-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T8RmD72UZuASS71/fUZFT0ufSifGvjXjWvwXJvS9/d+98kXbwXIGtzdeelU4ZpWA IDYSWM4o4zmRz2ERL1+XNw== 0001362310-09-001210.txt : 20090206 0001362310-09-001210.hdr.sgml : 20090206 20090205185518 ACCESSION NUMBER: 0001362310-09-001210 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20090205 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090206 DATE AS OF CHANGE: 20090205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARTFORD FINANCIAL SERVICES GROUP INC/DE CENTRAL INDEX KEY: 0000874766 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 133317783 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13958 FILM NUMBER: 09574354 BUSINESS ADDRESS: STREET 1: ONE HARTFORD PLAZA CITY: HARTFORD STATE: CT ZIP: 06155 BUSINESS PHONE: 8605475000 MAIL ADDRESS: STREET 1: ONE HARTFORD PLAZA CITY: HARTFORD STATE: CT ZIP: 06155 FORMER COMPANY: FORMER CONFORMED NAME: ITT HARTFORD GROUP INC /DE DATE OF NAME CHANGE: 19930328 8-K 1 c80105e8vk.htm FORM 8-K Filed by Bowne Pure Compliance
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 5, 2009

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)

Registrant’s telephone number, including area code: (860) 547-5000
 
 
(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

1


 

Item 2.02 Results of Operations and Financial Condition

On February 5, 2009, The Hartford Financial Services Group, Inc. issued its Investor Financial Supplement (“IFS”) relating to its financial results for the quarter and year ended December 31, 2008. A copy of the IFS is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

Exhibit No.    
99.1  
Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the quarter and year ended December 31, 2008

 

2


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Date: February 5, 2009

By: /s/ Beth A. Bombara           
Name: Beth A. Bombara
Title: Senior Vice President and Controller

 

3


 

EXHIBIT INDEX

Exhibit No.    
99.1  
Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the quarter and year ended December 31, 2008

 

4

EX-99.1 2 c80105exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
Exhibit 99.1
(THE HARTFORD LOGO)
INVESTOR FINANCIAL SUPPLEMENT
DECEMBER 31, 2008

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Address:
One Hartford Plaza
Hartford, CT 06155
Internet address:
http://www.thehartford.com
Contacts:
Rick Costello
Senior Vice President
Investor Relations
Phone (860) 547-8480
JR (John) Reilly
Vice President
Investor Relations
Phone (860) 547-9140
Margaret Mann
Program Assistant
Investor Relations
Phone (860) 547-3800
As of January 30, 2009
                 
    A.M. Best   Fitch   Standard & Poor’s   Moody’s
 
               
Insurance Financial Strength Ratings:
               
Hartford Fire Insurance Company
  A+   AA-   AA-   Aa3
Hartford Life Insurance Company
  A+   AA-   AA-   Aa3
Hartford Life and Accident Insurance Company
  A+   AA-   AA-   Aa3
Hartford Life and Annuity Insurance Company
  A+   AA-   AA-   Aa3
Hartford Life Insurance KK (Japan)
      AA-  
Hartford Life Limited (Ireland)
      AA-  
Other Ratings:
               
The Hartford Financial Services Group, Inc.:
               
Senior debt
  a-   A-   A   A3
Commercial paper
  AMB-1   F1   A-1   P-2
Junior subordinated debentures
  bbb   BBB+   BBB+   Baa1
 
               
Hartford Life, Inc.:
               
Senior debt
  a-   A-   A   A3
 
               
Hartford Life Insurance Company:
               
Short term rating
      A-1+   P-1
Consumer notes
  a+   A+   AA-   A1
TRANSFER AGENT
The Bank of New York Mellon
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
1 (877) 272-7740
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
    C-1  
   
Operating Results by Segment
    C-2  
   
Analysis of Operating Results by Segment
    C-2 a
   
Consolidating Statements of Operations
       
   
Three Months Ended December 31, 2007 and 2008
    C-3  
   
Year Ended December 31, 2007 and 2008
    C-4  
   
Consolidating Balance Sheets
       
   
As of December 31, 2007 and December 31, 2008
    C-5  
   
Capital Structure
    C-6  
   
Accumulated Other Comprehensive Loss
    C-7  
   
Computation of Basic and Diluted Earnings (Losses) Per Share
    C-8  
   
Analysis of Net Realized Capital Losses
       
   
Three Months Ended December 31, 2007 and 2008 After Tax and DAC
    C-9  
   
Year Ended December 31, 2007 and 2008 After Tax and DAC
    C-10  
   
Computation of Return-on-Equity Measures
    C-11  
   
 
       
LIFE  
Financial Highlights
    L-1  
   
Financial Highlights Excluding Impacts of the Unlock
    L-1a  
   
Operating Results
    L-2  
   
Total Assets Under Management
    L-3  
   
Consolidated Balance Sheets
    L-4  
   
Deferred Policy Acquisition Costs and Present Value of Future Profits
    L-5  
   
Supplemental Data — Annuity Death and Income Benefits
    L-6  
   
Reinsurance Recoverable Analysis
       
   
As of December 31, 2008
    L-7  
   
Statutory Surplus to GAAP Stockholders’ Equity Reconciliation
    L-8  
   
Retail Products Group
       
   
Income Statements
       
   
Individual Annuity
    L-9  
   
Other
    L-10  
   
Supplemental Data
       
   
Deposits
    L-11  
   
Assets Under Management
    L-12  
   
Individual Annuity — Account Value Rollforward
    L-13  
   
Other Retail — Asset Rollforward
    L-14  
   
Individual Life
       
   
Income Statements
    L-15  
   
Supplemental Data
    L-16  
   
Account Value Rollforward
    L-17  
   
Retirement Plans
       
   
Income Statements
    L-18  
   
Supplemental Data
       
   
Deposits
    L-19  
   
Assets Under Management and Administration
    L-20  
   
Account Value and Asset Rollforward
    L-21  
   
Group Benefits
       
   
Income Statements
    L-22  
   
Supplemental Data
    L-23  
   
International
       
   
Highlights
    L-24  
   
Japan
       
   
Income Statements
    L-25  
   
Supplemental Data — Account Value Rollforward in Dollars
    L-26  
   
Supplemental Data — Account Value Rollforward in Yen
    L-27  
   
 
       
   
Institutional Solutions Group
       
   
Income Statements
    L-28  
   
Supplemental Data
       
   
Assets Under Management
    L-29  
   
Deposits
    L-30  
   
Account Value and Asset Rollforward
    L-31  
   
 
       
PROPERTY & CASUALTY  
Financial Highlights
  PC-1
   
Operating Results
  PC-2
   
Ongoing Operations Operating Results
  PC-3
   
Ongoing Operations Consolidating Underwriting Results
       
   
Three Months Ended December 31, 2008
  PC-4
   
Year Ended December 31, 2008
  PC-5
   
Ongoing Operations Underwriting Results
  PC-6
   
Personal Lines Underwriting Results
  PC-7
   
Personal Lines Written and Earned Premiums
  PC-8
   
Small Commercial Underwriting Results
  PC-9
   
Middle Market Underwriting Results
  PC-10
   
Specialty Commercial Underwriting Results
  PC-11
   
Specialty Commercial Written and Earned Premiums
  PC-12
   
Other Operations Operating Results
  PC-13
   
Other Operations Losses and Loss Adjustment Expenses
  PC-14
   
Paid and Incurred Loss and Loss Adjustment Expense Development — A&E
  PC-15
   
Unpaid Loss and Loss Adjustment Expense Reserve Rollforward
       
   
Three Months Ended December 31, 2008
  PC-16
   
Year Ended December 31, 2008
  PC-17
   
Reinsurance Recoverable Analysis
  PC-18
   
Consolidated Income Statements
  PC-19
   
Consolidated Balance Sheets
  PC-20
   
Statutory Surplus to GAAP Stockholders’ Equity Reconciliation
  PC-21
   
 
       
INVESTMENTS  
Investment Earnings Before-tax
       
   
Consolidated
    I-1  
   
Life
    I-2  
   
Property & Casualty
    I-3  
   
Corporate
    I-4  
   
Net Realized Capital Gains (Losses), After-tax/DAC
       
   
Three Months Ended December 31, 2008 and 2007
    I-5  
   
Year Ended December 31, 2008 and 2007
    I-6  
   
Composition of Invested Assets
       
   
Consolidated
    I-7  
   
Life
    I-8  
   
Property & Casualty
    I-9  
   
Unrealized Loss Aging
       
   
Consolidated
    I-10  
   
Life
    I-11  
   
Property & Casualty
    I-12  
   
Invested Asset Exposures
       
   
As of December 31, 2008
    I-13  

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
  All amounts are in millions, except for per share and ratio information unless otherwise stated.
 
  Life is organized into four groups which are comprised of six reporting segments: The Retail Products Group (“Retail”) and Individual Life segments make up the Individual Markets Group. The Retirement Plans and Group Benefits segments make up the Employer Markets Group. The Institutional Solutions Group (“Institutional”) and International segments each make up their own group. Life also includes in an Other category its leveraged PPLI product line of business; corporate items not directly allocated to any of its reportable operating segments; the mark-to-market adjustment for the equity securities held for trading reported in net investment income and the related change in interest credited reported as a component of benefits, losses and loss adjustment expenses because these items are not considered by Life’s chief operating decision maker in evaluating the International results of operations; and inter-segment eliminations.
 
  Property & Casualty includes Ongoing Operations and Other Operations. Ongoing Operations includes the underwriting results of Personal Lines, Small Commercial, Middle Market and Specialty Commercial segments. Other Operations includes the underwriting results of certain property and casualty insurance operations that have discontinued writing new business and substantially all of the Company’s asbestos and environmental exposures. The profitability of the Personal Lines, Small Commercial, Middle Market and Specialty Commercial segments are evaluated primarily based on underwriting results. The Company allocates income and expense items not directly attributed to the underwriting segments, such as net investment income, net realized capital gains and losses, other expenses and income taxes, to Ongoing Operations and Other Operations, respectively. The profitability of Ongoing Operations and the Other Operations segment is evaluated based on net income.
 
  Corporate primarily includes the Company’s debt financing and related interest expense, as well as other capital raising and purchase accounting adjustment activities.
 
  Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in The Hartford’s business. These measures include sales, deposits, net flows, account value, insurance in-force and premium retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period.
 
  The Hartford, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs, as well as other underwriting expenses) to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums.
 
  The Hartford, along with others in the life insurance industry, uses underwriting ratios as measures of the Group Benefits segment’s performance. The loss ratio is the ratio of total benefits, losses and loss adjustment expenses, excluding buyouts, to total premiums and other considerations excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses to total premiums and other considerations excluding buyout premiums.
 
  Accumulated other comprehensive income (“AOCI”) represents net of tax unrealized gain (loss) on available-for-sale securities; net gain (loss) on cash-flow hedging instruments; foreign currency translation adjustments; and pension and other postretirement adjustments.
 
  Assets under management is a measure used by the Company because a significant portion of the Company’s revenues are based upon asset values. These revenues increase or decrease with a rise or fall in the amount of assets under management whether caused by changes in the market or through net flow.
 
  Assets under administration represents the client asset base of the Company’s recordkeeping business for which revenues are predominately based on the number of plan participants. Unlike assets under management, increases or decreases in assets under administration do not have a direct corresponding increase or decrease to the Company’s revenues.
 
  Annualized investment yield, before- or after-tax, is calculated by dividing before- or after-tax, respectively, annualized net investment income (excluding net realized capital gains (losses) and change in fair value of trading securities) by average invested assets at cost (fixed maturities at amortized cost, excluding trading securities).
 
  Certain reclassifications have been made to the prior periods to conform to the December 31, 2008 presentation.
 
  NM — Not meaningful means increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa.

 

i


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
  The Hartford uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company’s operating performance for the periods presented herein. Because The Hartford’s calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford’s non-GAAP and other financial measures to those of other companies.
 
  The Hartford uses the non-GAAP financial measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that the measure core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by the net effect of certain realized capital gains and losses. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax and the effects of deferred policy acquisition costs (“DAC”)) that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives and net periodic settlements on the Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Core earnings is also used by management to assess our operating performance and is one of the measures considered in determining incentive compensation for our managers. Net income is the most directly comparable GAAP measure. Core earnings should not be considered as a substitute for net income and does not reflect the overall profitability of our business. Therefore, The Hartford believes that it is useful for investors to evaluate both net income and core earnings when reviewing the Company’s performance. A reconciliation of net income to core earnings for the periods presented herein is set forth on page C-2.
 
  Core earnings per share is calculated based on the non-GAAP financial measure core earnings. The Hartford believes that the measure core earnings per share provides investors with a valuable measure of the Company’s operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of our business. Therefore, the Hartford believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance. A reconciliation of net income per share to core earnings per share for the periods presented herein is set forth on page C-8.
 
  Written premiums is a statutory accounting financial measure used by The Hartford as an important indicator of the operating performance of the Company’s property and casualty operations. Because written premiums represents the amount of premium charged for policies issued, net of reinsurance, during a fiscal period, The Hartford believes it is useful to investors because it reflects current trends in The Hartford’s sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves. A reconciliation of written premiums to earned premiums for the periods presented herein is set forth at page PC-2.
 
  The Hartford’s management evaluates profitability of the Personal Lines, Small Commercial, Middle Market and Specialty Commercial underwriting segments primarily on the basis of underwriting results. Underwriting results is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income is the most directly comparable GAAP measure. Underwriting results are influenced significantly by earned premium growth and the adequacy of The Hartford’s pricing. Underwriting profitability over time is also greatly influenced by The Hartford’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. The Hartford believes that underwriting results provides investors with a valuable measure of before-tax profitability derived from underwriting activities, which are managed separately from the Company’s investing activities. Underwriting results is also presented for Ongoing Operations, Other Operations and total Property & Casualty. A reconciliation of underwriting results to net income for total Property & Casualty, Ongoing Operations and Other Operations is set forth on pages PC-2, PC-3 and PC-13, respectively.
 
  A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Hartford believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
 
  Underwriting results before catastrophes and prior year development is a non-GAAP financial measure because it excludes the effects of catastrophes, prior year development and the reduction in earned premiums relating to retrospectively rated policies. The Company believes that this measure is useful to investors as an additional measure of Property & Casualty’s current operations, because it excludes the effect of items relating to prior periods. Net income is the most directly comparable GAAP measure. A reconciliation of the adjusted underwriting results to underwriting results and net income for the periods presented herein are set forth on page C-2a.

 

ii


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES (CONTINUED)
  Book value per share excluding accumulated other comprehensive income (“AOCI”) is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) stockholders’ equity excluding AOCI, net of tax, by (b) common shares outstanding plus assumed conversion of preferred shares to common. The Hartford provides book value per share excluding AOCI to enable investors to analyze the amount of the Company’s net worth that is primarily attributable to the Company’s business operations. The Hartford believes book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per share is the most directly comparable GAAP measure. A reconciliation of book value per share to book value per share excluding AOCI for the periods presented herein is set forth at page C-1.
 
  The Hartford provides different measures of the return on equity (“ROE”) of the Company. ROE (core earnings last twelve months to equity excluding AOCI), is calculated based on non-GAAP financial measures. ROE (core earnings last twelve months to equity excluding AOCI) is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average stockholders’ equity excluding AOCI. The Hartford provides to investors return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above. The Hartford excludes AOCI in the calculation of these return-on-equity measures to provide investors with a measure of how effectively the Company is investing the portion of the Company’s net worth that is primarily attributable to the Company’s business operations. ROE (net income last twelve months to equity including AOCI) is the most directly comparable GAAP measure. A reconciliation of the non-GAAP return-on-equity measures for the periods presented herein to ROE (net income last twelve months to equity including AOCI) is set forth at page C-11.

 

iii


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
HIGHLIGHTS
                                                                               
Net income (loss)
  $ 595     $ 145     $ 543     $ (2,631 )   $ (806 )   NM       69 %   $ 2,949     $ (2,749 )   NM  
Core earnings (losses)
  $ 840     $ 792     $ 696     $ (422 )   $ (208 )   NM       51 %   $ 3,507     $ 858       (76 %)
Total revenues [1]
  $ 5,674     $ 1,544     $ 7,503     $ (393 )   $ 565       (90 %)   NM     $ 25,916     $ 9,219       (64 %)
Total assets
  $ 360,361     $ 344,168     $ 333,840     $ 311,485     $ 287,583       (20 %)     (8 %)                        
Total assets under management [2]
  $ 426,764     $ 424,193     $ 416,269     $ 384,981     $ 346,916       (19 %)     (10 %)                        
 
                                                                 
 
                                                                               
PER SHARE AND SHARES DATA [3]
                                                                               
Basic earnings per share
                                                                               
Net income (loss) available to common shareholders
  $ 1.90     $ 0.46     $ 1.74     $ (8.74 )   $ (2.71 )   NM       69 %   $ 9.32     $ (8.99 )   NM  
Core earnings (losses)
  $ 2.68     $ 2.52     $ 2.23     $ (1.40 )   $ (0.72 )   NM       49 %   $ 11.09     $ 2.75       (75 %)
Diluted earnings (losses) per share
                                                                               
Net income (loss) available to common shareholders
  $ 1.88     $ 0.46     $ 1.73     $ (8.74 )   $ (2.71 )   NM       69 %   $ 9.24     $ (8.99 )   NM  
Core earnings (losses)
  $ 2.66     $ 2.51     $ 2.22     $ (1.40 )   $ (0.72 )   NM       49 %   $ 10.99     $ 2.74       (75 %)
Weighted average common shares outstanding (basic)
    313.4       313.8       311.7       301.1       300.2     (13.2 )sh   (0.9 )sh     316.3       306.7     (9.6 )sh
Weighted average common shares outstanding and dilutive potential common shares (diluted)
    316.1       315.7       313.1       302.1       320.9     4.8 sh   18.8 sh     319.1       313.0     (6.1 )sh
Common shares outstanding assuming conversion of outstanding preferred shares to common [4]
    313.8       314.5       303.1       300.4       324.8     11.0 sh   24.4 sh     313.8       324.8     11.0 sh
Book value per share
  $ 61.20     $ 56.71     $ 55.51     $ 41.80     $ 28.53       (53 %)     (32 %)                        
Per share impact of AOCI
  $ (2.73 )   $ (7.08 )   $ (9.17 )   $ (13.83 )   $ (23.16 )   NM       (67 %)                        
Book value per share (excluding AOCI)
  $ 63.93     $ 63.79     $ 64.68     $ 55.63     $ 51.69       (19 %)     (7 %)                        
 
                                                                 
 
                                                                               
FINANCIAL RATIOS
                                                                               
ROE (net income last 12 months to equity including AOCI) [5]
    15.5 %     12.1 %     12.0 %     (8.6 %)     (19.3 %)     (34.8 )     (10.7 )                        
ROE (core earnings last 12 months to equity excluding AOCI) [5]
    18.1 %     17.8 %     17.4 %     10.5 %     4.7 %     (13.4 )     (5.8 )                        
Debt to capitalization including AOCI
    19.0 %     21.8 %     26.2 %     30.6 %     40.2 %     21.2       9.6                          
Annualized investment yield, after-tax
    4.0 %     3.6 %     3.6 %     3.2 %     2.2 %     (1.8 )     (1.0 )     4.1 %     3.2 %     (0.9 )
Ongoing Property & Casualty GAAP combined ratio
    91.1       87.8       95.8       101.7       77.6       13.5       24.1       90.8       90.7       0.1  
     
[1]   Total revenues of The Hartford are impacted by net investment income and mark-to-market effects of equity securities held for trading supporting the international variable annuity business, which have corresponding amounts credited to policyholders within benefits losses and loss adjustment expenses. See pages C-3 and C-4 for the impact to total revenues along with the corresponding amounts in benefits losses and loss adjustment expenses in the three months and year ended December 31, 2007 and 2008.
 
[2]   Includes mutual fund assets (see page L-3) and third party assets managed by HIMCO (see page I-7).
 
[3]   See page C-8 for computation of basic and diluted earnings (losses) per share.
 
[4]   All conditions have been met to exchange Allianz preferred shares to common. Shares were exchanged effective January 9, 2009.
 
[5]   See page C-11 for a computation of return-on-equity measures.

 

C-1


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
                                                                                 
                                            Year over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
                                                                               
LIFE
                                                                               
Retail Products Group
                                                                               
Individual Annuity
  $ 192     $ 174     $ 189     $ (552 )   $ (198 )   NM       64 %   $ 918     $ (387 )   NM  
Other Retail
    17       13       14       13       (2 )   NM     NM       65       38       (42 %)
 
                                                           
Total Retail Products Group
    209       187       203       (539 )     (200 )   NM       63 %     983       (349 )   NM  
Individual Life
    40       41       43       8       26       (35 %)   NM       196       118       (40 %)
 
                                                           
Total Individual Markets Group
    249       228       246       (531 )     (174 )   NM       67 %     1,179       (231 )   NM  
 
                                                                               
Retirement Plans
    22       17       33       (36 )     (3 )   NM       92 %     89       11       (88 %)
Group Benefits
    92       70       85       100       90       (2 %)     (10 %)     338       345       2 %
 
                                                           
Total Employer Markets Group
    114       87       118       64       87       (24 %)     36 %     427       356       (17 %)
International Markets Group
    61       67       64       (75 )     (110 )   NM       (47 %)     254       (54 )   NM  
Institutional Solutions Group
    35       22       27       1       (40 )   NM     NM       140       10       (93 %)
Other
    (2 )     (11 )     (5 )           (24 )   NM     NM       (8 )     (40 )   NM  
 
                                                           
Total Life core earnings (losses) [1][2][3]
    457       393       450       (541 )     (261 )   NM       52 %     1,992       41       (98 %)
 
                                                                               
PROPERTY & CASUALTY
                                                                               
Ongoing Operations Underwriting Results
                                                                               
Personal Lines
    30       105       18       (45 )     202     NM     NM       322       280       (13 %)
Small Commercial
    204       119       69       82       167       (18 %)     104 %     508       437       (14 %)
Middle Market
    58       55       3       (37 )     148       155 %   NM       157       169       8 %
Specialty Commercial
    (58 )     39       18       (44 )     58     NM     NM       (18 )     71     NM  
 
                                                           
Total Ongoing Operations underwriting results
    234       318       108       (44 )     575       146 %   NM       969       957       (1 %)
Net servicing income
    11       (1 )     8       14       10       (9 %)     (29 %)     52       31       (40 %)
Net investment income (loss)
    357       310       334       285       127       (64 %)     (55 %)     1,439       1,056       (27 %)
Periodic net coupon settlements on credit derivatives, before-tax
    4       2       1       2       (3 )   NM     NM       15       2       (87 %)
Other expenses
    (69 )     (57 )     (65 )     (58 )     (39 )     43 %     33 %     (248 )     (219 )     12 %
Income tax expense
    (155 )     (172 )     (105 )     (39 )     (236 )     (52 %)   NM       (636 )     (552 )     13 %
 
                                                           
Ongoing Operations core earnings
    382       400       281       160       434       14 %     171 %     1,591       1,275       (20 %)
 
                                                                               
Other Operations core earnings (losses) [4]
    32       26       2       (4 )     18       (44 %)   NM       38       42       11 %
 
                                                           
 
                                                                               
Total Property & Casualty core earnings
    414       426       283       156       452       9 %     190 %     1,629       1,317       (19 %)
 
                                                                               
Total Corporate core losses [1][3]
    (31 )     (27 )     (37 )     (37 )     (399 )   NM     NM       (114 )     (500 )   NM  
 
                                                           
 
                                                                               
CONSOLIDATED
                                                                               
Core earnings (losses)
    840       792       696       (422 )     (208 )   NM       51 %     3,507       858       (76 %)
Add: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) [1][5]
    (245 )     (647 )     (153 )     (2,209 )     (598 )     (144 %)     73 %     (558 )     (3,607 )   NM  
 
                                                           
Net income (loss)
  $ 595     $ 145     $ 543     $ (2,631 )   $ (806 )   NM       69 %   $ 2,949     $ (2,749 )   NM  
 
                                                           
PER SHARE DATA [6]
                                                                               
Diluted earnings (losses) per share
                                                                               
Core earnings (losses) available to common shareholders
  $ 2.66     $ 2.51     $ 2.22     $ (1.40 )   $ (0.72 )   NM       49 %   $ 10.99     $ 2.74       (75 %)
Net income (loss) available to common shareholders
  $ 1.88     $ 0.46     $ 1.73     $ (8.74 )   $ (2.71 )   NM       69 %   $ 9.24     $ (8.99 )   NM  
     
[1]   Included in the year ended December 31, 2007 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $227, $3, and $(17), respectively, related to the effect of the unlock of deferred acquisition costs. Included in the three months ended September 30, 2008 and year ended December 31, 2008 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $(932), $9, and $(9), respectively, related to the effect of the unlock of deferred acquisition costs. See page L-1 for further details by Life segment.
 
[2]   Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits.
 
[3]   As a result of the goodwill testing performed during the three months ended December 31, 2008, The Company has written off goodwill of $274 and $323, after-tax, in Life and Corporate, respectively.
 
[4]   The year ended December 31, 2007 included a charge of $64, after-tax, principally as a result of an adverse arbitration decision and an environmental reserve increase of $16, after-tax. The three months ended June 30, 2008 included an asbestos reserve increase of $33, after-tax. The three months ended September 30, 2008 included an environmental reserve increase of $34, after-tax.
 
[5]   Includes those net realized capital losses not included in core earnings (losses). See pages C-9 and C-10 for further analysis.
 
[6]   See page C-8 for reconciliation of net income (loss) per share to core earnings (losses) per share.

 

C-2


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
                                                                               
LIFE
                                                                               
Retail Products Group
                                                                               
Individual Annuity
  $ 192     $ 174     $ 189     $ (552 )   $ (198 )   NM       64 %   $ 918     $ (387 )   NM  
Other Retail
    17       13       14       13       (2 )   NM     NM       65       38       (42 %)
 
                                                           
Total Retail Products Group
    209       187       203       (539 )     (200 )   NM       63 %     983       (349 )   NM  
Individual Life
    40       41       43       8       26       (35 %)   NM       196       118       (40 %)
 
                                                           
Total Individual Markets Group
    249       228       246       (531 )     (174 )   NM       67 %     1,179       (231 )   NM  
 
                                                                               
Retirement Plans
    22       17       33       (36 )     (3 )   NM       92 %     89       11       (88 %)
Group Benefits
    92       70       85       100       90       (2 %)     (10 %)     338       345       2 %
 
                                                           
Total Employer Markets Group
    114       87       118       64       87       (24 %)     36 %     427       356       (17 %)
 
                                                                               
International Markets Group
    61       67       64       (75 )     (110 )   NM       (47 %)     254       (54 )   NM  
 
                                                                               
Institutional Solutions Group
    35       22       27       1       (40 )   NM     NM       140       10       (93 %)
 
                                                                               
Other
    (2 )     (11 )     (5 )           (24 )   NM     NM       (8 )     (40 )   NM  
 
                                                           
Total Life core earnings (losses) [1][2][3]
    457       393       450       (541 )     (261 )   NM       52 %     1,992       41       (98 %)
 
                                                                               
PROPERTY & CASUALTY
                                                                               
Ongoing Operations Underwriting Results Before Catastrophes and Prior Year Development:
                                                                               
Personal Lines
    61       127       116       126       130       113 %     3 %     443       499       13 %
Small Commercial
    77       126       102       93       157       104 %     69 %     327       478       46 %
Middle Market
    23       48       15       12       79     NM     NM       156       154       (1 %)
Specialty Commercial
    12       16       7       4       11       (8 %)     175 %     75       38       (49 %)
 
                                                           
Total Ongoing Operations underwriting results before catastrophes and prior year development
    173       317       240       235       377       118 %     60 %     1,001       1,169       17 %
Catastrophes, excluding prior year development [4]
    (65 )     (50 )     (171 )     (356 )     3     NM     NM       (177 )     (574 )   NM  
Prior year reserve development:
                                                                               
Catastrophe loss and loss adjustment expenses
    (4 )     11       1       11       6     NM       (45 %)     (10 )     29     NM  
Other loss and loss adjustment expenses
    130       40       38       66       189       45 %     186 %     155       333       115 %
 
                                                           
Total Ongoing Operations underwriting results
    234       318       108       (44 )     575       146 %   NM       969       957       (1 %)
Net servicing income (loss)
    11       (1 )     8       14       10       (9 %)     (29 %)     52       31       (40 %)
Net investment income
    357       310       334       285       127       (64 %)     (55 %)     1,439       1,056       (27 %)
Periodic net coupon settlements on credit derivatives, before-tax
    4       2       1       2       (3 )   NM     NM       15       2       (87 %)
Other expenses
    (69 )     (57 )     (65 )     (58 )     (39 )     43 %     33 %     (248 )     (219 )     12 %
Income tax expense
    (155 )     (172 )     (105 )     (39 )     (236 )     (52 %)   NM       (636 )     (552 )     13 %
 
                                                           
Ongoing Operations core earnings
    382       400       281       160       434       14 %     171 %     1,591       1,275       (20 %)
 
                                                                               
Other Operations core earnings (losses) [5]
    32       26       2       (4 )     18       (44 %)   NM       38       42       11 %
 
                                                           
Total Property & Casualty core earnings
    414       426       283       156       452       9 %     190 %     1,629       1,317       (19 %)
 
                                                                               
CORPORATE
                                                                               
Total Corporate core losses [1][3]
    (31 )     (27 )     (37 )     (37 )     (399 )   NM     NM       (114 )     (500 )   NM  
 
                                                           
 
                                                                               
CONSOLIDATED
                                                                               
Core earnings (losses)
    840       792       696       (422 )     (208 )   NM       51 %     3,507       858       (76 %)
Add: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses) [1][6]
    (245 )     (647 )     (153 )     (2,209 )     (598 )     (144 %)     73 %     (558 )     (3,607 )   NM  
 
                                                           
Net income (loss)
  $ 595     $ 145     $ 543     $ (2,631 )   $ (806 )   NM       69 %   $ 2,949     $ (2,749 )   NM  
 
                                                           
     
[1]   Included in the year ended December 31, 2007 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $227, $3, and $(17), respectively, related to the effect of the unlock of deferred acquisition costs. Included in the three months ended September 30, 2008 and year ended December 31, 2008 in Life core earnings (losses), Corporate core losses and net realized losses, after-tax, is $(932), $9, and $(9), respectively, related to the effect of the unlock of deferred acquisition costs. See page L-1 for further details by Life segment.
 
[2]   Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits.
 
[3]   As a result of the goodwill testing performed during the three months ended December 31, 2008, The Company has written off goodwill of $274 and $323, after-tax, in Life and Corporate, respectively.
 
[4]   The year ended December 31, 2008 included catastrophe treaty reinstatement premium, catastrophe losses, and assessments from the Texas Windstorm Insurance Association, totaling $258, including $277 for the three months ended September 30, 2008, primarily related to hurricane Ike.
 
[5]   The year ended December 31, 2007 included a charge of $64, after-tax, principally as a result of an adverse arbitration decision and an environmental reserve increase of $16, after-tax. The three months ended June 30, 2008 included an asbestos reserve increase of $33, after-tax. The three months ended September 30, 2008 included an environmental reserve increase of $34, after-tax.
 
[6]   Includes those net realized capital losses not included in core earnings (losses). See pages C-9 and C-10 for further analysis.

