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): August 1, 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) | (Zip Code) |
Registrants telephone number, including area code: (860) 547-5000
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:
¨ | 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 August 1, 2012, The Hartford Financial Services Group, Inc. issued (i) a press release announcing its financial results for the fiscal quarter ended June 30, 2012, and (ii) its Investor Financial Supplement (IFS) relating to its financial results for the fiscal quarter ended June 30, 2012. 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 August 1, 2012 | |
99.2 | Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the fiscal quarter ended June 30, 2012 |
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: August 1, 2012 | By: | /s/ Beth A. Bombara | ||||
Name: | Beth A. Bombara | |||||
Title: | Senior Vice President and Controller |
Exhibit 99.1
NEWS RELEASE |
The Hartford Reports Second Quarter 2012 Financial Results
| Second quarter core earnings* of $119 million, or $0.23 per diluted share,* compared with $14 million, or $0.01 per diluted share, in the second quarter of 2011 |
| Net income of $486 million, excluding $587 million loss on extinguishment of debt, compared with net income of $33 million in the second quarter of 2011 |
| Strong renewal written pricing trends continue with standard commercial up 7% |
| $500 million share repurchase authorization completed in the quarter |
| Book value per diluted share was $45.59, up 14% from June 30, 2011 |
| Definitive agreement signed for sale of Woodbury Financial Services |
HARTFORD, Conn., Aug. 1, 2012 The Hartford (NYSE:HIG) reported a net loss of $101 million, or $0.26 per diluted share, for the second quarter of 2012, which included a $587 million loss on extinguishment of debt, compared with net income of $33 million, or $0.05 per diluted share, in the second quarter of 2011. The company also reported that second quarter 2012 core earnings rose to $119 million, or $0.23 per diluted share, from $14 million, or $0.01 per diluted share, in the second quarter of 2011.
Second quarter financial results benefitted from the pricing and underwriting actions that we initiated last year in our Property and Casualty and Group Benefits businesses, said Chairman, President and CEO Liam E. McGee. P&C pricing remains strong. Renewal pricing increased 7% in standard commercial with acceptable retention, and rose 4% in personal auto and 6% in homeowners. Group Benefits results also improved modestly compared to the prior year reflecting stable incidence and a small improvement in terminations.
We are making progress executing on our strategy to focus The Hartford on its historical strength in insurance underwriting. We announced the definitive agreement to sell Woodbury Financial Services yesterday and the sales process for Individual Life and Retirement Plans is proceeding as expected, added McGee. The Hartford is on the right path to create greater shareholder value by sharpening our business focus, improving expense efficiency, increasing capital generation and reducing market risks.
* | 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. |
SECOND QUARTER 2012 FINANCIAL RESULTS
(in millions except per share data) | Three Months Ended | |||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Net income (loss) |
$ | (101 | ) | $ | 33 | NM | 2 | |||||
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Net income (loss) available to common shareholders per diluted share |
$ | (0.26 | ) | $ | 0.05 | NM | ||||||
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Core earnings |
$ | 119 | $ | 14 | NM | |||||||
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Core earnings available to common shareholders per diluted share |
$ | 0.23 | $ | 0.01 | NM | |||||||
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Book value per diluted share |
$ | 45.59 | $ | 40.09 | 14 | % | ||||||
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Book value per diluted share (ex. AOCI1) |
$ | 40.91 | $ | 40.14 | 2 | % | ||||||
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[1] | Accumulated other comprehensive income (AOCI) |
[2] | 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. |
Second quarter 2012 core earnings included the following items that, in total, reduced core earnings by $379 million, after tax, or $0.82 per diluted share, and net income by $398 million, or $0.91 per diluted share (all items are presented after tax):
| Current accident year catastrophe losses totaled $189 million, reflecting $201 million from 13 U.S. catastrophe events in the second quarter of 2012 and $12 million of favorable development on first quarter 2012 catastrophes; |
| Unfavorable deferred acquisition cost unlock expense (DAC unlock) included in core earnings was $127 million while unfavorable DAC unlock included in net income was $146 million due to actual separate account returns being below aggregated estimated returns; |
| Net prior year Property and Casualty (P&C) loss and loss adjustment expense reserve strengthening of $32 million, including $33 million for the companys annual ground-up studies of asbestos and environmental reserves (A&E); and |
| Restructuring and other costs related to the companys exit from Individual Annuity new business, the anticipated sales of Retirement Plans, Individual Life and Woodbury Financial and other expense initiatives totaling $31 million. |
2
COMMERCIAL MARKETS
Second Quarter 2012 Highlights:
| P&C Commercial written premiums grew 1% due to higher pricing across all business lines, offset by slightly lower retention and new business premiums |
| Renewal written price increases averaged 7% in Small Commercial and Middle Market and 16% in Middle Market workers compensation |
| Group Benefits core earnings were $34 million, up 13% from $30 million in the second quarter of 2011 |
P&C COMMERCIAL
($ in millions) |
Three Months Ended | |||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Written premiums |
$ | 1,516 | $ | 1,498 | 1 | % | ||||||
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Combined ratio1 |
94.5 | % | 93.1 | % | (1.4 | ) | ||||||
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Core earnings |
$ | 160 | $ | 96 | 67 | % | ||||||
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[1] | Excludes catastrophes and prior year development* |
GROUP BENEFITS
($ in millions) |
Three Months Ended | |||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Fully insured premiums2 |
$ | 950 | $ | 1,013 | (6 | %) | ||||||
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Loss ratio2 |
78.6 | % | 78.0 | % | (0.6 | ) | ||||||
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Core earnings |
$ | 34 | $ | 30 | 13 | % | ||||||
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[2] | Excludes buyout premiums |
Commercial Markets net income rose 16% to $184 million in the second quarter of 2012 from $159 million in the second quarter of 2011 and core earnings increased 54% to $194 million from $126 million in the second quarter of 2011.
P&C Commercial core earnings were $160 million in the second quarter of 2012, a 67% increase from $96 million in the second quarter of 2011 primarily due to lower catastrophe losses. The combined ratio, excluding catastrophes and prior year development, increased to 94.5% in the second quarter of 2012 compared with 93.1% in the second quarter of 2011, reflecting lower workers compensation profitability. Unfavorable prior year reserve development was $12 million, after tax, in the second quarter of 2012 compared with unfavorable development of $20 million, after tax, in the second quarter of 2011. Current year catastrophe losses were $48 million, after tax, in the second quarter of 2012 compared with $108 million, after tax, in the second quarter of 2011.
3
P&C Commercial continued to benefit from strong renewal written pricing trends in all business lines in the second quarter of 2012. Small Commercial and Middle Market renewal written pricing increases averaged 7%, consistent with the first quarter of 2012. Middle Market pricing increased 10%, while Middle Market workers compensation renewal pricing increased 16% in the quarter. Retention remained strong at 82% in Small Commercial, a slight decline from 83% in the second quarter of 2011. Middle Market retention for the second quarter of 2012 was down to 73% compared with 79% in the prior year period, reflecting the impact of the companys pricing actions on its renewal book of business.
Group Benefits core earnings in the second quarter of 2012 were $34 million, up 13% compared with $30 million in the second quarter of 2011. The loss ratio rose slightly to 78.6% compared with 78.0% in the second quarter of 2011. Group Benefits loss experience reflects stable but elevated incidence compared to historical levels, higher severity and a slight improvement in terminations in group long term disability. Second quarter 2012 core earnings also reflect favorable life and accidental death and dismemberment results. Second quarter 2012 fully insured premium in Group Benefits declined 6% to $950 million compared with the second quarter of 2011 due to lower persistency resulting from the companys targeted pricing initiatives as well as the competitive market environment.
CONSUMER MARKETS
Second Quarter 2012 Highlights:
| New auto and homeowners written premium rose 17% due to strong production in AARP Direct and AARP Agency |
| Automobile and homeowners policy count retention improved 2 points to 84% and 86%, respectively, from the second quarter of 2011 |
| Combined ratio, excluding catastrophes and prior year development, was 91.3% |
CONSUMER MARKETS
($ in millions) |
Three Months Ended | |||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Written premiums |
$ | 950 | $ | 969 | (2 | %) | ||||||
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Combined ratio1 |
91.3 | % | 91.2 | % | (0.1 | ) | ||||||
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Core losses |
$ | (48 | ) | $ | (177 | ) | 73 | % | ||||
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[1] | Excludes catastrophes and prior year development* |
Consumer Markets had a net loss of $50 million for the second quarter of 2012 compared with a net loss of $172 million in the second quarter of 2011, reflecting significant catastrophe losses in both quarters and a charge of $73 million, after tax, in the second quarter of 2011 related to a discontinued software program. Core losses were $48 million in the second quarter of 2012 compared with core losses of $177 million in the second quarter of 2011. Net loss and core losses include current accident year catastrophe losses of $140 million, after tax, in the second quarter of 2012, down 23% from $183 million, after tax, in the second quarter of 2011 and favorable prior year development of $15 million, after tax, compared with zero in the second quarter of 2011.
4
Consumer Markets combined ratio, excluding catastrophes and prior year development, was 91.3% in the second quarter of 2012, up slightly from 91.2% in the second quarter of 2011. The small increase reflects higher expense and auto loss ratios that were largely offset by improved homeowners margins.
Second quarter 2012 written premiums declined 2% to $950 million from $969 million in the second quarter of 2011, while earned premiums declined 4% to $904 million. However, new business written rose 17% to $115 million due to strong production in AARP Direct and AARP Agency. Auto new business premiums rose 13% while homeowners increased 30%. Second quarter 2012 policy count retention for auto and homeowners increased 2 points to 84% and 86%, respectively, from the second quarter of 2011.
WEALTH MANAGEMENT
Second Quarter 2012 Highlights:
| Individual Annuity was placed into runoff during the quarter; its financial results are included in the Runoff Operations division |
| Announced definitive agreement on July 31, 2012 to sell Woodbury Financial Services |
| The sales processes for Individual Life and Retirement Plans are proceeding as expected |
WEALTH MANAGEMENT
($ in millions)
Three Months Ended | ||||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Core Earnings |
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Individual Life |
$ | 25 | $ | 41 | (39 | %) | ||||||
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Mutual Funds |
18 | 27 | (33 | %) | ||||||||
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Retirement Plans |
5 | 11 | (55 | %) | ||||||||
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Total Core Earnings |
$ | 48 | $ | 79 | (39 | %) | ||||||
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Wealth Management net income was $52 million in the second quarter of 2012 compared with $100 million in the second quarter of 2011. Core earnings in the second quarter of 2012 were $48 million, including $8 million, after tax, of restructuring and other expenses, compared with second quarter 2011 core earnings of $79 million, which included a $7 million tax benefit. Excluding these items, second quarter 2012 core earnings declined from the second quarter of 2011, due to increased death benefits in Individual Life and lower core earnings in Mutual Funds.
Individual Life second quarter 2012 core earnings were $25 million compared with $41 million in the second quarter of 2011, which included a $3 million tax benefit. Core earnings declined from the second quarter of 2011 due to increased death benefits and higher expenses, including $5 million, after tax, of restructuring and other costs.
5
Mutual Funds second quarter 2012 core earnings were $18 million, down 33% compared with $27 million in the second quarter of 2011. The reduction in core earnings was principally due to the 15% reduction in fee income, consistent with the 14% decline in assets under management since June 30, 2011. The decline in assets under management is principally due to net outflows from equity mutual funds over the past twelve months.
Retirement Plans second quarter 2012 core earnings totaled $5 million compared with $11 million in the second quarter of 2011, which included a $4 million tax benefit. Aside from the tax benefit in the prior year quarter, core earnings in the second quarter of 2012 declined compared with the second quarter of 2011 due to a $3 million, after tax, charge for restructuring and other expenses.
RUNOFF OPERATIONS
| Life Other Operations core earnings were $37 million, including an unfavorable DAC unlock of $125 million |
| P&C Other Operations core losses were $14 million, including $33 million, after tax, of unfavorable development on A&E loss reserves |
| Net realized capital gains, which are excluded from core earnings, after tax and DAC, were $368 million, largely related to International Annuity hedge gains |
RUNOFF OPERATIONS
($ in millions)
Three Months Ended | ||||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Core Earnings |
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Life Other Operations, excluding DAC unlock |
$ | 162 | $ | 250 | (35 | %) | ||||||
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DAC unlock |
(125 | ) | (14 | ) | NM | |||||||
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Life Other Operations |
37 | 236 | (84 | %) | ||||||||
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P&C Other Operations |
(14 | ) | (167 | ) | 92 | % | ||||||
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Total Runoff Operations |
$ | 23 | $ | 69 | (67 | %) | ||||||
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Runoff Operations generated net income of $391 million in the second quarter of 2012 compared with net income of $97 million in the second quarter of 2011. Net income includes net realized capital gains, after tax and after DAC, of $368 million in the second quarter of 2012 compared with $28 million in the second quarter of 2011. The net realized capital gains in both periods are largely related to variable annuity hedging programs. The increase in the net realized capital gains in the second quarter of 2012 is principally from the international variable annuity hedging program, reflecting gains on the derivative assets in the hedging program as a result of lower global equity market levels and yen strengthening since March 31, 2012.
6
Core earnings for Runoff Operations were $23 million in the second quarter of 2012 compared with core earnings of $69 million in the second quarter of 2011. Core earnings in both periods included unfavorable DAC unlock of $125 million, after tax, and $14 million, after tax, respectively, in the Life Other Operations segments. In addition, both periods included unfavorable A&E loss reserve development of $33 million, after tax, and $189 million, after tax, respectively, in the P&C Other Operations segment.
The companys Life Other Operations segments reported core earnings, excluding DAC unlock, of $162 million, down 35% from $250 million in the second quarter of 2011. Life Other Operations now includes U.S. Annuity, previously reported in the Wealth Management division, International Annuities, Institutional Annuities and Private Placement Life Insurance (PPLI). Second quarter 2011 results included favorable impacts totaling $63 million, after tax, comprised of a $45 million tax benefit in U.S. Annuity and an $18 million reserve benefit in International Annuity. Excluding these items, the principal reason for the decline in Life Other Operations core earnings was the 15% decline in U.S. Annuity account values from $91.3 billion to $77.8 billion, which was almost entirely due to surrenders and withdrawals.
On July 16, 2012, The Hartford completed the sale of the private placement life insurance unit that that administers the companys PPLI book of business; this sale does not include the liabilities for the companys in-force PPLI book of business. The transaction is not expected to have a material effect on the companys financial results. The company continues to own the in-force PPLI block of business.
Core losses for P&C Other Operations in the second quarter of 2012 totaled $14 million compared with core losses of $167 million in the second quarter of 2011. Core losses included unfavorable A&E loss reserve development of $33 million, after tax, in the second quarter of 2012 and unfavorable asbestos loss reserve development of $189 million, after tax in the second quarter of 2011.
CORPORATE
Corporate incurred a second quarter 2012 net loss of $678 million compared with a net loss of $151 million in the second quarter of 2011. The net loss in the second quarter of 2012 included a $587 million, after tax, loss on extinguishment of debt due to the repurchase of $1.75 billion in par value of junior subordinated securities from Allianz SE. The refinancing of this debt reduced interest expenses from $128 million, before tax, in the second quarter of 2011 to $115 million in the second quarter of 2012. The net loss in the second quarter of 2011 included a net loss from discontinued operations of $77 million, due to the sale of Federal Trust Corporation.
Corporate core losses, which exclude the debt extinguishment charge, were $98 million in the second quarter of 2012 compared with core losses of $83 million in the second quarter of 2011. The increase in the net loss was largely due to restructuring and other expenses of $18 million, after tax, which are associated with the companys contemplated sale of the Individual Life, Retirement Plans and Woodbury Financial businesses and expense reduction initiatives.
7
INVESTMENTS
Second Quarter 2012 Highlights:
| Annualized investment yield, excluding limited partnerships and other alternative investments, of 4.3%, flat with the second quarter of 2011 |
| Net impairment losses, including mortgage loan loss reserves, were $60 million, after tax and DAC |
INVESTMENTS
($ in millions)
Three Months Ended | ||||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Amounts presented before tax |
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Net investment income, excluding trading securities |
$ | 1,097 | $ | 1,104 | (1 | %) | ||||||
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Net impairment losses including mortgage loan loss reserves |
$ | (98 | ) | $ | 3 | NM | ||||||
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Annualized investment yield1 |
4.4 | % | 4.6 | % | (0.2 | ) | ||||||
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Annualized investment yield, excluding limited partnerships and other alternative investments1 |
4.3 | % | 4.3 | % | | |||||||
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Net investment income, excluding trading securities, declined 1% to $1,097 million, before tax, in the second quarter of 2012 compared with the second quarter of 2011 due to a slight decrease in the annualized investment yield earned on fixed maturities that was partially offset by higher investment income from an increased balance in higher yielding mortgage loans.
Annualized investment yield, before tax, was 4.4% in the second quarter of 2012 compared with 4.6% in the second quarter of 2011. Excluding limited partnerships and other alternative investments, the annualized pre-tax investment yield was flat compared to the prior year at 4.3%. Annualized returns on limited partnerships and other alternative investments were approximately 10% in the second quarter of 2012 compared with 17% in the second quarter of 2011.
Net impairment losses and changes to the mortgage loan loss reserve in the quarter were $98 million, before tax ($60 million, after tax and DAC) compared with a gain of $3 million in the second quarter of 2011. The increased loss included approximately $51 million, before tax, of impairments on recently downgraded preferred equity securities of financial institutions.
Total invested assets, excluding trading securities, were $105.7 billion as of June 30, 2012, compared with $99.8 billion at June 30, 2011.
8
STOCKHOLDERS EQUITY
The Hartfords stockholders equity was $22.0 billion on June 30, 2012, a 9% increase over stockholders equity of $20.2 billion on June 30, 2011. Book value per diluted common share, which includes the dilutive effect of the companys common stock warrants and mandatory convertible preferred stock, was $45.59 at June 30, 2012, an increase of 14% compared with $40.09 at June 30, 2011. Excluding AOCI, book value per diluted common share* increased by 2% to $40.91 on June 30, 2012, compared with $40.14 on June 30, 2011.
The company completed the $500 million equity repurchase program that was authorized in August 2011. Under the program, the company repurchased 11.3 million shares of common stock at a total price of $200 million, or $17.75 per share. In addition, the company purchased 69.4 million common stock warrants for $300 million under this authorization.
CONFERENCE CALL
The Hartford will discuss its second quarter 2012 results in a conference call on Thursday, Aug. 2, 2012 at 9 a.m. EDT. The call, along with a slide presentation, can be accessed live or as a replay through the investor relations section of The Hartfords website at http://ir.thehartford.com. The slide presentation will be posted on The Hartfords website at approximately 8:30 a.m. EDT on Aug. 2, 2012.
More detailed financial information can be found in The Hartfords Investor Financial Supplement for the second quarter of 2012 which is available at http://ir.thehartford.com.
ABOUT THE HARTFORD
The Hartford Financial Services Group Inc. (NYSE: HIG) is a leading provider of insurance and wealth management services for millions of consumers and businesses worldwide. The Hartford is consistently recognized for its superior service, its sustainability efforts and as one of the worlds most ethical companies. More information on the company and its financial performance is available at www.thehartford.com.
HIG-F
Media Contact: Shannon Lapierre 860-547-5624 shannon.lapierre@thehartford.com |
Investor Contact: Sabra Purtill, CFA 860-547-8691 sabra.purtill@thehartford.com |
9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INCOME STATEMENTS BY DIVISION
($ in millions)
Three months ended June 30, 2012
Commercial Markets |
Consumer Markets |
Wealth Management |
Runoff Operations |
Corporate | Consolidated | |||||||||||||||||||
Earned premiums |
$ | 2,502 | $ | 904 | $ | (27 | ) | $ | 21 | | $ | 3,400 | ||||||||||||
Fee income |
16 | | 489 | 564 | 45 | 1,114 | ||||||||||||||||||
Net investment income (loss) |
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Securities available-for-sale and other |
346 | 41 | 232 | 475 | 3 | 1,097 | ||||||||||||||||||
Equity securities held for trading [1] |
| | | (1,687 | ) | | (1,687 | ) | ||||||||||||||||
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Total net investment income (loss) |
346 | 41 | 232 | (1,212 | ) | 3 | (590 | ) | ||||||||||||||||
Other revenues |
26 | 35 | | | | 61 | ||||||||||||||||||
Net realized capital gains (losses) |
(16 | ) | (2 | ) | 6 | 584 | 17 | 589 | ||||||||||||||||
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Total revenues |
2,874 | 978 | 700 | (43 | ) | 65 | 4,574 | |||||||||||||||||
Benefits, losses, and loss adjustment expenses |
1,847 | 788 | 294 | 693 | (1 | ) | 3,621 | |||||||||||||||||
Benefits, losses, and loss adjustment expenses returns credited on International variable annuities [1] |
| | | (1,686 | ) | | (1,686 | ) | ||||||||||||||||
Amortization of deferred policy acquisition costs |
239 | 84 | 47 | 184 | | 554 | ||||||||||||||||||
Insurance operating costs and other expenses |
541 | 187 | 283 | 187 | 63 | 1,261 | ||||||||||||||||||
Loss on extinguishment of debt |
| | | | 910 | 910 | ||||||||||||||||||
Interest expense |
| | | | 115 | 115 | ||||||||||||||||||
Restructuring and other costs |
4 | 1 | 12 | 3 | 28 | 48 | ||||||||||||||||||
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Total benefits and expenses |
2,631 | 1,060 | 636 | (619 | ) | 1,115 | 4,823 | |||||||||||||||||
Income (loss) from continuing operations before income taxes |
243 | (82 | ) | 64 | 576 | (1,050 | ) | (249 | ) | |||||||||||||||
Income tax expense (benefit) |
58 | (32 | ) | 12 | 185 | (372 | ) | (149 | ) | |||||||||||||||
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Income (loss) from continuing operations |
185 | (50 | ) | 52 | 391 | (678 | ) | (100 | ) | |||||||||||||||
Loss from discontinued operations, net of tax |
(1 | ) | | | | | (1 | ) | ||||||||||||||||
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Net income (loss) |
184 | (50 | ) | 52 | 391 | (678 | ) | (101 | ) | |||||||||||||||
Less: Loss from discontinued operations, net of tax |
(1 | ) | | | | | (1 | ) | ||||||||||||||||
Less: Loss extinguishment of debt, net of tax |
| | | | (587 | ) | (587 | ) | ||||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
(9 | ) | (2 | ) | 4 | 368 | 7 | 368 | ||||||||||||||||
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Core earnings (losses) |
194 | (48 | ) | 48 | 23 | (98 | ) | 119 |
Three months ended June 30, 2011
Commercial Markets |
Consumer Markets |
Wealth Management |
Runoff Operations |
Corporate | Consolidated | |||||||||||||||||||
Earned premiums |
$ | 2,579 | 939 | $ | (23 | ) | $ | 49 | 1 | $ | 3,545 | |||||||||||||
Fee income |
14 | | 511 | 641 | 53 | 1,219 | ||||||||||||||||||
Net investment income (loss) |
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Securities available-for-sale and other |
345 | 49 | 214 | 483 | 13 | 1,104 | ||||||||||||||||||
Equity securities held for trading [1] |
| | | (597 | ) | | (597 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total net investment income (loss) |
345 | 49 | 214 | (114 | ) | 13 | 507 | |||||||||||||||||
Other revenues |
26 | 36 | | (1 | ) | | 61 | |||||||||||||||||
Net realized capital gains |
23 | 2 | 17 | 21 | 6 | 69 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
2,987 | 1,026 | 719 | 596 | 73 | 5,401 | ||||||||||||||||||
Benefits, losses, and loss adjustment expenses |
1,997 | 904 | 255 | 819 | 1 | 3,976 | ||||||||||||||||||
Benefits, losses, and loss adjustment expenses returns credited on International variable annuities [1] |
| | | (597 | ) | | (597 | ) | ||||||||||||||||
Amortization of deferred policy acquisition costs |
239 | 85 | 63 | 205 | | 592 | ||||||||||||||||||
Insurance operating costs and other expenses |
580 | 311 | 294 | 202 | 65 | 1,452 | ||||||||||||||||||
Interest expense |
| | | | 128 | 128 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total benefits and expenses |
2,816 | 1,300 | 612 | 629 | 194 | 5,551 | ||||||||||||||||||
Income (loss) from continuing operations before income taxes |
171 | (274 | ) | 107 | (33 | ) | (121 | ) | (150 | ) | ||||||||||||||
Income tax expense (benefit) |
9 | (102 | ) | 7 | (130 | ) | (47 | ) | (263 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
162 | (172 | ) | 100 | 97 | (74 | ) | 113 | ||||||||||||||||
Income from discontinued operations, net of tax |
(3 | ) | | | | (77 | ) | (80 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
159 | (172 | ) | 100 | 97 | (151 | ) | 33 | ||||||||||||||||
Less: Loss from discontinued operations, net of tax |
(3 | ) | | | | (77 | ) | (80 | ) | |||||||||||||||
Less: Net realized gains, net of tax and DAC, excluded from core earnings |
36 | 5 | 21 | 28 | 9 | 99 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Core earnings (losses) |
126 | (177 | ) | 79 | 69 | (83 | ) | 14 |
[1] | Includes dividend income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within interest credited. |
10
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RESULTS BY SEGMENT
($ in millions, except per share data)
THREE MONTHS ENDED | ||||||||||||
June 30, 2012 |
June 30, 2011 |
Change | ||||||||||
Property & Casualty Commercial |
$ | 160 | $ | 96 | 67 | % | ||||||
Group Benefits |
34 | 30 | 13 | % | ||||||||
|
|
|
|
|
|
|||||||
Commercial Markets core earnings |
$ | 194 | $ | 126 | 54 | % | ||||||
Consumer Markets core losses |
$ | (48 | ) | $ | (177 | ) | 73 | % | ||||
Individual Life |
24 | 42 | (43 | %) | ||||||||
Retirement Plans |
8 | 13 | (38 | %) | ||||||||
Mutual Funds |
18 | 27 | (33 | %) | ||||||||
|
|
|
|
|
|
|||||||
Wealth Management core earnings, excluding DAC unlock |
50 | 82 | (39 | %) | ||||||||
DAC unlock |
(2 | ) | (3 | ) | 33 | % | ||||||
|
|
|
|
|
|
|||||||
Wealth Management core earnings |
$ | 48 | $ | 79 | (39 | %) | ||||||
Life Other Operations core earnings, excluding DAC unlock |
162 | 250 | (35 | %) | ||||||||
DAC unlock |
(125 | ) | (14 | ) | NM | |||||||
|
|
|
|
|
|
|||||||
Life Other Operations core earnings |
37 | 236 | (84 | %) | ||||||||
P&C Other Operations |
(14 | ) | (167 | ) | 92 | % | ||||||
|
|
|
|
|
|
|||||||
Total Runoff Operations core earnings |
$ | 23 | $ | 69 | (67 | %) | ||||||
Corporate core losses |
$ | (98 | ) | $ | (83 | ) | (18 | %) | ||||
|
|
|
|
|
|
|||||||
Core earnings |
$ | 119 | $ | 14 | NM | |||||||
Add: Net realized capital gains, net of tax and DAC, excluded from core earnings |
368 | 99 | NM | |||||||||
Add: Loss on extinguishment of debt, net of tax |
(587 | ) | | NM | ||||||||
Add: Loss from discontinued operations |
(1 | ) | (80 | ) | 99 | % | ||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | (101 | ) | $ | 33 | NM | ||||||
|
|
|
|
|
|
|||||||
PER SHARE DATA |
||||||||||||
Diluted Earnings Per Share |
||||||||||||
Core earnings |
0.23 | 0.01 | NM | |||||||||
Less: Difference arising from shares used for the denominator between net loss and core earnings |
0.01 | | NM | |||||||||
Add: Net realized capital gains, net of tax and DAC, excluded from core earnings |
0.79 | 0.20 | NM | |||||||||
Add: Loss on extinguishment of debt, net of tax |
(1.26 | ) | | | ||||||||
Add: Loss from discontinued operations |
(0.01 | ) | (0.16 | ) | 94 | % | ||||||
|
|
|
|
|
|
|||||||
Net income (loss) available to common shareholders |
(0.26 | ) | 0.05 | NM | ||||||||
|
|
|
|
|
|
[1] | NM: The Hartford defines increases or decreases greater than or equity to 200% or changes from a net gain to a net loss position, or vice versa, as NM or not meaningful. |
11
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 below and in The Hartfords Investor Financial Supplement for the second quarter of 2012, which is available on The Hartfords website, http://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 June 30, 2012 and June 30, 2011, is set forth below.
