UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 7, 2012
THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
(Exact name of registrant as specified in its charter)
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, including zip code)
Registrants telephone number, including area code: (860) 547-5000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
On February 7, 2012, The Hartford Financial Services Group, Inc. issued (i) a press release announcing its financial results for the fiscal year ended December 31, 2011, and (ii) its Investor Financial Supplement (IFS) relating to its financial results for the fiscal year ended December 31, 2011. Copies of the press release and the IFS are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
Item 9.01 | Financial Statements and Exhibits |
Exhibit No. |
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99.1 | Press Release of The Hartford Financial Services Group, Inc. dated February 7, 2012 | |
99.2 | Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the fiscal year ended December 31, 2011 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||||||
Date: February 7, 2012 | By: | /s/ Beth A. Bombara | ||||
Name: | Beth A. Bombara | |||||
Title: | Senior Vice President and Controller |
Exhibit 99.1
NEWS RELEASE |
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THE HARTFORD REPORTS FOURTH QUARTER 2011 FINANCIAL RESULTS
| Fourth quarter core earnings* of $339 million or $0.69 per diluted share* |
| The Hartford purchased $93.7 million of its common stock as of Feb. 7, 2012 |
| Book value per diluted share increased 17% to $47.25 at Dec. 31, 2011 |
HARTFORD, Conn., Feb. 7, 2011 The Hartford (NYSE:HIG) reported net income of $127 million, or $0.24 per diluted share for the fourth quarter of 2011 compared with $619 million, or $1.24 per diluted share, in the fourth quarter of 2010. Core earnings in the fourth quarter of 2011 were $339 million, or $0.69 per diluted share, compared with $529 million, or $1.06 per diluted share, in the fourth quarter of 2010.
The Hartford made good progress in the fourth quarter, said The Hartfords Chairman, President and CEO Liam E. McGee. P&C Commercial pricing continued to firm and margins improved across the board, including a 7% rate increase in Middle Market. Margins are also expanding in Consumer Markets as we shift to a more preferred book of business. Wealth Management is focused on increasing returns and managing risk in this low-rate environment.
Capital markets volatility, low interest rates and higher than normal cat and non-cat weather challenged the industry and The Hartford in 2011. Even in this environment, The Hartford is a much stronger and more efficient organization, with a significantly enhanced financial position and risk profile. As we said in December at our Investor Day, we are evaluating our strategy and business portfolio for opportunities to deliver greater value for shareholders. We will be objective and pragmatic about the best ways to achieve this goal, added McGee.
FOURTH QUARTER 2011 FINANCIAL RESULTS
Three Months Ended | Year Ended | |||||||||||||||||||||||
(in millions except per share data) |
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | Dec. 31, 2011 |
Dec. 31, 2010 |
Change | ||||||||||||||||||
Net income |
$ | 127 | $ | 619 | (79 | %) | $ | 662 | $ | 1,680 | (61 | %) | ||||||||||||
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Net income available to common shareholders per diluted share |
$ | 0.24 | $ | 1.24 | (81 | %) | $ | 1.30 | $ | 2.50 | (48 | %) | ||||||||||||
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Core earnings |
$ | 339 | $ | 529 | (36 | %) | $ | 970 | $ | 1,972 | (51 | %) | ||||||||||||
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Core earnings available to common shareholders per diluted share |
$ | 0.69 | $ | 1.06 | (35 | %) | $ | 1.94 | $ | 3.09 | (37 | %) | ||||||||||||
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Book value per diluted share |
$ | 47.25 | $ | 40.40 | 17 | % | ||||||||||||||||||
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Book value per diluted share (ex. AOCI1) |
$ | 44.86 | $ | 42.40 | 6 | % | ||||||||||||||||||
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[1] | Accumulated other comprehensive income (AOCI) |
The companys fourth quarter of 2011 net income and core earnings included the following items, which in total reduced net income by $149 million, or $0.30 per diluted share, and core earnings by $103 million, or $0.21 per diluted share (all items are presented after tax):
| Net prior year reserve strengthening of $64 million, or $0.13 per diluted share, in Commercial Markets, Consumer Markets and P&C Other Operations |
| Current accident year reserve strengthening in Commercial Markets of $57 million, or $0.12 per diluted share |
| DAC unlock benefit of $47 million, or $0.10 per diluted share, in Wealth Management and Life Other Operations, included in core earnings; the DAC unlock benefit included in net income was $1 million |
| Write-off of goodwill associated with The Hartford Financial Products business of $20 million, or $0.04 per diluted share, in Commercial Markets |
| Net current accident year catastrophe losses of $9 million, or $0.02 per diluted share, in Commercial and Consumer Markets |
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COMMERCIAL MARKETS
Fourth Quarter 2011 Highlights:
| P&C Commercial written premiums grew 2% due to strong retention, increased exposures and higher pricing |
| P&C Commercial combined ratio1 rose to 101.5% primarily due to higher workers compensation loss costs |
| Group Benefits loss ratio2 rose to 80.5%, reflecting unfavorable disability results |
P&C COMMERCIAL
($ in millions)
Three Months Ended | ||||||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | ||||||||||
Written premiums |
$ | 1,482 | $ | 1,449 | 2 | % | ||||||
Combined ratio1 |
101.5 | % | 95.0 | % | (6.5 | ) | ||||||
Core earnings |
$ | 25 | $ | 201 | (88 | %) |
[1] | Excludes catastrophes and prior year development* |
GROUP BENEFITS
($ in millions)
Three Months Ended |
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Dec. 31, 2011 |
Dec. 31, 2010 |
Change | ||||||||||
Fully insured premiums2 |
$ | 995 | $ | 1,030 | (3 | %) | ||||||
Loss ratio2 |
80.5 | % | 79.1 | % | (1.4 | ) | ||||||
Core earnings |
$ | 15 | $ | 30 | (50 | %) |
[2] | Excludes buyout premiums |
Commercial Markets net income declined to $41 million in the fourth quarter of 2011 from $253 million in the fourth quarter of 2010 and core earnings decreased to $40 million from $231 million in the comparable prior year period.
P&C Commercial core earnings were $25 million in the fourth quarter of 2011 compared with $201 million in the fourth quarter of 2010. The reduction in core earnings resulted principally from unfavorable prior accident year reserve development of $109 million before tax ($71 million after tax) in the fourth quarter of 2011 compared with a favorable $22 million before tax ($14 million after tax) in the fourth quarter of 2010. Prior accident year development in the fourth quarter of 2011 primarily reflects reserve strengthening in the workers compensation line of business for the 2010 accident year.
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Excluding catastrophes and prior year development, the combined ratio was 101.5%, up 6.5 points in the fourth quarter of 2011 compared with 95.0% in the fourth quarter of 2010. The combined ratio, excluding catastrophes and prior year development, for the fourth quarter of 2011 included current accident year reserve strengthening of $87 million before tax ($57 million after tax), compared with $44 million before tax ($29 million after tax) in the prior year period. The current year reserve strengthening in both periods was primarily related to workers compensation. Catastrophe losses in the current quarter totaled $15 million before tax ($10 million after tax), or 1.0 points on the P&C Commercial combined ratio, compared with $18 million before tax ($12 million after tax), or 1.2 points in the fourth quarter of 2010.
Group Benefits core earnings in the fourth quarter of 2011 were $15 million compared with $30 million in the fourth quarter of 2010. Fully insured premium for the fourth quarter of 2011 declined 3% to $995 million compared with $1,030 million for the fourth quarter of 2010. The decline reflects the companys targeted pricing initiatives and the competitive market environment. The loss ratio rose to 80.5% in the fourth quarter of 2011 compared with 79.1% in the fourth quarter of 2010 reflecting unfavorable disability results.
CONSUMER MARKETS
Fourth Quarter 2011 Highlights:
| New business written grew 21% due to AARP Direct and AARP Agency |
| Automobile policy retention increased 2 points to 83% |
| Combined ratio, excluding catastrophes and prior year development, improved 3.8 points from the fourth quarter of 2010 |
CONSUMER MARKETS
($ in millions)
Three Months Ended | ||||||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | ||||||||||
Written premiums |
$ | 858 | $ | 896 | (4 | %) | ||||||
Combined ratio1 |
93.0 | % | 96.8 | % | 3.8 | |||||||
Core earnings |
$ | 83 | $ | 28 | 196 | % |
[1] | Excludes catastrophes and prior year development* |
Consumer Markets net income was $85 million in the fourth quarter of 2011 compared with net income of $30 million in the fourth quarter of 2010. Core earnings were $83 million in the fourth quarter of 2011 compared with core earnings of $28 million in the fourth quarter of 2010. Compared with the prior year, fourth quarter 2011 core earnings and net income results reflect favorable catastrophe losses and improved current accident year underwriting results before catastrophes.
Written premiums declined 4% to $858 million in the fourth quarter of 2011 from the 2010 comparable period. New business written was $100 million, a 21% increase from the fourth quarter of 2010 due to strong production in AARP Direct and AARP Agency. The increase in new business in fourth quarter 2011 reflects a return to historical new
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business growth levels. In the fourth quarter of 2011, automobile policy retention increased 2 points to 83% while homeowners retention was unchanged from the comparable prior year period.
Consumer Markets combined ratio excluding catastrophes and prior year development improved to 93.0% in the fourth quarter of 2011 compared with 96.8% in the fourth quarter of 2010, largely reflecting the effect of earned pricing increases and lower auto liability loss costs. Net current accident year catastrophes in the fourth quarter of 2011 were $(1) million before tax (($1) million after tax) as $27 million of fourth quarter losses were offset by $28 million of favorable development related to second and third quarter 2011 catastrophes. The fourth quarter of 2011 had favorable prior year reserve development of $17 million before tax ($11 million after tax) compared with $35 million before tax ($23 million after tax) in the fourth quarter of 2010.
WEALTH MANAGEMENT
Fourth Quarter 2011 Highlights:
| Core earnings, excluding DAC unlock, declined 11% compared with fourth quarter 2010 due to net outflows in Individual Annuity, lower income from limited partnerships and alternative investments and modestly elevated mortality in Individual Life |
| Individual Life sales increased 43% over the fourth quarter of 2010 with strong growth in each distribution channel |
| The Hartford expanded its sub-advisory relationship with Wellington Management Company to include fixed income mutual funds |
WEALTH MANAGEMENT
($ in millions)
Three Months Ended | ||||||||||||
Core Earnings |
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | |||||||||
Individual Annuity |
$ | 86 | $ | 96 | (10 | %) | ||||||
Individual Life |
40 | 44 | (9 | %) | ||||||||
Mutual Funds |
20 | 24 | (17 | %) | ||||||||
Retirement Plans |
9 | 11 | (18 | %) | ||||||||
Total, excluding DAC unlock |
$ | 155 | $ | 175 | (11 | %) | ||||||
DAC unlock |
73 | 85 | (14 | %) | ||||||||
Total Core Earnings |
$ | 228 | $ | 260 | (12 | %) |
In the fourth quarter of 2011, International Annuity, Institutional Annuity and the Private Placement Life Insurance business, previously reported as part of Wealth Management, were moved to the Life Other Operations segment, which is included in the newly formed Runoff Operations Division, discussed below. Results for Wealth Management have been restated to be consistent with this change.
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Wealth Management net income was $112 million in the fourth quarter of 2011 compared with $340 million in the comparable prior year period. Core earnings, including a $73 million after tax favorable DAC unlock, were $228 million in the fourth quarter of 2011 compared with $260 million, including a favorable $85 million after tax DAC unlock in the fourth quarter of 2010. Core earnings, excluding DAC unlock were $155 million in the fourth quarter of 2011, down 11% from $175 million in the prior year due to net outflows in Individual Annuity, lower limited partnership and alternative investment income and modestly elevated mortality in Individual Life compared with the fourth quarter of 2010.
Total Wealth Management assets under management declined 11% to $193.8 billion at Dec. 31, 2011 compared with $216.9 billion at Dec. 31, 2010. The decrease in assets under management reflects net outflows and lower account values which resulted in a reduction of assets under management of 16% in Individual Annuity and 14% in non-proprietary Mutual Funds. Assets under management were essentially flat compared with prior year for Retirement Plans and Individual Life, as deposits were offset by redemptions. Sales of Individual Life products increased 43% in the fourth quarter of 2011 compared with the fourth quarter 2010.
As previously announced, The Hartfords mutual funds have expanded their sub-advisory relationship with Wellington Management Company to include fixed income funds. Pending a fund-by-fund review by The Hartfords mutual fund board of directors, the company intends to have Wellington Management Company serve as the sole sub-advisor for The Hartfords non-proprietary mutual funds. Wellington Management Company currently serves as the sub-advisor for 45 of The Hartford Mutual Funds 77 funds.
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RUNOFF OPERATIONS
The Runoff Operations Division, which was established in the fourth quarter of 2011, includes P&C Other Operations, previously reported as part of Corporate and Other and Life Other Operations. Life Other Operations includes International Annuity, Institutional Annuity and the Private Placement Life Insurance business, previously reported as part of Wealth Management.
RUNOFF OPERATIONS
($ in millions)
Three Months Ended | ||||||||||||
Core Earnings |
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | |||||||||
Life Other Operations, excluding DAC unlock |
$ | 68 | $ | 102 | (33 | %) | ||||||
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DAC unlock |
$ | (26 | ) | $ | (36 | ) | 28 | % | ||||
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Life Other Operations |
$ | 42 | $ | 66 | (36 | %) | ||||||
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P&C Other Operations |
$ | 16 | $ | 13 | 23 | % | ||||||
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Total Runoff Operations |
$ | 58 | $ | 79 | (27 | %) | ||||||
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Net loss for Runoff Operations was $21 million in the fourth quarter of 2011 compared with net income of $49 million in the fourth quarter 2010. Core earnings for Runoff Operations were $58 million in the fourth quarter of 2011 compared with $79 million in the fourth quarter 2010.
Core earnings, excluding DAC unlock, in the fourth quarter of 2011 for the Life Other Operations segment were $68 million, reflecting a decline of 33% from $102 million in the fourth quarter of 2010. The decrease in the fourth quarter of 2011 was principally attributable to lower limited partnership and alternative investment income in Institutional Annuity. Additionally, in the fourth quarter of 2010, Life Other Operations benefitted from a favorable reserve adjustment of $24 million after tax in Institutional Annuity.
P&C Other Operations, which primarily includes the companys legacy asbestos and environmental liabilities, generated core earnings of $16 million compared with $13 million in the fourth quarter of 2010.
CORPORATE
The Corporate segment net loss for the fourth quarter of 2011 was $90 million compared with a net loss of $53 million in the fourth quarter of 2010. Core losses in the fourth quarter of 2011 were $70 million compared with core losses of $69 million in the fourth quarter of 2010.
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The Corporate segment includes corporate interest expense, holding company investment income and other non-insurance subsidiaries owned by the holding company.
INVESTMENTS
Fourth Quarter 2011 Highlights:
| Pre-tax net investment income, excluding trading securities, declined by 8% from fourth quarter of 2010 primarily due to reduced income on limited partnerships and alternative investments |
| Net impairment losses, including mortgage loan loss reserves, were $35 million, down from $57 million in the fourth quarter of 2010 |
| Net unrealized gains before tax and DAC were approximately $2.8 billion as of Dec. 31, 2011 |
8
INVESTMENTS
($ in millions)
Three Months Ended | ||||||||||||
Amounts presented before tax |
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | |||||||||
Net investment income, excluding trading securities |
$ | 998 | $ | 1,089 | (8 | %) | ||||||
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Net impairment losses, including mortgage loan loss reserves |
$ | (35 | ) | $ | (57 | ) | 39 | % | ||||
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Net unrealized gain (loss) before DAC |
$ | 2,768 | $ | (600 | ) | NM | ||||||
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Annualized investment yield1 |
4.0 | % | 4.5 | % | (0.5 | ) | ||||||
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Annualized investment yield, excluding limited partnerships and alternative investments1 |
4.1 | % | 4.2 | % | (0.1 | ) | ||||||
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The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as NM or not meaningful.
[1] | 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. |
Net investment income, excluding trading securities, was $998 million in the fourth quarter of 2011 compared with $1.1 billion in the fourth quarter of 2010. Net investment income declined due to a decrease in average portfolio yield, largely related to lower returns on limited partnerships and alternative investments. For the fourth quarter of 2011, annualized yield, excluding limited partnerships and alternative investments, was 4.1% compared to 4.2% in the comparable prior year period. Annualized returns on limited partnerships and other alternative investments were (0.4%) in the fourth quarter of 2011 compared with 17.0% in the fourth quarter of 2010.
Total invested assets, excluding trading securities, were $104.5 billion as of Dec. 31, 2011 compared with $98.2 billion at Dec. 31, 2010.
Net unrealized gains improved $364 million from the third quarter of 2011, ending the year at approximately $2.8 billion. Improvement in investment positions in the fourth quarter of 2011 were across most sectors and were driven primarily by declining interest rates.
STOCKHOLDERS EQUITY
The Hartfords stockholders equity was $22.9 billion on Dec. 31, 2011, an increase of 13% compared with $20.3 billion on Dec. 31, 2010. The improvement in stockholders equity reflects the companys 2011 net income of $662 million and the $2.2 billion increase in AOCI during the year that were partially offset by dividends paid and share repurchase activity.
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Book value per diluted common share, which includes the dilutive effect of derivative securities such as the companys outstanding warrants and mandatory convertible preferred stock, was $47.25 at Dec. 31, 2011, an increase of 17% compared with $40.40 at Dec. 31, 2010. Excluding AOCI, book value per diluted common share increased by 6% to $44.86 on Dec. 31, 2011 compared with $42.40 on Dec. 31, 2010.
In the fourth quarter of 2011, The Hartford purchased 3.2 million shares of common stock at a total price of $51.4 million, or $15.93 per share. The company purchased an additional 2.6 million shares of common stock for a total price of $42.3 million, or $16.58 per share, through Feb. 7, 2012. The company has $406.3 million remaining under the August 2011 purchase authorization.
* | Denotes financial measures not calculated based on generally accepted accounting principles (non-GAAP). More information is provided in the Discussion of Non-GAAP Financial Measures section below. |
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CONFERENCE CALL
The Hartford will discuss its fourth quarter 2011 and full year 2011 results in a conference call on Wednesday, Feb. 8 at 9 a.m. EST. The call, along with a slide presentation, can be accessed live or as a replay through the investor relations section of The Hartfords website at www.ir.thehartford.com. The slide presentation will be posted on The Hartfords website at approximately 8:30 a.m. EST on Feb. 8.
More detailed financial information can be found in The Hartfords Investor Financial Supplement for the fourth quarter of 2011 which is available at www.ir.thehartford.com.
ABOUT THE HARTFORD
The Hartford Financial Services Group Inc. (NYSE: HIG) is a leading provider of insurance and wealth management services for millions of consumers and businesses worldwide. The Hartford is consistently recognized for its superior service, its sustainability efforts and as one of the worlds most ethical companies. More information on the company and its financial performance is available at www.thehartford.com.
HIG-F
Media Contact: |
Investor Contact: | |
Dave Snowden |
Sabra Purtill, CFA | |
860-547-3397 |
860-547-8691 | |
david.snowden@thehartford.com |
sabra.purtill@thehartford.com | |
Ryan Greenier | ||
860-547-8844 | ||
ryan.greenier@thehartford.com |
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INCOME STATEMENTS BY DIVISION
($ in millions)
Three months ended December 31, 2011
Commercial Markets |
Consumer Markets |
Wealth Management |
Runoff Operations |
Corporate | Consolidated | |||||||||||||||||||
Earned premiums |
$ | 2,554 | $ | 922 | $ | 35 | $ | (5 | ) | $ | | $ | 3,506 | |||||||||||
Fee income |
16 | | 805 | 261 | 48 | 1,130 | ||||||||||||||||||
Net investment income (loss) |
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Securities available-for-sale and other |
311 | 42 | 395 | 257 | (7 | ) | 998 | |||||||||||||||||
Equity securities held for trading [1] |
| | | 325 | | 325 | ||||||||||||||||||
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Total net investment income (loss) |
311 | 42 | 395 | 582 | (7 | ) | 1,323 | |||||||||||||||||
Other revenues |
20 | 45 | | | | 65 | ||||||||||||||||||
Net realized capital gains (losses) |
6 | 1 | (295 | ) | (58 | ) | (40 | ) | (386 | ) | ||||||||||||||
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Total revenues |
2,907 | 1,010 | 940 | 780 | 1 | 5,638 | ||||||||||||||||||
Benefits, losses, and loss adjustment expenses |
2,080 | 616 | 466 | 302 | 1 | 3,465 | ||||||||||||||||||
Benefits, losses, and loss adjustment expenses returns credited on International variable annuities [1] |
| | | 324 | | 324 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
354 | 159 | (4 | ) | 99 | | 608 | |||||||||||||||||
Insurance operating costs and other expenses |
416 | 112 | 369 | 78 | 20 | 995 | ||||||||||||||||||
Interest expense |
| | | | 124 | 124 | ||||||||||||||||||
Goodwill impairment |
30 | | | | | 30 | ||||||||||||||||||
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Total benefits and expenses |
2,880 | 887 | 831 | 803 | 145 | 5,546 | ||||||||||||||||||
Income (loss) from continuing operations before income taxes |
27 | 123 | 109 | (23 | ) | (144 | ) | 92 | ||||||||||||||||
Income tax expense (benefit) |
(19 | ) | 38 | (3 | ) | (2 | ) | (48 | ) | (34 | ) | |||||||||||||
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Income (loss) from continuing operations |
46 | 85 | 112 | (21 | ) | (96 | ) | 126 | ||||||||||||||||
Income(loss) from discontinued operations, net of tax |
(5 | ) | | | | 6 | 1 | |||||||||||||||||
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Net income (loss) |
41 | 85 | 112 | (21 | ) | (90 | ) | 127 | ||||||||||||||||
Less: Income (loss )from discontinued operations, net of tax |
(5 | ) | | | | 6 | 1 | |||||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
6 | 2 | (116 | ) | (79 | ) | (26 | ) | (213 | ) | ||||||||||||||
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Core earnings (loss) |
$ | 40 | $ | 83 | $ | 228 | $ | 58 | $ | (70 | ) | $ | 339 | |||||||||||
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Three months ended December 31, 2010
Commercial Markets |
Consumer Markets |
Wealth Management |
Runoff Operations |
Corporate | Consolidated | |||||||||||||||||||
Earned premiums |
$ | 2,496 | $ | 971 | $ | 45 | $ | (6 | ) | $ | 3 3 | $ | 3,509 | |||||||||||
Fee income |
14 | | 886 | 274 | 44 | 1,218 | ||||||||||||||||||
Net investment income |
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Securities available-for-sale and other |
347 | 48 | 391 | 289 | 14 | 1,089 | ||||||||||||||||||
Equity securities held for trading [1] |
| | | 131 | | 131 | ||||||||||||||||||
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Total net investment income |
347 | 48 | 391 | 420 | 14 | 1,220 | ||||||||||||||||||
Other revenues |
24 | 49 | | | (1 | ) | 72 | |||||||||||||||||
Net realized capital gains (losses) |
29 | 2 | (100 | ) | (58 | ) | 38 | (89 | ) | |||||||||||||||
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Total revenues |
2,910 | 1,070 | 1,222 | 630 | 98 | 5,930 | ||||||||||||||||||
Benefits, losses, and loss adjustment expenses |
1,767 | 739 | 465 | 294 | (2 | ) | 3,263 | |||||||||||||||||
Benefits, losses, and loss adjustment expenses returns credited on International variable annuities [1] |
| | | 131 | | 131 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
350 | 164 | (41 | ) | 41 | | 514 | |||||||||||||||||
Insurance operating costs and other expenses |
454 | 128 | 395 | 84 | 74 | 1,135 | ||||||||||||||||||
Interest expense |
| | | | 128 | 128 | ||||||||||||||||||
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|
|||||||||||||
Total benefits and expenses |
2,571 | 1,031 | 819 | 550 | 200 | 5,171 | ||||||||||||||||||
Income (loss) from continuing operations before income taxes |
339 | 39 | 403 | 80 | (102 | ) | 759 | |||||||||||||||||
Income tax expense (benefit) |
87 | 9 | 103 | 27 | (51 | ) | 175 | |||||||||||||||||
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|
|||||||||||||
Income (loss) from continuing operations |
252 | 30 | 300 | 53 | (51 | ) | 584 | |||||||||||||||||
Income (loss) from discontinued operations, net of tax |
1 | | 40 | (4 | ) | (2 | ) | 35 | ||||||||||||||||
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|
|||||||||||||
Net income (loss) |
253 | 30 | 340 | 49 | (53 | ) | 619 | |||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
1 | | 40 | (4 | ) | (2 | ) | 35 | ||||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
21 | 2 | 40 | (26 | ) | 18 | 55 | |||||||||||||||||
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|
|||||||||||||
Core earnings (loss) |
$ | 231 | $ | 28 | $ | 260 | $ | 79 | $ | (69 | ) | $ | 529 | |||||||||||
|
|
[1] | Includes dividend income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classiified in net investment income with corresponding amounts credited to policyholders within interest credited. |
12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RESULTS BY SEGMENT
($ in millions, except per share data)
THREE MONTHS ENDED | ||||||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
Change | ||||||||||
Property & Casualty Commercial |
$ | 25 | $ | 201 | (88 | %) | ||||||
Group Benefits |
15 | 30 | (50 | %) | ||||||||
|
|
|
|
|
|
|||||||
Commercial Markets core earnings |
$ | 40 | $ | 231 | (83 | %) | ||||||
Consumer Markets core earnings |
83 | 28 | 196 | % | ||||||||
Individual Annuity |
86 | 96 | (10 | %) | ||||||||
Individual Life |
40 | 44 | (9 | %) | ||||||||
Retirement Plans |
9 | 11 | (18 | %) | ||||||||
Mutual Funds |
20 | 24 | (17 | %) | ||||||||
|
|
|
|
|
|
|||||||
Wealth Management core earnings, excluding DAC unlock |
$ | 155 | $ | 175 | (11 | %) | ||||||
DAC unlock |
73 | 85 | (14 | %) | ||||||||
|
|
|
|
|
|
|||||||
Wealth Management core earnings |
$ | 228 | $ | 260 | (12 | %) | ||||||
Life Other Operations core earnings, excluding DAC unlock |
68 | 102 | (33 | %) | ||||||||
DAC unlock |
(26 | ) | (36 | ) | 28 | % | ||||||
|
|
|
|
|
|
|||||||
Life Other Operations core earnings |
42 | 66 | (36 | %) | ||||||||
P&C Other Operations |
16 | 13 | 23 | % | ||||||||
|
|
|
|
|
|
|||||||
Total Runoff Operations core earnings |
$ | 58 | $ | 79 | (27 | %) | ||||||
Corporate core losses |
(70 | ) | (69 | ) | (1 | %) | ||||||
|
|
|
|
|
|
|||||||
Core earnings |
339 | 529 | (36 | %) | ||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
(213 | ) | 55 | NM | ||||||||
Add: Income from discontinued operations |
1 | 35 | (97 | %) | ||||||||
|
|
|
|
|
|
|||||||
Net Income |
$ | 127 | $ | 619 | (79 | %) | ||||||
|
|
|
|
|
|
|||||||
PER SHARE DATA |
||||||||||||
Diluted Earnings Per Share |
||||||||||||
Core earnings |
$ | 0.69 | $ | 1.06 | ||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
(0.45 | ) | 0.11 | |||||||||
Add: Income from discontinued operations |
| 0.07 | ||||||||||
|
|
|
|
|||||||||
Net income available to common shareholders and assumed conversion of preferred shares |
$ | 0.24 | $ | 1.24 | ||||||||
|
|
|
|
[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. |
13
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release 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 financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found in The Hartfords Investor Financial Supplement for the fourth quarter of 2011, which is available on The Hartfords website, www.ir.thehartford.com.
Book value per diluted common share excluding accumulated other comprehensive income (AOCI): Book value per diluted common share excluding AOCI is a non-GAAP financial measure based on a GAAP financial measure. It is calculated by dividing (a) common stockholders equity excluding AOCI, net of tax, by (b) diluted common shares outstanding. The Hartford provides book value per diluted common share excluding AOCI to enable investors to analyze the companys stockholders equity excluding the effect of changes in the value of the companys investment portfolio and other assets due to interest rates, currency and other factors. The Hartford believes book value per diluted 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 market value. Stockholders equity per diluted common share is the most directly comparable GAAP measure. A reconciliation of stockholders equity per diluted common share to book value per diluted common share excluding AOCI as of Dec. 31, 2011 and Dec. 31, 2010, is set forth below.
THREE MONTHS ENDED | Change | |||||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
|||||||||||
Stockholders equity per diluted common share, including AOCI |
$ | 47.25 | $ | 40.40 | 17 | % | ||||||
Less: Per share impact of AOCI |
2.39 | (2.00 | ) | NM | ||||||||
|
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|
|
|
|
|||||||
Book value per diluted common share, excluding AOCI |
$ | 44.86 | $ | 42.40 | 6 | % | ||||||
|
|
|
|
|
|
Combined ratio before catastrophes and prior accident year development: Combined ratio before catastrophes and prior accident year development is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio measures the cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100% demonstrates a positive underwriting result. A combined ratio above 100% indicates a negative underwriting result. The combined ratio before catastrophes and prior accident year development represents the combined ratio for the current accident year, excluding the impact of catastrophes. The company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss development. A reconciliation of the combined ratio to the combined ratio before catastrophes and prior year development is provided in the table below.