 

C-2a


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
                                                                                                 
    LIFE     PROPERTY & CASUALTY     CORPORATE     CONSOLIDATED  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
Earned premiums
  $ 1,236     $ 1,296       5 %   $ 2,623     $ 2,570       (2 %)   $     $           $ 3,859     $ 3,866        
Fee income
    1,407       1,076       (24 %)                       3       3             1,410       1,079       (23 %)
Net investment income (loss)
                                                                                               
Securities available-for-sale and other
    878       638       (27 %)     421       162       (62 %)     8       9       13 %     1,307       809       (38 %)
Equity securities held for trading [1]
    (601 )     (4,500 )   NM                                           (601 )     (4,500 )   NM  
 
                                                                       
Total net investment income (loss)
    277       (3,862 )   NM       421       162       (62 %)     8       9       13 %     706       (3,691 )   NM  
Other revenues
                      128       127       (1 %)                       128       127       (1 %)
Net realized capital gains (losses)
    (333 )     (678 )     (104 %)     (96 )     (246 )     (156 %)           108     NM       (429 )     (816 )     (90 %)
 
                                                                       
Total revenues
    2,587       (2,168 )   NM       3,076       2,613       (15 %)     11       120     NM       5,674       565       (90 %)
 
                                                                                               
Benefits, losses and loss adjustment expenses
    1,709       1,858       9 %     1,667       1,293       (22 %)                       3,376       3,151       (7 %)
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities [1]
    (601 )     (4,500 )   NM                                           (601 )     (4,500 )   NM  
Amortization of deferred policy acquisition costs and present value of future profits
    280       542       94 %     523       528       1 %     1             (100 %)     804       1,070       33 %
Insurance operating costs and expenses
    846       786       (7 %)     222       181       (18 %)                       1,068       967       (9 %)
Interest expense
    2             (100 %)                       65       115       77 %     67       115       72 %
Goodwill impairment
          422     NM                               323     NM             745     NM  
Other expenses [2]
    3       (4 )   NM       184       158       (14 %)     (8 )     14     NM       179       168       (6 %)
 
                                                                       
Total benefits and expenses
    2,239       (896 )   NM       2,596       2,160       (17 %)     58       452     NM     4,893       1,716       (65 %)
 
                                                                                               
Income (loss) before income taxes
    348       (1,272 )   NM       480       453       (6 %)     (47 )     (332 )   NM       781       (1,151 )   NM  
 
                                                                                               
Income tax expense (benefit)
    71       (465 )   NM       131       162       24 %     (16 )     (42 )     (163 %)     186       (345 )   NM  
 
                                                                       
 
                                                                                               
Net income (loss)
    277       (807 )   NM       349       291       (17 %)     (31 )     (290 )   NM       595       (806 )   NM  
 
                                                                                               
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
    (180 )     (546 )   NM       (65 )     (161 )     (148 %)           109     NM       (245 )     (598 )     (144 %)
 
                                                                       
 
                                                                                               
Core earnings (losses)
  $ 457     $ (261 )   NM     $ 414     $ 452       9 %   $ (31 )   $ (399 )   NM     $ 840     $ (208 )   NM  
 
                                                                       
     
[1]   ncludes investment income and mark-to-market effects of equity securities held for trading supporting the International variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses.
 
[2]   The three months ended December 31, 2007 included $5, $11, and $(16) in Life, Property & Casualty and Corporate, respectively, of interest charged by Corporate on the amount of capital held by the Life and Property & Casualty operations in excess of the amount needed to support the capital requirements of the Life and Property & Casualty operations. The three months ended December 31, 2008 included $(22), $(6), and $28 in Life, Property & Casualty and Corporate, respectively, of interest charged or credited, as applicable, by Corporate to the extent that the amount of capital held by the Life and Property & Casualty operations is greater than or less than the amount of capital allocated to support the capital requirements of the Life and Property & Casualty operations.

 

C-3


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 AND 2008
                                                                                                 
    LIFE     PROPERTY & CASUALTY     CORPORATE     CONSOLIDATED  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
Earned premiums
  $ 5,123     $ 5,165       1 %   $ 10,496     $ 10,338       (2 %)   $     $           $ 15,619     $ 15,503       (1 %)
Fee income
    5,420       5,118       (6 %)                       16       17       6 %     5,436       5,135       (6 %)
Net investment income (loss)
                                                                                               
Securities available-for-sale and other
    3,497       3,045       (13 %)     1,687       1,253       (26 %)     30       37       23 %     5,214       4,335       (17 %)
Equity securities held for trading [1]
    145       (10,340 )   NM                                           145       (10,340 )   NM  
 
                                                                       
Total net investment income (loss)
    3,642       (7,295 )   NM       1,687       1,253       (26 %)     30       37       23 %     5,359       (6,005 )   NM  
Other revenues
                      496       504       2 %                       496       504       2 %
Net realized capital gains (losses)
    (819 )     (4,138 )   NM       (172 )     (1,877 )   NM       (3 )     97     NM       (994 )     (5,918 )   NM  
 
                                                                       
Total revenues
    13,366       (1,150 )   NM     12,507       10,218       (18 %)     43       151     NM     25,916       9,219       (64 %)
 
                                                                                               
Benefits, losses and loss adjustment expenses
    7,002       7,381       5 %     6,917       6,707       (3 %)                       13,919       14,088       1 %
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities [1]
    145       (10,340 )   NM                                           145       (10,340 )   NM  
Amortization of deferred policy acquisition costs and present value of future profits
    884       2,176       146 %     2,104       2,095             1             (100 %)     2,989       4,271       43 %
Insurance operating costs and expenses
    3,178       3,269       3 %     716       724       1 %                       3,894       3,993       3 %
Interest expense
    4       2       (50 %)                       259       341       32 %     263       343       30 %
Goodwill impairment
          422     NM                               323     NM             745     NM  
Other expenses [2]
    48       29       (40 %)     693       695             (40 )     (14 )     65 %     701       710       1 %
 
                                                                       
Total benefits and expenses
    11,261       2,939       (74 %)     10,430       10,221       (2 %)     220       650       195 %     21,911       13,810       (37 %)
 
                                                                                               
Income (loss) before income taxes
    2,105       (4,089 )   NM     2,077       (3 )   NM     (177 )     (499 )     (182 %)     4,005       (4,591 )   NM
 
                                                                                               
Income tax expense (benefit)
    547       (1,646 )   NM       570       (95 )   NM       (61 )     (101 )     (65 %)     1,056       (1,842 )   NM  
 
                                                                       
 
                                                                                               
Net income (loss)
    1,558       (2,443 )   NM     1,507       92       (94 %)     (116 )     (398 )   NM     2,949       (2,749 )   NM
 
                                                                                               
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
    (434 )     (2,484 )   NM       (122 )     (1,225 )   NM       (2 )     102     NM       (558 )     (3,607 )   NM  
 
                                                                       
 
                                                                                               
Core earnings (losses)
  $ 1,992     $ 41       (98 %)   $ 1,629     $ 1,317       (19 %)   $ (114 )   $ (500 )   NM   $ 3,507     $ 858       (76 %)
 
                                                                       
     
[1]   Includes investment income and mark-to-market effects of equity securities held for trading supporting the International variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses.
 
[2]   The year ended December 31, 2007 included $28, $49, and $(77) in Life, Property & Casualty and Corporate, respectively, of interest charged by Corporate on the amount of capital held by the Life and Property & Casualty operations in excess of the amount needed to support the capital requirements of the Life and Property & Casualty operations. The year ended December 31, 2008 included $(10), $25, and $(15) in Life, Property & Casualty and Corporate, respectively, of interest charged or credited, as applicable, by Corporate to the extent that the amount of capital held by the Life and Property & Casualty operations is greater than or less than the amount of capital allocated to support the capital requirements of the Life and Property & Casualty operations.

 

C-4


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2008
                                                                                                 
    LIFE     PROPERTY & CASUALTY     CORPORATE     CONSOLIDATED  
    Dec. 31,     Dec. 31,             Dec. 31,     Dec. 31,             Dec. 31,     Dec. 31,             Dec. 31,     Dec. 31,        
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
Investments
                                                                                               
Fixed maturities, available-for-sale, at fair value
  $ 52,542     $ 45,182       (14 %)   $ 27,205     $ 19,775       (27 %)   $ 308     $ 155       (50 %)   $ 80,055     $ 65,112       (19 %)
Equity securities, trading, at fair value
    36,182       30,820       (15 %)                                         36,182       30,820       (15 %)
Equity securities, available-for-sale, at fair value
    1,284       711       (45 %)     1,208       674       (44 %)     103       73       (29 %)     2,595       1,458       (44 %)
Policy loans, at outstanding balance
    2,061       2,208       7 %                                         2,061       2,208       7 %
Mortgage loans on real estate
    4,739       5,684       20 %     671       785       17 %                       5,410       6,469       20 %
Limited partnerships and other alternative investments
    1,306       1,129       (14 %)     1,260       1,166       (7 %)                       2,566       2,295       (11 %)
Other investments
    534       1,473       176 %     38       207     NM       43       43             615       1,723       180 %
Short-term investments
    1,158       6,937     NM       284       1,597     NM       160       1,488     NM       1,602       10,022     NM  
 
                                                                       
Total investments
    99,806       94,144       (6 %)     30,666       24,204       (21 %)     614       1,759       186 %     131,086       120,107       (8 %)
Cash
    1,770       1,648       (7 %)     241       162       (33 %)           1     NM       2,011       1,811       (10 %)
Premiums receivable and agents’ balances
    427       407       (5 %)     3,254       3,197       (2 %)                       3,681       3,604       (2 %)
Reinsurance recoverables
    1,419       2,918       106 %     3,731       3,439       (8 %)                       5,150       6,357       23 %
Deferred policy acquisition costs and present value of future profits
    10,514       11,988       14 %     1,228       1,260       3 %                       11,742       13,248       13 %
Deferred income taxes
    (754 )     2,183     NM       662       2,435     NM       400       621       55 %     308       5,239     NM  
Goodwill
    805       462       (43 %)     149       149             772       449       (42 %)     1,726       1,060       (39 %)
Property and equipment, net
    374       400       7 %     598       675       13 %                       972       1,075       11 %
Other assets
    1,869       3,557       90 %     1,312       1,159       (12 %)     558       182       (67 %)     3,739       4,898       31 %
Separate account assets
    199,946       130,184       (35 %)                                         199,946       130,184       (35 %)
 
                                                                       
 
                                                                                               
Total assets
  $ 316,176     $ 247,891       (22 %)   $ 41,841     $ 36,680       (12 %)   $ 2,344     $ 3,012       28 %   $ 360,361     $ 287,583       (20 %)
 
                                                                       
 
                                                                                               
Future policy benefits, unpaid losses and loss adjustment expenses
  $ 15,331     $ 16,747       9 %   $ 22,153     $ 21,933       (1 %)   $     $           $ 37,484     $ 38,680       3 %
Other policyholder funds and benefits payable
    44,190       53,753       22 %                                         44,190       53,753       22 %
Other policyholder funds and benefits payable — International variable annuities
    36,152       30,799       (15 %)                                         36,152       30,799       (15 %)
Unearned premiums
    147       138       (6 %)     5,402       5,244       (3 %)     (4 )     (3 )     25 %     5,545       5,379       (3 %)
Debt
    115       92       (20 %)     13             (100 %)     4,379       6,129       40 %     4,507       6,221       38 %
Consumer notes
    809       1,210       50 %                                         809       1,210       50 %
Other liabilities
    8,045       7,389       (8 %)     4,855       2,914       (40 %)     (376 )     1,786     NM       12,524       12,089       (3 %)
Separate account liabilities
    199,946       130,184       (35 %)                                         199,946       130,184       (35 %)
 
                                                                       
Total liabilities
    304,735       240,312       (21 %)     32,423       30,091       (7 %)     3,999       7,912       98 %     341,157       278,315       (18 %)
 
                                                                       
 
                                                                                               
Equity excluding AOCI, net of tax
    11,868       12,095       2 %     9,428       8,675       (8 %)     (1,234 )     (3,982 )   NM       20,062       16,788       (16 %)
AOCI, net of tax
    (427 )     (4,516 )   NM       (10 )     (2,086 )   NM       (421 )     (918 )     (118 %)     (858 )     (7,520 )   NM  
 
                                                                       
Total stockholders’ equity
    11,441       7,579       (34 %)     9,418       6,589       (30 %)     (1,655 )     (4,900 )     (196 %)     19,204       9,268       (52 %)
 
                                                                       
 
                                                                                               
Total liabilities and stockholders’ equity
  $ 316,176     $ 247,891       (22 %)   $ 41,841     $ 36,680       (12 %)   $ 2,344     $ 3,012       28 %   $ 360,361     $ 287,583       (20 %)
 
                                                                       

 

C-5


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
DEBT
                                                       
Short-term debt (includes current maturities of long-term debt and capital lease obligations)
  $ 1,365     $ 1,364     $ 1,353     $ 927     $ 398       (71 %)     (57 %)
Capital lease obligations
    91       67       67       68       68       (25 %)      
Senior notes
    3,051       3,551       4,051       4,052       4,052       33 %      
Junior subordinated debentures
                500       500       1,703     NM     NM  
 
                                         
Total debt [1]
  $ 4,507     $ 4,982     $ 5,971     $ 5,547     $ 6,221       38 %     12 %
 
                                         
 
                                                       
STOCKHOLDERS’ EQUITY
                                                       
Equity excluding AOCI, net of tax
  $ 20,062     $ 20,061     $ 19,604     $ 16,712     $ 16,788       (16 %)      
AOCI, net of tax
    (858 )     (2,225 )     (2,780 )     (4,155 )     (7,520 )   NM       (81 %)
 
                                         
 
                                                       
Total stockholders’ equity
  $ 19,204     $ 17,836     $ 16,824     $ 12,557     $ 9,268       (52 %)     (26 %)
 
                                         
 
                                                       
CAPITALIZATION
                                                       
Total capitalization including AOCI, net of tax
  $ 23,711     $ 22,818     $ 22,795     $ 18,104     $ 15,489       (35 %)     (14 %)
 
                                                       
Total capitalization excluding AOCI, net of tax
  $ 24,569     $ 25,043     $ 25,575     $ 22,259     $ 23,009       (6 %)     3 %
 
                                                       
DEBT TO CAPITALIZATION RATIOS [1]
                                                       
 
                                                       
Ratio Including AOCI
                                                       
 
                                                       
Total debt to capitalization
    19.0 %     21.8 %     26.2 %     30.6 %     40.2 %     21.2       9.6  
 
                                                       
Ratios Excluding AOCI
                                                       
 
                                                       
Total debt to capitalization
    18.3 %     19.9 %     23.3 %     24.9 %     27.0 %     8.7       2.1  
 
                                                       
Total adjusted debt to capitalization [2] [3] [4] [5]
    21.8 %     23.1 %     25.0 %     27.0 %     27.7 %     5.9       0.7  
     
[1]   The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $809, $971, $1,113, $1,225, and $1,210 as of December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively.
 
[2]   Reflects a rating agency assignment in the leverage calculation of an estimate of the adjusted unfunded pension liability of the Company’s defined benefit plans and six times the Company’s rental expense on operating leases for total adjustments of $1.0 billion, $0.9 billion, $0.9 billion, $1.0 billion, and $1.5 billion for the three months ended December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively.
 
[3]   Reflects the assignment by certain rating agencies in the leverage calculation of 75% equity credit for the $500 junior subordinated debentures as of June 30, 2008, and September 30, 2008.
 
[4]   Reflects the assignment by certain rating agencies in the leverage calculation of 75% equity credit for the $1,703 junior subordinated debentures and $547 warrants as of December 31, 2008.
 
[5]   Reflects a rating agency assignment to adjust equity for pension related amounts that are included in AOCI.

 

C-6


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE LOSS
                                 
            PROPERTY &              
    LIFE     CASUALTY     CORPORATE     CONSOLIDATED  
 
                               
As of December 31, 2008
                               
 
                               
Fixed maturities net unrealized loss
  $ (5,196 )   $ (2,221 )   $ (2 )   $ (7,419 )
Equities net unrealized gain (loss)
    (148 )     85       (4 )     (67 )
Net deferred gain on cash-flow hedging instruments
    611       31       2       644  
 
                       
Total net unrealized loss
    (4,733 )     (2,105 )     (4 )     (6,842 )
Foreign currency translation adjustments
    217       5             222  
Pension and other postretirement adjustment
          14       (914 )     (900 )
 
                       
Total accumulated other comprehensive loss
  $ (4,516 )   $ (2,086 )   $ (918 )   $ (7,520 )
 
                       
 
                               
As of December 31, 2007
                               
Fixed maturities net unrealized loss
  $ (293 )   $ (67 )   $     $ (360 )
Equities net unrealized gain (loss)
    (58 )     51       8       1  
Net deferred loss on cash-flow hedging instruments
    (115 )     (25 )           (140 )
 
                       
Total net unrealized gain (loss)
    (466 )     (41 )     8       (499 )
Foreign currency translation adjustments
    39       (13 )           26  
Pension and other postretirement adjustment
          44       (429 )     (385 )
 
                       
Total accumulated other comprehensive loss
  $ (427 )   $ (10 )   $ (421 )   $ (858 )
 
                       

 

C-7


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER SHARE
                                                         
    THREE MONTHS ENDED     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     DECEMBER 31,  
    2007     2008     2008     2008     2008     2007     2008  
Numerator:
                                                       
Net income (loss)
  $ 595     $ 145     $ 543     $ (2,631 )   $ (806 )   $ 2,949     $ (2,749 )
Less: preferred dividends
                            8             8  
 
                                         
Net income (loss) available to common shareholders
    595       145       543       (2,631 )     (814 )     2,949       (2,757 )
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)
    (245 )     (647 )     (153 )     (2,209 )     (598 )     (558 )     (3,607 )
Add: preferred dividends
                                        8  
 
                                         
Core earnings (losses) available to common shareholders
    840       792       696       (422 )     (216 )     3,507       858  
 
                                                       
Denominator:
                                                       
Weighted average common shares outstanding (basic)
    313.4       313.8       311.7       301.1       300.2       316.3       306.7  
Add: Weighted average common shares assuming conversion of outstanding preferred shares to common
                            20.1             5.0  
 
                                         
Weighted average common assuming conversion of outstanding preferred shares to common (Core basic)
    313.4       313.8       311.7       301.1       320.3       316.3       311.7  
Dilutive effect of stock compensation
    2.7       1.9       1.4       1.0       0.6       2.8       1.3  
Dilutive effect of warrants [1]
                                         
 
                                         
Weighted average common shares outstanding and dilutive potential common shares (diluted)
    316.1       315.7       313.1       302.1       320.9       319.1       313.0  
 
                                                       
Basic earnings (losses) per share
                                                       
Net income (loss) available to common shareholders
  $ 1.90     $ 0.46     $ 1.74     $ (8.74 )   $ (2.71 )   $ 9.32     $ (8.99 )
Less: Difference arising from shares used for the denominator between net loss and core earnings
                                        (0.14 )
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)
    (0.78 )     (2.06 )     (0.49 )     (7.34 )     (1.99 )     (1.77 )     (11.57 )
Add: preferred dividends
                                        0.03  
 
                                         
Core earnings (losses) available to common shareholders [2]
    2.68       2.52       2.23       (1.40 )     (0.72 )     11.09       2.75  
 
                                                       
Diluted earnings (losses) per share [3]
                                                       
Net income (loss) available to common shareholders
  $ 1.88     $ 0.46     $ 1.73     $ (8.74 )   $ (2.71 )   $ 9.24     $ (8.99 )
Less: Difference arising from shares used for the denominator between net loss and core earnings
                                        (0.18 )
Less: Net realized capital losses, net of tax and DAC, excluded from core earnings (losses)
    (0.78 )     (2.05 )     (0.49 )     (7.34 )     (1.99 )     (1.75 )     (11.52 )
Add: preferred dividends
                                        0.03  
 
                                         
Core earnings (losses) available to common shareholders
    2.66       2.51       2.22       (1.40 )     (0.72 )     10.99       2.74  
 
                                         
     
[1]   The Hartford issued 69.1 million warrants to purchase The Hartford Common Stock to Allianz on October 17, 2008 at a strike price of $25.32. There is no dilutive effect as the warrants were not in-the-money for the period.
 
[2]   Due to the core loss for the quarter ended December 31, 2008, weighted average common shares outstanding of 300.2 are used in the calculation of Core-Basic loss per share, since the preferred shareholders do not have a contractual oblgation to fund the net losses of the Company.
 
[3]   As a result of anti-dilutive impact, in periods of a loss, weighted average common shares are used in the calculation of diluted earnings per share.

 

C-8


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
THREE MONTHS ENDED DECEMBER 31, 2007 AND 2008
                                                                                                 
    LIFE     PROPERTY & CASUALTY     CORPORATE     CONSOLIDATED  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
Net Realized Capital Gains (Losses), After Tax and DAC
                                                                                               
 
                                                                                               
Gains/losses on sales, net
  $ 31     $ 89       187 %   $ 10     $ (109 )   NM     $     $ (1 )   NM     $ 41     $ (21 )   NM  
Impairments
    (163 )     (196 )     (20 %)     (45 )     (70 )     (56 %)           (1 )   NM       (208 )     (267 )     (28 %)
Japanese fixed annuity contract hedges, net [1]
    10       34     NM                                           10       34     NM  
Results of variable annuity hedge program
                                                                                               
GMWB derivatives, net [2]
    15       (384 )   NM                                           15       (384 )   NM  
Macro hedge
          28     NM                                                 28     NM  
 
                                                                       
Total results of variable annuity hedge program
    15       (356 )   NM                                           15       (356 )   NM  
Other net gain (loss) [3]
    (61 )     (128 )     (110 %)     (27 )     17     NM             111     NM       (88 )           100 %
 
                                                                       
 
                                                                                               
Total net realized capital gains (losses), after tax and DAC
    (168 )     (557 )   NM       (62 )     (162 )     (161 %)           109     NM       (230 )     (610 )     (165 %)
Reconciliation of Net Realized Capital Gains (Losses), net of tax and DAC, excluded from Core Earnings (Losses) to Total Net Realized Capital Gains (Losses) — After Tax and DAC
                                                                                               
 
                                                                                               
Total net realized capital gains (losses)
  $ (168 )   $ (557 )   NM     $ (62 )   $ (162 )     (161 %)   $     $ 109     NM     $ (230 )   $ (610 )     (165 %)
Less: total net realized capital losses included in core earnings (losses)
    12       (11 )   NM       3       (1 )   NM                         15       (12 )   NM  
 
                                                                       
Total net realized capital gains (losses), after tax and DAC, excluded from core earnings (losses)
  $ (180 )   $ (546 )   NM     $ (65 )   $ (161 )     (148 %)   $     $ 109     NM     $ (245 )   $ (598 )     (144 %)
 
                                                                       
     
[1]   Represents realized gains and losses related to currency remeasurement on yen denominated fixed annuity liabilities and changes in fair value of the associated foreign currency swaps. While economically hedged, volatility exists due to a difference in the basis of accounting between the yen liabilities (historical cost) and the currency swaps (fair value). The primary difference relates to changes in Japan interest rates which are included in the fair value of the currency swaps but not the yen liabilities. If the economic impact of the change in Japan interest rates was permitted to be reflected in the value of the yen denominated fixed annuity liabilities, an estimated realized loss of $14 and $33 would have been recognized as an adjustment to this amount in the three months ended December 31, 2007 and 2008, respectively.
 
[2]   Represents the net activity associated with the guaranteed minimum withdrawal benefit (“GMWB”) feature in certain of the Company’s life products. The net activity includes the fair value of the embedded derivatives associated with these products, related reinsurance and the fair value of the derivatives used to hedge this exposure.
 
[3]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Also included for the three months ended December 31, 2008, are gains of $110 related to a decrease in the liability related to warrants associated with the Allianz transaction.

 

C-9


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER TAX AND DAC
YEAR ENDED DECEMBER 31, 2007 AND 2008
                                                                                                 
    LIFE     PROPERTY & CASUALTY     CORPORATE     CONSOLIDATED  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
Net Realized Capital Gains (Losses), After Tax and DAC
                                                                                               
 
                                                                                               
Gains/losses on sales, net
  $ 26     $ 16       (38 %)   $ 25     $ (175 )   NM     $     $ (3 )   NM     $ 51     $ (162 )   NM  
Impairments
    (227 )     (1,537 )   NM       (82 )     (996 )   NM             (4 )   NM       (309 )     (2,537 )   NM  
Japanese fixed annuity contract hedges, net [1]
    12       42     NM                                           12       42     NM  
SFAS 157 transition impact [3]
          (220 )   NM                                                 (220 )   NM  
Results of variable annuity hedge program
                                                                                               
GMWB derivatives, net [2]
    (112 )     (488 )   NM                                           (112 )     (488 )   NM  
Macro hedge
    (5 )     38     NM                                           (5 )     38     NM  
 
                                                                       
Total results of variable annuity hedge program
    (117 )     (450 )   NM                                           (117 )     (450 )   NM  
Other net gain (loss) [4]
    (140 )     (355 )     (154 %)     (55 )     (52 )     5 %     (2 )     109     NM       (197 )     (298 )     (51 %)
 
                                                                       
 
                                                                                               
Total net realized capital gains (losses), after tax and DAC
    (446 )     (2,504 )   NM       (112 )     (1,223 )   NM       (2 )     102     NM       (560 )     (3,625 )   NM  
 
                                                                                               
Reconciliation of Net Realized Capital Gains (Losses), net of tax and DAC, excluded from Core Earnings (Losses) to Total Net Realized Capital Gains (Losses) — After Tax and DAC
                                                                                               
 
                                                                                               
Total net realized capital gains (losses)
  $ (446 )   $ (2,504 )   NM     $ (112 )   $ (1,223 )   NM     $ (2 )   $ 102     NM     $ (560 )   $ (3,625 )   NM  
Less: total net realized capital losses included in core earnings (losses)
    (12 )     (20 )     (67 %)     10       2       (80 %)                       (2 )     (18 )   NM  
 
                                                                       
Total net realized capital gains (losses), after tax and DAC, excluded from core earnings (losses)
  $ (434 )   $ (2,484 )   NM     $ (122 )   $ (1,225 )   NM     $ (2 )   $ 102     NM     $ (558 )   $ (3,607 )   NM  
 
                                                                       
     
[1]   Represents realized gains and losses related to currency remeasurement on yen denominated fixed annuity liabilities and changes in fair value of the associated foreign currency swaps. While economically hedged, volatility exists due to a difference in the basis of accounting between the yen liabilities (historical cost) and the currency swaps (fair value). The primary difference relates to changes in Japan interest rates which are included in the fair value of the currency swaps but not the yen liabilities. If the economic impact of the change in Japan interest rates was permitted to be reflected in the value of the yen denominated fixed annuity liabilities, an estimated realized loss of $12 and $23 would have been recognized as an adjustment to this amount in the year ended December 31, 2007 and 2008, respectively.
 
[2]   Represents the net activity associated with the guaranteed minimum withdrawal benefit (“GMWB”) feature in certain of the Company’s life products. The net activity includes the fair value of the embedded derivatives associated with these products, related reinsurance and the fair value of the derivatives used to hedge this exposure.
 
[3]   Includes SFAS 157 implementation losses related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively.
 
[4]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Also included for the year ended December 31, 2008, are gains of $110 related to a decrease in the liability related to warrants associated with the Allianz transaction.

 

C-10


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF RETURN-ON-EQUITY MEASURES
                                         
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,  
    2007     2008     2008     2008     2008  
 
                                       
Numerator [1]:
                                       
Net income (loss) — last 12 months
  $ 2,949     $ 2,218     $ 2,134     $ (1,348 )   $ (2,749 )
Core earnings — last 12 months
  $ 3,507     $ 3,456     $ 3,388     $ 1,906     $ 858  
 
                                       
Denominator [2]:
                                       
Average equity, including AOCI
    19,040.0       18,344.0       17,736.0       15,753.5       14,236.0  
Less: Average AOCI
    (340.0 )     (1,024.0 )     (1,690.5 )     (2,410.5 )     (4,189.0 )
 
                             
Average equity, excluding AOCI
    19,380.0       19,368.0       19,426.5       18,164.0       18,425.0  
 
                                       
ROE (net income (loss) last 12 months to equity including AOCI)
    15.5 %     12.1 %     12.0 %     (8.6 %)     (19.3 %)
ROE (core earnings last 12 months to equity excluding AOCI)
    18.1 %     17.8 %     17.4 %     10.5 %     4.7 %
     
[1]   For a reconciliation of net income to core earnings, see page C-2.
 
[2]   Average equity is calculated by taking the sum of equity at the beginning of the twelve month period and equity at the end of the twelve month period and dividing by 2.

 

C-11


 

LIFE

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
FINANCIAL HIGHLIGHTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
REVENUES
                                                                               
Retail Products Group
                                                                               
Individual Annuity [1]
  $ 783     $ 722     $ 721     $ 714     $ 548       (30 %)     (23 %)   $ 3,049     $ 2,705       (11 %)
Other Retail
    223       213       222       205       154       (31 %)     (25 %)     813       794       (2 %)
 
                                                           
Total Retail
                                                                               
Products Group
    1,006       935       943       919       702       (30 %)     (24 %)     3,862       3,499       (9 %)
Individual Life [1]
    304       291       310       288       275       (10 %)     (5 %)     1,166       1,164        
 
                                                           
Total Individual Markets Group
    1,310       1,226       1,253       1,207       977       (25 %)     (19 %)     5,028       4,663       (7 %)
 
                                                                               
Retirement Plans
    152       157       188       182       149       (2 %)     (18 %)     597       676       13 %
Group Benefits
    1,183       1,180       1,213       1,219       1,197       1 %     (2 %)     4,773       4,809       1 %
 
                                                           
Total Employer Markets Group
    1,335       1,337       1,401       1,401       1,346       1 %     (4 %)     5,370       5,485       2 %
International Markets Group [1]
    241       258       264       249       267       11 %     7 %     895       1,038       16 %
Institutional Solutions Group
    580       523       559       522       441       (24 %)     (16 %)     2,481       2,045       (18 %)
Other
    53       40       38       39       (24 )   NM     NM       234       93       (60 %)
 
                                                           
Core revenues before net investment income (loss) on equity securities held for trading
    3,519       3,384       3,515       3,418       3,007       (15 %)     (12 %)     14,008       13,324       (5 %)
 
                                                                               
Net investment income (loss) on equity securities held for trading [2]
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
 
                                                           
Total core revenues
  $ 2,918     $ (194 )   $ 4,668     $ 3     $ (1,493 )   NM     NM     $ 14,153     $ 2,984       (79 %)
 
                                                                               
Net realized losses and other, before tax and DAC, excluded from core revenues
    (331 )     (1,224 )     (228 )     (2,007 )     (675 )     (104 %)     66 %     (787 )     (4,134 )   NM  
 
                                                           
Total revenues
  $ 2,587     $ (1,418 )   $ 4,440     $ (2,004 )   $ (2,168 )   NM       (8 %)   $ 13,366     $ (1,150 )   NM  
 
                                                                               
CORE EARNINGS BY SEGMENT
                                                                               
Retail Products Group
                                                                               
Individual Annuity [3] [4]
  $ 192     $ 174     $ 189     $ (552 )   $ (198 )   NM       64 %   $ 918     $ (387 )   NM  
Other Retail [3]
    17       13       14       13       (2 )   NM     NM       65       38       (42 %)
 
                                                           
Total Retail Products Group
    209       187       203       (539 )     (200 )   NM       63 %     983       (349 )   NM  
Individual Life [3]
    40       41       43       8       26       (35 %)   NM       196       118       (40 %)
 
                                                           
Total Individual Markets Group
    249       228       246       (531 )     (174 )   NM       67 %     1,179       (231 )   NM  
 
                                                                               
Retirement Plans [3]
    22       17       33       (36 )     (3 )   NM       92 %     89       11       (88 %)
Group Benefits
    92       70       85       100       90       (2 %)     (10 %)     338       345       2 %
 
                                                           
Total Employer Markets Group
    114       87       118       64       87       (24 %)     36 %     427       356       (17 %)
 
                                                                               
International Markets Group [3] [5]
    61       67       64       (75 )     (110 )   NM       (47 %)     254       (54 )   NM  
 
                                                                               
Institutional Solutions Group [3]
    35       22       27       1       (40 )   NM     NM       140       10       (93 %)
 
                                                                               
Other [6]
    (2 )     (11 )     (5 )           (24 )   NM             (8 )     (40 )   NM  
 
                                                           
 
                                                                               
Core earnings
    457       393       450       (541 )     (261 )   NM       52 %     1,992       41       (98 %)
 
                                                                               
Net realized losses and other, net of tax and DAC, excluded from core earnings [3]
    (180 )     (548 )     (116 )     (1,274 )     (546 )   NM       57 %     (434 )     (2,484 )   NM  
 
                                                           
Net income (loss)
  $ 277     $ (155 )   $ 334     $ (1,815 )   $ (807 )   NM       56 %   $ 1,558     $ (2,443 )   NM  
 
                                                           
 
                                                                               
ROE (core earnings last 12 months to equity excluding AOCI) [7]
    21.4 %     21.8 %     20.6 %     7.5 %     (0.6 %)     (22.0 )     (8.1 )                        
Assets under management
  $ 371,707     $ 370,290     $ 362,509     $ 333,305     $ 298,017       (20 %)     (11 %)                        
DAC capitalization
  $ 489     $ 428     $ 413     $ 397     $ 310               (22 %)                        
DAC amortization
  $ 280     $ (55 )   $ 285     $ 1,404     $ 542               (61 %)                        
DAC and PVFP assets
  $ 10,514     $ 11,586     $ 11,706     $ 11,012     $ 11,988               9 %                        
United States Statutory surplus ($ in billions) [8]
  $ 5.8     $ 5.7     $ 5.4     $ 4.7     $ 5.1                                          
     
[1]   Includes benefits (charges) of ($5) and ($8), after tax, recorded in the year ended December 31, 2007 for the unlock of unearned revenue reserves in Individual Annuity and Individual Life, respectively and benefits (charges) of $19, ($17) and ($5), after tax, recorded in the three months ended September 30, 2008 for the unlock of unearned revenue reserves and reinsurance premiums in Individual Annuity, Individual Life and International, respectively. The 2008 after-tax unlock benefit recorded in the three months ended September 30, 2008, in net realized gains (losses) excluded from core earnings, was $8.
 