THREE MONTHS ENDED | Change | |||||||||||
June 30, 2012 |
June 30, 2011 |
|||||||||||
Stockholders equity per diluted common share, including AOCI |
$ | 45.59 | $ | 40.09 | 14 | % | ||||||
Less: Per share impact of AOCI |
4.68 | (0.05 | ) | NM | ||||||||
|
|
|
|
|
|
|||||||
Book value per diluted common share, excluding AOCI |
$ | 40.91 | $ | 40.14 | 2 | % | ||||||
|
|
|
|
|
|
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 and prior year development. 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.
12
THREE MONTHS ENDED | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
P&C Commercial |
||||||||
Combined ratio |
100.5 | 106.2 | ||||||
Less: Prior year reserve development |
1.2 | 2.1 | ||||||
Less: Current year catastrophe losses |
4.8 | 11.0 | ||||||
|
|
|
|
|||||
Combined ratio before prior year development & catastrophes |
94.5 | 93.1 | ||||||
Consumer Markets |
||||||||
Combined ratio |
112.6 | 121.1 | ||||||
Less: Prior year reserve development |
(2.5 | ) | (0.0 | ) | ||||
Less: Current year catastrophe losses |
23.9 | 29.9 | ||||||
|
|
|
|
|||||
Combined ratio before prior year development & catastrophes |
91.3 | 91.2 |
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, discontinued operations and loss from the extinguishment of debt. 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 June 30, 2012 and June 30, 2011, is included in this press release. A reconciliation of core earnings to net income for individual reporting segments can be found in The Hartfords Investor Financial Supplement for the second quarter of 2012.
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 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.
13
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 June 30, 2012 and June 30, 2011 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 as of June 30, 2012, and June 30, 2011, is set forth below.
THREE MONTHS ENDED | ||||||||
June 30, 2012 |
June 30, 2011 |
|||||||
P&C Commercial |
||||||||
Net income |
$ | 149 | $ | 118 | ||||
Less: Income (loss) from discontinued operations, after tax |
(1 | ) | (3 | ) | ||||
Less: Net realized capital gains (losses) after tax |
(10 | ) | 25 | |||||
Less: Income tax expense |
(54 | ) | (14 | ) | ||||
Less: Periodic net coupon settlements on credit derivatives, before tax |
| (1 | ) | |||||
Less: Restructuring and other costs |
(4 | ) | | |||||
Less: Other expenses |
(14 | ) | (34 | ) | ||||
Less: Net investment income |
239 | 239 | ||||||
|
|
|
|
|||||
Underwriting results |
$ | (7 | ) | $ | (94 | ) | ||
Consumer Markets |
||||||||
Net loss |
$ | (50 | ) | $ | (172 | ) | ||
Less: Net realized capital gains (losses) after tax |
(2 | ) | 5 | |||||
Less: Income tax benefit |
31 | 100 | ||||||
Less: Periodic net coupon settlements on credit derivatives, before tax |
| (1 | ) | |||||
Less: Restructuring and other costs |
(1 | ) | | |||||
Less: Other expenses |
(5 | ) | (128 | ) | ||||
Less: Net investment income |
41 | 49 | ||||||
|
|
|
|
|||||
Underwriting results |
$ | (114 | ) | $ | (197 | ) |
14
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 risks, challenges and uncertainties associated with our March 21, 2012 announcement that we will focus on our property and casualty, group benefits and mutual fund businesses, place our Individual Annuity business into run-off and pursue sales or other strategic alternatives for the Individual Life, Woodbury Financial Services and the Retirement Plans businesses and related implementation plans and goals and objectives, 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 possible occurrence of terrorist attacks and 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 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; 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, including dividends associated with the proceeds from a sale of any of our life businesses; 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 2011 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, and other filings The Hartford makes with the Securities and Exchange Commission.
15
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.
16
Exhibit 99.2
INVESTOR FINANCIAL SUPPLEMENT
June 30, 2012
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
Margaret Mann
Program Assistant
Investor Relations
Phone (860) 547-3800
As of July 26, 2012
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- | BBB+ | 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 | |||
COMMERCIAL MARKETS |
||||
Income Statements |
11 | |||
Property & Casualty Commercial |
||||
Operating Results |
12 | |||
Underwriting Results |
13 | |||
Supplemental Data |
14 | |||
Group Benefits |
||||
Income Statements |
15 | |||
Supplemental Data |
16 | |||
CONSUMER MARKETS |
||||
Income Statements |
17 | |||
Operating Results |
18 | |||
Underwriting Results |
19 | |||
Written and Earned Premiums |
20 | |||
WEALTH MANAGEMENT |
||||
Operating Results |
21 | |||
Financial Highlights Excluding Impact of Unlock |
22 | |||
Deferred Policy Acquisition Costs and Present Value of Future Profits |
23 | |||
Individual Life |
||||
Income Statements |
24 | |||
Supplemental Data |
25 | |||
Account Value Rollforward |
26 | |||
Retirement Plans |
||||
Income Statements |
27 | |||
Supplemental Data |
||||
Assets Under Management |
28 | |||
Account Value and Asset Rollforward |
29 | |||
Mutual Funds |
||||
Income Statements |
30 | |||
Supplemental Data |
||||
Deposits and Assets Under Management |
31 | |||
Asset Rollforward |
32 | |||
RUNOFF OPERATIONS |
||||
Financial Highlights |
33 | |||
Life Other Operations |
||||
Supplemental Data |
34 | |||
U.S. Annuity - Account Value Rollforward |
35 | |||
International Annuity - Account Value Rollforward |
36 | |||
Deferred Policy Acquisition Costs and Present Value of Future Profits |
37 | |||
Annuity Death and Income Benefits |
38 | |||
CORPORATE |
||||
Income Statements |
39 | |||
INVESTMENTS |
||||
Investment Earnings Before-tax |
||||
Consolidated |
40 | |||
Life |
41 | |||
Property & Casualty |
42 | |||
Composition of Invested Assets |
||||
Consolidated |
43 | |||
Life |
44 | |||
Property & Casualty |
45 | |||
Unrealized Loss Aging |
46 | |||
Invested Asset Exposures |
||||
As of June 30, 2012 |
47 |
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. |
| On March 21, 2012, the Company announced the completion of an evaluation of its businesses and strategy. As a result of this review, which was conducted by the Companys management and Board of Directors over the past several quarters, the Company announced that it will focus on its Property and Casualty, Group Benefits and Mutual Fund businesses, place its Individual Annuity business into runoff and pursue sales or other strategic alternatives for the Individual Life, Woodbury Financial Services and Retirement Plans businesses. Starting in the second quarter of 2012, financial results for the Individual Annuity segment, which consists of U.S. variable, fixed and fixed indexed annuities, will be reported in the Life Other Operations segment. The Company is organized into four divisions: Commercial Markets, Consumer Markets, Wealth Management and Runoff Operations and currently conducts business principally in nine reporting segments, as well as the Corporate category |
| 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 Life, Retirement Plans and Mutual Funds. 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 (the Code) and products and services to municipalities and not-for-profit organizations under Sections 457 and 403(b) of the Code, collectively referred to as government plans. Mutual Funds offers retail mutual funds, investment-only mutual funds and college savings plans under Section 529 of the Code (collectively referred to as non-proprietary) and proprietary mutual funds supporting insurance products issued by The Hartford. |
| The Runoff Operations division includes the reporting segments of Life Other Operations and Property & Casualty Other Operations. Life Other Operations includes U.S. Annuity, International Annuity, Institutional Annuity, and Private Placement Life Insurance, previously reported in Wealth Management. |
| 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) include account values and mutual funds assets. AUM is a measure used by the Company because a significant portion of the Company's revenues are based upon asset values. These revenues increase or decrease with a rise or fall in the amount of account value whether caused by changes in capital markets or through net flows. |
| 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 Company's 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, discontinued operations and loss on extinguishment of debt. 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 Company's 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 Company's operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company's 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 Hartford's sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves. A reconciliation of written premiums to earned premiums for Property & Casualty Commercial and Consumer Markets is set forth at pages 12 and 18, 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 Hartford's underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. The Hartford believes that underwriting results provides investors with a valuable measure of before-tax profitability derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation of underwriting results to net income for Property & Casualty Commercial and Consumer Markets is set forth at pages 12 and 18, 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,excluding discontinued operations and the impact of the DAC unlock, 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, excluding discontinued operations and the impact of the DAC unlock, 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,the effect of including discontinued operations and the effect of including the DAC unlock. 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,excluding discontinued operations, and the impact of the DAC unlock 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,excluding discontinued operations, and the impact of the DAC unlock 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,excluding discontinued operations, and excluding the impact of the DAC unlock 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
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
HIGHLIGHTS |
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Net income (loss) [1] |
$ | 33 | $ | 60 | $ | 118 | $ | 96 | $ | (101 | ) | NM | NM | $ | 534 | $ | (5 | ) | NM | |||||||||||||||||||||
Core earnings |
$ | 14 | $ | 50 | $ | 339 | $ | 612 | $ | 119 | NM | (81 | %) | $ | 588 | $ | 731 | 24 | % | |||||||||||||||||||||
Total revenues [2] |
$ | 5,401 | $ | 4,520 | $ | 5,638 | $ | 7,661 | $ | 4,574 | (15 | %) | (40 | %) | $ | 11,701 | $ | 12,235 | 5 | % | ||||||||||||||||||||
Total assets |
$ | 315,957 | $ | 304,188 | $ | 302,609 | $ | 310,548 | $ | 304,142 | (4 | %) | (2 | %) | ||||||||||||||||||||||||||
PER SHARE AND SHARES DATA [3] |
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Basic earnings (losses) per common share |
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Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.24 | $ | 0.20 | $ | (0.26 | ) | NM | NM | $ | 1.15 | $ | (0.06 | ) | NM | |||||||||||||||||||||
Core earnings available to common shareholders |
$ | 0.01 | $ | 0.09 | $ | 0.74 | $ | 1.37 | $ | 0.25 | NM | (82 | %) | $ | 1.27 | $ | 1.62 | 27 | % | |||||||||||||||||||||
Diluted earnings (losses) per common share |
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Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.23 | $ | 0.18 | $ | (0.26 | ) | NM | NM | $ | 1.06 | $ | (0.06 | ) | NM | |||||||||||||||||||||
Core earnings available to common shareholders |
$ | 0.01 | $ | 0.08 | $ | 0.69 | $ | 1.25 | $ | 0.23 | NM | (82 | %) | $ | 1.16 | $ | 1.50 | 29 | % | |||||||||||||||||||||
Weighted average common shares outstanding (basic) |
445.1 | 445.3 | 445.1 | 440.7 | 438.2 | (6.9 | ) sh | (2.5 | ) sh | 444.9 | 439.4 | (5.5 | ) sh | |||||||||||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) |
482.4 | 473.4 | 489.6 | 489.9 | 464.8 | (17.6 | ) sh | (25.1 | ) sh | 505.6 | 487.9 | (17.7 | ) sh | |||||||||||||||||||||||||||
Common shares outstanding |
445.3 | 445.5 | 442.5 | 440.9 | 435.6 | (9.7 | ) sh | (5.3 | ) sh | 445.3 | 435.6 | (9.7 | ) sh | |||||||||||||||||||||||||||
Book value per common share |
$ | 44.02 | $ | 46.70 | $ | 47.30 | $ | 46.99 | $ | 49.14 | 12 | % | 5 | % | ||||||||||||||||||||||||||
Per common share impact of AOCI |
$ | (0.06 | ) | $ | 2.59 | $ | 2.83 | $ | 3.01 | $ | 5.18 | NM | 72 | % | ||||||||||||||||||||||||||
Book value per common share (excluding AOCI) |
$ | 44.08 | $ | 44.11 | $ | 44.47 | $ | 43.98 | $ | 43.96 | | | ||||||||||||||||||||||||||||
Book value per diluted share |
$ | 40.09 | $ | 43.81 | $ | 44.31 | $ | 43.25 | $ | 45.59 | 14 | % | 5 | % | ||||||||||||||||||||||||||
Per diluted share impact of AOCI |
$ | (0.05 | ) | $ | 2.37 | $ | 2.58 | $ | 2.70 | $ | 4.68 | NM | 73 | % | ||||||||||||||||||||||||||
Book value per diluted share (excluding AOCI) |
$ | 40.14 | $ | 41.44 | $ | 41.73 | $ | 40.55 | $ | 40.91 | 2 | % | 1 | % | ||||||||||||||||||||||||||
Common shares outstanding and dilutive potential common shares |
502.8 | 487.6 | 484.9 | 491.9 | 481.7 | (21.1 | ) sh | (10.2 | ) sh | |||||||||||||||||||||||||||||||
FINANCIAL RATIOS |
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ROE (net income last 12 months to common stockholder equity including AOCI) [4] |
9.8 | % | 5.9 | % | 3.5 | % | 1.5 | % | 0.8 | % | (9.0 | ) | (0.7 | ) | ||||||||||||||||||||||||||
ROE (core earnings last 12 months to common stockholder equity excluding AOCI) [4] |
9.6 | % | 6.0 | % | 4.9 | % | 5.1 | % | 5.6 | % | (4.0 | ) | 0.5 | |||||||||||||||||||||||||||
Debt to capitalization, including AOCI |
24.7 | % | 23.6 | % | 22.4 | % | 22.6 | % | 24.5 | % | (0.2 | ) | 1.9 | |||||||||||||||||||||||||||
Annualized investment yield, after-tax |
3.1 | % | 2.9 | % | 2.8 | % | 3.0 | % | 3.0 | % | (0.1 | ) | | 3.1 | % | 3.0 | % | (0.1 | ) |
[1] | Includes a loss on extinguishment of debt of $587, after-tax, recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction. |
[2] | 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 June 30, 2011, September 30, 2011,December 31, 2011,March 31, 2012 and June 30, 2012, respectively. |
[3] | See page 8 for computation of basic and diluted earnings (losses) per common share. |
[4] | 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 | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Property & Casualty Commercial |
$ | 96 | $ | 87 | $ | 29 | $ | 162 | $ | 160 | 67 | % | (1 | %) | $ | 273 | $ | 322 | 18 | % | ||||||||||||||||||||
Group Benefits |
30 | 20 | 17 | 5 | 34 | 13 | % | NM | 49 | 39 | (20 | %) | ||||||||||||||||||||||||||||
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Commercial Markets core earnings |
126 | 107 | 46 | 167 | 194 | 54 | % | 16 | % | 322 | 361 | 12 | % | |||||||||||||||||||||||||||
Consumer Markets core earnings (losses) |
(177 | ) | (10 | ) | 85 | 102 | (48 | ) | 73 | % | NM | (66 | ) | 54 | NM | |||||||||||||||||||||||||
Individual Life |
41 | (20 | ) | 36 | 26 | 25 | (39 | %) | (4 | %) | 77 | 51 | (34 | %) | ||||||||||||||||||||||||||
Retirement Plans |
11 | (20 | ) | | 12 | 5 | (55 | %) | (58 | %) | 22 | 17 | (23 | %) | ||||||||||||||||||||||||||
Mutual Funds |
27 | 24 | 20 | 20 | 18 | (33 | %) | (10 | %) | 54 | 38 | (30 | %) | |||||||||||||||||||||||||||
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Wealth Management core earnings (losses) |
79 | (16 | ) | 56 | 58 | 48 | (39 | %) | (17 | %) | 153 | 106 | (31 | %) | ||||||||||||||||||||||||||
ONGOING OPERATIONS |
28 | 81 | 187 | 327 | 194 | NM | (41 | %) | 409 | 521 | 27 | % | ||||||||||||||||||||||||||||
Life Other Operations |
236 | 43 | 206 | 373 | 37 | (84 | %) | (90 | %) | 485 | 410 | (15 | %) | |||||||||||||||||||||||||||
P&C Other Operations |
(167 | ) | 9 | 16 | 20 | (14 | ) | 92 | % | NM | (144 | ) | 6 | NM | ||||||||||||||||||||||||||
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Runoff Operations core earnings (losses) |
69 | 52 | 222 | 393 | 23 | (67 | %) | (94 | %) | 341 | 416 | 22 | % | |||||||||||||||||||||||||||
Corporate core losses |
(83 | ) | (83 | ) | (70 | ) | (108 | ) | (98 | ) | (18 | %) | 9 | % | (162 | ) | (206 | ) | (27 | %) | ||||||||||||||||||||
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CONSOLIDATED |
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Core earnings |
14 | 50 | 339 | 612 | 119 | NM | (81 | %) | 588 | 731 | 24 | % | ||||||||||||||||||||||||||||
Add: Income (loss) from discontinued operations |
(80 | ) | 3 | 1 | (1 | ) | (1 | ) | 99 | % | | 82 | (2 | ) | NM | |||||||||||||||||||||||||
Add: Loss on extinguishment of debt, net of tax |
| | | | (587 | ) | | | | (587 | ) | | ||||||||||||||||||||||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1] |
99 | 7 | (222 | ) | (515 | ) | 368 | NM | NM | (136 | ) | (147 | ) | (8 | %) | |||||||||||||||||||||||||
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Net income (loss) |
$ | 33 | $ | 60 | $ | 118 | $ | 96 | $ | (101 | ) | NM | NM | $ | 534 | $ | (5 | ) | NM | |||||||||||||||||||||
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PER SHARE DATA [2] |
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Diluted earnings (losses) per common share |
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Core earnings available to common shareholders |
$ | 0.01 | $ | 0.08 | $ | 0.69 | $ | 1.25 | $ | 0.23 | NM | (82 | %) | $ | 1.16 | $ | 1.50 | 29 | % | |||||||||||||||||||||
Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.23 | $ | 0.18 | $ | (0.26 | ) | NM | NM | $ | 1.06 | $ | (0.06 | ) | NM | |||||||||||||||||||||
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DAC UNLOCK IMPACT ON CORE EARNINGS BY SEGMENT |
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Individual Life |
(1 | ) | (57 | ) | 2 | (8 | ) | 1 | NM | NM | (3 | ) | (7 | ) | (133 | %) | ||||||||||||||||||||||||
Retirement Plans |
(2 | ) | (24 | ) | (1 | ) | 8 | (3 | ) | (50 | %) | NM | | 5 | | |||||||||||||||||||||||||
Life Other Operations |
(14 | ) | (126 | ) | 44 | 192 | (125 | ) | NM | NM | 42 | 67 | 60 | % | ||||||||||||||||||||||||||
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DAC unlock impact on core earnings |
(17 | ) | (207 | ) | 45 | 192 | (127 | ) | NM | NM | 39 | 65 | 67 | % | ||||||||||||||||||||||||||
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
(49 | ) | (262 | ) | (40 | ) | 22 | (19 | ) | 61 | % | NM | (48 | ) | 3 | NM | ||||||||||||||||||||||||
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DAC unlock impact on net income (loss) |
$ | (66 | ) | $ | (469 | ) | $ | 5 | $ | 214 | $ | (146 | ) | (121 | %) | NM | $ | (9 | ) | $ | 68 | NM | ||||||||||||||||||
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[1] | Includes those net realized capital gains (losses) excluded from core earnings. See page 9 for further analysis. |
[2] | See page 8 for the reconciliation of net income per common share to core earnings per common share. |
2
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 3,545 | $ | 3,518 | $ | 3,506 | $ | 3,442 | $ | 3,400 | (4 | %) | (1 | %) | $ | 7,064 | $ | 6,842 | (3 | %) | ||||||||||||||||||||
Fee income |
1,219 | 1,192 | 1,130 | 1,134 | 1,114 | (9 | %) | (2 | %) | 2,428 | 2,248 | (7 | %) | |||||||||||||||||||||||||||
Net investment income (loss): |
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Securities available-for-sale and other |
1,104 | 1,062 | 998 | 1,070 | 1,097 | (1 | %) | 3 | % | 2,212 | 2,167 | (2 | %) | |||||||||||||||||||||||||||
Equity securities, trading [1] |
(597 | ) | (1,890 | ) | 325 | 2,866 | (1,687 | ) | (183 | %) | NM | 206 | 1,179 | NM | ||||||||||||||||||||||||||
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Total net investment income (loss) |
507 | (828 | ) | 1,323 | 3,936 | (590 | ) | NM | NM | 2,418 | 3,346 | 38 | % | |||||||||||||||||||||||||||
Realized capital gains (losses): |
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Total other-than-temporary impairment (OTTI) losses |
(31 | ) | (71 | ) | (42 | ) | (36 | ) | (106 | ) | NM | (194 | %) | (150 | ) | (142 | ) | 5 | % | |||||||||||||||||||||
OTTI losses recognized in other comprehensive income |
8 | 11 | 6 | 7 | 8 | | 14 | % | 72 | 15 | (79 | %) | ||||||||||||||||||||||||||||
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Net OTTI losses recognized in earnings |
(23 | ) | (60 | ) | (36 | ) | (29 | ) | (98 | ) | NM | NM | (78 | ) | (127 | ) | (63 | %) | ||||||||||||||||||||||
Net realized capital gains (losses), excluding OTTI losses recognized in earnings |
92 | 635 | (350 | ) | (881 | ) | 687 | NM | NM | (256 | ) | (194 | ) | 24 | % | |||||||||||||||||||||||||
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Total net realized capital gains (losses) |
69 | 575 | (386 | ) | (910 | ) | 589 | NM | NM | (334 | ) | (321 | ) | 4 | % | |||||||||||||||||||||||||
Other revenues |
61 | 63 | 65 | 59 | 61 | | 3 | % | 125 | 120 | (4 | %) | ||||||||||||||||||||||||||||
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Total revenues |
5,401 | 4,520 | 5,638 | 7,661 | 4,574 | (15 | %) | (40 | %) | 11,701 | 12,235 | 5 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
3,976 | 4,006 | 3,465 | 3,038 | 3,621 | (9 | %) | 19 | % | 7,154 | 6,659 | (7 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expensesreturns credited on international variable annuities [1] |
(597 | ) | (1,889 | ) | 324 | 2,864 | (1,686 | ) | (182 | %) | NM | 206 | 1,178 | NM | ||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs and present value of future profits |
592 | 1,005 | 397 | 321 | 554 | (6 | %) | 73 | % | 1,042 | 875 | (16 | %) | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
1,452 | 1,273 | 1,206 | 1,303 | 1,261 | (13 | %) | (3 | %) | 2,806 | 2,564 | (9 | %) | |||||||||||||||||||||||||||
Loss on extinguishment of debt |
| | | | 910 | | | | 910 | | ||||||||||||||||||||||||||||||
Interest expense |
128 | 128 | 124 | 124 | 115 | (10 | %) | (7 | %) | 256 | 239 | (7 | %) | |||||||||||||||||||||||||||
Goodwill impairment |
| | 30 | | | | | | | | ||||||||||||||||||||||||||||||
Restructuring and other costs |
| 14 | 11 | 9 | 48 | | NM | | 57 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
5,551 | 4,537 | 5,557 | 7,659 | 4,823 | (13 | %) | (37 | %) | 11,464 | 12,482 | 9 | % | |||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
(150 | ) | (17 | ) | 81 | 2 | (249 | ) | (66 | %) | NM | 237 | (247 | ) | NM | |||||||||||||||||||||||||
Income tax expense (benefit) |
(263 | ) | (74 | ) | (36 | ) | (95 | ) | (149 | ) | 43 | % | (57 | %) | (215 | ) | (244 | ) | (13 | %) | ||||||||||||||||||||
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Income (loss) from continuing operations, net of tax |
113 | 57 | 117 | 97 | (100 | ) | NM | NM | 452 | (3 | ) | NM | ||||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
(80 | ) | 3 | 1 | (1 | ) | (1 | ) | 99 | % | | 82 | (2 | ) | NM | |||||||||||||||||||||||||
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Net income (loss) |
33 | 60 | 118 | 96 | (101 | ) | NM | NM | 534 | (5 | ) | NM | ||||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
(80 | ) | 3 | 1 | (1 | ) | (1 | ) | 99 | % | | 82 | (2 | ) | NM | |||||||||||||||||||||||||
Less: Loss on extinguishment of debt, net of tax |
| | | | (587 | ) | | | | (587 | ) | | ||||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
99 | 7 | (222 | ) | (515 | ) | 368 | NM | NM | (136 | ) | (147 | ) | (8 | %) | |||||||||||||||||||||||||
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Core earnings |
$ | 14 | $ | 50 | $ | 339 | $ | 612 | $ | 119 | NM | (81 | %) | $ | 588 | $ | 731 | 24 | % | |||||||||||||||||||||
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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. |
3
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND JUNE 30, 2012
LIFE [1] | PROPERTY & CASUALTY [1] | CORPORATE [1] | CONSOLIDATED | |||||||||||||||||||||||||||||||||||||||||||||
Dec. 31, 2011 |
Jun. 30, 2012 |
Change | Dec. 31, 2011 |
Jun. 30, 2012 |
Change | Dec. 31, 2011 |
Jun. 30, 2012 |
Change | Dec. 31, 2011 |
Jun. 30, 2012 |