14
THREE MONTHS ENDED | ||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
|||||||
P&C Commercial |
||||||||
Combined ratio |
109.4 | 94.7 | ||||||
Less: Prior year reserve development |
7.0 | (1.5 | ) | |||||
Less: Current year catastrophe losses |
1.0 | 1.2 | ||||||
|
|
|
|
|||||
Combined ratio before prior year development & catastrophes |
101.5 | 95.0 | ||||||
Consumer Markets |
||||||||
Combined ratio |
91.0 | 100.4 | ||||||
Less: Prior year reserve development |
(1.8 | ) | (3.6 | ) | ||||
Less: Current year catastrophe losses |
(0.1 | ) | 7.3 | |||||
|
|
|
|
|||||
Combined ratio before prior year development & catastrophes |
93.0 | 96.8 |
Core Earnings: The Hartford uses the non-GAAP financial measure core earnings as a measure of the companys operating performance. The Hartford believes that the measure core earnings provides investors with a measure of the performance of the companys ongoing businesses because it reveals trends in the companys insurance and financial services businesses before 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 activities of the companys business.
Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax and the effects of deferred policy acquisition costs) 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 the companys insurance operations, so core earnings includes certain 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 statement of operations such as net investment income (loss). 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 core earnings to net income as of Dec. 31, 2011 and Dec. 31, 2010, is included in this press release.
Core earnings available to common shareholders per diluted share: Core earnings available to common shareholders per diluted share is calculated based on the non-GAAP financial measure core earnings. The Hartford believes that the measure core earnings per diluted common 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 diluted common share is the most
15
directly comparable GAAP measure. Core earnings available to common shareholders per diluted share should not be considered as a substitute for net income per diluted common 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 diluted common share and core earnings available to common shareholders per diluted share when reviewing the companys performance. A reconciliation of core earnings available to common shareholders per diluted share to net income per diluted common share as of Dec. 31, 2011 and Dec. 31, 2010 is included in this press release under the heading The Hartford Financial Services Group, Inc. Results By Segment.
Underwriting results: The Hartfords management evaluates profitability of the P&C 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 (loss) 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, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure 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 (loss) as of Dec. 31, 2011, and Dec. 31, 2010, is set forth below.
16
THREE MONTHS ENDED | ||||||||
Dec. 31, 2011 |
Dec. 31, 2010 |
|||||||
P&C Commercial |
||||||||
Net income |
$ | 28 | $ | 213 | ||||
Less: Income (loss) from discontinued operations, after tax |
(5 | ) | 1 | |||||
Less: Net realized capital gains (Losses) after tax |
8 | 11 | ||||||
Less: Income tax benefit (expense) |
19 | (71 | ) | |||||
Less: Goodwill impairment |
(30 | ) | | |||||
Less: Periodic net coupon settlements on credit derivatives, before tax |
| (2 | ) | |||||
Less: Other expenses |
(29 | ) | (45 | ) | ||||
Less: Net investment income |
212 | 242 | ||||||
|
|
|
|
|||||
Underwriting results |
$ | (147 | ) | $ | 77 | |||
Consumer Markets |
||||||||
Net income (loss) |
$ | 85 | $ | 30 | ||||
Less: Net realized capital gains (losses) after tax |
2 | 2 | ||||||
Less: Income tax benefit (expense) |
(38 | ) | (8 | ) | ||||
Less: Periodic net coupon settlements on credit derivatives, before tax |
(1 | ) | (1 | ) | ||||
Less: Other expenses |
(3 | ) | (6 | ) | ||||
Less: Net investment income |
42 | 48 | ||||||
|
|
|
|
|||||
Underwriting results |
$ | 83 | $ | (5 | ) |
17
SAFE HARBOR STATEMENT
Some of the statements in this release should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as anticipates, intends, plans, seeks, believes, estimates, expects, projects and similar references to the future. Examples of forward-looking statements include, but are not limited to, statements the company makes regarding future results of operations. The Hartford cautions investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include: challenges related to the companys current operating environment, including continuing uncertainty about the strength and speed of the recovery in the United States and other key economies and the impact of governmental stimulus and austerity initiatives, sovereign credit concerns, including the potential consequences associated with recent and further potential downgrades to the credit ratings of debt issued by the United States government, European sovereigns and other adverse developments on financial, commodity and credit markets and consumer spending and investment, including in respect of Europe, and the effect of these events on our returns in our life and property and casualty investment portfolios and our hedging costs associated with our variable annuities business; the success of our initiatives relating to the realignment of our business, including the continuing realignment of our hedge program for our variable annuity business, and plans to improve the profitability and long-term growth prospects of our key divisions, including through opportunistic acquisitions or divestitures or other actions or initiatives, and the impact of regulatory or other constraints on our ability to complete these initiatives and deploy capital among our businesses as and when planned; market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; volatility in our earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of statutory surplus; the impact on our statutory capital of various factors, including many that are outside the companys control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the companys financial strength and credit ratings or negative rating actions or downgrades relating to our investments; the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the valuation of the companys financial instruments that could result in changes to investment valuations; the subjective determinations that underlie the companys evaluation of other-than-temporary impairments on available-for-sale securities; losses due to nonperformance or defaults by others; the potential for further acceleration of deferred policy acquisition cost amortization; the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets; the potential impact or consequences of strategic acquisition, divestitures, restructurings or other strategic actions with respect to our operations; the possible occurrence of terrorist attacks and
18
the companys ability to contain its exposure, including the effect of the absence or insufficiency of applicable terrorism legislation on coverage; the possibility of unfavorable loss development including with respect to long-tailed exposures; the difficulty in predicting the companys potential exposure for asbestos and environmental claims; the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses and cost and availability of reinsurance; weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; the response of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the company against losses; actions by our competitors, many of which are larger or have greater financial resources than we do; the companys ability to distribute its products through distribution channels, both current and future; the cost and other effects of increased regulation as a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act), which, among other effects, has resulted in the establishment of a newly created Financial Services Oversight Council with the power to designate systemically important institutions, will require central clearing of, and/or impose new margin and capital requirements on, derivatives transactions, and created a new Federal Insurance Office within the U.S. Department of the Treasury (Treasury); unfavorable judicial or legislative developments; the uncertain effects of emerging claim and coverage issues; the potential effect of other domestic and foreign regulatory developments, including those that could adversely impact the demand for the companys products, operating costs and required capital levels; regulatory limitations on the ability of the company and certain of its subsidiaries to declare and pay dividends; the companys ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines; the companys ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; the risk that our framework for managing business risks may not be effective in mitigating material risk and loss to the company; the potential for difficulties arising from outsourcing relationships; the impact of potential changes in federal or state tax laws, including changes affecting the availability of the separate account dividend received deduction; the impact of potential changes in accounting principles and related financial reporting requirements; the companys ability to protect its intellectual property and defend against claims of infringement; and other factors described in such forward-looking statements and other factors described in The Hartfords 2010 Annual Report on Form 10-K and other filings The Hartford makes with the Securities and Exchange Commission.
Any forward-looking statement made by the company in this release speaks only as of the date of this release. Factors or events that could cause the companys actual results to differ may emerge from time to time, and it is not possible for the company to predict all of them. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
19
Exhibit 99.2
INVESTOR FINANCIAL SUPPLEMENT
DECEMBER 31, 2011
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Address:
One Hartford Plaza
Hartford, CT 06155
Internet address:
http://www.thehartford.com
Contacts:
Sabra Purtill
Senior Vice President
Investor Relations
Phone (860) 547-8691
Ryan Greenier
Assistant Vice President
Investor Relations
Phone (860) 547-8844
Margaret Mann
Program Assistant
Investor Relations
Phone (860) 547-3800
As of January 27, 2011
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 |
TRANSFER AGENT
The Bank of New York Mellon
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
1 (877) 272-7740
COMMON STOCK
Common stock of The Hartford Financial Services Group, Inc. is traded on the New York Stock Exchange under the symbol HIG.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
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 December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011 |
11 | |||
Year Ended December 31, 2010 and 2011 |
12 | |||
Unpaid Loss and Loss Adjustment Expense Reserve Rollforward |
||||
Three Months Ended December 31, 2011 |
13 | |||
Year Ended December 31, 2011 |
14 | |||
COMMERCIAL MARKETS |
||||
Income Statements |
15 | |||
Property & Casualty Commercial |
||||
Operating Results |
16 | |||
Underwriting Results |
17 | |||
Group Benefits |
||||
Income Statements |
18 | |||
Supplemental Data |
19 | |||
CONSUMER MARKETS |
||||
Income Statements |
20 | |||
Operating Results |
21 | |||
Underwriting Results |
22 | |||
Written and Earned Premiums |
23 | |||
WEALTH MANAGEMENT |
||||
Operating Results |
24 | |||
Financial Highlights Excluding Impact of Unlock |
25 | |||
Deferred Policy Acquisition Costs and Present Value of Future Profits |
26 | |||
Annuity Death and Income Benefits |
27 | |||
Individual Annuity |
||||
Income Statements |
28 | |||
Account Value Rollforward |
29 | |||
Individual Life |
||||
Income Statements |
30 | |||
Supplemental Data |
31 | |||
Account Value Rollforward |
32 | |||
Retirement Plans |
||||
Income Statements |
33 | |||
Supplemental Data |
||||
Assets Under Management |
34 | |||
Account Value and Asset Rollforward |
35 | |||
Mutual Funds |
||||
Income Statements |
36 | |||
Supplemental Data |
||||
Deposits and Assets Under Management |
37 | |||
Asset Rollforward |
38 | |||
RUNOFF OPERATIONS |
||||
Financial Highlights |
39 | |||
Supplemental Data |
||||
Life Other Operations - Account Value Data |
40 | |||
Life Other Operations - DAC rollforward |
41 | |||
International Annuity Death and Income Benefits |
42 | |||
CORPORATE |
||||
Income Statements |
43 | |||
INVESTMENTS |
||||
Investment Earnings Before-tax |
44 | |||
Composition of Invested Assets |
||||
Consolidated |
45 | |||
Life |
46 | |||
Property & Casualty |
47 | |||
Unrealized Loss Aging |
48 | |||
Invested Asset Exposures |
||||
As of December 31, 2011 |
49 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
| All amounts are in millions, except for per share and ratio information unless otherwise stated. |
| The Company is organized into three customer-oriented divisions, Commercial Markets, Consumer Markets and Wealth Management, conducting business principally in nine reporting segments. A Runoff Operations division was formed for 2011 segment reporting to reflect the manner in which the Company is currently organized for purposes of making operating decisions and assessing performance. The Runoff Operations division consists of two new reporting segments, Life Other Operations and Property & Casualty Other Operations. Segment data for prior reporting periods has been adjusted accordingly. |
| The Commercial Markets division consists of the reporting segments of Property & Casualty Commercial and Group Benefits. Property & Casualty Commercial provides workers compensation, property, automobile, marine, livestock, 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, and specialty casualty coverages. 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 Individual Annuity, Individual Life, Retirement Plans and Mutual Funds. Individual Annuity offers individual variable, fixed market value adjusted, and single premium immediate annuities in the U.S. Individual Life sells a variety of life insurance products, including variable universal life, universal life, and term life. 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 Runoff Operations division includes the reporting segments of Life Other Operations and Property & Casualty Other Operations. Life Other Operations includes International Annuity, Institutional Annuity, and Private Placement Life Insurance, previously reported in Wealth Management. Property & Casualty Other Operations was previously reported in Corporate and Other. |
| The Hartford includes in Corporate the Companys debt financing and related interest expense, as well as other capital raising activities; banking operations; certain fee inome and commissions expenses associated with sales of non-proprietary products by broker-dealer subsidiaries; 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, Life Other Operations, Group Benefits and an Other category. Property & Casualty consists of the of Property & Casualty Commercial, Property & Casualty 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. |
| NMNot meaningful means increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa. |
i
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
| The Hartford uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the 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 16 and 21, 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 16 and 21, 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 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 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. |
ii
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
| 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. |
| 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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | Year Over Year |
Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
HIGHLIGHTS |
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Net income |
$ | 619 | $ | 511 | $ | 24 | $ | | $ | 127 | (79 | %) | NM | $ | 1,680 | $ | 662 | (61 | %) | |||||||||||||||||||||
Core earnings |
$ | 529 | $ | 586 | $ | 12 | $ | 33 | $ | 339 | (36 | %) | NM | $ | 1,972 | $ | 970 | (51 | %) | |||||||||||||||||||||
Total revenues [1] |
$ | 5,930 | $ | 6,300 | $ | 5,401 | $ | 4,520 | $ | 5,638 | (5 | %) | 25 | % | $ | 22,049 | $ | 21,859 | (1 | %) | ||||||||||||||||||||
Total assets |
$ | 318,346 | $ | 322,538 | $ | 317,469 | $ | 305,598 | $ | 304,064 | (4 | %) | (1 | %) | ||||||||||||||||||||||||||
PER SHARE AND SHARES DATA [2] |
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Basic earnings (losses) per common share |
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Net income (loss) available to common shareholders |
$ | 1.37 | $ | 1.13 | $ | 0.03 | $ | (0.02 | ) | $ | 0.26 | (81 | %) | NM | $ | 2.70 | $ | 1.40 | (48 | %) | ||||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.17 | $ | 1.30 | $ | 0.00 | $ | 0.05 | $ | 0.74 | (37 | %) | NM | $ | 3.38 | $ | 2.09 | (38 | %) | |||||||||||||||||||||
Diluted earnings (losses) per common share |
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Net income (loss) available to common shareholders |
$ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | $ | 0.24 | (81 | %) | NM | $ | 2.50 | $ | 1.30 | (48 | %) | ||||||||||||||||||||
Core earnings available to common shareholders |
$ | 1.06 | $ | 1.15 | $ | 0.00 | $ | 0.05 | $ | 0.69 | (35 | %) | NM | $ | 3.09 | $ | 1.94 | (37 | %) | |||||||||||||||||||||
Weighted average common shares outstanding (basic) |
444.3 | 444.6 | 445.1 | 445.3 | 445.1 | 0.8 | sh | (0.2 | ) sh | 431.5 | 445.0 | 13.5 | sh | |||||||||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) |
497.8 | 508.2 | 482.4 | 473.4 | 489.6 | (8.2 | ) sh | 16.2 | sh | 481.5 | 478.0 | (3.5 | ) sh | |||||||||||||||||||||||||||
Common shares outstanding |
444.5 | 445.1 | 445.3 | 445.5 | 442.5 | (2.0 | ) sh | (3.0 | ) sh | 444.5 | 442.5 | (2.0 | ) sh | |||||||||||||||||||||||||||
Book value per common share |
$ | 44.44 | $ | 45.93 | $ | 47.43 | $ | 49.89 | $ | 50.52 | 14 | % | 1 | % | ||||||||||||||||||||||||||
Per common share impact of AOCI |
$ | (2.26 | ) | $ | (1.72 | ) | $ | (0.17 | ) | $ | 2.39 | $ | 2.62 | NM | 10 | % | ||||||||||||||||||||||||
Book value per common share (excluding AOCI) |
$ | 46.70 | $ | 47.65 | $ | 47.60 | $ | 47.50 | $ | 47.90 | 3 | % | 1 | % | ||||||||||||||||||||||||||
Book value per diluted share |
$ | 40.40 | $ | 41.57 | $ | 43.11 | $ | 46.72 | $ | 47.25 | 17 | % | 1 | % | ||||||||||||||||||||||||||
Per diluted share impact of AOCI |
$ | (2.00 | ) | $ | (1.52 | ) | $ | (0.15 | ) | $ | 2.18 | $ | 2.39 | NM | 9 | % | ||||||||||||||||||||||||
Book value per diluted share (excluding AOCI) |
$ | 42.40 | $ | 43.09 | $ | 43.26 | $ | 44.54 | $ | 44.86 | 6 | % | 1 | % | ||||||||||||||||||||||||||
Common shares outstanding and dilutive potential common shares |
502.7 | 505.1 | 502.8 | 487.6 | 484.9 | (17.8 | ) sh | (2.7 | ) sh | |||||||||||||||||||||||||||||||
FINANCIAL RATIOS |
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ROE (net income last 12 months to common stockholder equity including AOCI) [3] |
6.8 | % | 9.6 | % | 9.0 | % | 5.3 | % | 3.1 | % | (3.7 | ) | (2.2 | ) | ||||||||||||||||||||||||||
ROE (core earnings last 12 months to common stockholder equity excluding AOCI) [3] |
7.5 | % | 9.6 | % | 8.7 | % | 5.5 | % | 4.5 | % | (3.0 | ) | (1.0 | ) | ||||||||||||||||||||||||||
Debt to capitalization, including AOCI |
24.5 | % | 23.9 | % | 23.4 | % | 22.5 | % | 21.3 | % | (3.2 | ) | (1.2 | ) | ||||||||||||||||||||||||||
Annualized investment yield, after-tax |
3.1 | % | 3.2 | % | 3.1 | % | 2.9 | % | 2.8 | % | (0.3 | ) | (0.1 | ) | 3.1 | % | 3.0 | % | (0.1 | ) |
[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 December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Property & Casualty Commercial |
$ | 201 | $ | 181 | $ | 99 | $ | 86 | $ | 25 | (88 | %) | (71 | %) | $ | 991 | $ | 391 | (61 | %) | ||||||||||||||||||||
Group Benefits |
30 | 19 | 30 | 20 | 15 | (50 | %) | (25 | %) | 158 | 84 | (47 | %) | |||||||||||||||||||||||||||
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Commercial Markets core earnings |
231 | 200 | 129 | 106 | 40 | (83 | %) | (62 | %) | 1,149 | 475 | (59 | %) | |||||||||||||||||||||||||||
Consumer Markets core earnings (losses) |
28 | 113 | (179 | ) | (10 | ) | 83 | 196 | % | NM | 145 | 7 | (95 | %) | ||||||||||||||||||||||||||
Individual Annuity |
179 | 145 | 139 | (96 | ) | 161 | (10 | %) | NM | 525 | 349 | (34 | %) | |||||||||||||||||||||||||||
Individual Life |
43 | 43 | 50 | (19 | ) | 39 | (9 | %) | NM | 208 | 113 | (46 | %) | |||||||||||||||||||||||||||
Retirement Plans |
14 | 21 | 16 | (26 | ) | 8 | (43 | %) | NM | 70 | 19 | (73 | %) | |||||||||||||||||||||||||||
Mutual Funds |
24 | 27 | 27 | 24 | 20 | (17 | %) | (17 | %) | 94 | 98 | 4 | % | |||||||||||||||||||||||||||
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Wealth Management core earnings |
260 | 236 | 232 | (117 | ) | 228 | (12 | %) | NM | 897 | 579 | (35 | %) | |||||||||||||||||||||||||||
Life Other Operations |
66 | 93 | 80 | 128 | 42 | (36 | %) | (67 | %) | 210 | 343 | 63 | % | |||||||||||||||||||||||||||
P&C Other Operations |
13 | 23 | (167 | ) | 9 | 16 | 23 | % | 78 | % | (69 | ) | (119 | ) | (72 | %) | ||||||||||||||||||||||||
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Runoff operations core earnings |
79 | 116 | (87 | ) | 137 | 58 | (27 | %) | (58 | %) | 141 | 224 | 59 | % | ||||||||||||||||||||||||||
Corporate core losses |
(69 | ) | (79 | ) | (83 | ) | (83 | ) | (70 | ) | (1 | %) | 16 | % | (360 | ) | (315 | ) | 12 | % | ||||||||||||||||||||
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CONSOLIDATED |
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Core earnings |
529 | 586 | 12 | 33 | 339 | (36 | %) | NM | 1,972 | 970 | (51 | %) | ||||||||||||||||||||||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1][2] |
55 | (237 | ) | 92 | (36 | ) | (213 | ) | NM | NM | (228 | ) | (394 | ) | (73 | %) | ||||||||||||||||||||||||
Add: Income (loss) from discontinued operations |
35 | 162 | (80 | ) | 3 | 1 | (97 | %) | (67 | %) | (64 | ) | 86 | NM | ||||||||||||||||||||||||||
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Net income |
$ | 619 | $ | 511 | $ | 24 | $ | | $ | 127 | (79 | %) | NM | $ | 1,680 | $ | 662 | (61 | %) | |||||||||||||||||||||
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PER SHARE DATA [3] |
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Diluted earnings (losses) per common share |
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Core earnings available to common shareholders |
$ | 1.06 | $ | 1.15 | $ | 0.00 | $ | 0.05 | $ | 0.69 | (35 | %) | NM | $ | 3.09 | $ | 1.94 | (37 | %) | |||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | $ | 0.24 | (81 | %) | NM | $ | 2.50 | $ | 1.30 | (48 | %) | ||||||||||||||||||||
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DAC unlock IMPACT ON CORE EARNINGS BY SEGMENT |
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Individual Annuity |
$ | 83 | $ | 46 | $ | (5 | ) | $ | (179 | ) | $ | 75 | (10 | %) | NM | $ | 152 | $ | (63 | ) | NM | |||||||||||||||||||
Individual Life |
(1 | ) | (2 | ) | (2 | ) | (65 | ) | (1 | ) | | 98 | % | 23 | (70 | ) | NM | |||||||||||||||||||||||
Retirement Plans |
3 | 4 | (4 | ) | (38 | ) | (1 | ) | NM | 97 | % | 26 | (39 | ) | NM | |||||||||||||||||||||||||
Life Other Operations |
(36 | ) | 13 | (10 | ) | 55 | (26 | ) | 28 | % | NM | (72 | ) | 32 | NM | |||||||||||||||||||||||||
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DAC unlock impact on core earnings |
49 | 61 | (21 | ) | (227 | ) | 47 | (4 | %) | NM | 129 | (140 | ) | NM | ||||||||||||||||||||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
15 | 1 | (56 | ) | (289 | ) | (46 | ) | NM | 84 | % | (14 | ) | (390 | ) | NM | ||||||||||||||||||||||||
Add: Income (loss) from discontinued operations |
(1 | ) | | | | | 100 | % | | (4 | ) | | 100 | % | ||||||||||||||||||||||||||
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DAC unlock impact on net income (loss) |
$ | 63 | $ | 62 | $ | (77 | ) | $ | (516 | ) | $ | 1 | (98 | %) | NM | $ | 111 | $ | (530 | ) | NM | |||||||||||||||||||
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[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] | Includes those net realized capital losses excluded from core earnings (losses). See page 9 for further analysis. |
[3] | See page 8 for the reconciliation of net income (loss) per common share to core earnings (losses) per common share. |
2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 3,509 | $ | 3,519 | $ | 3,545 | $ | 3,518 | $ | 3,506 | | | $ | 14,055 | $ | 14,088 | | |||||||||||||||||||||||
Fee income |
1,218 | 1,209 | 1,219 | 1,192 | 1,130 | (7 | %) | (5 | %) | 4,748 | 4,750 | | ||||||||||||||||||||||||||||
Net investment income (loss): |
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Securities available-for-sale and other |
1,089 | 1,108 | 1,104 | 1,062 | 998 | (8 | %) | (6 | %) | 4,364 | 4,272 | (2 | %) | |||||||||||||||||||||||||||
Equity securities, trading [1] |
131 | 803 | (597 | ) | (1,890 | ) | 325 | 148 | % | NM | (774 | ) | (1,359 | ) | (76 | %) | ||||||||||||||||||||||||
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Total net investment income (loss) |
1,220 | 1,911 | 507 | (828 | ) | 1,323 | 8 | % | NM | 3,590 | 2,913 | (19 | %) | |||||||||||||||||||||||||||
Realized capital gains (losses): |
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Total other-than-temporary impairment (OTTI) losses |
(74 | ) | (119 | ) | (31 | ) | (71 | ) | (42 | ) | 43 | % | 41 | % | (852 | ) | (263 | ) | 69 | % | ||||||||||||||||||||
OTTI losses recognized in other comprehensive income |
15 | 64 | 8 | 11 | 6 | (60 | %) | (45 | %) | 418 | 89 | (79 | %) | |||||||||||||||||||||||||||
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Net OTTI losses recognized in earnings |
(59 | ) | (55 | ) | (23 | ) | (60 | ) | (36 | ) | 39 | % | 40 | % | (434 | ) | (174 | ) | 60 | % | ||||||||||||||||||||
Net realized capital gains (losses), excluding OTTI losses recognized in earnings |
(30 | ) | (348 | ) | 92 | 635 | (350 | ) | NM | NM | (177 | ) | 29 | NM | ||||||||||||||||||||||||||
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Total net realized capital gains (losses) |
(89 | ) | (403 | ) | 69 | 575 | (386 | ) | NM | NM | (611 | ) | (145 | ) | 76 | % | ||||||||||||||||||||||||
Other revenues |
72 | 64 | 61 | 63 | 65 | (10 | %) | 3 | % | 267 | 253 | (5 | %) | |||||||||||||||||||||||||||
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Total revenues |
5,930 | 6,300 | 5,401 | 4,520 | 5,638 | (5 | %) | 25 | % | 22,049 | 21,859 | (1 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
3,263 | 3,178 | 3,976 | 4,006 | 3,465 | 6 | % | (14 | %) | 13,025 | 14,625 | 12 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expensesreturns credited on International variable annuities [1] |
131 | 803 | (597 | ) | (1,889 | ) | 324 | 147 | % | NM | (774 | ) | (1,359 | ) | (76 | %) | ||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits |
514 | 664 | 835 | 1,320 | 608 | 18 | % | (54 | %) | 2,527 | 3,427 | 36 | % | |||||||||||||||||||||||||||
Insurance operating costs and expenses |
1,135 | 1,120 | 1,224 | 1,059 | 995 | (12 | %) | (6 | %) | 4,407 | 4,398 | | ||||||||||||||||||||||||||||
Interest expense |
128 | 128 | 128 | 128 | 124 | (3 | %) | (3 | %) | 508 | 508 | | ||||||||||||||||||||||||||||
Goodwill impairment |
| | | | 30 | NM | NM | | 30 | NM | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
5,171 | 5,893 | 5,566 | 4,624 | 5,546 | 7 | % | 20 | % | 19,693 | 21,629 | 10 | % | |||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
759 | 407 | (165 | ) | (104 | ) | 92 | (88 | %) | NM | 2,356 | 230 | (90 | %) | ||||||||||||||||||||||||||
Income tax expense (benefit) |
175 | 58 | (269 | ) | (101 | ) | (34 | ) | NM | 66 | % | 612 | (346 | ) | NM | |||||||||||||||||||||||||
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Income (loss) from continuing operations |
584 | 349 | 104 | (3 | ) | 126 | (78 | %) | NM | 1,744 | 576 | (67 | %) | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
35 | 162 | (80 | ) | 3 | 1 | (97 | %) | (67 | %) | (64 | ) | 86 | NM | ||||||||||||||||||||||||||
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Net income |
619 | 511 | 24 | | 127 | (79 | %) | NM | 1,680 | 662 | (61 | %) | ||||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