[2]   These revenues will fluctuate principally due to the investment income and the mark-to-market adjustment of the trading investment portfolio supporting the variable annuity business in the international operations, principally in Japan. An equal and offsetting amount is recorded in benefits, losses and loss adjustment expenses, and as such has no impact on core earnings or net income.
 
[3]   Includes the effect of the unlock on amortization of deferred policy acquisition costs and present value of future profits, death benefits, sales inducements and mutual fund and other fees recorded in the year ended December 31, 2007 and the three months ended September 30, 2008. The 2007 after-tax benefits (charges) recorded in Individual Annuity, Retail Other, Retirement Plans, Institutional Solutions Group, Individual Life and International Markets Group were $198, ($1), ($9), $1, $16 and $22, respectively. The 2007 after-tax charge recorded in net realized gains (losses) excluded from core earnings was ($17). The 2008 after-tax (charges) recorded in Individual Annuity, Retail Other, Retirement Plans, Individual Life and International Markets Group were ($721), ($1), ($48), ($37) and ($125), respectively. The 2008 after-tax unlock (charge) recorded in net realized gains (losses) excluded from core earnings was ($9).
 
[4]   As a result of the goodwill testing performed during the three months ended, December 31, 2008, Individual Annuity wrote-off goodwill of $274, after-tax.
 
[5]   Includes the after-tax charge of $152 recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and policyholder benefits.
 
[6]   Included in the year ended December 31, 2007 is a charge of $21, after-tax, to reserve for regulatory matters.
 
[7]   Core earnings return on equity is calculated using equity attributed to Life using the Company’s capital attribution methodology.
 
[8]   Estimated United States statutory surplus at December 31, 2008.

 

L-1


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
FINANCIAL HIGHLIGHTS EXCLUDING IMPACTS OF THE UNLOCK [1]
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008 [1]     2008     Change     Change     2007 [1]     2008 [1]     Change  
REVENUES
                                                                               
Retail Products Group
                                                                               
Individual Annuity
  $ 783     $ 722     $ 721     $ 685     $ 548       (30 %)     (20 %)   $ 3,057     $ 2,676       (12 %)
Other Retail
    223       213       222       205       154       (31 %)     (25 %)     813       794       (2 %)
 
                                                           
Total Retail Products Group
    1,006       935       943       890       702       (30 %)     (21 %)     3,870       3,470       (10 %)
Individual Life
    304       291       310       314       275       (10 %)     (12 %)     1,179       1,190       1 %
 
                                                           
Total Individual Markets Group
    1,310       1,226       1,253       1,204       977       (25 %)     (19 %)     5,049       4,660       (8 %)
 
                                                                               
Retirement Plans
    152       157       188       182       149       (2 %)     (18 %)     597       676       13 %
 
                                                                               
Group Benefits
    1,183       1,180       1,213       1,219       1,197       1 %     (2 %)     4,773       4,809       1 %
 
                                                           
Total Employer Markets Group
    1,335       1,337       1,401       1,401       1,346       1 %     (4 %)     5,370       5,485       2 %
 
                                                                               
International Markets Group
    241       258       264       256       267       11 %     4 %     895       1,045       17 %
 
                                                                               
Institutional Solutions Group
    580       523       559       522       441       (24 %)     (16 %)     2,481       2,045       (18 %)
 
                                                                               
Other
    53       40       38       39       (24 )   NM     NM       234       93       (60 %)
 
                                                           
Core revenues before net investment income (loss) on equity securities held for trading
    3,519       3,384       3,515       3,422       3,007       (15 %)     (12 %)     14,029       13,328       (5 %)
 
                                                                               
Net investment income (loss) on equity securities held for trading
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
 
                                                           
Total core revenues
  $ 2,918     $ (194 )   $ 4,668     $ 7       (1,493 )   NM     NM     $ 14,174       2,988       (79 %)
 
                                                                               
Net realized losses and other, before tax and DAC, excluded from core revenues
    (331 )     (1,224 )     (228 )     (2,019 )     (675 )     (104 %)     67 %     (787 )     (4,146 )   NM  
 
                                                           
 
                                                                               
Total revenues
  $ 2,587     $ (1,418 )   $ 4,440     $ (2,012 )   $ (2,168 )   NM       (8 %)   $ 13,387     $ (1,158 )   NM  
 
                                                                               
CORE EARNINGS BY SEGMENT
                                                                               
Retail Products Group
                                                                               
Individual Annuity
  $ 192     $ 174     $ 189     $ 169     $ (198 )   NM     NM       720     $ 334       (54 %)
Other Retail
    17       13       14       14       (2 )   NM     NM       66       39       (41 %)
 
                                                           
Total Retail Products Group
    209       187       203       183       (200 )   NM     NM       786       373       (53 %)
Individual Life
    40       41       43       45       26       (35 %)     (42 %)     180       155       (14 %)
 
                                                           
Total Individual Markets Group
    249       228       246       228       (174 )   NM     NM       966       528       (45 %)
 
                                                                               
Retirement Plans
    22       17       33       12       (3 )   NM     NM       98       59       (40 %)
Group Benefits
    92       70       85       100       90       (2 %)     (10 %)     338       345       2 %
 
                                                           
Total Employer Markets Group
    114       87       118       112       87       (24 %)     (22 %)     436       404       (7 %)
 
                                                                               
International Markets Group
    61       67       64       50       (110 )   NM     NM       232       71       (69 %)
 
                                                                               
Institutional Solutions Group
    35       22       27       1       (40 )   NM     NM       139       10       (93 %)
 
                                                                               
Other
    (2 )     (11 )     (5 )           (24 )   NM             (8 )     (40 )   NM  
 
                                                           
 
Core earnings
    457       393       450       391       (261 )   NM     NM       1,765       973       (45 %)
 
                                                                               
Net realized losses and other, net of tax and DAC, excluded from core earnings
    (180 )     (548 )     (116 )     (1,265 )     (546 )   NM       57 %     (417 )     (2,475 )   NM  
 
                                                           
 
                                                                               
Net income (loss)
  $ 277     $ (155 )   $ 334     $ (874 )   $ (807 )   NM       8 %   $ 1,348     $ (1,502 )   NM  
 
                                                           
     
[1]   This page represents financial results as reported on page L-1 excluding the impacts of the unlock recorded in the year ended December 31, 2007 and the three months ended September 30, 2008.

 

L-1A


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
REVENUES
                                                                               
Earned premiums
  $ 1,236     $ 1,229     $ 1,305     $ 1,335     $ 1,296       5 %     (3 %)   $ 5,123     $ 5,165       1 %
Fee income
    1,407       1,339       1,390       1,332       1,081       (23 %)     (19 %)     5,420       5,142       (5 %)
Net investment income (loss)
                                                                               
Securities available-for-sale and other
    878       819       829       759       638       (27 %)     (16 %)     3,497       3,045       (13 %)
Equity securities held for trading [1]
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
 
                                                           
Total net investment income (loss)
    277       (2,759 )     1,982       (2,656 )     (3,862 )   NM       (45 %)     3,642       (7,295 )   NM  
Net realized capital losses — core
    (2 )     (3 )     (9 )     (8 )     (8 )   NM             (32 )     (28 )     13 %
 
                                                           
Total core revenues
    2,918       (194 )     4,668       3       (1,493 )   NM     NM       14,153       2,984       (79 %)
 
                                                           
Net realized losses and other, before tax and DAC, excluded from core revenues
    (331 )     (1,224 )     (228 )     (2,007 )     (675 )     (104 %)     66 %     (787 )     (4,134 )   NM  
 
                                                           
Total revenues
    2,587       (1,418 )     4,440       (2,004 )     (2,168 )   NM       (8 %)     13,366       (1,150 )   NM  
 
                                                           
 
                                                                               
BENEFITS AND EXPENSES
                                                                               
Benefits, losses and loss adjustment expenses
    1,709       1,729       1,771       2,095       1,829       7 %     (13 %)     7,002       7,424       6 %
Benefits, losses and loss adjustment expenses — Returns credited on International variable annuities [1]
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
Amortization of deferred policy acquisition costs and present value of future profits
    339       317       321       1,408       424       25 %     (70 %)     1,007       2,470       145 %
Goodwill impairment [2]
                            422                         422        
Insurance operating costs and other expenses
    851       817       863       838       782       (8 %)     (7 %)     3,230       3,300       2 %
 
                                                           
Total benefits and expenses
    2,298       (715 )     4,108       926       (1,043 )   NM     NM       11,384       3,276       (71 %)
 
                                                           
 
                                                                               
CORE EARNINGS
                                                                               
Core earnings before income taxes
    620       521       560       (923 )     (450 )   NM       51 %     2,769       (292 )   NM  
Income tax expense (benefit)
    163       128       110       (382 )     (189 )   NM       51 %     777       (333 )   NM  
 
                                                           
Core earnings
    457       393       450       (541 )     (261 )   NM       52 %     1,992       41       (98 %)
Net realized losses and other, net of tax and DAC, excluded from core earnings
    (180 )     (548 )     (116 )     (1,274 )     (546 )   NM       57 %     (434 )     (2,484 )   NM  
 
                                                           
Net income (loss)
    277       (155 )     334       (1,815 )     (807 )   NM       56 %     1,558       (2,443 )   NM  
 
                                                           
     
[1]   Includes dividend income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within interest credited.
 
[2]   As a result of the goodwill testing performed during the three months ended, December 31, 2008, the Company wrote-off goodwill of $274, after-tax.

 

L-2


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
TOTAL ASSETS UNDER MANAGEMENT
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
 
                                                       
TOTAL ASSETS UNDER MANAGEMENT
                                                       
Assets
                                                       
General account
  $ 116,230     $ 118,697     $ 118,455     $ 114,838     $ 117,707       1 %     2 %
Separate account
    199,946       181,273       170,841       154,029       130,184       (35 %)     (15 %)
 
                                         
Total assets
    316,176       299,970       289,296       268,867       247,891       (22 %)     (8 %)
Mutual fund assets [1]
    55,531       70,320       73,213       64,438       50,126       (10 %)     (22 %)
 
                                         
Total assets under management
  $ 371,707     $ 370,290     $ 362,509     $ 333,305     $ 298,017       (20 %)     (11 %)
 
                                         
     
[1]   During the three months ended March 31, 2008, the Company acquired the rights to service $18.7 billion of mutual fund assets from Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29, and March 28, 2008, respectively.

 

L-3


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
CONSOLIDATED BALANCE SHEETS
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
Investments
                                                       
Fixed maturities, available-for-sale, at fair value
  $ 52,542     $ 50,615     $ 49,683     $ 46,292     $ 45,182       (14 %)     (2 %)
Equity securities, trading, at fair value
    36,182       37,406       36,853       33,655       30,820       (15 %)     (8 %)
Equity securities, available-for-sale, at fair value
    1,284       1,202       1,194       908       711       (45 %)     (22 %)
Policy loans, at outstanding balance
    2,061       2,118       2,146       2,159       2,208       7 %     2 %
Mortgage loans on real estate
    4,739       4,821       5,135       5,460       5,684       20 %     4 %
Limited partnerships and other alternative investments
    1,306       1,329       1,407       1,410       1,129       (14 %)     (20 %)
Short term Investments
    1,158       1,807       2,756       3,793       6,937     NM       83 %
Other investments
    534       1,086       894       1,308       1,473       176 %     13 %
 
                                         
Total investments
    99,806       100,384       100,068       94,985       94,144       (6 %)     (1 %)
 
                                                       
Cash
    1,770       2,016       1,842       1,683       1,648       (7 %)     (2 %)
Premiums receivable and agents’ balances
    427       395       392       390       407       (5 %)     4 %
Reinsurance recoverables
    1,419       1,599       1,535       2,103       2,918       106 %     39 %
Deferred policy acquisition costs and present value of future profits
    10,514       11,586       11,706       11,012       11,988       14 %     9 %
Deferred income taxes
    (754 )     (373 )     (135 )     1,324       2,183     NM       65 %
Goodwill
    805       867       867       880       462       (43 %)     (48 %)
Property and equipment, net
    374       393       383       380       400       7 %     5 %
Other assets
    1,869       1,830       1,797       2,081       3,557       90 %     71 %
Separate account assets
    199,946       181,273       170,841       154,029       130,184       (35 %)     (15 %)
 
                                         
Total assets
  $ 316,176     $ 299,970     $ 289,296     $ 268,867     $ 247,891       (22 %)     (8 %)
 
                                         
 
                                                       
Future policy benefits, unpaid losses and loss adjustment expenses
  $ 15,331     $ 15,544     $ 15,772     $ 16,602     $ 16,747       9 %     1 %
Other policyholder funds and benefits payable
    44,190       46,460       46,563       47,208       53,753       22 %     14 %
Other policyholder funds payable — International variable annuities
    36,152       37,376       36,822       33,629       30,799       (15 %)     (8 %)
Unearned premiums
    147       167       161       163       138       (6 %)     (15 %)
Consumer Notes
    809       971       1,113       1,225       1,210       50 %     (1 %)
Debt
    115       91       91       92       92       (20 %)      
Other liabilities
    8,045       8,286       7,712       7,816       7,389       (8 %)     (5 %)
Separate account liabilities
    199,946       181,273       170,841       154,029       130,184       (35 %)     (15 %)
 
                                         
Total liabilities
    304,735       290,168       279,075       260,764       240,312       (21 %)     (8 %)
 
                                         
Equity excluding AOCI, net of tax
    11,868       11,059       11,888       10,752       12,095       2 %     12 %
AOCI, net of tax
    (427 )     (1,257 )     (1,667 )     (2,649 )     (4,516 )   NM       (70 %)
Total stockholders’ equity
    11,441       9,802       10,221       8,103       7,579       (34 %)     (6 %)
 
                                         
Total liabilities and stockholders’ equity
  $ 316,176     $ 299,970     $ 289,296     $ 268,867     $ 247,891       (22 %)     (8 %)
 
                                         
 
Hartford Life and Accident Insurance Company NAIC RBC
    416.1 %                                                
Hartford Life Insurance Company NAIC RBC
    513.2 %                                                
Hartford Life and Annuity Insurance Company NAIC RBC
    1309.9 %                                                

 

L-4


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (“DAC”)
                                                                 
                            Institutional                          
    Individual     Other     Retirement     Solutions     Individual     Group              
    Annuity     Retail     Plans     Group     Life     Benefits     International     Total  
YEAR-TO-DATE
                                                               
Balance, December 31, 2007
  $ 5,179     $ 136     $ 658     $ 143     $ 2,406     $ 69     $ 1,923     $ 10,514  
Adjustments to unrealized gains and losses on securities available — for — sale and other
    (92 )     (2 )     (41 )           (2 )           (22 )     (159 )
 
                                               
Balance excluding adjustments to unrealized gains and losses on securities available — for — sale and other
    5,087       134       617       143       2,404       69       1,901       10,355  
Capitalization
    577       74       142       31       362       69       293       1,548  
Amortization — Deferred Policy Acquisition Costs
    (538 )     (94 )     (25 )     (19 )     (125 )     (57 )     (452 )     (1,310 )
Amortization — Present Value of Future Profits
    (6 )                       (16 )                 (22 )
Amortization — Realized Capital Gains / Losses
    291             10             16             (8 )     309  
Amortization — Unlock — Core
    (959 )     (2 )     (75 )           (26 )           (44 )     (1,106 )
Amortization — Unlock — Non-core
    (36 )           (1 )           (18 )           8       (47 )
Effect of Currency Translation Adjustment
                                        348       348  
 
                                               
Balance, December 31, 2008
    4,416       112       668       155       2,597       81       2,046       10,075  
Adjustments to unrealized gains and losses on securities available — for — sale and other
    1,277       (4 )     209       1       430                   1,913  
 
                                               
Balance, December 31, 2008 including adjustments to unrealized gains and losses on securities available-for-sale and other
  $ 5,693     $ 108     $ 877     $ 156     $ 3,027     $ 81     $ 2,046     $ 11,988  
 
                                               
                                                                                 
                            Institutional                                          
    Individual     Other     Retirement     Solutions     Individual     Group                     HFSG     Total  
Effect of Unlock [2] — September 30, 2008   Annuity     Retail     Plans     Group     Life     Benefits     International     Total Life     Corporate [1]     Company  
 
Mutual Fund and Other Fees
  $ 24     $     $     $     $ (26 )   $     $ (7 )   $ (9 )   $     $ (9 )
Reinsurance Premiums
    5                                           5             5  
Death Benefits
    116             1                         139       256             256  
Change in Reserves
                            5                   5             5  
Sales Inducements
    62             1                         1       64             64  
Amortization of DAC
    959       2       75             26             44       1,106             1,106  
Other Expenses
                                                    (13 )     (13 )
 
                                                           
Effect of Unlock on Earnings before income taxes
    (1,108 )     (2 )     (77 )           (57 )           (191 )     (1,435 )     13       (1,422 )
Income tax (benefit) expense
    (387 )     (1 )     (29 )           (20 )           (66 )     (503 )     4       (499 )
 
                                                           
Effect of Unlock on Core Earnings
    (721 )     (1 )     (48 )           (37 )           (125 )     (932 )     9       (923 )
Net realized gains (losses), net of tax, excluded from core earnings
    (10 )           (1 )           (7 )           9       (9 )           (9 )
 
                                                           
Effect of Unlock on Net Income
  $ (731 )   $ (1 )   $ (49 )   $     $ (44 )   $     $ (116 )   $ (941 )   $ 9     $ (932 )
 
                                                           
     
[1]   In HFSG Corporate, revisions to estimated gross profits affect the purchase accounting adjustments made in connection with the buyback of Hartford Life, Inc. shares in 2000.
 
[2]   For purposes of this schedule increases to revenue amounts are positive numbers; increases to expense amounts are positive numbers; and increases to income before taxes, net income and core earnings are positive numbers.

 

L-5


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
SUPPLEMENTAL DATA — ANNUITY DEATH AND INCOME BENEFITS
                                 
    As of December 31, 2008  
    ACCOUNT     NET AMT AT     % of NAR        
    VALUE     RISK     REINSURED     RETAINED NAR  
BREAKDOWN OF INDIVIDUAL VARIABLE AND GROUP ANNUITY ACCOUNT VALUE BY BENEFIT TYPE
                               
Maximum anniversary value (MAV) [1]
                               
MAV only
  $ 25,961     $ 14,743       66 %   $ 5,019  
with 5% rollup [2]
    1,858       1,153       58 %     481  
with Earnings Protection Benefit Rider (EPB) [3]
    5,068       2,447       90 %     241  
with 5% rollup & EPB
    742       400       81 %     75  
 
                       
Total MAV
    33,629       18,743       69 %     5,816  
Asset Protection Benefit (APB) [4]
    25,601       11,985       45 %     6,634  
Lifetime Income Benefit (LIB) — Death Benefit [5]
    1,137       487       %     487  
Reset [6] (5-7 years)
    3,440       1,190       %     1,189  
Return of Premium [7]/Other
    17,321       3,889       6 %     3,638  
 
                       
SUBTOTAL U.S. GUARANTEED MINIMUM DEATH BENEFITS
  $ 81,128     $ 36,294       51 %   $ 17,764  
 
                       
 
                               
JAPAN GUARANTEED MINIMUM DEATH AND INCOME BENEFITS [8]
    29,726       9,151       15 %     7,761  
 
                       
TOTAL
  $ 110,854     $ 45,445       44 %   $ 25,525  
 
                       
                                         
    As of     As of     As of     As of     As of  
    December 31,     March 31,     June 30,     September 30,     December 31,  
    2007     2008     2008     2008     2008  
OTHER DATA
                                       
U.S. VARIABLE ANNUITY BUSINESS
                                       
S&P 500 Index Value at end of period
    1,468.36       1,322.70       1,280.00       1,164.74       903.25  
Total Account Value
  $ 126,834     $ 115,212     $ 112,786     $ 99,118     $ 81,128  
Retained net amount of risk
    976       3,633       4,067       8,565       17,764  
GMDB net GAAP liability [9]
    202       203       208       304       275  
JAPAN VARIABLE ANNUITY BUSINESS
                                       
Total Account Value
  $ 35,793     $ 36,777     $ 35,910     $ 32,706     $ 29,726  
Retained net amount of risk
    419       2,151       1,706       3,716       7,761  
GMDB/GMIB net GAAP liability [9]
    34       39       37       178       198  
     
[1]   MAV: the death benefit is the greatest of current account value, net premiums paid and the highest account value on any anniversary before age 80 (adjusted for withdrawals).
 
[2]   Rollup: the death benefit is the greatest of the MAV, current account value, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier age 80 or 100% of adjusted premiums.
 
[3]   EPB: the death benefit is the greatest of the MAV, current account value, or contract value plus a percentage of the contract’s growth. The contract’s growth is account value less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.
 
[4]   APB: the death benefit is the greater of current account value or MAV, not to exceed current account value plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months).
 
[5]   LIB: the death benefit is the greatest of current account value, net premiums paid, or for certain contracts a benefit amount that rachets over time, generally based on market performance.
 
[6]   Reset: the death benefit is the greatest of current account value, net premiums paid and the most recent five to seven year anniversary account value before age 80 (adjusted for withdrawals).
 
[7]   Return of premium: the death benefit is the greater of current account value and net premiums paid.
 
[8]   Death benefits include a Return of Premium and MAV (before age 80) paid in a single lump sum. The income benefit is a guarantee to return initial investment, which is adjusted for earnings liquidity, paid through a fixed annuity after a minimum deferral period of 10, 15 or 20 years. The guaranteed remaining balance related to the Japan GMIB was $30.6 billion and $26.8 billion as of December 31, 2008 and December 31, 2007, respectively.
 
[9]   Includes the increase (decrease) to GMDB/GMIB liability as a result of the unlock recorded in the year ended December 31, 2007 for U.S. and Japan variable annuity business of $6 and ($9), respectively. For the three months ended September 30, 2008 there was an increase to GMDB/GMIB liability, as a result of the unlock, for U.S. and Japan variable annuity business of $116 and $139, respectively.

 

L-6


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
REINSURANCE RECOVERABLE ANALYSIS
As of December 31, 2008
Statutory Reserve Credit and Amounts Recoverable
         
Gross statutory reinsurance reserve credit
  $ 2,835  
Liability for reinsurance in unauthorized companies
    (2 )
 
     
Net statutory reinsurance reserve credit
  $ 2,833  
 
     
 
       
Statutory amounts recoverable from reinsurers
  $ 229  
 
     
The top ten reinsurers represent $2,741 or 90% of the total statutory reserve credit and amounts recoverable.
    55% of this amount is with reinsurers rated “A+” by A.M. Best at January 23, 2009.
 
    33% of this amount is with reinsurers rated “A” by A.M. Best at January 23, 2009.
 
    4% of this amount is with reinsurers rated “A-” by A.M. Best at January 23, 2009.
 
    8% of this amount is with reinsurers rated “B++” by A.M. Best at January 23, 2009.

 

L-7


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
                 
    December 31, 2008     December 31, 2007  
 
               
Statutory Capital and Surplus [1]
  $ 5,060     $ 5,786  
GAAP Adjustments
               
 
               
Investment in subsidiaries
    2,960       230  
Deferred policy acquisition costs
    11,988       10,514  
Deferred taxes
    1,885       (1,155 )
Benefit reserves
    (6,663 )     (4,240 )
Unrealized losses on investments, net of impairments
    (8,465 )     (513 )
Asset valuation reserve and interest maintenance reserve
    177       626  
Goodwill
    376       662  
Other, net
    261       (469 )
 
           
GAAP Stockholders’ Equity
  $ 7,579     $ 11,441  
 
           
Certain Reclassifications have been made to prior year financial information to conform to current year presentation.
     
[1]   Estimated United States statutory surplus at December 31, 2008.

 

L-8


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP — INDIVIDUAL ANNUITY
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity fees
  $ 554     $ 497     $ 495     $ 454     $ 335       (40 %)     (26 %)   $ 2,151     $ 1,781       (17 %)
Mutual fund and other fees [2]
    37       33       34       59       31       (16 %)     (47 %)     138       157       14 %
 
                                                           
Total fee income
    591       530       529       513       366       (38 %)     (29 %)     2,289       1,938       (15 %)
 
                                                                         
 
                                                                               
Direct premiums
    22       24       24       29       22             (24 %)     81       99       22 %
Reinsurance premiums [2]
    (36 )     (30 )     (31 )     (18 )     (24 )     33 %     (33 %)     (143 )     (103 )     28 %
 
                                                           
Net premiums
    (14 )     (6 )     (7 )     11       (2 )     86 %   NM       (62 )     (4 )     94 %
 
                                                           
Total premiums and other considerations
    577       524       522       524       364       (37 %)     (31 %)     2,227       1,934       (13 %)
Net investment income
                                                                               
Net investment income on G/A assets
    226       209       210       198       162       (28 %)     (18 %)     919       779       (15 %)
Net investment income on assigned capital
    12       19       20       22       31       158 %     41 %     47       92       96 %
Charge for invested capital
    (35 )     (33 )     (32 )     (30 )     (7 )     80 %     77 %     (150 )     (102 )     32 %
 
                                                           
Total net investment income
    203       195       198       190       186       (8 %)     (2 %)     816       769       (6 %)
Net realized capital gains (losses) — core
    3       3       1             (2 )   NM             6       2       (67 %)
 
                                                           
Total core revenues
    783       722       721       714       548       (30 %)     (23 %)     3,049       2,705       (11 %)
Net realized losses and other, before tax and DAC, excluded from core revenues
    (81 )     (759 )     (71 )     (483 )     (595 )   NM       (23 %)     (387 )     (1,908 )   NM  
 
                                                           
Total revenues
    702       (37 )     650       231       (47 )   NM     NM       2,662       797       (70 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits [2]
    11       13       13       131       35     NM       (73 %)     49       192     NM  
Other contract benefits
    17       18       18       24       27       59 %     13 %     65       87       34 %
Change in reserve
    12       14       13       14       11       (8 %)     (21 %)     45       52       16 %
Sales inducements [2]
    16       13       12       73       2       (88 %)     (97 %)     47       100       113 %
Interest credited on G/A assets
    155       150       148       159       162       5 %     2 %     614       619       1 %
 
                                                           
Total benefits and losses
    211       208       204       401       237       12 %     (41 %)     820       1,050       28 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    282       253       242       214       175       (38 %)     (18 %)     1,198       884       (26 %)
Operating expenses
    61       52       62       56       56       (8 %)           227       226        
Premium taxes and other expenses
    4       3       2       3       5       25 %     67 %     14       13       (7 %)
 
                                                           
Subtotal — expenses before deferral
    347       308       306       273       236       (32 %)     (14 %)     1,439       1,123       (22 %)
Deferred policy acquisition costs
    (190 )     (167 )     (157 )     (144 )     (109 )     43 %     24 %     (844 )     (577 )     32 %
 
                                                           
Total other insurance expense
    157       141       149       129       127       (19 %)     (2 %)     595       546       (8 %)
Amortization of deferred policy acquisition costs [2]
    178       164       157       1,096       86       (52 %)     (92 %)     438       1,503     NM  
Goodwill impairment [4]
                            422                         422        
 
                                                           
Total benefits and expenses
    546       513       510       1,626       872       60 %     (46 %)     1,853       3,521       90 %
Core earnings (loss) before income taxes
    237       209       211       (912 )     (324 )   NM       64 %     1,196       (816 )   NM  
Income tax expense (benefit) [1] [2]
    45       35       22       (360 )     (126 )   NM       65 %     278       (429 )   NM  
 
                                                           
Core earnings (loss) [2]
    192       174       189       (552 )     (198 )   NM       64 %     918       (387 )   NM  
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [2] [3]
    (13 )     (264 )     (33 )     (282 )     (470 )   NM       (67 %)     (171 )     (1,049 )   NM  
 
                                                           
Net income (loss) [2]
  $ 179     $ (90 )   $ 156     $ (834 )   $ (668 )   NM       20 %   $ 747     $ (1,436 )   NM  
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    58.5       56.3       64.7       (202.0 )     (83.9 )   NM       58 %     72.4       (36.0 )   NM  
Net income (loss)
    54.5       (29.1 )     53.4       (305.1 )     (283.1 )   NM       7 %     58.9       (133.5 )   NM  
     
[1]   The year ended December 31, 2007 includes an additional $12 tax charge related to DRD and the three months ended June 30, 2008 includes a tax benefit of $16 related to DRD and FTC.
 
[2]   The DAC unlock included in the year ended December 31, 2007 increased core earnings and net income by $198 and $181, respectively. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $721 and $731, respectively. The effect on each income statement line item is as follows:
                 
    December 31, 2007     September 30, 2008  
 
               
Mutual Fund and Other Fees
  $ (8 )   $ 24  
Reinsurance Premiums
          5  
Death Benefits
    6       116  
Sales Inducements
    (14 )     62  
Amortization of deferred policy acquisition costs
    (305 )     959  
Income tax expense (benefit)
    107       (387 )
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    (17 )     (10 )
     
[3]   Included in the three months ended December 31, 2007 are guaranteed minimum withdrawal benefit (“GMWB”) net realized gains (losses), net of tax and DAC, excluded from core earnings of $(13). Included in the three months ended March 31, June 30, September 30, and December 31, 2008 the amounts are $(251), $(7), ($45) and ($254), respectively.
 
[4]   As a result of the goodwill testing performed during the three months ended, December 31, 2008, Individual Annuity wrote-off goodwill of $274, after-tax.