Change | |||||||||||||||||||||||||||||||||||||
Investments |
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Fixed maturities, available-for-sale, at fair value |
$ | 55,633 | $ | 58,891 | 6 | % | $ | 26,023 | $ | 26,222 | 1 | % | $ | 153 | $ | 114 | (25 | %) | $ | 81,809 | $ | 85,227 | 4 | % | ||||||||||||||||||||||||
Fixed maturities, at fair value using the fair value option |
1,317 | 1,154 | (12 | %) | 11 | 11 | | | | | 1,328 | 1,165 | (12 | %) | ||||||||||||||||||||||||||||||||||
Equity securities, trading, at fair value |
30,499 | 29,215 | (4 | %) | | | | | | | 30,499 | 29,215 | (4 | %) | ||||||||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
515 | 446 | (13 | %) | 302 | 295 | (2 | %) | 104 | 110 | 6 | % | 921 | 851 | (8 | %) | ||||||||||||||||||||||||||||||||
Mortgage loans |
4,979 | 5,817 | 17 | % | 749 | 1,058 | 41 | % | | | | 5,728 | 6,875 | 20 | % | |||||||||||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,001 | 1,956 | (2 | %) | | | | | | | 2,001 | 1,956 | (2 | %) | ||||||||||||||||||||||||||||||||||
Limited partnerships and other alternative investments |
1,318 | 1,543 | 17 | % | 1,214 | 1,401 | 15 | % | | | | 2,532 | 2,944 | 16 | % | |||||||||||||||||||||||||||||||||
Other investments |
2,244 | 1,365 | (39 | %) | 121 | 157 | 30 | % | 29 | 26 | (10 | %) | 2,394 | 1,548 | (35 | %) | ||||||||||||||||||||||||||||||||
Short-term investments |
5,641 | 3,549 | (37 | %) | 658 | 466 | (29 | %) | 1,437 | 1,139 | (21 | %) | 7,736 | 5,154 | (33 | %) | ||||||||||||||||||||||||||||||||
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Total investments |
104,147 | 103,936 | | 29,078 | 29,610 | 2 | % | 1,723 | 1,389 | (19 | %) | 134,948 | 134,935 | | ||||||||||||||||||||||||||||||||||
Cash |
2,377 | 2,163 | (9 | %) | 203 | 175 | (14 | %) | 1 | | (100 | %) | 2,581 | 2,338 | (9 | %) | ||||||||||||||||||||||||||||||||
Premiums receivable and agents balances |
344 | 331 | (4 | %) | 3,102 | 3,206 | 3 | % | | | | 3,446 | 3,537 | 3 | % | |||||||||||||||||||||||||||||||||
Reinsurance recoverables |
2,022 | 2,193 | 8 | % | 2,746 | 2,750 | | | | | 4,768 | 4,943 | 4 | % | ||||||||||||||||||||||||||||||||||
Deferred policy acquisition costs and present value of future profits |
6,000 | 5,770 | (4 | %) | 556 | 566 | 2 | % | | | | 6,556 | 6,336 | (3 | %) | |||||||||||||||||||||||||||||||||
Deferred income taxes |
174 | (165 | ) | NM | 800 | 528 | (34 | %) | 1,157 | 1,445 | 25 | % | 2,131 | 1,808 | (15 | %) | ||||||||||||||||||||||||||||||||
Goodwill |
470 | 470 | | 119 | 119 | | 417 | 417 | | 1,006 | 1,006 | | ||||||||||||||||||||||||||||||||||||
Property and equipment, net |
388 | 369 | (5 | %) | 632 | 623 | (1 | %) | 9 | 9 | | 1,029 | 1,001 | (3 | %) | |||||||||||||||||||||||||||||||||
Other assets |
1,070 | 2,112 | 97 | % | 1,205 | 1,216 | 1 | % | (1 | ) | 83 | NM | 2,274 | 3,411 | 50 | % | ||||||||||||||||||||||||||||||||
Separate account assets |
143,870 | 144,662 | 1 | % | | | | | | | 143,870 | 144,662 | 1 | % | ||||||||||||||||||||||||||||||||||
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Total assets |
$ | 260,862 | $ | 261,841 | | $ | 38,441 | $ | 38,793 | 1 | % | $ | 3,306 | $ | 3,343 | 1 | % | $ | 302,609 | $ | 303,977 | | ||||||||||||||||||||||||||
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Future policy benefits, unpaid losses and loss adjustment expenses |
19,466 | 19,445 | | 21,550 | 21,535 | | | | | $ | 41,016 | $ | 40,980 | | ||||||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable |
45,612 | 44,014 | (4 | %) | | | | | | | 45,612 | 44,014 | (4 | %) | ||||||||||||||||||||||||||||||||||
Other policyholder funds and benefits payable International variable annuities |
30,461 | 29,174 | (4 | %) | | | | | | | 30,461 | 29,174 | (4 | %) | ||||||||||||||||||||||||||||||||||
Unearned premiums |
182 | 173 | (5 | %) | 5,041 | 5,106 | 1 | % | (1 | ) | (1 | ) | | 5,222 | 5,278 | 1 | % | |||||||||||||||||||||||||||||||
Debt |
| | | | | | 6,216 | 7,125 | 15 | % | 6,216 | 7,125 | 15 | % | ||||||||||||||||||||||||||||||||||
Consumer notes |
314 | 254 | (19 | %) | | | | | | | 314 | 254 | (19 | %) | ||||||||||||||||||||||||||||||||||
Other liabilities |
5,152 | 7,373 | 43 | % | 1,831 | 1,656 | (10 | %) | 1,429 | 1,500 | 5 | % | 8,412 | 10,529 | 25 | % | ||||||||||||||||||||||||||||||||
Separate account liabilities |
143,870 | 144,662 | 1 | % | | | | | | | 143,870 | 144,662 | 1 | % | ||||||||||||||||||||||||||||||||||
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Total liabilities |
245,057 | 245,095 | | 28,422 | 28,297 | | 7,644 | 8,624 | 13 | % | 281,123 | 282,016 | | |||||||||||||||||||||||||||||||||||
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Common equity, excluding AOCI |
13,943 | 14,326 | 3 | % | 9,393 | 9,418 | | (3,657 | ) | (4,595 | ) | (26 | %) | 19,679 | 19,149 | (3 | %) | |||||||||||||||||||||||||||||||
Preferred stock |
| | | | | | 556 | 556 | | 556 | 556 | | ||||||||||||||||||||||||||||||||||||
AOCI, net of tax |
1,862 | 2,420 | 30 | % | 626 | 1,078 | 72 | % | (1,237 | ) | (1,242 | ) | | 1,251 | 2,256 | 80 | % | |||||||||||||||||||||||||||||||
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Total stockholders equity |
15,805 | 16,746 | 6 | % | 10,019 | 10,496 | 5 | % | (4,338 | ) | (5,281 | ) | (22 | %) | 21,486 | 21,961 | 2 | % | ||||||||||||||||||||||||||||||
Total liabilities and equity |
$ | 260,862 | $ | 261,841 | | $ | 38,441 | $ | 38,793 | 1 | % | $ | 3,306 | $ | 3,343 | 1 | % | $ | 302,609 | $ | 303,977 | | ||||||||||||||||||||||||||
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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
Year Over | ||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | ||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | ||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | ||||||||||||||||||||||
DEBT |
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Short-term debt (includes current maturities of long-term debt) |
$ | 400 | $ | 400 | $ | | $ | | $ | | (100 | %) | | |||||||||||||||
Senior notes |
4,480 | 4,480 | 4,481 | 4,481 | 6,025 | 34 | % | 34 | % | |||||||||||||||||||
Junior subordinated debentures |
1,734 | 1,737 | 1,735 | 1,739 | 1,100 | (37 | %) | (37 | %) | |||||||||||||||||||
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Total debt [1][2] |
$ | 6,614 | $ | 6,617 | $ | 6,216 | $ | 6,220 | $ | 7,125 | 8 | % | 15 | % | ||||||||||||||
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STOCKHOLDERS EQUITY |
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Common stockholders' equity, excluding AOCI, net of tax |
$ | 19,627 | $ | 19,651 | $ | 19,679 | $ | 19,390 | $ | 19,149 | (2 | %) | (1 | %) | ||||||||||||||
Preferred stock |
556 | 556 | 556 | 556 | 556 | | | |||||||||||||||||||||
AOCI, net of tax |
(25 | ) | 1,155 | 1,251 | 1,328 | 2,256 | NM | 70 | % | |||||||||||||||||||
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Total stockholders equity |
$ | 20,158 | $ | 21,362 | $ | 21,486 | $ | 21,274 | $ | 21,961 | 9 | % | 3 | % | ||||||||||||||
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CAPITALIZATION |
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Total capitalization, including AOCI, net of tax |
$ | 26,772 | $ | 27,979 | $ | 27,702 | $ | 27,494 | $ | 29,086 | 9 | % | 6 | % | ||||||||||||||
Total capitalization, excluding AOCI, net of tax |
$ | 26,797 | $ | 26,824 | $ | 26,451 | $ | 26,166 | $ | 26,830 | | 3 | % | |||||||||||||||
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DEBT TO CAPITALIZATION RATIOS [2] |
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Total debt to capitalization, including AOCI |
24.7 | % | 23.6 | % | 22.4 | % | 22.6 | % | 24.5 | % | (0.2 | ) | 1.9 | |||||||||||||||
Total debt to capitalization, excluding AOCI |
24.7 | % | 24.7 | % | 23.5 | % | 23.8 | % | 26.6 | % | 1.9 | 2.8 | ||||||||||||||||
Total rating agency adjusted debt to capitalization [3] [4] |
28.6 | % | 27.4 | % | 26.5 | % | 26.5 | % | 27.3 | % | (1.3 | ) | 0.8 | |||||||||||||||
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[1] | On April 5, 2012, the Company issued $1.55 billion aggregate principal amount of senior notes and $600 million of junior subordinated debentures. The Company used the proceeds from these debt issuances to repurchase all of the outstanding 10% fixed to floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz SE for $2.125 billion. For additional information on the debt issuance, see Note 14 of the Company's June 30, 2012 10Q. |
[2] | The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $368, $349, $314,$310 and $254 as of June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[3] | 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 Company's rental expense on operating leases for total adjustments of $1.5 billion, $1.5 billion, $1.6 billion,$1.5 billion and $1.5 billion for the three months ended June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[4] | Reflects 25% equity credit for the junior subordinated debentures and the discount value of the debentures issued in October 2008. Reflects 100% equity credit for the MCP stock. |
5
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY SURPLUS TO GAAP STOCKHOLDERS EQUITY RECONCILIATION
June 30, 2012 | December 31, 2011 | |||||||
P&C U.S. Statutory Net Income [1] [2] |
$ | 528 | $ | 514 | ||||
Life U.S. Statutory Net Income (Loss) [1] [2] [3] |
$ | 622 | $ | (1,272 | ) | |||
P&C U.S. Statutory Capital and Surplus [1] |
$ | 7,732 | $ | 7,412 | ||||
GAAP Adjustments |
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Deferred policy acquisition costs |
566 | 556 | ||||||
Benefit reserves |
(55 | ) | (59 | ) | ||||
GAAP unrealized losses on investments, net of tax |
1,021 | 641 | ||||||
Goodwill |
119 | 119 | ||||||
Non-admitted assets |
900 | 1,081 | ||||||
Other, net |
213 | 269 | ||||||
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P&C GAAP Stockholders Equity |
$ | 10,496 | $ | 10,019 | ||||
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Life U.S. Statutory Capital and Surplus [1] |
$ | 7,666 | $ | 7,388 | ||||
GAAP Adjustments |
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Investment in subsidiaries |
3,696 | 3,748 | ||||||
Deferred policy acquisition costs |
5,769 | 6,000 | ||||||
Deferred taxes |
(2,074 | ) | (1,542 | ) | ||||
Benefit reserves |
(2,741 | ) | (2,991 | ) | ||||
Unrealized losses on investments, net of impairments |
3,294 | 2,472 | ||||||
Asset valuation reserve and interest maintenance reserve |
987 | 816 | ||||||
Goodwill |
470 | 470 | ||||||
Other, net |
(321 | ) | (556 | ) | ||||
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Life GAAP Stockholders Equity |
$ | 16,746 | $ | 15,805 | ||||
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[1] | Please refer to the basis of presentation on page i for a description of Life and Property & Casualty. |
[2] | The net income (loss) shown above includes the six months ended June 30, 2012 and the year ended December 31, 2011, respectively. |
[3] | Net income (loss) does not include hedging activity recorded directly to surplus. |
6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED | Year Over Year |
Sequential 3 Month Change |
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Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
3 Month Change |
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Fixed maturities net unrealized gain |
$ | 324 | $ | 1,313 | $ | 1,599 | $ | 1,793 | $ | 2,507 | NM | 40 | % | |||||||||||||||
Equities net unrealized gain (loss) |
7 | (68 | ) | (88 | ) | (41 | ) | (8 | ) | NM | 80 | % | ||||||||||||||||
Other-than-temporary impairment losses recognized in AOCI |
(107 | ) | (97 | ) | (99 | ) | (107 | ) | (94 | ) | 12 | % | 12 | % | ||||||||||||||
Net deferred gain on cash-flow hedging instruments |
388 | 542 | 516 | 463 | 544 | 40 | % | 17 | % | |||||||||||||||||||
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Total net unrealized gain |
612 | 1,690 | 1,928 | 2,108 | 2,949 | NM | 40 | % | ||||||||||||||||||||
Foreign currency translation adjustments |
493 | 571 | 574 | 438 | 494 | | 13 | % | ||||||||||||||||||||
Pension and other postretirement adjustment |
(1,130 | ) | (1,106 | ) | (1,251 | ) | (1,218 | ) | (1,187 | ) | (5 | %) | 3 | % | ||||||||||||||
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Total accumulated other comprehensive income (loss) |
$ | (25 | ) | $ | 1,155 | $ | 1,251 | $ | 1,328 | $ | 2,256 | NM | 70 | % | ||||||||||||||
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7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE
THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Numerator: |
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Net income (loss) |
$ | 33 | $ | 60 | $ | 118 | $ | 96 | $ | (101 | ) | $ | 534 | $ | (5 | ) | ||||||||||||
Less: MCP dividends |
11 | 10 | 11 | 10 | 11 | 21 | 21 | |||||||||||||||||||||
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Net income (loss) available to common shareholders |
22 | 50 | 107 | 86 | (112 | ) | 513 | (26 | ) | |||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
| | | | | 21 | | |||||||||||||||||||||
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Net income (loss) available to common shareholders and assumed conversion of preferred shares |
22 | 50 | 107 | 86 | (112 | ) | 534 | (26 | ) | |||||||||||||||||||
Net income (loss) available to common shareholders |
22 | 50 | 107 | 86 | (112 | ) | 513 | (26 | ) | |||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1] |
99 | 7 | (222 | ) | (515 | ) | 368 | (136 | ) | (147 | ) | |||||||||||||||||
Less: Loss on extinguishment of debt, net of tax |
| | | | (587 | ) | | (587 | ) | |||||||||||||||||||
Less: Income (loss) from discontinued operations |
(80 | ) | 3 | 1 | (1 | ) | (1 | ) | 82 | (2 | ) | |||||||||||||||||
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Core earnings available to common shareholders |
3 | 40 | 328 | 602 | 108 | 567 | 710 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
| | 11 | 10 | | 21 | 21 | |||||||||||||||||||||
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Core earnings available to common shareholders and assumed conversion of preferred shares |
$ | 3 | $ | 40 | $ | 339 | $ | 612 | $ | 108 | $ | 588 | $ | 731 | ||||||||||||||
Denominator: |
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Weighted average common shares outstanding (basic) |
445.1 | 445.3 | 445.1 | 440.7 | 438.2 | 444.9 | 439.4 | |||||||||||||||||||||
Dilutive effect of stock compensation |
1.0 | 0.7 | 0.7 | 1.9 | 1.5 | 1.4 | 1.8 | |||||||||||||||||||||
Dilutive effect of CPP Warrants [2] |
32.9 | 27.4 | 23.1 | 26.4 | 25.1 | 33.4 | 25.7 | |||||||||||||||||||||
Dilutive effect of Allianz warrants [3] |
3.4 | | | | | 5.2 | | |||||||||||||||||||||
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Weighted average common shares outstanding and dilutive potential common shares (diluted), before assumed conversion of preferred shares |
482.4 | 473.4 | 468.9 | 469.0 | 464.8 | 484.9 | 466.9 | |||||||||||||||||||||
Dilutive effect of assumed conversion of MCP [4] |
| | 20.7 | 20.9 | | 20.7 | 21.0 | |||||||||||||||||||||
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Weighted average common shares outstanding and dilutive potential common shares (diluted) and assumed conversion of preferred shares |
482.4 | 473.4 | 489.6 | 489.9 | 464.8 | 505.6 | 487.9 | |||||||||||||||||||||
Basic earnings (losses) per common share |
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Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.24 | $ | 0.20 | $ | (0.26 | ) | $ | 1.15 | $ | (0.06 | ) | ||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
0.22 | 0.02 | (0.50 | ) | (1.17 | ) | 0.84 | (0.30 | ) | (0.33 | ) | |||||||||||||||||
Less: Loss on extinguishment of debt, net of tax |
| | | | (1.34 | ) | | (1.34 | ) | |||||||||||||||||||
Less: Income (loss) from discontinued operations |
(0.18 | ) | | | | (0.01 | ) | 0.18 | (0.01 | ) | ||||||||||||||||||
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Core earnings available to common shareholders |
$ | 0.01 | $ | 0.09 | $ | 0.74 | $ | 1.37 | $ | 0.25 | $ | 1.27 | $ | 1.62 | ||||||||||||||
Diluted earnings per common share [5] |
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Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.23 | $ | 0.18 | $ | (0.26 | ) | $ | 1.06 | $ | (0.06 | ) | ||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
| | | | | | | |||||||||||||||||||||
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Net income (loss) available to common shareholders and assumed conversion of preferred shares |
$ | 0.05 | $ | 0.11 | $ | 0.23 | $ | 0.18 | $ | (0.26 | ) | $ | 1.06 | $ | (0.06 | ) | ||||||||||||
Net income (loss) available to common shareholders |
$ | 0.05 | $ | 0.11 | $ | 0.23 | $ | 0.18 | $ | (0.26 | ) | $ | 1.06 | $ | (0.06 | ) | ||||||||||||
Add: Difference arising from shares used for the denominator between net loss and core earnings |
| | | | 0.01 | | 0.01 | |||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings |
0.20 | 0.02 | (0.47 | ) | (1.10 | ) | 0.79 | (0.28 | ) | (0.30 | ) | |||||||||||||||||
Less: Loss on extinguishment of debt, net of tax |
| | | | (1.26 | ) | | (1.26 | ) | |||||||||||||||||||
Less: Income (loss) from discontinued operations |
(0.16 | ) | 0.01 | | | (0.01 | ) | 0.17 | (0.01 | ) | ||||||||||||||||||
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Core earnings available to common shareholders |
0.01 | 0.08 | 0.70 | 1.28 | 0.23 | 1.17 | 1.52 | |||||||||||||||||||||
Add: Impact of assumed conversion of preferred shares to common [4] |
| | (0.01 | ) | (0.03 | ) | | (0.01 | ) | (0.02 | ) | |||||||||||||||||
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Core earnings available to common shareholders and assumed conversion of preferred shares |
0.01 | 0.08 | 0.69 | 1.25 | 0.23 | 1.16 | 1.50 | |||||||||||||||||||||
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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] | The Hartford issued 52.1 million warrants to purchase The Hartford Common Stock to the U.S. Department of the Treasury on June 26, 2009 at a strike price of $9.79. The declaration of a quarterly common stock dividend of $0.10 during the third quarter of 2011 triggered a provision in The Hartfords Warrant Agreement with The Bank of New York Mellon resulting in an adjustment to the warrant exercise price to $9.649 from $9.676. |
[3] | The Hartford issued 69.4 million warrants to purchase The Hartford Common Stock to Allianz on October 17, 2008 at a strike price of $25.23. On March 30, 2012, The Hartford repurchased 69.4 million warrants for $300 million as part of the company's existing $500 million equity repurchase program. |
[4] | The Hartford issued $575 of mandatory convertible preferred stock which, at June 30, 2011, September 30, 2011, and June 30, 2012 would have been convertible into 20.7 million, 20.8, and 21.0 million weighted average shares of common stock, respectively. However, the impact of applying the "if-converted" method to these shares was anti-dilutive and, therefore, the shares were not included in core earnings available to common shareholders and assumed conversion of preferred shares. Additionally at December 31, 2011 and March 31, 2012, the shares were not included in net income available to common shareholders and assumed conversion of preferred shares. At December 31, 2011 and March 31, 2012, the mandatory convertible preferred stock would have been convertible into 20.7 million and 20.9 million weighted average shares of common stock, respectively. |
[5] | As a result of anti-dilutive impact, in periods of a loss, weighted average common shares outstanding (basic) are used in the calculation of diluted earnings per share. |
8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER-TAX AND DAC
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED |
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Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Net Realized Capital Gains (Losses), After-Tax and DAC |
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Gains/losses on sales, net |
$ | 174 | $ | 52 | $ | 69 | $ | 112 | $ | 56 | (68 | %) | (50 | %) | $ | 126 | $ | 168 | 33 | % | ||||||||||||||||||||
Net impairment losses |
(14 | ) | (34 | ) | (34 | ) | (16 | ) | (60 | ) | NM | NM | (44 | ) | (76 | ) | (73 | %) | ||||||||||||||||||||||
Japanese fixed annuity contract hedges, net |
4 | 5 | 4 | (13 | ) | 1 | (75 | %) | NM | (7 | ) | (12 | ) | (71 | %) | |||||||||||||||||||||||||
Results of variable annuity hedge program |
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U.S. GMWB derivatives, net |
(19 | ) | (167 | ) | (74 | ) | 78 | (55 | ) | (189 | %) | NM | 3 | 23 | NM | |||||||||||||||||||||||||
U.S. macro hedge |
(11 | ) | 24 | (29 | ) | (76 | ) | (1 | ) | 91 | % | 99 | % | (39 | ) | (77 | ) | (97 | %) | |||||||||||||||||||||
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Total U.S. Program |
(30 | ) | (143 | ) | (103 | ) | 2 | (56 | ) | (87 | %) | NM | (36 | ) | (54 | ) | (50 | %) | ||||||||||||||||||||||
International program |
67 | 621 | (98 | ) | (760 | ) | 508 | NM | NM | (85 | ) | (252 | ) | (196 | %) | |||||||||||||||||||||||||
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Total results of variable annuity hedge program |
37 | 478 | (201 | ) | (758 | ) | 452 | NM | NM | (121 | ) | (306 | ) | (153 | %) | |||||||||||||||||||||||||
Other net gain (loss) [1] |
(52 | ) | (228 | ) | (17 | ) | 137 | (56 | ) | (8 | %) | NM | (41 | ) | 81 | NM | ||||||||||||||||||||||||
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Total net realized capital gains (losses), after-tax and DAC, excluding unlock |
$ | 149 | $ | 273 | $ | (179 | ) | $ | (538 | ) | $ | 393 | 164 | % | NM | $ | (87 | ) | $ | (145 | ) | (67 | %) | |||||||||||||||||
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DAC unlock impacts on net realized gains (losses) |
(49 | ) | (262 | ) | (40 | ) | 22 | (19 | ) | 61 | % | NM | (48 | ) | 3 | NM | ||||||||||||||||||||||||
Total net realized captial gains (losses), after-tax and DAC |
100 | 11 | (219 | ) | (516 | ) | 374 | NM | NM | (135 | ) | (142 | ) | (5 | %) | |||||||||||||||||||||||||
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 gains (losses) |
$ | 100 | $ | 11 | $ | (219 | ) | $ | (516 | ) | $ | 374 | NM | NM | $ | (135 | ) | $ | (142 | ) | (5 | %) | ||||||||||||||||||
Less: total net realized capital gains (losses) included in core earnings (losses) |
1 | 4 | 3 | (1 | ) | 6 | NM | NM | 1 | 5 | NM | |||||||||||||||||||||||||||||
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Total net realized capital gains (losses), after tax and DAC, excluded from core earnings (losses) |
$ | 99 | $ | 7 | $ | (222 | ) | $ | (515 | ) | $ | 368 | NM | NM | $ | (136 | ) | $ | (147 | ) | (8 | %) | ||||||||||||||||||
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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 | ||||||||||||||||||||
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
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Numerator [1]: |
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Net income available to common shareholders - last 12 months |
$ | 1,774 | $ | 1,208 | $ | 712 | $ | 307 | $ | 173 | ||||||||||
Core earnings available to common shareholders - last 12 months |
$ | 1,802 | $ | 1,173 | $ | 977 | $ | 1,015 | $ | 1,120 | ||||||||||
Denominator [2]: |
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Average common stockholders equity, including AOCI |
18,079.0 | 20,387.0 | 20,120.0 | 20,360.5 | 21,059.5 | |||||||||||||||
Less: Average AOCI |
(720.6 | ) | 708.2 | 130.5 | 295.0 | 1,115.5 | ||||||||||||||
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Average common stockholders' equity, excluding AOCI |
18,799.6 | 19,678.8 | 19,989.5 | 20,065.5 | 19,944.0 | |||||||||||||||
ROE (net income last 12 months to common stockholders equity, including AOCI) [3] |
9.8 | % | 5.9 | % | 3.5 | % | 1.5 | % | 0.8 | % | ||||||||||
ROE (core earnings last 12 months to common stockholders equity, excluding AOCI) [3] |
9.6 | % | 6.0 | % | 4.9 | % | 5.1 | % | 5.6 | % |
[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
COMMERCIAL MARKETS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 2,579 | $ | 2,553 | $ | 2,554 | $ | 2,514 | $ | 2,502 | (3 | %) | | $ | 5,105 | $ | 5,016 | (2 | %) | |||||||||||||||||||||
