Total |
$ | 21,095 | $ | 18,290 | $ | (2,722 | ) | $ | 34,385 | $ | 30,850 | $ | (3,496 | ) | ||||||||||
[1] | As of September 30, 2011, fixed maturities, AFS, represented $2,526, or 93%, of the Companys total unrealized loss on AFS 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 September 30, 2011 and December 31, 2010. | |
[2] | Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Subsequent changes in fair value are recorded in net realized capital gains (losses). |
46
Cost or | Percent of Total | |||||||||||
Amortized Cost | Fair Value | Invested Assets [1] | ||||||||||
Top Ten Corporate and Equity, AFS, Exposures by Sector |
||||||||||||
Utilities |
$ | 8,381 | $ | 9,134 | 8.6 | % | ||||||
Financial services |
8,262 | 7,897 | 7.5 | % | ||||||||
Consumer non-cyclical |
6,053 | 6,723 | 6.4 | % | ||||||||
Technology and communications |
4,291 | 4,633 | 4.4 | % | ||||||||
Basic industry |
3,812 | 4,079 | 3.9 | % | ||||||||
Energy |
3,624 | 3,992 | 3.8 | % | ||||||||
Capital goods |
3,319 | 3,632 | 3.4 | % | ||||||||
Consumer cyclical |
2,136 | 2,303 | 2.2 | % | ||||||||
Transportation |
1,103 | 1,204 | 1.1 | % | ||||||||
Other |
771 | 708 | 0.7 | % | ||||||||
Total |
$ | 41,752 | $ | 44,305 | 42.0 | % | ||||||
Top Ten Exposures by Issuer [2] |
||||||||||||
Government of United Kingdom |
$ | 468 | $ | 478 | 0.4 | % | ||||||
AT&T Inc. |
355 | 403 | 0.4 | % | ||||||||
National Grid PLC |
332 | 383 | 0.3 | % | ||||||||
State of Califorina |
307 | 324 | 0.3 | % | ||||||||
Verizon Communications Inc. |
264 | 307 | 0.3 | % | ||||||||
State of Massachusetts |
273 | 300 | 0.3 | % | ||||||||
Wells Fargo & Co. |
321 | 299 | 0.3 | % | ||||||||
General Electric Co. |
331 | 291 | 0.3 | % | ||||||||
Pfizer Inc |
242 | 282 | 0.3 | % | ||||||||
JPMorgan Chase & Co. |
302 | 270 | 0.3 | % | ||||||||
Total |
$ | 3,195 | $ | 3,337 | 3.2 | % | ||||||
[1] | Excludes equity securities, trading. | |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions and equity securities, trading. |
47
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