 

L-9


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP — OTHER
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity fees
  $ 4     $ 4     $ 4     $ 3     $ 2       (50 %)     (33 %)   $ 15     $ 13       (13 %)
Mutual fund and other fees
    223       213       224       208       158       (29 %)     (24 %)     813       803       (1 %)
 
                                                           
Total fee income
    227       217       228       211       160       (30 %)     (24 %)     828       816       (1 %)
 
                                                                               
Net investment loss
                                                                               
Net investment loss on G/A assets
          (1 )     (3 )     (3 )     (4 )           (33 %)     (3 )     (11 )   NM  
Net investment loss on assigned capital
    (4 )     (3 )     (3 )     (3 )     (2 )     50 %     33 %     (12 )     (11 )     8 %
 
                                                           
Total net investment loss
    (4 )     (4 )     (6 )     (6 )     (6 )     (50 %)           (15 )     (22 )     (47 %)
Total core revenues
    223       213       222       205       154       (31 %)     (25 %)     813       794       (2 %)
Net realized losses, before tax and DAC, excluded from core revenues
                      (1 )                 100 %           (1 )      
 
                                                           
Total revenues
    223       213       222       204       154       (31 %)     (25 %)     813       793       (2 %)
 
                                                                               
Benefits and Expenses
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    156       149       158       143       103       (34 %)     (28 %)     578       553       (4 %)
Operating expenses
    41       40       40       34       30       (27 %)     (12 %)     137       144       5 %
Premium taxes and other expenses
    3       4       3       5       6       100 %     20 %     12       18       50 %
 
                                                           
Subtotal — expenses before deferral
    200       193       201       182       139       (31 %)     (24 %)     727       715       (2 %)
Deferred policy acquisition costs
    (25 )     (22 )     (23 )     (17 )     (12 )     52 %     29 %     (101 )     (74 )     27 %
 
                                                           
Total other insurance expense
    175       171       178       165       127       (27 %)     (23 %)     626       641       2 %
Amortization of deferred policy acquisition costs [1]
    23       22       22       22       30       30 %     36 %     88       96       9 %
 
                                                           
Total benefits and expenses
    198       193       200       187       157       (21 %)     (16 %)     714       737       3 %
 
                                                                               
Core earnings (loss) before income taxes
    25       20       22       18       (3 )   NM     NM       99       57       (42 %)
 
                                                                               
Income tax expense (benefit) [1]
    8       7       8       5       (1 )   NM     NM       34       19       (44 %)
 
                                                           
Core earnings (loss) [1]
    17       13       14       13       (2 )   NM     NM       65       38       (42 %)
Net realized losses, net of tax and DAC, excluded from core earnings
                      (1 )                 100 %           (1 )      
 
                                                           
Net income (loss) [1]
  $ 17     $ 13     $ 14     $ 12     $ (2 )   NM     NM     $ 65     $ 37       (43 %)
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    13.4       10.6       11.5       11.1       (2.1 )   NM     NM       14.2       9.0       (37 %)
Net income
    13.4       10.6       11.5       10.3       (2.1 )   NM     NM       14.2       8.8       (38 %)
     
[1]   The DAC unlock included in the year ended December 31, 2007 increased amortization of deferred policy acquisition costs by $1, after-tax. The DAC unlock recorded in the three months ended September 30, 2008 increased amortization of deferred policy acquisition costs by $1, after-tax.

 

L-10


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — DEPOSITS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Individual Annuity
                                                                               
Broker-dealer
  $ 2,106     $ 1,677     $ 1,574     $ 1,502     $ 1,266       (40 %)     (16 %)   $ 8,775     $ 6,019       (31 %)
Banks
    1,148       938       982       832       742       (35 %)     (11 %)     5,549       3,494       (37 %)
 
                                                           
Total deposits by distribution
    3,254       2,615       2,556       2,334       2,008       (38 %)     (14 %)     14,324       9,513       (34 %)
 
                                                           
 
                                                                               
Variable
    3,126       2,546       2,233       1,948       1,160       (63 %)     (40 %)     13,197       7,887       (40 %)
Fixed MVA/other
    128       69       323       386       848     NM       120 %     1,127       1,626       44 %
 
                                                           
Total deposits by product
    3,254       2,615       2,556       2,334       2,008       (38 %)     (14 %)     14,324       9,513       (34 %)
 
                                                           
 
                                                                               
Retail Mutual Funds
    3,549       3,966       3,967       3,614       2,565       (28 %)     (29 %)     14,356       14,112       (2 %)
 
                                                                               
529 College Savings Plan/Specialty Products/Other
    180       183       153       141       80       (56 %)     (43 %)     721       557       (23 %)
 
                                                           
 
                                                                               
Total Retail Products Group
  $ 6,983     $ 6,764     $ 6,676     $ 6,089     $ 4,653       (33 %)     (24 %)   $ 29,401     $ 24,182       (18 %)
 
                                                           

 

L-11


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
INDIVIDUAL ANNUITY
                                                       
General account
  $ 15,100     $ 15,126     $ 15,275     $ 15,650     $ 16,051       6 %     3 %
Non-guaranteed separate account
    114,214       102,924       100,436       87,287       69,805       (39 %)     (20 %)
 
                                         
Total Individual Annuity
  $ 129,314     $ 118,050     $ 115,711     $ 102,937     $ 85,856       (34 %)     (17 %)
 
                                         
 
                                                       
BY PRODUCT
                                                       
Individual Annuity
                                                       
Individual Variable Annuities
                                                       
General account
  $ 4,995     $ 5,126     $ 5,039     $ 5,081     $ 4,866       (3 %)     (4 %)
Non-guaranteed separate account
    114,076       102,794       100,306       87,169       69,712       (39 %)     (20 %)
 
                                         
Total individual variable annuities
    119,071       107,920       105,345       92,250       74,578       (37 %)     (19 %)
 
Fixed MVA & other individual annuities
    10,243       10,130       10,366       10,687       11,278       10 %     6 %
 
                                         
Total Individual Annuity
    129,314       118,050       115,711       102,937       85,856       (34 %)     (17 %)
 
                                         
 
                                                       
Specialty Products/Other — Segregated Assets
    677       604       578       500       398       (41 %)     (20 %)
 
                                                       
Mutual Fund Assets
                                                       
Retail mutual fund assets
    48,383       44,617       47,239       40,903       31,032       (36 %)     (24 %)
Specialty Product/Other mutual fund assets
    937       1,022       1,126       1,071       826       (12 %)     (23 %)
529 College Savings Plan assets
    1,176       1,121       1,150       1,013       852       (28 %)     (16 %)
 
                                         
Total Mutual Fund Assets
    50,496       46,760       49,515       42,987       32,710       (35 %)     (24 %)
 
                                         
 
                                                       
Total Retail Products Group Assets Under Management
  $ 180,487     $ 165,414     $ 165,804     $ 146,424     $ 118,964       (34 %)     (19 %)
 
                                         

 

L-12


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — INDIVIDUAL ANNUITY — ACCOUNT VALUE ROLLFORWARD [1]
                                             
        THREE MONTHS ENDED  
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
        2007     2008     2008     2008     2008  
   
 
                                       
VARIABLE ANNUITIES  
Beginning balance
  $ 123,051     $ 119,071     $ 107,920     $ 105,345     $ 92,250  
   
 
                                       
   
Deposits
    3,126       2,546       2,233       1,948       1,160  
   
Surrenders
    (3,810 )     (3,338 )     (3,331 )     (3,058 )     (2,671 )
   
Death benefits/annuity payouts
    (418 )     (445 )     (460 )     (404 )     (342 )
   
Transfers [2]
    4       (2 )     (20 )     (26 )     (25 )
   
 
                             
   
Net Flows
    (1,098 )     (1,239 )     (1,578 )     (1,540 )     (1,878 )
   
Change in market value/change in reserve/interest credited
    (2,882 )     (9,911 )     (1,016 )     (11,544 )     (15,778 )
   
Other [3]
          (1 )     19       (11 )     (16 )
   
 
                             
   
Ending balance
  $ 119,071     $ 107,920     $ 105,345     $ 92,250     $ 74,578  
   
 
                                       
FIXED MVA AND OTHER  
Beginning balance
  $ 10,263     $ 10,243     $ 10,130     $ 10,366     $ 10,687  
   
 
                                       
   
Deposits
    128       69       323       386       848  
   
Surrenders
    (201 )     (219 )     (175 )     (131 )     (308 )
   
Death benefits/annuity payouts
    (106 )     (118 )     (102 )     (101 )     (112 )
   
Transfers [2]
    42       49       71       57       55  
   
 
                             
   
Net Flows
    (137 )     (219 )     117       211       483  
   
Change in market value/change in reserve/interest credited
    117       106       119       110       108  
   
 
                             
   
Ending balance
  $ 10,243     $ 10,130     $ 10,366     $ 10,687     $ 11,278  
   
 
                                       
TOTAL INDIVIDUAL ANNUITY  
Beginning balance
  $ 133,314     $ 129,314     $ 118,050     $ 115,711     $ 102,937  
   
 
                                       
   
Deposits
    3,254       2,615       2,556       2,334       2,008  
   
Surrenders
    (4,011 )     (3,557 )     (3,506 )     (3,189 )     (2,979 )
   
Death benefits/annuity payouts
    (524 )     (563 )     (562 )     (505 )     (454 )
   
Transfers [2]
    46       47       51       31       30  
   
 
                             
   
Net Flows
    (1,235 )     (1,458 )     (1,461 )     (1,329 )     (1,395 )
   
Change in market value/change in reserve/interest credited
    (2,765 )     (9,805 )     (897 )     (11,434 )     (15,670 )
   
Other [3]
          (1 )     19       (11 )     (16 )
   
 
                             
   
Ending balance
  $ 129,314     $ 118,050     $ 115,711     $ 102,937     $ 85,856  
     
[1]   Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
 
[2]   Includes internal product exchanges, policyholder balance transfers from the accumulation phase to the annuitization phase, and death benefits remaining on deposit.
 
[3]   Includes a bonus on certain products, front end loads on A share products and annual maintenance fees. The three months ended June 30, 2008 also includes the crediting of policyholder account balances associated with the settlement of the New York Attorney General’s investigation related to market timing.

 

L-13


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
RETAIL PRODUCTS GROUP
SUPPLEMENTAL DATA — OTHER RETAIL — ASSET ROLLFORWARD
                                         
    THREE MONTHS ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
    2007     2008     2008     2008     2008  
 
                                       
RETAIL MUTUAL FUNDS
                                       
 
                                       
Beginning balance
  $ 47,785     $ 48,383     $ 44,617     $ 47,239     $ 40,903  
 
                                       
Deposits
    3,549       3,966       3,967       3,614       2,565  
Redemptions
    (2,289 )     (2,845 )     (2,066 )     (2,798 )     (3,563 )
 
                             
Net Sales
    1,260       1,121       1,901       816       (998 )
Change in market value
    (626 )     (4,854 )     761       (7,117 )     (8,852 )
Other [1]
    (36 )     (33 )     (40 )     (35 )     (21 )
 
                             
Ending balance
  $ 48,383     $ 44,617     $ 47,239     $ 40,903     $ 31,032  
     
[1]   Includes front end loads on A share products.

 

L-14


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
INCOME STATEMENTS
                                                                                 
                                            Year Over              
                                            Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable life fees
  $ 20     $ 18     $ 19     $ 16     $ 12       (40 %)     (25 %)   $ 75     $ 65       (13 %)
Cost of insurance charges
    137       140       143       145       150       9 %     3 %     533       578       8 %
Other fees [1]
    75       63       75       59       59       (21 %)           262       256       (2 %)
 
                                                           
Total fee income
    232       221       237       220       221       (5 %)           870       899       3 %
 
                                                                               
Direct premiums
    30       28       30       31       32       7 %     3 %     111       121       9 %
Reinsurance premiums
    (50 )     (46 )     (49 )     (46 )     (51 )     (2 %)     (11 %)     (173 )     (192 )     (11 %)
 
                                                           
Net premiums
    (20 )     (18 )     (19 )     (15 )     (19 )     5 %     (27 %)     (62 )     (71 )     (15 %)
 
                                                           
Total premiums and other considerations
    212       203       218       205       202       (5 %)     (1 %)     808       828       2 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    94       92       95       87       77       (18 %)     (11 %)     366       351       (4 %)
Net investment income on assigned capital
    3       4       4       5       3             (40 %)     12       16       33 %
Charge for invested capital
    (5 )     (8 )     (7 )     (8 )     (6 )     (20 %)     25 %     (19 )     (29 )     (53 %)
 
                                                           
Total net investment income
    92       88       92       84       74       (20 %)     (12 %)     359       338       (6 %)
 
                                                                               
Net realized capital losses — core
                      (1 )     (1 )                 (1 )     (2 )     (100 %)
 
                                                           
Total core revenues
    304       291       310       288       275       (10 %)     (5 %)     1,166       1,164        
Net realized losses and other, before tax and DAC, excluded from core revenues
    (18 )     (35 )     (25 )     (169 )     (21 )     (17 %)     88 %     (27 )     (250 )   NM  
 
                                                           
Total revenues
    286       256       285       119       254       (11 %)     113 %     1,139       914       (20 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits
    76       91       88       86       94       24 %     9 %     298       359       20 %
Other contract benefits
    6       5       5       5       5       (17 %)           24       20       (17 %)
Change in reserve [1] [2]
    1       (4 )     (3 )     4       (3 )   NM     NM       (11 )     (6 )     45 %
Interest credited on G/A assets
    64       62       63       64       65       2 %     2 %     251       254       1 %
 
                                                           
Total benefits and losses
    147       154       153       159       161       10 %     1 %     562       627       12 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    69       59       57       60       67       (3 %)     12 %     245       243       (1 %)
Operating expenses
    71       64       70       66       69       (3 %)     5 %     263       269       2 %
Dividends to policyholders
    1       1       1                   (100 %)           3       2       (33 %)
Premium taxes and other expenses
    16       11       12       14       13       (19 %)     (7 %)     49       50       2 %
 
                                                           
Subtotal — expenses before deferral
    157       135       140       140       149       (5 %)     6 %     560       564       1 %
Deferred policy acquisition costs
    (105 )     (88 )     (89 )     (91 )     (94 )     10 %     (3 %)     (367 )     (362 )     1 %
 
                                                           
Total other insurance expense
    52       47       51       49       55       6 %     12 %     193       202       5 %
Amortization of deferred policy acquisition costs and present value of future profits [1]
    48       32       44       74       21       (56 %)     (72 %)     127       171       35 %
 
                                                           
Total benefits and expenses
    247       233       248       282       237       (4 %)     (16 %)     882       1,000       13 %
Core earnings before income taxes
    57       58       62       6       38       (33 %)   NM       284       164       (42 %)
Income tax expense (benefit) [1]
    17       17       19       (2 )     12       (29 %)   NM       88       46       (48 %)
 
                                                           
Core earnings [1] [2]
    40       41       43       8       26       (35 %)   NM       196       118       (40 %)
Net realized losses and other, net of tax and DAC, excluded from core earnings
    (9 )     (21 )     (13 )     (110 )     (17 )     (89 %)     85 %     (14 )     (161 )   NM  
 
                                                           
Net income (loss) [1] [2]
  $ 31     $ 20     $ 30     $ (102 )   $ 9       (71 %)   NM     $ 182     $ (43 )   NM  
 
                                                           
 
                                                                               
Earnings Margin (After-tax)
                                                                               
Core earnings
    13.2 %     14.1 %     13.9 %     2.8 %     9.5 %     (3.7 )     6.7       16.8 %     10.1 %     (6.7 )
Net income
    10.8 %     7.8 %     10.5 %     (85.7 %)     3.5 %     (7.3 )     89.2       16.0 %     (4.7 %)     (20.7 )
     
[1]   The DAC unlock included in the year ended December 31, 2007 increased both core earnings and net income by $16. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $37 and $44, respectively. The effect on each income statement line item is as follows:
                 
    December 31, 2007     September 30, 2008  
Other Fees
  $ (13 )   $ (26 )
Change in Reserves
          5  
Amortization of deferred policy acquisition costs
    (37 )     26  
Income tax expense (benefit)
    8       (20 )
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
          (7 )
     
[2]   The three months ended December 31, 2007 includes an additional SOP 03-1 reserve of $5, after the effects of DAC amortization and taxes, related to the implementation of the Company’s AG38 capital solution.

 

L-15


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
SUPPLEMENTAL DATA
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
SALES BY DISTRIBUTION
                                                                               
Wirehouse
  $ 30     $ 24     $ 25     $ 24     $ 22       (27 %)     (8 %)   $ 103     $ 95       (8 %)
Banks
    13       9       9       9       8       (38 %)     (11 %)     44       35       (20 %)
Independent
    41       29       32       31       36       (12 %)     16 %     124       128       3 %
Other
    5       3       4       5       4       (20 %)     (20 %)     15       16       7 %
 
                                                           
Total sales by distribution
  $ 89     $ 65     $ 70     $ 69     $ 70       (21 %)     1 %   $ 286     $ 274       (4 %)
 
                                                           
 
                                                                               
SALES BY PRODUCT
                                                                               
Variable Life
    38       28       23       22       18       (53 %)     (18 %)   $ 130     $ 91       (30 %)
Universal life/whole life
    46       32       40       41       45       (2 %)     10 %     136       158       16 %
Term life/other
    5       5       7       6       7       40 %     17 %     20       25       25 %
 
                                                           
Total sales by product
  $ 89     $ 65     $ 70     $ 69     $ 70       (21 %)     1 %   $ 286     $ 274       (4 %)
 
                                                           
 
                                                                               
ACCOUNT VALUE
                                                                               
General account
  $ 5,591     $ 5,688     $ 5,768     $ 5,863     $ 5,926       6 %     1 %                        
Separate account
    6,758       6,091       6,090       5,308       4,256       (37 %)     (20 %)                        
 
                                                                 
Total account value
  $ 12,349     $ 11,779     $ 11,858     $ 11,171     $ 10,182       (18 %)     (9 %)                        
 
                                                                 
 
                                                                               
ACCOUNT VALUE BY PRODUCT
                                                                               
Variable life
  $ 7,284     $ 6,620     $ 6,625     $ 5,848     $ 4,802       (34 %)     (18 %)                        
Universal life/interest sensitive whole life
    4,388       4,485       4,569       4,663       4,727       8 %     1 %                        
Modified guaranteed life
    555       551       542       537       529       (5 %)     (1 %)                        
Other
    122       123       122       123       124       2 %     1 %                        
 
                                                                 
Total account value by product
  $ 12,349     $ 11,779     $ 11,858     $ 11,171     $ 10,182       (18 %)     (9 %)                        
 
                                                                 
 
                                                                               
LIFE INSURANCE IN-FORCE
                                                                               
Variable life
  $ 77,566     $ 78,145     $ 78,557     $ 78,809     $ 78,853       2 %                              
Universal life/interest sensitive whole life
    48,636       49,415       50,298       51,355       52,356       8 %     2 %                        
Term life
    52,298       54,369       57,371       60,261       63,334       21 %     5 %                        
Modified guaranteed life
    671       662       648       637       624       (7 %)     (2 %)                        
Other
    312       307       299       299       297       (5 %)     (1 %)                        
 
                                                                 
Total life insurance in-force
  $ 179,483     $ 182,898     $ 187,173     $ 191,361     $ 195,464       9 %     2 %                        
 
                                                                 

 

L-16


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INDIVIDUAL LIFE
ACCOUNT VALUE ROLLFORWARD
                                             
        THREE MONTHS ENDED  
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
        2007     2008     2008     2008     2008  
   
 
                                       
VARIABLE LIFE  
Beginning balance
  $ 7,402     $ 7,284     $ 6,620     $ 6,625     $ 5,848  
   
 
                                       
   
First year & single premiums
    93       74       74       63       63  
   
Renewal premiums
    155       142       140       139       149  
   
 
                             
   
Premiums and deposits
    248       216       214       202       212  
   
Surrenders
    (91 )     (90 )     (99 )     (76 )     (79 )
   
Death benefits
    (13 )     (16 )     (20 )     (20 )     (13 )
   
 
                             
   
Net Flows
    144       110       95       106       120  
   
Policy fees
    (130 )     (131 )     (123 )     (128 )     (137 )
   
Change in market value/interest credited
    (132 )     (643 )     33       (755 )     (1,029 )
   
 
                             
   
Ending balance
  $ 7,284     $ 6,620     $ 6,625     $ 5,848     $ 4,802  
   
 
                                       
OTHER [1]  
Beginning balance
  $ 4,968     $ 5,065     $ 5,159     $ 5,233     $ 5,323  
   
 
                                       
   
First year & single premiums
    111       117       108       125       145  
   
Renewal premiums
    126       121       120       123       136  
   
 
                             
   
Premiums and deposits
    237       238       228       248       281  
   
Surrenders
    (43 )     (46 )     (54 )     (53 )     (76 )
   
Death benefits
    (25 )     (21 )     (24 )     (22 )     (55 )
   
 
                             
   
Net Flows
    169       171       150       173       150  
   
Policy fees
    (129 )     (132 )     (133 )     (139 )     (152 )
   
Change in market value/interest credited
    57       55       57       56       59  
   
 
                             
   
Ending balance
  $ 5,065     $ 5,159     $ 5,233     $ 5,323     $ 5,380  
   
 
                                       
TOTAL INDIVIDUAL LIFE  
Beginning balance
  $ 12,370     $ 12,349     $ 11,779     $ 11,858     $ 11,171  
   
 
                                       
   
First year & single premiums
    204       191       182       188       208  
   
Renewal premiums
    281       263       260       262       285  
   
 
                             
   
Premiums and deposits
    485       454       442       450       493  
   
Surrenders
    (134 )     (136 )     (153 )     (129 )     (155 )
   
Death benefits
    (38 )     (37 )     (44 )     (42 )     (68 )
   
 
                             
   
Net Flows
    313       281       245       279       270  
   
Policy fees
    (259 )     (263 )     (256 )     (267 )     (289 )
   
Change in market value/interest credited
    (75 )     (588 )     90       (699 )     (970 )
   
 
                             
   
Ending balance
  $ 12,349     $ 11,779     $ 11,858     $ 11,171     $ 10,182  
     
[1]   Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and other.

 

L-17


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS [1]
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity and life fees
  $ 59     $ 56     $ 57     $ 55     $ 41       (31 %)     (25 %)   $ 223     $ 209       (6 %)
Mutual fund and other fees
    4       12       40       39       34     NM       (13 %)     15       125     NM  
 
                                                           
Total fee income
    63       68       97       94       75       19 %     (20 %)     238       334       40 %
 
                                                                               
Direct premiums
    1       1       1       1       1                   4       4        
 
                                                           
Total premiums and other considerations
    64       69       98       95       76       19 %     (20 %)     242       338       40 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    85       85       88       83       72       (15 %)     (13 %)     343       328       (4 %)
Net investment income on assigned capital
    3       4       4       4       3             (25 %)     13       15       15 %
Charge for invested capital
                (1 )                             (1 )     (1 )      
 
                                                           
Total net investment income
    88       89       91       87       75       (15 %)     (14 %)     355       342       (4 %)
Net realized losses — core
          (1 )     (1 )           (2 )                       (4 )      
 
                                                           
Total core revenues
    152       157       188       182       149       (2 %)     (18 %)     597       676       13 %
Net realized losses, before tax and DAC, excluded from core revenues
    (22 )     (35 )     (18 )     (181 )     (34 )     (55 %)     81 %     (41 )     (268 )   NM  
 
                                                           
Total revenues
    130       122       170       1       115       (12 %)   NM       556       408       (27 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits [2]
                      1                   (100 %)     (1 )     1     NM  
Other contract benefits
    12       11       12       11       11       (8 %)           48       45       (6 %)
Change in reserve
    (6 )     (5 )     (5 )     (6 )     (5 )     17 %     17 %     (23 )     (21 )     9 %
Sales inducements [2]
    1                   2       (1 )   NM     NM       1       1        
Interest credited on G/A assets
    56       59       59       62       66       18 %     6 %     224       246       10 %
 
                                                           
Total benefits and losses
    63       65       66       70       71       13 %     1 %     249       272       9 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    24       30       36       34       31       29 %     (9 %)     95       131       38 %
Operating expenses
    61       68       88       89       82       34 %     (8 %)     214       327       53 %
Premium taxes and other expenses
    (1 )     1       6       7       5     NM       (29 %)           19        
 
                                                           
Subtotal — expenses before deferral
    84       99       130       130       118       40 %     (9 %)     309       477       54 %
Deferred policy acquisition costs
    (39 )     (38 )     (38 )     (35 )     (31 )     21 %     11 %     (139 )     (142 )     (2 %)
 
                                                           
Total other insurance expense
    45       61       92       95       87       93 %     (8 %)     170       335       97 %
Amortization of deferred policy acquisition costs [2]
    12       9       7       83       1       (92 %)     (99 %)     55       100       82 %
 
                                                           
Total benefits and expenses
    120       135       165       248       159       33 %     (36 %)     474       707       49 %
 
                                                                               
Core earnings (loss) before income taxes
    32       22       23       (66 )     (10 )   NM       85 %     123       (31 )   NM  
Income tax expense (benefit) [2] [3]
    10       5       (10 )     (30 )     (7 )   NM       77 %     34       (42 )   NM  
 
                                                           
Core earnings (loss) [2]
    22       17       33       (36 )     (3 )   NM       92 %     89       11       (88 %)
 
                                                                               
Net realized losses, net of tax and DAC, excluded from core earnings [2]
    (15 )     (22 )     (2 )     (124 )     (20 )     (33 %)     84 %     (28 )     (168 )   NM  
 
                                                           
Net income (loss) [2]
  $ 7     $ (5 )   $ 31     $ (160 )   $ (23 )   NM       86 %   $ 61     $ (157 )   NM  
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    30.8       18.1       28.3       (31.9 )     (3.0 )   NM       91 %     33.4       3.4       (90 %)
Net income (loss)
    9.8       (5.3 )     26.6       (141.9 )     (22.9 )   NM       84 %     22.9       (47.9 )   NM  
     
[1]   Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively.
 
[2]   The DAC unlock included in the year ended December 31, 2007 decreased both core earnings and net income by $9. The DAC unlock recorded in the three months ended September 30, 2008 decreased core earnings and net income by $48 and $49, respectively. The effect on each income statement line item is as follows:
                 
    December 31, 2007     September 30, 2008  
Death Benefits
  $     $ 1  
Sales Inducements
  $     $ 1  
Amortization of deferred policy acquisition costs
    14       75  
Income tax expense (benefit)
    (5 )     (29 )
Net realized gains (losses), net of tax and DAC, excluded from core earnings
          (1 )
     
[3]   The three months ended June 30, 2008 includes a tax benefit related to DRD of $15.

 

L-18


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — DEPOSITS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
                                                                               
401(k)
                                                                               
Annuity — plan/participant rollovers
  $ 460     $ 739     $ 506     $ 487     $ 418       (9 %)     (14 %)   $ 2,134     $ 2,150       1 %
Annuity — ongoing contributions
    511       643       569       579       555       9 %     (4 %)     2,065       2,346       14 %
 
                                                           
Total 401(k) Annuity
    971       1,382       1,075       1,066       973             (9 %)     4,199       4,496       7 %
Mutual funds [1]
    108       441       836       862       687     NM       (20 %)     418       2,826     NM  
 
                                                           
Total 401(k)
    1,079       1,823       1,911       1,928       1,660       54 %     (14 %)     4,617       7,322       59 %
 
                                                           
 
                                                                               
403(b)/457
                                                                               
Annuity — plan/participant rollovers
    102       143       57       79       38       (63 %)     (52 %)     342       317       (7 %)
Annuity — ongoing contributions
    235       257       339       314       285       21 %     (9 %)     940       1,195       27 %
 
                                                           
Total 403(b)/457 Annuity
    337       400       396       393       323       (4 %)     (18 %)     1,282       1,512       18 %
Mutual funds
    7       26       43       13       13       86 %           19       95     NM  
 
                                                           
Total 403(b)/457
    344       426       439       406       336       (2 %)     (17 %)     1,301       1,607       24 %
 
                                                           
 
                                                                               
Total Retirement
                                                                               
401(k) Annuity
    971       1,382       1,075       1,066       973             (9 %)     4,199       4,496       7 %
403(b)/457 Annuity
    337       400       396       393       323       (4 %)     (18 %)     1,282       1,512       18 %
 
                                                           
Total Retirememt Plans Annuity deposits
    1,308       1,782       1,471       1,459       1,296       (1 %)     (11 %)     5,481       6,008       10 %
Mutual funds [1]
    115       467       879       875       700     NM       (20 %)     437       2,921     NM  
 
                                                           
Total Retirement Plans Deposits
    1,423       2,249       2,350       2,334       1,996       40 %     (14 %)     5,918       8,929       51 %
 
                                                           
     
[1]   Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively.

 

L-19


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT AND ADMINISTRATION
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
 
                                                       
401(k)
                                                       
General account
  $ 1,298     $ 1,354     $ 1,365     $ 1,446     $ 1,499       15 %     4 %
Non-guaranteed separate account
    13,433       13,059       13,467       12,290       10,457       (22 %)     (15 %)
 
                                         
Total 401(k) — Annuity account value
  $ 14,731     $ 14,413     $ 14,832     $ 13,736     $ 11,956       (19 %)     (13 %)
Mutual fund assets [1]
    1,428       20,005       19,748       18,022       14,739     NM       (18 %)
 
                                         
Total 401(k) Assets Under Management
  $ 16,159     $ 34,418     $ 34,580     $ 31,758     $ 26,695       65 %     (16 %)
 
                                         
 
                                                       
403(b)/457
                                                       
General account
  $ 4,627     $ 4,850     $ 5,022     $ 5,238     $ 5,292       14 %     1 %
Non-guaranteed separate account
    7,736       7,076       7,175       6,194       4,950       (36 %)     (20 %)
 
                                         
Total 403(b)/457 - Annuity account value
  $ 12,363     $ 11,926     $ 12,197     $ 11,432     $ 10,242       (17 %)     (10 %)
Mutual fund assets
    26       66       106       104       99     NM       (5 %)
 
                                         
Total 403(b)/457 Assets Under Management
  $ 12,389     $ 11,992     $ 12,303     $ 11,536     $ 10,341       (17 %)     (10 %)
 
                                         
 
                                                       
TOTAL RETIREMENT
                                                       
General account
  $ 5,925     $ 6,204     $ 6,387     $ 6,684     $ 6,791       15 %     2 %
Non-guaranteed separate account
    21,169       20,135       20,642       18,484       15,407       (27 %)     (17 %)
 
                                         
Total Retirement Plans account value
  $ 27,094     $ 26,339     $ 27,029     $ 25,168     $ 22,198       (18 %)     (12 %)
Mutual fund assets [1]
    1,454       20,071       19,854       18,126       14,838     NM       (18 %)
 
                                         
Total Retirement Plans Assets Under Management
  $ 28,548     $ 46,410     $ 46,883     $ 43,294     $ 37,036       30 %     (14 %)
 
                                         
 
                                                       
RECORDKEEPING ONLY BUSINESS
                                                       
Assets Under Administration [2]
  $     $ 5,666     $ 6,282     $ 5,853     $ 5,122             (12 %)
Number of Participants [3]
          142,537       155,618       155,373       155,914              
 
                                         
     
[1]   Prior to March 31, 2008, 401(k) mutual fund assets were predominantly comprised of The Hartford’s 401(k) plan. During the three months ended March 31, 2008, the Company acquired the rights to service $18.7 billion of mutual fund assets from Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29, and March 28, 2008, respectively.
 
[2]   Assets under administration are not included when calculating return on assets measures for the Retirement Plans segment and are not included in Retirement Plans Assets Under Management.
 
[3]   Earnings for assets under administration are predominantly driven by participant count. The participant count represents the actual number of participants.