Fee income |
14 | 16 | 16 | 15 | 16 | 14 | % | 7 | % | 30 | 31 | 3 | % | |||||||||||||||||||||||||||
Net investment income |
345 | 319 | 311 | 334 | 346 | | 4 | % | 691 | 680 | (2 | %) | ||||||||||||||||||||||||||||
Other revenues |
26 | 28 | 20 | 22 | 26 | | 18 | % | 49 | 48 | (2 | %) | ||||||||||||||||||||||||||||
Net realized capital gains (losses) |
23 | (45 | ) | 6 | 63 | (16 | ) | NM | NM | (14 | ) | 47 | NM | |||||||||||||||||||||||||||
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Total revenues |
2,987 | 2,871 | 2,907 | 2,948 | 2,874 | (4 | %) | (3 | %) | 5,861 | 5,822 | (1 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
1,997 | 1,983 | 2,080 | 1,886 | 1,847 | (8 | %) | (2 | %) | 3,827 | 3,733 | (2 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
239 | 238 | 238 | 239 | 239 | | | 476 | 478 | | ||||||||||||||||||||||||||||||
Insurance operating costs and other expenses |
580 | 567 | 522 | 549 | 541 | (7 | %) | (1 | %) | 1,172 | 1,090 | (7 | %) | |||||||||||||||||||||||||||
Goodwill impairment |
| | 30 | | | | | | | | ||||||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 4 | | | | 4 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
2,816 | 2,788 | 2,870 | 2,674 | 2,631 | (7 | %) | (2 | %) | 5,475 | 5,305 | (3 | %) | |||||||||||||||||||||||||||
Income from continuing operations before income taxes |
171 | 83 | 37 | 274 | 243 | 42 | % | (11 | %) | 386 | 517 | 34 | % | |||||||||||||||||||||||||||
Income tax expense (benefit) [1] |
9 | 3 | (15 | ) | 66 | 58 | NM | (12 | %) | 50 | 124 | 148 | % | |||||||||||||||||||||||||||
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Income from continuing operations, net of tax |
162 | 80 | 52 | 208 | 185 | 14 | % | (11 | %) | 336 | 393 | 17 | % | |||||||||||||||||||||||||||
Income (loss) from discontinued operations, net of tax |
(3 | ) | (2 | ) | (5 | ) | (1 | ) | (1 | ) | 67 | % | | 157 | (2 | ) | NM | |||||||||||||||||||||||
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Net income |
159 | 78 | 47 | 207 | 184 | 16 | % | (11 | %) | 493 | 391 | (21 | %) | |||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations, net of tax |
(3 | ) | (2 | ) | (5 | ) | (1 | ) | (1 | ) | 67 | % | | 157 | (2 | ) | NM | |||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings [1] |
36 | (27 | ) | 6 | 41 | (9 | ) | NM | NM | 14 | 32 | 129 | % | |||||||||||||||||||||||||||
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Core earnings |
$ | 126 | $ | 107 | $ | 46 | $ | 167 | $ | 194 | 54 | % | 16 | % | $ | 322 | $ | 361 | 12 | % | ||||||||||||||||||||
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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. |
11
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
||||||||||||||||||||||||||||||||||||||||
Written premiums |
1,498 | 1,551 | 1,482 | 1,687 | 1,516 | 1 | % | (10 | %) | 3,143 | 3,203 | 2 | % | |||||||||||||||||||||||||||
Change in unearned premium reserve |
(19 | ) | (2 | ) | (77 | ) | 130 | (36 | ) | (89 | %) | NM | 128 | 94 | (27 | %) | ||||||||||||||||||||||||
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Earned premiums |
1,517 | 1,553 | 1,559 | 1,557 | 1,552 | 2 | % | | 3,015 | 3,109 | 3 | % | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses |
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Current accident year before catastrophes [1] |
950 | 1,085 | 1,142 | 1,027 | 995 | 5 | % | (3 | %) | 1,912 | 2,022 | 6 | % | |||||||||||||||||||||||||||
Current accident year catastrophes |
166 | 93 | 15 | 32 | 74 | (55 | %) | 131 | % | 212 | 106 | (50 | %) | |||||||||||||||||||||||||||
Prior accident years [2] [3] |
31 | (9 | ) | 109 | 20 | 19 | (39 | %) | (5 | %) | 25 | 39 | 56 | % | ||||||||||||||||||||||||||
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Total losses and loss adjustment expenses |
1,147 | 1,169 | 1,266 | 1,079 | 1,088 | (5 | %) | 1 | % | 2,149 | 2,167 | 1 | % | |||||||||||||||||||||||||||
Underwriting expenses [4] |
460 | 453 | 429 | 476 | 466 | 1 | % | (2 | %) | 922 | 942 | 2 | % | |||||||||||||||||||||||||||
Dividends to policyholders [5] |
4 | 5 | 5 | (2 | ) | 5 | 25 | % | NM | 8 | 3 | (63 | %) | |||||||||||||||||||||||||||
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Underwriting results |
(94 | ) | (74 | ) | (141 | ) | 4 | (7 | ) | 93 | % | NM | (64 | ) | (3 | ) | 95 | % | ||||||||||||||||||||||
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Net investment income |
239 | 217 | 212 | 235 | 239 | | 2 | % | 481 | 474 | (1 | %) | ||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
(1 | ) | (2 | ) | | | | 100 | % | | (3 | ) | | 100 | % | |||||||||||||||||||||||||
Other expenses |
(34 | ) | (35 | ) | (29 | ) | (26 | ) | (14 | ) | 59 | % | 46 | % | (74 | ) | (40 | ) | 46 | % | ||||||||||||||||||||
Goodwill impairment |
| | (30 | ) | | | | | | | | |||||||||||||||||||||||||||||
Restructuring and other costs |
| | | | (4 | ) | | | | (4 | ) | | ||||||||||||||||||||||||||||
Income tax (expense) benefit |
(14 | ) | (19 | ) | 17 | (51 | ) | (54 | ) | NM | (6 | %) | (67 | ) | (105 | ) | (57 | %) | ||||||||||||||||||||||
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Core earnings |
96 | 87 | 29 | 162 | 160 | 67 | % | (1 | %) | 273 | 322 | 18 | % | |||||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax |
25 | (32 | ) | 8 | 28 | (10 | ) | NM | NM | 11 | 18 | 64 | % | |||||||||||||||||||||||||||
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Income from continuing operations, net of tax |
121 | 55 | 37 | 190 | 150 | 24 | % | (21 | %) | 284 | 340 | 20 | % | |||||||||||||||||||||||||||
Add: Income (loss) from discontinued operations, net of tax |
(3 | ) | (2 | ) | (5 | ) | (1 | ) | (1 | ) | 67 | % | | 157 | (2 | ) | NM | |||||||||||||||||||||||
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Net income |
$ | 118 | $ | 53 | $ | 32 | $ | 189 | $ | 149 | 26 | % | (21 | %) | $ | 441 | $ | 338 | (23 | %) | ||||||||||||||||||||
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[1] | 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 | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Auto liability |
| (4 | ) | 1 | 12 | 19 | (1 | ) | 31 | |||||||||||||||||||
Workers compensation |
4 | 7 | 161 | 8 | 43 | 3 | 51 | |||||||||||||||||||||
Package business |
3 | (42 | ) | (30 | ) | (16 | ) | (16 | ) | (4 | ) | (32 | ) | |||||||||||||||
General liability |
6 | (8 | ) | (44 | ) | (16 | ) | (24 | ) | 12 | (40 | ) | ||||||||||||||||
Professional liability |
2 | 29 | 7 | 9 | 9 | (7 | ) | 18 | ||||||||||||||||||||
Discount accretion on workers compensation |
10 | 15 | 6 | 29 | 8 | 17 | 37 | |||||||||||||||||||||
Catastrophes |
10 | 2 | 5 | 3 | (39 | ) | 5 | (36 | ) | |||||||||||||||||||
Other reserve re-estimates, net |
(4 | ) | (8 | ) | 3 | (9 | ) | 19 | | 10 | ||||||||||||||||||
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Total prior accident years development |
31 | (9 | ) | 109 | 20 | 19 | 25 | 39 |
[3] | The three months ended June 30, 2012 includes one time reserve releases on certain prior year catastrophes primarily related to 2001 World Trade Center workers compensation claims. |
[4] | The three months ended December 31, 2011 included taxes, licenses and fees reserve releases of $12. |
[5] | The three months ended March 31, 2012 included a decrease in prior year dividends of $8. |
12
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
$ | (94 | ) | $ | (74 | ) | $ | (141 | ) | $ | 4 | $ | (7 | ) | 93 | % | NM | $ | (64 | ) | $ | (3 | ) | 95 | % | |||||||||||||||
UNDERWRITING RATIOS |
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Losses and loss adjustment expenses |
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Current accident year before catastrophes [1] |
62.6 | 69.9 | 73.3 | 66.0 | 64.1 | (1.5 | ) | 1.9 | 63.4 | 65.0 | (1.6 | ) | ||||||||||||||||||||||||||||
Current accident year catastrophes |
11.0 | 6.0 | 1.0 | 2.1 | 4.8 | 6.2 | (2.7 | ) | 7.0 | 3.4 | 3.6 | |||||||||||||||||||||||||||||
Prior accident years [2] |
2.1 | (0.6 | ) | 7.0 | 1.3 | 1.2 | 0.9 | 0.1 | 0.8 | 1.3 | (0.5 | ) | ||||||||||||||||||||||||||||
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Total losses and loss adjustment expenses |
75.6 | 75.3 | 81.2 | 69.3 | 70.1 | 5.5 | (0.8 | ) | 71.3 | 69.7 | 1.6 | |||||||||||||||||||||||||||||
Expenses |
30.3 | 29.2 | 27.5 | 30.6 | 30.0 | 0.3 | 0.6 | 30.6 | 30.3 | 0.3 | ||||||||||||||||||||||||||||||
Policyholder dividends |
0.3 | 0.3 | 0.3 | (0.1 | ) | 0.3 | | (0.4 | ) | 0.3 | 0.1 | 0.2 | ||||||||||||||||||||||||||||
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Combined ratio |
106.2 | 104.8 | 109.0 | 99.7 | 100.5 | 5.7 | (0.8 | ) | 102.1 | 100.1 | 2.0 | |||||||||||||||||||||||||||||
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Catastrophes |
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Current year |
11.0 | 6.0 | 1.0 | 2.1 | 4.8 | 6.2 | (2.7 | ) | 7.0 | 3.4 | 3.6 | |||||||||||||||||||||||||||||
Prior year |
0.7 | 0.1 | 0.3 | 0.2 | (2.5 | ) | 3.2 | 2.7 | 0.2 | (1.2 | ) | 1.4 | ||||||||||||||||||||||||||||
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Catastrophe ratio |
11.6 | 6.1 | 1.3 | 2.2 | 2.3 | 9.3 | (0.1 | ) | 7.2 | 2.3 | 4.9 | |||||||||||||||||||||||||||||
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Combined ratio before catastrophes |
94.5 | 98.6 | 107.8 | 97.5 | 98.2 | (3.7 | ) | (0.7 | ) | 94.9 | 97.8 | (2.9 | ) | |||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
93.1 | 99.4 | 101.1 | 96.4 | 94.5 | (1.4 | ) | 1.9 | 94.2 | 95.4 | (1.2 | ) | ||||||||||||||||||||||||||||
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[1] | The three months ended September 30, 2011 included current accident year reserve strengthening of 3.0 points, predominantly related to workers compensation business. The three months ended December 31, 2011 included current accident year reserve strengthening of 5.6 points, predominantly related to workers compensation business. |
[2] | Refer to footnote 2 on page 12 for a summary of reserve strengthenings (releases) that are included within prior accident years development. |
13
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
SUPPLEMENTAL DATA
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
WRITTEN PREMIUMS [1] |
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Small Commercial |
$ | 725 | $ | 719 | $ | 688 | $ | 815 | $ | 769 | 6 | % | (6 | %) | $ | 1,480 | $ | 1,584 | 7 | % | ||||||||||||||||||||
Middle Market |
$ | 537 | $ | 572 | $ | 569 | $ | 581 | $ | 512 | (5 | %) | (12 | %) | $ | 1,139 | $ | 1,093 | (4 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
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Small Commercial |
$ | 692 | $ | 715 | $ | 719 | $ | 726 | $ | 738 | 7 | % | 2 | % | $ | 1,371 | $ | 1,464 | 7 | % | ||||||||||||||||||||
Middle Market |
$ | 576 | $ | 587 | $ | 584 | $ | 577 | $ | 562 | (3 | %) | (3 | %) | $ | 1,150 | $ | 1,139 | (1 | %) | ||||||||||||||||||||
SMALL COMMERCIAL |
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Combined ratio |
104.1 | 96.2 | 101.1 | 97.3 | 94.8 | 9.3 | 2.5 | 97.7 | 96.1 | 1.6 | ||||||||||||||||||||||||||||||
Combined ratio before catastrophes |
85.1 | 89.8 | 99.5 | 93.1 | 88.7 | (3.6 | ) | 4.4 | 86.1 | 90.9 | (4.8 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
84.4 | 92.5 | 92.9 | 91.8 | 87.1 | (2.7 | ) | 4.7 | 86.0 | 89.4 | (3.4 | ) | ||||||||||||||||||||||||||||
MIDDLE MARKET |
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Combined ratio |
105.8 | 109.4 | 121.0 | 98.8 | 104.1 | 1.7 | (5.3 | ) | 104.9 | 101.4 | 3.5 | |||||||||||||||||||||||||||||
Combined ratio before catastrophes |
99.2 | 101.3 | 119.2 | 97.6 | 102.5 | (3.3 | ) | (4.9 | ) | 100.4 | 100.0 | 0.4 | ||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
98.2 | 103.7 | 108.9 | 99.2 | 98.4 | (0.2 | ) | 0.8 | 99.5 | 98.8 | 0.7 | |||||||||||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) |
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Renewal Written Price Increases |
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Small Commercial and Middle Market |
3 | % | 4 | % | 5 | % | 7 | % | 7 | % | 4 | % | | 3 | % | 7 | % | 4 | % | |||||||||||||||||||||
Policy Count Retention |
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Small Commercial |
83 | % | 82 | % | 83 | % | 84 | % | 82 | % | (1 | %) | (2 | %) | 83 | % | 83 | % | | |||||||||||||||||||||
Middle Market |
79 | % | 77 | % | 77 | % | 79 | % | 73 | % | (6 | %) | (6 | %) | 79 | % | 76 | % | (3 | %) | ||||||||||||||||||||
New Business Premium $ |
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Small Commercial |
$ | 146 | $ | 135 | $ | 119 | $ | 145 | $ | 135 | (8 | %) | (7 | %) | $ | 289 | $ | 280 | (3 | %) | ||||||||||||||||||||
Middle Market |
$ | 107 | $ | 105 | $ | 86 | $ | 91 | $ | 78 | (27 | %) | (14 | %) | $ | 232 | $ | 169 | (27 | %) | ||||||||||||||||||||
Policies in force |
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Small Commercial |
1,165,123 | 1,172,591 | 1,170,947 | 1,179,995 | 1,188,147 | 2 | % | 1 | % | |||||||||||||||||||||||||||||||
Middle Market |
85,809 | 84,421 | 82,695 | 81,159 | 78,676 | (8 | %) | (3 | %) |
[1] | The difference between the written premiums and earned premiums is attributable to the change in unearned premium reserve. |
14
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 1,062 | $ | 1,000 | $ | 995 | $ | 957 | $ | 950 | (11 | %) | (1 | %) | $ | 2,090 | $ | 1,907 | (9 | %) | ||||||||||||||||||||
Fee income |
14 | 16 | 16 | 15 | 16 | 14 | % | 7 | % | 30 | 31 | 3 | % | |||||||||||||||||||||||||||
Net investment income |
106 | 102 | 99 | 99 | 107 | 1 | % | 8 | % | 210 | 206 | (2 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
10 | 6 | (5 | ) | 20 | | (100 | %) | (100 | %) | (4 | ) | 20 | NM | ||||||||||||||||||||||||||
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Total revenues |
1,192 | 1,124 | 1,105 | 1,091 | 1,073 | (10 | %) | (2 | %) | 2,326 | 2,164 | (7 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
850 | 814 | 814 | 807 | 759 | (11 | %) | (6 | %) | 1,678 | 1,566 | (7 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
9 | 9 | 8 | 8 | 8 | (11 | %) | | 18 | 16 | (11 | %) | ||||||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
286 | 274 | 270 | 258 | 261 | (9 | %) | 1 | % | 577 | 519 | (10 | %) | |||||||||||||||||||||||||||
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Total benefits and expenses |
1,145 | 1,097 | 1,092 | 1,073 | 1,028 | (10 | %) | (4 | %) | 2,273 | 2,101 | (8 | %) | |||||||||||||||||||||||||||
Income from continuing operations before income taxes |
47 | 27 | 13 | 18 | 45 | (4 | %) | 150 | % | 53 | 63 | 19 | % | |||||||||||||||||||||||||||
Income tax expense (benefit) |
6 | 2 | (2 | ) | | 10 | 67 | % | | 1 | 10 | NM | ||||||||||||||||||||||||||||
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Net income |
41 | 25 | 15 | 18 | 35 | (15 | %) | 94 | % | 52 | 53 | 2 | % | |||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings |
11 | 5 | (2 | ) | 13 | 1 | (91 | %) | (92 | %) | 3 | 14 | NM | |||||||||||||||||||||||||||
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Core earnings |
$ | 30 | $ | 20 | $ | 17 | $ | 5 | $ | 34 | 13 | % | NM | $ | 49 | $ | 39 | (20 | %) | |||||||||||||||||||||
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Earnings margin (After-tax) |
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Net income |
3.6 | % | 2.2 | % | 1.4 | % | 1.7 | % | 3.3 | % | (0.3 | ) | 1.6 | 2.3 | % | 2.5 | % | 0.2 | ||||||||||||||||||||||
Core earnings |
2.6 | % | 1.8 | % | 1.5 | % | 0.5 | % | 3.2 | % | 0.6 | 2.7 | 2.1 | % | 1.8 | % | (0.3 | ) |
[1] | The six months ended June 30, 2011 includes a one-time payment to a third-party administrator of $8, before-tax. |
15
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
SUPPLEMENTAL DATA
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
PREMIUMS |
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Fully Insured Ongoing Premiums |
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Group disability |
$ | 452 | $ | 452 | $ | 452 | $ | 428 | $ | 423 | (6 | %) | (1 | %) | $ | 914 | $ | 851 | (7 | %) | ||||||||||||||||||||
Group life |
512 | 501 | 495 | 476 | 478 | (7 | %) | | 1,028 | 954 | (7 | %) | ||||||||||||||||||||||||||||
Other |
49 | 47 | 48 | 50 | 49 | | (2 | %) | 99 | 99 | | |||||||||||||||||||||||||||||
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Total fully insured ongoing premiums |
$ | 1,013 | $ | 1,000 | $ | 995 | $ | 954 | $ | 950 | (6 | %) | | $ | 2,041 | $ | 1,904 | (7 | %) | |||||||||||||||||||||
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Total buyouts [1] |
49 | | | 3 | | (100 | %) | (100 | %) | 49 | 3 | (94 | %) | |||||||||||||||||||||||||||
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Total premiums |
1,062 | 1,000 | 995 | 957 | 950 | (11 | %) | (1 | %) | 2,090 | 1,907 | (9 | %) | |||||||||||||||||||||||||||
Group disability premium equivalents [2] |
107 | 109 | 111 | 110 | 111 | 4 | % | 1 | % | 212 | 221 | 4 | % | |||||||||||||||||||||||||||
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Total premiums and premium equivalent |
$ | 1,169 | $ | 1,109 | $ | 1,106 | $ | 1,067 | $ | 1,061 | (9 | %) | (1 | %) | $ | 2,302 | $ | 2,128 | (8 | %) | ||||||||||||||||||||
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SALES (GROSS ANNUALIZED NEW PREMIUMS) |
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Fully Insured Ongoing Sales |
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Group disability |
$ | 41 | $ | 36 | $ | 33 | $ | 86 | $ | 27 | (34 | %) | (69 | %) | $ | 150 | $ | 113 | (25 | %) | ||||||||||||||||||||
Group life |
48 | 53 | 40 | 135 | 37 | (23 | %) | (73 | %) | 176 | 172 | (2 | %) | |||||||||||||||||||||||||||
Other |
3 | 2 | 5 | 7 | 2 | (33 | %) | (71 | %) | 10 | 9 | (10 | %) | |||||||||||||||||||||||||||
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Total fully insured ongoing sales |
92 | 91 | 78 | 228 | 66 | (28 | %) | (71 | %) | 336 | 294 | (13 | %) | |||||||||||||||||||||||||||
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Total buyouts [1] |
49 | (1 | ) | | 2 | 1 | (98 | %) | (50 | %) | 49 | 3 | (94 | %) | ||||||||||||||||||||||||||
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Total sales |
141 | 90 | 78 | 230 | 67 | (52 | %) | (71 | %) | 385 | 297 | (23 | %) | |||||||||||||||||||||||||||
Group disability premium equivalents [2] |
22 | 23 | 14 | 31 | 3 | (86 | %) | (90 | %) | 69 | 34 | (51 | %) | |||||||||||||||||||||||||||
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Total sales and premium equivalents |
$ | 163 | $ | 113 | $ | 92 | $ | 261 | $ | 70 | (57 | %) | (73 | %) | $ | 454 | $ | 331 | (27 | %) | ||||||||||||||||||||
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RATIOS [3] |
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Loss ratio |
78.0 | % | 80.1 | % | 80.5 | % | 83.0 | % | 78.6 | % | 0.6 | (4.4 | ) | 78.7 | % | 80.8 | % | 2.1 | ||||||||||||||||||||||
Expense ratio [4] |
28.7 | % | 27.9 | % | 27.5 | % | 27.5 | % | 27.8 | % | (0.9 | ) | 0.3 | 28.7 | % | 27.6 | % | (1.1 | ) | |||||||||||||||||||||
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GAAP RESERVES [5] |
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Group disability |
$ | 5,225 | $ | 5,259 | $ | 5,307 | $ | 5,342 | $ | 5,348 | 2 | % | | |||||||||||||||||||||||||||
Group life |
1,210 | 1,206 | 1,202 | 1,174 | 1,159 | (4 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Other |
75 | 75 | 77 | 75 | 73 | (3 | %) | (3 | %) | |||||||||||||||||||||||||||||||
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Total GAAP reserves |
$ | 6,510 | $ | 6,540 | $ | 6,586 | $ | 6,591 | $ | 6,580 | 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 six months ended June 30, 2011 includes a one-time payment to a third-party administrator totaling 0.3 points. |
[5] | Reserve balances for the three months ended June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012 are net of reinsurance recoverables of $219, $225, $233, $239, and $244, respectively. |
16
CONSUMER MARKETS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
INCOME STATEMENTS
THREE MONTHS ENDED | Year Over Year |
Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 939 | $ | 930 | $ | 922 | $ | 909 | $ | 904 | (4 | %) | (1 | %) | $ | 1,895 | $ | 1,813 | (4 | %) | ||||||||||||||||||||
Net investment income |
49 | 46 | 42 | 43 | 41 | (16 | %) | (5 | %) | 99 | 84 | (15 | %) | |||||||||||||||||||||||||||
Other revenues |
36 | 35 | 45 | 37 | 35 | (3 | %) | (5 | %) | 76 | 72 | (5 | %) | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
2 | (10 | ) | 1 | 7 | (2 | ) | NM | NM | (2 | ) | 5 | NM | |||||||||||||||||||||||||||
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Total revenues |
1,026 | 1,001 | 1,010 | 996 | 978 | (5 | %) | (2 | %) | 2,068 | 1,974 | (5 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
904 | 767 | 616 | 558 | 788 | (13 | %) | 41 | % | 1,503 | 1,346 | (10 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
85 | 84 | 83 | 83 | 84 | (1 | %) | 1 | % | 170 | 167 | (2 | %) | |||||||||||||||||||||||||||
Insurance operating costs and other expenses [1] |
311 | 180 | 183 | 196 | 187 | (40 | %) | (5 | %) | 508 | 383 | (25 | %) | |||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 1 | | | | 1 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
1,300 | 1,031 | 882 | 837 | 1,060 | (18 | %) | 27 | % | 2,181 | 1,897 | (13 | %) | |||||||||||||||||||||||||||
Income (loss) before income taxes |
(274 | ) | (30 | ) | 128 | 159 | (82 | ) | 70 | % | NM | (113 | ) | 77 | NM | |||||||||||||||||||||||||
Income tax expense (benefit) |
(102 | ) | (14 | ) | 41 | 51 | (32 | ) | 69 | % | NM | (49 | ) | 19 | NM | |||||||||||||||||||||||||
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Net income (loss) |
(172 | ) | (16 | ) | 87 | 108 | (50 | ) | 71 | % | NM | (64 | ) | 58 | NM | |||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (losses) |
5 | (6 | ) | 2 | 6 | (2 | ) | NM | NM | 2 | 4 | 100 | % | |||||||||||||||||||||||||||
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Core earnings (losses) |
$ | (177 | ) | $ | (10 | ) | $ | 85 | $ | 102 | $ | (48 | ) | 73 | % | NM | $ | (66 | ) | $ | 54 | NM | ||||||||||||||||||
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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. |
17
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
OPERATING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
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Written premiums |
$ | 969 | $ | 964 | $ | 858 | $ | 861 | $ | 950 | (2 | %) | 10 | % | $ | 1,853 | $ | 1,811 | (2 | %) | ||||||||||||||||||||
Change in unearned premium reserve |
30 | 34 | (64 | ) | (48 | ) | 46 | 53 | % | NM | (42 | ) | (2 | ) | 95 | % | ||||||||||||||||||||||||
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Earned premiums |
939 | 930 | 922 | 909 | 904 | (4 | %) | (1 | %) | 1,895 | 1,813 | (4 | %) | |||||||||||||||||||||||||||
Losses and loss adjustment expenses |
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Current accident year before catastrophes |
623 | 663 | 634 | 574 | 595 | (4 | %) | 4 | % | 1,239 | 1,169 | (6 | %) | |||||||||||||||||||||||||||
Current accident year catastrophes |
281 | 113 | (1 | ) | 39 | 216 | (23 | %) | NM | 313 | 255 | (19 | %) | |||||||||||||||||||||||||||
Prior accident years [1] |
| (9 | ) | (17 | ) | (55 | ) | (23 | ) | | 58 | % | (49 | ) | (78 | ) | (59 | %) | ||||||||||||||||||||||
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Total losses and loss adjustment expenses |
904 | 767 | 616 | 558 | 788 | (13 | %) | 41 | % | 1,503 | 1,346 | (10 | %) | |||||||||||||||||||||||||||
Underwriting expenses |
232 | 225 | 218 | 233 | 230 | (1 | %) | (1 | %) | 466 | 463 | (1 | %) | |||||||||||||||||||||||||||
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Underwriting results |
(197 | ) | (62 | ) | 88 | 118 | (114 | ) | 42 | % | NM | (74 | ) | 4 | NM | |||||||||||||||||||||||||
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Net investment income |
49 | 46 | 42 | 43 | 41 | (16 | %) | (5 | %) | 99 | 84 | (15 | %) | |||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives, before-tax |
(1 | ) | | (1 | ) | (1 | ) | | 100 | % | 100 | % | (1 | ) | (1 | ) | | |||||||||||||||||||||||
Other expenses [2] |
(128 | ) | (4 | ) | (3 | ) | (9 | ) | (5 | ) | 96 | % | 44 | % | (136 | ) | (14 | ) | 90 | % | ||||||||||||||||||||