35 | 162 | (80 | ) | 3 | 1 | (97 | %) | (67 | %) | (64 | ) | 86 | NM | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [2] |
55 | (237 | ) | 92 | (36 | ) | (213 | ) | NM | NM | (228 | ) | (394 | ) | (73 | %) | ||||||||||||||||||||||||
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Core earnings |
$ | 529 | $ | 586 | $ | 12 | $ | 33 | $ | 339 | (36 | %) | NM | $ | 1,972 | $ | 970 | (51 | %) | |||||||||||||||||||||
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[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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND DECEMBER 31, 2011
LIFE [1] | PROPERTY & CASUALTY [1] |
CORPORATE [1] | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||||||||||||||||||
2010 | 2011 | Change | 2010 | 2011 | Change | 2010 | 2011 | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||||||||
Investments |
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Fixed maturities, available-for-sale, at fair value |
$ | 52,429 | $ | 55,633 | 6 | % | $ | 25,114 | $ | 26,023 | 4 | % | $ | 277 | $ | 153 | (45 | %) | $ | 77,820 | $ | 81,809 | 5 | % | ||||||||||||||||||||||||
Fixed maturities, at fair value using the fair value option |
639 | 1,317 | 106 | % | 10 | 11 | 10 | % | | | | 649 | 1,328 | 105 | % | |||||||||||||||||||||||||||||||||
Equity securities, trading, at fair value |
32,820 | 30,499 | (7 | %) | | | | | | | 32,820 | 30,499 | (7 | %) | ||||||||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
502 | 515 | 3 | % | 374 | 302 | (19 | %) | 97 | 104 | 7 | % | 973 | 921 | (5 | %) | ||||||||||||||||||||||||||||||||
Mortgage loans |
3,915 | 4,979 | 27 | % | 372 | 749 | 101 | % | 202 | | (100 | %) | 4,489 | 5,728 | 28 | % | ||||||||||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,181 | 2,001 | (8 | %) | | | | | | | 2,181 | 2,001 | (8 | %) | ||||||||||||||||||||||||||||||||||
Limited partnerships and other alternative investments |
957 | 1,318 | 38 | % | 961 | 1,214 | 26 | % | | | | 1,918 | 2,532 | 32 | % | |||||||||||||||||||||||||||||||||
Other investments |
1,486 | 2,244 | 51 | % | 83 | 121 | 46 | % | 48 | 29 | (40 | %) | 1,617 | 2,394 | 48 | % | ||||||||||||||||||||||||||||||||
Short-term investments |
5,631 | 5,641 | | 1,117 | 658 | (41 | %) | 1,780 | 1,437 | (19 | %) | 8,528 | 7,736 | (9 | %) | |||||||||||||||||||||||||||||||||
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Total investments |
100,560 | 104,147 | 4 | % | 28,031 | 29,078 | 4 | % | 2,404 | 1,723 | (28 | %) | 130,995 | 134,948 | 3 | % | ||||||||||||||||||||||||||||||||
Cash |
1,809 | 2,377 | 31 | % | 250 | 203 | (19 | %) | 3 | 1 | (67 | %) | 2,062 | 2,581 | 25 | % | ||||||||||||||||||||||||||||||||
Premiums receivable and agents balances |
362 | 344 | (5 | %) | 2,911 | 3,102 | 7 | % | | | | 3,273 | 3,446 | 5 | % | |||||||||||||||||||||||||||||||||
Reinsurance recoverables |
1,991 | 2,022 | 2 | % | 2,871 | 2,746 | (4 | %) | | | | 4,862 | 4,768 | (2 | %) | |||||||||||||||||||||||||||||||||
Deferred policy acquisition costs and present value of future profits |
8,594 | 7,483 | (13 | %) | 1,263 | 1,261 | | | | | 9,857 | 8,744 | (11 | %) | ||||||||||||||||||||||||||||||||||
Deferred income taxes |
1,786 | (312 | ) | NM | 966 | 553 | (43 | %) | 973 | 1,157 | 19 | % | 3,725 | 1,398 | (62 | %) | ||||||||||||||||||||||||||||||||
Goodwill |
470 | 470 | | 149 | 119 | (20 | %) | 432 | 417 | (3 | %) | 1,051 | 1,006 | (4 | %) | |||||||||||||||||||||||||||||||||
Property and equipment, net |
398 | 388 | (3 | %) | 729 | 632 | (13 | %) | 23 | 9 | (61 | %) | 1,150 | 1,029 | (11 | %) | ||||||||||||||||||||||||||||||||
Other assets |
573 | 1,070 | 87 | % | 952 | 1,205 | 27 | % | 104 | (1 | ) | NM | 1,629 | 2,274 | 40 | % | ||||||||||||||||||||||||||||||||
Separate account assets |
159,742 | 143,870 | (10 | %) | | | | | | | 159,742 | 143,870 | (10 | %) | ||||||||||||||||||||||||||||||||||
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Total assets |
$ | 276,285 | $ | 261,859 | (5 | %) | $ | 38,122 | $ | 38,899 | 2 | % | $ | 3,939 | $ | 3,306 | (16 | %) | $ | 318,346 | $ | 304,064 | (4 | %) | ||||||||||||||||||||||||
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Future policy benefits, unpaid losses and loss adjustment expenses |
18,573 | 19,466 | 5 | % | 21,025 | 21,550 | 2 | % | | | | $ | 39,598 | $ | 41,016 | 4 | % | |||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable |
44,550 | 45,612 | 2 | % | | | | | | | 44,550 | 45,612 | 2 | % | ||||||||||||||||||||||||||||||||||
Other policyholder funds and benefits payableInternational variable annuities |
32,793 | 30,461 | (7 | %) | | | | | | | 32,793 | 30,461 | (7 | %) | ||||||||||||||||||||||||||||||||||
Unearned premiums |
173 | 182 | 5 | % | 5,005 | 5,041 | 1 | % | (2 | ) | (1 | ) | 50 | % | 5,176 | 5,222 | 1 | % | ||||||||||||||||||||||||||||||
Debt |
| | | | | | 6,607 | 6,216 | (6 | %) | 6,607 | 6,216 | (6 | %) | ||||||||||||||||||||||||||||||||||
Consumer notes |
382 | 314 | (18 | %) | | | | | | | 382 | 314 | (18 | %) | ||||||||||||||||||||||||||||||||||
Other liabilities |
5,604 | 5,183 | (8 | %) | 1,756 | 1,831 | 4 | % | 1,827 | 1,429 | (22 | %) | 9,187 | 8,443 | (8 | %) | ||||||||||||||||||||||||||||||||
Separate account liabilities |
159,742 | 143,870 | (10 | %) | | | | | | | 159,742 | 143,870 | (10 | %) | ||||||||||||||||||||||||||||||||||
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Total liabilities |
261,817 | 245,088 | (6 | %) | 27,786 | 28,422 | 2 | % | 8,432 | 7,644 | (9 | %) | 298,035 | 281,154 | (6 | %) | ||||||||||||||||||||||||||||||||
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Common equity, excluding AOCI |
14,247 | 15,003 | 5 | % | 10,379 | 9,851 | (5 | %) | (3,870 | ) | (3,657 | ) | 6 | % | 20,756 | 21,197 | 2 | % | ||||||||||||||||||||||||||||||
Preferred stock |
| | | | | | 556 | 556 | | 556 | 556 | | ||||||||||||||||||||||||||||||||||||
AOCI, net of tax |
221 | 1,768 | NM | (43 | ) | 626 | NM | (1,179 | ) | (1,237 | ) | (5 | %) | (1,001 | ) | 1,157 | NM | |||||||||||||||||||||||||||||||
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Total stockholders equity |
14,468 | 16,771 | 16 | % | 10,336 | 10,477 | 1 | % | (4,493 | ) | (4,338 | ) | 3 | % | 20,311 | 22,910 | 13 | % | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 276,285 | $ | 261,859 | (5 | %) | $ | 38,122 | $ | 38,899 | 2 | % | $ | 3,939 | $ | 3,306 | (16 | %) | $ | 318,346 | $ | 304,064 | (4 | %) | ||||||||||||||||||||||||
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[1] | Please refer to the basis of presentation on page i for a description of Life, Property & Casualty and Corporate. |
4
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
THREE MONTHS ENDED | Year Over Year 3 Month Change |
Sequential 3 Month Change |
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Dec. 31, 2010 |
Mar. 31, 2011 |
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
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DEBT |
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Short-term debt (includes current maturities of |
$ | 400 | $ | 400 | $ | 400 | $ | 400 | $ | | (100 | %) | (100 | %) | ||||||||||||||
Senior notes |
4,480 | 4,480 | 4,480 | 4,480 | 4,481 | | | |||||||||||||||||||||
Junior subordinated debentures |
1,727 | 1,730 | 1,734 | 1,737 | 1,735 | | | |||||||||||||||||||||
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Total debt [1] |
$ | 6,607 | $ | 6,610 | $ | 6,614 | $ | 6,617 | $ | 6,216 | (6 | %) | (6 | %) | ||||||||||||||
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STOCKHOLDERS EQUITY |
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Common stockholders equity, excluding AOCI, net of tax |
$ | 20,756 | $ | 21,207 | $ | 21,196 | $ | 21,160 | $ | 21,197 | 2 | % | | |||||||||||||||
Preferred stock |
556 | 556 | 556 | 556 | 556 | | | |||||||||||||||||||||
AOCI, net of tax |
(1,001 | ) | (764 | ) | (77 | ) | 1,065 | 1,157 | NM | 9 | % | |||||||||||||||||
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Total stockholders equity |
$ | 20,311 | $ | 20,999 | $ | 21,675 | $ | 22,781 | $ | 22,910 | 13 | % | 1 | % | ||||||||||||||
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CAPITALIZATION |
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Total capitalization, including AOCI, net of tax |
$ | 26,918 | $ | 27,609 | $ | 28,289 | $ | 29,398 | $ | 29,126 | 8 | % | (1 | %) | ||||||||||||||
Total capitalization, excluding AOCI, net of tax |
$ | 27,919 | $ | 28,373 | $ | 28,365 | $ | 28,333 | $ | 27,969 | | (1 | %) | |||||||||||||||
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DEBT TO CAPITALIZATION RATIOS [1] |
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Total debt to capitalization, including AOCI |
24.5 | % | 23.9 | % | 23.4 | % | 22.5 | % | 21.3 | % | (3.2 | ) | (1.2 | ) | ||||||||||||||
Total debt to capitalization, excluding AOCI |
23.7 | % | 23.3 | % | 23.3 | % | 23.4 | % | 22.2 | % | (1.5 | ) | (1.2 | ) | ||||||||||||||
Total rating agency adjusted debt to capitalization [2] [3] |
28.5 | % | 27.9 | % | 27.2 | % | 26.2 | % | 25.2 | % | (3.3 | ) | (1.0 | ) | ||||||||||||||
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[1] | The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $382, $382, $368, $349 and $314 as of December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 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 $1.5 billion, $1.6 billion, $1.5 billion, $1.5 billion and $1.6 billion for the three months ended December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY SURPLUS TO GAAP STOCKHOLDERS EQUITY RECONCILIATION
December 31, 2011 | December 31, 2010 | |||||||
P&C U.S. Statutory Capital and Surplus [1] |
$ | 7,412 | $ | 7,721 | ||||
GAAP Adjustments |
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Deferred policy acquisition costs |
1,261 | 1,263 | ||||||
Benefit reserves |
(59 | ) | (70 | ) | ||||
GAAP unrealized losses on investments, net of tax |
641 | (57 | ) | |||||
Goodwill |
119 | 149 | ||||||
Non-admitted assets |
1,081 | 1,247 | ||||||
Other, net |
22 | 83 | ||||||
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P&C GAAP Stockholders Equity |
$ | 10,477 | $ | 10,336 | ||||
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Life U.S. Statutory Capital and Surplus [1] |
$ | 7,388 | $ | 7,731 | ||||
GAAP Adjustments |
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Investment in subsidiaries |
3,748 | 2,699 | ||||||
Deferred policy acquisition costs |
7,483 | 8,594 | ||||||
Deferred taxes |
(2,059 | ) | (777 | ) | ||||
Benefit reserves |
(2,991 | ) | (4,097 | ) | ||||
Unrealized losses on investments, net of impairments |
2,472 | 306 | ||||||
Asset valuation reserve and interest maintenance reserve |
816 | 420 | ||||||
Goodwill |
470 | 461 | ||||||
Other, net |
(556 | ) | (869 | ) | ||||
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Life GAAP Stockholders Equity |
$ | 16,771 | $ | 14,468 | ||||
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[1] | Please refer to the basis of presentation on page i for a description of Life and Property & Casualty. |
6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED | Year Over Year 3 Month Change |
Sequential 3 Month Change |
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Dec. 31, 2010 |
Mar. 31, 2011 |
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
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Fixed maturities net unrealized gain (loss) |
$ | (562 | ) | $ | (306 | ) | $ | 251 | $ | 1,197 | $ | 1,479 | NM | 24 | % | |||||||||||||
Equities net unrealized gain (loss) |
(26 | ) | 28 | 7 | (68 | ) | (88 | ) | NM | (29 | %) | |||||||||||||||||
Other-than-temporary impairment losses recognized in AOCI |
(108 | ) | (103 | ) | (107 | ) | (97 | ) | (99 | ) | 8 | % | (2 | %) | ||||||||||||||
Net deferred gain on cash-flow hedging instruments |
385 | 317 | 388 | 542 | 516 | 34 | % | (5 | %) | |||||||||||||||||||
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Total net unrealized gain (loss) |
(311 | ) | (64 | ) | 539 | 1,574 | 1,808 | NM | 15 | % | ||||||||||||||||||
Foreign currency translation adjustments |
488 | 456 | 514 | 597 | 600 | 23 | % | 1 | % | |||||||||||||||||||
Pension and other postretirement adjustment |
(1,178 | ) | (1,156 | ) | (1,130 | ) | (1,106 | ) | (1,251 | ) | (6 | %) | (13 | %) | ||||||||||||||
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Total accumulated other comprehensive income (loss) |
$ | (1,001 | ) | $ | (764 | ) | $ | (77 | ) | $ | 1,065 | $ | 1,157 | NM | 9 | % | ||||||||||||
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7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE
THREE MONTHS ENDED | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Net income |
$ | 619 | $ | 511 | $ | 24 | $ | | $ | 127 | $ | 1,680 | $ | 662 | ||||||||||||||
Less: MCP dividends |
11 | 10 | 11 | 10 | 11 | 33 | 42 | |||||||||||||||||||||
Less: Capital Purchase Program (CPP) preferred dividends and accretion of discount |
| | | | | 482 | | |||||||||||||||||||||
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Net income (loss) available to common shareholders |
608 | 501 | 13 | (10 | ) | 116 | 1,165 | 620 | ||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
11 | 10 | | | | 33 | | |||||||||||||||||||||
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Net income (loss) available to common shareholders and assumed conversion of preferred shares |
619 | 511 | 13 | (10 | ) | 116 | 1,198 | 620 | ||||||||||||||||||||
Net income (loss) available to common shareholders |
608 | 501 | 13 | (10 | ) | 116 | 1,165 | 620 | ||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1] |
55 | (237 | ) | 92 | (36 | ) | (213 | ) | (228 | ) | (394 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
35 | 162 | (80 | ) | 3 | 1 | (64 | ) | 86 | |||||||||||||||||||
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Core earnings available to common shareholders |
518 | 576 | 1 | 23 | 328 | 1,457 | 928 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
11 | 10 | | | 11 | 33 | | |||||||||||||||||||||
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Core earnings available to common shareholders and assumed conversion of preferred shares |
$ | 529 | $ | 586 | $ | 1 | $ | 23 | $ | 339 | $ | 1,490 | $ | 928 | ||||||||||||||
Weighted average common shares outstanding (basic) |
444.3 | 444.6 | 445.1 | 445.3 | 445.1 | 431.5 | 445.0 | |||||||||||||||||||||
Dilutive effect of stock compensation |
1.3 | 1.8 | 1.0 | 0.7 | 0.7 | 1.3 | 1.1 | |||||||||||||||||||||
Dilutive effect of CPP Warrants [2] |
31.4 | 34.0 | 32.9 | 27.4 | 23.1 | 31.3 | 29.3 | |||||||||||||||||||||
Dilutive effect of Allianz warrants [3] |
| 7.1 | 3.4 | | | 1.0 | 2.6 | |||||||||||||||||||||
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Weighted average common shares outstanding and dilutive potential common shares (diluted), before assumed conversion of preferred shares |
477.0 | 487.5 | 482.4 | 473.4 | 468.9 | 465.1 | 478.0 | |||||||||||||||||||||
Dilutive effect of assumed conversion of MCP [4] |
20.8 | 20.7 | | | 20.7 | 16.4 | | |||||||||||||||||||||
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Weighted average common shares outstanding and dilutive potential common shares (diluted) and assumed conversion of preferred shares |
497.8 | 508.2 | 482.4 | 473.4 | 489.6 | 481.5 | 478.0 | |||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.37 | $ | 1.13 | $ | 0.03 | $ | (0.02 | ) | $ | 0.26 | $ | 2.70 | $ | 1.40 | |||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
0.12 | (0.53 | ) | 0.21 | (0.08 | ) | (0.48 | ) | (0.54 | ) | (0.88 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
0.08 | 0.36 | (0.18 | ) | 0.01 | | (0.15 | ) | 0.19 | |||||||||||||||||||
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Core earnings available to common shareholders |
$ | 1.17 | $ | 1.30 | $ | 0.00 | $ | 0.05 | $ | 0.74 | $ | 3.38 | $ | 2.09 | ||||||||||||||
Net income (loss) available to common shareholders |
$ | 1.27 | $ | 1.03 | $ | 0.03 | $ | (0.02 | ) | $ | 0.25 | $ | 2.50 | $ | 1.30 | |||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
(0.03 | ) | (0.02 | ) | | | (0.01 | ) | (0.07 | ) | | |||||||||||||||||
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Net income (loss) available to common shareholders and assumed conversion of preferred shares |
$ | 1.24 | $ | 1.01 | $ | 0.03 | $ | (0.02 | ) | $ | 0.24 | $ | 2.58 | $ | 1.30 | |||||||||||||
Net income (loss) available to common shareholders |
$ | 1.27 | $ | 1.03 | $ | 0.03 | $ | (0.02 | ) | $ | 0.25 | $ | 2.50 | $ | 1.30 | |||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
0.11 | (0.47 | ) | 0.19 | (0.08 | ) | (0.45 | ) | (0.49 | ) | (0.82 | ) | ||||||||||||||||
Less: Income (loss) from discontinued operations |
0.07 | 0.32 | (0.16 | ) | 0.01 | 0.00 | (0.14 | ) | 0.18 | |||||||||||||||||||
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Core earnings available to common shareholders |
1.09 | 1.18 | 0.00 | 0.05 | 0.70 | 3.13 | 1.94 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
(0.03 | ) | (0.03 | ) | | | (0.01 | ) | (0.04 | ) | | |||||||||||||||||
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Core earnings available to common shareholders and assumed conversion of preferred shares |
$ | 1.06 | $ | 1.15 | $ | 0.00 | $ | 0.05 | 0.69 | $ | 3.09 | $ | 1.94 | |||||||||||||||
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8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER-TAX AND DAC
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Net Realized Capital Gains (Losses), After-Tax and DAC |
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Gains/losses on sales, net |
$ | (29 | ) | $ | (49 | ) | $ | 151 | $ | 73 | $ | 60 | NM | (18 | %) | $ | 180 | $ | 235 | 31 | % | |||||||||||||||||||
Net impairment (gains) losses |
(38 | ) | (29 | ) | (1 | ) | (42 | ) | (38 | ) | | 10 | % | (320 | ) | (110 | ) | 66 | % | |||||||||||||||||||||
Japanese fixed annuity contract hedges, net |
4 | (11 | ) | 15 | (5 | ) | 4 | | NM | 18 | 3 | (83 | %) | |||||||||||||||||||||||||||
Results of variable annuity hedge program |
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U.S. GMWB derivatives, net |
100 | 20 | (72 | ) | (104 | ) | (75 | ) | NM | 28 | % | 83 | (231 | ) | NM | |||||||||||||||||||||||||
U.S. macro hedge |
(60 | ) | (24 | ) | (11 | ) | (52 | ) | (60 | ) | | (15 | %) | (90 | ) | (147 | ) | (63 | %) | |||||||||||||||||||||
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Total U.S. Program |
40 | (4 | ) | (83 | ) | (156 | ) | (135 | ) | NM | 13 | % | (7 | ) | (378 | ) | NM | |||||||||||||||||||||||
International program |
9 | (159 | ) | 69 | 340 | (91 | ) | NM | NM | (33 | ) | 159 | NM | |||||||||||||||||||||||||||
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Total results of variable annuity hedge program |
49 | (163 | ) | (14 | ) | 184 | (226 | ) | NM | NM | (40 | ) | (219 | ) | NM | |||||||||||||||||||||||||
Other net gain (loss) [1] |
78 | 20 | (59 | ) | (242 | ) | (10 | ) | NM | 96 | % | (57 | ) | (291 | ) | NM | ||||||||||||||||||||||||
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Total net realized capital gains (losses), after-tax and DAC |
$ | 64 | $ | (232 | ) | $ | 92 | $ | (32 | ) | $ | (210 | ) | NM | NM | $ | (219 | ) | $ | (382 | ) | (74 | %) | |||||||||||||||||
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 |
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Total net realized capital losses |
$ | 64 | $ | (232 | ) | $ | 92 | $ | (32 | ) | $ | (210 | ) | NM | NM | $ | (219 | ) | $ | (382 | ) | (74 | %) | |||||||||||||||||
Less: total net realized capital gains (losses) included in core earnings (losses) |
9 | 5 | | 4 | 3 | (67 | %) | (25 | %) | 9 | 12 | 33 | % | |||||||||||||||||||||||||||
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Total net realized capital losses, after tax and DAC, excluded from core earnings (losses) |
$ | 55 | $ | (237 | ) | $ | 92 | $ | (36 | ) | $ | (213 | ) | NM | NM | $ | (228 | ) | $ | (394 | ) | (73 | %) | |||||||||||||||||
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[1] | Other net gain (loss) primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF RETURN-ON-EQUITY MEASURES
THREE MONTHS ENDED | ||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
Numerator [1]: |
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Net income available to common shareholders last 12 months |
$ | 1,198 | $ | 1,872 | $ | 1,820 | $ | 1,154 | $ | 662 | ||||||||||
Core earnings available to common shareholderslast 12 months |
$ | 1,490 | $ | 2,013 | $ | 1,832 | $ | 1,160 | $ | 970 | ||||||||||
Denominator [2]: |
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Average common stockholders equity, including AOCI |
17,608.0 | 19,419.5 | 20,283.0 | 21,845.0 | 21,611.0 | |||||||||||||||
Less: Average AOCI |
(1,511.5 | ) | (2,156.5 | ) | (1,570.5 | ) | (728.0 | ) | 78.0 | |||||||||||
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Average common stockholders equity, excluding AOCI |
19,764.5 | 20,990.0 | 21,011.0 | 21,216.0 | 21,533.0 | |||||||||||||||
ROE (net income last 12 months to common stockholders equity, including AOCI) [3] |
6.8 | % | 9.6 | % | 9.0 | % | 5.3 | % | 3.1 | % | ||||||||||
ROE (core earnings last 12 months to common stockholders equity, excluding AOCI) [3] |
7.5 | % | 9.6 | % | 8.7 | % | 5.5 | % | 4.5 | % | ||||||||||
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[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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX AND DAC, EXCLUDED FROM CORE EARNINGS (LOSSES) [1]
Property & Casualty Commercial |
Group Benefits |
Total Commercial Markets |
Total Consumer Markets |
Individual Annuity |
Individual Life |
Retirement Plans |
Mutual Funds |
Total Wealth Management |
Life Other Operations |
Property & Casualty Other Operations |
Total Runoff |
Corporate | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
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 | $ | (79 | ) | $ | (22 | ) | $ | (7 | ) | $ | | $ | (108 | ) | $ | (63 | ) | $ | 1 | $ | (62 | ) | $ | 36 | $ | (99 | ) | |||||||||||||||||||||
Less: Impacts of DAC |
| | | | (164 | ) | (2 | ) | 1 | | (165 | ) | (28 | ) | | (28 | ) | 2 | (191 | ) | ||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
5 | 6 | 11 | 1 | 29 | (8 | ) | (3 | ) | (1 | ) | 17 | (8 | ) | | (8 | ) | 16 | 37 | |||||||||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | 11 | $ | 10 | $ | 21 | $ | 2 | $ | 56 | $ | (12 | ) | $ | (5 | ) | $ | 1 | $ | 40 | $ | (27 | ) | $ | 1 | $ | (26 | ) | $ | 18 | $ | 55 | ||||||||||||||||||||||||
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Three months ended March 31, 2011 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | (21 | ) | $ | (13 | ) | $ | (34 | ) | $ | (4 | ) | $ | (32 | ) | $ | (31 | ) | $ | (9 | ) | $ | 1 | $ | (71 | ) | $ | (281 | ) | $ | (3 | ) | $ | (284 | ) | $ | (12 | ) | $ | (405 | ) | |||||||||||||||
Less: Impacts of DAC |
| | | | (22 | ) | (3 | ) | (1 | ) | | (26 | ) | (12 | ) | | (12 | ) | 1 | (37 | ) | |||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(7 | ) | (5 | ) | (12 | ) | (1 | ) | (4 | ) | (10 | ) | (2 | ) | | (16 | ) | (97 | ) | (1 | ) | (98 | ) | (4 | ) | (131 | ) | |||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | (14 | ) | $ | (8 | ) | $ | (22 | ) | $ | (3 | ) | $ | (6 | ) | $ | (18 | ) | $ | (6 | ) | $ | 1 | $ | (29 | ) | $ | (172 | ) | $ | (2 | ) | $ | (174 | ) | $ | (9 | ) | $ | (237 | ) | |||||||||||||||
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Three months ended June 30, 2011 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | 14 | $ | 10 | $ | 24 | $ | 3 | $ | (13 | ) | $ | 8 | $ | 11 | $ | | $ | 6 | $ | 28 | $ | 4 | $ | 32 | $ | 8 | $ | 73 | |||||||||||||||||||||||||||
Less: Impacts of DAC |
| | | | 106 | 9 | 6 | | 121 | (55 | ) | | (55 | ) | 1 | 67 | ||||||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(11 | ) | (1 | ) | (12 | ) | (2 | ) | (47 | ) | (5 | ) | (9 | ) | | (61 | ) | (10 | ) | 1 | (9 | ) | (2 | ) | (86 | ) | ||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | 25 | $ | 11 | $ | 36 | $ | 5 | $ | (72 | ) | $ | 4 | $ | 14 | $ | | $ | (54 | ) | $ | 93 | $ | 3 | $ | 96 | $ | 9 | $ | 92 | ||||||||||||||||||||||||||
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Three months ended September 30, 2011 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | (49 | ) | $ | 7 | $ | (42 | ) | $ | (10 | ) | $ | (238 | ) | $ | 31 | $ | (2 | ) | $ | | $ | (209 | ) | $ | 890 | $ | (5 | ) | $ | 885 | $ | (50 | ) | $ | 574 | ||||||||||||||||||||
Less: Impacts of DAC |
| | | | (1 | ) | 16 | 7 | | 22 | 592 | | 592 | (6 | ) | 608 | ||||||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(17 | ) | 2 | (15 | ) | (4 | ) | (85 | ) | 5 | (3 | ) | | (83 | ) | 123 | (4 | ) | 119 | (15 | ) | 2 | ||||||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | (32 | ) | $ | 5 | $ | (27 | ) | $ | (6 | ) | $ | (152 | ) | $ | 10 | $ | (6 | ) | $ | | $ | (148 | ) | $ | 175 | $ | (1 | ) | $ | 174 | $ | (29 | ) | $ | (36 | ) | |||||||||||||||||||
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Three months ended December 31, 2011 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | 11 | $ | (4 | ) | $ | 6 | $ | 2 | $ | (315 | ) | $ | 22 | $ | (10 | ) | $ | 1 | $ | (302 | ) | $ | (65 | ) | $ | 3 | $ | (62 | ) | $ | (42 | ) | $ | (397 | ) | ||||||||||||||||||||
Less: Impacts of DAC |
| | | | (111 | ) | (14 | ) | (1 | ) | | (126 | ) | 43 | | 43 | | (83 | ) | |||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
3 | (2 | ) | | | (71 | ) | 12 | (3 | ) | 2 | (60 | ) | (27 | ) | 1 | (26 | ) | (16 | ) | (101 | ) | ||||||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | 8 | $ | (2 | ) | $ | 6 | $ | 2 | $ | (133 | ) | $ | 24 | $ | (6 | ) | $ | (1 | ) | $ | (116 | ) | $ | (81 | ) | $ | 2 | $ | (79 | ) | $ | (26 | ) | $ | (213 | ) | |||||||||||||||||||
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[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. |
The impacts of tax are calculated at an effective tax rate of 35% as applicable. Impacts of tax also includes any increase in the deferred tax asset valuation allowance.
11
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX AND DAC, EXCLUDED FROM CORE EARNINGS (LOSSES) [1]
Property & Casualty Commercial |
Group Benefits |
Total Commercial Markets |
Total Consumer Markets |
Individual Annuity |
Individual Life |
Retirement Plans |
Mutual Funds |
Total Wealth Management |
Life Other Operations |
Property & Casualty Other Operations |
Total Runoff |
Corporate | Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Year ended December 31, 2010 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | 12 | $ | 49 | $ | 61 | $ | 2 | $ | (353 | ) | $ | 23 | $ | (12 | ) | $ | | $ | (342 | ) | $ | (428 | ) | $ | 24 | $ | (404 | ) | $ | 68 | $ | (615 | ) | ||||||||||||||||||||||
Less: Impacts of DAC |
| | | | (365 | ) | (17 | ) | 8 | | (374 | ) | (37 | ) | | (37 | ) | 6 | (405 | ) | ||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
20 | 22 | 42 | 4 | 10 | 19 | 3 | (1 | ) | 31 | (97 | ) | 8 | (89 | ) | 30 | 18 | |||||||||||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | (8 | ) | $ | 27 | $ | 19 | $ | (2 | ) | $ | 2 | $ | 21 | $ | (23 | ) | $ | 1 | $ | 1 | $ | (294 | ) | $ | 16 | $ | (278 | ) | $ | 32 | $ | (228 | ) | ||||||||||||||||||||||
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Year ended December 31, 2011 |
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Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses) |
$ | (45 | ) | $ | | $ | (45 | ) | $ | (9 | ) | $ | (598 | ) | $ | 30 | $ | (10 | ) | $ | 2 | $ | (576 | ) | $ | 572 | $ | (1 | ) | $ | 571 | $ | (96 | ) | $ | (155 | ) | |||||||||||||||||||
Less: Impacts of DAC |
| | | | (28 | ) | 8 | 11 | | (9 | ) | 568 | | 568 | (4 | ) | 555 | |||||||||||||||||||||||||||||||||||||||
Less: Impacts of tax |
(32 | ) | (6 | ) | (38 | ) | (7 | ) | (207 | ) | 2 | (17 | ) | 2 | (220 | ) | (11 | ) | (3 | ) | (14 | ) | (37 | ) | (316 | ) | ||||||||||||||||||||||||||||||
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Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) |
$ | (13 | ) | $ | 6 | $ | (7 | ) | $ | (2 | ) | $ | (363 | ) | $ | 20 | $ | (4 | ) | $ | | $ | (347 | ) | $ | 15 | $ | 2 | $ | 17 | $ | (55 | ) | $ | (394 | ) | ||||||||||||||||||||
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[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. |
The impacts of tax are calculated at an effective tax rate of 35%, as applicable. Impacts of tax also includes any increase in the deferred tax asset valuation allowance.