 

L-20


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
RETIREMENT PLANS
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1] [2]
                                             
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
        2007     2008     2008     2008     2008  
401(k) GROUP ANNUITY ACCOUNT VALUE [1]
  Beginning balance   $ 14,685     $ 14,731     $ 14,413     $ 14,832     $ 13,736  
 
  Deposits     971       1,382       1,075       1,066       973  
 
  Surrenders     (673 )     (617 )     (591 )     (610 )     (625 )
 
  Death benefits/annuity payouts     (8 )     (9 )     (11 )     (10 )     (9 )
 
                                 
 
  Net Flows     290       756       473       446       339  
 
 
Change in market value/change in reserve/interest credited
    (244 )     (1,074 )     (54 )     (1,542 )     (2,119 )
 
                                 
 
  Ending balance   $ 14,731     $ 14,413     $ 14,832     $ 13,736     $ 11,956  
 
                                           
403(b)/457 GROUP ANNUITY ACCOUNT VALUE [1]
  Beginning balance   $ 12,486     $ 12,363     $ 11,926     $ 12,197     $ 11,432  
 
  Deposits     337       400       396       393       323  
 
  Surrenders     (393 )     (244 )     (245 )     (240 )     (330 )
 
  Death benefits/annuity payouts     (12 )     (12 )     (13 )     (12 )     (12 )
 
                                 
 
  Net Flows     (68 )     144       138       141       (19 )
 
 
Change in market value/change in reserve/interest credited
    (55 )     (581 )     133       (906 )     (1,171 )
 
                                 
 
  Ending balance   $ 12,363     $ 11,926     $ 12,197     $ 11,432     $ 10,242  
 
                                           
MUTUAL FUND ASSETS [2] [3]
  Beginning balance   $ 1,409     $ 1,454     $ 20,071     $ 19,854     $ 18,126  
 
  Deposits     115       467       879       875       700  
 
  Surrenders     (83 )     (345 )     (1,109 )     (836 )     (1,077 )
 
                                 
 
  Net Flows     32       122       (230 )     39       (377 )
 
  Acquisitions [4]           18,725                    
 
 
Change in market value/change in reserve/interest credited
    13       (230 )     13       (1,767 )     (2,911 )
 
                                 
 
  Ending balance   $ 1,454     $ 20,071     $ 19,854     $ 18,126     $ 14,838  
 
                                           
TOTAL RETIREMENT
  Beginning balance   $ 28,580     $ 28,548     $ 46,410     $ 46,883     $ 43,294  
 
  Deposits     1,423       2,249       2,350       2,334       1,996  
 
  Surrenders     (1,149 )     (1,206 )     (1,945 )     (1,686 )     (2,032 )
 
  Death benefits/annuity payouts     (20 )     (21 )     (24 )     (22 )     (21 )
 
                                 
 
  Net Flows     254       1,022       381       626       (57 )
 
  Acquisitions [4]           18,725                    
 
 
Change in market value/change in reserve/interest credited
    (286 )     (1,885 )     92       (4,215 )     (6,201 )
 
                                 
 
  Ending balance   $ 28,548     $ 46,410     $ 46,883     $ 43,294     $ 37,036  
 
                                 
     
[1]   Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
 
[2]   Excludes Assets Under Administration.
 
[3]   Mutual Fund assets are an internal measure of assets under management used by the Company because a portion of revenues are based upon asset levels. Mutual Fund assets are not included on the balance sheet.
 
[4]   Reflects the acquisition of Sun Life Retirement Services, Inc. and Princeton Retirement Group on February 29 and March 28, 2008, respectively.

 

L-21


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
GROUP BENEFITS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
                                            Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
ASO fees
  $ 9     $ 9     $ 9     $ 9     $ 9                 $ 34     $ 36       6 %
Other fees
    1       (1 )     1             (1 )   NM             1       (1 )   NM  
 
                                                           
Total fee income
    10       8       10       9       8       (20 %)     (11 %)     35       35        
 
                                                                               
 
                                                                             
Direct premiums
    1,015       1,031       1,060       1,061       1,055       4 %     (1 %)     4,068       4,207       3 %
Reinsurance premiums
    39       35       30       39       45       15 %     15 %     198       149       (25 %)
 
                                                           
Net premiums
    1,054       1,066       1,090       1,100       1,100       4 %           4,266       4,356       2 %
 
                                                           
Total premiums and other considerations
    1,064       1,074       1,100       1,109       1,108       4 %           4,301       4,391       2 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    96       88       95       92       71       (26 %)     (23 %)     389       346       (11 %)
Net investment income on assigned capital
    19       18       18       19       18       (5 %)     (5 %)     76       73       (4 %)
 
                                                           
Total net investment income
    115       106       113       111       89       (23 %)     (20 %)     465       419       (10 %)
Net realized capital gains (losses) — core
    4                   (1 )           (100 %)     100 %     7       (1 )   NM  
 
                                                           
Total core revenues
    1,183       1,180       1,213       1,219       1,197       1 %     (2 %)     4,773       4,809       1 %
Net realized losses, before tax and DAC, excluded from core revenues
    (20 )     (36 )     (37 )     (440 )     (26 )     (30 %)     94 %     (37 )     (539 )   NM  
 
                                                           
Total revenues
    1,163       1,144       1,176       779       1,171       1 %     50 %     4,736       4,270       (10 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits
    261       290       316       321       284       9 %     (12 %)     1,059       1,211       14 %
Other contract benefits [1]
    497       475       469       463       460       (7 %)     (1 %)     1,930       1,867       (3 %)
Change in reserve [1]
    (13 )     23       26       (4 )     21     NM     NM       120       66       (45 %)
 
                                                           
Total benefits and losses
    745       788       811       780       765       3 %     (2 %)     3,109       3,144       1 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    144       148       128       144       146       1 %     1 %     582       566       (3 %)
Operating expenses
    150       135       145       134       145       (3 %)     8 %     549       559       2 %
Premium taxes and other expenses
    22       19       12       21       20       (9 %)     (5 %)     73       72       (1 %)
 
                                                           
Subtotal — expenses before deferral
    316       302       285       299       311       (2 %)     4 %     1,204       1,197       (1 %)
Deferred policy acquisition costs
    (21 )     (17 )     (15 )     (16 )     (21 )           (31 %)     (73 )     (69 )     5 %
 
                                                           
Total other insurance expense
    295       285       270       283       290       (2 %)     2 %     1,131       1,128        
Amortization of deferred policy acquisition costs
    14       13       14       15       15       7 %           62       57       (8 %)
 
                                                           
Total benefits and expenses
    1,054       1,086       1,095       1,078       1,070       2 %     (1 %)     4,302       4,329       1 %
Core earnings before income taxes
    129       94       118       141       127       (2 %)     (10 %)     471       480       2 %
Income tax expense
    37       24       33       41       37             (10 %)     133       135       2 %
 
                                                           
Core earnings
    92       70       85       100       90       (2 %)     (10 %)     338       345       2 %
Net realized losses, net of tax and DAC, excluded from core earnings
    (12 )     (24 )     (23 )     (286 )     (18 )     (50 %)     94 %     (23 )     (351 )   NM  
 
                                                           
Net income (loss)
  $ 80     $ 46     $ 62     $ (186 )   $ 72       (10 %)   NM     $ 315     $ (6 )   NM  
 
                                                           
 
                                                                               
After-Tax Profit as % of Revenues
                                                                               
Core earnings
    7.8 %     5.9 %     7.0 %     8.2 %     7.5 %     (0.3 )     (0.7 )     7.1 %     7.2 %     0.1  
Net income
    6.9 %     4.0 %     5.3 %     (23.9 %)     6.1 %     (0.8 )     30.0       6.7 %     (0.1 %)     (6.8 )
     
[1]   During the three months ended December 31, 2007, a reserve commutation of approximately $30 reduced change in reserve and correspondingly increased other contract benefits upon settlement.

 

L-22


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
GROUP BENEFITS
SUPPLEMENTAL DATA
                                                                                     
                                                Year Over              
        THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
        2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
PREMIUMS
  Fully Insured - Ongoing Premiums                                                                                
 
 
Group disability
  $ 466     $ 480     $ 497     $ 490     $ 517       11 %     6 %   $ 1,858     $ 1,984       7 %
 
 
Group life
    488       508       526       534       516       6 %     (3 %)     1,926       2,084       8 %
 
 
Other
    99       78       67       75       67       (32 %)     (11 %)     455       287       (37 %)
 
                                                               
 
 
Total fully insured - ongoing premiums
    1,053       1,066       1,090       1,099       1,100       4 %           4,239       4,355       3 %
 
                                                               
 
                                                                                   
 
 
Total buyouts [1]
    1                   1             (100 %)     (100 %)     27       1       (96 %)
 
                                                               
 
 
Total premiums
    1,054       1,066       1,090       1,100       1,100       4 %           4,266       4,356       2 %
 
 
Group disability - premium equivalents [2]
    78       85       85       85       83       6 %     (2 %)     332       338       2 %
 
                                                               
 
 
Total premiums and premium equivalent
  $ 1,132     $ 1,151     $ 1,175     $ 1,185     $ 1,183       5 %         $ 4,598     $ 4,694       2 %
 
                                                               
 
                                                                                   
SALES (GROSS ANNUALIZED NEW PREMIUMS)
  Fully Insured — Ongoing Sales                                                                                
 
 
Group disability
  $ 54     $ 190     $ 54     $ 66     $ 65       20 %     (2 %)   $ 325     $ 375       15 %
 
 
Group life
    75       186       76       87       75             (14 %)     364       424       16 %
 
 
Other
    11       5       5       5       6       (45 %)     20 %     81       21       (74 %)
 
                                                               
 
 
Total fully insured - ongoing sales
    140       381       135       158       146       4 %     (8 %)     770       820       6 %
 
                                                               
 
 
Total buyouts [1]
                      1                   (100 %)     26       1       (96 %)
 
                                                               
 
  Total sales     140       381       135       159       146       4 %     (8 %)     796       821       3 %
 
 
Group disability premium equivalents [2]
    17       95       6       7       24       41 %   NM       106       132       25 %
 
                                                               
 
 
Total sales and premium equivalents
  $ 157     $ 476     $ 141     $ 166     $ 170       8 %     2 %   $ 902     $ 953       6 %
 
                                                               
RATIOS [3]
 
Loss Ratio
    70.0 %     73.4 %     73.7 %     70.3 %     69.0 %     (1.0 )     (1.3 )     72.1 %     71.6 %     (0.5 )
 
 
Expense Ratio
    29.1 %     27.7 %     25.8 %     26.9 %     27.5 %     (1.6 )     0.6       27.9 %     27.0 %     (0.9 )
 
                                                               
GAAP RESERVES [4]
 
Group disability
  $ 4,616     $ 4,657     $ 4,699     $ 4,717     $ 4,727       2 %                              
 
 
Group life
    1,315       1,320       1,331       1,319       1,333       1 %     1 %                        
 
 
Other
    176       146       112       98       100       (43 %)     2 %                        
 
                                                                     
 
 
Total GAAP reserves
  $ 6,107     $ 6,123     $ 6,142     $ 6,134     $ 6,160       1 %                              
 
                                                                     
     
[1]   Takeover of open claim liabilities and other non-recurring premium amounts.
 
[2]   Administrative services only (ASO) fees and claims under claim management agreements.
 
[3]   Ratios calculated excluding the effects of buyout premiums.
 
[4]   Reserve balances for the three months ended December 31, 2007, March 31, June 30 and September 30, and December 31, 2008 are net of reinsurance recoverables of $261, $252, $ 241, $243 and $231, respectively.

 

L-23


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL
HIGHLIGHTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Months     3 Months     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
CORE EARNINGS
                                                                               
Japan operations
  $ 68     $ 70     $ 64     $ (59 )   $ (111 )   NM       (88 %)   $ 281     $ (36 )   NM  
Other international operations
    (7 )     (3 )           (16 )     1           NM       (27 )     (18 )     33 %
 
                                                           
Core earnings (loss)
  $ 61     $ 67     $ 64     $ (75 )   $ (110 )   NM       (47 %)   $ 254     $ (54 )   NM  
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    (23 )     (59 )     8       (32 )     (188 )   NM     NM       (31 )     (271 )   NM  
 
                                                           
Net income (loss)
  $ 38     $ 8     $ 72     $ (107 )   $ (298 )   NM       (179 %)   $ 223     $ (325 )   NM  
 
                                                           
 
                                                                               
JAPAN DEPOSITS — Dollars
                                                                               
Individual Annuity
                                                                               
Variable
  $ 1,086     $ 944     $ 863     $ 868     $ 291       (73 %)     (66 %)   $ 6,321     $ 2,966       (53 %)
Fixed MVA and other
    20       172       149       231       43       115 %     (81 %)     84       595     NM  
 
                                                           
Total deposits by product
  $ 1,106     $ 1,116     $ 1,012     $ 1,099     $ 334       (70 %)     (70 %)   $ 6,405     $ 3,561       (44 %)
 
                                                           
 
                                                                               
JAPAN DEPOSITS — Yen
                                                                               
Individual Annuity
                                                                               
Variable
  ¥ 122,808     ¥ 99,140     ¥ 90,334     ¥ 93,342     ¥ 28,200       (77 %)     (70 %)   ¥ 746,707     ¥ 311,016       (58 %)
Fixed MVA and other
    2,293       17,558       15,609       24,985       4,016       75 %     (84 %)     9,869       62,168     NM  
 
                                                           
Total deposits by product
  ¥ 125,101     ¥ 116,698     ¥ 105,943     ¥ 118,327     ¥ 32,216       (74 %)     (73 %)   ¥ 756,576     ¥ 373,184       (51 %)
 
                                                           
 
                                                                               
JAPAN NET FLOWS — Dollars
                                                                               
Individual Annuity
                                                                               
Variable
  $ 646     $ 520     $ 469     $ 383     $ (3,087 )   NM     NM     $ 4,498     $ (1,715 )   NM  
Fixed MVA and other
    5       143       128       196       1,962     NM     NM       27       2,429     NM  
 
                                                           
Total net flows by product
  $ 651     $ 663     $ 597     $ 579     $ (1,125 )   NM     NM     $ 4,525     $ 714       (84 %)
 
                                                           
 
                                                                               
JAPAN NET FLOWS — Yen
                                                                               
Individual Annuity
                                                                               
Variable
  ¥ 73,035     ¥ 54,447     ¥ 49,111     ¥ 41,213     ¥ (309,214 )   NM     NM     ¥ 531,470     ¥ (164,443 )   NM  
Fixed MVA and other
    636       14,580       13,396       21,193       177,526     NM     NM       3,168       226,695     NM  
 
                                                           
Total net flows by product
  ¥ 73,671     ¥ 69,027     ¥ 62,507     ¥ 62,406     ¥ (131,688 )   NM     NM     ¥ 534,638     ¥ 62,252       (88 %)
 
                                                           
 
                                                                               
JAPAN AUM — Dollars
                                                                               
Individual Annuity
                                                                               
Variable
  $ 35,793     $ 36,777     $ 35,910     $ 32,706     $ 29,726       (17 %)     (9 %)                        
Fixed MVA and other
    1,844       2,198       2,212       2,416       4,769       159 %     97 %                        
 
                                                                 
Total AUM by product
  $ 37,637     $ 38,975     $ 38,122     $ 35,122     $ 34,495       (8 %)     (2 %)                        
 
                                                                 
 
                                                                               
JAPAN AUM — Yen
                                                                               
Individual Annuity
                                                                               
Variable
  ¥ 3,998,563     ¥ 3,660,549     ¥ 3,806,639     ¥ 3,472,208     ¥ 2,694,696       (33 %)     (22 %)                        
Fixed MVA and other
    206,028       218,854       234,442       256,542       432,267       110 %     68 %                        
 
                                                                 
Total AUM by product
  ¥ 4,204,591     ¥ 3,879,403     ¥ 4,041,081     ¥ 3,728,750     ¥ 3,126,963       (26 %)     (16 %)                        
 
                                                                 

 

L-24


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity fees
  $ 209     $ 209     $ 214     $ 205     $ 170       (19 %)     (17 %)   $ 765     $ 798       4 %
Other fees
    15       18       16       10       25       67 %     150 %     60       69       15 %
 
                                                           
Total fee income
    224       227       230       215       195       (13 %)     (9 %)     825       867       5 %
 
                                                                               
Reinsurance premiums
    (3 )     (2 )     (3 )     (2 )     (2 )     33 %           (11 )     (9 )     18 %
 
                                                           
Total premiums and other considerations
    221       225       227       213       193       (13 %)     (9 %)     814       858       5 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    29       25       24       27       30       3 %     11 %     117       106       (9 %)
Net investment income on assigned capital
    1       1       1       2       21     NM     NM       3       25     NM  
 
                                                           
Total net investment income
    30       26       25       29       51       70 %     76 %     120       131       9 %
Net realized capital losses — core
    (16 )     (7 )     (11 )     (8 )     (2 )     88 %     75 %     (68 )     (28 )     59 %
 
                                                           
Total core revenues
    235       244       241       234       242       3 %     3 %     866       961       11 %
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues
    (33 )     (108 )     3       (43 )     (218 )   NM     NM       (43 )     (366 )   NM  
 
                                                           
Total revenues
    202       136       244       191       24       (88 %)     (87 %)     823       595       (28 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death and other benefits [1]
    6       8       6       146       70     NM       (52 %)     4       230     NM  
Sales inducements
                      1                   (100 %)     1       1        
Interest credited on G/A assets
    7       8       8       9       11       57 %     22 %     25       36       44 %
 
                                                           
Total benefits and losses
    13       16       14       156       81     NM       (48 %)     30       267     NM  
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    78       73       70       73       32       (59 %)     (56 %)     423       248       (41 %)
Operating expenses
    50       40       46       43       49       (2 %)     14 %     167       178       7 %
Premium taxes and other expenses
    7       9       5       11       7             (36 %)     31       32       3 %
 
                                                           
Subtotal — expenses before deferral
    135       122       121       127       88       (35 %)     (31 %)     621       458       (26 %)
Deferred policy acquisition costs
    (80 )     (69 )     (63 )     (67 )     (22 )     73 %     67 %     (429 )     (221 )     48 %
 
                                                           
Total other insurance expense
    55       53       58       60       66       20 %     10 %     192       237       23 %
Amortization of deferred policy acquisition costs [1]
    62       68       70       109       265     NM       143 %     211       512       143 %
 
                                                           
Total benefits and expenses
    130       137       142       325       412     NM       27 %     433       1,016       135 %
Core earnings (loss) before income taxes
    105       107       99       (91 )     (170 )   NM       (87 %)     433       (55 )   NM  
Income tax expense (benefit) [1]
    37       37       35       (32 )     (59 )   NM       (84 %)     152       (19 )   NM  
 
                                                           
Core earnings (loss) [1] [2]
    68       70       64       (59 )     (111 )   NM       (88 %)     281       (36 )   NM  
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    (20 )     (56 )     5       (22 )     (154 )   NM     NM       (28 )     (227 )   NM  
 
                                                           
Net Income (loss) [1]
  $ 48     $ 14     $ 69     $ (81 )   $ (265 )   NM     NM     $ 253     $ (263 )   NM  
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    73.2       73.1       66.4       (64.4 )     (127.6 )   NM       (98 %)     81.5       (10.0 )   NM  
Net income
    51.7       14.6       71.6       (88.5 )     (304.5 )   NM       1 %     73.4       (72.9 )   NM  
     
[1]   The DAC unlock included in the year ended December 31, 2007 increased both core earnings and net income by $22. The DAC unlock recorded in the three months ended September 30, 2008 decreased
core earnings and net income by $123 and $115, respectively. The effect on each income statement line item is as follows:
                 
    December 31, 2007     September 30, 2008  
Other Fees
  $     $ (7 )
Death and other benefits
    (9 )     139  
Sales Inducements
          1  
Amortization of deferred policy acquisition costs
    (25 )     42  
Income tax expense (benefit)
    12       (66 )
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
          8  
     
[2]   Includes the after-tax charge of ($152) recorded in the three months ended December 31, 2008 for the effect of the triggering of the guaranteed minimum income benefit for the 3 Win product on amortization of deferred policy acquisition costs and present value of future profits and death benefits.

 

L-25


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Dollars
                                                 
            THREE MONTHS ENDED  
            Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
            2007     2008     2008     2008     2008  
       
 
                                       
VARIABLE ANNUITIES  
Beginning balance
  $ 34,888     $ 35,793     $ 36,777     $ 35,910     $ 32,706  
       
 
                                       
       
Deposits/Premiums/other
    1,086       944       863       868       291  
       
Surrenders
    (321 )     (298 )     (272 )     (370 )     (297 )
       
Death benefits/annuitizations/other [1]
    (119 )     (126 )     (122 )     (115 )     (910 )
       
Transfers — 3 Win [1]
                            (2,171 )
       
 
                             
       
Net Flows
    646       520       469       383       (3,087 )
       
Change in market value/currency/change in reserve/interest credited
    (801 )     (3,722 )     976       (3,508 )     (4,662 )
       
Effect of currency translation
    1,060       4,186       (2,312 )     (79 )     4,769  
       
 
                             
       
Ending balance
  $ 35,793     $ 36,777     $ 35,910     $ 32,706     $ 29,726  
       
 
                             
       
 
                                       
FIXED MVA AND OTHER  
Beginning balance
  $ 1,785     $ 1,844     $ 2,198     $ 2,212     $ 2,416  
       
 
                                       
       
Deposits/Premiums/other
    20       172       149       231       43  
       
Surrenders
    (8 )     (12 )     (7 )     (17 )     (62 )
       
Death benefits/annuitizations/other [1]
    (7 )     (17 )     (14 )     (18 )     (190 )
       
Transfers — 3 Win [1]
                            2,171  
       
 
                             
       
Net Flows
    5       143       128       196       1,962  
       
Change in market value/currency/change in reserve/interest credited
    1       (17 )     21       9       (18 )
       
Effect of currency translation
    53       228       (135 )     (1 )     409  
       
 
                             
       
Ending balance
  $ 1,844     $ 2,198     $ 2,212     $ 2,416     $ 4,769  
       
 
                             
       
 
                                       
TOTAL JAPAN  
Beginning balance
  $ 36,673     $ 37,637     $ 38,975     $ 38,122     $ 35,122  
       
 
                                       
       
Deposits/Premiums/other
    1,106       1,116       1,012       1,099       334  
       
Surrenders
    (329 )     (310 )     (279 )     (387 )     (359 )
       
Death benefits/annuitizations/other [1]
    (126 )     (143 )     (136 )     (133 )     (1,100 )
       
Transfers — 3 Win [1]
                             
       
 
                             
       
Net Flows
    651       663       597       579       (1,125 )
       
Change in market value/change in reserve/interest credited
    (800 )     (3,739 )     997       (3,499 )     (4,680 )
       
Effect of currency translation
    1,113       4,414       (2,447 )     (80 )     5,178  
       
 
                             
       
Ending balance
  $ 37,637     $ 38,975     $ 38,122     $ 35,122     $ 34,495  
     
[1]   The three months ended, December 31, 2008, includes the effect of the triggering of the guaranteed minimum income benefit (“GMIB”) for the 3 Win product. This GMIB required the policyholder to elect one of two options; either (1) receive 80% of their initial deposit without surrender penalty or (2) receive 100% of the initial deposit via a 15 year pay out annuity. For those policyholders that elected option (1), $(809) is included in variable annuity — death benefits/annuitizations/other. For those policyholders that elected option (2) a reserve of $2,171 was established which is reflected as a transfer out of variable annuity account value and a transfer into the fixed MVA and other account value. Additionally the current period annuity payments were of $(181) and related interest credited of $11 associated with option (2) are included in the fixed MVA and other — death benefits/annuitizations/other and change in market value/change in reserve/interest credited.

 

L-26


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INTERNATIONAL — JAPAN
SUPPLEMENTAL DATA — ACCOUNT VALUE ROLLFORWARD — Yen
                                             
        THREE MONTHS ENDED  
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
        2007     2008     2008     2008     2008  
   
 
                                       
VARIABLE ANNUITIES  
Beginning balance
  ¥ 4,012,693     ¥ 3,998,563     ¥ 3,660,549     ¥ 3,806,639     ¥ 3,472,208  
   
Deposits/Premiums/other
    122,808       99,140       90,334       93,342       28,200  
   
Surrenders
    (36,261 )     (31,364 )     (28,471 )     (39,753 )     (28,757 )
   
Death benefits/annuitizations/other [1]
    (13,512 )     (13,329 )     (12,752 )     (12,376 )     (111,840 )
   
Transfers - 3 Win [1]
                            (196,817 )
   
 
                             
   
Net Flows
    73,035       54,447       49,111       41,213       (309,214 )
   
Change in market value/change in reserve/interest credited
    (87,165 )     (392,461 )     96,979       (375,644 )     (468,298 )
   
 
                             
   
Ending balance
    3,998,563       3,660,549       3,806,639       3,472,208       2,694,696  
   
 
                                       
FIXED MVA AND OTHER  
Beginning balance
    205,275       206,028       218,854       234,442       256,542  
   
 
                                       
   
Deposits/Premiums/other
    2,293       17,558       15,609       24,985       4,016  
   
Surrenders
    (904 )     (1,245 )     (744 )     (1,845 )     (5,921 )
   
Death benefits/annuitizations/other [1]
    (753 )     (1,733 )     (1,469 )     (1,947 )     (17,386 )
   
Transfers - 3 Win [1]
                            196,817  
   
 
                             
   
Net Flows
    636       14,580       13,396       21,193       177,526  
   
Change in market value/change in reserve/interest credited
    767       790       884       1,011       725  
   
Effect of currency translation on USD Fixed Annuity products
    (650 )     (2,544 )     1,308       (104 )     (2,526 )
   
 
                             
   
Ending balance
    206,028       218,854       234,442       256,542       432,267  
   
 
                                       
TOTAL JAPAN  
Beginning balance
    4,217,968       4,204,591       3,879,403       4,041,081       3,728,750  
   
 
                                       
   
Deposits/Premiums/other
    125,101       116,698       105,943       118,327       32,216  
   
Surrenders
    (37,165 )     (32,609 )     (29,215 )     (41,598 )     (34,678 )
   
Death benefits/annuitizations/other [1]
    (14,265 )     (15,062 )     (14,221 )     (14,323 )     (129,226 )
   
Transfers - 3 Win [1]
                             
   
 
                             
   
Net Flows
    73,671       69,027       62,507       62,406       (131,688 )
   
Change in market value/change in reserve/interest credited
    (86,398 )     (391,671 )     97,863       (374,633 )     (467,573 )
   
Effect of currency translation on USD Fixed Annuity products
    (650 )     (2,544 )     1,308       (104 )     (2,526 )
   
 
                             
   
Ending balance
  ¥ $4,204,591     ¥ 3,879,403     ¥ 4,041,081     ¥ 3,728,750     ¥ 3,126,963  
     
[1]   The three months ended, December 31, 2008, includes the effect of the triggering of the guaranteed minimum income benefit (“GMIB”) for the 3 Win product. This GMIB required the policyholder to elect one of two options; either (1) receive 80% of their initial deposit without surrender penalty or (2) receive 100% of the initial deposit via a 15 year pay out annuity. Included in variable annuity death benefits/annuitizations/other is ¥(102,143) for those policyholders that elected option (1). For those policyholders that elected option (2) a reserve of ¥(196,817) was established which is reflected as a transfer out of variable annuity account value and a transfer into the fixed MVA and other account value. Additionally the current period annuity payments and related interest credited associated with option (2) are included in the fixed MVA and other — death benefits/annuitizations/other and change in market value/change in reserve/interest credited, respectively.

 

L-27


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity fees
  $ 21     $ 19     $ 20     $ 18     $ 13       (38 %)     (28 %)   $ 73     $ 70       (4 %)
Cost of insurance charges
    10       17       16       13       16       60 %     23 %     62       62        
Mutual fund and other fees
    9       5       2       9       4       (56 %)     (56 %)     116       20       (83 %)
 
                                                           
Total fee income
    40       41       38       40       33       (18 %)     (18 %)     251       152       (39 %)
Direct premiums
    217       188       242       241       218             (10 %)     987       889       (10 %)
 
                                                           
Total premiums and other considerations
    257       229       280       281       251       (2 %)     (11 %)     1,238       1,041       (16 %)
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    312       284       269       231       180       (42 %)     (22 %)     1,206       964       (20 %)
Net investment income on assigned capital
    9       9       9       8       9             13 %     34       35       3 %
Charge for invested capital
    1       1       1       1       2       100 %     100 %     1       5     NM  
 
                                                           
Total net investment income
    322       294       279       240       191       (41 %)     (20 %)     1,241       1,004       (19 %)
Net realized capital gains (losses) — core
    1                   1       (1 )   NM     NM       2             (100 %)
 
                                                           
Total core revenues
    580       523       559       522       441       (24 %)     (16 %)     2,481       2,045       (18 %)
 
                                                                               
Net realized gains (losses), before tax and DAC, excluded from core revenues
    (120 )     (219 )     (87 )     (606 )     123     NM     NM       (190 )     (789 )   NM  
 
                                                           
Total revenues
    460       304       472       (84 )     564       23 %   NM       2,291       1,256       (45 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits
    11       17       13       12       15       36 %     25 %     71       57       (20 %)
Other contract benefits
    117       113       120       120       130       11 %     8 %     424       483       14 %
Change in reserve
    192       177       220       221       198       3 %     (10 %)     916       816       (11 %)
Interest credited on G/A assets
    171       151       135       132       133       (22 %)     1 %     663       551       (17 %)
 
                                                           
Total benefits and losses
    491       458       488       485       476       (3 %)     (2 %)     2,074       1,907       (8 %)
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    15       14       15       19       11       (27 %)     (42 %)     63       59       (6 %)
Operating expenses
    23       20       25       22       18       (22 %)     (18 %)     79       85       8 %
Premium taxes and other expenses
    7       3       (1 )     2       3       (57 %)     50 %     93       7       (92 %)
 
                                                           
Subtotal — expenses before deferral
    45       37       39       43       32       (29 %)     (26 %)     235       151       (36 %)
Deferred policy acquisition costs
    (9 )     (9 )     (9 )     (8 )     (5 )     44 %     38 %     (50 )     (31 )     38 %
 
                                                           
Total other insurance expense
    36       28       30       35       27       (25 %)     (23 %)     185       120       (35 %)
Amortization of deferred policy acquisition costs [1]
    4       6       5       5       3       (25 %)     (40 %)     23       19       (17 %)
 
                                                           
Total benefits and expenses
    531       492       523       525       506       (5 %)     (4 %)     2,282       2,046       (10 %)
Core earnings (loss) before income taxes
    49       31       36       (3 )     (65 )   NM     NM       199       (1 )   NM  
Income tax expense (benefit)
    14       9       9       (4 )     (25 )   NM     NM       59       (11 )   NM  
 
                                                           
Core earnings (loss) [1]
    35       22       27       1       (40 )   NM     NM       140       10       (93 %)
Net realized gains (losses), net of tax and DAC, excluded from core earnings
    (78 )     (142 )     (57 )     (394 )     81     NM     NM       (123 )     (512 )   NM  
 
                                                           
Net income (loss) [1]
  $ (43 )   $ (120 )   $ (30 )   $ (393 )   $ 41     NM     NM     $ 17     $ (502 )   NM  
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    23.0       14.3       17.4       0.7       (26.7 )   NM     NM       24.9       1.7       (93 %)
Net income (loss)
    (28.2 )     (78.0 )     (19.4 )     (255.6 )     27.4     NM     NM       3.0       (83.3 )   NM  
     
[1]   The DAC unlock included in the year ended December 31, 2007 decreased amortization of deferred policy acquisition costs by $1, after-tax. There was no DAC unlock impact in the three months ended, September 30, 2008.