Restructuring and other costs |
| | | | (1 | ) | | | | (1 | ) | | ||||||||||||||||||||||||||||
Income tax (expense) benefit |
100 | 10 | (41 | ) | (49 | ) | 31 | (69 | %) | NM | 46 | (18 | ) | NM | ||||||||||||||||||||||||||
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Core earnings (losses) |
(177 | ) | (10 | ) | 85 | 102 | (48 | ) | 73 | % | NM | (66 | ) | 54 | NM | |||||||||||||||||||||||||
Add: Net realized capital gains (losses), after-tax |
5 | (6 | ) | 2 | 6 | (2 | ) | NM | NM | 2 | 4 | 100 | % | |||||||||||||||||||||||||||
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Net income (loss) |
$ | (172 | ) | $ | (16 | ) | $ | 87 | $ | 108 | $ | (50 | ) | 71 | % | NM | $ | (64 | ) | $ | 58 | NM | ||||||||||||||||||
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[1] | Included within prior accident years development were the following reserve strengthenings (releases): |
THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Auto liability |
$ | (9 | ) | $ | (19 | ) | $ | (10 | ) | $ | (30 | ) | $ | (11 | ) | $ | (64 | ) | $ | (41 | ) | |||||||
Homeowners |
1 | 14 | (2 | ) | (5 | ) | (1 | ) | (13 | ) | (6 | ) | ||||||||||||||||
Catastrophes |
9 | | (3 | ) | (14 | ) | (9 | ) | 28 | (23 | ) | |||||||||||||||||
Other reserve re-estimates, net |
(1 | ) | (4 | ) | (2 | ) | (6 | ) | (2 | ) | | (8 | ) | |||||||||||||||
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Total prior accident years development |
$ | | $ | (9 | ) | $ | (17 | ) | $ | (55 | ) | $ | (23 | ) | $ | (49 | ) | $ | (78 | ) |
[2] | The three months ended June 30, 2011 includes a charge of $113, before-tax, related to a discontinued software program. |
18
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RESULTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
UNDERWRITING RESULTS |
$ | (197 | ) | $ | (62 | ) | $ | 88 | $ | 118 | $ | (114 | ) | 42 | % | NM | (74 | ) | 4 | NM | ||||||||||||||||||||
UNDERWRITING RATIOS |
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Losses and loss adjustment expenses |
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Current accident year before catastrophes |
66.5 | 71.3 | 68.8 | 63.1 | 65.8 | 0.7 | (2.7 | ) | 65.4 | 64.5 | 0.9 | |||||||||||||||||||||||||||||
Current accident year catastrophes |
29.9 | 12.2 | (0.1 | ) | 4.3 | 23.9 | 6.0 | (19.6 | ) | 16.5 | 14.1 | 2.4 | ||||||||||||||||||||||||||||
Prior accident years [1] |
(0.0 | ) | (1.0 | ) | (1.8 | ) | (6.1 | ) | (2.5 | ) | 2.5 | (3.6 | ) | (2.6 | ) | (4.3 | ) | 1.7 | ||||||||||||||||||||||
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Total losses and loss adjustment expenses |
96.4 | 82.5 | 66.8 | 61.4 | 87.2 | 9.2 | (25.8 | ) | 79.4 | 74.2 | 5.2 | |||||||||||||||||||||||||||||
Expenses |
24.7 | 24.2 | 23.6 | 25.6 | 25.4 | (0.7 | ) | 0.2 | 24.7 | 25.5 | (0.8 | ) | ||||||||||||||||||||||||||||
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Combined ratio |
121.1 | 106.7 | 90.5 | 87.0 | 112.6 | 8.5 | (25.6 | ) | 104.1 | 99.8 | 4.3 | |||||||||||||||||||||||||||||
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Catastrophes |
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Current year |
29.9 | 12.2 | (0.1 | ) | 4.3 | 23.9 | 6.0 | (19.6 | ) | 16.5 | 14.1 | 2.4 | ||||||||||||||||||||||||||||
Prior year |
1.0 | | (0.3 | ) | (1.5 | ) | (1.0 | ) | 2.0 | (0.5 | ) | 1.5 | (1.3 | ) | 2.8 | |||||||||||||||||||||||||
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Catastrophe ratio |
30.8 | 12.2 | (0.4 | ) | 2.8 | 22.9 | 7.9 | (20.1 | ) | 18.0 | 12.8 | 5.2 | ||||||||||||||||||||||||||||
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Combined ratio before catastrophes |
90.2 | 94.5 | 90.9 | 84.3 | 89.7 | 0.5 | (5.4 | ) | 86.0 | 87.0 | (1.0 | ) | ||||||||||||||||||||||||||||
Combined ratio before catastrophes and prior year development |
91.2 | 95.5 | 92.4 | 88.8 | 91.3 | (0.1 | ) | (2.5 | ) | 90.1 | 90.0 | 0.1 | ||||||||||||||||||||||||||||
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PRODUCT |
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Automobile |
98.0 | 99.4 | 99.0 | 88.4 | 98.8 | (0.8 | ) | (10.4 | ) | 91.5 | 93.6 | (2.1 | ) | |||||||||||||||||||||||||||
Homeowners |
175.0 | 124.1 | 72.5 | 83.8 | 144.1 | 30.9 | (60.3 | ) | 133.1 | 113.9 | 19.2 | |||||||||||||||||||||||||||||
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Total |
121.1 | 106.7 | 90.5 | 87.0 | 112.6 | 8.5 | (25.6 | ) | 104.1 | 99.8 | 4.3 | |||||||||||||||||||||||||||||
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[1] | Refer to footnote 1 on page 18 for a summary of reserve strengthenings (releases) that are included within prior accident years development. |
19
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
WRITTEN AND EARNED PREMIUMS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
BUSINESS UNIT |
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WRITTEN PREMIUMS [1] |
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AARP Direct |
$ | 724 | $ | 717 | $ | 630 | $ | 633 | $ | 710 | (2 | %) | 12 | % | $ | 1,371 | $ | 1,343 | (2 | %) | ||||||||||||||||||||
AARP Agency |
17 | 19 | 22 | 27 | 32 | 88 | % | 19 | % | 31 | 59 | 90 | % | |||||||||||||||||||||||||||
Other Agency |
216 | 213 | 194 | 186 | 194 | (10 | %) | 4 | % | 426 | 380 | (11 | %) | |||||||||||||||||||||||||||
Other |
12 | 15 | 12 | 15 | 14 | 17 | % | (7 | %) | 25 | 29 | 16 | % | |||||||||||||||||||||||||||
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Total |
$ | 969 | $ | 964 | $ | 858 | $ | 861 | $ | 950 | (2 | %) | 10 | % | $ | 1,853 | $ | 1,811 | (2 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
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AARP Direct |
$ | 694 | $ | 687 | $ | 685 | $ | 676 | $ | 671 | (3 | %) | (1 | %) | $ | 1,392 | $ | 1,347 | (3 | %) | ||||||||||||||||||||
AARP Agency |
12 | 14 | 16 | 19 | 23 | 92 | % | 21 | % | 22 | 42 | 91 | % | |||||||||||||||||||||||||||
Other Agency |
222 | 215 | 208 | 201 | 195 | (12 | %) | (3 | %) | 455 | 396 | (13 | %) | |||||||||||||||||||||||||||
Other |
11 | 14 | 13 | 13 | 15 | 36 | % | 15 | % | 26 | 28 | 8 | % | |||||||||||||||||||||||||||
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Total |
$ | 939 | $ | 930 | $ | 922 | $ | 909 | $ | 904 | (4 | %) | (1 | %) | $ | 1,895 | $ | 1,813 | (4 | %) | ||||||||||||||||||||
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PRODUCT LINE |
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WRITTEN PREMIUMS [1] |
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Automobile |
$ | 665 | $ | 657 | $ | 599 | $ | 620 | $ | 649 | (2 | %) | 5 | % | $ | 1,306 | $ | 1,269 | (3 | %) | ||||||||||||||||||||
Homeowners |
304 | 307 | 259 | 241 | 301 | (1 | %) | 25 | % | 547 | 542 | (1 | %) | |||||||||||||||||||||||||||
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Total |
$ | 969 | $ | 964 | $ | 858 | $ | 861 | $ | 950 | (2 | %) | 10 | % | $ | 1,853 | $ | 1,811 | (2 | %) | ||||||||||||||||||||
EARNED PREMIUMS [1] |
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Automobile |
$ | 657 | $ | 649 | $ | 641 | $ | 632 | $ | 630 | (4 | %) | | $ | 1,329 | $ | 1,262 | (5 | %) | |||||||||||||||||||||
Homeowners |
282 | 281 | 281 | 277 | 274 | (3 | %) | (1 | %) | 566 | 551 | (3 | %) | |||||||||||||||||||||||||||
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Total |
$ | 939 | $ | 930 | $ | 922 | $ | 909 | $ | 904 | (4 | %) | (1 | %) | $ | 1,895 | $ | 1,813 | (4 | %) | ||||||||||||||||||||
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STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) |
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Renewal Written Price Increases [2] |
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Automobile |
6 | % | 4 | % | 3 | % | 4 | % | 4 | % | (2.0 | ) | | 6 | % | 4 | % | (2.0 | ) | |||||||||||||||||||||
Homeowners |
9 | % | 8 | % | 6 | % | 6 | % | 6 | % | (3.0 | ) | | 9 | % | 6 | % | (3.0 | ) | |||||||||||||||||||||
Policy Count Retention [3] |
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Automobile |
82 | % | 83 | % | 83 | % | 84 | % | 84 | % | 2.0 | | 82 | % | 84 | % | 2.0 | |||||||||||||||||||||||
Homeowners |
84 | % | 84 | % | 84 | % | 85 | % | 86 | % | 2.0 | 1.0 | 83 | % | 85 | % | 2.0 | |||||||||||||||||||||||
New Business Premium $ |
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Automobile |
$ | 75 | $ | 80 | $ | 77 | $ | 86 | $ | 85 | 13 | % | (1 | %) | $ | 141 | $ | 171 | 21 | % | ||||||||||||||||||||
Homeowners |
$ | 23 | $ | 26 | $ | 23 | $ | 25 | $ | 30 | 30 | % | 20 | % | $ | 42 | $ | 55 | 31 | % | ||||||||||||||||||||
Policies in force |
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Automobile |
2,137,351 | 2,106,385 | 2,080,535 | 2,065,317 | 2,044,874 | (4 | %) | (1 | %) | |||||||||||||||||||||||||||||||
Homeowners |
1,380,301 | 1,358,162 | 1,338,676 | 1,330,117 | 1,323,557 | (4 | %) | |
[1] | The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve. |
[2] | Renewal written price increases represents the combined effect of rate changes and amount of insurance per unit of exposure since the prior year. It does not include other factors that affect average premium per unit of exposure such as changes in the mix of business by state, territory, class plan and tier of risk. |
[3] | Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period. |
20
WEALTH MANAGEMENT
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
OPERATING RESULTS
THREE MONTHS ENDED | Year Over Year |
Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
REVENUES |
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Earned premiums [1] |
$ | (23 | ) | $ | (24 | ) | $ | (27 | ) | $ | (26 | ) | $ | (27 | ) | (17 | %) | (4 | %) | $ | (44 | ) | $ | (53 | ) | (20 | %) | |||||||||||||
Fee income [1] |
511 | 514 | 493 | 500 | 489 | (4 | %) | (2 | %) | 1,016 | 989 | (3 | %) | |||||||||||||||||||||||||||
Net investment income |
214 | 215 | 211 | 222 | 232 | 8 | % | 5 | % | 423 | 454 | 7 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
17 | 26 | 16 | 14 | 6 | (65 | %) | (57 | %) | (21 | ) | 20 | NM | |||||||||||||||||||||||||||
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Total revenues |
719 | 731 | 693 | 710 | 700 | (3 | %) | (1 | %) | 1,374 | 1,410 | 3 | % | |||||||||||||||||||||||||||
Benefits and claims, losses and loss adjustment expenses [1] |
255 | 341 | 274 | 297 | 294 | 15 | % | (1 | %) | 509 | 591 | 16 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
63 | 149 | 46 | 48 | 47 | (25 | %) | (2 | %) | 107 | 95 | (11 | %) | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
294 | 274 | 272 | 290 | 283 | (4 | %) | (2 | %) | 586 | 573 | (2 | %) | |||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 12 | | | | 12 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
612 | 764 | 592 | 635 | 636 | 4 | % | | 1,202 | 1,271 | 6 | % | ||||||||||||||||||||||||||||
Income (loss) before income taxes |
107 | (33 | ) | 101 | 75 | 64 | (40 | %) | (15 | %) | 172 | 139 | (19 | %) | ||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
7 | (25 | ) | 29 | 18 | 12 | 71 | % | (33 | %) | 21 | 30 | 43 | % | ||||||||||||||||||||||||||
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Net income (loss) |
100 | (8 | ) | 72 | 57 | 52 | (48 | %) | (9 | %) | 151 | 109 | (28 | %) | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings [1][3] |
21 | 8 | 16 | (1 | ) | 4 | (81 | %) | NM | (2 | ) | 3 | NM | |||||||||||||||||||||||||||
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Core earnings (losses) |
$ | 79 | $ | (16 | ) | $ | 56 | $ | 58 | $ | 48 | (39 | %) | (17 | %) | $ | 153 | $ | 106 | (31 | %) | |||||||||||||||||||
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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 | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Fee Income |
$ | 1 | $ | 18 | $ | 13 | $ | | $ | 3 | $ | 1 | $ | 3 | ||||||||||||||
Benefits, losses and loss adjustment expense |
| 68 | (4 | ) | 10 | (2 | ) | | 8 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
7 | 80 | 16 | (9 | ) | 9 | 5 | | ||||||||||||||||||||
Income tax expense (benefit) |
(2 | ) | (45 | ) | (1 | ) | | (1 | ) | (1 | ) | (1 | ) | |||||||||||||||
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Net income (loss) |
(4 | ) | (85 | ) | 2 | (1 | ) | (3 | ) | (3 | ) | (4 | ) | |||||||||||||||
Less: Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
(1 | ) | (4 | ) | 1 | (1 | ) | (1 | ) | | (2 | ) | ||||||||||||||||
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Core earnings (losses) |
$ | (3 | ) | $ | (81 | ) | $ | 1 | $ | | $ | (2 | ) | $ | (3 | ) | $ | (2 | ) |
[2] | The three months ended June 30, 2011 includes a tax benefit of $7 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 $16 related to the release of a deferred tax valuation allowance. |
21
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
FINANCIAL HIGHLIGHTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
CORE EARNINGS BY SEGMENT |
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Individual Life |
42 | 37 | 34 | 34 | 24 | (43 | %) | (29 | %) | 80 | 58 | (28 | %) | |||||||||||||||||||||||||||
Retirement Plans |
13 | 4 | 1 | 4 | 8 | (38 | %) | 100 | % | 22 | 12 | (45 | %) | |||||||||||||||||||||||||||
Mutual Funds |
27 | 24 | 20 | 20 | 18 | (33 | %) | (10 | %) | 54 | 38 | (30 | %) | |||||||||||||||||||||||||||
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Wealth Management core earnings, excluding DAC unlock |
82 | 65 | 55 | 58 | 50 | (39 | %) | (14 | %) | 156 | 108 | (31 | %) | |||||||||||||||||||||||||||
DAC unlock impacts on net income (loss) |
(4 | ) | (85 | ) | 2 | (1 | ) | (3 | ) | 25 | % | NM | (3 | ) | (4 | ) | (33 | %) | ||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
22 | 12 | 15 | | 5 | (77 | %) | | (2 | ) | 5 | NM | ||||||||||||||||||||||||||||
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Wealth Management net income (loss) |
100 | (8 | ) | 72 | 57 | 52 | (48 | %) | (9 | %) | 151 | 109 | (28 | %) | ||||||||||||||||||||||||||
DAC UNLOCK IMPACT ON CORE EARNINGS (LOSSES) BY SEGMENT |
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Individual Life |
(1 | ) | (57 | ) | 2 | (8 | ) | 1 | NM | NM | (3 | ) | (7 | ) | (133 | %) | ||||||||||||||||||||||||
Retirement Plans |
(2 | ) | (24 | ) | (1 | ) | 8 | (3 | ) | (50 | %) | NM | | 5 | | |||||||||||||||||||||||||
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DAC unlock impact on core earnings (losses) |
(3 | ) | (81 | ) | 1 | | (2 | ) | 33 | % | | (3 | ) | (2 | ) | 33 | % | |||||||||||||||||||||||
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DAC unlock impact on net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
(1 | ) | (4 | ) | 1 | (1 | ) | (1 | ) | | | | (2 | ) | | |||||||||||||||||||||||||
DAC unlock impact on net income (loss) |
$ | (4 | ) | $ | (85 | ) | $ | 2 | $ | (1 | ) | $ | (3 | ) | 25 | % | NM | $ | (3 | ) | $ | (4 | ) | (33 | %) | |||||||||||||||
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ASSETS UNDER MANAGEMENT BY SEGMENT |
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Individual Life |
$ | 12,366 | $ | 11,808 | $ | 12,300 | $ | 12,928 | $ | 12,758 | 3 | % | (1 | %) | ||||||||||||||||||||||||||
Retirement Plans |
55,555 | 49,685 | 52,302 | 57,155 | 54,898 | (1 | %) | (4 | %) | |||||||||||||||||||||||||||||||
Non-proprietary Mutual Funds |
58,150 | 47,307 | 48,768 | 53,244 | 49,944 | (14 | %) | (6 | %) | |||||||||||||||||||||||||||||||
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Total assets under management |
$ | 126,071 | $ | 108,800 | $ | 113,370 | $ | 123,327 | $ | 117,600 | (7 | %) | (5 | %) | ||||||||||||||||||||||||||
DEPOSITS BY SEGMENT |
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Individual Life |
$ | 448 | $ | 512 | $ | 545 | $ | 481 | $ | 429 | (4 | %) | (11 | %) | $ | 863 | $ | 910 | 5 | % | ||||||||||||||||||||
Retirement Plans |
2,069 | 2,470 | 2,034 | 2,606 | 2,447 | 18 | % | (6 | %) | 4,932 | 5,053 | 2 | % | |||||||||||||||||||||||||||
Non-proprietary Mutual Funds |
3,872 | 4,338 | 2,318 | 2,744 | 2,548 | (34 | %) | (7 | %) | 8,693 | 5,292 | (39 | %) | |||||||||||||||||||||||||||
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Total deposits |
$ | 6,389 | $ | 7,320 | $ | 4,897 | $ | 5,831 | $ | 5,424 | (15 | %) | (7 | %) | $ | 14,488 | $ | 11,255 | (22 | %) |
22
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
DEFERRED POLICY ACQUISITION COSTS AND PRESENT VALUE OF FUTURE PROFITS (DAC)
Individual Life | Retirement Plans | Mutual Funds | Wealth Management | |||||||||||||
Balance, December 31, 2011 |
$ | 2,002 | $ | 304 | $ | 27 | $ | 2,333 | ||||||||
Adjustments to unrealized gains and losses on securities available-for-sale and other |
236 | 44 | | 280 | ||||||||||||
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Balance, excluding adjustments to unrealized gains and losses on securities available-for-sale and other |
2,238 | 348 | 27 | 2,613 | ||||||||||||
Deferred costs |
120 | 27 | 15 | 162 | ||||||||||||
Amortization DAC |
(61 | ) | (16 | ) | (18 | ) | (95 | ) | ||||||||
Amortization Core unlock benefit (charge), pre-tax |
(5 | ) | 8 | | 3 | |||||||||||
Amortization Non-core unlock benefit (charge), pre-tax |
(1 | ) | (2 | ) | | (3 | ) | |||||||||
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Balance, June 30, 2012 |
2,291 | 365 | 24 | 2,680 | ||||||||||||
Adjustments to unrealized gains and losses on securities available-for-sale and other |
(283 | ) | (77 | ) | | (360 | ) | |||||||||
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Balance, June 30, 2012 including adjustments to unrealized gains and losses on securities available-for-sale and other |
$ | 2,008 | $ | 288 | $ | 24 | $ | 2,320 | ||||||||
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23
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
Year | Sequential | SIX MONTHS ENDED | ||||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Fee income [1] |
$ | 237 | $ | 269 | $ | 262 | $ | 255 | $ | 248 | 5 | % | (3 | %) | $ | 470 | $ | 503 | 7 | % | ||||||||||||||||||||
Earned premiums |
(25 | ) | (25 | ) | (28 | ) | (28 | ) | (28 | ) | (12 | %) | | (49 | ) | (56 | ) | (14 | %) | |||||||||||||||||||||
Net investment income |
115 | 115 | 115 | 122 | 126 | 10 | % | 3 | % | 226 | 248 | 10 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
6 | 28 | 26 | (1 | ) | 20 | NM | NM | (24 | ) | 19 | NM | ||||||||||||||||||||||||||||
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Total revenues |
333 | 387 | 375 | 348 | 366 | 10 | % | 5 | % | 623 | 714 | 15 | % | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses [1] |
180 | 260 | 194 | 216 | 211 | 17 | % | (2 | %) | 362 | 427 | 18 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
34 | 87 | 25 | 39 | 28 | (18 | %) | (28 | %) | 59 | 67 | 14 | % | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
67 | 63 | 70 | 70 | 71 | 6 | % | 1 | % | 128 | 141 | 10 | % | |||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 7 | | | | 7 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
281 | 410 | 289 | 325 | 317 | 13 | % | (2 | %) | 549 | 642 | 17 | % | |||||||||||||||||||||||||||
Income (loss) before income taxes |
52 | (23 | ) | 86 | 23 | 49 | (6 | %) | 113 | % | 74 | 72 | (3 | %) | ||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
6 | (14 | ) | 27 | 4 | 13 | 117 | % | NM | 10 | 17 | 70 | % | |||||||||||||||||||||||||||
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Net income (loss) |
46 | (9 | ) | 59 | 19 | 36 | (22 | %) | 89 | % | 64 | 55 | (14 | %) | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings (loss) [1] |
5 | 11 | 23 | (7 | ) | 11 | 120 | % | NM | (13 | ) | 4 | NM | |||||||||||||||||||||||||||
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Core earnings (losses) |
$ | 41 | $ | (20 | ) | $ | 36 | $ | 26 | $ | 25 | (39 | %) | (4 | %) | $ | 77 | $ | 51 | (34 | %) | |||||||||||||||||||
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EARNINGS MARGIN (After-tax) |
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Net income (loss) |
13.8 | % | (2.3 | %) | 15.7 | % | 5.5 | % | 9.8 | % | (4.0 | ) | 4.3 | 10.3 | % | 7.7 | % | (2.6 | ) | |||||||||||||||||||||
Core earnings (losses), excluding impact of DAC unlock |
13.0 | % | 11.0 | % | 10.0 | % | 9.8 | % | 7.1 | % | (5.9 | ) | (2.7 | ) | 12.4 | % | 8.4 | % | (3.9 | ) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Fee Income |
$ | 1 | $ | 18 | $ | 13 | $ | | $ | 3 | $ | 1 | $ | 3 | ||||||||||||||
Benefits, losses and loss adjustment expense |
| 66 | (4 | ) | 10 | (2 | ) | | 8 | |||||||||||||||||||
Amortization of deferred policy acquisition costs |
3 | 40 | 14 | 1 | 5 | 4 | 6 | |||||||||||||||||||||
Income tax expense (benefit) |
(1 | ) | (30 | ) | | (3 | ) | | (1 | ) | (3 | ) | ||||||||||||||||
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Net income (loss) |
(1 | ) | (58 | ) | 3 | (8 | ) | | (2 | ) | (8 | ) | ||||||||||||||||
Less: Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings (losses) |
| (1 | ) | 1 | | (1 | ) | 1 | (1 | ) | ||||||||||||||||||
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Core earnings (losses) |
(1 | ) | (57 | ) | 2 | (8 | ) | 1 | (3 | ) | (7 | ) |
[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. |
24
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
SUPPLEMENTAL DATA
THREE MONTHS ENDED | Year Over Year 3 |
Sequential 3 | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Month Change | Month Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
SALES BY DISTRIBUTION |
||||||||||||||||||||||||||||||||||||||||
National Accounts |
$ | 28 | $ | 29 | $ | 39 | $ | 26 | $ | 22 | (21 | %) | (15 | %) | $ | 50 | $ | 48 | (4 | %) | ||||||||||||||||||||
Independent |
25 | 31 | 36 | 32 | 28 | 12 | % | (13 | %) | 53 | 60 | 13 | % | |||||||||||||||||||||||||||
Other |
3 | 2 | 2 | 3 | 1 | (67 | %) | (67 | %) | 7 | 4 | (43 | %) | |||||||||||||||||||||||||||
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Total sales by distribution |
$ | 56 | $ | 62 | $ | 77 | $ | 61 | $ | 51 | (9 | %) | (16 | %) | $ | 110 | $ | 112 | 2 | % | ||||||||||||||||||||
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SALES BY PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 8 | $ | 6 | $ | 6 | $ | 5 | $ | 4 | (50 | %) | (20 | %) | $ | 15 | $ | 9 | (40 | %) | ||||||||||||||||||||
Universal life |
43 | 52 | 67 | 52 | 43 | | (17 | %) | 86 | 95 | 10 | % | ||||||||||||||||||||||||||||
Term/other life |
5 | 4 | 4 | 4 | 4 | (20 | %) | | 9 | 8 | (11 | %) | ||||||||||||||||||||||||||||
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Total sales by product |
$ | 56 | $ | 62 | $ | 77 | $ | 61 | $ | 51 | (9 | %) | (16 | %) | $ | 110 | $ | 112 | 2 | % | ||||||||||||||||||||
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PREMIUMS & DEPOSITS |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 130 | $ | 134 | $ | 126 | $ | 118 | $ | 111 | (15 | %) | (6 | %) | $ | 257 | $ | 229 | (11 | %) | ||||||||||||||||||||
Universal life/other life |
318 | 378 | 419 | 363 | 318 | | (12 | %) | 606 | 681 | 12 | % | ||||||||||||||||||||||||||||
Term/other |
39 | 43 | 42 | 41 | 41 | 5 | % | | 76 | 82 | 8 | % | ||||||||||||||||||||||||||||
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Total Premiums & Deposits |
$ | 487 | $ | 555 | $ | 587 | $ | 522 | $ | 470 | (3 | %) | (10 | %) | $ | 939 | $ | 992 | 6 | % | ||||||||||||||||||||
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ACCOUNT VALUE |
||||||||||||||||||||||||||||||||||||||||
General account |
$ | 6,954 | $ | 7,126 | $ | 7,337 | $ | 7,501 | $ | 7,629 | 10 | % | 2 | % | ||||||||||||||||||||||||||
Separate account |
5,412 | 4,682 | 4,963 | 5,427 | 5,129 | (5 | %) | (5 | %) | |||||||||||||||||||||||||||||||
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Total account value |
$ | 12,366 | $ | 11,808 | $ | 12,300 | $ | 12,928 | $ | 12,758 | 3 | % | (1 | %) | ||||||||||||||||||||||||||
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ACCOUNT VALUE BY PRODUCT |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 5,993 | $ | 5,259 | $ | 5,535 | $ | 5,996 | $ | 5,699 | (5 | %) | (5 | %) | ||||||||||||||||||||||||||
Universal life/other life |
6,373 | 6,549 | 6,765 | 6,932 | 7,059 | 11 | % | 2 | % | |||||||||||||||||||||||||||||||
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Total account value by product |
$ | 12,366 | $ | 11,808 | $ | 12,300 | $ | 12,928 | $ | 12,758 | 3 | % | (1 | %) | ||||||||||||||||||||||||||