12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Property and Casualty Insurance Product
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
For the three months ended December 31, 2011 | ||||||||||||||||
Property and Casualty Commercial |
Consumer Markets |
PC Other Ops | Total PC | |||||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross |
15,286 | 2,152 | 4,179 | 21,617 | ||||||||||||
Reinsurance and other recoverables |
2,428 | 9 | 730 | 3,167 | ||||||||||||
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Beginning liabilities for unpaid losses and loss adjustment expenses, net |
12,858 | 2,143 | 3,449 | 18,450 | ||||||||||||
Provision for unpaid losses and loss adjustment expenses |
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Current accident year before catastrophes |
1,142 | 634 | | 1,776 | ||||||||||||
Current accident year catastrophes |
15 | (1 | ) | | 14 | |||||||||||
Prior accident years |
109 | (17 | ) | 6 | 98 | |||||||||||
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Total provision for unpaid losses and loss adjustment expenses |
1,266 | 616 | 6 | 1,888 | ||||||||||||
Payments |
(1,030 | ) | (707 | ) | (84 | ) | (1,821 | ) | ||||||||
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Ending liabilities for unpaid losses and loss adjustment expenses, net |
13,094 | 2,052 | 3,371 | 18,517 | ||||||||||||
Reinsurance and other recoverables |
2,343 | 9 | 681 | 3,033 | ||||||||||||
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Ending liabilities for unpaid losses and loss adjustment expenses, gross |
15,437 | 2,061 | 4,052 | 21,550 | ||||||||||||
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13
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Property and Casualty Insurance Product
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
For the year ended December 31, 2011 | ||||||||||||||||
Property and Casualty Commercial |
Consumer Markets |
PC Other Ops | Total PC | |||||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross |
14,727 | 2,177 | 4,121 | 21,025 | ||||||||||||
Reinsurance and other recoverables |
2,361 | 17 | 699 | 3,077 | ||||||||||||
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Beginning liabilities for unpaid losses and loss adjustment expenses, net |
12,366 | 2,160 | 3,422 | 17,948 | ||||||||||||
Provision for unpaid losses and loss adjustment expenses |
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Current accident year before catastrophes |
4,139 | 2,536 | | 6,675 | ||||||||||||
Current accident year catastrophes |
320 | 425 | | 745 | ||||||||||||
Prior accident years |
125 | (75 | ) | 317 | 367 | |||||||||||
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Total provision for unpaid losses and loss adjustment expenses |
4,584 | 2,886 | 317 | 7,787 | ||||||||||||
Payments |
(3,856 | ) | (2,994 | ) | (368 | ) | (7,218 | ) | ||||||||
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Ending liabilities for unpaid losses and loss adjustment expenses, net |
13,094 | 2,052 | 3,371 | 18,517 | ||||||||||||
Reinsurance and other recoverables |
2,343 | 9 | 681 | 3,033 | ||||||||||||
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Ending liabilities for unpaid losses and loss adjustment expenses, gross |
15,437 | 2,061 | 4,052 | 21,550 | ||||||||||||
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14
COMMERCIAL MARKETS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 2,496 | $ | 2,526 | $ | 2,579 | $ | 2,553 | $ | 2,554 | 2 | % | | $ | 9,968 | $ | 10,212 | 2 | % | |||||||||||||||||||||
Fee income |
14 | 16 | 14 | 16 | 16 | 14 | % | | 54 | 62 | 15 | % | ||||||||||||||||||||||||||||
Net investment income |
347 | 346 | 345 | 319 | 311 | (10 | %) | (3 | %) | 1,364 | 1,321 | (3 | %) | |||||||||||||||||||||||||||
Other revenues |
24 | 23 | 26 | 28 | 20 | (17 | %) | (29 | %) | 96 | 97 | 1 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
29 | (37 | ) | 23 | (45 | ) | 6 | (79 | %) | NM | 49 | (53 | ) | NM | ||||||||||||||||||||||||||
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Total revenues |
2,910 | 2,874 | 2,987 | 2,871 | 2,907 | | 1 | % | 11,531 | 11,639 | 1 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
1,767 | 1,830 | 1,997 | 1,983 | 2,080 | 18 | % | 5 | % | 6,701 | 7,890 | 18 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
350 | 350 | 353 | 354 | 354 | 1 | % | | 1,414 | 1,411 | | |||||||||||||||||||||||||||||
Insurance operating costs and other expenses |
454 | 472 | 461 | 451 | 416 | (8 | %) | (8 | %) | 1,776 | 1,800 | 1 | % | |||||||||||||||||||||||||||
Goodwill impairment |
| | | | 30 | | | | 30 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
2,571 | 2,652 | 2,811 | 2,788 | 2,880 | 12 | % | 3 | % | 9,891 | 11,131 | 13 | % | |||||||||||||||||||||||||||
Income from continuing operations before income taxes |
339 | 222 | 176 | 83 | 27 | (92 | %) | (67 | %) | 1,640 | 508 | (69 | %) | |||||||||||||||||||||||||||
Income tax expense (benefit) [1] |
87 | 44 | 11 | 4 | (19 | ) | NM | NM | 472 | 40 | (92 | %) | ||||||||||||||||||||||||||||
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Income from continuing operations |
252 | 178 | 165 | 79 | 46 | (82 | %) | (42 | %) | 1,168 | 468 | (60 | %) | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
1 | 160 | (3 | ) | (2 | ) | (5 | ) | NM | (150 | %) | 12 | 150 | NM | ||||||||||||||||||||||||||
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Net income |
253 | 338 | 162 | 77 | 41 | (84 | %) | (47 | %) | 1,180 | 618 | (48 | %) | |||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
1 | 160 | (3 | ) | (2 | ) | (5 | ) | NM | (150 | %) | 12 | 150 | NM | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings [1][2] |
21 | (22 | ) | 36 | (27 | ) | 6 | (71 | %) | NM | 19 | (7 | ) | NM | ||||||||||||||||||||||||||
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Core earnings |
$ | 231 | $ | 200 | $ | 129 | $ | 106 | $ | 40 | (83 | %) | (62 | %) | $ | 1,149 | $ | 475 | (59 | %) | ||||||||||||||||||||
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[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. |
15
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
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Written premiums |
$ | 1,449 | $ | 1,645 | $ | 1,498 | $ | 1,551 | $ | 1,482 | 2 | % | (4 | %) | $ | 5,796 | $ | 6,176 | 7 | % | ||||||||||||||||||||
Change in unearned premium reserve |
(17 | ) | 147 | (19 | ) | (2 | ) | (77 | ) | NM | NM | 52 | 49 | (6 | %) | |||||||||||||||||||||||||
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Earned premiums |
1,466 | 1,498 | 1,517 | 1,553 | 1,559 | 6 | % | | 5,744 | 6,127 | 7 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
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Current accident year before catastrophes [1] |
945 | 962 | 950 | 1,085 | 1,142 | 21 | % | 5 | % | 3,579 | 4,139 | 16 | % | |||||||||||||||||||||||||||
Current accident year catastrophes |
18 | 46 | 166 | 93 | 15 | (17 | %) | (84 | %) | 152 | 320 | 111 | % | |||||||||||||||||||||||||||
Prior accident years [2] |
(22 | ) | (6 | ) | 31 | (9 | ) | 109 | NM | NM | (361 | ) | 125 | NM | ||||||||||||||||||||||||||
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Total losses and loss adjustment expenses |
941 | 1,002 | 1,147 | 1,169 | 1,266 | 35 | % | 8 | % | 3,370 | 4,584 | 36 | % | |||||||||||||||||||||||||||
Underwriting expenses [3] |
443 | 455 | 455 | 454 | 435 | (2 | %) | (4 | %) | 1,779 | 1,799 | 1 | % | |||||||||||||||||||||||||||
Dividends to policyholders [4] |
5 | 4 | 4 | 5 | 5 | | | 5 | 18 | NM | ||||||||||||||||||||||||||||||
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Underwriting results |
77 | 37 | (89 | ) | (75 | ) | (147 | ) | NM | (96 | %) | 590 | (274 | ) | NM | |||||||||||||||||||||||||
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Net investment income |
242 | 242 | 239 | 217 | 212 | (12 | %) | (2 | %) | 935 | 910 | (3 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
(2 | ) | (2 | ) | (1 | ) | (2 | ) | | 100 | % | 100 | % | (9 | ) | (5 | ) | 44 | % | |||||||||||||||||||||
Other expenses |
(45 | ) | (40 | ) | (34 | ) | (35 | ) | (29 | ) | 36 | % | 17 | % | (138 | ) | (138 | ) | | |||||||||||||||||||||
Goodwill impairment |
| | | | (30 | ) | | | | (30 | ) | | ||||||||||||||||||||||||||||
Income tax (expense) benefit |
(71 | ) | (56 | ) | (16 | ) | (19 | ) | 19 | NM | NM | (387 | ) | (72 | ) | 81 | % | |||||||||||||||||||||||
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Core earnings |
201 | 181 | 99 | 86 | 25 | (88 | %) | (71 | %) | 991 | 391 | (61 | %) | |||||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax [5] |
11 | (14 | ) | 25 | (32 | ) | 8 | (27 | %) | NM | (8 | ) | (13 | ) | (63 | %) | ||||||||||||||||||||||||
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Income from continuing operations, net of tax |
212 | 167 | 124 | 54 | 33 | (84 | %) | (39 | %) | 983 | 378 | (62 | %) | |||||||||||||||||||||||||||
Add: Income (loss) from discontinued operations, net of tax |
1 | 160 | (3 | ) | (2 | ) | (5 | ) | NM | (150 | %) | 12 | 150 | NM | ||||||||||||||||||||||||||
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Net Income |
$ | 213 | $ | 327 | $ | 121 | $ | 52 | $ | 28 | (87 | %) | (46 | %) | $ | 995 | $ | 528 | (47 | %) | ||||||||||||||||||||
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[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. The three months ended December 31, 2011 included current accident year reserve strengthening of $87 predominantly related to workers compensation business. |
[2] | Included within prior accident years development were the following reserve strengthenings (releases): |
THREE MONTHS ENDED | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | ||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Auto liability |
(3 | ) | (1 | ) | | (4 | ) | 1 | (54 | ) | (4 | ) | ||||||||||||||||
Workers compensation |
(17 | ) | (1 | ) | 4 | 7 | 161 | (70 | ) | 171 | ||||||||||||||||||
Package business |
1 | (7 | ) | 3 | (42 | ) | (30 | ) | (19 | ) | (76 | ) | ||||||||||||||||
General liability |
(14 | ) | 6 | 6 | (8 | ) | (44 | ) | (108 | ) | (40 | ) | ||||||||||||||||
Professional liability |
(1 | ) | (9 | ) | 2 | 29 | 7 | (88 | ) | 29 | ||||||||||||||||||
Fidelity & Surety |
4 | | (2 | ) | (7 | ) | 2 | (5 | ) | (7 | ) | |||||||||||||||||
Commercial Property |
(3 | ) | 2 | (7 | ) | 1 | | (16 | ) | (4 | ) | |||||||||||||||||
Uncollectible reinsurance |
| | | | | (30 | ) | | ||||||||||||||||||||
Discount accretion on workers compensation |
6 | 7 | 10 | 15 | 6 | 26 | 38 | |||||||||||||||||||||
Catastrophes |
| (5 | ) | 10 | 2 | 5 | 1 | 12 | ||||||||||||||||||||
Other reserve re-estimates, net |
5 | 2 | 5 | (2 | ) | 1 | 2 | 6 | ||||||||||||||||||||
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Total prior accident years development |
(22 | ) | (6 | ) | 31 | (9 | ) | 109 | (361 | ) | 125 |
[3] | The year ended December 31, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes. The year ended December 31, 2011 included taxes, licenses and fees reserve releases of $12. |
[4] | The year ended December 31, 2010 included a decrease in prior year dividends of $12. |
[5] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
16
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
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Written premiums |
$ | 1,449 | $ | 1,645 | $ | 1,498 | $ | 1,551 | $ | 1,482 | 2 | % | (4 | %) | $ | 5,796 | $ | 6,176 | 7 | % | ||||||||||||||||||||
Change in unearned premium reserve |
(17 | ) | 147 | (19 | ) | (2 | ) | (77 | ) | NM | NM | 52 | 49 | (6 | %) | |||||||||||||||||||||||||
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Earned premiums |
1,466 | 1,498 | 1,517 | 1,553 | 1,559 | 6 | % | | 5,744 | 6,127 | 7 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
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Current accident year before catastrophes [1] |
945 | 962 | 950 | 1,085 | 1,142 | 21 | % | 5 | % | 3,579 | 4,139 | 16 | % | |||||||||||||||||||||||||||
Current accident year catastrophes |
18 | 46 | 166 | 93 | 15 | (17 | %) | (84 | %) | 152 | 320 | 111 | % | |||||||||||||||||||||||||||
Prior accident years [2] |
(22 | ) | (6 | ) | 31 | (9 | ) | 109 | NM | NM | (361 | ) | 125 | NM | ||||||||||||||||||||||||||
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Total losses and loss adjustment expenses |
941 | 1,002 | 1,147 | 1,169 | 1,266 | 35 | % | 8 | % | 3,370 | 4,584 | 36 | % | |||||||||||||||||||||||||||
Underwriting expenses [3] |
443 | 455 | 455 | 454 | 435 | (2 | %) | (4 | %) | 1,779 | 1,799 | 1 | % | |||||||||||||||||||||||||||
Dividends to policyholders [4] |
5 | 4 | 4 | 5 | 5 | | | 5 | 18 | NM | ||||||||||||||||||||||||||||||
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Underwriting results |
77 | 37 | (89 | ) | (75 | ) | (147 | ) | NM | (96 | %) | 590 | (274 | ) | NM | |||||||||||||||||||||||||
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UNDERWRITING RATIOS |
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Losses and loss adjustment expenses |
. | |||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes [1] |
64.4 | 64.3 | 62.6 | 69.9 | 73.3 | (8.9 | ) | (3.4 | ) | 62.3 | 67.6 | (5.3 | ) | |||||||||||||||||||||||||||
Current accident year catastrophes |
1.2 | 3.1 | 11.0 | 6.0 | 1.0 | 0.2 | 5.0 | 2.7 | 5.2 | (2.5 | ) | |||||||||||||||||||||||||||||
Prior accident years [2] |
(1.5 | ) | (0.4 | ) | 2.1 | (0.6 | ) | 7.0 | (8.5 | ) | (7.6 | ) | (6.3 | ) | 2.0 | (8.3 | ) | |||||||||||||||||||||||
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Total losses and loss adjustment expenses |
64.2 | 66.9 | 75.6 | 75.3 | 81.2 | (17.0 | ) | (5.9 | ) | 58.7 | 74.8 | (16.1 | ) | |||||||||||||||||||||||||||
Expenses |
30.2 | 30.4 | 30.0 | 29.2 | 27.9 | 2.3 | 1.3 | 31.0 | 29.4 | 1.6 | ||||||||||||||||||||||||||||||
Policyholder dividends |
0.3 | 0.3 | 0.3 | 0.3 | 0.3 | | | 0.1 | 0.3 | (0.2 | ) | |||||||||||||||||||||||||||||
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Combined ratio |
94.7 | 97.5 | 105.8 | 104.8 | 109.4 | (14.7 | ) | (4.6 | ) | 89.7 | 104.5 | (14.8 | ) | |||||||||||||||||||||||||||
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Catastrophes |
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Current year |
1.2 | 3.0 | 11.0 | 6.0 | 1.0 | 0.2 | 5.0 | 2.7 | 5.2 | (2.5 | ) | |||||||||||||||||||||||||||||
Prior year |
| (0.3 | ) | 0.7 | 0.1 | 0.3 | (0.3 | ) | (0.2 | ) | | 0.2 | (0.2 | ) | ||||||||||||||||||||||||||
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Catastrophe ratio |
1.3 | 2.7 | 11.6 | 6.1 | 1.3 | | 4.8 | 2.7 | 5.4 | (2.7 | ) | |||||||||||||||||||||||||||||
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Combined ratio before catastrophes |
93.5 | 94.8 | 94.2 | 98.7 | 108.1 | (14.6 | ) | (9.4 | ) | 87.1 | 99.1 | (12.0 | ) | |||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
95.0 | 94.9 | 92.8 | 99.4 | 101.5 | (6.5 | ) | (2.1 | ) | 93.4 | 97.2 | (3.8 | ) | |||||||||||||||||||||||||||
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STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) |
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Standard Commercial Lines Renewal Written Price Increases [5] |
1 | % | 3 | % | 3 | % | 4 | % | 5 | % | 4 | % | 1 | % | 1 | % | 4 | % | 3 | % | ||||||||||||||||||||
Standard Commercial Lines Policy Count Retention [5] |
83 | % | 83 | % | 82 | % | 82 | % | 83 | % | | 1 | % | 84 | % | 82 | % | (2 | %) | |||||||||||||||||||||
New Business Premium $ |
$ | 270 | $ | 303 | $ | 286 | $ | 271 | $ | 237 | (12 | %) | (13 | %) | $ | 1,122 | $ | 1,097 | (2 | %) | ||||||||||||||||||||
Standard Commercial Lines Policies in Force [5] |
1,211,047 | 1,229,758 | 1,250,152 | 1,256,229 | 1,252,820 | 3 | % | | ||||||||||||||||||||||||||||||||
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[1] | The three months ended December 31, 2010 included current accident year reserve strengthening of $44, or 3.0 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. The three months ended December 31, 2011 included current accident year reserve strengthening of $87, or 5.6 points, predominantly related to workers compensation business. |
[2] | Refer to footnote 2 on page 16 for a summary of reserve strengthenings (releases) that are included within prior accident years development. |
[3] | The year ended December 31, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes. The year ended December 31, 2011 included taxes, licenses and fees reserve releases of $12. |
[4] | The year ended December 31, 2010 included a decrease in prior year dividends of $12. |
[5] | Standard commercial lines consist of The Hartfords small commercial and middle market lines of business. |
17
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR
ENDED DECEMBER 31, |
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Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues |
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Premiums and other considerations |
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Direct premiums |
$ | 1,025 | $ | 1,024 | $ | 1,058 | $ | 996 | $ | 995 | (3 | %) | | $ | 4,200 | $ | 4,073 | (3 | %) | |||||||||||||||||||||
Reinsurance premiums |
5 | 4 | 4 | 4 | | (100 | %) | (100 | %) | 24 | 12 | (50 | %) | |||||||||||||||||||||||||||
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Net premiums |
1,030 | 1,028 | 1,062 | 1,000 | 995 | (3 | %) | | 4,224 | 4,085 | (3 | %) | ||||||||||||||||||||||||||||
Administrative Services Only (ASO) fees |
10 | 11 | 11 | 11 | 11 | 10 | % | | 39 | 44 | 13 | % | ||||||||||||||||||||||||||||
Other fees |
4 | 5 | 3 | 5 | 5 | 25 | % | | 15 | 18 | 20 | % | ||||||||||||||||||||||||||||
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Total fee income |
14 | 16 | 14 | 16 | 16 | 14 | % | | 54 | 62 | 15 | % | ||||||||||||||||||||||||||||
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Total premiums and other considerations |
1,044 | 1,044 | 1,076 | 1,016 | 1,011 | (3 | %) | | 4,278 | 4,147 | (3 | %) | ||||||||||||||||||||||||||||
Net investment income |
105 | 104 | 106 | 102 | 99 | (6 | %) | (3 | %) | 429 | 411 | (4 | %) | |||||||||||||||||||||||||||
Net realized capital losses - core |
(1 | ) | (1 | ) | | (1 | ) | (1 | ) | | | (3 | ) | (3 | ) | | ||||||||||||||||||||||||
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Total core revenues |
1,148 | 1,147 | 1,182 | 1,117 | 1,109 | (3 | %) | (1 | %) | 4,704 | 4,555 | (3 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), before tax and DAC, excluded from core revenues |
16 | (13 | ) | 10 | 7 | (4 | ) | NM | NM | 49 | | (100 | %) | |||||||||||||||||||||||||||
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Total revenues |
1,164 | 1,134 | 1,192 | 1,124 | 1,105 | (5 | %) | (2 | %) | 4,753 | 4,555 | (4 | %) | |||||||||||||||||||||||||||
Benefits and Expenses |
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Benefits and losses |
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Death benefits |
286 | 340 | 319 | 300 | 283 | (1 | %) | (6 | %) | 1,217 | 1,242 | 2 | % | |||||||||||||||||||||||||||
Other contract benefits |
481 | 488 | 478 | 486 | 485 | 1 | % | | 1,865 | 1,937 | 4 | % | ||||||||||||||||||||||||||||
Change in reserve |
59 | | 53 | 28 | 46 | (22 | %) | 64 | % | 249 | 127 | (49 | %) | |||||||||||||||||||||||||||
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Total benefits and losses |
826 | 828 | 850 | 814 | 814 | (1 | %) | | 3,331 | 3,306 | (1 | %) | ||||||||||||||||||||||||||||
Other insurance expenses |
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Commissions & wholesaling expenses |
125 | 136 | 136 | 125 | 121 | (3 | %) | (3 | %) | 546 | 518 | (5 | %) | |||||||||||||||||||||||||||
Operating expenses |
133 | 133 | 135 | 135 | 131 | (2 | %) | (3 | %) | 522 | 534 | 2 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses [1] |
25 | 31 | 23 | 21 | 25 | | 19 | % | 93 | 100 | 8 | % | ||||||||||||||||||||||||||||
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Subtotal - expenses before deferral |
283 | 300 | 294 | 281 | 277 | (2 | %) | (1 | %) | 1,161 | 1,152 | (1 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(11 | ) | (14 | ) | (13 | ) | (13 | ) | (8 | ) | 27 | % | 38 | % | (50 | ) | (48 | ) | 4 | % | ||||||||||||||||||||
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Total other insurance expense |
272 | 286 | 281 | 268 | 269 | (1 | %) | | 1,111 | 1,104 | (1 | %) | ||||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
15 | 14 | 14 | 14 | 13 | (13 | %) | (7 | %) | 61 | 55 | (10 | %) | |||||||||||||||||||||||||||
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Total benefits and expenses |
1,113 | 1,128 | 1,145 | 1,096 | 1,096 | (2 | %) | | 4,503 | 4,465 | (1 | %) | ||||||||||||||||||||||||||||
Core earnings before income taxes |
35 | 19 | 37 | 21 | 13 | (63 | %) | (38 | %) | 201 | 90 | (55 | %) | |||||||||||||||||||||||||||
Income tax expense |
5 | | 7 | 1 | (2 | ) | NM | NM | 43 | 6 | (86 | %) | ||||||||||||||||||||||||||||
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Core earnings |
30 | 19 | 30 | 20 | 15 | (50 | %) | (25 | %) | 158 | 84 | (47 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings [2] |
10 | (8 | ) | 11 | 5 | (2 | ) | NM | NM | 27 | 6 | (78 | %) | |||||||||||||||||||||||||||
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Net income |
40 | 11 | 41 | 25 | 13 | (67 | %) | (48 | %) | 185 | 90 | (51 | %) | |||||||||||||||||||||||||||
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After-Tax Profit as % of Revenues |
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Core earnings |
2.6 | % | 1.7 | % | 2.6 | % | 1.8 | % | 1.4 | % | (1.2 | ) | (0.4 | ) | 3.4 | % | 1.9 | % | (1.5 | ) | ||||||||||||||||||||
Net income |
3.4 | % | 1.0 | % | 3.6 | % | 2.2 | % | 1.2 | % | (2.2 | ) | (1.0 | ) | 3.9 | % | 2.0 | % | (1.9 | ) |
[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. |
18
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | Year Over Year |
Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
PREMIUMS |
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Fully Insured - Ongoing Premiums |
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Group disability |
$ | 470 | $ | 462 | $ | 452 | $ | 452 | $ | 452 | (4 | %) | | $ | 1,892 | $ | 1,818 | (4 | %) | |||||||||||||||||||||
Group life |
513 | 516 | 512 | 501 | 495 | (4 | %) | (1 | %) | 2,052 | 2,024 | (1 | %) | |||||||||||||||||||||||||||
Other |
47 | 50 | 49 | 47 | 48 | 2 | % | 2 | % | 222 | 194 | (13 | %) | |||||||||||||||||||||||||||
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Total fully insured - ongoing premiums |
$ | 1,030 | $ | 1,028 | $ | 1,013 | $ | 1,000 | $ | 995 | (3 | %) | | $ | 4,166 | $ | 4,036 | (3 | %) | |||||||||||||||||||||
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Total buyouts [1] |
| | 49 | | | | | 58 | 49 | (16 | %) | |||||||||||||||||||||||||||||
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Total premiums |
1,030 | 1,028 | 1,062 | 1,000 | $ | 995 | (3 | %) | (1 | %) | 4,224 | 4,085 | (3 | %) | ||||||||||||||||||||||||||
Group disability - premium equivalents [2] |
99 | 105 | 107 | 109 | 111 | 12 | % | 2 | % | 394 | 432 | 10 | % | |||||||||||||||||||||||||||
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Total premiums and premium equivalent |
$ | 1,129 | $ | 1,133 | $ | 1,169 | $ | 1,109 | $ | 1,106 | (2 | %) | | $ | 4,618 | $ | 4,517 | (2 | %) | |||||||||||||||||||||
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SALES (GROSS ANNUALIZED NEW PREMIUMS) |
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Fully Insured - Ongoing Sales |
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Group disability |
$ | 37 | $ | 109 | $ | 41 | $ | 36 | $ | 33 | (11 | %) | (8 | %) | $ | 237 | $ | 219 | (8 | %) | ||||||||||||||||||||
Group life |
47 | 128 | 48 | 53 | 40 | (15 | %) | (25 | %) | 332 | 269 | (19 | %) | |||||||||||||||||||||||||||
Other |
2 | 7 | 3 | 2 | 5 | 150 | % | 150 | % | 14 | 17 | 21 | % | |||||||||||||||||||||||||||
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Total fully insured - ongoing sales |
86 | 244 | 92 | 91 | 78 | (9 | %) | (14 | %) | 583 | 505 | (13 | %) | |||||||||||||||||||||||||||
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Total buyouts [1] |
| | 49 | (1 | ) | | | 100 | % | 58 | 48 | (17 | %) | |||||||||||||||||||||||||||
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Total sales |
86 | 244 | 141 | 90 | 78 | (9 | %) | (13 | %) | 641 | 553 | (14 | %) | |||||||||||||||||||||||||||
Group disability premium equivalents [2] |
8 | 47 | 22 | 23 | 14 | 75 | % | (39 | %) | 92 | 106 | 15 | % | |||||||||||||||||||||||||||
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Total sales and premium equivalents |
$ | 94 | $ | 291 | $ | 163 | $ | 113 | $ | 92 | (2 | %) | (19 | %) | $ | 733 | $ | 659 | (10 | %) | ||||||||||||||||||||
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RATIOS [3] |
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Loss Ratio |
79.1 | % | 79.3 | % | 78.0 | % | 80.1 | % | 80.5 | % | 1.4 | 0.4 | 77.6 | % | 79.5 | % | 1.9 | |||||||||||||||||||||||
Expense Ratio [4] |
27.5 | % | 28.7 | % | 28.7 | % | 27.8 | % | 27.9 | % | 0.4 | 0.1 | 27.8 | % | 28.3 | % | 0.5 | |||||||||||||||||||||||
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GAAP RESERVES [5] |
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Group disability |
$ | 5,127 | $ | 5,164 | $ | 5,225 | $ | 5,259 | 5,307 | 4 | % | 1 | % | |||||||||||||||||||||||||||
Group life |
1,250 | 1,217 | 1,210 | 1,206 | 1,202 | (4 | %) | | ||||||||||||||||||||||||||||||||
Other |
79 | 76 | 75 | 75 | 77 | (3 | %) | 3 | % | |||||||||||||||||||||||||||||||
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Total GAAP reserves |
$ | 6,456 | $ | 6,457 | $ | 6,510 | $ | 6,540 | $ | 6,586 | 2 | % | 1 | % | ||||||||||||||||||||||||||
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[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 December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011 are net of reinsurance recoverables of $209, $212, $219, $225, and $233, respectively. |
19
CONSUMER MARKETS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 971 | $ | 956 | $ | 939 | $ | 930 | $ | 922 | (5 | %) | (1 | %) | $ | 3,947 | $ | 3,747 | (5 | %) | ||||||||||||||||||||
Net investment income |
48 | 50 | 49 | 46 | 42 | (13 | %) | (9 | %) | 187 | 187 | | ||||||||||||||||||||||||||||
Other revenues |
49 | 40 | 36 | 35 | 45 | (8 | %) | 29 | % | 172 | 156 | (9 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
2 | (4 | ) | 2 | (10 | ) | 1 | (50 | %) | NM | | (11 | ) | | ||||||||||||||||||||||||||
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Total revenues |
1,070 | 1,042 | 1,026 | 1,001 | 1,010 | (6 | %) | 1 | % | 4,306 | 4,079 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
739 | 599 | 904 | 767 | 616 | (17 | %) | (20 | %) | 2,951 | 2,886 | (2 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
164 | 161 | 160 | 159 | 159 | (3 | %) | | 667 | 639 | (4 | %) | ||||||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
128 | 120 | 240 | 106 | 112 | (13 | %) | 6 | % | 493 | 578 | 17 | % | |||||||||||||||||||||||||||
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Total benefits and expenses |
1,031 | 880 | 1,304 | 1,032 | 887 | (14 | %) | (14 | %) | 4,111 | 4,103 | | ||||||||||||||||||||||||||||
Income (loss) before income taxes |
39 | 162 | (278 | ) | (31 | ) | 123 | NM | NM | 195 | (24 | ) | NM | |||||||||||||||||||||||||||
Income tax expense (benefit) |
9 | 52 | (104 | ) | (15 | ) | 38 | NM | NM | 52 | (29 | ) | NM | |||||||||||||||||||||||||||
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Net income (loss) |
30 | 110 | (174 | ) | (16 | ) | 85 | 183 | % | NM | 143 | 5 | (97 | %) | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (losses) [2] |
2 | (3 | ) | 5 | (6 | ) | 2 | | NM | (2 | ) | (2 | ) | | ||||||||||||||||||||||||||
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Core earnings (losses) |
$ | 28 | $ | 113 | $ | (179 | ) | $ | (10 | ) | $ | 83 | 196 | % | NM | $ | 145 | $ | 7 | (95 | %) | |||||||||||||||||||
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[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. |
20
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
$ | 896 | $ | 884 | $ | 969 | $ | 964 | $ | 858 | (4 | %) | (11 | %) | $ | 3,886 | $ | 3,675 | (5 | %) | ||||||||||||||||||||
Change in unearned premium reserve |
(75 | ) | (72 | ) | 30 | 34 | (64 | ) | 15 | % | NM | (61 | ) | (72 | ) | (18 | %) | |||||||||||||||||||||||
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Earned premiums |
971 | 956 | 939 | 930 | 922 | (5 | %) | (1 | %) | 3,947 | 3,747 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
||||||||||||||||||||||||||||||||||||||||
Current accident year before catastrophes |
703 | 616 | 623 | 663 | 634 | (10 | %) | (4 | %) | 2,737 | 2,536 | (7 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes |
71 | 32 | 281 | 113 | (1 | ) | NM | NM | 300 | 425 | 42 | % | ||||||||||||||||||||||||||||
Prior accident years [1] |
(35 | ) | (49 | ) | | (9 | ) | (17 | ) | 51 | % | (89 | %) | (86 | ) | (75 | ) | 13 | % | |||||||||||||||||||||
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Total losses and loss adjustment expenses |
739 | 599 | 904 | 767 | 616 | (17 | %) | (20 | %) | 2,951 | 2,886 | (2 | %) | |||||||||||||||||||||||||||
Underwriting expenses |
237 | 233 | 236 | 226 | 223 | (6 | %) | (1 | %) | 957 | 918 | (4 | %) | |||||||||||||||||||||||||||
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Underwriting results |
(5 | ) | 124 | (201 | ) | (63 | ) | 83 | NM | NM | 39 | (57 | ) | NM | ||||||||||||||||||||||||||
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Net investment income |
48 | 50 | 49 | 46 | 42 | (13 | %) | (9 | %) | 187 | 187 | | ||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
(1 | ) | | (1 | ) | | (1 | ) | | | (2 | ) | (2 | ) | | |||||||||||||||||||||||||
Other expenses [2] |
(6 | ) | (8 | ) | (128 | ) | (4 | ) | (3 | ) | 50 | % | 25 | % | (31 | ) | (143 | ) | NM | |||||||||||||||||||||
Income tax benefit (expense) |
(8 | ) | (53 | ) | 102 | 11 | (38 | ) | NM | NM | (48 | ) | 22 | NM | ||||||||||||||||||||||||||
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Core earnings (losses) |
28 | 113 | (179 | ) | (10 | ) | 83 | 196 | % | NM | 145 | 7 | (95 | %) | ||||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax [3] |
2 | (3 | ) | 5 | (6 | ) | 2 | | NM | (2 | ) | (2 | ) | | ||||||||||||||||||||||||||
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Net income (loss) |
$ | 30 | $ | 110 | $ | (174 | ) | $ | (16 | ) | $ | 85 | 183 | % | NM | $ | 143 | $ | 5 | (97 | %) | |||||||||||||||||||
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[1] | Included within prior accident years development were the following reserve strengthenings (releases): |
THREE MONTHS ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Auto liability |
$ | (33 | ) | $ | (55 | ) | $ | (9 | ) | $ | (19 | ) | $ | (10 | ) | $ | (115 | ) | $ | (93 | ) | |||||||
Homeowners |
(4 | ) | (14 | ) | 1 | 14 | (2 | ) | 23 | (1 | ) | |||||||||||||||||
Catastrophes |
(1 | ) | 19 | 9 | | (3 | ) | 10 | 25 | |||||||||||||||||||
Other reserve re-estimates, net |
3 | 1 | (1 | ) | (4 | ) | (2 | ) | (4 | ) | (6 | ) | ||||||||||||||||
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Total prior accident years development |
$ | (35 | ) | $ | (49 | ) | $ | | $ | (9 | ) | $ | (17 | ) | $ | (86 | ) | $ | (75 | ) |
[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. |
21
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
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Written premiums |
$ | 896 | $ | 884 | $ | 969 | $ | 964 | $ | 858 | (4 | %) | (11 | %) | $ | 3,886 | $ | 3,675 | (5 | %) | ||||||||||||||||||||
Change in unearned premium reserve |
(75 | ) | (72 | ) | 30 | 34 | (64 | ) | 15 | % | NM | (61 | ) | (72 | ) | (18 | %) | |||||||||||||||||||||||
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Earned premiums |
971 | 956 | 939 | 930 | 922 | (5 | %) | (1 | %) | 3,947 | 3,747 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
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Current accident year before catastrophes |
703 | 616 | 623 | 663 | 634 | (10 | %) | (4 | %) | 2,737 | 2,536 | (7 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes |
71 | 32 | 281 | 113 | (1 | ) | NM | NM | 300 | 425 | 42 | % | ||||||||||||||||||||||||||||
Prior accident years [1] |
(35 | ) | (49 | ) | | (9 | ) | (17 | ) | 51 | % | (89 | %) | (86 | ) | (75 | ) | 13 | % | |||||||||||||||||||||
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Total losses and loss adjustment expenses |
739 | 599 | 904 | 767 | 616 | (17 | %) | (20 | %) | 2,951 | 2,886 | (2 | %) | |||||||||||||||||||||||||||
Underwriting expenses |
237 | 233 | 236 | 226 | 223 | (6 | %) | (1 | %) | 957 | 918 | (4 | %) | |||||||||||||||||||||||||||
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Underwriting results |
(5 | ) | 124 | (201 | ) | (63 | ) | 83 | NM | NM | 39 | (57 | ) | NM | ||||||||||||||||||||||||||
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UNDERWRITING RATIOS |
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Losses and loss adjustment expenses |
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Current accident year before catastrophes |
72.4 | 64.3 | 66.5 | 71.3 | 68.8 | 3.6 | 2.5 | 69.4 | 67.7 | 1.7 | ||||||||||||||||||||||||||||||
Current accident year catastrophes |
7.3 | 3.4 | 29.9 | 12.2 | (0.1 | ) | 7.4 | 12.3 | 7.6 | 11.3 | (3.7 | ) | ||||||||||||||||||||||||||||
Prior accident years [1] |
(3.6 | ) | (5.1 | ) | (0.0 | ) | (1.0 | ) | (1.8 | ) | (1.8 | ) | 0.8 | (2.2 | ) | (2.0 | ) | (0.2 | ) | |||||||||||||||||||||
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Total losses and loss adjustment expenses |
76.0 | 62.6 | 96.4 | 82.5 | 66.8 | 9.2 | 15.7 | 74.8 | 77.0 | (2.2 | ) | |||||||||||||||||||||||||||||
Expenses |
24.4 | 24.4 | 25.1 | 24.3 | 24.2 | 0.2 | 0.1 | 24.2 | 24.5 | (0.3 | ) | |||||||||||||||||||||||||||||
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Combined ratio |
100.4 | 87.0 | 121.5 | 106.8 | 91.0 | 9.4 | 15.8 | 99.0 | 101.5 | (2.5 | ) | |||||||||||||||||||||||||||||
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Catastrophes |
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Current year |
7.3 | 3.4 | 29.9 | 12.2 | (0.1 | ) | 7.4 | 12.3 | 7.6 | 11.3 | (3.7 | ) | ||||||||||||||||||||||||||||
Prior year |
| 2.0 | 1.0 | | (0.3 | ) | 0.3 | 0.3 | 0.3 | 0.7 | (0.4 | ) | ||||||||||||||||||||||||||||
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Catastrophe ratio |
7.2 | 5.4 | 30.8 | 12.2 | (0.4 | ) | 7.6 | 12.6 | 7.8 | 12.0 | (4.2 | ) | ||||||||||||||||||||||||||||
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Combined ratio before catastrophes |
93.2 | 81.6 | 90.6 | 94.6 | 91.4 | 1.8 | 3.2 | 91.2 | 89.5 | 1.7 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
96.8 | 88.7 | 91.6 | 95.6 | 93.0 | 3.8 | 2.6 | 93.6 | 92.2 | 1.4 | ||||||||||||||||||||||||||||||
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PRODUCT |
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Automobile |
103.1 | 85.7 | 99.5 | 100.3 | 100.3 | 2.8 | | 97.1 | 96.4 | 0.7 | ||||||||||||||||||||||||||||||
Homeowners |
94.1 | 89.2 | 172.8 | 122.1 | 71.0 | 23.1 | 51.1 | 104.0 | 113.7 | (9.7 | ) | |||||||||||||||||||||||||||||
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Total |
100.4 | 87.0 | 121.5 | 106.8 | 91.0 | 9.4 | 15.8 | 99.0 | 101.5 | (2.5 | ) | |||||||||||||||||||||||||||||
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[1] | Refer to footnote 1 on page 21 for a summary of reserve strengthenings (releases) that are included within prior accident years development. |
22
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
WRITTEN AND EARNED PREMIUMS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec, 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
BUSINESS UNIT |
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WRITTEN PREMIUMS [1] |
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AARP |
$ | 653 | $ | 647 | $ | 724 | $ | 717 | $ | 630 | (4 | %) | (12 | %) | $ | 2,819 | $ | 2,718 | (4 | %) | ||||||||||||||||||||
Agency |
231 | 224 | 233 | 232 | 216 | (6 | %) | (7 | %) | 1,014 | 905 | (11 | %) | |||||||||||||||||||||||||||
Other |
12 | 13 | 12 | 15 | 12 | | (20 | %) | 53 | 52 | (2 | %) | ||||||||||||||||||||||||||||
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Total |
$ | 896 | $ | 884 | $ | 969 | $ | 964 | $ | 858 | (4 | %) | (11 | %) | $ | 3,886 | $ | 3,675 | (5 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
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AARP |
$ | 707 | $ | 698 | $ | 694 | $ | 687 | $ | 685 | (3 | %) | | $ | 2,850 | $ | 2,764 | (3 | %) | |||||||||||||||||||||
Agency |
251 | 243 | 234 | 229 | 224 | (11 | %) | (2 | %) | 1,040 | 930 | (11 | %) | |||||||||||||||||||||||||||
Other |
13 | 15 | 11 | 14 | 13 | | (7 | %) | 57 | 53 | (7 | %) | ||||||||||||||||||||||||||||
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Total |
$ | 971 | $ | 956 | $ | 939 | $ | 930 | $ | 922 | (5 | %) | (1 | %) | $ | 3,947 | $ | 3,747 | (5 | %) | ||||||||||||||||||||
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PRODUCT LINE |
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WRITTEN PREMIUMS [1] |
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Automobile |
$ | 630 | $ | 641 | $ | 665 | $ | 657 | $ | 599 | (5 | %) | (9 | %) | $ | 2,745 | $ | 2,562 | (7 | %) | ||||||||||||||||||||
Homeowners |
266 | 243 | 304 | 307 | 259 | (3 | %) | (16 | %) | 1,141 | 1,113 | (2 | %) | |||||||||||||||||||||||||||
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Total |
$ | 896 | $ | 884 | $ | 969 | $ | 964 | $ | 858 | (4 | %) | (11 | %) | $ | 3,886 | $ | 3,675 | (5 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
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Automobile |
$ | 684 | $ | 672 | $ | 657 | $ | 649 | $ | 641 | (6 | %) | (1 | %) | $ | 2,806 | $ | 2,619 | (7 | %) | ||||||||||||||||||||
Homeowners |
287 | 284 | 282 | 281 | 281 | (2 | %) | | 1,141 | 1,128 | (1 | %) | ||||||||||||||||||||||||||||
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Total |
$ | 971 | $ | 956 | $ | 939 | $ | 930 | $ | 922 | (5 | %) | (1 | %) | $ | 3,947 | $ | 3,747 | (5 | %) | ||||||||||||||||||||
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STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) |
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Renewal Written Price Increases |
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Automobile |
7 | % | 7 | % | 6 | % | 4 | % | 3 | % | (4 | %) | (1 | %) | 6 | % | 5 | % | (1 | %) | ||||||||||||||||||||
Homeowners |
10 | % | 9 | % | 9 | % | 8 | % | 6 | % | (4 | %) | (2 | %) | 10 | % | 8 | % | (2 | %) | ||||||||||||||||||||
Policy Count Retention |
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Automobile |
81 | % | 82 | % | 82 | % | 83 | % | 83 | % | 2 | % | | 83 | % | 83 | % | | ||||||||||||||||||||||
Homeowners |
84 | % | 83 | % | 84 | % | 84 | % | 84 | % | | | 85 | % | 84 | % | (1 | %) | ||||||||||||||||||||||
New Business Premium $ |
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Automobile |
$ | 62 | $ | 66 | $ | 75 | $ | 80 | $ | 77 | 24 | % | (4 | %) | $ | 311 | $ | 298 | (4 | %) | ||||||||||||||||||||
Homeowners |
$ | 20 | $ | 19 | $ | 23 | $ | 26 | $ | 23 | 15 | % | (12 | %) | $ | 106 | $ | 91 | (14 | %) | ||||||||||||||||||||
Policies in force |
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Automobile |
2,226,351 | 2,178,719 | 2,137,351 | 2,106,385 | 2,080,535 | (7 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Homeowners |
1,426,107 | 1,402,264 | 1,380,301 | 1,358,162 | 1,338,676 | (6 | %) | (1 | %) |
[1] | The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve. |
23
WEALTH MANAGEMENT
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
OPERATING RESULTS
Year
Over Year 3 Month Change |
Sequential 3 Month Change |
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THREE MONTHS ENDED | YEAR ENDED | |||||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||||
REVENUES |
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Earned premiums [1] |
$ | 45 | $ | 44 | $ | 33 | $ | 42 | $ | 35 | (22 | %) | (17 | %) | $ | 134 | $ | 154 | 15 | % | ||||||||||||||||||||
Fee income [1] |
892 | 883 | 886 | 855 | 812 | (9 | %) | (5 | %) | 3,473 | 3,436 | (1 | %) | |||||||||||||||||||||||||||
Net investment income |
391 | 406 | 410 | 406 | 395 | 1 | % | (3 | %) | 1,570 | 1,617 | 3 | % | |||||||||||||||||||||||||||
Net realized capital gains losses - core |
2 | 2 | | 2 | | (100 | %) | (100 | %) | (3 | ) | 4 | NM | |||||||||||||||||||||||||||
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Total core revenues |
1,330 | 1,335 | 1,329 | 1,305 | 1,242 | (7 | %) | (5 | %) | 5,174 | 5,211 | 1 | % | |||||||||||||||||||||||||||
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Net realized gains (losses) and other, before tax and DAC, excluded from core revenues |
(108 | ) | (71 | ) | 6 | (209 | ) | (302 | ) | (180 | %) | (44 | %) | (342 | ) | (576 | ) | (68 | %) | |||||||||||||||||||||
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Total revenues |
1,222 | 1,264 | 1,335 | 1,096 | 940 | (23 | %) | (14 | %) | 4,832 | 4,635 | (4 | %) | |||||||||||||||||||||||||||
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BENEFITS AND EXPENSES |
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Benefits, losses and loss adjustment expenses [1][2] |
482 | 508 | 519 | 729 | 479 | (1 | %) | (34 | %) | 2,013 | 2,235 | 11 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits [1] |
107 | 124 | 197 | 459 | 110 | 3 | % | (76 | %) | 478 | 890 | 86 | % | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
395 | 397 | 395 | 360 | 370 | (6 | %) | 3 | % | 1,521 | 1,522 | | ||||||||||||||||||||||||||||
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Total benefits and expenses |
984 | 1,029 | 1,111 | 1,548 | 959 | (3 | %) | (38 | %) | 4,012 | 4,647 | 16 | % | |||||||||||||||||||||||||||
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CORE EARNINGS |
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Core earnings before income taxes |
346 | 306 | 218 | (243 | ) | 283 | (18 | %) | NM | 1,162 | 564 | (51 | %) | |||||||||||||||||||||||||||
Income tax expense (benefit) [1][2][3] |
86 | 70 | (14 | ) | (126 | ) | 55 | (36 | %) | NM | 265 | (15 | ) | NM | ||||||||||||||||||||||||||
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Core earnings |
260 | 236 | 232 | (117 | ) | 228 | (12 | %) | NM | 897 | 579 | (35 | %) | |||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1][3][4] |
40 | (29 | ) | (54 | ) | (148 | ) | (116 | ) | NM | 22 | % | 1 | (347 | ) | NM | ||||||||||||||||||||||||
Income (loss) from discontinued operations |
40 | | | | | (100 | %) | | 37 | | (100 | %) | ||||||||||||||||||||||||||||
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Net income |
$ | 340 | $ | 207 | $ | 178 | $ | (265 | ) | $ | 112 | (67 | %) | NM | $ | 935 | $ | 232 | (75 | %) | ||||||||||||||||||||
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[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTHS ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Earned Premiums |
$ | | $ | | $ | 1 | $ | (3 | ) | $ | 1 | $ | (6 | ) | $ | (1 | ) | |||||||||||
Fee Income |
| (1 | ) | 2 | 22 | 12 | 8 | 35 | ||||||||||||||||||||
Benefits, losses and loss adjustment expense |
(46 | ) | (28 | ) | (8 | ) | 166 | (61 | ) | (70 | ) | 69 | ||||||||||||||||
Amortization of deferred policy acquisition costs |
(83 | ) | (46 | ) | 26 | 288 | (38 | ) | (237 | ) | 230 | |||||||||||||||||
Income tax expense (benefit) |
44 | 25 | (4 | ) | (153 | ) | 39 | 108 | (93 | ) | ||||||||||||||||||
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Core earnings (loss) |
85 | 48 | (11 | ) | (282 | ) | 73 | 201 | (172 | ) | ||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
13 | 2 | (56 | ) | (15 | ) | (45 | ) | (12 | ) | (114 | ) | ||||||||||||||||
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Net income (loss) |
$ | 98 | $ | 50 | $ | (67 | ) | $ | (297 | ) | $ | 28 | $ | 189 | $ | (286 | ) | |||||||||||
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[2] | The three 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. |
[3] | The three months ended June 30, 2011 includes a benefit of $22 related to the release of a deferred tax valuation allowance. |
[4] | 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. |
24
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
FINANCIAL HIGHLIGHTS EXCLUDING IMPACTS OF DAC unlock
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
CORE EARNINGS BY SEGMENT | ||||||||||||||||||||||||||||||||||||||||
Individual Annuity |
$ | 96 | $ | 99 | $ | 144 | $ | 83 | $ | 86 | (10 | %) | 4 | % | $ | 373 | $ | 412 | 10 | % | ||||||||||||||||||||
Individual Life |
44 | 45 | 52 | 46 | 40 | (9 | %) | (13 | %) | 185 | 183 | (1 | %) | |||||||||||||||||||||||||||
Retirement Plans |
11 | 17 | 20 | 12 | 9 | (18 | %) | (25 | %) | 44 | 58 | 32 | % | |||||||||||||||||||||||||||
Mutual Funds |
24 | 27 | 27 | 24 | 20 | (17 | %) | (17 | %) | 94 | 98 | 4 | % | |||||||||||||||||||||||||||
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Wealth Management core earnings, excluding DAC unlock |
175 | 188 | 243 | 165 | 155 | (11 | %) | (6 | %) | 696 | 751 | 8 | % | |||||||||||||||||||||||||||
DAC unlock impacts on net income |
98 | 50 | (67 | ) | (297 | ) | 28 | (71 | %) | NM | 189 | (286 | ) | NM | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
27 | (31 | ) | 2 | (133 | ) | (71 | ) | NM | 47 | % | 13 | (233 | ) | NM | |||||||||||||||||||||||||
Income (loss) from discontinued operations |
40 | | | | | (100 | %) | | 37 | | (100 | %) | ||||||||||||||||||||||||||||
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Wealth Management net income |
340 | 207 | 178 | (265 | ) | 112 | (67 | %) | NM | 935 | 232 | (75 | %) | |||||||||||||||||||||||||||
DAC unlock IMPACT ON REVENUES |
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Individual Annuity |
(2 | ) | (1 | ) | 2 | | | 100 | % | | (8 | ) | 1 | NM | ||||||||||||||||||||||||||
Individual Life |
2 | | 1 | 19 | 13 | NM | (32 | %) | 10 | 33 | NM | |||||||||||||||||||||||||||||
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Total DAC unlock impact on core revenues |
| (1 | ) | 3 | 19 | 13 | NM | (32 | %) | 2 | 34 | NM | ||||||||||||||||||||||||||||
DAC unlock impact on net realized gains (losses), before tax and DAC, excluded from core earnings |
| | 3 | | 2 | NM | NM | | 5 | | ||||||||||||||||||||||||||||||
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Total DAC unlock impact on revenues |
| (1 | ) | 6 | 19 | 15 | NM | (21 | %) | 2 | 39 | NM | ||||||||||||||||||||||||||||
DAC unlock IMPACT ON CORE EARNINGS (LOSSES) BY SEGMENT |
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Individual Annuity |
83 | 46 | (5 | ) | (179 | ) | 75 | (10 | %) | NM | 152 | (63 | ) | NM | ||||||||||||||||||||||||||
Individual Life |
(1 | ) | (2 | ) | (2 | ) | (65 | ) | (1 | ) | | 98 | % | 23 | (70 | ) | NM | |||||||||||||||||||||||
Retirement Plans |
3 | 4 | (4 | ) | (38 | ) | (1 | ) | NM | 97 | % | 26 | (39 | ) | NM | |||||||||||||||||||||||||
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DAC unlock impact on core earnings (losses) [1] |
85 | 48 | (11 | ) | (282 | ) | 73 | (14 | %) | NM | 201 | (172 | ) | NM | ||||||||||||||||||||||||||
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DAC unlock impact on net realized gains (losses), net of tax and DAC, excluded from core earnings [2] [3] |
13 | 2 | (56 | ) | (15 | ) | (45 | ) | NM | NM | (12 | ) | (114 | ) | NM | |||||||||||||||||||||||||
DAC unlock impact from discontinued operations |
| | | | | | | | | | ||||||||||||||||||||||||||||||
DAC unlock impact on net income (loss) |
$ | 98 | $ | 50 | $ | (67 | ) | $ | (297 | ) | $ | 28 | (71 | %) | NM | $ | 189 | $ | (286 | ) | NM | |||||||||||||||||||
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[1] | Included in the year ended December 31, 2010 are the impacts of assumption updates of $(15), $28 and $18 for Individual Annuity, Individual Life and Retirement Plans, respectively. Included in the year ended December 31, 2011 are the impacts of assumption updates of $(26), $(63) and $(36) for Individual Annuity, Individual Life and Retirement Plans, respectively. |
[2] | Included in the three months ended December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011 are income tax expense (benefits) of $19, $(1), $(29), $(6), and $(27), respectively. Included in the year ended December 31, 2010 and 2011 are income tax benefits of $(5) and $(63), respectively. |
[3] | Included in the year ended December 31, 2010 are the impacts of assumption updates of $35, $1 and $(5) for Individual Annuity, Individual Life and Retirement Plans, respectively. Included in the three months ended September 30, 2011 are the impacts of assumption updates of $(6) and $(1) for Individual Annuity and Retirement Plans, respectively. |
25
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (DAC)
Total | ||||||||||||||||||||
U.S. | Individual | Retirement | Mutual | Wealth | ||||||||||||||||
Annuity | Life | Plans | Funds | Management | ||||||||||||||||
YEAR-TO-DATE |
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Balance, December 31, 2010 |
$ | 3,216 | $ | 2,626 | $ | 842 | $ | 43 | $ | 6,727 | ||||||||||
Adjustments to unrealized gains and losses on securities available - for - sale and other |
240 | 99 | (25 | ) | | 314 | ||||||||||||||
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Balance excluding adjustments to unrealized gains and losses on securities available - for - sale and other |
3,456 | 2,725 | 817 | 43 | 7,041 | |||||||||||||||
Capitalization |
65 | 342 | 127 | 31 | 565 | |||||||||||||||
Amortization - Deferred Policy Acquisition Costs |
(411 | ) | (117 | ) | (65 | ) | (47 | ) | (640 | ) | ||||||||||
Amortization - Present Value of Future Profits |
(4 | ) | (17 | ) | | | (21 | ) | ||||||||||||
Amortization - Realized Capital Gains / Losses |
181 | (10 | ) | (1 | ) | | 170 | |||||||||||||
Effect of Currency Translation Adjustment |
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Balance, December 31, 2011 |
3,038 | 2,846 | 810 | 27 | 6,721 | |||||||||||||||
Adjustments to unrealized gains and losses on securities available - for - sale and other |
(236 | ) | (288 | ) | (96 | ) | | (620 | ) | |||||||||||
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Balance, December 31, 2011 including adjustments to unrealized gains and losses on securities available-for-sale and other |
$ | 2,802 | $ | 2,558 | $ | 714 | $ | 27 | $ | 6,101 | ||||||||||
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26
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
SUPPLEMENTAL DATAANNUITY DEATH AND LIVING BENEFITS
As of | As of | As of | As of | As of | ||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
U.S. VARIABLE ANNUITY BUSINESS |
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S&P 500 Index Value at end of period |
1,257.64 | 1,325.83 | 1,320.64 | 1,131.42 | 1,257.60 | |||||||||||||||
Total Account Value with Guaranteed Minimum Death Benefits (GMDB) |
$ | 90,831 | $ | 90,968 | $ | 87,303 | $ | 73,831 | $ | 76,239 | ||||||||||
GMDB Gross net amount of risk |
10,746 | 8,616 | 8,598 | 15,934 | 12,070 | |||||||||||||||
% of GMDB NAR reinsured |
60 | % | 63 | % | 64 | % | 54 | % | 57 | % | ||||||||||
GMDB Retained net amount of risk |
4,331 | 3,152 | 3,136 | 7,306 | 5,136 | |||||||||||||||
GMDB net GAAP liability [1] |
367 | 348 | 347 | 441 | 380 | |||||||||||||||
Total Account Value with Guaranteed Minimum Withdrawal Benefits (GMWB) |
44,803 | 44,616 | 42,501 | 35,566 | 36,604 | |||||||||||||||
GMWB Gross net amount of risk |
1,296 | 744 | 745 | 3,025 | 1,888 | |||||||||||||||
% of GMWB NAR reinsured |
17 | % | 20 | % | 21 | % | 16 | % | 16 | % | ||||||||||
GMWB Retained net amount of risk |
1,080 | 595 | 592 | 2,533 | 1,587 | |||||||||||||||
GMWB Net GAAP Liability [2] |
1,330 | 1,074 | 1,176 | 2,276 | 2,082 |
[1] | For the three months ended December 31, 2010, there was a decrease to the GMDB/GMIB liability as a result of the unlock, for U.S. variable annuity business of $(51). For the three months ended March 31, 2011 the amount was $(25). For the three months ended June 30, 2011, the amount was $(10). For the three months ended September 30, 2011, the amount was $89. For the three months ended December 31, 2011, the amount was $(54). |
[2] | Policies with a guaranteed living benefit (a GMWB in the US) 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 is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to $0. |
27
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL ANNUITY
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
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Variable annuity fees |
$ | 361 | $ | 358 | $ | 352 | $ | 322 | $ | 303 | (16 | %) | (6 | %) | $ | 1,419 | $ | 1,335 | (6 | %) | ||||||||||||||||||||
Other fees [1] |
19 | 19 | 25 | 21 | 13 | (32 | %) | (38 | %) | 83 | 78 | (6 | %) | |||||||||||||||||||||||||||
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Total fee income |
380 | 377 | 377 | 343 | 316 | (17 | %) | (8 | %) | 1,502 | 1,413 | (6 | %) | |||||||||||||||||||||||||||
Direct premiums |
90 | 85 | 76 | 86 | 80 | (11 | %) | (7 | %) | 314 | 327 | 4 | % | |||||||||||||||||||||||||||
Reinsurance premiums [1] |
(21 | ) | (20 | ) | (20 | ) | (20 | ) | (18 | ) | 14 | % | 10 | % | (91 | ) | (78 | ) | 14 | % | ||||||||||||||||||||
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Net premiums |
69 | 65 | 56 | 66 | 62 | (10 | %) | (6 | %) | 223 | 249 | 12 | % | |||||||||||||||||||||||||||
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Total premiums and other considerations |
449 | 442 | 433 | 409 | 378 | (16 | %) | (8 | %) | 1,725 | 1,662 | (4 | %) | |||||||||||||||||||||||||||
Net investment income |
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Net investment income on G/A assets |
172 | 178 | 179 | 168 | 153 | (11 | %) | (9 | %) | 751 | 678 | (10 | %) | |||||||||||||||||||||||||||
Other net investment income |
23 | 19 | 17 | 23 | 31 | 35 | % | 35 | % | 63 | 90 | 43 | % | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Total net investment income |
195 | 197 | 196 | 191 | 184 | (6 | %) | (4 | %) | 814 | 768 | (6 | %) | |||||||||||||||||||||||||||
Net realized capital gains - core |
4 | 2 | | 3 | | (100 | %) | (100 | %) | 5 | 5 | | ||||||||||||||||||||||||||||
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Total core revenues |
648 | 641 | 629 | 603 | 562 | (13 | %) | (7 | %) | 2,544 | 2,435 | (4 | %) | |||||||||||||||||||||||||||
Net realized losses and other, before tax and DAC, excluded from core revenues |
(79 | ) | (32 | ) | (13 | ) | (238 | ) | (315 | ) | NM | (32 | %) | (353 | ) | (598 | ) | (69 | %) | |||||||||||||||||||||
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Total revenues |
569 | 609 | 616 | 365 | 247 | (57 | %) | (32 | %) | 2,191 | 1,837 | (16 | %) | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
||||||||||||||||||||||||||||||||||||||||
Death benefits [1] |
(14 | ) | | 15 | 119 | (34 | ) | (143 | %) | NM | 46 | 100 | 117 | % | ||||||||||||||||||||||||||
Other contract benefits |
43 | 41 | 39 | 44 | 43 | | (2 | %) | 151 | 167 | 11 | % | ||||||||||||||||||||||||||||
Change in reserve |
62 | 57 | 47 | 63 | 48 | (23 | %) | (24 | %) | 207 | 215 | 4 | % | |||||||||||||||||||||||||||
Sales inducements [1] |
3 | 8 | 12 | 20 | 4 | 33 | % | (80 | %) | 37 | 44 | 19 | % | |||||||||||||||||||||||||||
Interest credited on G/A assets |
156 | 148 | 151 | 143 | 143 | (8 | %) | | 649 | 585 | (10 | %) | ||||||||||||||||||||||||||||
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Total benefits and losses |
250 | 254 | 264 | 389 | 204 | (18 | %) | (48 | %) | 1,090 | 1,111 | 2 | % | |||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
103 | 109 | 107 | 96 | 108 | 5 | % | 13 | % | 433 | 420 | (3 | %) | |||||||||||||||||||||||||||
Operating expenses |
53 | 44 | 45 | 43 | 46 | (13 | %) | 7 | % | 188 | 178 | (5 | %) | |||||||||||||||||||||||||||
Premium taxes and other expenses |
| 2 | 2 | 2 | (2 | ) | | NM | 17 | 4 | (76 | %) | ||||||||||||||||||||||||||||
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Subtotal - expenses before deferral |
156 | 155 | 154 | 141 | 152 | (3 | %) | 8 | % | 638 | 602 | (6 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(18 | ) | (15 | ) | (16 | ) | (16 | ) | (18 | ) | | (13 | %) | (96 | ) | (65 | ) | 32 | % | |||||||||||||||||||||
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Total other insurance expense |
138 | 140 | 138 | 125 | 134 | (3 | %) | 7 | % | 542 | 537 | (1 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
30 | 68 | 128 | 281 | 30 | | (89 | %) | 273 | 507 | 86 | % | ||||||||||||||||||||||||||||
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Total benefits and expenses |
418 | 462 | 530 | 795 | 368 | (12 | %) | (54 | %) | 1,905 | 2,155 | 13 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes |
230 | 179 | 99 | (192 | ) | 194 | (16 | %) | NM | 639 | 280 | (56 | %) | |||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
51 | 34 | (40 | ) | (96 | ) | 33 | (35 | %) | NM | 114 | (69 | ) | NM | ||||||||||||||||||||||||||
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Core earnings (loss) [1] |
179 | 145 | 139 | (96 | ) | 161 | (10 | %) | NM | 525 | 349 | (34 | %) | |||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [3] |
56 | (6 | ) | (72 | ) | (152 | ) | (133 | ) | NM | 13 | % | 2 | (363 | ) | NM | ||||||||||||||||||||||||
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Net income (loss) [1] |