 

L-28


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
                                                         
                                            Year Over        
                                            Year     Sequential  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month  
    2007     2008     2008     2008     2008     Change     Change  
 
                                                       
INSTITUTIONAL
                                                       
General account
  $ 19,731     $ 20,197     $ 20,593     $ 19,923     $ 19,771             (1 %)
Guaranteed separate account
    421       412       402       384       393       (7 %)     2 %
Non-guaranteed separate account
    4,951       4,675       4,551       4,189       3,917       (21 %)     (6 %)
 
                                         
Total Institutional account value
    25,103       25,284       25,546       24,496       24,081       (4 %)     (2 %)
Mutual fund assets
    3,581       3,489       3,844       3,325       2,578       (28 %)     (22 %)
 
                                         
Total Institutional Assets Under Management
  $ 28,684     $ 28,773     $ 29,390     $ 27,821     $ 26,659       (7 %)     (4 %)
 
                                         
 
                                                       
PRIVATE PLACEMENT LIFE INSURANCE
                                                       
General account
  $ 4     $ 5     $ 5     $ 6     $ 46     NM     NM  
Non-guaranteed separate account
    32,788       32,779       32,939       32,860       32,413       (1 %)     (1 %)
 
                                         
Total Private Placement Life Insurance account value
    32,792       32,784       32,944       32,866       32,459       (1 %)     (1 %)
 
                                         
 
                                                       
TOTAL INSTITUTIONAL SOLUTIONS GROUP
                                                       
General account
  $ 19,735     $ 20,202     $ 20,598     $ 19,929     $ 19,817             (1 %)
Guaranteed separate account
    421       412       402       384       393       (7 %)     2 %
Non-guaranteed separate account
    37,739       37,454       37,490       37,049       36,330       (4 %)     (2 %)
 
                                         
Total Institutional Solutions Group account value
    57,895       58,068       58,490       57,362       56,540       (2 %)     (1 %)
Mutual fund assets
    3,581       3,489       3,844       3,325       2,578       (28 %)     (22 %)
 
                                         
Total Institutional Solutions Group Assets Under Management
  $ 61,476     $ 61,557     $ 62,334     $ 60,687     $ 59,118       (4 %)     (3 %)
 
                                         
 
                                                       
BY PRODUCT
                                                       
Institutional
                                                       
Structured settlements
  $ 6,322     $ 6,530     $ 6,729     $ 6,962     $ 7,137       13 %     3 %
Institutional annuities
    3,113       3,108       3,118       3,089       3,067       (1 %)     (1 %)
Guaranteed interest products
    10,421       10,644       10,741       9,760       9,353       (10 %)     (4 %)
Other
    5,247       5,002       4,958       4,685       4,524       (14 %)     (3 %)
 
                                         
Total Institutional
    25,103       25,284       25,546       24,496       24,081       (4 %)     (2 %)
 
                                         
 
                                                       
Private Placement Life Insurance
    32,792       32,784       32,944       32,866       32,459       (1 %)     (1 %)
 
                                                       
Total Institutional Solutions Group account value
    57,895       58,068       58,490       57,362       56,540       (2 %)     (1 %)
 
                                                       
Institutional Mutual Fund Assets
    3,581       3,489       3,844       3,325       2,578       (28 %)     (22 %)
 
                                         
 
                                                       
Total Institutional Solutions Group Assets Under Management
  $ 61,476     $ 61,557     $ 62,334     $ 60,687     $ 59,118       (4 %)     (3 %)
 
                                         

 

L-29


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — DEPOSITS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
Institutional
                                                                               
Structured settlements
    267     $ 211     $ 200     $ 231     $ 170       (36 %)     (26 %)     1,066     $ 812       (24 %)
Institutional annuities
    10       23       38       25       10             (60 %)     315       96       (70 %)
Guaranteed interest products
    115       721       552       168       254       121 %     51 %     2,585       1,695       (34 %)
Other
    114       53       119       111       127       11 %     14 %     381       410       8 %
 
                                                           
Subtotal
    506       1,008       909       535       561       11 %     5 %     4,347       3,013       (31 %)
Mutual funds
    504       583       383       282       309       (39 %)     10 %     1,682       1,557       (7 %)
 
                                                           
Total Institutional
    1,010       1,591       1,292       817       870       (14 %)     6 %     6,029       4,570       (24 %)
 
                                                           
 
                                                                               
Private Placement Life Insurance
                                                                               
Corporate owned
    450       57       64       17       45       (90 %)     165 %     5,195       183       (96 %)
Private clients
    4       13       22       16       13     NM       (19 %)     24       64       167 %
 
                                                           
Total Private Placement Life Insurance
    454       70       86       33       58       (87 %)     76 %     5,219       247       (95 %)
 
                                                           
 
                                                                               
Total Institutional Solutions Group
  $ 1,464     $ 1,661     $ 1,378     $ 850     $ 928       (37 %)     9 %   $ 11,248     $ 4,817       (57 %)
 
                                                           

 

L-30


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
LIFE
INSTITUTIONAL SOLUTIONS GROUP
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLLFORWARD [1]
                                             
        THREE MONTHS ENDED  
        Dec. 31,     March 31,     June 30,     Sept. 30,     Dec. 31,  
        2007     2008     2008     2008     2008  
INSTITUTIONAL INVESTMENT PRODUCTS ACCOUNT VALUE [1]  
Beginning balance
  $ 25,041     $ 25,103     $ 25,284     $ 25,546     $ 24,496  
   
Deposits
    506       1,008       909       535       561  
   
Surrenders
    (572 )     (695 )     (626 )     (1,294 )     (810 )
   
Death benefits/annuity payouts
    (161 )     (160 )     (171 )     (201 )     (193 )
   
 
                             
   
Net Flows
    (227 )     153       112       (960 )     (442 )
   
Change in market value/change in reserve/interest credited
    289       28       150       (90 )     27  
   
 
                             
   
Ending balance
  $ 25,103     $ 25,284     $ 25,546     $ 24,496     $ 24,081  
   
 
                                       
INSTITUTIONAL MUTUAL FUND ASSETS [2]  
Beginning balance
  $ 3,398     $ 3,581     $ 3,489     $ 3,844     $ 3,325  
   
Deposits
    504       583       383       282       309  
   
Surrenders
    (273 )     (285 )     (201 )     (228 )     (243 )
   
 
                             
   
Net Flows
    231       298       182       54       66  
   
Change in market value/change in reserve/interest credited
    (48 )     (390 )     173       (573 )     (813 )
   
 
                             
   
Ending balance
  $ 3,581     $ 3,489     $ 3,844     $ 3,325     $ 2,578  
   
 
                                       
PRIVATE PLACEMENT LIFE INSURANCE ACCOUNT VALUE [1]  
Beginning balance
  $ 32,041     $ 32,792     $ 32,784     $ 32,944     $ 32,866  
   
Deposits
    454       70       86       33       58  
   
Surrenders
    (29 )     (17 )     (20 )     (27 )     (2 )
   
Death benefits/annuity payouts
    (27 )     (25 )     (47 )     (16 )     (17 )
   
 
                             
   
Net Flows
    398       28       19       (10 )     39  
   
Change in market value/change in reserve/interest credited
    372       18       197       (42 )     (419 )
   
Other [3]
    (19 )     (54 )     (56 )     (26 )     (27 )
   
 
                             
   
Ending balance
  $ 32,792     $ 32,784     $ 32,944     $ 32,866     $ 32,459  
   
 
                                       
INSTITUTIONAL SOLUTIONS GROUP  
 
                                       
   
Beginning balance
  $ 60,480     $ 61,476     $ 61,557     $ 62,334     $ 60,687  
   
Deposits
    1,464       1,661       1,378       850       928  
   
Surrenders
    (874 )     (997 )     (847 )     (1,549 )     (1,055 )
   
Death benefits/annuity payouts
    (188 )     (185 )     (218 )     (217 )     (210 )
   
 
                             
   
Net Flows
    402       479       313       (916 )     (337 )
   
Change in market value/change in reserve/interest credited
    613       (344 )     520       (705 )     (1,205 )
   
Other [3]
    (19 )     (54 )     (56 )     (26 )     (27 )
   
 
                             
   
Ending balance
  $ 61,476     $ 61,557     $ 62,334     $ 60,687     $ 59,118  
     
[1]   Account value includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
 
[2]   Mutual Fund assets are an internal measure used by the company because a portion of revenues are based upon asset levels. Mutual Fund assets are not included on the balance sheet.
 
[3]   Primarily consists of cost of insurance and M&E charges.

 

L -31


 

PROPERTY & CASUALTY

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
FINANCIAL HIGHLIGHTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
TOTAL PROPERTY & CASUALTY PREMIUMS
                                                                               
Written premiums
  $ 2,513     $ 2,586     $ 2,585     $ 2,593     $ 2,467       (2 %)     (5 %)   $ 10,440     $ 10,231       (2 %)
Earned premiums
    2,623       2,614       2,586       2,568       2,570       (2 %)           10,496       10,338       (2 %)
 
                                                                               
TOTAL PROPERTY & CASUALTY UNDERWRITING RESULTS
                                                                               
Personal Lines
    30       105       18       (45 )     202     NM     NM       322       280       (13 %)
Small Commercial
    204       119       69       82       167       (18 %)     104 %     508       437       (14 %)
Middle Market
    58       55       3       (37 )     148       155 %   NM       157       169       8 %
Specialty Commercial
    (58 )     39       18       (44 )     58     NM     NM       (18 )     71     NM  
 
                                                           
 
                                                                               
Ongoing Operations underwriting results
    234       318       108       (44 )     575       146 %   NM       969       957       (1 %)
Other Operations [1]
    (23 )     (19 )     (58 )     (61 )     (7 )     70 %     89 %     (210 )     (145 )     31 %
 
                                                           
 
                                                                               
Total Property & Casualty underwriting results
  $ 211     $ 299     $ 50     $ (105 )   $ 568       169 %   NM     $ 759     $ 812       7 %
 
                                                                               
ONGOING OPERATIONS UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [2]
    65.2       62.2       63.4       63.8       58.0       7.2       5.8       63.8       61.9       1.9  
Current accident year catastrophes [3]
    2.5       1.9       6.6       12.7       (0.1 )     2.6       12.8       1.7       5.3       (3.6 )
Prior accident years [4]
    (4.8 )     (2.0 )     (1.5 )     (2.8 )     (7.6 )     2.8       4.8       (1.4 )     (3.4 )     2.0  
 
                                                           
Total losses and loss adjustment expenses
    62.8       62.2       68.5       73.7       50.3       12.5       23.4       64.1       63.7       0.4  
 
                                                                               
Expenses [5]
    27.3       25.5       26.5       27.3       27.1       0.2       0.2       26.3       26.6       (0.3 )
Policyholder dividends [6]
    0.9       0.2       0.8       0.7       0.2       0.7       0.5       0.4       0.5       (0.1 )
 
                                                           
 
                                                                               
Combined ratio
    91.1       87.8       95.8       101.7       77.6       13.5       24.1       90.8       90.7       0.1  
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    2.5       1.9       6.6       12.7       (0.1 )     2.6       12.8       1.7       5.3       (3.6 )
Prior year
    0.2       (0.4 )           (0.2 )     (0.2 )     0.4             0.1       (0.2 )     0.3  
 
                                                           
Catastrophe ratio
    2.6       1.5       6.6       12.5       (0.4 )     3.0       12.9       1.8       5.0       (3.2 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    88.4       86.4       89.2       89.2       78.0       10.4       11.2       89.0       85.7       3.3  
 
                                                                               
Combined ratio before catastrophes and prior year development
    93.4       87.9       90.7       91.8       85.3       8.1       6.5       90.5       88.9       1.6  
 
                                                           
 
                                                                               
Total Property & Casualty Income and ROE
                                                                               
Net income (loss)
  $ 349     $ 326     $ 249     $ (774 )   $ 291       (17 %)   NM     $ 1,507     $ 92       (94 %)
Core earnings
  $ 414     $ 426     $ 283     $ 156     $ 452       9 %     190 %   $ 1,629     $ 1,317       (19 %)
 
                                                                               
Core earnings ROE (rolling 12 months income) [7]
                                                                               
Ongoing Operations
    23.2 %     22.7 %     20.0 %     18.1 %     17.1 %     (6.1 )     (1.0 )                        
Other Operations
    4.4 %     4.6 %     10.7 %     7.9 %     5.7 %     1.3       (2.2 )                        
Total Property & Casualty
    21.4 %     21.1 %     19.2 %     17.2 %     16.2 %     (5.2 )     (1.0 )                        
                         
    PROPERTY & CASUALTY  
    Dec. 31,     Dec. 31,        
    2007     2008     Change  
Selected Financial Data
                       
Total Property and Casualty adjusted statutory surplus ($ in billions) [8]
  $ 8.5     $ 6.0     $ (2.5 )
Total Property and Casualty premium to adjusted surplus ratio
    1.2       1.7       0.5  
     
[1]   The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended June 30, 2008 included net asbestos reserve strengthening of $50. The three months ended September 30, 2008 included environmental reserve strengthening of $53.
 
[2]   The three months ended December 31, 2007 included net current accident year reserve strengthening, totaling 0.5 points, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening, totaling 0.3 points, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release, totaling 0.4 points, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release, totaling 3.7 points, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims.
 
[3]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[4]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.
 
[5]   The three months ended September 30, 2008 included an assessment from the Texas Windstorm Insurance Association totaling 0.8 points, primarily related to hurricane Ike.
 
[6]   Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of 0.8 points, 0.6 points and 0.4 points, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[7]   Core earnings return on equity is calculated using equity attributed to Ongoing Operations, Other Operations and Total Property and Casualty using the Company’s capital attribution methodology.
 
[8]   Estimated statutory surplus as of December 31, 2008.

 

PC-1


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
TOTAL PROPERTY & CASUALTY UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 2,513     $ 2,586     $ 2,585     $ 2,593     $ 2,467       (2 %)     (5 %)   $ 10,440     $ 10,231       (2 %)
Change in unearned premium reserve
    (110 )     (28 )     (1 )     25       (103 )     6 %   NM       (56 )     (107 )     (91 %)
 
                                                           
Earned premiums
    2,623       2,614       2,586       2,568       2,570       (2 %)           10,496       10,338       (2 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    1,708       1,625       1,639       1,638       1,488       (13 %)     (9 %)     6,692       6,390       (5 %)
Current accident year catastrophes [2]
    65       50       171       325       (3 )   NM     NM       177       543     NM  
Prior accident years [3]
    (106 )     (36 )     16       (14 )     (192 )     (81 %)   NM       48       (226 )   NM  
 
                                                           
Total losses and loss adjustment expenses
    1,667       1,639       1,826       1,949       1,293       (22 %)     (34 %)     6,917       6,707       (3 %)
 
                                                                               
Underwriting expenses [4]
    721       671       690       707       704       (2 %)           2,777       2,772        
Dividends to policyholders [5]
    24       5       20       17       5       (79 %)     (71 %)     43       47       9 %
 
                                                           
Underwriting results
    211       299       50       (105 )     568       169 %   NM       759       812       7 %
 
                                                                               
Net servicing income
    11       (1 )     8       14       10       (9 %)     (29 %)     52       31       (40 %)
Net investment income [6]
    421       365       391       335       162       (62 %)     (52 %)     1,687       1,253       (26 %)
Periodic net coupon settlements on credit derivatives, before-tax
    4       2       1       2       (3 )   NM     NM       15       2       (87 %)
Other expenses
    (67 )     (59 )     (65 )     (57 )     (41 )     39 %     28 %     (249 )     (222 )     11 %
Income tax expense
    (166 )     (180 )     (102 )     (33 )     (244 )     (47 %)   NM       (635 )     (559 )     12 %
 
                                                           
 
                                                                               
Core earnings
    414       426       283       156       452       9 %     190 %     1,629       1,317       (19 %)
 
                                                                               
Add: Net realized capital losses, after-tax, excluded from core earnings
    (65 )     (100 )     (34 )     (930 )     (161 )     (148 %)     83 %     (122 )     (1,225 )   NM  
 
                                                           
 
                                                                               
Net income (loss)
  $ 349     $ 326     $ 249     $ (774 )   $ 291       (17 %)   NM     $ 1,507     $ 92       (94 %)
 
                                                           
 
                                                                               
Total Property & Casualty effective tax rate — net income
    27.4 %     27.9 %     25.1 %     37.6 %     35.7 %     8.3       (1.9 )     27.5 %   NM     NM  
Total Property & Casualty effective tax rate — core earnings
    28.7 %     29.7 %     26.4 %     17.6 %     35.1 %     6.4       17.5       28.0 %     29.8 %     1.8  
 
                                                           
     
[1]  
The three months ended December 31, 2007 included current accident year reserve strengthening of $13, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening of $7, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release of $9, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims.
 
[2]  
Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[3]  
The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims, $70 of reserve releases related to Personal Lines auto liability claims, $53 of environmental reserve strengthening and $50 of net asbestos reserve strengthening.
 
[4]  
The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[5]  
Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[6]  
The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships.

 

PC-2


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
ONGOING OPERATIONS UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 2,511     $ 2,584     $ 2,583     $ 2,592     $ 2,465       (2 %)     (5 %)   $ 10,435     $ 10,224       (2 %)
Change in unearned premium reserve
    (110 )     (29 )     (1 )     25       (102 )     7 %   NM       (56 )     (107 )     (91 %)
 
                                                           
Earned premiums
    2,621       2,613       2,584       2,567       2,567       (2 %)           10,491       10,331       (2 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    1,708       1,625       1,639       1,638       1,488       (13 %)     (9 %)     6,692       6,390       (5 %)
Current accident year catastrophes [2]
    65       50       171       325       (3 )   NM     NM       177       543     NM  
Prior accident years [3]
    (126 )     (51 )     (39 )     (70 )     (195 )     (55 %)     (179 %)     (145 )     (355 )     (145 %)
 
                                                           
Total losses and loss adjustment expenses
    1,647       1,624       1,771       1,893       1,290       (22 %)     (32 %)     6,724       6,578       (2 %)
 
                                                                               
Underwriting expenses [4]
    716       666       685       701       697       (3 %)     (1 %)     2,755       2,749        
Dividends to policyholders [5]
    24       5       20       17       5       (79 %)     (71 %)     43       47       9 %
 
                                                           
Underwriting results
    234       318       108       (44 )     575       146 %   NM       969       957       (1 %)
 
                                                                               
Net servicing income
    11       (1 )     8       14       10       (9 %)     (29 %)     52       31       (40 %)
Net investment income [6]
    357       310       334       285       127       (64 %)     (55 %)     1,439       1,056       (27 %)
Periodic net coupon settlements on credit derivatives, before-tax
    4       2       1       2       (3 )   NM     NM       15       2       (87 %)
Other expenses
    (69 )     (57 )     (65 )     (58 )     (39 )     43 %     33 %     (248 )     (219 )     12 %
Income tax expense
    (155 )     (172 )     (105 )     (39 )     (236 )     (52 %)   NM       (636 )     (552 )     13 %
 
                                                           
 
                                                                               
Core earnings
    382       400       281       160       434       14 %     171 %     1,591       1,275       (20 %)
 
                                                                               
Add: Net realized capital losses, after-tax, excluded from core earnings
    (59 )     (88 )     (35 )     (826 )     (137 )     (132 %)     83 %     (114 )     (1,086 )   NM  
 
                                                           
 
                                                                               
Net income (loss)
  $ 323     $ 312     $ 246     $ (666 )   $ 297       (8 %)   NM     $ 1,477     $ 189       (87 %)
 
                                                           
 
                                                                               
Ongoing Operations effective tax rate — net income
    27.6 %     28.4 %     26.0 %     37.8 %     35.4 %     7.8       (2.4 )     28.0 %   NM     NM  
Ongoing Operations effective tax rate — core earnings
    28.9 %     30.0 %     27.3 %     19.8 %     35.3 %     6.4       15.5       28.6 %     30.2 %     1.6  
 
                                                           
     
[1]  
The three months ended December 31, 2007 included current accident year reserve strengthening of $13, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included current accident year reserve strengthening of $7, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release of $9, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims.
 
[2]  
Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[3]  
The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims and $70 of reserve releases related to Personal Lines auto liability claims.
 
[4]  
The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[5]  
Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[6]  
The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships.

 

PC-3


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008
                                         
    Personal     Small     Middle     Specialty     Ongoing  
    Lines     Commercial     Market     Commercial     Operations  
UNDERWRITING RESULTS
                                       
Written premiums
  $ 936     $ 622     $ 577     $ 330     $ 2,465  
Change in unearned premium reserve
    (49 )     (54 )     15       (14 )     (102 )
 
                             
Earned premiums
    985       676       562       344       2,567  
 
                                       
Losses and loss adjustment expenses
                                       
Current accident year before catastrophes
    628       317       314       229       1,488  
Current accident year catastrophes
    (37 )     29       10       (5 )     (3 )
Prior accident years
    (35 )     (39 )     (79 )     (42 )     (195 )
 
                             
Total losses and loss adjustment expenses
    556       307       245       182       1,290  
 
                                       
Underwriting expenses
    227       201       167       102       697  
Dividends to policyholders
          1       2       2       5  
 
                             
Underwriting results
  $ 202     $ 167     $ 148     $ 58     $ 575  
 
                             
 
                                       
UNDERWRITING RATIOS
                                       
Losses and loss adjustment expenses
                                       
Current accident year before catastrophes
    63.8       46.8       56.0       66.4       58.0  
Current accident year catastrophes
    (3.8 )     4.4       1.8       (1.7 )     (0.1 )
Prior accident years [1]
    (3.5 )     (5.8 )     (14.1 )     (12.0 )     (7.6 )
 
                             
Total losses and loss adjustment expenses
    56.5       45.4       43.7       52.7       50.3  
Expenses
    23.0       29.7       29.7       29.7       27.1  
Policyholder dividends
          0.2       0.3       0.5       0.2  
 
                             
 
                                       
Combined ratio
    79.5       75.4       73.7       83.0       77.6  
 
                             
 
                                       
Catastrophes
                                       
Current year
    (3.8 )     4.4       1.8       (1.7 )     (0.1 )
Prior year
    0.3             (0.8 )     (1.5 )     (0.2 )
 
                             
Catastrophe ratio
    (3.5 )     4.4       1.1       (3.2 )     (0.4 )
 
                             
 
                                       
Combined ratio before catastrophes
    82.9       71.0       72.7       86.1       78.0  
 
                                       
Combined ratio before catastrophes and prior year development
    86.8       76.8       86.0       96.7       85.3  
 
                             
     
[1]  
Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-4


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS CONSOLIDATING UNDERWRITING RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2008
                                         
    Personal     Small     Middle     Specialty     Ongoing  
    Lines     Commercial     Market     Commercial     Operations  
UNDERWRITING RESULTS
                                       
Written premiums
  $ 3,925     $ 2,696     $ 2,242     $ 1,361     $ 10,224  
Change in unearned premium reserve
    (1 )     (28 )     (57 )     (21 )     (107 )
 
                             
Earned premiums
    3,926       2,724       2,299       1,382       10,331  
 
                                       
Losses and loss adjustment expenses
                                       
Current accident year before catastrophes
    2,542       1,447       1,460       941       6,390  
Current accident year catastrophes
    258       122       116       47       543  
Prior accident years
    (51 )     (89 )     (134 )     (81 )     (355 )
 
                             
Total losses and loss adjustment expenses
    2,749       1,480       1,442       907       6,578  
 
                                       
Underwriting expenses
    897       793       667       392       2,749  
Dividends to policyholders
          14       21       12       47  
 
                             
Underwriting results
  $ 280     $ 437     $ 169     $ 71     $ 957  
 
                             
 
                                       
UNDERWRITING RATIOS
                                       
Losses and loss adjustment expenses
                                       
Current accident year before catastrophes
    64.8       53.1       63.5       68.1       61.9  
Current accident year catastrophes
    6.6       4.5       5.1       3.4       5.3  
Prior accident years [1]
    (1.3 )     (3.3 )     (5.9 )     (5.8 )     (3.4 )
 
                             
Total losses and loss adjustment expenses
    70.0       54.3       62.7       65.6       63.7  
 
                                       
Expenses
    22.8       29.1       29.0       28.3       26.6  
Policyholder dividends
          0.5       0.9       0.9       0.5  
 
                             
 
                                       
Combined ratio
    92.9       84.0       92.6       94.8       90.7  
 
                             
 
Catastrophes
                                       
Current year
    6.6       4.5       5.1       3.4       5.3  
Prior year
    0.2       (0.1 )     (0.5 )     (1.2 )     (0.2 )
 
                             
Catastrophe ratio
    6.8       4.4       4.6       2.2       5.0  
 
                             
 
                                       
Combined ratio before catastrophes
    86.1       79.6       88.1       92.6       85.7  
Combined ratio before catastrophes and prior year development
    87.6       82.8       93.4       97.3       88.9  
 
                             
     
[1]  
Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-5


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ONGOING OPERATIONS
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 2,511     $ 2,584     $ 2,583     $ 2,592     $ 2,465       (2 %)     (5 %)   $ 10,435     $ 10,224       (2 %)
Change in unearned premium reserve
    (110 )     (29 )     (1 )     25       (102 )     7 %   NM       (56 )     (107 )     (91 %)
 
                                                           
Earned premiums
    2,621       2,613       2,584       2,567       2,567       (2 %)           10,491       10,331       (2 %)
 
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    1,708       1,625       1,639       1,638       1,488       (13 %)     (9 %)     6,692       6,390       (5 %)
Current accident year catastrophes [2]
    65       50       171       325       (3 )   NM     NM       177       543     NM  
Prior accident years [3]
    (126 )     (51 )     (39 )     (70 )     (195 )     (55 %)     (179 %)     (145 )     (355 )     (145 %)
 
                                                           
Total losses and loss adjustment expenses
    1,647       1,624       1,771       1,893       1,290       (22 %)     (32 %)     6,724       6,578       (2 %)
 
Underwriting expenses [4]
    716       666       685       701       697       (3 %)     (1 %)     2,755       2,749        
Dividends to policyholders [5]
    24       5       20       17       5       (79 %)     (71 %)     43       47       9 %
 
                                                           
Underwriting results
  $ 234     $ 318     $ 108     $ (44 )   $ 575       146 %   NM     $ 969     $ 957       (1 %)
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    65.2       62.2       63.4       63.8       58.0       7.2       5.8       63.8       61.9       1.9  
Current accident year catastrophes [2]
    2.5       1.9       6.6       12.7       (0.1 )     2.6       12.8       1.7       5.3       (3.6 )
Prior accident years [3] [6]
    (4.8 )     (2.0 )     (1.5 )     (2.8 )     (7.6 )     2.8       4.8       (1.4 )     (3.4 )     2.0  
 
                                                           
Total losses and loss adjustment expenses
    62.8       62.2       68.5       73.7       50.3       12.5       23.4       64.1       63.7       0.4  
 
Expenses
    27.3       25.5       26.5       27.3       27.1       0.2       0.2       26.3       26.6       (0.3 )
Policyholder dividends
    0.9       0.2       0.8       0.7       0.2       0.7       0.5       0.4       0.5       (0.1 )
 
                                                           
 
Combined ratio
    91.1       87.8       95.8       101.7       77.6       13.5       24.1       90.8       90.7       0.1  
 
                                                           
 
Catastrophes
                                                                               
Current year
    2.5       1.9       6.6       12.7       (0.1 )     2.6       12.8       1.7       5.3       (3.6 )
Prior year
    0.2       (0.4 )           (0.2 )     (0.2 )     0.4             0.1       (0.2 )     0.3  
 
                                                           
Catastrophe ratio
    2.6       1.5       6.6       12.5       (0.4 )     3.0       12.9       1.8       5.0       (3.2 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    88.4       86.4       89.2       89.2       78.0       10.4       11.2       89.0       85.7       3.3  
 
                                                                               
Combined ratio before catastrophes and prior year development
    93.4       87.9       90.7       91.8       85.3       8.1       6.5       90.5       88.9       1.6  
 
                                                           
     
[1]   The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $13, or 0.5 points, primarily related to strengthening of reserves for Personal Lines auto liability claims and Small Commercial package business, partially offset by a release of reserves for Small Commercial and Middle Market workers’ compensation claims. The three months ended June 30, 2008 included a current accident year reserve strengthening, totaling $7, or 0.3 points, primarily related to liability claims under Small Commercial package business. The three months ended September 30, 2008 included a current accident year reserve release, totaling $9, or 0.4 points, related to Personal Lines auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release, totaling $95, or 3.7 points, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims.
 
[2]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[3]   The three months ended December 31, 2007 included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims and $70 of reserve releases related to Personal Lines auto liability claims.
 
[4]   The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[5]   Included in policyholder dividends for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[6]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-6


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PERSONAL LINES
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 934     $ 936     $ 1,029     $ 1,024     $ 936             (9 %)   $ 3,947     $ 3,925       (1 %)
Change in unearned premium reserve
    (51 )     (47 )     49       46       (49 )     4 %   NM       58       (1 )   NM  
 
                                                           
Earned premiums
    985       983       980       978       985             1 %     3,889       3,926       1 %
 
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    696       635       645       634       628       (10 %)     (1 %)     2,576       2,542       (1 %)
Current accident year catastrophes [2]
    50       30       97       168       (37 )   NM     NM       125       258       106 %
Prior accident years [3]
    (19 )     (8 )     1       (9 )     (35 )     (84 %)   NM       (4 )     (51 )   NM  
 
                                                           
Total losses and loss adjustment expenses
    727       657       743       793       556       (24 %)     (30 %)     2,697       2,749       2 %
 
Underwriting expenses [4]
    228       221       219       230       227             (1 %)     870       897       3 %
 
                                                           
Underwriting results
  $ 30     $ 105     $ 18     $ (45 )   $ 202     NM     NM     $ 322     $ 280       (13 %)
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    70.5       64.6       65.9       64.7       63.8       6.7       0.9       66.2       64.8       1.4  
Current accident year catastrophes [2]
    5.1       3.1       9.8       17.2       (3.8 )     8.9       21.0       3.2       6.6       (3.4 )
Prior accident years [3] [5]
    (1.9 )     (0.8 )           (0.9 )     (3.5 )     1.6       2.6       (0.1 )     (1.3 )     1.2  
 
                                                           
Total losses and loss adjustment expenses
    73.8       66.9       75.8       81.1       56.5       17.3       24.6       69.3       70.0       (0.7 )
 
Expenses
    23.2       22.4       22.4       23.5       23.0       0.2       0.5       22.4       22.8       (0.4 )
 
                                                           
 
Combined ratio
    97.0       89.4       98.1       104.6       79.5       17.5       25.1       91.7       92.9       (1.2 )
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    5.1       3.1       9.8       17.2       (3.8 )     8.9       21.0       3.2       6.6       (3.4 )
Prior year
    0.1       (0.7 )     0.3       0.8       0.3       (0.2 )     0.5       0.2       0.2        
 
                                                           
Catastrophe ratio
    5.2       2.5       10.1       18.1       (3.5 )     8.7       21.6       3.4       6.8       (3.4 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    91.7       86.9       88.0       86.5       82.9       8.8       3.6       88.3       86.1       2.2  
 
                                                                               
Combined ratio before catastrophes and prior year development
    93.7       87.0       88.3       88.3       86.8       6.9       1.5       88.6       87.6       1.0  
 
                                                           
 
                                                                               
COMBINED RATIO
                                                                               
Automobile
    102.3       92.6       94.3       90.5       86.5       15.8       4.0       96.2       91.0       5.2  
Homeowners
    83.1       81.1       107.9       141.2       61.7       21.4       79.5       79.8       97.6       (17.8 )
 
                                                             
Total
    97.0       89.4       98.1       104.6       79.5       17.5       25.1       91.7       92.9       (1.2 )
 
                                                           
     
[1]   The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $19, or 1.9 points, related to auto liability claims. The three months ended September 30, 2008 included a current accident year reserve release of $9, or 1.0 point, related to auto liability claims. The three months ended December 31, 2008 included a current accident year reserve release of $33, or 3.4 points, primarily related to auto liability claims.
 
[2]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. The estimate of hurricane Ike losses was reduced by $42 during the fourth quarter of 2008.
 
[3]   The three months ended December 31, 2007 included a reserve release of $16 related to auto liability claims. The three months and year ended December 31, 2008 included reserve releases of $38 and $70, respectively, related to auto liability claims.
 