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LIFE INSURANCE IN-FORCE |
||||||||||||||||||||||||||||||||||||||||
Variable life |
$ | 71,977 | $ | 70,926 | $ | 69,716 | $ | 68,642 | $ | 67,514 | (6 | %) | (2 | %) | ||||||||||||||||||||||||||
Universal life |
60,759 | 62,052 | 64,006 | 65,400 | 66,625 | 10 | % | 2 | % | |||||||||||||||||||||||||||||||
Term |
78,714 | 80,249 | 81,494 | 82,659 | 83,291 | 6 | % | 1 | % | |||||||||||||||||||||||||||||||
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Total life insurance in-force |
$ | 211,450 | $ | 213,227 | $ | 215,216 | $ | 216,701 | $ | 217,430 | 3 | % | | |||||||||||||||||||||||||||
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25
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
INDIVIDUAL LIFE
SUPPLEMENTAL DATAACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
||||||||||||||||
VARIABLE LIFE |
||||||||||||||||||||
Beginning balance |
$ | 6,235 | $ | 5,993 | $ | 5,259 | $ | 5,535 | $ | 5,996 | ||||||||||
First year & single premiums |
16 | 15 | 12 | 9 | 7 | |||||||||||||||
Renewal premiums |
114 | 119 | 114 | 109 | 104 | |||||||||||||||
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|||||||||||
Premiums and deposits |
130 | 134 | 126 | 118 | 111 | |||||||||||||||
Surrenders |
(102 | ) | (91 | ) | (100 | ) | (108 | ) | (87 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(17 | ) | (20 | ) | (15 | ) | (16 | ) | (21 | ) | ||||||||||
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Net flows |
11 | 23 | 11 | (6 | ) | 3 | ||||||||||||||
Policy Fees |
(111 | ) | (120 | ) | (109 | ) | (108 | ) | (106 | ) | ||||||||||
Change in market value/interest credited |
(142 | ) | (637 | ) | 374 | 575 | (194 | ) | ||||||||||||
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|||||||||||
Ending balance |
$ | 5,993 | $ | 5,259 | $ | 5,535 | $ | 5,996 | $ | 5,699 | ||||||||||
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UNIVERSAL LIFE [1] |
||||||||||||||||||||
Beginning balance |
$ | 6,235 | $ | 6,373 | $ | 6,549 | $ | 6,765 | $ | 6,932 | ||||||||||
First year & single premiums |
165 | 210 | 251 | 198 | 152 | |||||||||||||||
Renewal premiums |
153 | 168 | 168 | 165 | 166 | |||||||||||||||
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|||||||||||
Premiums and deposits |
318 | 378 | 419 | 363 | 318 | |||||||||||||||
Surrenders |
(36 | ) | (44 | ) | (44 | ) | (39 | ) | (41 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(29 | ) | (29 | ) | (26 | ) | (32 | ) | (25 | ) | ||||||||||
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|||||||||||
Net flows |
253 | 305 | 349 | 292 | 252 | |||||||||||||||
Policy Fees |
(173 | ) | (193 | ) | (194 | ) | (188 | ) | (188 | ) | ||||||||||
Change in market value/interest credited |
58 | 64 | 61 | 63 | 63 | |||||||||||||||
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Ending balance |
$ | 6,373 | $ | 6,549 | $ | 6,765 | $ | 6,932 | $ | 7,059 | ||||||||||
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INDIVIDUAL LIFE |
||||||||||||||||||||
Beginning balance |
$ | 12,470 | $ | 12,366 | $ | 11,808 | $ | 12,300 | $ | 12,928 | ||||||||||
First year & single premiums |
181 | 225 | 263 | 207 | 159 | |||||||||||||||
Renewal premiums |
267 | 287 | 282 | 274 | 270 | |||||||||||||||
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|||||||||||
Premiums and deposits |
448 | 512 | 545 | 481 | 429 | |||||||||||||||
Surrenders |
(138 | ) | (135 | ) | (144 | ) | (147 | ) | (128 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(46 | ) | (49 | ) | (41 | ) | (48 | ) | (46 | ) | ||||||||||
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|||||||||||
Net flows |
264 | 328 | 360 | 286 | 255 | |||||||||||||||
Policy Fees |
(284 | ) | (313 | ) | (303 | ) | (296 | ) | (294 | ) | ||||||||||
Change in market value/interest credited |
(84 | ) | (573 | ) | 435 | 638 | (131 | ) | ||||||||||||
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|||||||||||
Ending balance |
$ | 12,366 | $ | 11,808 | $ | 12,300 | $ | 12,928 | $ | 12,758 |
[1] | Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and Other. |
26
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Fee income |
$ | 99 | $ | 92 | $ | 88 | $ | 94 | $ | 93 | (6 | %) | (1 | %) | $ | 193 | $ | 187 | (3 | %) | ||||||||||||||||||||
Earned premiums |
2 | 1 | 1 | 2 | 1 | (50 | %) | (50 | %) | 5 | 3 | (40 | %) | |||||||||||||||||||||||||||
Net investment income |
100 | 100 | 97 | 101 | 106 | 6 | % | 5 | % | 199 | 207 | 4 | % | |||||||||||||||||||||||||||
Net realized capital gains (losses) |
11 | (2 | ) | (10 | ) | 14 | (12 | ) | NM | NM | 2 | 2 | | |||||||||||||||||||||||||||
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Total revenues |
212 | 191 | 176 | 211 | 188 | (11 | %) | (11 | %) | 399 | 399 | | ||||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses [1] |
75 | 81 | 80 | 81 | 83 | 11 | % | 2 | % | 147 | 164 | 12 | % | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs [1] |
17 | 50 | 10 | | 10 | (41 | %) | | 24 | 10 | (58 | %) | ||||||||||||||||||||||||||||
Insurance operating costs and other expenses |
107 | 106 | 102 | 109 | 104 | (3 | %) | (5 | %) | 215 | 213 | (1 | %) | |||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 4 | | | | 4 | | ||||||||||||||||||||||||||||||
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|||||||||||||||||||||
Total benefits and expenses |
199 | 237 | 192 | 190 | 201 | 1 | % | 6 | % | 386 | 391 | 1 | % | |||||||||||||||||||||||||||
Income (loss) before income taxes |
13 | (46 | ) | (16 | ) | 21 | (13 | ) | NM | NM | 13 | 8 | (38 | %) | ||||||||||||||||||||||||||
Income tax expense (benefit) [1] [2] |
(14 | ) | (23 | ) | (10 | ) | 3 | (11 | ) | 21 | % | NM | (19 | ) | (8 | ) | 58 | % | ||||||||||||||||||||||
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|||||||||||||||||||||
Net income (loss) |
27 | (23 | ) | (6 | ) | 18 | (2 | ) | NM | NM | 32 | 16 | (50 | %) | ||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (loss) [1] |
16 | (3 | ) | (6 | ) | 6 | (7 | ) | NM | NM | 10 | (1 | ) | NM | ||||||||||||||||||||||||||
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|||||||||||||||||||||
Core earnings (losses) |
$ | 11 | $ | (20 | ) | $ | | $ | 12 | $ | 5 | (55 | %) | (58 | %) | $ | 22 | $ | 17 | (23 | %) | |||||||||||||||||||
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RETURN ON ASSETS (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
19.5 | (17.5 | ) | (4.7 | ) | 13.2 | (1.4 | ) | (20.9 | ) | (14.6 | ) | 11.8 | 6.0 | (50 | %) | ||||||||||||||||||||||||
Core earnings (losses), excluding impact of DAC unlock |
9.4 | 3.0 | 0.8 | 3.0 | 5.7 | (3.7 | ) | 2.7 | 8.1 | 4.5 | (45 | %) |
[1] | The DAC unlock recorded in the periods presented below affected each income statement line item as follows: |
THREE MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | JUNE 30, | |||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | 2011 | 2012 | ||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
$ | | $ | 2 | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Amortization of deferred policy acquisition costs |
3 | 40 | 2 | (10 | ) | 4 | 1 | (6 | ) | |||||||||||||||||||
Income tax expense (benefit) |
| (15 | ) | (1 | ) | 3 | (1 | ) | | 2 | ||||||||||||||||||
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|
|||||||||||||||
Net income (loss) |
(3 | ) | (27 | ) | (1 | ) | 7 | (3 | ) | (1 | ) | 4 | ||||||||||||||||
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings |
(1 | ) | (3 | ) | | (1 | ) | | (1 | ) | (1 | ) | ||||||||||||||||
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|
|||||||||||||||
Core earnings (losses) |
(2 | ) | (24 | ) | (1 | ) | 8 | (3 | ) | | 5 |
[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. |
27
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATA ASSETS UNDER MANAGEMENT
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
Year 3 Month Change |
Sequential 3 Month Change |
||||||||||||||||||||||
RETIREMENT PLANS |
||||||||||||||||||||||||||||
General account |
$ | 7,638 | $ | 8,042 | $ | 8,374 | $ | 8,644 | $ | 8,913 | 17 | % | 3 | % | ||||||||||||||
Non-guaranteed separate account |
27,443 | 23,799 | 25,525 | 28,459 | 27,680 | 1 | % | (3 | %) | |||||||||||||||||||
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|
|||||||||||||||
Total Retirement Plans account value |
$ | 35,081 | $ | 31,841 | $ | 33,899 | $ | 37,103 | $ | 36,593 | 4 | % | (1 | %) | ||||||||||||||
401(k) mutual funds |
20,085 | 17,488 | 18,038 | 19,630 | 17,881 | (11 | %) | (9 | %) | |||||||||||||||||||
403(b)/457 mutual funds |
389 | 356 | 365 | 422 | 424 | 9 | % | | ||||||||||||||||||||
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|||||||||||||||
Total Retirement Plans assets under management |
$ | 55,555 | $ | 49,685 | $ | 52,302 | $ | 57,155 | $ | 54,898 | (1 | %) | (4 | %) | ||||||||||||||
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28
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATAACCOUNT VALUE AND ASSET ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | ||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||
401(k) GROUP ANNUITY ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 21,891 | $ | 21,963 | $ | 19,769 | $ | 21,124 | $ | 23,378 | ||||||||||
Deposits |
1,194 | 1,425 | 1,239 | 1,625 | 1,464 | |||||||||||||||
Surrenders |
(1,049 | ) | (911 | ) | (1,150 | ) | (1,099 | ) | (1,083 | ) | ||||||||||
Death benefits/annuitizations/other |
(20 | ) | (19 | ) | (17 | ) | (18 | ) | (18 | ) | ||||||||||
Transfers [1] |
1 | 11 | 47 | 4 | 19 | |||||||||||||||
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Net flows |
126 | 506 | 119 | 512 | 382 | |||||||||||||||
Change in market value/change in reserve/interest credited |
(54 | ) | (2,700 | ) | 1,236 | 1,742 | (675 | ) | ||||||||||||
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Ending balance |
$ | 21,963 | $ | 19,769 | $ | 21,124 | $ | 23,378 | $ | 23,085 | ||||||||||
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403(b)/457 GROUP ANNUITY ACCOUNT VALUE |
||||||||||||||||||||
Beginning balance |
$ | 13,133 | $ | 13,118 | $ | 12,072 | $ | 12,775 | $ | 13,725 | ||||||||||
Deposits |
326 | 330 | 336 | 364 | 321 | |||||||||||||||
Surrenders |
(347 | ) | (259 | ) | (216 | ) | (246 | ) | (271 | ) | ||||||||||
Death benefits/annuitizations/other |
(12 | ) | (12 | ) | (11 | ) | (11 | ) | (11 | ) | ||||||||||
Transfers [1] |
| 3 | 2 | (3 | ) | (1 | ) | |||||||||||||
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|||||||||||
Net flows |
(33 | ) | 62 | 111 | 104 | 38 | ||||||||||||||
Change in market value/change in reserve/interest credited |
18 | (1,108 | ) | 592 | 846 | (255 | ) | |||||||||||||
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Ending balance |
$ | 13,118 | $ | 12,072 | $ | 12,775 | $ | 13,725 | $ | 13,508 | ||||||||||
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|||||||||||
401(k) /403(b)/457 MUTUAL FUNDS ASSETS |
||||||||||||||||||||
Beginning balance |
$ | 20,324 | $ | 20,474 | $ | 17,844 | $ | 18,403 | $ | 20,052 | ||||||||||
Reclassification of AUA to AUM |
267 | | | | | |||||||||||||||
Deposits |
549 | 715 | 459 | 617 | 662 | |||||||||||||||
Surrenders |
(814 | ) | (511 | ) | (1,127 | ) | (806 | ) | (1,688 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(2 | ) | 2 | 1 | (1 | ) | | |||||||||||||
Transfers |
(1 | ) | (14 | ) | (49 | ) | (1 | ) | (19 | ) | ||||||||||
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|||||||||||
Net flows |
(268 | ) | 192 | (716 | ) | (191 | ) | (1,045 | ) | |||||||||||
Change in market value/change in reserve/interest credited |
151 | (2,822 | ) | 1,275 | 1,840 | (702 | ) | |||||||||||||
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Ending balance |
$ | 20,474 | $ | 17,844 | $ | 18,403 | $ | 20,052 | $ | 18,305 | ||||||||||
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TOTAL RETIREMENT |
||||||||||||||||||||
Beginning balance |
$ | 55,348 | $ | 55,555 | $ | 49,685 | $ | 52,302 | $ | 57,155 | ||||||||||
Reclassification of AUA to AUM |
267 | | | | | |||||||||||||||
Deposits |
2,069 | 2,470 | 2,034 | 2,606 | 2,447 | |||||||||||||||
Surrenders |
(2,210 | ) | (1,681 | ) | (2,493 | ) | (2,151 | ) | (3,042 | ) | ||||||||||
Death benefits/annuitizations/other [1] |
(34 | ) | (29 | ) | (27 | ) | (30 | ) | (29 | ) | ||||||||||
Transfers |
| | | | (1 | ) | ||||||||||||||
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|||||||||||
Net flows |
(175 | ) | 760 | (486 | ) | 425 | (625 | ) | ||||||||||||
Change in market value/change in reserve/interest credited |
115 | (6,630 | ) | 3,103 | 4,428 | (1,632 | ) | |||||||||||||
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Ending balance |
$ | 55,555 | $ | 49,685 | $ | 52,302 | $ | 57,155 | $ | 54,898 | ||||||||||
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[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. |
29
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Fee income |
$ | 175 | $ | 153 | $ | 143 | $ | 151 | $ | 148 | (15 | %) | (2 | %) | $ | 353 | $ | 299 | (15 | %) | ||||||||||||||||||||
Net investment income |
(1 | ) | | (1 | ) | (1 | ) | | 100 | % | 100 | % | (2 | ) | (1 | ) | 50 | % | ||||||||||||||||||||||
Net realized capital gains (losses) |
| | | 1 | (2 | ) | | NM | 1 | (1 | ) | NM | ||||||||||||||||||||||||||||
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Total revenues |
174 | 153 | 142 | 151 | 146 | (16 | %) | (3 | %) | 352 | 297 | (16 | %) | |||||||||||||||||||||||||||
Amortization of deferred policy acquisition costs |
12 | 12 | 11 | 9 | 9 | (25 | %) | | 24 | 18 | (25 | %) | ||||||||||||||||||||||||||||
Insurance operating costs and other expenses |
120 | 105 | 100 | 111 | 108 | (10 | %) | (3 | %) | 243 | 219 | (10 | %) | |||||||||||||||||||||||||||
Restructuring and other costs |
| | | | 1 | | | | 1 | | ||||||||||||||||||||||||||||||
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Total benefits and expenses |
132 | 117 | 111 | 120 | 118 | (11 | %) | (2 | %) | 267 | 238 | (11 | %) | |||||||||||||||||||||||||||
Income before income taxes |
42 | 36 | 31 | 31 | 28 | (33 | %) | (10 | %) | 85 | 59 | (31 | %) | |||||||||||||||||||||||||||
Income tax expense |
15 | 12 | 12 | 11 | 10 | (33 | %) | (9 | %) | 30 | 21 | (30 | %) | |||||||||||||||||||||||||||
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Net income |
27 | 24 | 19 | 20 | 18 | (33 | %) | (10 | %) | 55 | 38 | (31 | %) | |||||||||||||||||||||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings |
| | (1 | ) | | | | | 1 | | (100 | %) | ||||||||||||||||||||||||||||
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Core earnings |
27 | $ | 24 | $ | 20 | $ | 20 | $ | 18 | (33 | %) | (10 | %) | $ | 54 | $ | 38 | (30 | %) | |||||||||||||||||||||
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RETURN ON ASSETS (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
Net income |
10.6 | 10.5 | 9.0 | 9.0 | 8.1 | (2.5 | ) | (0.9 | ) | 11.0 | 8.9 | (2.1 | ) | |||||||||||||||||||||||||||
Core earnings |
10.6 | 10.5 | 9.5 | 9.0 | 8.1 | (2.5 | ) | (0.9 | ) | 10.8 | 8.9 | (1.9 | ) |
30
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | ||||||||||||||||||||||||||||
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
Year Over Year 3 Month Change |
Sequential 3 Month Change |
||||||||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS DEPOSITS |
||||||||||||||||||||||||||||
Retail mutual funds |
3,131 | 2,051 | 1,760 | 2,140 | 1,975 | (37 | %) | (8 | %) | |||||||||||||||||||
Investment only mutual funds [1] |
676 | 2,228 | 493 | 534 | 517 | (24 | %) | (3 | %) | |||||||||||||||||||
529 college savings plan |
65 | 59 | 65 | 70 | 56 | (14 | %) | (20 | %) | |||||||||||||||||||
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|||||||||||||||
Total Deposits |
3,872 | 4,338 | 2,318 | 2,744 | 2,548 | (34 | %) | (7 | %) | |||||||||||||||||||
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ASSETS UNDER MANAGEMENT |
||||||||||||||||||||||||||||
Retail mutual fund assets |
49,584 | 39,258 | 40,228 | 43,575 | 40,942 | (17 | %) | (6 | %) | |||||||||||||||||||
Investment only mutual fund assets |
6,954 | 6,625 | 6,983 | 7,929 | 7,279 | 5 | % | (8 | %) | |||||||||||||||||||
Proprietary mutual fund assets [2] |
42,204 | 35,494 | 36,770 | 39,161 | 36,287 | (14 | %) | (7 | %) | |||||||||||||||||||
529 college savings plan assets |
1,612 | 1,424 | 1,557 | 1,740 | 1,723 | 7 | % | (1 | %) | |||||||||||||||||||
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|||||||||||||||
Total Mutual Fund Assets |
100,354 | 82,801 | 85,538 | 92,405 | 86,231 | (14 | %) | (7 | %) | |||||||||||||||||||
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[1] | Investment only mutual funds refers to mutual funds offered as defined contribution investments within employee directed retirements plans. |
[2] | Include Company-sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products. |
31
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA ASSET ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
||||||||||||||||
NON-PROPRIETARY MUTUAL FUNDS |
||||||||||||||||||||
Beginning balance |
$ | 59,945 | $ | 58,150 | $ | 47,307 | $ | 48,768 | $ | 53,244 | ||||||||||
Deposits |
3,872 | 4,338 | 2,318 | 2,744 | 2,548 | |||||||||||||||
Redemptions |
(5,054 | ) | (6,734 | ) | (4,112 | ) | (3,781 | ) | (3,755 | ) | ||||||||||
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Net flows |
(1,182 | ) | (2,396 | ) | (1,794 | ) | (1,037 | ) | (1,207 | ) | ||||||||||
Change in market value/currency/change in reserve/interest credited |
(635 | ) | (8,430 | ) | 3,271 | 5,533 | (2,032 | ) | ||||||||||||
Other [1] |
22 | (17 | ) | (16 | ) | (20 | ) | (61 | ) | |||||||||||
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Ending balance |
$ | 58,150 | $ | 47,307 | $ | 48,768 | $ | 53,244 | $ | 49,944 | ||||||||||
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PROPRIETARY MUTUAL FUNDS [2] |
||||||||||||||||||||
Beginning balance |
$ | 44,044 | $ | 42,204 | $ | 35,494 | $ | 36,770 | $ | 39,161 | ||||||||||
Net flows |
(1,604 | ) | (1,244 | ) | (1,442 | ) | (1,372 | ) | (1,577 | ) | ||||||||||
Change in market value/currency/change in reserve/interest credited |
(236 | ) | (5,466 | ) | 2,718 | 3,763 | (1,297 | ) | ||||||||||||
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Ending balance |
$ | 42,204 | $ | 35,494 | $ | 36,770 | $ | 39,161 | $ | 36,287 | ||||||||||
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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. |
32
RUNOFF OPERATIONS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED | Year
Over Year 3 Month Change |
Sequential 3 Month Change |
SIX MONTHS ENDED |
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Jun. 30, 2011 |
Sept. 30, 2011 |
Dec. 31, 2011 |
Mar. 31, 2012 |
Jun. 30, 2012 |
JUNE 30, | |||||||||||||||||||||||||||||||||||
2011 | 2012 | Change | ||||||||||||||||||||||||||||||||||||||
NET INCOME(LOSS) |
||||||||||||||||||||||||||||||||||||||||
U.S. Annuity |
$ | 87 | $ | (224 | ) | $ | 18 | $ | 198 | $ | (19 | ) | NM | NM | $ | 230 | $ | 179 | (22 | %) | ||||||||||||||||||||
International Annuity |
104 | 376 | (44 | ) | (465 | ) | 402 | NM | NM | 6 | (63 | ) | NM | |||||||||||||||||||||||||||
Institutional Annuity |
58 | (53 | ) | 1 | 52 | 13 | (78 | %) | (75 | %) | 76 | 65 | (14 | %) | ||||||||||||||||||||||||||
Private Placement Life Insurance (PPLI) |
12 | 6 | 9 | 8 | 10 | (17 | %) | 25 | % | 22 | 18 | (18 | %) | |||||||||||||||||||||||||||
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Life Other Operations net income (loss) [1] |
261 | 105 | (16 | ) | (207 | ) | 406 | 56 | % | NM | 334 | 199 | (40 | %) | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings Hedging |
37 | 478 | (201 | ) | (758 | ) | 452 | NM | NM | (152 | ) | (306 | ) | (101 | %) | |||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings all other |
(12 | ) | (416 | ) | (21 | ) | 178 | (83 | ) | NM | NM | 1 | 95 | NM | ||||||||||||||||||||||||||
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Life Other Operations core earnings |
$ | 236 | $ | 43 | $ | 206 | $ | 373 | $ | 37 | (84 | %) | (90 | %) | $ | 485 | $ | 410 | (15 | %) | ||||||||||||||||||||
Property & Casualty Other Operations net income (loss) [2] [3] |
(164 | ) | 8 | 18 | 27 | (15 | ) | 91 | % | NM | (143 | ) | 12 | NM | ||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings |
3 | (1 | ) | 2 | 7 | (1 | ) | NM | NM | 1 | 6 | NM | ||||||||||||||||||||||||||||
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Property & Casualty Other Operations core earnings (losses) |
$ | (167 | ) | $ | 9 | $ | 16 | $ | 20 | $ | (14 | ) | 92 | % | NM | $ | (144 | ) | $ | 6 | NM | |||||||||||||||||||
Runoff Operations net income (loss) |
97 | 113 | 2 | 94 | 391 | NM | NM | 191 | 211 | 10 | % | |||||||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings Hedging |
37 | 478 | (201 | ) | (758 | ) | 452 | NM | NM | (152 | ) | (306 | ) | (101 | %) | |||||||||||||||||||||||||
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings all other |
(9 | ) | (417 | ) | (19 | ) | 185 | (84 | ) | NM | NM | 2 | 101 | NM | ||||||||||||||||||||||||||
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Runoff Operations core earnings (losses) |
$ | 69 | $ | 52 | $ | 222 | $ | 393 | $ | 23 | (67 | %) | (94 | %) | $ | 341 | $ | 416 | 22 | % | ||||||||||||||||||||
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DAC unlock impact on net income (loss) by segment |
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U.S. Annuity |
$ | (52 | ) | $ | (170 | ) | $ | 29 | $ | 90 | $ | (43 | ) | 17 | % | NM | $ | (9 | ) | $ | 47 | NM | ||||||||||||||||||
International Annuity |
(11 | ) | (212 | ) | (25 | ) | 125 | (100 | ) | NM | NM | 3 | 25 | NM | ||||||||||||||||||||||||||
Institutional Annuity |
1 | (2 | ) | (1 | ) | | | (100 | %) | | | | | |||||||||||||||||||||||||||
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Life Other Operations |
$ | (62 | ) | $ | (384 | ) | $ | 3 | $ | 215 | $ | (143 | ) | (131 | %) | NM | $ | (6 | ) | $ | 72 | NM | ||||||||||||||||||
DAC unlock impact on core earnings (losses) by segment |
||||||||||||||||||||||||||||||||||||||||
U.S. Annuity |
$ | (4 | ) | $ | (163 | ) | $ | 69 | $ | 88 | $ | (39 | ) | NM | NM | $ | 39 | $ | 49 | 26 | % | |||||||||||||||||||
International Annuity |
(10 | ) | 41 | (26 | ) | 104 | (86 | ) | NM | NM | 3 | 18 | NM | |||||||||||||||||||||||||||
Institutional Annuity |
| (4 | ) | 1 | | | | | | | | |||||||||||||||||||||||||||||
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Life Other Operations |
$ | (14 | ) | $ | (126 | ) | $ | 44 | $ | 192 | $ | (125 | ) | NM | NM | $ | 42 | $ | 67 | 60 | % |
[1] | 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. Additionally, the three months ended June 30, 2011 includes a benefit of $18, after tax, related to the release of reserves associated with the 3 Win product. |
[2] | The three months ended June 30, 2011 included net asbestos reserve strengthening of $290, before-tax. The three months ended September 30, 2011 included net environmental reserve strengthening of $19, before-tax. The three months ended June 30, 2012 included net asbestos and environmental reserve strengthening of $48 and $3, before-tax, respectively. |
[3] | Additionally, includes prior accident years development reserve strengthenings (releases) for the three months ended June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012 of $(4), $2, $6, $6, and $2 before-tax, respectively. |
33
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONS
SUPPLEMENTAL DATA
Year Over |
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THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Core earnings (losses), excluding impact of DAC unlock |
||||||||||||||||||||||||||||||||||||||||
U.S. Annuity |
$ | 154 | $ | 90 | $ | 92 | $ | 96 | $ | 78 | (49 | %) | (19 | %) | $ | 262 | $ | 174 | (34 | %) | ||||||||||||||||||||
International Annuity |
79 | 73 | 70 | 74 | 68 | (14 | %) | (8 | %) | 143 | 142 | (1 | %) | |||||||||||||||||||||||||||
Institutional Annuity |
7 | (5 | ) | (10 | ) | 4 | 5 | (29 | %) | 25 | % | 18 | 9 | (50 | %) | |||||||||||||||||||||||||
Private Placement Life Insurance |
10 | 11 | 10 | 7 | 11 | 10 | % | 57 | % | 20 | 18 | (10 | %) | |||||||||||||||||||||||||||
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|
|
|
|
|
|
|||||||||||||||||||||
Life Other Operations core earnings |