$ | 235 | $ | 139 | $ | 67 | $ | (248 | ) | $ | 28 | (88 | %) | NM | $ | 527 | $ | (14 | ) | NM | ||||||||||||||||||||
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RETURN ON ASSETS (After-tax bps) |
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Core earnings |
76.2 | 60.9 | 59.6 | (45.2 | ) | 81.1 | 6 | % | NM | 54.5 | 39.7 | (27 | %) | |||||||||||||||||||||||||||
Net income (loss) |
100.0 | 58.4 | 28.7 | (116.9 | ) | 14.1 | (86 | %) | NM | 54.7 | (1.6 | ) | NM |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Other Fees |
$ | (2 | ) | $ | (1 | ) | $ | 1 | $ | 3 | $ | (1 | ) | $ | (2 | ) | $ | 2 | ||||||||||
Reinsurance Premiums |
| | 1 | (3 | ) | 1 | (6 | ) | (1 | ) | ||||||||||||||||||
Death Benefits |
(41 | ) | (25 | ) | (10 | ) | 88 | (54 | ) | (67 | ) | (1 | ) | |||||||||||||||
Sales Inducements |
(5 | ) | (3 | ) | 2 | 10 | (2 | ) | (2 | ) | 7 | |||||||||||||||||
Amortization of deferred policy acquisition costs |
(82 | ) | (43 | ) | 16 | 178 | (59 | ) | (172 | ) | 92 | |||||||||||||||||
Income tax expense (benefit) |
43 | 24 | (1 | ) | (97 | ) | 40 | 81 | (34 | ) | ||||||||||||||||||
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Core earnings (loss) |
83 | 46 | (5 | ) | (179 | ) | 75 | 152 | (63 | ) | ||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
13 | 1 | (55 | ) | (9 | ) | (46 | ) | (9 | ) | (109 | ) | ||||||||||||||||
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Net income (loss) |
96 | 47 | (60 | ) | (188 | ) | 29 | 143 | (172 | ) |
[2] | 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. |
[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. |
28
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL ANNUITY
SUPPLEMENTAL DATAACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
VARIABLE ANNUITIES |
||||||||||||||||||||
Beginning balance |
$ | 80,357 | $ | 83,013 | $ | 82,977 | $ | 79,347 | $ | 66,716 | ||||||||||
Deposits |
286 | 250 | 227 | 192 | 216 | |||||||||||||||
Surrenders |
(2,723 | ) | (2,963 | ) | (3,141 | ) | (2,445 | ) | (2,207 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(398 | ) | (419 | ) | (392 | ) | (344 | ) | (346 | ) | ||||||||||
Transfers |
(3 | ) | (47 | ) | (44 | ) | (45 | ) | (44 | ) | ||||||||||
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Net Flows |
(2,838 | ) | (3,179 | ) | (3,350 | ) | (2,642 | ) | (2,381 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
5,498 | 3,142 | (281 | ) | (9,989 | ) | 4,425 | |||||||||||||
Other [2] |
(4 | ) | 1 | 1 | | | ||||||||||||||
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Ending balance |
$ | 83,013 | $ | 82,977 | $ | 79,347 | $ | 66,716 | $ | 68,760 | ||||||||||
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FIXED MARKET VALUE ADJUSTED (MVA) AND OTHER |
||||||||||||||||||||
Beginning balance |
$ | 12,397 | $ | 12,223 | $ | 12,136 | $ | 11,978 | $ | 11,727 | ||||||||||
Deposits |
19 | 13 | 20 | 36 | 42 | |||||||||||||||
Surrenders |
(241 | ) | (173 | ) | (203 | ) | (301 | ) | (175 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(150 | ) | (152 | ) | (167 | ) | (165 | ) | (163 | ) | ||||||||||
Transfers |
51 | 66 | 68 | 73 | 62 | |||||||||||||||
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Net Flows |
(321 | ) | (246 | ) | (282 | ) | (357 | ) | (234 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
147 | 159 | 124 | 106 | 138 | |||||||||||||||
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Ending balance |
$ | 12,223 | $ | 12,136 | $ | 11,978 | $ | 11,727 | $ | 11,631 | ||||||||||
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TOTAL INDIVIDUAL ANNUITY |
||||||||||||||||||||
Beginning balance |
$ | 92,754 | $ | 95,236 | $ | 95,113 | $ | 91,325 | $ | 78,443 | ||||||||||
Deposits |
305 | 263 | 247 | 228 | 258 | |||||||||||||||
Surrenders |
(2,964 | ) | (3,136 | ) | (3,344 | ) | (2,746 | ) | (2,382 | ) | ||||||||||
Death benefits/annuitizations/annuity payouts [1] |
(548 | ) | (571 | ) | (559 | ) | (509 | ) | (509 | ) | ||||||||||
Transfers |
48 | 19 | 24 | 28 | 18 | |||||||||||||||
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Net Flows |
(3,159 | ) | (3,425 | ) | (3,632 | ) | (2,999 | ) | (2,615 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
5,645 | 3,301 | (157 | ) | (9,883 | ) | 4,563 | |||||||||||||
Other [2] |
(4 | ) | 1 | 1 | | | ||||||||||||||
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Ending balance |
$ | 95,236 | $ | 95,113 | $ | 91,325 | $ | 78,443 | $ | 80,391 | ||||||||||
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[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. |
29
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
INCOME STATEMENTS
Year Over Year 3 Month Change |
Sequential 3 Month Change |
YEAR ENDED | ||||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
||||||||||||||||||||||||||||||||||||||||
Variable life fees |
$ | 14 | $ | 13 | $ | 14 | $ | 12 | $ | 12 | (14 | %) | | $ | 52 | $ | 51 | (2 | %) | |||||||||||||||||||||
Cost of insurance charges |
161 | 163 | 165 | 169 | 172 | 7 | % | 2 | % | 635 | 669 | 5 | % | |||||||||||||||||||||||||||
Other fees [1] |
74 | 58 | 56 | 86 | 81 | 9 | % | (6 | %) | 268 | 281 | 5 | % | |||||||||||||||||||||||||||
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Total fee income |
249 | 234 | 235 | 267 | 265 | 6 | % | (1 | %) | 955 | 1,001 | 5 | % | |||||||||||||||||||||||||||
Direct premiums |
37 | 35 | 38 | 38 | 38 | 3 | % | | 140 | 149 | 6 | % | ||||||||||||||||||||||||||||
Reinsurance premiums |
(63 | ) | (59 | ) | (63 | ) | (63 | ) | (66 | ) | (5 | %) | (5 | %) | (236 | ) | (251 | ) | (6 | %) | ||||||||||||||||||||
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Net premiums |
(26 | ) | (24 | ) | (25 | ) | (25 | ) | (28 | ) | (8 | %) | (12 | %) | (96 | ) | (102 | ) | (6 | %) | ||||||||||||||||||||
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Total premiums and other considerations |
223 | 210 | 210 | 242 | 237 | 6 | % | (2 | %) | 859 | 899 | 5 | % | |||||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
98 | 106 | 106 | 107 | 107 | 9 | % | | 400 | 426 | 7 | % | ||||||||||||||||||||||||||||
Other net investment income (loss) |
3 | 5 | 9 | 8 | 8 | 167 | % | | | 30 | | |||||||||||||||||||||||||||||
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Total net investment income |
101 | 111 | 115 | 115 | 115 | 14 | % | | 400 | 456 | 14 | % | ||||||||||||||||||||||||||||
Net realized capital gains (losses) - core |
(1 | ) | | | (1 | ) | 1 | NM | NM | (2 | ) | | 100 | % | ||||||||||||||||||||||||||
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Total core revenues |
323 | 321 | 325 | 356 | 353 | 9 | % | (1 | %) | 1,257 | 1,355 | 8 | % | |||||||||||||||||||||||||||
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues |
(22 | ) | (31 | ) | 8 | 31 | 22 | NM | (29 | %) | 23 | 30 | 30 | % | ||||||||||||||||||||||||||
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|||||||||||||||||||||
Total revenues |
301 | 290 | 333 | 387 | 375 | 25 | % | (3 | %) | 1,280 | 1,385 | 8 | % | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
||||||||||||||||||||||||||||||||||||||||
Death benefits |
87 | 105 | 102 | 108 | 108 | 24 | % | | 362 | 423 | 17 | % | ||||||||||||||||||||||||||||
Other contract benefits |
5 | 6 | 8 | 8 | 7 | 40 | % | (13 | %) | 25 | 29 | 16 | % | |||||||||||||||||||||||||||
Change in reserve [1] |
2 | 6 | 6 | 77 | 11 | NM | (86 | %) | 1 | 100 | NM | |||||||||||||||||||||||||||||
Sales inducements |
1 | | 1 | | 1 | | | 4 | 2 | (50 | %) | |||||||||||||||||||||||||||||
Interest credited on G/A assets |
62 | 65 | 63 | 66 | 68 | 10 | % | 3 | % | 253 | 262 | 4 | % | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Total benefits and losses |
157 | 182 | 180 | 259 | 195 | 24 | % | (25 | %) | 645 | 816 | 27 | % | |||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
50 | 43 | 47 | 55 | 66 | 32 | % | 20 | % | 176 | 211 | 20 | % | |||||||||||||||||||||||||||
Operating expenses |
71 | 59 | 63 | 66 | 70 | (1 | %) | 6 | % | 252 | 258 | 2 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses |
15 | 12 | 14 | 12 | 18 | 20 | % | 50 | % | 48 | 56 | 17 | % | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Subtotal - expenses before deferral |
136 | 114 | 124 | 133 | 154 | 13 | % | 16 | % | 476 | 525 | 10 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(84 | ) | (70 | ) | (77 | ) | (91 | ) | (104 | ) | (24 | %) | (14 | %) | (295 | ) | (342 | ) | (16 | %) | ||||||||||||||||||||
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Total other insurance expense |
52 | 44 | 47 | 42 | 50 | (4 | %) | 19 | % | 181 | 183 | 1 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits [1] |
52 | 34 | 33 | 92 | 54 | 4 | % | (41 | %) | 135 | 213 | 58 | % | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Total benefits and expenses |
261 | 260 | 260 | 393 | 299 | 15 | % | (24 | %) | 961 | 1,212 | 26 | % | |||||||||||||||||||||||||||
Core earnings before income taxes |
62 | 61 | 65 | (37 | ) | 54 | (13 | %) | NM | 296 | 143 | (52 | %) | |||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
19 | 18 | 15 | (18 | ) | 15 | (21 | %) | NM | 88 | 30 | (66 | %) | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Core earnings (loss) [1] |
43 | 43 | 50 | (19 | ) | 39 | (9 | %) | NM | 208 | 113 | (46 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings [3] |
(12 | ) | (18 | ) | 4 | 10 | 24 | NM | 140 | % | 21 | 20 | (5 | %) | ||||||||||||||||||||||||||
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Net income (loss) [1] |
$ | 31 | $ | 25 | $ | 54 | $ | (9 | ) | $ | 63 | 103 | % | NM | $ | 229 | $ | 133 | (42 | %) | ||||||||||||||||||||
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Earnings Margin (After-tax) |
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Core earnings |
13.3 | % | 13.4 | % | 15.4 | % | (5.3 | %) | 11.0 | % | (2.3 | ) | 16.3 | 16.6 | % | 8.3 | % | (8.3 | ) | |||||||||||||||||||||
Net income |
10.3 | % | 8.6 | % | 16.2 | % | (2.3 | %) | 16.8 | % | 6.5 | 19.1 | 17.9 | % | 9.6 | % | (8.3 | ) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Other Fees |
$ | 2 | $ | | $ | 1 | $ | 19 | $ | 13 | $ | 10 | $ | 33 | ||||||||||||||
Change in reserve |
| | | 66 | (4 | ) | (2 | ) | 62 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
3 | 3 | 4 | 53 | 19 | (26 | ) | 79 | ||||||||||||||||||||
Income tax expense (benefit) |
| (1 | ) | (1 | ) | (35 | ) | (1 | ) | 13 | (38 | ) | ||||||||||||||||
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Core earnings (loss) |
(1 | ) | (2 | ) | (2 | ) | (65 | ) | (1 | ) | 23 | (70 | ) | |||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings (losses) |
| 1 | | (1 | ) | 1 | 5 | 1 | ||||||||||||||||||||
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Net income (loss) |
(1 | ) | (1 | ) | (2 | ) | (66 | ) | | 28 | (69 | ) |
[2] | The three 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
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
SUPPLEMENTAL DATA
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
SALES BY DISTRIBUTION |
||||||||||||||||||||||||||||||||||||||||
National Accounts |
$ | 26 | $ | 22 | $ | 28 | $ | 29 | $ | 39 | 48 | % | 32 | % | $ | 98 | $ | 118 | 20 | % | ||||||||||||||||||||
Independent |
25 | 28 | 25 | 31 | 36 | 45 | % | 18 | % | 97 | 120 | 23 | % | |||||||||||||||||||||||||||
Other |
3 | 4 | 3 | 2 | 2 | (19 | %) | 10 | % | 12 | 11 | (6 | %) | |||||||||||||||||||||||||||
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Total sales by distribution |
$ | 54 | $ | 54 | $ | 56 | $ | 62 | $ | 77 | 43 | % | 24 | % | $ | 207 | $ | 249 | 20 | % | ||||||||||||||||||||
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SALES BY PRODUCT |
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Variable Life |
$ | 7 | $ | 7 | $ | 8 | $ | 6 | $ | 6 | (14 | %) | | $ | 31 | $ | 27 | (13 | %) | |||||||||||||||||||||
Universal life |
43 | 43 | 43 | 52 | 67 | 56 | % | 29 | % | 159 | 205 | 29 | % | |||||||||||||||||||||||||||
Term/other life |
4 | 4 | 5 | 4 | 4 | | | 17 | 17 | | ||||||||||||||||||||||||||||||
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Total sales by product |
$ | 54 | $ | 54 | $ | 56 | $ | 62 | $ | 77 | 43 | % | 24 | % | $ | 207 | $ | 249 | 20 | % | ||||||||||||||||||||
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PREMIUMS & DEPOSITS |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 148 | $ | 127 | $ | 130 | $ | 134 | $ | 126 | (15 | %) | (6 | %) | $ | 557 | $ | 517 | (7 | %) | ||||||||||||||||||||
Universal life/other life |
329 | 288 | 318 | 378 | 419 | 27 | % | 11 | % | 1,143 | 1,403 | 23 | % | |||||||||||||||||||||||||||
Term/other |
42 | 37 | 39 | 43 | 42 | | (2 | %) | 152 | 161 | 6 | % | ||||||||||||||||||||||||||||
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Total Premiums & Deposits |
$ | 519 | $ | 452 | $ | 487 | $ | 555 | $ | 587 | 13 | % | 6 | % | $ | 1,852 | $ | 2,081 | 12 | % | ||||||||||||||||||||
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ACCOUNT VALUE |
||||||||||||||||||||||||||||||||||||||||
General account |
$ | 6,690 | $ | 6,808 | $ | 6,954 | $ | 7,126 | $ | 7,337 | 10 | % | 3 | % | ||||||||||||||||||||||||||
Separate account |
5,553 | 5,662 | 5,412 | 4,682 | 4,963 | (11 | %) | 6 | % | |||||||||||||||||||||||||||||||
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Total account value |
$ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | $ | 12,300 | | 4 | % | |||||||||||||||||||||||||||
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ACCOUNT VALUE BY PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 6,115 | $ | 6,235 | $ | 5,993 | $ | 5,259 | $ | 5,535 | (9 | %) | 5 | % | ||||||||||||||||||||||||||
Universal life/other life |
6,128 | 6,235 | 6,373 | 6,549 | 6,765 | 10 | % | 3 | % | |||||||||||||||||||||||||||||||
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Total account value by product |
$ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | $ | 12,300 | | 4 | % | |||||||||||||||||||||||||||
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LIFE INSURANCE IN-FORCE |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 74,044 | $ | 72,946 | $ | 71,977 | $ | 70,926 | $ | 69,716 | (6 | %) | (2 | %) | ||||||||||||||||||||||||||
Universal life |
58,789 | 59,613 | 60,759 | 62,052 | 64,006 | 9 | % | 3 | % | |||||||||||||||||||||||||||||||
Term |
75,797 | 77,138 | 78,714 | 80,249 | 81,494 | 8 | % | 2 | % | |||||||||||||||||||||||||||||||
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Total life insurance in-force |
$ | 208,630 | $ | 209,697 | $ | 211,450 | $ | 213,227 | $ | 215,216 | 3 | % | 1 | % | ||||||||||||||||||||||||||
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31
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
SUPPLEMENTAL DATAACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
VARIABLE LIFE |
||||||||||||||||||||
Beginning balance |
$ | 5,757 | $ | 6,115 | $ | 6,235 | $ | 5,993 | $ | 5,259 | ||||||||||
First year & single premiums |
15 | 13 | 16 | 15 | 12 | |||||||||||||||
Renewal premiums |
133 | 114 | 114 | 119 | 114 | |||||||||||||||
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Premiums and deposits |
148 | 127 | 130 | 134 | 126 | |||||||||||||||
Surrenders |
(106 | ) | (98 | ) | (102 | ) | (91 | ) | (100 | ) | ||||||||||
Death benefits |
(14 | ) | (19 | ) | (17 | ) | (20 | ) | (15 | ) | ||||||||||
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Net Flows |
28 | 10 | 11 | 23 | 11 | |||||||||||||||
Policy fees |
(123 | ) | (108 | ) | (111 | ) | (120 | ) | (109 | ) | ||||||||||
Change in market value/interest credited |
453 | 218 | (142 | ) | (637 | ) | 374 | |||||||||||||
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Ending balance |
$ | 6,115 | $ | 6,235 | $ | 5,993 | $ | 5,259 | $ | 5,535 | ||||||||||
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UNIVERSAL LIFE [1] |
||||||||||||||||||||
Beginning balance |
$ | 5,995 | $ | 6,128 | $ | 6,235 | $ | 6,373 | $ | 6,549 | ||||||||||
First year & single premiums |
165 | 143 | 165 | 210 | 251 | |||||||||||||||
Renewal premiums |
164 | 145 | 153 | 168 | 168 | |||||||||||||||
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Premiums and deposits |
329 | 288 | 318 | 378 | 419 | |||||||||||||||
Surrenders |
(49 | ) | (43 | ) | (36 | ) | (44 | ) | (44 | ) | ||||||||||
Death benefits |
(30 | ) | (35 | ) | (29 | ) | (29 | ) | (26 | ) | ||||||||||
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Net Flows |
250 | 210 | 253 | 305 | 349 | |||||||||||||||
Policy fees |
(177 | ) | (160 | ) | (173 | ) | (193 | ) | (194 | ) | ||||||||||
Change in market value/interest credited |
60 | 57 | 58 | 64 | 61 | |||||||||||||||
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Ending balance |
$ | 6,128 | $ | 6,235 | $ | 6,373 | $ | 6,549 | $ | 6,765 | ||||||||||
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INDIVIDUAL LIFE |
||||||||||||||||||||
Beginning balance |
$ | 11,752 | $ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | ||||||||||
First year & single premiums |
180 | 156 | 181 | 225 | 263 | |||||||||||||||
Renewal premiums |
297 | 259 | 267 | 287 | 282 | |||||||||||||||
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Premiums and deposits |
477 | 415 | 448 | 512 | 545 | |||||||||||||||
Surrenders |
(155 | ) | (141 | ) | (138 | ) | (135 | ) | (144 | ) | ||||||||||
Death benefits |
(44 | ) | (54 | ) | (46 | ) | (49 | ) | (41 | ) | ||||||||||
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Net Flows |
278 | 220 | 264 | 328 | 360 | |||||||||||||||
Policy fees |
(300 | ) | (268 | ) | (284 | ) | (313 | ) | (303 | ) | ||||||||||
Change in market value/interest credited |
513 | 275 | (84 | ) | (573 | ) | 435 | |||||||||||||
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Ending balance |
$ | 12,243 | $ | 12,470 | $ | 12,366 | $ | 11,808 | $ | 12,300 | ||||||||||
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[1] | Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and Other. |
32
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums and other considerations |
||||||||||||||||||||||||||||||||||||||||
Variable annuity and life fees |
$ | 63 | $ | 65 | $ | 67 | $ | 63 | $ | 60 | (5 | %) | (5 | %) | $ | 230 | $ | 255 | 11 | % | ||||||||||||||||||||
Mutual fund and other fees |
29 | 29 | 32 | 29 | 28 | (3 | %) | (3 | %) | 122 | 118 | (3 | %) | |||||||||||||||||||||||||||
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Total fee income |
92 | 94 | 99 | 92 | 88 | (4 | %) | (4 | %) | 352 | 373 | 6 | % | |||||||||||||||||||||||||||
Direct premiums |
2 | 3 | 2 | 1 | 1 | (50 | %) | | 7 | 7 | | |||||||||||||||||||||||||||||
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Total premiums and other considerations |
94 | 97 | 101 | 93 | 89 | (5 | %) | (4 | %) | 359 | 380 | 6 | % | |||||||||||||||||||||||||||
Net investment income |
||||||||||||||||||||||||||||||||||||||||
Net investment income on G/A assets |
94 | 96 | 96 | 97 | 94 | | (3 | %) | 356 | 383 | 8 | % | ||||||||||||||||||||||||||||
Other net investment income |
3 | 3 | 4 | 3 | 3 | | | 8 | 13 | 63 | % | |||||||||||||||||||||||||||||
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Total net investment income |
97 | 99 | 100 | 100 | 97 | | (3 | %) | 364 | 396 | 9 | % | ||||||||||||||||||||||||||||
Net realized losses - core |
(1 | ) | (0 | ) | | | | 100 | % | | (6 | ) | | 100 | % | |||||||||||||||||||||||||
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Total core revenues |
190 | 196 | 201 | 193 | 186 | (2 | %) | (4 | %) | 717 | 776 | 8 | % | |||||||||||||||||||||||||||
Net realized gains (losses), before tax and DAC, excluded from core revenues |
(7 | ) | (9 | ) | 11 | (2 | ) | (10 | ) | (43 | %) | NM | (12 | ) | (10 | ) | 17 | % | ||||||||||||||||||||||
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Total revenues |
183 | 187 | 212 | 191 | 176 | (4 | %) | (8 | %) | 705 | 766 | 9 | % | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and losses |
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Death benefits [1] |
| 1 | (2 | ) | 2 | (1 | ) | | NM | (0 | ) | 0 | | |||||||||||||||||||||||||||
Other contract benefits |
15 | 16 | 15 | 15 | 13 | (13 | %) | (13 | %) | 60 | 59 | (2 | %) | |||||||||||||||||||||||||||
Change in reserve |
(5 | ) | (7 | ) | (5 | ) | (7 | ) | (5 | ) | | 29 | % | (28 | ) | (24 | ) | 14 | % | |||||||||||||||||||||
Sales inducements [1] |
| | 1 | 1 | 1 | | | (0 | ) | 3 | | |||||||||||||||||||||||||||||
Interest credited on G/A assets |
64 | 62 | 66 | 70 | 72 | 13 | % | 3 | % | 246 | 270 | 10 | % | |||||||||||||||||||||||||||
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Total benefits and losses |
74 | 72 | 75 | 81 | 80 | 8 | % | (1 | %) | 278 | 308 | 11 | % | |||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
48 | 49 | 46 | 46 | 46 | (4 | %) | | 177 | 187 | 6 | % | ||||||||||||||||||||||||||||
Operating expenses |
72 | 70 | 68 | 68 | 66 | (8 | %) | (3 | %) | 278 | 272 | (2 | %) | |||||||||||||||||||||||||||
Premium taxes and other expenses |
6 | 7 | 6 | 5 | 4 | (33 | %) | (20 | %) | 22 | 22 | | ||||||||||||||||||||||||||||
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Subtotal - expenses before deferral |
126 | 126 | 120 | 119 | 116 | (8 | %) | (3 | %) | 477 | 481 | 1 | % | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(36 | ) | (36 | ) | (30 | ) | (31 | ) | (30 | ) | 17 | % | 3 | % | (137 | ) | (127 | ) | 7 | % | ||||||||||||||||||||
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Total other insurance expense |
90 | 90 | 90 | 88 | 86 | (4 | %) | (2 | %) | 340 | 354 | 4 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
12 | 10 | 24 | 74 | 15 | 25 | % | (80 | %) | 19 | 123 | NM | ||||||||||||||||||||||||||||
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Total benefits and expenses |
176 | 172 | 189 | 243 | 181 | 3 | % | (26 | %) | 637 | 785 | 23 | % | |||||||||||||||||||||||||||
Core earnings (loss) before income taxes |
14 | 24 | 12 | (50 | ) | 5 | (64 | %) | NM | 80 | (9 | ) | NM | |||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
| 3 | (4 | ) | (24 | ) | (3 | ) | | 88 | % | 10 | (28 | ) | NM | |||||||||||||||||||||||||
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Core earnings (loss) [2] |
14 | 21 | 16 | (26 | ) | 8 | (43 | %) | NM | 70 | 19 | (73 | %) | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings [3] |
(5 | ) | (6 | ) | 14 | (6 | ) | (6 | ) | (20 | %) | | (23 | ) | (4 | ) | 83 | % | ||||||||||||||||||||||
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Net income (loss) [1] |
$ | 9 | $ | 15 | $ | 30 | $ | (32 | ) | $ | 2 | (78 | %) | NM | $ | 47 | $ | 15 | (68 | %) | ||||||||||||||||||||
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RETURN ON ASSETS (After-tax bps) |
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Core earnings |
10.9 | 15.5 | 11.5 | (19.7 | ) | 6.3 | (42 | %) | NM | 14.5 | 3.6 | (75 | %) | |||||||||||||||||||||||||||
Net income (loss) |
7.0 | 11.1 | 21.6 | (24.3 | ) | 1.6 | (77 | %) | NM | 9.7 | 2.9 | (70 | %) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTH ENDED | YEAR ENDED | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | DECEMBER 31, | |||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | 2010 | 2011 | ||||||||||||||||||||||
Death Benefits |
$ | | $ | | $ | | $ | 1 | $ | (1 | ) | $ | | $ | | |||||||||||||
Sales Inducements |
| | | 1 | | (1 | ) | 1 | ||||||||||||||||||||
Amortization of deferred policy acquisition costs |
(4 | ) | (6 | ) | 6 | 57 | 2 | (39 | ) | 59 | ||||||||||||||||||
Income tax expense (benefit) |
1 | 2 | (2 | ) | (21 | ) | | 14 | (21 | ) | ||||||||||||||||||
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|||||||||||||||
Core earnings (loss) |
3 | 4 | (4 | ) | (38 | ) | (1 | ) | 26 | (39 | ) | |||||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
| | (1 | ) | (5 | ) | | (8 | ) | (6 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income (loss) |
3 | 4 | (5 | ) | (43 | ) | (1 | ) | 18 | (45 | ) |
[2] | The three 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. |
33
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATAASSETS UNDER MANAGEMENT
Year Over | ||||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
RETIREMENT PLANS TOTAL |
||||||||||||||||||||||||||||
General account |
$ | 7,280 | $ | 7,502 | $ | 7,638 | $ | 8,042 | $ | 8,374 | 15 | % | 4 | % | ||||||||||||||
Guaranteed separate account |
6 | | | | | (100 | %) | | ||||||||||||||||||||
Non-guaranteed separate account |
25,654 | 27,522 | 27,443 | 23,799 | 25,525 | (1 | %) | 7 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Retirement Plans account value |
$ | 32,940 | $ | 35,024 | $ | 35,081 | $ | 31,841 | $ | 33,899 | 3 | % | 6 | % | ||||||||||||||
401(k)/403(b)/457 mutual funds |
19,578 | 20,324 | 20,474 | 17,844 | 18,403 | (6 | %) | 3 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Retirement Plans Assets Under Management |
$ | 52,518 | $ | 55,348 | $ | 55,555 | $ | 49,685 | $ | 52,302 | | 5 | % | |||||||||||||||
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34
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATAACCOUNT VALUE AND ASSET ROLL FORWARD
THREE MONTHS ENDED, | ||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
401(k) GROUP ANNUITY |
||||||||||||||||||||
ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 18,764 | $ | 20,291 | $ | 21,891 | $ | 21,963 | $ | 19,769 | ||||||||||
Deposits |
1,211 | 1,807 | 1,194 | 1,425 | 1,239 | |||||||||||||||
Surrenders |
(874 | ) | (921 | ) | (1,049 | ) | (911 | ) | (1,150 | ) | ||||||||||
Death benefits/annuity payouts |
(18 | ) | (18 | ) | (20 | ) | (19 | ) | (17 | ) | ||||||||||
Transfers [1] |
| (26 | ) | 1 | 11 | 47 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net Flows |
319 | 842 | 126 | 506 | 119 | |||||||||||||||
Change in market value/change in reserve/interest credited |
1,209 | 758 | (54 | ) | (2,700 | ) | 1,236 | |||||||||||||
Other |
(1 | ) | | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 20,291 | $ | 21,891 | $ | 21,963 | $ | 19,769 | $ | 21,124 | ||||||||||
|
|
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|
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|
|
|
|
|
|||||||||||
403(b)/457 GROUP ANNUITY |
||||||||||||||||||||
ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 11,874 | $ | 12,649 | $ | 13,133 | $ | 13,118 | $ | 12,072 | ||||||||||
Deposits |
369 | 359 | 326 | 330 | 336 | |||||||||||||||
Surrenders |
(239 | ) | (255 | ) | (347 | ) | (259 | ) | (216 | ) | ||||||||||
Death benefits/annuity payouts |
(12 | ) | (12 | ) | (12 | ) | (12 | ) | (11 | ) | ||||||||||
Transfers [1] |
| (0 | ) | 0 | 3 | 2 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net Flows |
118 | 92 | (33 | ) | 62 | 111 | ||||||||||||||
Change in market value/change in reserve/interest credited |
658 | 392 | 18 | (1,108 | ) | 592 | ||||||||||||||
Other |
(1 | ) | | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 12,649 | $ | 13,133 | $ | 13,118 | $ | 12,072 | $ | 12,775 | ||||||||||
|
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|
|
|
|
|
|||||||||||
401(k)/403(b)/457 MUTUAL FUNDS ASSETS |
||||||||||||||||||||
Beginning balance |
$ | 18,602 | $ | 19,578 | $ | 20,324 | $ | 20,474 | $ | 17,844 | ||||||||||
Reclassificiation of AUA to AUM [2] |
| | 267 | | | |||||||||||||||
Deposits |
491 | 697 | 549 | 715 | 459 | |||||||||||||||
Surrenders |
(825 | ) | (995 | ) | (814 | ) | (511 | ) | (1,127 | ) | ||||||||||
Death benefits/annuity payouts |
| | (2 | ) | 2 | 1 | ||||||||||||||
Transfers [1] |
| 26 | (1 | ) | (14 | ) | (49 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net Flows |
(334 | ) | (272 | ) | (268 | ) | 192 | (716 | ) | |||||||||||
Change in market value/change in reserve/interest credited |
1,308 | 1,018 | 151 | (2,822 | ) | 1,275 | ||||||||||||||
Other |
2 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 19,578 | $ | 20,324 | $ | 20,474 | $ | 17,844 | $ | 18,403 | ||||||||||
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|
|||||||||||
TOTAL RETIREMENT |
||||||||||||||||||||
Beginning balance |
$ | 49,240 | $ | 52,518 | $ | 55,348 | $ | 55,555 | $ | 49,685 | ||||||||||
Reclassificiation of AUA to AUM [2] |
| | 267 | | | |||||||||||||||
Deposits |
2,071 | 2,863 | 2,069 | 2,470 | 2,034 | |||||||||||||||
Surrenders |
(1,938 | ) | (2,171 | ) | (2,210 | ) | (1,681 | ) | (2,493 | ) | ||||||||||
Death benefits/annuity payouts |
(30 | ) | (30 | ) | (34 | ) | (29 | ) | (27 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net Flows |
103 | 662 | (175 | ) | 760 | (486 | ) | |||||||||||||
Change in market value/change in reserve/interest credited |
3,175 | 2,168 | 115 | (6,630 | ) | 3,103 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 52,518 | $ | 55,348 | $ | 55,555 | $ | 49,685 | $ | 52,302 |
[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. |
35
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | Year Over Year 3 Month Change |
Sequential 3 Month Change |
YEAR ENDED DECEMBER 31, |
|||||||||||||||||||||||||||||||||||||
Dec.