[4]   The three months ended September 30, 2008 included an assessment of $10 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[5]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-7


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PERSONAL LINES
WRITTEN AND EARNED PREMIUMS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
BUSINESS UNIT
                                                                               
WRITTEN PREMIUMS [1]
                                                                               
 
                                                                               
AARP
  $ 649     $ 662     $ 741     $ 741     $ 669       3 %     (10 %)   $ 2,750     $ 2,813       2 %
Agency
    267       258       271       269       252       (6 %)     (6 %)     1,123       1,050       (7 %)
Other
    18       16       17       14       15       (17 %)     7 %     74       62       (16 %)
 
                                                           
Total
  $ 934     $ 936     $ 1,029     $ 1,024     $ 936             (9 %)   $ 3,947     $ 3,925       (1 %)
 
                                                                               
EARNED PREMIUMS [1]
                                                                               
 
                                                                               
AARP
  $ 685     $ 687     $ 691     $ 695     $ 705       3 %     1 %   $ 2,681     $ 2,778       4 %
Agency
    281       277       273       266       264       (6 %)     (1 %)     1,123       1,080       (4 %)
Other
    19       19       16       17       16       (16 %)     (6 %)     85       68       (20 %)
 
                                                           
Total
  $ 985     $ 983     $ 980     $ 978     $ 985             1 %   $ 3,889     $ 3,926       1 %
 
                                                           
 
                                                                               
PRODUCT LINE
                                                                               
WRITTEN PREMIUMS [1]
                                                                               
 
                                                                               
Automobile
  $ 678     $ 698     $ 729     $ 726     $ 676             (7 %)   $ 2,848     $ 2,829       (1 %)
Homeowners
    256       238       300       298       260       2 %     (13 %)     1,099       1,096        
 
                                                           
Total
  $ 934     $ 936     $ 1,029     $ 1,024     $ 936             (9 %)   $ 3,947     $ 3,925       (1 %)
 
                                                                               
EARNED PREMIUMS [1]
                                                                               
 
                                                                               
Automobile
  $ 712     $ 706     $ 707     $ 707     $ 704       (1 %)         $ 2,822     $ 2,824        
Homeowners
    273       277       273       271       281       3 %     4 %     1,067       1,102       3 %
 
                                                           
Total
  $ 985     $ 983     $ 980     $ 978     $ 985             1 %   $ 3,889     $ 3,926       1 %
 
                                                           
 
                                                                               
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
                                                                               
 
                                                                               
Written Price Increases/(Decreases)
                                                                               
Automobile
          3 %     3 %     2 %     1 %     1 %     (1 %)           2 %     2 %
Homeowners
    3 %     3 %     2 %     3 %     3 %                 5 %     2 %     (3 %)
 
                                                                               
Premium Retention
                                                                               
Automobile
    87 %     88 %     87 %     86 %     86 %     (1 %)           88 %     87 %     (1 %)
Homeowners
    93 %     88 %     91 %     90 %     88 %     (5 %)     (2 %)     96 %     89 %     (7 %)
 
                                                                               
New Business Premium $
                                                                               
Automobile
  $ 84     $ 84     $ 87     $ 97     $ 96       14 %     (1 %)   $ 424     $ 364       (14 %)
Homeowners
  $ 28     $ 24     $ 27     $ 29     $ 26       (7 %)     (10 %)   $ 140     $ 106       (24 %)
 
                                                                               
Policies in force
                                                                               
Automobile
    2,349,402       2,339,871       2,326,188       2,324,124       2,323,882       (1 %)                              
Homeowners
    1,481,542       1,477,335       1,471,920       1,465,907       1,455,954       (2 %)     (1 %)                        
 
                                                                           
     
[1]   The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.

 

PC-8


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SMALL COMMERCIAL
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 649     $ 743     $ 679     $ 652     $ 622       (4 %)     (5 %)   $ 2,747     $ 2,696       (2 %)
Change in unearned premium reserve
    (39 )     56       (4 )     (26 )     (54 )     (38 %)     (108 %)     11       (28 )   NM  
 
                                                           
Earned premiums
    688       687       683       678       676       (2 %)           2,736       2,724        
 
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    392       370       380       380       317       (19 %)     (17 %)     1,594       1,447       (9 %)
Current accident year catastrophes [2]
    3       9       35       49       29     NM       (41 %)     28       122     NM  
Prior accident years [3]
    (130 )     (2 )     (2 )     (46 )     (39 )     70 %     15 %     (209 )     (89 )     57 %
 
                                                           
Total losses and loss adjustment expenses
    265       377       413       383       307       16 %     (20 %)     1,413       1,480       5 %
 
Underwriting expenses [4]
    208       190       198       204       201       (3 %)     (1 %)     799       793       (1 %)
Dividends to policyholders [5]
    11       1       3       9       1       (91 %)     (89 %)     16       14       (13 %)
 
                                                           
Underwriting results
  $ 204     $ 119     $ 69     $ 82     $ 167       (18 %)     104 %   $ 508     $ 437       (14 %)
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [1]
    56.9       53.8       55.5       56.3       46.8       10.1       9.5       58.3       53.1       5.2  
Current accident year catastrophes [2]
    0.4       1.3       5.2       7.0       4.4       (4.0 )     2.6       1.0       4.5       (3.5 )
Prior accident years [3] [6]
    (18.8 )     (0.3 )     (0.3 )     (6.8 )     (5.8 )     (13.0 )     (1.0 )     (7.6 )     (3.3 )     (4.3 )
 
                                                           
Total losses and loss adjustment expenses
    38.6       54.8       60.4       56.5       45.4       (6.8 )     11.1       51.6       54.3       (2.7 )
 
Expenses
    30.2       27.7       29.0       30.1       29.7       0.5       0.4       29.2       29.1       0.1  
Policyholder dividends
    1.6       0.2       0.5       1.3       0.2       1.4       1.1       0.6       0.5       0.1  
 
                                                           
 
                                                                               
Combined ratio
    70.4       82.7       89.8       87.9       75.4       (5.0 )     12.5       81.4       84.0       (2.6 )
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    0.4       1.3       5.2       7.0       4.4       (4.0 )     2.6       1.0       4.5       (3.5 )
Prior year
                0.1       (0.5 )                 (0.5 )     0.2       (0.1 )     0.3  
 
                                                           
Catastrophe ratio
    0.5       1.3       5.3       6.5       4.4       (3.9 )     2.1       1.2       4.4       (3.2 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    69.9       81.3       84.5       81.4       71.0       (1.1 )     10.4       80.3       79.6       0.7  
 
                                                                               
Combined ratio before catastrophes and prior year development
    88.8       81.7       84.9       87.7       76.8       12.0       10.9       88.0       82.8       5.2  
 
                                                           
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
                                                                               
 
                                                                               
Written Price Increases/(Decreases)
    (3 %)     (2 %)     (3 %)     (2 %)     1 %     4 %     3 %     (2 %)     (2 %)      
 
                                                                               
Premium Retention
    83 %     83 %     81 %     83 %     81 %     (2 %)     (2 %)     84 %     82 %     (2 %)
 
                                                                               
New Business Premium $
  $ 110     $ 127     $ 117     $ 105     $ 97       (12 %)     (8 %)   $ 481     $ 446       (7 %)
 
                                                                               
Policies in force
    1,038,542       1,048,057       1,057,058       1,062,291       1,055,463       2 %     (1 %)                        
     
[1]   The three months ended December 31, 2007 included a current accident year reserve release, totaling $24, or 3.5 points, related to workers’ compensation business, substantially offset by current accident year reserve strengthening, totaling $18, or 2.6 points, related to package business. The three months ended June 30, 2008 included current accident year reserve strengthening, totaling $7, or 1.0 point, primarily related to liability claims under package business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $30, or 4.4 points, primarily related to workers’ compensation business.
 
[2]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike. The estimate of hurricane Ike losses was increased by $31 during the fourth quarter of 2008.
 
[3]   The three months and year ended December 31, 2007 included reserve releases of $110, and $184, respectively, related to workers’ compensation business. The three months ended September 30, 2008 included a reserve release of $33 related to workers’ compensation business. The three months and year ended December 31, 2008 included reserve releases of $20, and $92, respectively, related to workers’ compensation business.
 
[4]   The three months ended September 30, 2008 included an assessment of $7 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[5]   Included in policyholder dividends for the three months ended December 31, 2007, the three months ended September 30, 2008 and year ended December 31, 2008 were increases of $10, $6 and $8, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[6]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-9


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
MIDDLE MARKET
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums [1]
  $ 609     $ 565     $ 529     $ 571     $ 577       (5 %)     1 %   $ 2,326     $ 2,242       (4 %)
Change in unearned premium reserve
    19       (28 )     (46 )     2       15       (21 %)   NM       (94 )     (57 )     39 %
 
                                                           
Earned premiums
    590       593       575       569       562       (5 %)     (1 %)     2,420       2,299       (5 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [2]
    388       380       377       389       314       (19 %)     (19 %)     1,561       1,460       (6 %)
Current accident year catastrophes [3]
    6       9       33       64       10       67 %     (84 %)     15       116     NM  
Prior accident years [4]
    (41 )     (16 )     (21 )     (18 )     (79 )     (93 %)   NM       (16 )     (134 )   NM  
 
                                                           
Total losses and loss adjustment expenses
    353       373       389       435       245       (31 %)     (44 %)     1,560       1,442       (8 %)
 
                                                                               
Underwriting expenses [5]
    174       163       170       167       167       (4 %)           689       667       (3 %)
Dividends to policyholders [6]
    5       2       13       4       2       (60 %)     (50 %)     14       21       50 %
 
                                                           
Underwriting results
  $ 58     $ 55     $ 3     $ (37 )   $ 148       155 %   NM     $ 157     $ 169       8 %
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [2]
    65.8       64.1       65.7       68.1       56.0       9.8       12.1       64.5       63.5       1.0  
Current accident year catastrophes [3]
    1.0       1.6       5.7       11.2       1.8       (0.8 )     9.4       0.6       5.1       (4.5 )
Prior accident years [4] [7]
    (6.9 )     (2.6 )     (3.7 )     (3.2 )     (14.1 )     7.2       10.9       (0.7 )     (5.9 )     5.2  
 
                                                           
Total losses and loss adjustment expenses
    59.8       63.0       67.7       76.1       43.7       16.1       32.4       64.5       62.7       1.8  
 
                                                                               
Expenses
    29.5       27.5       29.4       29.6       29.7       (0.2 )     (0.1 )     28.5       29.0       (0.5 )
Policyholder dividends
    0.8       0.3       2.3       0.7       0.3       0.5       0.4       0.6       0.9       (0.3 )
 
                                                           
 
                                                                               
Combined ratio
    90.1       90.8       99.4       106.4       73.7       16.4       32.7       93.5       92.6       0.9  
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    1.0       1.6       5.7       11.2       1.8       (0.8 )     9.4       0.6       5.1       (4.5 )
Prior year
    0.5       0.3       (0.4 )     (1.1 )     (0.8 )     1.3       (0.3 )     (0.1 )     (0.5 )     0.4  
 
                                                           
Catastrophe ratio
    1.4       1.8       5.3       10.1       1.1       0.3       9.0       0.5       4.6       (4.1 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    88.7       89.0       94.1       96.3       72.7       16.0       23.6       93.0       88.1       4.9  
 
                                                                               
Combined ratio before catastrophes and prior year development [1]
    96.1       91.9       97.4       98.4       86.0       10.1       12.4       93.5       93.4       0.1  
 
                                                           
 
                                                                               
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
                                                                               
 
                                                                               
Written Price Increases/(Decreases)
    (6 %)     (6 %)     (7 %)     (5 %)     (3 %)     3 %     2 %     (5 %)     (5 %)      
 
                                                                               
Premium Retention
    79 %     80 %     78 %     79 %     77 %     (2 %)     (2 %)     78 %     79 %     1 %
 
                                                                               
New Business Premium $
  $ 95     $ 105     $ 101     $ 111     $ 103       8 %     (7 %)   $ 394     $ 420       7 %
 
                                                                               
Policies in force
    88,254       89,179       90,212       90,796       90,478       3 %                              
     
[1]   During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial to Middle Market. As such, underwriting results for all prior periods presented above have been restated to reflect this change. The following table shows written premium and combined ratios before catastrophes and prior year development before giving effect to the resegmentation:
                                                                                 
Written premiums
  $ 591     $ 548     $ 513     $ 555     $ 561       (5 %)     1 %   $ 2,257     $ 2,177       (4 %)
Combined ratio before catastrophes and prior year development
    96.4       92.3       97.9       98.5       85.9       10.5       12.6       93.8       93.7       0.1  
     
[2]   The three months ended December 31, 2007 included current accident year reserve strengthening, totaling $7, or 1.2 points, related to general liability, substantially offset by a current accident year reserve release, totaling $4, or 0.7 points, related to workers’ compensation business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $28, or 5.1 points, primarily related to workers’ compensation business.
 
[3]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[4]   The three months ended December 31, 2007 included a $39 release of general liability reserves for recent accident years. The three months and year ended December 31, 2008 included net reserve releases of $48 and $40, respectively, related to general liability claims and reserve releases of $30, and $64, respectively, related to workers’ compensation business.
 
[5]   The three months ended September 30, 2008 included an assessment of $3 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.
 
[6]   Included in policyholder dividends for the three months ended June 30, 2008 and year ended December 31, 2008 were increases of $11 and $14, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[7]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-10


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED             Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums [1]
  $ 319     $ 340     $ 346     $ 345     $ 330       3 %     (4 %)   $ 1,415     $ 1,361       (4 %)
Change in unearned premium reserve
    (39 )     (10 )           3       (14 )     64 %   NM       (31 )     (21 )     32 %
 
                                                           
Earned premiums
    358       350       346       342       344       (4 %)     1 %     1,446       1,382       (4 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [2]
    232       240       237       235       229       (1 %)     (3 %)     961       941       (2 %)
Current accident year catastrophes [3]
    6       2       6       44       (5 )   NM     NM       9       47     NM  
Prior accident years [4]
    64       (25 )     (17 )     3       (42 )   NM     NM       84       (81 )   NM  
 
                                                           
Total losses and loss adjustment expenses
    302       217       226       282       182       (40 %)     (35 %)     1,054       907       (14 %)
 
                                                                               
Underwriting expenses
    106       92       98       100       102       (4 %)     2 %     397       392       (1 %)
Dividends to policyholders [5]
    8       2       4       4       2       (75 %)     (50 %)     13       12       (8 %)
 
                                                           
Underwriting results
  $ (58 )   $ 39     $ 18     $ (44 )   $ 58     NM     NM     $ (18 )   $ 71     NM  
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes [2]
    65.3       68.7       68.4       68.7       66.4       (1.1 )     2.3       66.6       68.1       (1.5 )
Current accident year catastrophes [3]
    1.6       0.3       1.9       13.2       (1.7 )     3.3       14.9       0.6       3.4       (2.8 )
Prior accident years [4] [6]
    17.5       (7.2 )     (4.6 )     0.6       (12.0 )     29.5       12.6       5.8       (5.8 )     11.6  
 
                                                           
Total losses and loss adjustment expenses
    84.3       61.7       65.7       82.5       52.7       31.6       29.8       73.0       65.6       7.4  
 
                                                                               
Expenses
    29.5       26.3       28.4       29.0       29.7       (0.2 )     (0.7 )     27.4       28.3       (0.9 )
Policyholder dividends
    2.5       0.5       1.1       1.3       0.5       2.0       0.8       0.9       0.9        
 
                                                           
 
Combined ratio
    116.3       88.6       95.2       112.8       83.0       33.3       29.8       101.3       94.8       6.5  
 
                                                           
 
Catastrophes
                                                                               
Current year
    1.6       0.3       1.9       13.2       (1.7 )     3.3       14.9       0.6       3.4       (2.8 )
Prior year
    0.1       (1.9 )     (0.5 )     (0.8 )     (1.5 )     1.6       0.7       0.1       (1.2 )     1.3  
 
                                                           
Catastrophe ratio
    1.7       (1.6 )     1.4       12.4       (3.2 )     4.9       15.6       0.7       2.2       (1.5 )
 
                                                           
 
Combined ratio before catastrophes
    114.6       90.2       93.8       100.4       86.1       28.5       14.3       100.6       92.6       8.0  
 
                                                                               
Combined ratio before catastrophes and prior year development [1]
    97.3       95.5       97.9       99.0       96.7       0.6       2.3       94.9       97.3       (2.4 )
 
                                                           
     
[1]   During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial to Middle Market. As such, underwriting results for all prior periods presented above have been restated to reflect this change. The following table shows written premium and combined ratios before catastrophes and prior year development before giving effect to the resegmentation:
                                                                                 
Written premiums
  $ 337     $ 357     $ 362     $ 361     $ 346       3 %     (4 %)   $ 1,484     $ 1,426       (4 %)
Combined ratio before catastrophes and prior year development
    96.6       94.7       97.0       98.8       96.3       0.3       2.5       94.4       96.7       (2.3 )
 
                                                                           
     
[2]   The three months ended December 31, 2007 included a current accident year reserve release, totaling $3, or 0.8 points, related to workers’ compensation business. The three months ended December 31, 2008 included a current accident year reserve release, totaling $3, or 0.9 points, primarily related to programs business.
 
[3]   Catastrophe losses for the three months ended September 30, 2008 included losses from hurricane Ike.
 
[4]   The three months ended December 31, 2007 included a $35 strengthening of workers’ compensation reserves and a $34 strengthening of general liability reserves, each primarily for older accident years, partially offset by a $15 reserve release for professional liability claims. The three months and year ended December 31, 2008 included reserve releases of $30, and $75, respectively, related to professional liability claims.
 
[5]   Included in policyholder dividends for the three months ended December 31, 2007 and year ended December 31, 2008 were increases of $7 and $5, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits.
 
[6]   Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.

 

PC-11


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
SPECIALTY COMMERCIAL
WRITTEN AND EARNED PREMIUMS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
                                                                               
WRITTEN PREMIUMS [1]
                                                                               
 
                                                                               
Property [2]
  $ 18     $ 7     $ 14     $ 14     $ 15       (17 %)     7 %   $ 111     $ 50       (55 %)
Casualty
    103       159       135       134       110       7 %     (18 %)     534       538       1 %
Professional Liability, Fidelity and Surety
    179       152       176       178       185       3 %     4 %     689       691        
Other
    19       22       21       19       20       5 %     5 %     81       82       1 %
 
                                                           
Total
  $ 319     $ 340     $ 346     $ 345     $ 330       3 %     (4 %)   $ 1,415     $ 1,361       (4 %)
 
EARNED PREMIUMS [1]
                                                                               
 
                                                                               
Property [2]
  $ 31     $ 27     $ 24     $ 19     $ 17       (45 %)     (11 %)   $ 133     $ 87       (35 %)
Casualty
    134       132       132       131       131       (2 %)           543       526       (3 %)
Professional Liability, Fidelity and Surety
    171       170       169       173       173       1 %           685       685        
Other
    22       21       21       19       23       5 %     21 %     85       84       (1 %)
 
                                                           
Total
  $ 358     $ 350     $ 346     $ 342     $ 344       (4 %)     1 %   $ 1,446     $ 1,382       (4 %)
 
                                                           
     
[1]   The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.
 
[2]   During the fourth quarter of 2008, the livestock business was resegmented from Specialty Commercial Property to Middle Market. As such, written and earned premium for all prior periods presented above have been restated to reflect this change. The following table shows Specialty Commercial Property written premium and earned premium before giving effect to the resegmentation:
                                                                                 
Written premiums
  $ 36     $ 24     $ 30     $ 30     $ 31       (14 %)     3 %   $ 180     $ 115       (36 %)
Earned premiums
  $ 49     $ 44     $ 40     $ 35     $ 34       (31 %)     (3 %)   $ 202     $ 153       (24 %)
 
                                                                           

 

PC-12


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OTHER OPERATIONS
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 2     $ 2     $ 2     $ 1     $ 2             100 %   $ 5     $ 7       40 %
Change in unearned premium reserve
          1                   (1 )                              
 
                                                           
Earned premiums
    2       1       2       1       3       50 %   NM       5       7       40 %
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
                                                           
Current accident year catastrophes
                                                           
Prior accident years [1]
    20       15       55       56       3       (85 %)     (95 %)     193       129       (33 %)
 
                                                           
Total losses and loss adjustment expenses
    20       15       55       56       3       (85 %)     (95 %)     193       129       (33 %)
 
                                                                             
 
                                                                               
Underwriting expenses
    5       5       5       6       7       40 %     17 %     22       23       5 %
 
                                                           
Underwriting results
  $ (23 )   $ (19 )   $ (58 )   $ (61 )   $ (7 )     70 %     89 %   $ (210 )   $ (145 )     31 %
 
                                                           
Net investment income
    64       55       57       50       35       (45 %)     (30 %)     248       197       (21 %)
Other expenses
    2       (2 )           1       (2 )   NM     NM       (1 )     (3 )   NM  
Income tax (expense) benefit
    (11 )     (8 )     3       6       (8 )     27 %   NM       1       (7 )   NM  
 
                                                           
 
                                                                               
Core earnings
    32       26       2       (4 )     18       (44 %)   NM       38       42       11 %
 
                                                                               
Add: Net realized capital (losses) gains, after-tax
    (6 )     (12 )     1       (104 )     (24 )   NM       77 %     (8 )     (139 )   NM  
 
                                                           
Net income (loss)
  $ 26     $ 14     $ 3     $ (108 )   $ (6 )   NM       94 %   $ 30     $ (97 )   NM  
 
                                                           
     
[1]   The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision and $25 of environmental reserve strengthening. The three months ended June 30, 2008 included net asbestos reserve strengthening of $50. The three months ended September 30, 2008 included environmental reserve strengthening of $53.

 

PC-13


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
OTHER OPERATIONS LOSSES AND LOSS ADJUSTMENT EXPENSES
                                 
For the Three Months Ended December 31, 2008   Asbestos     Environmental     All Other [1]     Total  
Beginning liability — net [2] [3]
  $ 1,935     $ 281     $ 1,744     $ 3,960  
Losses and loss adjustment expenses incurred
    9       1       (7 )     3  
Losses and loss adjustment expenses paid
    (60 )     (13 )     (109 )     (182 )
 
                       
Ending liability — net [2] [3]
  $ 1,884 [4]   $ 269     $ 1,628     $ 3,781  
 
                       
                                 
For the Year Ended December 31, 2008   Asbestos     Environmental     All Other [1]     Total  
Beginning liability — net [2] [3]
  $ 1,998     $ 251     $ 1,888     $ 4,137  
Losses and loss adjustment expenses incurred
    68       54       7       129  
Losses and loss adjustment expenses paid
    (182 )     (36 )     (267 )     (485 )
 
                       
Ending liability — net [2] [3]
  $ 1,884 [4]   $ 269     $ 1,628     $ 3,781  
 
                       
     
[1]   “All Other” also includes unallocated loss adjustment expense reserves and the allowance for uncollectible reinsurance.
 
[2]   Excludes asbestos and environmental net liabilities reported in Ongoing Operations of $12 and $6, respectively, as of December 31, 2008, $15 and $6, respectively, as of September 30, 2008, and $9 and $6, respectively, as of December 31, 2007. Total net losses and loss adjustment expenses incurred in Ongoing Operations for the three months and year ended December 31, 2008 includes $3 and $16, respectively, related to asbestos and environmental claims. Total net losses and loss adjustment expenses paid in Ongoing Operations for the three months and year ended December 31, 2008 includes $6 and $13, respectively, related to asbestos and environmental claims.
 
[3]   Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,498 and $309, respectively, as of December 31, 2008, $2,625 and $323, respectively, as of September 30, 2008, and $2,707 and $290, respectively, as of December 31, 2007.
 
[4]   The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $189 and $283, respectively, resulting in a one year net survival ratio of 10.0 and a three year net survival ratio of 6.7. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.

 

PC-14


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
PAID AND INCURRED LOSSES AND LOSS ADJUSTMENT EXPENSES (“LAE”)
DEVELOPMENT — ASBESTOS AND ENVIRONMENTAL
                                 
    Asbestos [1]     Environmental [1]  
    Paid     Incurred     Paid     Incurred  
For the Three Months Ended December 31, 2008   Losses & LAE     Losses & LAE     Losses & LAE     Losses & LAE  
 
                               
Gross
                               
 
                               
Direct
  $ 110     $     $ 9     $  
Assumed — Domestic
    10             4        
London Market
    3             3        
 
                       
Total
    123             16        
 
                               
Ceded
    (63 )     9       (3 )     1  
 
                       
Net
  $ 60     $ 9     $ 13     $ 1  
 
                       
                                 
    Asbestos [1]     Environmental [1]  
    Paid     Incurred     Paid     Incurred  
For the Year Ended December 31, 2008   Loss & LAE     Loss & LAE     Loss & LAE     Loss & LAE  
 
                               
Gross
                               
 
Direct
  $ 207     $ 76     $ 32     $ 69  
Assumed — Domestic
    61             9       (17 )
London Market
    19             6       13  
 
                       
Total
    287       76       47       65  
 
                               
Ceded
    (105 )     (8 )     (11 )     (11 )
 
                       
Net
  $ 182     $ 68     $ 36     $ 54  
 
                       
     
[1]   Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations.
 
    Total gross loss and LAE incurred in Ongoing Operations for the three months and year ended December 31, 2008 includes $3 and $15, respectively, related to asbestos and environmental claims. Total gross loss and LAE paid in Ongoing Operations for the three months and year ended December 31, 2008 includes $5 and $12, respectively, related to asbestos and environmental claims.

 

PC-15


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
                                                         
    For the Three Months Ended December 31, 2008  
    Personal     Small     Middle     Specialty     Ongoing     Other     Total  
    Lines     Commercial     Market     Commercial     Operations     Operations     P&C  
Liabilities for unpaid losses and loss adjustment expenses at 10/1/08 - gross
  $ 2,205     $ 3,646     $ 4,861     $ 7,029     $ 17,741     $ 4,864     $ 22,605  
Reinsurance and other recoverables
    87       189       424       2,157       2,857       904       3,761  
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 10/1/08 - net
    2,118       3,457       4,437       4,872       14,884       3,960       18,844  
 
                                                       
Provision for unpaid losses and loss adjustment expenses
                                                       
Current accident year before catastrophes
    628       317       314       229       1,488             1,488  
Current accident year catastrophes
    (37 )     29       10       (5 )     (3 )           (3 )
Prior accident years
    (35 )     (39 )     (79 )     (42 )     (195 )     3       (192 )
 
                                         
Total provision for unpaid losses and loss adjustment expenses
    556       307       245       182       1,290       3       1,293  
 
                                         
 
                                                       
Payments
    (682 )     (368 )     (375 )     (183 )     (1,608 )     (182 )     (1,790 )
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - net
    1,992       3,396       4,307       4,871       14,566       3,781       18,347  
Reinsurance and other recoverables
    60       176       437       2,110       2,783       803       3,586  
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - gross
  $ 2,052     $ 3,572     $ 4,744     $ 6,981     $ 17,349     $ 4,584     $ 21,933  
 
                                         
 
                                                       
Earned premiums
  $ 985     $ 676     $ 562     $ 344     $ 2,567     $ 3     $ 2,570  
Loss and loss expense paid ratio
    69.2       54.4       66.7       52.7       62.6                  
Loss and loss expense incurred ratio
    56.5       45.4       43.7       52.7       50.3                  
Prior accident year development (pts.)
    (3.5 )     (5.8 )     (14.1 )     (12.0 )     (7.6 )                
 
                                                     

 

PC-16


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNPAID LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE ROLLFORWARD
                                                         
    For the Year Ended December 31, 2008  
    Personal     Small     Middle     Specialty     Ongoing     Other     Total  
    Lines     Commercial     Market     Commercial     Operations     Operations     P&C  
Liabilities for unpaid losses and loss adjustment expenses at 1/1/08 - gross
  $ 2,042     $ 3,470     $ 4,697     $ 6,873     $ 17,082     $ 5,071     $ 22,153  
Reinsurance and other recoverables
    81       177       414       2,316       2,988       934       3,922  
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 1/1/08 - net
    1,961       3,293       4,283       4,557       14,094       4,137       18,231  
 
                                                       
Provision for unpaid losses and loss adjustment expenses
                                                       
Current accident year before catastrophes
    2,542       1,447       1,460       941       6,390             6,390  
Current accident year catastrophes
    258       122       116       47       543             543  
Prior accident years
    (51 )     (89 )     (134 )     (81 )     (355 )     129       (226 )
 
                                         
Total provision for unpaid losses and loss adjustment expenses
    2,749       1,480       1,442       907       6,578       129       6,707  
 
                                         
 
                                                       
Payments
    (2,718 )     (1,377 )     (1,418 )     (593 )     (6,106 )     (485 )     (6,591 )
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - net
    1,992       3,396       4,307       4,871       14,566       3,781       18,347  
Reinsurance and other recoverables
    60       176       437       2,110       2,783       803       3,586  
 
                                         
 
                                                       
Liabilities for unpaid losses and loss adjustment expenses at 12/31/08 - gross
  $ 2,052     $ 3,572     $ 4,744     $ 6,981     $ 17,349     $ 4,584     $ 21,933  
 
                                                       
Earned premiums
  $ 3,926     $ 2,724     $ 2,299     $ 1,382     $ 10,331     $ 7     $ 10,338  
Loss and loss expense paid ratio
    69.2       50.5       61.6       42.8       59.1                  
Loss and loss expense incurred ratio
    70.0       54.3       62.7       65.6       63.7                  
Prior accident year development (pts.)
    (1.3 )     (3.3 )     (5.9 )     (5.8 )     (3.4 )                
 
                                             

 

PC-17


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
REINSURANCE RECOVERABLE ANALYSIS
                 
    December 31,     December 31,  
    2008     2007  
 
               
Gross Reinsurance Recoverables
               
Paid Loss and Loss Adjustment Expenses
  $ 326     $ 347  
Unpaid Loss and Loss Adjustment Expenses
    3,492       3,788  
 
           
Subtotal Gross Reinsurance Recoverables
    3,818       4,135  
 
               
Less: Allowance for Uncollectible Reinsurance
    (379 )     (404 )
 
           
 
               
Net Reinsurance Recoverables
  $ 3,439     $ 3,731  
 
           
                                 
    As of December 31, 2008     As of December 31, 2007  
    Amount     % of Total     Amount     % of Total  
 
                               
Distribution of Gross Reinsurance Recoverables
                               
Gross Reinsurance Recoverables
  $ 3,818             $ 4,135          
 
                               
Less: Mandatory (Assigned Risk) Pools & Structured Settlements
    (638 )             (635 )        
 
                           
 
                               
Gross Reinsurance Recoverables Excluding Mandatory Pools & Structured Settlements
  $ 3,180             $ 3,500          
 
                           
 
                               
Rated A- (Excellent) or better by A.M. Best [1]
  $ 2,426       76.3 %   $ 2,614       74.7 %
Other Rated by A.M. Best
    52       1.6 %     90       2.6 %
 
                       
Total Rated Companies
    2,478       77.9 %     2,704       77.3 %
 
                               
Voluntary Pools
    181       5.7 %     195       5.6 %
Captives
    220       6.9 %     231       6.6 %
Other Not Rated Companies
    301       9.5 %     370       10.5 %
 
                       
Total
  $ 3,180       100.0 %   $ 3,500       100.0 %
 
                       
     
[1]   Based on A.M. Best ratings as of December 31, 2008 and 2007, respectively.

 

PC-18


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
CONSOLIDATED INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEAR ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Earned premiums
  $ 2,623     $ 2,614     $ 2,586     $ 2,568     $ 2,570       (2 %)         $ 10,496     $ 10,338       (2 %)
Net investment income [1]
    421       365       391       335       162       (62 %)     (52 %)     1,687       1,253       (26 %)
Other revenues
    128       120       125       132       127       (1 %)     (4 %)     496       504       2 %
Net realized capital losses
    (96 )     (152 )     (51 )     (1,428 )     (246 )     (156 %)     83 %     (172 )     (1,877 )   NM  
 
                                                           
Total revenues
    3,076       2,947       3,051       1,607       2,613       (15 %)     63 %     12,507       10,218       (18 %)
 
                                                                               
Losses and loss adjustment expenses [2]
    1,667       1,639       1,826       1,949       1,293       (22 %)     (34 %)     6,917       6,707       (3 %)
Amortization of deferred policy acquisition costs
    523       523       521       523       528       1 %     1 %     2,104       2,095        
Insurance operating costs and expenses [3]
    222       153       189       201       181       (18 %)     (10 %)     716       724       1 %
Other expenses
    184       180       182       175       158       (14 %)     (10 %)     693       695        
 
                                                           
Total benefits and expenses
    2,596       2,495       2,718       2,848       2,160       (17 %)     (24 %)     10,430       10,221       (2 %)
 
Income (loss) before income taxes
    480       452       333       (1,241 )     453       (6 %)   NM       2,077       (3 )   NM  
 
                                                                               
Income tax expense (benefit)
    131       126       84       (467 )     162       24 %   NM       570       (95 )   NM  
 
                                                           
 
Net income (loss)
    349       326       249       (774 )     291       (17 %)   NM       1,507       92       (94 %)
 
                                                                               
Less: Net realized capital losses, after-tax, excluded from core earnings
    (65 )     (100 )     (34 )     (930 )     (161 )     (148 %)     83 %     (122 )     (1,225 )   NM  
 
                                                           
 
Core earnings
  $ 414     $ 426     $ 283     $ 156     $ 452       9 %     190 %   $ 1,629     $ 1,317       (19 %)
 
                                                                               
Total Property & Casualty effective tax rate — net income
    27.4 %     27.9 %     25.1 %     37.6 %     35.7 %     8.3       (1.9 )     27.5 %   NM     NM  
Total Property & Casualty effective tax rate — core earnings
    28.7 %     29.7 %     26.4 %     17.6 %     35.1 %     6.4       17.5       28.0 %     29.8 %     1.8  
     
[1]   The decrease in net investment income for the three months and year ended December 31, 2008 was primarily driven by lower returns on limited partnerships and other alternative investments, largely due to lower returns on hedge funds and real estate partnerships.
 