$ | 250 | $ | 169 | $ | 162 | $ | 181 | $ | 162 | (35 | %) | (10 | %) | $ | 443 | $ | 343 | (23 | %) | ||||||||||||||||||||
Return on assets (After-tax bps) |
||||||||||||||||||||||||||||||||||||||||
U.S. Annuity return on assets |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
37.3 | (105.6 | ) | 9.1 | 96.5 | (9.4 | ) | (46.7 | ) | (105.9 | ) | 49.3 | 45.3 | (4.0 | ) | |||||||||||||||||||||||||
Core earnings, excluding impact of DAC unlock |
66.1 | 42.4 | 46.3 | 46.8 | 38.6 | (27.5 | ) | (8.2 | ) | 56.2 | 44.0 | (12.2 | ) | |||||||||||||||||||||||||||
International Annuity return on assets |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
110.5 | 405.1 | (48.6 | ) | (518.0 | ) | 458.4 | 347.9 | 976.4 | 3.2 | (35.9 | ) | (39.1 | ) | ||||||||||||||||||||||||||
Core earnings, excluding impact of DAC unlock |
83.9 | 78.6 | 77.3 | 82.4 | 77.5 | (6.4 | ) | (4.9 | ) | 75.4 | 80.9 | 5.5 | ||||||||||||||||||||||||||||
Life Other Operations return on assets |
||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
56.4 | 23.8 | (3.8 | ) | (48.1 | ) | 95.6 | 39.3 | 143.7 | 36.0 | 23.6 | (12.4 | ) | |||||||||||||||||||||||||||
Core earnings, excluding impact of DAC unlock |
54.0 | 38.4 | 38.2 | 42.0 | 38.2 | (15.8 | ) | (3.9 | ) | 47.7 | 40.8 | (6.9 | ) | |||||||||||||||||||||||||||
Account Value |
||||||||||||||||||||||||||||||||||||||||
U.S. Variable Annuity |
$ | 79,347 | $ | 66,716 | $ | 68,760 | $ | 72,235 | $ | 66,538 | (16 | %) | (8 | %) | ||||||||||||||||||||||||||
U.S. Fixed Annuity and Other |
11,978 | 11,727 | 11,631 | 11,507 | 11,228 | (6 | %) | (2 | %) | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total U.S. Annuity account value |
$ | 91,325 | $ | 78,443 | $ | 80,391 | $ | 83,742 | $ | 77,766 | (15 | %) | (7 | %) | ||||||||||||||||||||||||||
International Variable Annuity |
$ | 32,981 | $ | 31,438 | $ | 31,162 | $ | 31,392 | $ | 29,831 | (10 | %) | (5 | %) | ||||||||||||||||||||||||||
International Fixed Annuity |
4,824 | 5,013 | 4,786 | 4,469 | 4,461 | (8 | %) | | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Total International Annuity account value |
$ | 37,805 | $ | 36,451 | $ | 35,948 | $ | 35,861 | $ | 34,292 | (9 | %) | (4 | %) | ||||||||||||||||||||||||||
Institutional Annuity [1] |
$ | 19,230 | $ | 19,477 | $ | 19,330 | $ | 18,622 | $ | 18,233 | (5 | %) | (2 | %) | ||||||||||||||||||||||||||
PPLI |
$ | 36,700 | $ | 35,989 | $ | 36,335 | $ | 36,830 | $ | 36,911 | 1 | % | | |||||||||||||||||||||||||||
Total Life Other Operations account value [1] |
$ | 183,575 | $ | 168,886 | $ | 170,708 | $ | 173,743 | $ | 165,873 | (10 | %) | (5 | %) |
[1] | Included in the Institutional Annuity account value balance is 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, March 31, 2012 and June 30, 2012. |
34
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONS U.S. ANNUITY
SUPPLEMENTAL DATA ACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | ||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||
VARIABLE ANNUITIES |
||||||||||||||||||||
Beginning balance |
$ | 82,977 | $ | 79,347 | $ | 66,716 | $ | 68,760 | $ | 72,235 | ||||||||||
Deposits |
227 | 192 | 216 | 307 | 169 | |||||||||||||||
Partial Withdrawals [1] |
(888 | ) | (797 | ) | (912 | ) | (815 | ) | (780 | ) | ||||||||||
Full Surrenders [1] |
(2,253 | ) | (1,648 | ) | (1,295 | ) | (1,687 | ) | (2,251 | ) | ||||||||||
Death benefits/annuitizations/other [2] |
(392 | ) | (344 | ) | (346 | ) | (449 | ) | (397 | ) | ||||||||||
Transfers |
(44 | ) | (45 | ) | (44 | ) | 3 | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
(3,350 | ) | (2,642 | ) | (2,381 | ) | (2,641 | ) | (3,259 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
(281 | ) | (9,989 | ) | 4,425 | 6,116 | (2,439 | ) | ||||||||||||
Other [3] |
1 | | | | 1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 79,347 | $ | 66,716 | $ | 68,760 | $ | 72,235 | $ | 66,538 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FIXED MARKET VALUE ADJUSTED (MVA) AND OTHER |
||||||||||||||||||||
Beginning balance |
$ | 12,136 | $ | 11,978 | $ | 11,727 | $ | 11,631 | $ | 11,507 | ||||||||||
Deposits |
20 | 36 | 42 | 46 | 16 | |||||||||||||||
Surrenders |
(203 | ) | (301 | ) | (175 | ) | (204 | ) | (298 | ) | ||||||||||
Death benefits/annuitizations/other [2] |
(167 | ) | (165 | ) | (163 | ) | (102 | ) | (106 | ) | ||||||||||
Transfers |
68 | 73 | 62 | 1 | (4 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
(282 | ) | (357 | ) | (234 | ) | (259 | ) | (392 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
124 | 106 | 138 | 136 | 113 | |||||||||||||||
Other |
| | | (1 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 11,978 | $ | 11,727 | $ | 11,631 | $ | 11,507 | $ | 11,228 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL U.S. ANNUITY |
||||||||||||||||||||
Beginning balance |
$ | 95,113 | $ | 91,325 | $ | 78,443 | $ | 80,391 | $ | 83,742 | ||||||||||
Deposits |
247 | 228 | 258 | 353 | 185 | |||||||||||||||
Surrenders [1] |
(3,344 | ) | (2,746 | ) | (2,382 | ) | (2,706 | ) | (3,329 | ) | ||||||||||
Death benefits/annuitizations/other [2] |
(559 | ) | (509 | ) | (509 | ) | (551 | ) | (503 | ) | ||||||||||
Transfers |
24 | 28 | 18 | 4 | (4 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
(3,632 | ) | (2,999 | ) | (2,615 | ) | (2,900 | ) | (3,651 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
(157 | ) | (9,883 | ) | 4,563 | 6,252 | (2,326 | ) | ||||||||||||
Other [3] |
1 | | | (1 | ) | 1 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 91,325 | $ | 78,443 | $ | 80,391 | $ | 83,742 | $ | 77,766 | ||||||||||
|
|
|
|
|
|
|
|
|
|
[1] | Surrenders in the three months ended, June 30, 2012 on the U.S. variable annuity book averaged 17% compared with 15% in the three months ended, June 30,2011. Surrender activity increased after the companys March 21st announcement that it was placing the U.S. Annuity business into runoff, rising to a 20% annualized rate in April, which trended down to 18% in May and 15% in June. |
[2] | Includes transfers from the accumulation phase to the annuitization phase. |
[3] | Includes a bonus on certain products, front end loads on A share products and annual maintenance fees. |
35
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONSINTERNATIONAL ANNUITY
SUPPLEMENTAL DATAACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | ||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | ||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||
VARIABLE ANNUITIES |
||||||||||||||||||||
Beginning balance |
$ | 33,027 | $ | 32,981 | $ | 31,438 | $ | 31,162 | $ | 31,392 | ||||||||||
Deposits |
1 | | | | | |||||||||||||||
Surrenders [1] |
(291 | ) | (296 | ) | (291 | ) | (311 | ) | (379 | ) | ||||||||||
Death benefits/annuitizations/other |
(166 | ) | (165 | ) | (164 | ) | (194 | ) | (194 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
(456 | ) | (461 | ) | (455 | ) | (505 | ) | (573 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
(404 | ) | (2,477 | ) | 141 | 2,681 | (1,862 | ) | ||||||||||||
Effect of currency translation |
814 | 1,395 | 38 | (1,946 | ) | 874 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 32,981 | $ | 31,438 | $ | 31,162 | $ | 31,392 | $ | 29,831 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FIXED MARKET VALUE ADJUSTED (MVA) AND OTHER |
||||||||||||||||||||
Beginning balance |
$ | 4,463 | $ | 4,824 | $ | 5,013 | $ | 4,786 | $ | 4,469 | ||||||||||
Surrenders [1] |
(31 | ) | (44 | ) | (59 | ) | (47 | ) | (152 | ) | ||||||||||
Death benefits/annuitizations/other |
246 | (16 | ) | (204 | ) | 1 | (18 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
215 | (60 | ) | (263 | ) | (46 | ) | (170 | ) | |||||||||||
Change in market value/change in reserve/interest credited |
22 | 19 | 28 | 40 | 23 | |||||||||||||||
Effect of currency translation |
124 | 230 | 8 | (311 | ) | 139 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 4,824 | $ | 5,013 | $ | 4,786 | $ | 4,469 | $ | 4,461 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL INTERNATIONAL ANNUITY |
||||||||||||||||||||
Beginning balance |
$ | 37,490 | $ | 37,805 | $ | 36,451 | $ | 35,948 | $ | 35,861 | ||||||||||
Deposits |
1 | | | | | |||||||||||||||
Surrenders [1] |
(322 | ) | (340 | ) | (350 | ) | (358 | ) | (531 | ) | ||||||||||
Death benefits/annuitizations/other |
80 | (181 | ) | (368 | ) | (193 | ) | (212 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net flows |
(241 | ) | (521 | ) | (718 | ) | (551 | ) | (743 | ) | ||||||||||
Change in market value/change in reserve/interest credited |
(382 | ) | (2,458 | ) | 169 | 2,721 | (1,839 | ) | ||||||||||||
Effect of currency translation |
938 | 1,625 | 46 | (2,257 | ) | 1,013 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
$ | 37,805 | $ | 36,451 | $ | 35,948 | $ | 35,861 | $ | 34,292 | ||||||||||
|
|
|
|
|
|
|
|
|
|
[1] | Surrender activity on the International Annuity book averaged 5% in the three months ended June 30,2012 compared with 4% in the three months ended June 30,2011. |
36
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONS
LIFE OTHER OPERATIONS
DEFERRED POLICY ACQUISITION COSTS AND PRESENT VALUE OF FUTURE PROFITS (DAC)
U.S. Annuity | International Annuity |
Institutional Annuity | PPLI | Life Other Operations |
||||||||||||||||
Balance, December 31, 2011 |
$ | 2,412 | $ | 1,125 | $ | 55 | $ | 33 | $ | 3,625 | ||||||||||
Adjustments to unrealized gains and losses on securities available-for-sale and other |
178 | (16 | ) | | | 162 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, excluding adjustments to unrealized gains and losses on securitis available-for-sale and other |
2,590 | 1,109 | 55 | 33 | 3,787 | |||||||||||||||
Deferred costs |
37 | | | | 37 | |||||||||||||||
AmortizationDAC |
(147 | ) | (20 | ) | (2 | ) | (1 | ) | (170 | ) | ||||||||||
AmortizationCore unlock benefit (charge), pre-tax |
22 | 5 | | | 27 | |||||||||||||||
AmortizationNon-core unlock benefit (charge), pre-tax |
(2 | ) | 10 | | | 8 | ||||||||||||||
Effect of currency translation adjustment |
| (38 | ) | | | (38 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, June 30, 2012 |
2,500 | 1,066 | 53 | 32 | 3,651 | |||||||||||||||
Adjustments to unrealized gains and losses on securities available-for-sale and other |
(239 | ) | (5 | ) | | 1 | (243 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance, June 30, 2012 including adjustments to unrealized gains and losses on securities available-for-sale and other |
$ | 2,261 | $ | 1,061 | $ | 53 | $ | 33 | $ | 3,408 | ||||||||||
|
|
|
|
|
|
|
|
|
|
37
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RUNOFF OPERATIONSLIFE OTHER OPERATIONS
SUPPLEMENTAL DATAANNUITY DEATH AND LIVING BENEFITS
As of Jun. 30, 2011 |
As of Sept. 30, 2011 |
As of Dec. 31, 2011 |
As of Mar. 31, 2012 |
As of Jun. 30, 2012 |
||||||||||||||||
U.S. VARIABLE ANNUITY BUSINESS |
||||||||||||||||||||
S&P 500 index value at end of period |
1,320.64 | 1,131.42 | 1,257.60 | 1,408.47 | 1,362.16 | |||||||||||||||
Total account value with guaranteed minimum death benefits (GMDB) |
$ | 79,347 | $ | 66,716 | $ | 68,760 | $ | 72,235 | $ | 66,538 | ||||||||||
GMDB gross net amount of risk |
8,566 | 15,833 | 12,021 | 7,698 | 8,998 | |||||||||||||||
% of GMDB NAR reinsured |
64 | % | 54 | % | 58 | % | 65 | % | 62 | % | ||||||||||
GMDB retained net amount of risk |
3,104 | 7,205 | 5,087 | 2,724 | 3,461 | |||||||||||||||
GMDB net GAAP liability [1] |
346 | 440 | 380 | 322 | 337 | |||||||||||||||
Total account value with guaranteed minimum withdrawal benefits (GMWB) |
42,501 | 35,566 | 36,604 | 38,312 | 35,127 | |||||||||||||||
GMWB gross net amount of risk |
745 | 3,025 | 1,888 | 847 | 1,198 | |||||||||||||||
% of GMWB NAR reinsured |
21 | % | 16 | % | 16 | % | 16 | % | 16 | % | ||||||||||
GMWB retained net amount of risk |
592 | 2,533 | 1,587 | 711 | 1,009 | |||||||||||||||
GMWB net GAAP liability |
1,176 | 2,276 | 2,082 | 1,355 | 1,790 | |||||||||||||||
JAPAN VARIABLE ANNUITY BUSINESS |
||||||||||||||||||||
Yen / $ |
80.8 | 77.1 | 76.9 | 82.3 | 79.8 | |||||||||||||||
Total account value with GMDB |
$ | 30,785 | $ | 29,522 | $ | 29,234 | $ | 29,396 | $ | 27,977 | ||||||||||
GMDB gross net amount of risk |
8,469 | 11,035 | 10,857 | 7,580 | 9,477 | |||||||||||||||
% of GMDB NAR reinsured |
15 | % | 13 | % | 13 | % | 15 | % | 13 | % | ||||||||||
GMDB retained net amount of risk |
7,233 | 9,583 | 9,413 | 6,469 | 8,236 | |||||||||||||||
Total account value with guaranteed minimum income benefits (GMIB) |
28,526 | 27,471 | 27,282 | 27,350 | 26,119 | |||||||||||||||
GMIB retained net amount of risk [2] |
5,442 | 7,662 | 7,502 | 4,785 | 6,470 | |||||||||||||||
GMDB/GMIB net GAAP liability [1] |
635 | 907 | 930 | 704 | 847 |
[1] | For the three months ended June 30, 2011 there was a decrease to the GMDB/GMIB liability as a result of the unlock for the Japan and U.S. variable annuity business of $(10) and $16, respectively. For the three months ended September 30, 2011, the amounts were $88 and $244, respectively. For the three months ended December 31, 2011 the amounts were $(54) and $32, respectively. For the three months ended March 31, 2012 the amounts were $(61) and $(152), respectively. For the three months ended June 30, 2012 the amounts were $9 and $130, respectively. |
[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 the GMDB NAR is reduced to $0. |
38
CORPORATE |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
Year Over | ||||||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED | Year | Sequential | SIX MONTHS ENDED | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | JUNE 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Earned premiums |
$ | 1 | $ | | $ | | $ | | $ | | (100 | %) | | $ | | $ | | | ||||||||||||||||||||||
Fee income |
53 | 55 | 48 | 52 | 45 | (15 | %) | (13 | %) | 106 | 97 | (8 | %) | |||||||||||||||||||||||||||
Net investment income |
13 | 1 | (7 | ) | (6 | ) | 3 | (77 | %) | NM | 29 | (3 | ) | NM | ||||||||||||||||||||||||||
Net realized capital gains (losses) |
6 | (51 | ) | (40 | ) | 15 | 17 | 183 | % | 13 | % | (5 | ) | 32 | NM | |||||||||||||||||||||||||
Total revenues |
73 | 5 | 1 | 61 | 65 | (11 | %) | 7 | % | 130 | 126 | (3 | %) | |||||||||||||||||||||||||||
Benefits, losses and loss adjustment expenses |
1 | (6 | ) | 1 | | (1 | ) | NM | | 2 | (1 | ) | NM | |||||||||||||||||||||||||||
Insurance operating costs and other expenses |
65 | 43 | 9 | 76 | 63 | (3 | %) | (17 | %) | 125 | 139 | 11 | % | |||||||||||||||||||||||||||
Loss on extinguishment of debt [1] |
| | | | 910 | | | | 910 | | ||||||||||||||||||||||||||||||
Interest expense |
128 | 128 | 124 | 124 | 115 | (10 | %) | (7 | %) | 256 | 239 | (7 | %) | |||||||||||||||||||||||||||
Restructuring and other costs |
| 14 | 11 | 9 | 28 | | NM | | 37 | | ||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||
Total benefits and expenses |
194 | 179 | 145 | 209 | 1,115 | NM | NM | 383 | 1,324 | NM | ||||||||||||||||||||||||||||||
Loss from continuing operations before income taxes |
(121 | ) | (174 | ) | (144 | ) | (148 | ) | (1,050 | ) | NM | NM | (253 | ) | (1,198 | ) | NM | |||||||||||||||||||||||
Income tax benefit |
(47 | ) | (62 | ) | (48 | ) | (52 | ) | (372 | ) | NM | NM | (91 | ) | (424 | ) | NM | |||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Loss from continuing operations |
(74 | ) | (112 | ) | (96 | ) | (96 | ) | (678 | ) | NM | NM | (162 | ) | (774 | ) | NM | |||||||||||||||||||||||
Add: Income (loss) from discontinued operations [2] |
(77 | ) | 5 | 6 | | | 100 | % | | (75 | ) | | 100 | % | ||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Net loss |
(151 | ) | (107 | ) | (90 | ) | (96 | ) | (678 | ) | NM | NM | (237 | ) | (774 | ) | NM | |||||||||||||||||||||||
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core losses |
9 | (29 | ) | (26 | ) | 12 | 7 | (22 | %) | (42 | %) | | 19 | | ||||||||||||||||||||||||||
Less: Loss on extinguishment of debt, net of tax |
| | | | (587 | ) | | | | (587 | ) | | ||||||||||||||||||||||||||||
Less: Income (loss) from discontinued operations [2] |
(77 | ) | 5 | 6 | | | 100 | % | | (75 | ) | | 100 | % | ||||||||||||||||||||||||||
|
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|
|||||||||||||||||||||
Core losses |
$ | (83 | ) | $ | (83 | ) | $ | (70 | ) | $ | (108 | ) | $ | (98 | ) | (18 | %) | 9 | % | $ | (162 | ) | $ | (206 | ) | (27 | %) | |||||||||||||
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[1] | Includes a loss on extinguishment of debt of $587, after-tax, recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction. |
[2] | The three months ended June 30, 2011 includes an after-tax charge of $74 related to the disposition of Federal Trust Corporation. |
39
CONSOLIDATED
INVESTMENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CONSOLIDATED
Year Over | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year | Sequential | Six Months Ended | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | June 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) |
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Fixed maturities [1] |
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Taxable |
$ | 744 | $ | 711 | $ | 723 | $ | 738 | $ | 729 | (2 | %) | (1 | %) | $ | 1,463 | $ | 1,467 | | |||||||||||||||||||||
Tax-exempt |
126 | 125 | 121 | 120 | 119 | (6 | %) | (1 | %) | 253 | 239 | (6 | %) | |||||||||||||||||||||||||||
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Total fixed maturities |
870 | 836 | 844 | 858 | 848 | (3 | %) | (1 | %) | 1,716 | 1,706 | (1 | %) | |||||||||||||||||||||||||||
Equity securities, trading |
(597 | ) | (1,890 | ) | 325 | 2,866 | (1,687 | ) | (183 | %) | NM | 206 | 1,179 | NM | ||||||||||||||||||||||||||
Equity securities, available-for-sale |
8 | 8 | 9 | 10 | 8 | | (20 | %) | 19 | 18 | (5 | %) | ||||||||||||||||||||||||||||
Mortgage loans |
67 | 75 | 76 | 79 | 86 | 28 | % | 9 | % | 130 | 165 | 27 | % | |||||||||||||||||||||||||||
Policy loans |
34 | 32 | 32 | 30 | 30 | (12 | %) | | 67 | 60 | (10 | %) | ||||||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
78 | 67 | (2 | ) | 52 | 72 | (8 | %) | 38 | % | 178 | 124 | (30 | %) | ||||||||||||||||||||||||||
Other [3] |
77 | 73 | 70 | 69 | 81 | 5 | % | 17 | % | 158 | 150 | (5 | %) | |||||||||||||||||||||||||||
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Subtotal |
537 | (799 | ) | 1,354 | 3,964 | (562 | ) | NM | NM | 2,474 | 3,402 | 38 | % | |||||||||||||||||||||||||||
Less: Investment expense |
30 | 29 | 31 | 28 | 28 | (7 | %) | | 56 | 56 | | |||||||||||||||||||||||||||||
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Total net investment income [4] |
$ | 507 | $ | (828 | ) | $ | 1,323 | $ | 3,936 | $ | (590 | ) | NM | NM | $ | 2,418 | $ | 3,346 | 38 | % | ||||||||||||||||||||
Less: Equity securities, trading |
(597 | ) | (1,890 | ) | 325 | 2,866 | (1,687 | ) | (183 | %) | NM | 206 | 1,179 | NM | ||||||||||||||||||||||||||
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Total net investment income excluding trading securities |
$ | 1,104 | $ | 1,062 | $ | 998 | $ | 1,070 | $ | 1,097 | (1 | %) | 3 | % | $ | 2,212 | $ | 2,167 | (2 | %) | ||||||||||||||||||||
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Annualized investment yield, before-tax [5] |
4.6 | % | 4.3 | % | 4.0 | % | 4.3 | % | 4.4 | % | (0.2 | ) | 0.1 | 4.6 | % | 4.4 | % | (0.2 | ) | |||||||||||||||||||||
Annualized investment yield, after-tax [5] |
3.1 | % | 2.9 | % | 2.8 | % | 3.0 | % | 3.0 | % | (0.1 | ) | | 3.1 | % | 3.0 | % | (0.1 | ) | |||||||||||||||||||||
Net Realized Capital Gains (Losses) |
||||||||||||||||||||||||||||||||||||||||
Gross gains on sales |
$ | 261 | $ | 197 | $ | 174 | $ | 259 | $ | 246 | (6 | %) | (5 | %) | $ | 322 | $ | 505 | 57 | % | ||||||||||||||||||||
Gross losses on sales |
(98 | ) | (63 | ) | (90 | ) | (97 | ) | (159 | ) | (62 | %) | (64 | %) | (231 | ) | (256 | ) | (11 | %) | ||||||||||||||||||||
Net impairment losses |
(23 | ) | (60 | ) | (36 | ) | (29 | ) | (98 | ) | NM | NM | (78 | ) | (127 | ) | (63 | %) | ||||||||||||||||||||||
Valuation allowances on mortgage loans |
26 | | 1 | 1 | | (100 | %) | (100 | %) | 23 | 1 | (96 | %) | |||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [6] |
6 | 9 | 5 | (20 | ) | 2 | (67 | %) | NM | (11 | ) | (18 | ) | (64 | %) | |||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [7] |
(2 | ) | 1 | (2 | ) | (5 | ) | 4 | NM | NM | (9 | ) | (1 | ) | 89 | % | ||||||||||||||||||||||||
Results of variable annuity hedge program |
||||||||||||||||||||||||||||||||||||||||
U.S. GMWB derivatives, net |
(33 | ) | (323 | ) | (97 | ) | 185 | (115 | ) | NM | NM | 23 | 70 | NM | ||||||||||||||||||||||||||
U.S. macro hedge |
(17 | ) | 106 | (221 | ) | (189 | ) | 6 | NM | NM | (101 | ) | (183 | ) | (81 | %) | ||||||||||||||||||||||||
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Total U.S. program |
(50 | ) | (217 | ) | (318 | ) | (4 | ) | (109 | ) | (118 | %) | NM | (78 | ) | (113 | ) | (45 | %) | |||||||||||||||||||||
International program |
52 | 1,132 | (90 | ) | (1,219 | ) | 753 | NM | NM | (267 | ) | (466 | ) | (75 | %) | |||||||||||||||||||||||||
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Total results of variable annuity hedge program |
2 | 915 | (408 | ) | (1,223 | ) | 644 | NM | NM | (345 | ) | (579 | ) | (68 | %) | |||||||||||||||||||||||||
Other net gain (loss) [8] |
(103 | ) | (424 | ) | (30 | ) | 204 | (50 | ) | 51 | % | NM | (5 | ) | 154 | NM | ||||||||||||||||||||||||
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Total net realized capital gains (losses) [9] |
$ | 69 | $ | 575 | $ | (386 | ) | $ | (910 | ) | $ | 589 | NM | NM | $ | (334 | ) | $ | (321 | ) | 4 | % | ||||||||||||||||||
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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] | Includes $2, $1, $1, $1 and $2 in Corporate as of June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. Please refer to the basis of presentation for a description of the statutory legal entity view for Corporate. |
[5] | 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. |
[6] | 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). |
[7] | Included in core earnings. |
[8] | 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. |
[9] | Includes ($1), $0, ($1), ($2) and ($1) in Corporate as of June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
40
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
LIFE [1]
Year Over | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year | Sequential | Six Months Ended | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | June 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) |
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Fixed maturities [2] |
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Taxable |
$ | 555 | $ | 537 | $ | 541 | $ | 555 | $ | 553 | | | $ | 1,096 | $ | 1,108 | 1 | % | ||||||||||||||||||||||
Tax-exempt |
26 | 27 | 26 | 26 | 25 | (4 | %) | (4 | %) | 53 | 51 | (4 | %) | |||||||||||||||||||||||||||
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Total fixed maturities |
581 | 564 | 567 | 581 | 578 | (1 | %) | (1 | %) | 1,149 | 1,159 | 1 | % | |||||||||||||||||||||||||||
Equity securities, trading |
(597 | ) | (1,890 | ) | 325 | 2,866 | (1,687 | ) | (183 | %) | NM | 206 | 1,179 | NM | ||||||||||||||||||||||||||
Equity securities, available-for-sale |
4 | 3 | 4 | 5 | 3 | (25 | %) | (40 | %) | 9 | 8 | (11 | %) | |||||||||||||||||||||||||||
Mortgage loans |
59 | 67 | 67 | 69 | 74 | 25 | % | 7 | % | 117 | 143 | 22 | % | |||||||||||||||||||||||||||
Policy loans |
34 | 32 | 32 | 30 | 30 | (12 | %) | | 67 | 60 | (10 | %) | ||||||||||||||||||||||||||||
Limited partnerships and other alternative investments [3] |
50 | 52 | (3 | ) | 26 | 41 | (18 | %) | 58 | % | 110 | 67 | (39 | %) | ||||||||||||||||||||||||||
Other [4] |
67 | 65 | 59 | 61 | 69 | 3 | % | 13 | % | 137 | 130 | (5 | %) | |||||||||||||||||||||||||||
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Subtotal |
198 | (1,107 | ) | 1,051 | 3,638 | (892 | ) | NM | NM | 1,795 | 2,746 | 53 | % | |||||||||||||||||||||||||||
Less: Investment expense |
21 | 22 | 22 | 21 | 21 | | | 41 | 42 | 2 | % | |||||||||||||||||||||||||||||
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Total net investment income |
$ | 177 | $ | (1,129 | ) | $ | 1,029 | $ | 3,617 | $ | (913 | ) | NM | NM | $ | 1,754 | $ | 2,704 | 54 | % | ||||||||||||||||||||