31, 2010 |
March
31, 2011 |
June
30, 2011 |
Sept.
30, 2011 |
Dec.
31, 2011 |
||||||||||||||||||||||||||||||||||||
2010 | 2011 | Change | ||||||||||||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||||||||||||||
Fee income |
$ | 171 | $ | 178 | $ | 175 | $ | 153 | $ | 143 | (16 | %) | (7 | %) | $ | 664 | $ | 649 | (2 | %) | ||||||||||||||||||||
Net investment income |
(2 | ) | (1 | ) | (1 | ) | | (1 | ) | 50 | % | | (8 | ) | (3 | ) | 63 | % | ||||||||||||||||||||||
Total core revenues |
169 | 177 | 174 | 153 | 141 | (17 | %) | (8 | %) | 656 | 645 | (2 | %) | |||||||||||||||||||||||||||
Net realized gains, before tax and DAC, excluded from core revenues |
| 1 | | | 1 | | | | 2 | | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||
Total revenues |
169 | 178 | 174 | 153 | 142 | (16 | %) | (7 | %) | 656 | 647 | (1 | %) | |||||||||||||||||||||||||||
Benefits and Expenses |
||||||||||||||||||||||||||||||||||||||||
Benefits and claims |
1 | | | | | (100 | %) | | | | | |||||||||||||||||||||||||||||
Other insurance expenses |
||||||||||||||||||||||||||||||||||||||||
Commissions & wholesaling expenses |
95 | 101 | 94 | 75 | 71 | (25 | %) | (5 | %) | 356 | 341 | (4 | %) | |||||||||||||||||||||||||||
Operating expenses |
31 | 29 | 31 | 31 | 30 | (3 | %) | (3 | %) | 118 | 121 | 3 | % | |||||||||||||||||||||||||||
Premium taxes and other expenses |
(1 | ) | 4 | 4 | 5 | 4 | NM | (20 | %) | 21 | 17 | (19 | %) | |||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Subtotal - expenses before deferral |
125 | 134 | 129 | 111 | 105 | (16 | %) | (5 | %) | 495 | 479 | (3 | %) | |||||||||||||||||||||||||||
Deferred policy acquisition costs |
(10 | ) | (11 | ) | (9 | ) | (6 | ) | (5 | ) | 50 | % | 17 | % | (37 | ) | (31 | ) | 16 | % | ||||||||||||||||||||
|
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|
|||||||||||||||||||||
Total other insurance expense |
115 | 123 | 120 | 105 | 100 | (13 | %) | (5 | %) | 458 | 448 | (2 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
13 | 12 | 12 | 12 | 11 | (15 | %) | (8 | %) | 51 | 47 | (8 | %) | |||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Total benefits and expenses |
129 | 135 | 132 | 117 | 111 | (14 | %) | (5 | %) | 509 | 495 | (3 | %) | |||||||||||||||||||||||||||
Core earnings before income taxes |
40 | 42 | 42 | 36 | 30 | (25 | %) | (17 | %) | 147 | 150 | 2 | % | |||||||||||||||||||||||||||
Income tax expense |
16 | 15 | 15 | 12 | 10 | (38 | %) | (17 | %) | 53 | 52 | (2 | %) | |||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Core earnings |
24 | 27 | 27 | 24 | 20 | (17 | %) | (17 | %) | 94 | 98 | 4 | % | |||||||||||||||||||||||||||
Net realized gains (losses), net of tax and DAC, excluded from core earnings [1] |
1 | 1 | | | (1 | ) | NM | | 1 | | (100 | %) | ||||||||||||||||||||||||||||
Income (Loss) from discontinued operations [2] |
40 | | | | | (100 | %) | | 37 | | (100 | %) | ||||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Net income |
$ | 65 | $ | 28 | $ | 27 | $ | 24 | $ | 19 | (71 | %) | (21 | %) | $ | 132 | $ | 98 | (26 | %) | ||||||||||||||||||||
|
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|
|||||||||||||||||||||
RETURN ON ASSETS (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
Core earnings |
9.9 | 10.6 | 10.6 | 10.5 | 9.5 | (4 | %) | (10 | %) | 9.8 | 10.5 | 7 | % | |||||||||||||||||||||||||||
Net income |
26.6 | 11.0 | 10.6 | 10.5 | 9.0 | (66 | %) | (14 | %) | 13.7 | 10.5 | (23 | %) |
[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. |
36
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA [1]
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS DEPOSITS |
||||||||||||||||||||||||||||||||||||||||
Retail Mutual Funds |
$ | 3,355 | $ | 3,934 | $ | 3,131 | $ | 2,051 | $ | 1,760 | (48 | %) | (14 | %) | $ | 12,732 | $ | 10,876 | (15 | %) | ||||||||||||||||||||
Investment Only Mutual Funds |
604 | 807 | 676 | 2,228 | 493 | (18 | %) | (78 | %) | 2,506 | 4,204 | 68 | % | |||||||||||||||||||||||||||
529 College Savings Plan |
71 | 80 | 65 | 59 | 65 | (8 | %) | 10 | % | 213 | 269 | 26 | % | |||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Total Non-Proprietary Mutual Funds Deposits |
$ | 4,030 | $ | 4,821 | $ | 3,872 | $ | 4,338 | $ | 2,318 | (42 | %) | (47 | %) | $ | 15,451 | $ | 15,349 | (1 | %) | ||||||||||||||||||||
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|
|||||||||||||||||||||
ASSETS UNDER MANAGEMENT |
||||||||||||||||||||||||||||||||||||||||
Retail mutual fund assets |
$ | 48,753 | $ | 51,064 | $ | 49,584 | $ | 39,258 | $ | 40,228 | (17 | %) | 2 | % | ||||||||||||||||||||||||||
Investment Only mutual fund assets |
6,659 | 7,298 | 6,954 | 6,625 | 6,983 | 5 | % | 5 | % | |||||||||||||||||||||||||||||||
Proprietary mutual fund assets [2] |
43,602 | 44,044 | 42,204 | 35,494 | 36,770 | (16 | %) | 4 | % | |||||||||||||||||||||||||||||||
529 College Savings Plan assets |
1,472 | 1,583 | 1,612 | 1,424 | 1,557 | 6 | % | 9 | % | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
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|
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|
|
|
|||||||||||||||||||||||||||
Total Mutual Fund Assets |
$ | 100,486 | $ | 103,989 | $ | 100,354 | $ | 82,801 | $ | 85,538 | (15 | %) | 3 | % | ||||||||||||||||||||||||||
|
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|
|
[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. |
37
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA ASSET ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS |
||||||||||||||||||||
Beginning balance |
$ | 51,686 | $ | 56,884 | $ | 59,945 | $ | 58,150 | $ | 47,307 | ||||||||||
Deposits |
4,030 | 4,821 | 3,872 | 4,338 | 2,318 | |||||||||||||||
Redemptions |
(3,471 | ) | (3,827 | ) | (5,054 | ) | (6,734 | ) | (4,112 | ) | ||||||||||
|
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|
|||||||||||
Net Flows |
559 | 994 | (1,182 | ) | (2,396 | ) | (1,794 | ) | ||||||||||||
Change in market value |
4,749 | 2,095 | (635 | ) | (8,430 | ) | 3,271 | |||||||||||||
Other [1] |
(110 | ) | (28 | ) | 22 | (17 | ) | (16 | ) | |||||||||||
|
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|
|
|
|||||||||||
Ending balance |
$ | 56,884 | $ | 59,945 | $ | 58,150 | $ | 47,307 | $ | 48,768 | ||||||||||
|
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|
|||||||||||
PROPRIETARY MUTUAL FUNDS [2] |
||||||||||||||||||||
Beginning balance |
$ | 41,778 | $ | 43,602 | $ | 44,044 | $ | 42,204 | $ | 35,494 | ||||||||||
Net Flows |
(1,571 | ) | (1,507 | ) | (1,604 | ) | (1,244 | ) | (1,442 | ) | ||||||||||
Change in market value |
3,395 | 1,949 | (236 | ) | (5,466 | ) | 2,718 | |||||||||||||
|
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|
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|
|
|
|||||||||||
Ending balance |
$ | 43,602 | $ | 44,044 | $ | 42,204 | $ | 35,494 | $ | 36,770 | ||||||||||
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[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. |
38
RUNOFF OPERATIONS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
FINANCIAL HIGHLIGHTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
CORE EARNINGS BY SEGMENT |
||||||||||||||||||||||||||||||||||||||||
International Annuity |
$ | 34 | $ | 72 | $ | 63 | $ | 126 | $ | 41 | 21 | % | (67 | %) | $ | 180 | $ | 302 | 68 | % | ||||||||||||||||||||
Institutional Annuity |
25 | 11 | 7 | (9 | ) | (9 | ) | NM | | (5 | ) | | 100 | % | ||||||||||||||||||||||||||
Private Placement Life Insurance |
7 | 10 | 10 | 11 | 10 | 43 | % | (9 | %) | 35 | 41 | 17 | % | |||||||||||||||||||||||||||
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|||||||||||||||||||||
Life Other Operations core earnings |
66 | 93 | 80 | 128 | 42 | (36 | %) | (67 | %) | 210 | 343 | 63 | % | |||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1] |
(27 | ) | (172 | ) | 93 | 175 | (81 | ) | NM | NM | (294 | ) | 15 | NM | ||||||||||||||||||||||||||
Income (loss) from discontinued operations |
(4 | ) | | | | | 100 | % | | (6 | ) | | 100 | % | ||||||||||||||||||||||||||
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|||||||||||||||||||||
Life Other Operations net income (loss) |
$ | 35 | $ | (79 | ) | $ | 173 | $ | 303 | $ | (39 | ) | NM | NM | $ | (90 | ) | $ | 358 | NM | ||||||||||||||||||||
Property & Casualty Other Operations core earnings [2] |
13 | 23 | (167 | ) | 9 | 16 | 23 | % | 78 | % | (69 | ) | (119 | ) | (72 | %) | ||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1] |
1 | (2 | ) | 3 | (1 | ) | 2 | 100 | % | NM | 16 | 2 | (88 | %) | ||||||||||||||||||||||||||
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Property & Casualty Other Operations net income (loss) |
$ | 14 | $ | 21 | $ | (164 | ) | $ | 8 | $ | 18 | 29 | % | 125 | % | $ | (53 | ) | $ | (117 | ) | (121 | %) | |||||||||||||||||
Runoff operations core earnings (loss) |
79 | 116 | (87 | ) | 137 | 58 | (27 | %) | (58 | %) | 141 | 224 | 59 | % | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1] |
(26 | ) | (174 | ) | 96 | 174 | (79 | ) | NM | NM | (278 | ) | 17 | NM | ||||||||||||||||||||||||||
Income (loss) from discontinued operations |
(4 | ) | | | | | 100 | % | | (6 | ) | | 100 | % | ||||||||||||||||||||||||||
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Runoff operations net income (loss) |
$ | 49 | $ | (58 | ) | $ | 9 | $ | 311 | $ | (21 | ) | NM | NM | $ | (143 | ) | $ | 241 | NM | ||||||||||||||||||||
LIFE OTHER OPERATIONS SUPPLEMENTAL DATA |
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Return on Assets (After-tax bps) |
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Core earnings |
28.6 | 40.4 | 34.8 | 56.1 | 18.6 | (34 | %) | (66 | %) | 22.4 | 37.5 | 73 | % | |||||||||||||||||||||||||||
Net income (loss) |
15.2 | (34.3 | ) | 75.2 | 132.7 | (17.3 | ) | NM | NM | (9.6 | ) | 39.2 | NM | |||||||||||||||||||||||||||
DAC unlock impact on core earnings by segment |
||||||||||||||||||||||||||||||||||||||||
International Annuity |
$ | (35 | ) | $ | 13 | $ | (10 | ) | $ | 59 | $ | (27 | ) | 23 | % | NM | $ | (70 | ) | $ | 35 | NM | ||||||||||||||||||
Institutional Annuity |
(1 | ) | | | (4 | ) | 1 | NM | NM | (2 | ) | (3 | ) | (50 | %) | |||||||||||||||||||||||||
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Life Other Operations |
$ | (36 | ) | $ | 13 | $ | (10 | ) | $ | 55 | $ | (26 | ) | 28 | % | NM | $ | (72 | ) | $ | 32 | NM | ||||||||||||||||||
Other supplemental data |
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International Annuity Net Income |
$ | 60 | $ | (107 | ) | $ | 103 | $ | 350 | $ | (49 | ) | NM | NM | $ | (17 | ) | $ | 297 | NM |
[1] | See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein. |
[2] | The year ended December 31, 2010 included net asbestos reserve strengthening and net environmental reserve strengthening of $169 and $62, respectively. 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. |
39
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONS
SUPPLEMENTAL DATAACCOUNT VALUE DATA
THREE MONTHS ENDED | Year Over | |||||||||||||||||||||||||||
Year | Sequential | |||||||||||||||||||||||||||
Dec. 31, | March 31, | June 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | ||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | ||||||||||||||||||||||
ACCOUNT VALUE BY SEGMENT |
||||||||||||||||||||||||||||
Variable Annuity |
$ | 33,507 | $ | 33,027 | $ | 32,981 | $ | 31,438 | $ | 31,162 | (7 | %) | (1 | %) | ||||||||||||||
Fixed and other annuity |
4,596 | 4,463 | 4,824 | 5,013 | 4,786 | 4 | % | (5 | %) | |||||||||||||||||||
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Total International Annuity account value |
$ | 38,103 | $ | 37,490 | $ | 37,805 | $ | 36,451 | $ | 35,948 | (6 | %) | (1 | %) | ||||||||||||||
Institutional Annuity account value [1] |
$ | 19,674 | $ | 19,326 | $ | 19,230 | $ | 19,477 | $ | 19,330 | (2 | %) | (1 | %) | ||||||||||||||
Private Placement Life Insurance account value |
$ | 36,042 | $ | 36,424 | $ | 36,700 | $ | 35,989 | $ | 36,335 | 1 | % | 1 | % | ||||||||||||||
INTERNATIONAL ANNUITY ACCOUNT VALUE ROLL FORWARD |
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VARIABLE ANNUITIES |
||||||||||||||||||||||||||||
Beginning balance |
$ | 33,177 | $ | 33,507 | $ | 33,027 | $ | 32,981 | $ | 31,438 | ||||||||||||||||||
Deposits/Premiums/other |
1 | 1 | 1 | | | |||||||||||||||||||||||
Surrenders |
(363 | ) | (285 | ) | (291 | ) | (296 | ) | (291 | ) | ||||||||||||||||||
Death benefits/annuitizations/other [2] |
(159 | ) | (192 | ) | (166 | ) | (165 | ) | (164 | ) | ||||||||||||||||||
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Net Flows |
(521 | ) | (476 | ) | (456 | ) | (461 | ) | (455 | ) | ||||||||||||||||||
Change in market value/currency/change in reserve/interest credited |
(57 | ) | 610 | (404 | ) | (2,477 | ) | 141 | ||||||||||||||||||||
Effect of currency translation |
908 | (614 | ) | 814 | 1,395 | 38 | ||||||||||||||||||||||
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Ending balance |
$ | 33,507 | $ | 33,027 | $ | 32,981 | $ | 31,438 | $ | 31,162 | ||||||||||||||||||
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FIXED MVA AND OTHER [3] |
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Beginning balance |
$ | 4,703 | $ | 4,596 | $ | 4,463 | $ | 4,824 | $ | 5,013 | ||||||||||||||||||
Surrenders |
(58 | ) | (43 | ) | (31 | ) | (44 | ) | (59 | ) | ||||||||||||||||||
Death benefits/annuitizations/other [2] |
(209 | ) | (23 | ) | 246 | (16 | ) | (204 | ) | |||||||||||||||||||
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Net Flows |
(267 | ) | (66 | ) | 215 | (60 | ) | (263 | ) | |||||||||||||||||||
Change in market value/currency/change in reserve/interest credited |
23 | 31 | 22 | 19 | 28 | |||||||||||||||||||||||
Effect of currency translation |
137 | (98 | ) | 124 | 230 | 8 | ||||||||||||||||||||||
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Ending balance |
$ | 4,596 | $ | 4,463 | $ | 4,824 | $ | 5,013 | $ | 4,786 | ||||||||||||||||||
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TOTAL INTERNATIONAL ANNUITY |
||||||||||||||||||||||||||||
Beginning balance |
$ | 37,880 | $ | 38,103 | $ | 37,490 | $ | 37,805 | $ | 36,451 | ||||||||||||||||||
Deposits/Premiums/other |
1 | 1 | 1 | | | |||||||||||||||||||||||
Surrenders |
(421 | ) | (328 | ) | (322 | ) | (340 | ) | (350 | ) | ||||||||||||||||||
Death benefits/annuitizations/other [2] |
(368 | ) | (215 | ) | 80 | (181 | ) | (368 | ) | |||||||||||||||||||
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Net Flows |
(788 | ) | (542 | ) | (241 | ) | (521 | ) | (718 | ) | ||||||||||||||||||
Change in market value/change in reserve/interest credited |
(34 | ) | 641 | (382 | ) | (2,458 | ) | 169 | ||||||||||||||||||||
Effect of currency translation |
1,045 | (712 | ) | 938 | 1,625 | 46 | ||||||||||||||||||||||
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Ending balance |
$ | 38,103 | $ | 37,490 | $ | 37,805 | $ | 36,451 | $ | 35,948 | ||||||||||||||||||
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[1] | Included in the balance is approximately $1.4 billion for the three months ended December 31, 2010 and March 31, 2011, approximately $1.5 billion for the three months ended June 30, 2011 and September 30, 2011 and approximately $1.3 billion for the three months ended December 31, 2011 related to an intrasegment funding agreement which is eliminated in consolidation. |
[2] | Included in the three months ended December 31, 2011 are current period payments of $201 and interest credited of $14.6 related to 3 Win GMIB policies that triggered in fourth quarter 2008 and first quarter 2009 for option (2), which are included in the fixed MVA and otherdeath 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. |
[3] | Of the total ending fixed MVA and other balance as of December 31, 2011 of $4.8 billion, approximately $2.6billion 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. |
40
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONS
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (DAC)
Life | ||||||||||||||||
International | Institutional | Other | ||||||||||||||
Annuity | Annuity | PPLI | Operations | |||||||||||||
YEAR-TO-DATE |
||||||||||||||||
Balance, December 31, 2010 |
$ | 1,680 | $ | 85 | $ | 34 | $ | 1,799 | ||||||||
Adjustments to unrealized gains and losses on securities available - for - sale and other |
(63 | ) | 1 | | (62 | ) | ||||||||||
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Balance excluding adjustments to unrealized gains and losses on securities available - for - sale and other |
1,617 | 86 | 34 | 1,737 | ||||||||||||
Capitalization |
| | 1 | 1 | ||||||||||||
Amortization - Deferred Policy Acquisition Costs |
(226 | ) | (8 | ) | (2 | ) | (236 | ) | ||||||||
Amortization - Present Value of Future Profits |
| | | | ||||||||||||
Amortization - Realized Capital Gains / Losses |
(143 | ) | | | (143 | ) | ||||||||||
Amortization - Unlock - Core |
316 | (4 | ) | | 312 | |||||||||||
Amortization - Unlock - Non-core |
(425 | ) | | | (425 | ) | ||||||||||
Effect of Currency Translation Adjustment |
83 | | | 83 | ||||||||||||
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Balance, December 31, 2011 |
1,222 | 74 | 33 | 1,329 | ||||||||||||
Adjustments to unrealized gains and losses on securities available - for - sale and other |
(7 | ) | (1 | ) | | (8 | ) | |||||||||
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Balance, December 31, 2011 including adjustments to unrealized gains and losses on securities available-for-sale and other |
$ | 1,215 | $ | 73 | $ | 33 | $ | 1,321 | ||||||||
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41
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE OTHER OPERATIONS
SUPPLEMENTAL DATAANNUITY DEATH AND INCOME BENEFITS
As of | As of | As of | As of | As of | ||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||
JAPAN VARIABLE ANNUITY BUSINESS |
||||||||||||||||||||
Yen / $ |
81.1 | 82.9 | 80.8 | 77.1 | 76.9 | |||||||||||||||
Total Account Value with GMDB |
$ | 31,249 | $ | 30,778 | $ | 30,785 | $ | 29,522 | $ | 29,234 | ||||||||||
GMDB Gross net amount of risk |
8,847 | 7,962 | 8,469 | 11,035 | 10,857 | |||||||||||||||
% of GMDB NAR reinsured |
14 | % | 15 | % | 15 | % | 13 | % | 13 | % | ||||||||||
GMDB Retained net amount of risk |
7,593 | 6,750 | 7,233 | 9,583 | 9,413 | |||||||||||||||
Total Account Value with Guaranteed Minimum Income Benefits (GMIB) |
26,731 | 28,655 | 28,835 | 27,471 | 27,282 | |||||||||||||||
GMIB Retained net amount of risk [2] |
5,846 | 5,410 | 5,777 | 7,662 | 7,502 | |||||||||||||||
GMDB/GMIB net GAAP liability [1] |
652 | 607 | 635 | 907 | 930 |
[1] | For the three months ended December 31, 2010, there was a decrease to the GMDB/GMIB liability as a result of the unlock, for the Japan variable annuity business $(46). For the three months ended March 31, 2011 the amount was $(21). For the three months ended June 30, 2011, the amount was $17. For the three months ended September 30, 2011, the amount was $249. For the three months ended December 31, 2011 the amount was $33. |
[2] | Policies with a guaranteed living benefit (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 GMIB is released. Similarly, when a policy goes into benefit status on a GMIB, its GMDB NAR is released. |
42
CORPORATE
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | YEAR ENDED | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | DECEMBER 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 3 | $ | (1 | ) | $ | 1 | $ | | $ | | (100 | %) | | $ | 2 | $ | | (100 | %) | ||||||||||||||||||||
Fee income |
44 | 53 | 53 | 55 | 48 | 9 | % | (13 | %) | 187 | 209 | 12 | % | |||||||||||||||||||||||||||
Net investment income |
14 | 16 | 13 | 1 | (7 | ) | NM | NM | 81 | 23 | (72 | %) | ||||||||||||||||||||||||||||
Net realized capital gains (losses) |
38 | (11 | ) | 6 | (51 | ) | (40 | ) | NM | 22 | % | 66 | (96 | ) | NM | |||||||||||||||||||||||||
Other revenues |
(1 | ) | | | | | 100 | % | | (1 | ) | | 100 | % | ||||||||||||||||||||||||||
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Total revenues |
98 | 57 | 73 | 5 | 1 | (99 | %) | (80 | %) | 335 | 136 | (59 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
(2 | ) | 1 | 1 | (6 | ) | 1 | NM | NM | (2 | ) | (3 | ) | (50 | %) | |||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
74 | 60 | 65 | 57 | 20 | (73 | %) | (65 | %) | 325 | 202 | (38 | %) | |||||||||||||||||||||||||||
Interest expense |
128 | 128 | 128 | 128 | 124 | (3 | %) | (3 | %) | 508 | 508 | | ||||||||||||||||||||||||||||
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Total benefits and expenses |
200 | 189 | 194 | 179 | 145 | (27 | %) | (19 | %) | 831 | 707 | (15 | %) | |||||||||||||||||||||||||||
Loss from continuing operations before income taxes |
(102 | ) | (132 | ) | (121 | ) | (174 | ) | (144 | ) | (41 | %) | 17 | % | (496 | ) | (571 | ) | (15 | %) | ||||||||||||||||||||
Income tax benefit [2] [3] |
(51 | ) | (44 | ) | (47 | ) | (62 | ) | (48 | ) | 6 | % | 23 | % | (168 | ) | (201 | ) | (20 | %) | ||||||||||||||||||||
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Loss from continuing operations |
(51 | ) | (88 | ) | (74 | ) | (112 | ) | (96 | ) | (88 | %) | 14 | % | (328 | ) | (370 | ) | (13 | %) | ||||||||||||||||||||
Add: Income (loss) from discontinued operations [4] |
(2 | ) | 2 | (77 | ) | 5 | 6 | NM | 20 | % | (107 | ) | (64 | ) | 40 | % | ||||||||||||||||||||||||
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Net Loss |
(53 | ) | (86 | ) | (151 | ) | (107 | ) | (90 | ) | (70 | %) | 16 | % | (435 | ) | (434 | ) | | |||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core losses [5] |
18 | (9 | ) | 9 | (29 | ) | (26 | ) | NM | 10 | % | 32 | (55 | ) | NM | |||||||||||||||||||||||||
Less: Income (loss) from discontinued operations [4] |
(2 | ) | 2 | (77 | ) | 5 | 6 | NM | 20 | % | (107 | ) | (64 | ) | 40 | % | ||||||||||||||||||||||||
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Core losses |
$ | (69 | ) | $ | (79 | ) | $ | (83 | ) | $ | (83 | ) | $ | (70 | ) | (1 | %) | 16 | % | $ | (360 | ) | $ | (315 | ) | 12 | % | |||||||||||||
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[1] | Includes a before-tax charge of $73 for a litigation settlement in the year ended December 31, 2010. |