Less: Equity securities, trading |
(597 | ) | (1,890 | ) | 325 | 2,866 | (1,687 | ) | (183 | %) | NM | 206 | 1,179 | NM | ||||||||||||||||||||||||||
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Total net investment income excluding trading securities |
$ | 774 | $ | 761 | $ | 704 | $ | 751 | $ | 774 | | 3 | % | $ | 1,548 | $ | 1,525 | (1 | %) | |||||||||||||||||||||
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Annualized investment yield, before-tax [5] |
4.7 | % | 4.5 | % | 4.1 | % | 4.4 | % | 4.5 | % | (0.2 | ) | 0.1 | 4.7 | % | 4.4 | % | (0.3 | ) | |||||||||||||||||||||
Annualized investment yield, after-tax [5] |
3.1 | % | 3.0 | % | 2.7 | % | 2.9 | % | 3.0 | % | (0.1 | ) | 0.1 | 3.1 | % | 2.9 | % | (0.2 | ) | |||||||||||||||||||||
Net Realized Capital Gains (Losses) |
||||||||||||||||||||||||||||||||||||||||
Gross gains on sales |
$ | 191 | $ | 144 | $ | 123 | $ | 191 | $ | 170 | (11 | %) | (11 | %) | $ | 227 | $ | 361 | 59 | % | ||||||||||||||||||||
Gross losses on sales |
(64 | ) | (31 | ) | (61 | ) | (74 | ) | (107 | ) | (67 | %) | (45 | %) | (154 | ) | (181 | ) | (18 | %) | ||||||||||||||||||||
Net impairment losses |
(13 | ) | (44 | ) | (35 | ) | (24 | ) | (50 | ) | NM | (108 | %) | (54 | ) | (74 | ) | (37 | %) | |||||||||||||||||||||
Valuation allowances on mortgage loans |
26 | | | 1 | | (100 | %) | (100 | %) | 23 | 1 | (96 | %) | |||||||||||||||||||||||||||
Japanese fixed annuity contract hedges, net [6] |
6 | 9 | 5 | (20 | ) | 2 | (67 | %) | NM | (11 | ) | (18 | ) | (64 | %) | |||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [7] |
| 2 | (1 | ) | (5 | ) | 4 | | NM | (5 | ) | (1 | ) | 80 | % | |||||||||||||||||||||||||
Results of variable annuity hedge program |
| |||||||||||||||||||||||||||||||||||||||
U.S. GMWB derivatives, net |
(33 | ) | (323 | ) | (97 | ) | 185 | (115 | ) | NM | NM | 23 | 70 | NM | ||||||||||||||||||||||||||
U.S. macro hedge |
(17 | ) | 106 | (221 | ) | (189 | ) | 6 | NM | NM | (101 | ) | (183 | ) | (81 | %) | ||||||||||||||||||||||||
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Total U.S. program |
(50 | ) | (217 | ) | (318 | ) | (4 | ) | (109 | ) | (118 | %) | NM | (78 | ) | (113 | ) | (45 | %) | |||||||||||||||||||||
International program |
52 | 1,132 | (90 | ) | (1,219 | ) | 753 | NM | NM | (267 | ) | (466 | ) | (75 | %) | |||||||||||||||||||||||||
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Total results of variable annuity hedge program |
2 | 915 | (408 | ) | (1,223 | ) | 644 | NM | NM | (345 | ) | (579 | ) | (68 | %) | |||||||||||||||||||||||||
Other net gain (loss) [8] |
(96 | ) | (355 | ) | (22 | ) | 185 | (54 | ) | 44 | % | NM | | 131 | | |||||||||||||||||||||||||
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Total net realized capital gains (losses) |
$ | 52 | $ | 640 | $ | (399 | ) | $ | (969 | ) | $ | 609 | NM | NM | $ | (319 | ) | $ | (360 | ) | (13 | %) | ||||||||||||||||||
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[1] | Please refer to the basis of presentation for a description of the statutory legal entity view for Life. |
[2] | Includes income on short-term bonds. |
[3] | Includes income on a real estate joint venture. |
[4] | Primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
[5] | 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. |
[6] | 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). |
[7] | Included in core earnings. |
[8] | 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. |
41
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY [1]
Year Over | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Year | Sequential | Six Months Ended | |||||||||||||||||||||||||||||||||||||
Jun. 30, | Sept. 30, | Dec. 31, | Mar. 31, | Jun. 30, | 3 Month | 3 Month | June 30, | |||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | Change | Change | 2011 | 2012 | Change | |||||||||||||||||||||||||||||||
Net Investment Income (Loss) |
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Fixed maturities [2] |
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Taxable |
$ | 187 | $ | 174 | $ | 182 | $ | 183 | $ | 175 | (6 | %) | (4 | %) | $ | 364 | $ | 358 | (2 | %) | ||||||||||||||||||||
Tax-exempt |
100 | 98 | 95 | 94 | 94 | (6 | %) | | 200 | 188 | (6 | %) | ||||||||||||||||||||||||||||
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Total fixed maturities |
287 | 272 | 277 | 277 | 269 | (6 | %) | (3 | %) | 564 | 546 | (3 | %) | |||||||||||||||||||||||||||
Equity securities, available-for-sale |
4 | 4 | 4 | 4 | 4 | | | 9 | 8 | (11 | %) | |||||||||||||||||||||||||||||
Mortgage loans |
8 | 8 | 9 | 10 | 12 | 50 | % | 20 | % | 13 | 22 | 69 | % | |||||||||||||||||||||||||||
Limited partnerships and other alternative investments [3] |
28 | 15 | 1 | 26 | 31 | 11 | % | 19 | % | 68 | 57 | (16 | %) | |||||||||||||||||||||||||||
Other [4] |
10 | 8 | 11 | 8 | 12 | 20 | % | 50 | % | 21 | 20 | (5 | %) | |||||||||||||||||||||||||||
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Subtotal |
337 | 307 | 302 | 325 | 328 | (3 | %) | 1 | % | 675 | 653 | (3 | %) | |||||||||||||||||||||||||||
Less: Investment expense |
9 | 7 | 9 | 7 | 7 | (22 | %) | | 15 | 14 | (7 | %) | ||||||||||||||||||||||||||||
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Total net investment income |
$ | 328 | $ | 300 | $ | 293 | $ | 318 | $ | 321 | (2 | %) | 1 | % | $ | 660 | $ | 639 | (3 | %) | ||||||||||||||||||||
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Annualized investment yield, before-tax [5] |
4.7 | % | 4.3 | % | 4.2 | % | 4.5 | % | 4.6 | % | (0.1 | ) | 0.1 | 4.7 | % | 4.5 | % | (0.2 | ) | |||||||||||||||||||||
Annualized investment yield, after-tax [5] |
3.5 | % | 3.2 | % | 3.1 | % | 3.4 | % | 3.4 | % | (0.1 | ) | | 3.5 | % | 3.4 | % | (0.1 | ) | |||||||||||||||||||||
Net Realized Capital Gains (Losses) |
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Gross gains on sales |
$ | 69 | $ | 52 | $ | 51 | $ | 67 | $ | 77 | 12 | % | 15 | % | $ | 94 | $ | 144 | 53 | % | ||||||||||||||||||||
Gross losses on sales |
(34 | ) | (31 | ) | (29 | ) | (23 | ) | (52 | ) | (53 | %) | (126 | %) | (77 | ) | (75 | ) | 3 | % | ||||||||||||||||||||
Net impairment losses |
(10 | ) | (16 | ) | (1 | ) | (5 | ) | (48 | ) | NM | NM | (24 | ) | (53 | ) | (121 | %) | ||||||||||||||||||||||
Valuation allowances on mortgage loans |
| | 1 | | | | | | | | ||||||||||||||||||||||||||||||
Periodic net coupon settlements on credit derivatives/Japan [6] |
(2 | ) | (1 | ) | (1 | ) | | | 100 | % | | (4 | ) | | 100 | % | ||||||||||||||||||||||||
Other net gain (loss) [7] |
(5 | ) | (69 | ) | (7 | ) | 22 | 4 | NM | (82 | %) | (1 | ) | 26 | NM | |||||||||||||||||||||||||
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Total net realized capital gains (losses) |
$ | 18 | $ | (65 | ) | $ | 14 | $ | 61 | $ | (19 | ) | NM | NM | $ | (12 | ) | $ | 42 | NM | ||||||||||||||||||||
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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 income on short-term bonds. |
[3] | Includes income on a real estate joint venture and hedge fund investments outside of limited partnerships. |
[4] | Primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
[5] | 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. |
[6] | Included in core earnings. |
[7] | Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, and other investment gains and losses. |
42
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value [1] |
$ | 78,132 | 59.3 | % | $ | 80,263 | 59.0 | % | $ | 81,809 | 60.6 | % | $ | 83,157 | 62.3 | % | $ | 85,227 | 63.2 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
1,227 | 0.9 | % | 1,323 | 1.0 | % | 1,328 | 1.0 | % | 1,291 | 1.0 | % | 1,165 | 0.9 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,278 | 24.4 | % | 30,770 | 22.6 | % | 30,499 | 22.6 | % | 30,722 | 23.0 | % | 29,215 | 21.7 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value [3] |
1,081 | 0.8 | % | 989 | 0.7 | % | 921 | 0.7 | % | 938 | 0.7 | % | 851 | 0.6 | % | |||||||||||||||||||||||||
Mortgage loans [4] |
5,304 | 4.0 | % | 5,590 | 4.1 | % | 5,728 | 4.2 | % | 6,275 | 4.7 | % | 6,875 | 5.1 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,188 | 1.7 | % | 2,176 | 1.6 | % | 2,001 | 1.5 | % | 1,970 | 1.5 | % | 1,956 | 1.4 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [5] |
2,028 | 1.5 | % | 2,506 | 1.8 | % | 2,532 | 1.9 | % | 2,732 | 2.0 | % | 2,944 | 2.2 | % | |||||||||||||||||||||||||
Other investments [6] |
973 | 0.7 | % | 2,857 | 2.1 | % | 2,394 | 1.8 | % | 1,259 | 0.9 | % | 1,548 | 1.1 | % | |||||||||||||||||||||||||
Short-term investments [7] |
8,861 | 6.7 | % | 9,704 | 7.1 | % | 7,736 | 5.7 | % | 5,256 | 3.9 | % | 5,154 | 3.8 | % | |||||||||||||||||||||||||
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Total investments |
$ | 132,072 | 100.0 | % | $ | 136,178 | 100.0 | % | $ | 134,948 | 100.0 | % | $ | 133,600 | 100.0 | % | $ | 134,935 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,278 | 24.4 | % | 30,770 | 22.6 | % | 30,499 | 22.6 | % | 30,722 | 23.0 | % | 29,215 | 21.7 | % | |||||||||||||||||||||||||
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Total investments excluding trading securities |
$ | 99,794 | 75.6 | % | $ | 105,408 | 77.4 | % | $ | 104,449 | 77.4 | % | $ | 102,878 | 77.0 | % | $ | 105,720 | 78.3 | % | ||||||||||||||||||||
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Asset-backed securities (ABS) |
$ | 3,297 | 4.2 | % | $ | 3,504 | 4.4 | % | $ | 3,153 | 3.9 | % | $ | 3,087 | 3.7 | % | $ | 3,002 | 3.5 | % | ||||||||||||||||||||
Collateralized debt obligations (CDOs) |
2,575 | 3.3 | % | 2,465 | 3.1 | % | 2,487 | 3.0 | % | 3,043 | 3.7 | % | 3,037 | 3.5 | % | |||||||||||||||||||||||||
Commercial mortgage-backed securities (CMBS) |
7,277 | 9.3 | % | 6,960 | 8.7 | % | 6,951 | 8.5 | % | 6,774 | 8.1 | % | 6,346 | 7.5 | % | |||||||||||||||||||||||||
Corporate |
41,629 | 53.2 | % | 43,316 | 53.9 | % | 44,011 | 53.9 | % | 43,329 | 52.2 | % | 42,983 | 50.5 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,864 | 2.4 | % | 1,944 | 2.4 | % | 2,161 | 2.6 | % | 3,352 | 4.0 | % | 3,598 | 4.2 | % | |||||||||||||||||||||||||
Municipaltaxable |
1,299 | 1.7 | % | 1,649 | 2.1 | % | 1,757 | 2.1 | % | 2,284 | 2.7 | % | 2,364 | 2.8 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
11,482 | 14.7 | % | 11,515 | 14.3 | % | 11,503 | 14.1 | % | 11,554 | 13.9 | % | 11,761 | 13.8 | % | |||||||||||||||||||||||||
Residential mortgage-backed securities (RMBS) |
5,214 | 6.7 | % | 5,336 | 6.6 | % | 5,757 | 7.0 | % | 6,595 | 7.9 | % | 6,981 | 8.2 | % | |||||||||||||||||||||||||
U.S. Treasuries |
3,495 | 4.5 | % | 3,574 | 4.5 | % | 4,029 | 4.9 | % | 3,139 | 3.8 | % | 5,155 | 6.0 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS [8] |
$ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | $ | 81,809 | 100.0 | % | $ | 83,157 | 100.0 | % | $ | 85,227 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 8,073 | 10.3 | % | $ | 8,423 | 10.5 | % | $ | 9,364 | 11.4 | % | $ | 9,193 | 11.1 | % | $ | 11,980 | 14.1 | % | ||||||||||||||||||||
AAA |
9,409 | 12.0 | % | 10,497 | 13.1 | % | 10,113 | 12.4 | % | 9,712 | 11.7 | % | 9,002 | 10.6 | % | |||||||||||||||||||||||||
AA |
15,900 | 20.4 | % | 15,921 | 19.8 | % | 15,844 | 19.4 | % | 16,463 | 19.8 | % | 16,290 | 19.1 | % | |||||||||||||||||||||||||
A |
20,470 | 26.2 | % | 21,584 | 26.9 | % | 21,053 | 25.7 | % | 20,773 | 25.0 | % | 21,207 | 24.9 | % | |||||||||||||||||||||||||
BBB |
20,568 | 26.3 | % | 20,626 | 25.7 | % | 21,760 | 26.6 | % | 22,664 | 27.2 | % | 22,528 | 26.3 | % | |||||||||||||||||||||||||
BB & below |
3,712 | 4.8 | % | 3,212 | 4.0 | % | 3,675 | 4.5 | % | 4,352 | 5.2 | % | 4,220 | 5.0 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS [8] |
$ | 78,132 | 100.0 | % | $ | 80,263 | 100.0 | % | $ | 81,809 | 100.0 | % | $ | 83,157 | 100.0 | % | $ | 85,227 | 100.0 | % | ||||||||||||||||||||
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[1] | Includes $25, $1, $153, $149 and $114 in Corporate at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, 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 $100, $96, $104, $110 and $110 in Corporate at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[4] | Includes $138, $128, $0, $0 and $0 in Corporate at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[5] | Includes real estate joint ventures and hedge fund investments outside of limited partnerships. |
[6] | Primarily relates to derivative instruments. Additionally, includes $27, $27, $29, $26 and $26 in Corporate at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[7] | Includes $2,274, $2,293, $1,437, $1,346 and $1,139 in the Corporate segment at June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012 and June 30, 2012, respectively. |
[8] | Available-for-sale ("AFS"). |
43
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
LIFE [1]
June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 52,834 | 52.3 | % | $ | 54,329 | 51.9 | % | $ | 55,633 | 53.3 | % | $ | 56,923 | 55.5 | % | $ | 58,891 | 56.7 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
1,214 | 1.2 | % | 1,314 | 1.3 | % | 1,317 | 1.3 | % | 1,279 | 1.2 | % | 1,154 | 1.1 | % | |||||||||||||||||||||||||
Equity securities, trading, at fair value [2] |
32,278 | 31.9 | % | 30,770 | 29.4 | % | 30,499 | 29.3 | % | 30,722 | 29.9 | % | 29,215 | 28.1 | % | |||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
603 | 0.6 | % | 563 | 0.5 | % | 515 | 0.5 | % | 506 | 0.5 | % | 446 | 0.4 | % | |||||||||||||||||||||||||
Mortgage loans |
4,578 | 4.5 | % | 4,779 | 4.6 | % | 4,979 | 4.8 | % | 5,380 | 5.2 | % | 5,817 | 5.6 | % | |||||||||||||||||||||||||
Policy loans, at outstanding balance |
2,188 | 2.2 | % | 2,176 | 2.1 | % | 2,001 | 1.9 | % | 1,970 | 1.9 | % | 1,956 | 1.9 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [3] |
1,024 | 1.0 | % | 1,320 | 1.3 | % | 1,318 | 1.3 | % | 1,436 | 1.4 | % | 1,543 | 1.5 | % | |||||||||||||||||||||||||
Other investments [4] |
799 | 0.8 | % | 2,717 | 2.6 | % | 2,244 | 2.2 | % | 1,103 | 1.1 | % | 1,365 | 1.3 | % | |||||||||||||||||||||||||
Short-term investments |
5,565 | 5.5 | % | 6,619 | 6.3 | % | 5,641 | 5.4 | % | 3,384 | 3.3 | % | 3,549 | 3.4 | % | |||||||||||||||||||||||||
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Total investments |
$ | 101,083 | 100.0 | % | $ | 104,587 | 100.0 | % | $ | 104,147 | 100.0 | % | $ | 102,703 | 100.0 | % | $ | 103,936 | 100.0 | % | ||||||||||||||||||||
Less: Equity securities, trading |
32,278 | 31.9 | % | 30,770 | 29.4 | % | 30,499 | 29.3 | % | 30,722 | 29.9 | % | 29,215 | 28.1 | % | |||||||||||||||||||||||||
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Total investments excluding trading securities |
$ | 68,805 | 68.1 | % | $ | 73,817 | 70.6 | % | $ | 73,648 | 70.7 | % | $ | 71,981 | 70.1 | % | $ | 74,721 | 71.9 | % | ||||||||||||||||||||
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ABS |
$ | 2,732 | 5.2 | % | $ | 2,778 | 5.1 | % | $ | 2,491 | 4.5 | % | $ | 2,379 | 4.2 | % | $ | 2,345 | 4.0 | % | ||||||||||||||||||||
CDOs |
2,047 | 3.9 | % | 1,949 | 3.6 | % | 1,968 | 3.5 | % | 2,383 | 4.2 | % | 2,374 | 4.0 | % | |||||||||||||||||||||||||
CMBS |
4,967 | 9.4 | % | 4,715 | 8.7 | % | 4,667 | 8.4 | % | 4,546 | 8.0 | % | 4,308 | 7.3 | % | |||||||||||||||||||||||||
Corporate |
31,595 | 59.7 | % | 33,007 | 60.7 | % | 33,719 | 60.6 | % | 33,621 | 59.1 | % | 33,525 | 56.9 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
1,285 | 2.4 | % | 1,409 | 2.6 | % | 1,605 | 2.9 | % | 2,784 | 4.9 | % | 3,039 | 5.2 | % | |||||||||||||||||||||||||
Municipaltaxable |
1,167 | 2.2 | % | 1,508 | 2.8 | % | 1,603 | 2.9 | % | 1,950 | 3.4 | % | 2,015 | 3.4 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
2,417 | 4.6 | % | 2,500 | 4.6 | % | 2,450 | 4.4 | % | 2,453 | 4.3 | % | 2,485 | 4.2 | % | |||||||||||||||||||||||||
RMBS |
3,738 | 7.1 | % | 3,797 | 7.0 | % | 4,000 | 7.2 | % | 4,694 | 8.2 | % | 4,907 | 8.3 | % | |||||||||||||||||||||||||
U.S. Treasuries |
2,886 | 5.5 | % | 2,666 | 4.9 | % | 3,130 | 5.6 | % | 2,113 | 3.7 | % | 3,893 | 6.7 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | $ | 55,633 | 100.0 | % | $ | 56,923 | 100.0 | % | $ | 58,891 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 5,869 | 11.1 | % | $ | 5,806 | 10.7 | % | $ | 6,509 | 11.7 | % | $ | 6,121 | 10.7 | % | $ | 8,341 | 14.2 | % | ||||||||||||||||||||
AAA |
5,747 | 10.9 | % | 6,426 | 11.8 | % | 6,212 | 11.2 | % | 5,952 | 10.5 | % | 5,349 | 9.1 | % | |||||||||||||||||||||||||
AA |
8,152 | 15.4 | % | 8,498 | 15.6 | % | 8,353 | 15.0 | % | 9,044 | 15.9 | % | 9,130 | 15.5 | % | |||||||||||||||||||||||||
A |
14,873 | 28.2 | % | 15,798 | 29.1 | % | 15,528 | 27.8 | % | 15,574 | 27.4 | % | 16,024 | 27.2 | % | |||||||||||||||||||||||||
BBB |
15,218 | 28.8 | % | 15,165 | 27.9 | % | 16,108 | 29.0 | % | 16,775 | 29.4 | % | 16,682 | 28.3 | % | |||||||||||||||||||||||||
BB & below |
2,975 | 5.6 | % | 2,636 | 4.9 | % | 2,923 | 5.3 | % | 3,457 | 6.1 | % | 3,365 | 5.7 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 52,834 | 100.0 | % | $ | 54,329 | 100.0 | % | $ | 55,633 | 100.0 | % | $ | 56,923 | 100.0 | % | $ | 58,891 | 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. |
44
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY [1]
June 30, | September 30, | December 31, | March 31, | June 30, | ||||||||||||||||||||||||||||||||||||
2011 | 2011 | 2011 | 2012 | 2012 | ||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value |
$ | 25,273 | 88.9 | % | $ | 25,933 | 89.3 | % | $ | 26,023 | 89.5 | % | $ | 26,085 | 89.2 | % | $ | 26,222 | 88.6 | % | ||||||||||||||||||||
Fixed maturities, at fair value using fair value option |
13 | 0.1 | % | 9 | | 11 | | 12 | | 11 | | |||||||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value |
378 | 1.3 | % | 330 | 1.1 | % | 302 | 1.0 | % | 322 | 1.1 | % | 295 | 1.0 | % | |||||||||||||||||||||||||
Mortgage loans |
588 | 2.1 | % | 683 | 2.4 | % | 749 | 2.6 | % | 895 | 3.1 | % | 1,058 | 3.6 | % | |||||||||||||||||||||||||
Limited partnerships and other alternative investments [2] |
1,004 | 3.5 | % | 1,186 | 4.1 | % | 1,214 | 4.2 | % | 1,296 | 4.4 | % | 1,401 | 4.7 | % | |||||||||||||||||||||||||
Other investments [3] |
147 | 0.5 | % | 113 | 0.4 | % | 121 | 0.4 | % | 130 | 0.4 | % | 157 | 0.5 | % | |||||||||||||||||||||||||
Short-term investments |
1,022 | 3.6 | % | 792 | 2.7 | % | 658 | 2.3 | % | 526 | 1.8 | % | 466 | 1.6 | % | |||||||||||||||||||||||||
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Total investments |
$ | 28,425 | 100.0 | % | $ | 29,046 | 100.0 | % | $ | 29,078 | 100.0 | % | $ | 29,266 | 100.0 | % | $ | 29,610 | 100.0 | % | ||||||||||||||||||||
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ABS |
$ | 565 | 2.2 | % | $ | 726 | 2.8 | % | $ | 651 | 2.5 | % | $ | 660 | 2.5 | % | $ | 620 | 2.4 | % | ||||||||||||||||||||
CDOs |
528 | 2.1 | % | 516 | 2.0 | % | 519 | 2.0 | % | 660 | 2.5 | % | 663 | 2.5 | % | |||||||||||||||||||||||||
CMBS |
2,310 | 9.1 | % | 2,245 | 8.7 | % | 2,284 | 8.8 | % | 2,228 | 8.5 | % | 2,038 | 7.8 | % | |||||||||||||||||||||||||
Corporate |
10,034 | 39.7 | % | 10,309 | 39.7 | % | 10,292 | 39.5 | % | 9,708 | 37.2 | % | 9,458 | 36.1 | % | |||||||||||||||||||||||||
Foreign government/government agencies |
579 | 2.3 | % | 535 | 2.1 | % | 551 | 2.1 | % | 561 | 2.2 | % | 559 | 2.1 | % | |||||||||||||||||||||||||
Municipaltaxable |
132 | 0.5 | % | 141 | 0.5 | % | 154 | 0.6 | % | 334 | 1.3 | % | 349 | 1.3 | % | |||||||||||||||||||||||||
Municipaltax-exempt |
9,061 | 35.9 | % | 9,015 | 34.8 | % | 9,053 | 34.8 | % | 9,101 | 34.9 | % | 9,276 | 35.4 | % | |||||||||||||||||||||||||
RMBS |
1,456 | 5.8 | % | 1,538 | 5.9 | % | 1,757 | 6.8 | % | 1,901 | 7.3 | % | 2,074 | 7.9 | % | |||||||||||||||||||||||||
U.S. Treasuries |
608 | 2.4 | % | 908 | 3.5 | % | 762 | 2.9 | % | 932 | 3.6 | % | 1,185 | 4.5 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | $ | 26,023 | 100.0 | % | $ | 26,085 | 100.0 | % | $ | 26,222 | 100.0 | % | ||||||||||||||||||||
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U.S. government/government agencies |
$ | 2,183 | 8.6 | % | $ | 2,617 | 10.1 | % | $ | 2,718 | 10.4 | % | $ | 2,978 | 11.4 | % | $ | 3,562 | 13.6 | % | ||||||||||||||||||||
AAA |
3,662 | 14.5 | % | 4,071 | 15.7 | % | 3,889 | 14.9 | % | 3,712 | 14.2 | % | 3,616 | 13.8 | % | |||||||||||||||||||||||||
AA |
7,745 | 30.7 | % | 7,423 | 28.6 | % | 7,487 | 28.8 | % | 7,412 | 28.4 | % | 7,160 | 27.3 | % | |||||||||||||||||||||||||
A |
5,596 | 22.1 | % | 5,785 | 22.3 | % | 5,525 | 21.3 | % | 5,199 | 19.9 | % | 5,183 | 19.7 | % | |||||||||||||||||||||||||
BBB |
5,350 | 21.2 | % | 5,461 | 21.1 | % | 5,652 | 21.7 | % | 5,889 | 22.7 | % | 5,846 | 22.3 | % | |||||||||||||||||||||||||
BB & below |
737 | 2.9 | % | 576 | 2.2 | % | 752 | 2.9 | % | 895 | 3.4 | % | 855 | 3.3 | % | |||||||||||||||||||||||||
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Total fixed maturities, AFS |
$ | 25,273 | 100.0 | % | $ | 25,933 | 100.0 | % | $ | 26,023 | 100.0 | % | $ | 26,085 | 100.0 | % | $ | 26,222 | 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. |
45
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROSS UNREALIZED LOSS AGING
AVAILABLE-FOR-SALE SECURITIES
June 30, 2012 | December 31, 2011 | |||||||||||||||||||||||
Amortized Cost |
Fair Value |
Unrealized Loss [1] [2] |
Amortized Cost |
Fair Value |
Unrealized Loss [1] [2] |
|||||||||||||||||||
Total AFS Securities |
||||||||||||||||||||||||
Three months or less |
$ | 4,939 | $ | 4,839 | $ | (100 | ) | $ | 3,933 | $ | 3,672 | $ | (261 | ) | ||||||||||
Greater than three months to six months |
911 | 882 | (29 | ) | 2,617 | 2,517 | (100 | ) | ||||||||||||||||
Greater than six months to nine months |
222 | 216 | (6 | ) | 1,181 | 1,097 | (84 | ) | ||||||||||||||||
Greater than nine months to eleven months |
475 | 463 | (12 | ) | 106 | 95 | (11 | ) | ||||||||||||||||
Twelve months or more |
10,956 | 9,208 | (1,698 | ) | 11,613 | 9,324 | (2,218 | ) | ||||||||||||||||
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|
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|
|
|
|
|||||||||||||
Total |
$ | 17,503 | $ | 15,608 | $ | (1,845 | ) | $ | 19,450 | $ | 16,705 | $ | (2,674 | ) | ||||||||||
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|
[1] | As of June 30, 2012, fixed maturities, AFS, represented $1,766, or 96%, of the Company's 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 June 30, 2012 and December 31, 2011. |
[2] | Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses). |
46
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF JUNE 30, 2012
Cost or Amortized Cost |
Fair Value | Percent of Total Invested Assets [1] |
||||||||||
Top Ten Corporate and Equity, AFS, Exposures by Sector |
||||||||||||
Utilities |
$ | 8,484 | $ | 9,368 | 8.9 | % | ||||||
Financial services |
7,488 | 7,503 | 7.1 | % | ||||||||
Consumer non-cyclical |
5,516 | 6,214 | 5.9 | % | ||||||||
Technology and communications |
4,048 | 4,495 | 4.2 | % | ||||||||
Basic industry |
4,001 | 4,360 | 4.1 | % | ||||||||
Energy |
3,708 | 4,086 | 3.9 | % | ||||||||
Capital goods |
3,098 | 3,457 | 3.3 | % | ||||||||
Consumer cyclical |
2,246 | 2,480 | 2.3 | % | ||||||||
Transportation |
1,343 | 1,488 | 1.4 | % | ||||||||
Other |
320 | 383 | 0.4 | % | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 40,252 | $ | 43,834 | 41.5 | % | ||||||
|
|
|
|
|
|
|||||||
Top Ten Exposures by Issuer [2] |
||||||||||||
Government of Japan [3] |
$ | 2,616 | $ | 2,612 | 2.5 | % | ||||||
State of California |
487 | 514 | 0.5 | % | ||||||||
State of Illinois |
403 | 412 | 0.4 | % | ||||||||
National Grid PLC |
348 | 406 | 0.4 | % | ||||||||
AT&T Inc. |
335 | 405 | 0.4 | % | ||||||||
Government of United Kingdom |
322 | 350 | 0.3 | % | ||||||||
Caterpillar Inc |
304 | 339 | 0.3 | % | ||||||||
State of Massachusetts |
286 | 322 | 0.3 | % | ||||||||
Pfizer Inc |
271 | 314 | 0.3 | % | ||||||||
General Electric Co |
345 | 288 | 0.2 | % | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 5,717 | $ | 5,962 | 5.6 | % | ||||||
|
|
|
|
|
|
[1] | Excludes equity securities, trading. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions and equity securities, trading. |
[3] | These securities are included in short-term investments, fixed maturities, available-for-sale, and fixed maturities, fair value option on the Companys Consolidating Balance Sheets. |
47
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