[2] | The year ended December 31, 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 three months ended December 31, 2010 includes an income tax benefit of $18 related to tax adjustments for prior years. |
[4] | The year ended December 31, 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. |
[5] | 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. |
43
CONSOLIDATED
INVESTMENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
Year Over | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year | Sequential | Year Ended | |||||||||||||||||||||||||||||||||||||
Dec. 31, | Mar. 31, | Jun. 30, | Sept. 30, | Dec. 31, | 3 Month | 3 Month | December 31, | |||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | Change | Change | 2010 | 2011 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) |
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Fixed maturities [1] |
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Taxable |
$ | 736 | $ | 719 | $ | 744 | $ | 711 | $ | 723 | (2 | %) | 2 | % | $ | 2,972 | $ | 2,897 | (3 | %) | ||||||||||||||||||||
Tax-exempt |
125 | 127 | 126 | 125 | 121 | (3 | %) | (3 | %) | 517 | 499 | (3 | %) | |||||||||||||||||||||||||||
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Total fixed maturities |
861 | 846 | 870 | 836 | 844 | (2 | %) | 1 | % | 3,489 | 3,396 | (3 | %) | |||||||||||||||||||||||||||
Equity securities, trading |
131 | 803 | (597 | ) | (1,890 | ) | 325 | 148 | % | NM | (774 | ) | (1,359 | ) | (76 | %) | ||||||||||||||||||||||||
Equity securities, available-for-sale |
14 | 11 | 8 | 8 | 9 | (36 | %) | 13 | % | 53 | 36 | (32 | %) | |||||||||||||||||||||||||||
Mortgage loans |
67 | 63 | 67 | 75 | 76 | 13 | % | 1 | % | 260 | 281 | 8 | % | |||||||||||||||||||||||||||
Policy loans |
31 | 33 | 34 | 32 | 32 | 3 | % | | 132 | 131 | (1 | %) | ||||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
75 | 100 | 78 | 67 | (2 | ) | NM | NM | 216 | 243 | 13 | % | ||||||||||||||||||||||||||||
Other [3] |
78 | 81 | 77 | 73 | 70 | (10 | %) | (4 | %) | 329 | 301 | (9 | %) | |||||||||||||||||||||||||||
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Subtotal |
1,257 | 1,937 | 537 | (799 | ) | 1,354 | 8 | % | NM | 3,705 | 3,029 | (18 | %) | |||||||||||||||||||||||||||
Less: Investment expense |
37 | 26 | 30 | 29 | 31 | (16 | %) | 7 | % | 115 | 116 | 1 | % | |||||||||||||||||||||||||||
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Total net investment income |
$ | 1,220 | $ | 1,911 | $ | 507 | $ | (828 | ) | $ | 1,323 | 8 | % | NM | $ | 3,590 | $ | 2,913 | (19 | %) | ||||||||||||||||||||
Less: Equity securities, trading |
131 | 803 | (597 | ) | (1,890 | ) | 325 | 148 | % | NM | (774 | ) | (1,359 | ) | (76 | %) | ||||||||||||||||||||||||
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Total net investment income excluding trading securities |
$ | 1,089 | $ | 1,108 | $ | 1,104 | $ | 1,062 | $ | 998 | (8 | %) | (6 | %) | $ | 4,364 | $ | 4,272 | (2 | %) | ||||||||||||||||||||
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Annualized investment yield, before-tax [4] |
4.5 | % | 4.6 | % | 4.6 | % | 4.3 | % | 4.0 | % | (0.5 | ) | (0.3 | ) | 4.5 | % | 4.4 | % | (0.1 | ) | ||||||||||||||||||||
Annualized investment yield, after-tax [4] |
3.1 | % | 3.2 | % | 3.1 | % | 2.9 | % | 2.8 | % | (0.3 | ) | (0.1 | ) | 3.1 | % | 3.0 | % | (0.1 | ) | ||||||||||||||||||||
Net Realized Capital Gains (Losses) |
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Gross gains on sales |
$ | 182 | $ | 61 | $ | 261 | $ | 197 | $ | 174 | (4 | %) | (12 | %) | $ | 836 | $ | 693 | (17 | %) | ||||||||||||||||||||
Gross losses on sales |
(229 | ) | (133 | ) | (98 | ) | (63 | ) | (90 | ) | 61 | % | (43 | %) | (522 | ) | (384 | ) | 26 | % | ||||||||||||||||||||
Net impairment losses |
(59 | ) | (55 | ) | (23 | ) | (60 | ) | (36 | ) | 39 | % | 40 | % | (434 | ) | (174 | ) | 60 | % | ||||||||||||||||||||
Valuation allowances on mortgage loans |
2 | (3 | ) | 26 | | 1 | (50 | %) | | (154 | ) | 24 | NM | |||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [5] |
5 | (17 | ) | 6 | 9 | 5 | | (44 | %) | 27 | 3 | (89 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [6] |
(2 | ) | (7 | ) | (2 | ) | 1 | (2 | ) | | NM | (17 | ) | (10 | ) | 41 | % | |||||||||||||||||||||||
Results of variable annuity hedge program |
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U.S. GMWB derivatives, net |
208 | 56 | (33 | ) | (323 | ) | (97 | ) | NM | 70 | % | 89 | (397 | ) | NM | |||||||||||||||||||||||||
U.S. macro hedge |
(303 | ) | (84 | ) | (17 | ) | 106 | (221 | ) | 27 | % | NM | (445 | ) | (216 | ) | 51 | % | ||||||||||||||||||||||
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Total U.S. program |
(95 | ) | (28 | ) | (50 | ) | (217 | ) | (318 | ) | NM | (47 | %) | (356 | ) | (613 | ) | (72 | %) | |||||||||||||||||||||
International program |
27 | (319 | ) | 52 | 1,132 | (90 | ) | NM | NM | 11 | 775 | NM | ||||||||||||||||||||||||||||
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Total results of variable annuity hedge program |
(68 | ) | (347 | ) | 2 | 915 | (408 | ) | NM | NM | (345 | ) | 162 | NM | ||||||||||||||||||||||||||
Other net gain (loss) [7] |
80 | 98 | (103 | ) | (424 | ) | (30 | ) | NM | 93 | % | (2 | ) | (459 | ) | NM | ||||||||||||||||||||||||
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Total net realized capital gains (losses) |
$ | (89 | ) | $ | (403 | ) | $ | 69 | $ | 575 | $ | (386 | ) | NM | NM | $ | (611 | ) | $ | (145 | ) | 76 | % | |||||||||||||||||
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[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. |
44
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value [1] |
$ | 77,820 | 59.4 | % | $ | 78,268 | 60.3 | % | $ | 78,132 | 59.3 | % | $ | 80,263 | 59.0 | % | $ | 81,809 | 60.6 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
649 | 0.5 | % | 1,230 | 0.9 | % | 1,227 | 0.9 | % | 1,323 | 1.0 | % | 1,328 | 1.0 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,820 | 25.1 | % | 32,339 | 24.9 | % | 32,278 | 24.4 | % | 30,770 | 22.6 | % | 30,499 | 22.6 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value [3] |
973 | 0.7 | % | 993 | 0.8 | % | 1,081 | 0.8 | % | 989 | 0.7 | % | 921 | 0.7 | % | |||||||||||||||||||||||||
Mortgage loans [4] |
4,489 | 3.4 | % | 4,736 | 3.7 | % | 5,304 | 4.0 | % | 5,590 | 4.1 | % | 5,728 | 4.2 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,181 | 1.7 | % | 2,181 | 1.7 | % | 2,188 | 1.7 | % | 2,176 | 1.6 | % | 2,001 | 1.5 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [5] |
1,918 | 1.5 | % | 1,972 | 1.5 | % | 2,028 | 1.5 | % | 2,506 | 1.8 | % | 2,532 | 1.9 | % | |||||||||||||||||||||||||
Other investments [6] |
1,617 | 1.2 | % | 640 | 0.5 | % | 973 | 0.7 | % | 2,857 | 2.1 | % | 2,394 | 1.8 | % | |||||||||||||||||||||||||
Short-term investments [7] |
8,528 | 6.5 | % | 7,330 | 5.7 | % | 8,861 | 6.7 | % | 9,704 | 7.1 | % | 7,736 | 5.7 | % | |||||||||||||||||||||||||
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Total investments |
$ | 130,995 | 100.0 | % | $ | 129,689 | 100.0 | % | $ | 132,072 | 100.0 | % | $ | 136,178 | 100.0 | % | $ | 134,948 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,820 | 25.1 | % | 32,339 | 24.9 | % | 32,278 | 24.4 | % | 30,770 | 22.6 | % | 30,499 | 22.6 | % | |||||||||||||||||||||||||
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Total investments excluding trading securities |
$ | 98,175 | 74.9 | % | $ | 97,350 | 75.1 | % | $ | 99,794 | 75.6 | % | $ | 105,408 | 77.4 | % | $ | 104,449 | 77.4 | % | ||||||||||||||||||||
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Asset-backed securities (ABS) |
$ | 2,889 | 3.7 | % | $ | 3,150 | 4.0 | % | $ | 3,297 | 4.2 | % | $ | 3,504 | 4.4 | % | $ | 3,153 | 3.9 | % | ||||||||||||||||||||
Collateralized debt obligations (CDOs) |
2,611 | 3.4 | % | 2,674 | 3.4 | % | 2,575 | 3.3 | % | 2,465 | 3.1 | % | 2,487 | 3.0 | % | |||||||||||||||||||||||||
Commercial mortgage-backed securities (CMBS) |
7,917 | 10.2 | % | 7,709 | 9.8 | % | 7,277 | 9.3 | % | 6,960 | 8.7 | % | 6,951 | 8.5 | % | |||||||||||||||||||||||||
Corporate |
39,884 | 51.2 | % | 40,913 | 52.3 | % | 41,629 | 53.2 | % | 43,316 | 53.9 | % | 44,011 | 53.9 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,683 | 2.2 | % | 1,802 | 2.3 | % | 1,864 | 2.4 | % | 1,944 | 2.4 | % | 2,161 | 2.6 | % | |||||||||||||||||||||||||
Municipaltaxable |
1,199 | 1.5 | % | 1,237 | 1.6 | % | 1,299 | 1.7 | % | 1,649 | 2.1 | % | 1,757 | 2.1 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
10,925 | 14.0 | % | 11,090 | 14.2 | % | 11,482 | 14.7 | % | 11,515 | 14.3 | % | 11,503 | 14.1 | % | |||||||||||||||||||||||||
Residential mortgage-backed securities (RMBS) |
5,683 | 7.3 | % | 5,014 | 6.4 | % | 5,214 | 6.7 | % | 5,336 | 6.6 | % | 5,757 | 7.0 | % | |||||||||||||||||||||||||
U.S. Treasuries |
5,029 | 6.5 | % | 4,679 | 6.0 | % | 3,495 | 4.5 | % | 3,574 | 4.5 | % | 4,029 | 4.9 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS [8] |
$ | 77,820 | 100.0 | % | $ | 78,268 | 100.0 | % | $ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | $ | 81,809 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 9,918 | 12.7 | % | $ | 8,947 | 11.5 | % | $ | 8,073 | 10.3 | % | $ | 8,423 | 10.5 | % | $ | 9,364 | 11.4 | % | ||||||||||||||||||||
AAA |
10,174 | 13.1 | % | 10,155 | 13.0 | % | 9,409 | 12.0 | % | 10,497 | 13.1 | % | 10,113 | 12.4 | % | |||||||||||||||||||||||||
AA |
15,554 | 20.0 | % | 15,518 | 19.8 | % | 15,900 | 20.4 | % | 15,921 | 19.8 | % | 15,844 | 19.4 | % | |||||||||||||||||||||||||
A |
19,460 | 25.0 | % | 19,723 | 25.2 | % | 20,470 | 26.2 | % | 21,584 | 26.9 | % | 21,053 | 25.7 | % | |||||||||||||||||||||||||
BBB |
19,153 | 24.6 | % | 20,212 | 25.8 | % | 20,568 | 26.3 | % | 20,626 | 25.7 | % | 21,760 | 26.6 | % | |||||||||||||||||||||||||
BB & below |
3,561 | 4.6 | % | 3,713 | 4.7 | % | 3,712 | 4.8 | % | 3,212 | 4.0 | % | 3,675 | 4.5 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS [8] |
$ | 77,820 | 100.0 | % | $ | 78,268 | 100.0 | % | $ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | $ | 81,809 | 100.0 | % | ||||||||||||||||||||
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[1] | Includes $277, $275, $25, $1 and $153 in Corporate at December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 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 $97, $100, $100, $96 and $104 in Corporate at December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. |
[4] | Includes $202, $194, $138, $128 and $0 in Corporate at December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. |
[5] | Includes real estate joint ventures and hedge fund investments outside of limited partnerships. |
[6] | Primarily relates to derivative instruments. Additionally, includes $48, $49, $27, $27 and $29 in Corporate at December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. |
[7] | Includes $1,780, $1,999, $2,274, $2,293 and $1,437 in the Corporate segment at December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, respectively. |
[8] | Available-for-sale (AFS). |
45
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
LIFE [1]
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 52,429 | 52.1 | % | $ | 52,781 | 53.3 | % | $ | 52,834 | 52.3 | % | $ | 54,329 | 51.9 | % | $ | 55,633 | 53.3 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
639 | 0.6 | % | 1,217 | 1.2 | % | 1,214 | 1.2 | % | 1,314 | 1.3 | % | 1,317 | 1.3 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,820 | 32.6 | % | 32,339 | 32.7 | % | 32,278 | 31.9 | % | 30,770 | 29.4 | % | 30,499 | 29.3 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
502 | 0.5 | % | 523 | 0.5 | % | 603 | 0.6 | % | 563 | 0.5 | % | 515 | 0.5 | % | |||||||||||||||||||||||||
Mortgage loans |
3,915 | 3.9 | % | 4,162 | 4.2 | % | 4,578 | 4.5 | % | 4,779 | 4.6 | % | 4,979 | 4.8 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,181 | 2.2 | % | 2,181 | 2.2 | % | 2,188 | 2.2 | % | 2,176 | 2.1 | % | 2,001 | 1.9 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [3] |
957 | 1.0 | % | 985 | 1.0 | % | 1,024 | 1.0 | % | 1,320 | 1.3 | % | 1,318 | 1.3 | % | |||||||||||||||||||||||||
Other investments [4] |
1,486 | 1.5 | % | 450 | 0.5 | % | 799 | 0.8 | % | 2,717 | 2.6 | % | 2,244 | 2.2 | % | |||||||||||||||||||||||||
Short-term investments |
5,631 | 5.6 | % | 4,398 | 4.4 | % | 5,565 | 5.5 | % | 6,619 | 6.3 | % | 5,641 | 5.4 | % | |||||||||||||||||||||||||
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Total investments |
$ | 100,560 | 100.0 | % | $ | 99,036 | 100.0 | % | $ | 101,083 | 100.0 | % | $ | 104,587 | 100.0 | % | $ | 104,147 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,820 | 32.6 | % | 32,339 | 32.7 | % | 32,278 | 31.9 | % | 30,770 | 29.4 | % | 30,499 | 29.3 | % | |||||||||||||||||||||||||
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Total investments excluding trading securities |
$ | 67,740 | 67.4 | % | $ | 66,697 | 67.3 | % | $ | 68,805 | 68.1 | % | $ | 73,817 | 70.6 | % | $ | 73,648 | 70.7 | % | ||||||||||||||||||||
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ABS |
$ | 2,442 | 4.7 | % | $ | 2,655 | 5.0 | % | $ | 2,732 | 5.2 | % | $ | 2,778 | 5.1 | % | $ | 2,491 | 4.5 | % | ||||||||||||||||||||
CDOs |
2,087 | 4.0 | % | 2,144 | 4.1 | % | 2,047 | 3.9 | % | 1,949 | 3.6 | % | 1,968 | 3.5 | % | |||||||||||||||||||||||||
CMBS |
5,495 | 10.5 | % | 5,364 | 10.2 | % | 4,967 | 9.4 | % | 4,715 | 8.7 | % | 4,667 | 8.4 | % | |||||||||||||||||||||||||
Corporate |
30,204 | 57.6 | % | 31,218 | 59.0 | % | 31,595 | 59.7 | % | 33,007 | 60.7 | % | 33,719 | 60.6 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,160 | 2.2 | % | 1,200 | 2.3 | % | 1,285 | 2.4 | % | 1,409 | 2.6 | % | 1,605 | 2.9 | % | |||||||||||||||||||||||||
Municipaltaxable |
1,068 | 2.0 | % | 1,110 | 2.1 | % | 1,167 | 2.2 | % | 1,508 | 2.8 | % | 1,603 | 2.9 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
2,267 | 4.3 | % | 2,304 | 4.4 | % | 2,417 | 4.6 | % | 2,500 | 4.6 | % | 2,450 | 4.4 | % | |||||||||||||||||||||||||
RMBS |
4,302 | 8.2 | % | 3,779 | 7.2 | % | 3,738 | 7.1 | % | 3,797 | 7.0 | % | 4,000 | 7.2 | % | |||||||||||||||||||||||||
U.S. Treasuries |
3,404 | 6.5 | % | 3,007 | 5.7 | % | 2,886 | 5.5 | % | 2,666 | 4.9 | % | 3,130 | 5.6 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 52,429 | 100.0 | % | $ | 52,781 | 100.0 | % | $ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | $ | 55,633 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 6,809 | 13.0 | % | $ | 5,939 | 11.3 | % | $ | 5,869 | 11.1 | % | $ | 5,806 | 10.7 | % | $ | 6,509 | 11.7 | % | ||||||||||||||||||||
AAA |
6,288 | 12.0 | % | 6,174 | 11.7 | % | 5,747 | 10.9 | % | 6,426 | 11.8 | % | 6,212 | 11.2 | % | |||||||||||||||||||||||||
AA |
8,304 | 15.8 | % | 8,208 | 15.6 | % | 8,152 | 15.4 | % | 8,498 | 15.6 | % | 8,353 | 15.0 | % | |||||||||||||||||||||||||
A |
14,177 | 27.1 | % | 14,551 | 27.5 | % | 14,873 | 28.2 | % | 15,798 | 29.1 | % | 15,528 | 27.8 | % | |||||||||||||||||||||||||
BBB |
13,915 | 26.5 | % | 14,854 | 28.1 | % | 15,218 | 28.8 | % | 15,165 | 27.9 | % | 16,108 | 29.0 | % | |||||||||||||||||||||||||
BB & below |
2,936 | 5.6 | % | 3,055 | 5.8 | % | 2,975 | 5.6 | % | 2,636 | 4.9 | % | 2,923 | 5.3 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 52,429 | 100.0 | % | $ | 52,781 | 100.0 | % | $ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | $ | 55,633 | 100.0 | % | ||||||||||||||||||||
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[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. |
46
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY [1]
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 25,114 | 89.7 | % | $ | 25,212 | 90.0 | % | $ | 25,273 | 88.9 | % | $ | 25,933 | 89.3 | % | $ | 26,023 | 89.5 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
10 | | 13 | | 13 | 0.1 | % | 9 | | 11 | | |||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
374 | 1.3 | % | 370 | 1.3 | % | 378 | 1.3 | % | 330 | 1.1 | % | 302 | 1.0 | % | |||||||||||||||||||||||||
Mortgage loans |
372 | 1.3 | % | 380 | 1.4 | % | 588 | 2.1 | % | 683 | 2.4 | % | 749 | 2.6 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
961 | 3.4 | % | 987 | 3.5 | % | 1,004 | 3.5 | % | 1,186 | 4.1 | % | 1,214 | 4.2 | % | |||||||||||||||||||||||||
Other investments [3] |
83 | 0.3 | % | 141 | 0.5 | % | 147 | 0.5 | % | 113 | 0.4 | % | 121 | 0.4 | % | |||||||||||||||||||||||||
Short-term investments |
1,117 | 4.0 | % | 933 | 3.3 | % | 1,022 | 3.6 | % | 792 | 2.7 | % | 658 | 2.3 | % | |||||||||||||||||||||||||
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Total investments |
$ | 28,031 | 100.0 | % | $ | 28,036 | 100.0 | % | $ | 28,425 | 100.0 | % | $ | 29,046 | 100.0 | % | $ | 29,078 | 100.0 | % | ||||||||||||||||||||
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ABS |
$ | 447 | 1.8 | % | $ | 495 | 2.0 | % | $ | 565 | 2.2 | % | $ | 726 | 2.8 | % | $ | 651 | 2.5 | % | ||||||||||||||||||||
CDOs |
524 | 2.1 | % | 530 | 2.1 | % | 528 | 2.1 | % | 516 | 2.0 | % | 519 | 2.0 | % | |||||||||||||||||||||||||
CMBS |
2,422 | 9.6 | % | 2,345 | 9.3 | % | 2,310 | 9.1 | % | 2,245 | 8.7 | % | 2,284 | 8.8 | % | |||||||||||||||||||||||||
Corporate |
9,680 | 38.5 | % | 9,695 | 38.5 | % | 10,034 | 39.7 | % | 10,309 | 39.7 | % | 10,292 | 39.5 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
523 | 2.1 | % | 602 | 2.4 | % | 579 | 2.3 | % | 535 | 2.1 | % | 551 | 2.1 | % | |||||||||||||||||||||||||
Municipaltaxable |
131 | 0.5 | % | 127 | 0.5 | % | 132 | 0.5 | % | 141 | 0.5 | % | 154 | 0.6 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
8,654 | 34.5 | % | 8,783 | 34.8 | % | 9,061 | 35.9 | % | 9,015 | 34.8 | % | 9,053 | 34.8 | % | |||||||||||||||||||||||||
RMBS |
1,360 | 5.4 | % | 1,215 | 4.8 | % | 1,456 | 5.8 | % | 1,538 | 5.9 | % | 1,757 | 6.8 | % | |||||||||||||||||||||||||
U.S. Treasuries |
1,373 | 5.5 | % | 1,420 | 5.6 | % | 608 | 2.4 | % | 908 | 3.5 | % | 762 | 2.9 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 25,114 | 100.0 | % | $ | 25,212 | 100.0 | % | $ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | $ | 26,023 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 2,837 | 11.3 | % | $ | 2,737 | 10.9 | % | $ | 2,183 | 8.6 | % | $ | 2,617 | 10.1 | % | $ | 2,718 | 10.4 | % | ||||||||||||||||||||
AAA |
3,886 | 15.5 | % | 3,981 | 15.8 | % | 3,662 | 14.5 | % | 4,071 | 15.7 | % | 3,889 | 14.9 | % | |||||||||||||||||||||||||
AA |
7,248 | 28.8 | % | 7,308 | 28.9 | % | 7,745 | 30.7 | % | 7,423 | 28.6 | % | 7,487 | 28.8 | % | |||||||||||||||||||||||||
A |
5,280 | 21.0 | % | 5,170 | 20.5 | % | 5,596 | 22.1 | % | 5,785 | 22.3 | % | 5,525 | 21.3 | % | |||||||||||||||||||||||||
BBB |
5,238 | 20.9 | % | 5,358 | 21.3 | % | 5,350 | 21.2 | % | 5,461 | 21.1 | % | 5,652 | 21.7 | % | |||||||||||||||||||||||||
BB & below |
625 | 2.5 | % | 658 | 2.6 | % | 737 | 2.9 | % | 576 | 2.2 | % | 752 | 2.9 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 25,114 | 100.0 | % | $ | 25,212 | 100.0 | % | $ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | $ | 26,023 | 100.0 | % | ||||||||||||||||||||
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[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. |
47
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROSS UNREALIZED LOSS AGING
AVAILABLE-FOR-SALE SECURITIES
December 31, 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 |
$ | 3,933 | $ | 3,672 | $ | (261 | ) | $ | 17,431 | $ | 16,783 | $ | (643 | ) | ||||||||||
Greater than three months to six months |
2,617 | 2,517 | (100 | ) | 732 | 690 | (42 | ) | ||||||||||||||||
Greater than six months to nine months |
1,181 | 1,097 | (84 | ) | 438 | 397 | (41 | ) | ||||||||||||||||
Greater than nine months to eleven months |
106 | 95 | (11 | ) | 185 | 169 | (16 | ) | ||||||||||||||||
Twelve months or more |
11,613 | 9,324 | (2,218 | ) | 15,599 | 12,811 | (2,754 | ) | ||||||||||||||||
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Total |
$ | 19,450 | $ | 16,705 | $ | (2,674 | ) | $ | 34,385 | $ | 30,850 | $ | (3,496 | ) | ||||||||||
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[1] | As of December 31, 2011, fixed maturities, AFS, represented $2,471, or 92%, 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 December 31, 2011 and 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). |
48
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF DECEMBER 31, 2011
Cost or | Percent of Total | |||||||||||
Amortized Cost | Fair Value | Invested Assets [1] | ||||||||||
Top Ten Corporate and Equity, AFS, Exposures by Sector |
||||||||||||
Utilities |
$ | 8,350 | $ | 9,170 | 8.9 | % | ||||||
Financial services |
8,242 | 7,873 | 7.6 | % | ||||||||
Consumer non-cyclical |
5,985 | 6,616 | 6.3 | % | ||||||||
Technology and communications |
4,360 | 4,742 | 4.5 | % | ||||||||
Basic industry |
4,114 | 4,426 | 4.2 | % | ||||||||
Energy |
3,338 | 3,704 | 3.5 | % | ||||||||
Capital goods |
3,330 | 3,628 | 3.5 | % | ||||||||
Consumer cyclical |
2,299 | 2,497 | 2.4 | % | ||||||||
Transportation |
1,285 | 1,402 | 1.3 | % | ||||||||
Other |
914 | 874 | 0.8 | % | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 42,217 | $ | 44,932 | 43.0 | % | ||||||
|
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|
|
|
|||||||
Top Ten Exposures by Issuer [2] |
||||||||||||
Government of Japan [3] |
$ | 899 | $ | 899 | 0.8 | % | ||||||
Government of United Kingdom |
486 | 512 | 0.5 | % | ||||||||
AT&T Inc. |
341 | 405 | 0.4 | % | ||||||||
National Grid PLC |
332 | 385 | 0.4 | % | ||||||||
State of California |
328 | 352 | 0.3 | % | ||||||||
State of Massachusetts |
309 | 342 | 0.3 | % | ||||||||
Verizon Communications Inc. |
264 | 305 | 0.3 | % | ||||||||
JPMorgan Chase & Co. |
319 | 278 | 0.3 | % | ||||||||
Berkshire Hathaway Inc. |
230 | 272 | 0.3 | % | ||||||||
Pfizer Inc. |
222 | 262 | 0.2 | % | ||||||||
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|
|
|||||||
Total |
$ | 3,730 | $ | 4,012 | 3.8 | % | ||||||
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|
[1] | Excludes equity securities, trading. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, short-term investments, exposures resulting from derivative transactions and equity securities, trading. |
[3] | The majority of these investments are included in fixed maturities, at fair value using the fair value option, and changes in the fair value are recorded in net realized capital gains and losses. |
49
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