[2]   The year ended December 31, 2007 included a $99 charge principally as a result of an adverse arbitration decision, $25 of environmental reserve strengthening and, in the three months ended December 31, 2007, included $110 of reserve releases related to Small Commercial workers’ compensation claims. The three months ended September 30, 2008 included catastophe losses from hurricane Ike. The three months ended December 31, 2008 included $50 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $48 of reserve releases related to Middle Market general liability claims, $38 of reserve releases related to Personal Lines auto liability claims and $30 of reserve releases related to professional liability claims. The year ended December 31, 2008 included $156 of net reserve releases related to Small Commercial and Middle Market workers’ compensation claims, $75 of reserve releases related to professional liability claims, $70 of reserve releases related to Personal Lines auto liability claims, $53 of environmental reserve strengthening and $50 of net asbestos reserve strengthening. The three months ended December 31, 2008 included a current accident year reserve release of $95, primarily related to Personal Lines auto liability claims and Small Commercial and Middle Market workers’ compensation claims.
 
[3]   Included in insurance operating costs and expenses for the three months ended December 31, 2007, June 30, 2008 and September 30, 2008 were increases of $20, $15 and $11, respectively, in the estimated amount of dividends payable to certain workers’ compensation policyholders due to underwriting profits. The three months ended September 30, 2008 included an assessment of $20 from the Texas Windstorm Insurance Association, primarily related to hurricane Ike.

 

PC-19


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
CONSOLIDATED BALANCE SHEETS
                                                         
    AS OF     Year Over        
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     Year     Sequential  
    2007     2008     2008     2008     2008     Change     Change  
Investments
                                                       
Fixed maturities, available for sale, at fair value
  $ 27,205     $ 25,683     $ 25,234     $ 23,727     $ 19,775       (27 %)     (17 %)
Equity securities, available for sale, at fair value
    1,208       1,162       1,327       741       674       (44 %)     (9 %)
Mortgage loans
    671       682       747       762       785       17 %     3 %
Limited partnerships and other alternative investments [1]
    1,260       1,290       1,398       1,407       1,166       (7 %)     (17 %)
Short term investments
    284       711       1,073       827       1,597     NM       93 %
Other investments
    38       58       58       62       207     NM     NM  
 
                                         
Total investments
    30,666       29,586       29,837       27,526       24,204       (21 %)     (12 %)
 
                                                       
Cash
    241       232       241       278       162       (33 %)     (42 %)
Premiums receivable and agents’ balances
    3,254       3,281       3,233       3,237       3,197       (2 %)     (1 %)
Reinsurance recoverables
    3,731       3,611       3,613       3,572       3,439       (8 %)     (4 %)
Deferred policy acquisition costs
    1,228       1,233       1,246       1,260       1,260       3 %      
Deferred income tax
    662       947       1,013       1,819       2,435     NM       34 %
Goodwill
    149       149       149       149       149              
Property and equipment, net
    598       601       639       658       675       13 %     3 %
Other assets
    1,312       1,318       1,194       1,460       1,159       (12 %)     (21 %)
 
                                         
 
                                                       
Total assets
  $ 41,841     $ 40,958     $ 41,165     $ 39,959     $ 36,680       (12 %)     (8 %)
 
                                         
 
                                                       
Unpaid losses and loss adjustment expenses
  $ 22,153     $ 22,150     $ 22,315     $ 22,605     $ 21,933       (1 %)     (3 %)
Unearned premiums
    5,402       5,388       5,372       5,363       5,244       (3 %)     (2 %)
Debt
    13       11                         (100 %)      
Other liabilities
    4,855       4,589       4,647       4,729       2,914       (40 %)     (38 %)
 
                                         
 
                                                       
Total liabilities
    32,423       32,138       32,334       32,697       30,091       (7 %)     (8 %)
 
                                         
 
                                                       
Equity, x-AOCI, net of tax
    9,428       9,372       9,536       8,364       8,675       (8 %)     4 %
AOCI, net of tax
    (10 )     (552 )     (705 )     (1,102 )     (2,086 )   NM       (89 %)
 
                                         
 
                                                       
Total stockholders’ equity
    9,418       8,820       8,831       7,262       6,589       (30 %)     (9 %)
 
                                         
 
                                                       
Total liabilities and stockholders’ equity
  $ 41,841     $ 40,958     $ 41,165     $ 39,959     $ 36,680       (12 %)     (8 %)
 
                                         
 
                                                       
Hartford Fire NAIC RBC
    606 %                                                
 
                                                     
     
[1]   Other alternative investments include hedge fund investments outside limited partnerships and real estate joint ventures.

 

PC-20


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
ADJUSTED STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
                 
    Dec. 31,     Dec. 31,  
    2008     2007  
 
               
Adjusted Statutory Capital and Surplus [1]
  $ 6,012     $ 8,509  
GAAP Adjustments
               
Deferred policy acquisition costs
    1,260       1,228  
Deferred taxes
    (196 )     (304 )
Benefit reserves
    (90 )     (100 )
Unrealized losses on investments
    (2,136 )     (16 )
Goodwill
    149       149  
Non-admitted assets
    1,754       1,085  
Other, net
    (164 )     (1,133 )
 
           
GAAP Stockholders’ Equity
  $ 6,589     $ 9,418  
 
           
     
[1]   Estimated statutory surplus as of December 31, 2008.

 

PC-21


 

INVESTMENTS

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CONSOLIDATED
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEARS ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Net Investment Income (Loss)
                                                                               
Fixed maturities [1]
                                                                               
Taxable
  $ 1,051     $ 992     $ 936     $ 949     $ 878       (16 %)     (7 %)   $ 4,105     $ 3,755       (9 %)
Tax-exempt
    141       142       141       141       131       (7 %)     (7 %)     548       555       1 %
 
                                                           
Total fixed maturities
    1,192       1,134       1,077       1,090       1,009       (15 %)     (7 %)     4,653       4,310       (7 %)
Equities
                                                                               
Available-for-sale
    41       46       51       34       36       (12 %)     6 %     139       167       20 %
Held for trading
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
 
                                                           
Total equities
    (560 )     (3,532 )     1,204       (3,381 )     (4,464 )   NM       (32 %)     284       (10,173 )   NM  
Mortgage loans
    81       79       83       82       89       10 %     9 %     293       333       14 %
Policy loans
    33       33       34       34       38       15 %     12 %     135       139       3 %
Limited partnerships and other alternative investments [2]
    40       (36 )     25       (101 )     (333 )   NM     NM       255       (445 )   NM  
Other [3]
    (53 )     (44 )     (12 )     (10 )     (6 )     89 %     40 %     (161 )     (72 )     55 %
 
                                                           
Subtotal
    733       (2,366 )     2,411       (2,286 )     (3,667 )   NM       (60 %)     5,459       (5,908 )   NM  
Less: Investment expense
    27       19       28       26       24       (11 %)     (8 %)     100       97       (3 %)
 
                                                           
 
                                                                               
Total net investment income (loss)
  $ 706     $ (2,385 )   $ 2,383     $ (2,312 )   $ (3,691 )   NM       (60 %)   $ 5,359     $ (6,005 )   NM  
Less: Securities held for trading
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
 
                                                           
 
                                                                               
Total net investment income excluding trading securities
  $ 1,307     $ 1,193     $ 1,230     $ 1,103     $ 809       (38 %)     (27 %)   $ 5,214     $ 4,335       (17 %)
 
                                                           
 
Annualized investment yield, before-tax [4]
    5.8 %     5.2 %     5.3 %     4.7 %     3.3 %     (2.5 )     (1.4 )     5.9 %     4.6 %     (1.3 )
Annualized investment yield, after-tax [4]
    4.0 %     3.6 %     3.6 %     3.2 %     2.2 %     (1.8 )     (1.0 )     4.1 %     3.2 %     (0.9 )
 
                                                                               
Net Realized Capital Gains (Losses)
                                                                               
Gross gains on sale
  $ 120     $ 95     $ 73     $ 58     $ 381     NM     NM     $ 374     $ 607       62 %
Gross losses on sale
    (56 )     (211 )     (59 )     (175 )     (411 )   NM       (135 %)     (291 )     (856 )     (194 %)
Impairments [5]
    (318 )     (304 )     (164 )     (3,077 )     (419 )     (32 %)     86 %     (483 )     (3,964 )   NM  
Japanese fixed annuity contract hedges, net [6]
    15       (14 )     (9 )     36       51     NM       42 %     18       64     NM  
Periodic net coupon settlements on credit derivatives/Japan [7]
    (2 )     (5 )     (10 )     (6 )     (12 )   NM       (100 %)     (25 )     (33 )     (32 %)
SFAS 157 transition impact [8]
          (650 )                                         (650 )      
Results of variable annuity hedge program
                                                                               
GMWB derivatives, net [9]
    (34 )     (110 )     (13 )     (133 )     (457 )   NM     NM       (286 )     (713 )     (149 %)
Macro hedge
          9       (4 )     24       45             88 %     (12 )     74     NM  
 
                                                           
Total results of variable annuity hedge program
    (34 )     (101 )     (17 )     (109 )     (412 )                     (298 )     (639 )        
Other net gain (loss) [10]
    (154 )     (181 )     (96 )     (176 )     6     NM     NM       (289 )     (447 )     (55 %)
 
                                                           
 
Total net realized capital gains (losses)
  $ (429 )   $ (1,371 )   $ (282 )   $ (3,449 )   $ (816 )     (90 %)     76 %   $ (994 )   $ (5,918 )   NM  
 
                                                           
     
[1]   Includes income on short-term bonds.
 
[2]   Includes income on hedge fund investments outside of limited partnerships and real estate joint ventures.
 
[3]   Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities.
 
[4]   Yields calculated using net investment income (excluding income related to equity securities held for trading) divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities held for trading, collateral received associated with the securities lending program and consolidated variable interest entity minority interests.
 
[5]   Includes $23 and $808 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $125 and $896 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security.
 
[6]   Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).
 
[7]   Included in core earnings.
 
[8]   Includes SFAS 157 implementation losses of $616, $10 and $24 related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively.
 
[9]   The net loss on GMWB rider embedded derivatives for the three months and year ended December 31, 2008 was primarily related to liability model assumption updates for mortality in the first quarter and market-based hedge ineffectiveness in the third and fourth quarters due to extremely volatile capital markets, partially offset by gains in the fourth quarter related to liability model assumption updates for lapse rates.
 
[10]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. The net gain and loss for the three months and year ended December 31, 2008 included losses of $294 and $291, respectively, related to transactional foreign currency losses on the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, resulting from the appreciation of the Yen. Also included in the three months and year ended December 31, 2008, are gains of $119 and losses of $312, respectively, on credit derivatives, as well as gains of $110 related to a decrease in the liability related to the warrants associated with the Allianz transaction.

 

I-1


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
LIFE
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEARS ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Net Investment Income (Loss)
                                                                               
Fixed maturities [1]
                                                                               
Taxable
  $ 769     $ 723     $ 679     $ 686     $ 644       (16 %)     (6 %)   $ 2,989     $ 2,732       (9 %)
Tax-exempt
    32       32       32       32       30       (6 %)     (6 %)     125       126       1 %
                                                             
Total fixed maturities
    801       755       711       718       674       (16 %)     (6 %)     3,114       2,858       (8 %)
Equities
                                                                               
Available-for-sale
    23       25       31       17       23             35 %     86       96       12 %
Held for trading
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
                                                             
Total equities
    (578 )     (3,553 )     1,184       (3,398 )     (4,477 )   NM       (32 %)     231       (10,244 )   NM  
Mortgage loans
    71       69       74       71       79       11 %     11 %     255       293       15 %
Policy loans
    33       33       34       34       38       15 %     12 %     135       139       3 %
Limited partnerships and other alternative investments [2]
    14       (17 )     9       (59 )     (166 )   NM       (181 %)     115       (233 )   NM  
Other [3]
    (43 )     (32 )     (9 )     (3 )     8     NM     NM       (133 )     (36 )     73 %
                                                             
Subtotal
    298       (2,745 )     2,003       (2,637 )     (3,844 )   NM       (46 %)     3,717       (7,223 )   NM  
Less: Investment expense
    21       14       21       19       18       (14 %)     (5 %)     75       72       (4 %)
                                                             
 
                                                                               
Total net investment income (loss)
  $ 277     $ (2,759 )   $ 1,982     $ (2,656 )   $ (3,862 )   NM       (45 %)   $ 3,642     $ (7,295 )   NM
Less: Securities held for trading
    (601 )     (3,578 )     1,153       (3,415 )     (4,500 )   NM       (32 %)     145       (10,340 )   NM  
                                                             
 
                                                                               
Total net investment income excluding trading securities
  $ 878     $ 819     $ 829     $ 759     $ 638       (27 %)     (16 %)   $ 3,497     $ 3,045       (13 %)
                                                             
 
                                                                               
Annualized investment yield, before-tax [4]
    5.8 %     5.3 %     5.3 %     4.8 %     3.8 %     (2.0 )     (1.0 )     6.0 %     4.8 %     (1.2 )
Annualized investment yield, after-tax [4]
    3.9 %     3.5 %     3.6 %     3.2 %     2.5 %     (1.4 )     (0.7 )     4.0 %     3.2 %     (0.8 )
 
                                                                               
Net Realized Capital Gains (Losses)
                                                                               
Gross gains on sale
  $ 80     $ 43     $ 41     $ 44     $ 294     NM     NM     $ 213     $ 422       98 %
Gross losses on sale
    (31 )     (110 )     (45 )     (89 )     (155 )   NM       (74 %)     (168 )     (399 )     (138 %)
Impairments [5]
    (249 )     (231 )     (124 )     (1,760 )     (309 )     (24 %)     82 %     (358 )     (2,424 )   NM  
Japanese fixed annuity contract hedges, net [6]
    15       (14 )     (9 )     36       51     NM       42 %     18       64     NM  
Periodic net coupon settlements on credit derivatives/Japan [7]
    (6 )     (7 )     (11 )     (8 )     (9 )     (50 %)     (13 %)     (40 )     (35 )     13 %
SFAS 157 transition impact [8]
          (650 )                                         (650 )      
Results of variable annuity hedge program
                                                                               
GMWB derivatives, net [9]
    (34 )     (110 )     (13 )     (133 )     (457 )   NM     NM       (286 )     (713 )     (149 %)
Macro hedge
          9       (4 )     24       45             88 %     (12 )     74     NM  
                                                             
 
                                                                               
Total results of variable annuity hedge program
    (34 )     (101 )     (17 )     (109 )     (412 )   NM     NM       (298 )     (639 )     (114 %)
Other net gain (loss) [10]
    (108 )     (150 )     (63 )     (126 )     (138 )     (28 %)     (10 %)     (186 )     (477 )     (156 %)
                                                             
 
                                                                               
Total net realized capital gains (losses)
  $ (333 )   $ (1,220 )   $ (228 )   $ (2,012 )   $ (678 )     (104 %)     66 %   $ (819 )   $ (4,138 )   NM
                                                             
     
[1]   Includes income on short-term bonds.
 
[2]   Includes income on a real estate joint venture.
 
[3]   Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities.
 
[4]   Yields calculated using net investment income (excluding income related to equity securities held for trading) divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities held for trading, collateral received associated with the securities lending program and consolidated variable interest entity minority interests.
 
[5]   Includes $8 and $439 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $98 and $651 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security.
 
[6]   Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).
 
[7]   Included in core earnings.
 
[8]   Includes SFAS 157 implementation losses of $616, $10 and $24 related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively.
 
[9]   The net loss on GMWB rider embedded derivatives for the three months and year ended December 31, 2008 was primarily related to liability model assumption updates for mortality in the first quarter and market-based hedge ineffectiveness in the third and fourth quarters due to extremely volatile capital markets, partially offset by gains in the fourth quarter related to liability model assumption updates for lapse rates.
 
[10]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses. The net gain and loss for the three months and year ended December 31, 2008 included losses of $294 and $291, respectively, related to transactional foreign currency losses on the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, resulting from the appreciation of the Yen. Also included in the three months and year ended December 31, 2008, are gains of $91 and losses of $222, respectively, on credit derivatives.

 

I-2


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
PROPERTY & CASUALTY
                                                                                 
          Year Over              
    THREE MONTHS ENDED     Year     Sequential     YEARS ENDED  
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
Net Investment Income (Loss)
                                                                               
Fixed maturities [1]
                                                                               
Taxable
  $ 276     $ 261     $ 248     $ 255     $ 225       (18 %)     (12 %)   $ 1,088     $ 989       (9 %)
Tax-exempt
    109       110       109       109       101       (7 %)     (7 %)     423       429       1 %
 
                                                           
Total fixed maturities
    385       371       357       364       326       (15 %)     (10 %)     1,511       1,418       (6 %)
Equities — available-for-sale
    16       20       19       17       12       (25 %)     (29 %)     50       68       36 %
Mortgage loans
    10       10       9       11       10             (9 %)     38       40       5 %
Limited partnerships and other alternative investments [2]
    26       (19 )     16       (42 )     (167 )   NM     NM       140       (212 )   NM  
Other [3]
    (10 )     (12 )     (3 )     (8 )     (13 )     (30 %)     (63 %)     (27 )     (36 )     (33 %)
 
                                                           
Subtotal
    427       370       398       342       168       (61 %)     (51 %)     1,712       1,278       (25 %)
Less: Investment expense
    6       5       7       7       6             (14 %)     25       25        
 
                                                           
 
                                                                               
Total net investment income (loss)
  $ 421     $ 365     $ 391     $ 335     $ 162       (62 %)     (52 %)   $ 1,687     $ 1,253       (26 %)
 
                                                           
 
                                                                               
Annualized investment yield, before-tax [4]
    5.8 %     5.0 %     5.3 %     4.6 %     2.4 %     (3.4 )     (2.2 )     5.9 %     4.4 %     (1.5 )
Annualized investment yield, after-tax [4]
    4.3 %     3.7 %     3.9 %     3.4 %     1.6 %     (2.7 )     (1.8 )     4.4 %     3.2 %     (1.2 )
 
                                                                               
Net Realized Capital Gains (Losses)
                                                                               
Gross gains on sale
  $ 38     $ 52     $ 31     $ 12     $ 85       124 %   NM     $ 159     $ 180       13 %
Gross losses on sale
    (23 )     (100 )     (13 )     (82 )     (253 )   NM     NM       (121 )     (448 )   NM  
Impairments [5]
    (69 )     (73 )     (40 )     (1,312 )     (108 )     (57 %)     92 %     (125 )     (1,533 )   NM  
Periodic net coupon settlements on credit derivatives [6]
    4       2       1       2       (3 )   NM     NM       15       2       (87 %)
Other net gain (loss) [7]
    (46 )     (33 )     (30 )     (48 )     33     NM     NM       (100 )     (78 )     22 %
 
                                                           
 
                                                                               
Total net realized capital gains (losses)
  $ (96 )   $ (152 )   $ (51 )   $ (1,428 )   $ (246 )     (156 %)     83 %   $ (172 )   $ (1,877 )   NM  
 
                                                           
     
[1]   Includes income on short-term bonds.
 
[2]   Includes income on hedge fund investments outside of limited partnerships and a real estate joint venture.
 
[3]   Primarily represents fees associated with securities lending activities. The income from securities lending activities is included within fixed maturities. Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed maturities.
 
[4]   Yields calculated using net investment income divided by the monthly weighted average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding collateral received associated with the securities lending program.
 
[5]   Includes $15 and $366 for three months and year ended December 31, 2008, respectively, of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. Also includes $27 and $245 for three months and year ended December 31, 2008, respectively, of securitized assets impaired based primarily upon the results of cash flow modeling. For almost all of these securitized assets, we are currently receiving principal and interest payments in accordance with contractual terms. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security.
 
[6]   Included in core earnings.
 
[7]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments and other investment gains and losses. Included in the three months and year ended December 31, 2008, are gains of $28 and losses of $90, respectively, on credit derivatives.

 

I-3


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CORPORATE
                                                                                 
                                            Year Over                              
    THREE MONTHS ENDED     Year     Sequential             YEARS ENDED          
    Dec. 31,     Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     3 Month     3 Month     DECEMBER 31,  
    2007     2008     2008     2008     2008     Change     Change     2007     2008     Change  
 
                                                                               
Net Investment Income
                                                                               
Fixed maturities [1]
                                       
Taxable
  $ 6     $ 8     $ 9     $ 8     $ 9       50 %     13 %   $ 28     $ 34       21 %
 
                                                           
Total fixed maturities
    6       8       9       8       9       50 %     13 %     28       34       21 %
 
                                                                               
Equities — available-for-sale
    2       1       1             1       (50 %)           3       3        
Other
                      1       (1 )         NM       (1 )           100 %
 
                                                           
 
                                                                               
Total net investment income
  $ 8     $ 9     $ 10     $ 9     $ 9       13 %           30     $ 37       23 %
 
                                                           
 
                                                                               
Net Realized Capital Gains (Losses)
                                                                               
 
                                                                               
Gross gains on sale
    2             1       2       2                   2       5       150 %
Gross losses on sale
    (2 )     (1 )     (1 )     (4 )     (3 )     (50 %)     25 %     (2 )     (9 )   NM  
Impairments [2]
                      (5 )     (2 )           60 %           (7 )      
Other net gain (loss) [3]
          2       (3 )     (2 )     111           NM       (3 )     108     NM  
 
                                                           
 
                                                                               
Total net realized capital gains (losses)
  $     $ 1     $ (3 )   $ (9 )   $ 108           NM     $ (3 )   $ 97     NM  
 
                                                           
     
[1]   Includes income on short-term bonds.
 
[2]   Includes $3 for three months and year ended December 31, 2008 of financial services securities which we do not anticipate substantial recovery due to bankruptcy or financial restructurings. For the remaining impairments, the Company expects to recover principal and interest in accordance with the contractual terms of the security.
 
[3]   Primarily consists of changes in fair value on non-qualifying derivatives. Also included for three months and year ended December 31, 2008, are gains of $110 related to a decrease in the liability related to the warrants associated with the Allianz transaction.

 

I-4


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
                                                                                                 
    Life     P&C     Corporate     Consolidated  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
 
                                                                               
Gains/losses on sales, net
    31       89       187 %     10       (109 )   NM             (1 )           41       (21 )   NM  
Impairments
    (163 )     (196 )     (20 %)     (45 )     (70 )     (56 %)           (1 )           (208 )     (267 )     (28 %)
Japanese fixed annuity contract hedges, net [1]
    10       34     NM                                           10       34     NM  
Periodic net coupon settlements on credit derivatives/Japan [2]
    (4 )     (6 )     (50 %)     3       (2 )   NM                         (1 )     (8 )   NM  
Results of variable annuity hedge program
                                                                                               
GMWB derivatives, net
    15       (384 )   NM                                           15       (384 )   NM  
Macro hedge
          28                                                       28        
 
                                                                       
Total results of variable annuity hedge program
    15       (356 )   NM                                           15       (356 )   NM  
Other net gain (loss) [3]
    (57 )     (122 )     (114 %)     (30 )     19     NM             111             (87 )     8     NM  
 
                                                                       
 
Total net realized capital gains (losses)
  $ (168 )   $ (557 )   NM     $ (62 )   $ (162 )     (161 %)   $     $ 109           $ (230 )   $ (610 )     (165 %)
 
                                                                       
     
[1]   Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).
 
[2]   Included in core earnings.
 
[3]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses.

 

I-5


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX/DAC
YEAR ENDED DECEMBER 31, 2008 AND 2007
                                                                                                 
    Life     P&C     Corporate     Consolidated  
    2007     2008     Change     2007     2008     Change     2007     2008     Change     2007     2008     Change  
 
                                                                               
Gains/losses on sales, net
    26       16       (38 %)     25       (175 )   NM             (3 )           51       (162 )   NM  
Impairments
    (227 )     (1,537 )   NM       (82 )     (996 )   NM             (4 )           (309 )     (2,537 )   NM  
Japanese fixed annuity contract hedges, net [1]
    12       42     NM                                           12       42     NM  
Periodic net coupon settlements on credit derivatives/Japan [2]
    (25 )     (23 )     8 %     10       1       (90 %)                       (15 )     (22 )     (47 %)
SFAS 157 transition impact [3]
          (220 )                                                     (220 )      
Results of variable annuity hedge program
                                                                                               
GMWB derivatives, net
    (112 )     (488 )   NM                                           (112 )     (488 )   NM  
Macro hedge
    (5 )     38     NM                                           (5 )     38     NM  
 
                                                                       
Total results of variable annuity hedge program
    (117 )     (450 )   NM                                           (117 )     (450 )   NM  
Other net gain (loss) [4]
    (115 )     (332 )     (189 %)     (65 )     (53 )     18 %     (2 )     109     NM       (182 )     (276 )     (52 %)
 
                                                                       
 
                                                                                               
Total net realized capital gains (losses)
  $ (446 )   $ (2,504 )   NM     $ (112 )   $ (1,223 )   NM     $ (2 )   $ 102     NM     $ (560 )   $ (3,625 )   NM  
 
                                                                       
     
[1]   Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).
 
[2]   Included in core earnings.
 
[3]   Includes SFAS 157 implementation losses related to the embedded derivatives within GMWB-US, GMWB-UK and GMAB liabilities, respectively.
 
[4]   Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative instruments, foreign currency gains and losses, and other investment gains and losses.

 

I-6


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
                                                                                 
    December 31,     March 31,     June 30,     September 30,     December 31,  
    2007     2008     2008     2008     2008  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
                                                                               
Fixed maturities, available-for-sale, at fair value [1]
  $ 80,055       61.1 %   $ 76,611       58.3 %   $ 75,068       57.1 %   $ 70,091       56.8 %   $ 65,112       54.2 %
 
                                                           
Equity securities, at fair value
                                                                               
Available-for-sale [2]
    2,595       2.0 %     2,463       1.9 %     2,619       2.0 %     1,730       1.4 %     1,458       1.2 %
Held for trading [3]
    36,182       27.6 %     37,406       28.5 %     36,853       28.0 %     33,655       27.3 %     30,820       25.7 %
 
                                                           
Total equity securities, at fair value
    38,777       29.6 %     39,869       30.3 %     39,472       30.0 %     35,385       28.7 %     32,278       26.9 %
Policy loans, at outstanding balance
    2,061       1.5 %     2,118       1.6 %     2,146       1.6 %     2,159       1.7 %     2,208       1.8 %
Mortgage loans, at cost
    5,410       4.1 %     5,503       4.2 %     5,882       4.5 %     6,222       5.0 %     6,469       5.4 %
Limited partnerships and other alternative investments [4]
    2,566       2.0 %     2,619       2.0 %     2,805       2.1 %     2,817       2.3 %     2,295       1.9 %
Short-term [5]
    1,602       1.2 %     3,568       2.7 %     5,127       3.9 %     5,353       4.3 %     10,022       8.4 %
Other investments [6]
    615       0.5 %     1,187       0.9 %     993       0.8 %     1,410       1.2 %     1,723       1.4 %
 
                                                           
 
                                                                               
Total investments
  $ 131,086       100.0 %   $ 131,475       100.0 %   $ 131,493       100.0 %   $ 123,437       100.0 %   $ 120,107       100.0 %
Less: Equity securities held for trading
    36,182       27.6 %     37,406       28.5 %     36,853       28.0 %     33,655       27.3 %     30,820       25.7 %
 
                                                           
 
                                                                               
Total investments excluding trading securities
  $ 94,904       72.4 %   $ 94,069       71.5 %   $ 94,640       72.0 %   $ 89,782       72.7 %   $ 89,287       74.3 %
 
                                                           
 
                                                                               
HIMCO managed third party accounts
  $ 10,872             $ 9,705             $ 9,216             $ 9,058             $ 9,207          
 
                                                           
 
                                                                               
Asset-backed securities (“ABS”)
  $ 8,915       11.1 %   $ 8,374       10.9 %   $ 8,182       10.9 %   $ 7,624       10.9 %   $ 6,268       9.6 %
Commercial mortgage-backed securities (“CMBS”)
    17,031       21.3 %     15,056       19.6 %     14,028       18.7 %     12,282       17.5 %     8,776       13.5 %
Collateralized mortgage obligation (“CMO”)
    1,745       2.2 %     1,534       2.0 %     1,326       1.8 %     1,235       1.8 %     1,177       1.8 %
Corporate
    34,198       42.7 %     34,027       44.4 %     34,381       45.7 %     31,532       45.0 %     27,181       41.7 %
Government/Government agencies — Foreign
    1,053       1.3 %     1,048       1.4 %     979       1.3 %     875       1.2 %     2,821       4.3 %
Government/Government agencies — U.S.
    855       1.1 %     1,350       1.8 %     1,383       1.8 %     1,852       2.6 %     5,956       9.2 %
Mortgage-backed securities (“MBS”) — agency
    2,763       3.5 %     2,290       3.0 %     2,372       3.2 %     2,722       3.9 %     2,278       3.5 %
Municipal — taxable
    1,386       1.7 %     1,374       1.8 %     1,017       1.4 %     1,029       1.5 %     894       1.4 %
Municipal — tax-exempt
    12,103       15.1 %     11,558       15.1 %     11,400       15.2 %     10,940       15.6 %     9,761       15.0 %
Redeemable preferred stock
    6                                                        
 
                                                           
 
                                                                               
Total fixed maturities [1]
  $ 80,055       100.0 %   $ 76,611       100.0 %   $ 75,068       100.0 %   $ 70,091       100.0 %   $ 65,112       100.0 %
 
                                                           
 
                                                                               
AAA
  $ 28,318       35.4 %   $ 24,418       31.9 %   $ 19,238       25.6 %   $ 17,613       25.1 %   $ 13,489       20.7 %
AA
    10,999       13.7 %     10,932       14.3 %     13,717       18.3 %     12,410       17.7 %     11,646       17.9 %
A
    17,030       21.3 %     17,325       22.6 %     18,344       24.4 %     17,069       24.3 %     15,831       24.4 %
BBB
    14,974       18.7 %     15,319       20.0 %     14,909       19.9 %     13,794       19.7 %     12,794       19.6 %
U.S. Government/Government agencies
    5,229       6.5 %     5,071       6.6 %     5,005       6.7 %     5,785       8.3 %     9,568       14.7 %
BB & below
    3,505       4.4 %     3,546       4.6 %     3,855       5.1 %     3,420       4.9 %     1,784       2.7 %
 
                                                           
 
                                                                               
Total fixed maturities [1]
  $ 80,055       100.0 %   $ 76,611       100.0 %   $ 75,068       100.0 %   $ 70,091       100.0 %   $ 65,112       100.0 %
 
                                                           
     
[1]   Includes $308, $313, $151, $72 and $155 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively, of which $303, $208, $126, $51 and $149 respectively, were investments held by The Hartford Financial Services Group, Inc.
 
[2]   Includes $103, $99, $98, $81 and $73 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively.
 
[3]   These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities.
 
[4]   Includes hedge fund investments outside of limited partnerships and real estate joint ventures.
 
[5]   Includes $160, $1,050, $1,298, $733 and $1,488 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, respectively, of which $154, $1,046, $1,261, $692, and $1,484, respectively, were investments held by The Hartford Financial Services Group, Inc.
 
[6]   Primarily relates to derivative instruments. Additionally, includes $43, $43, $41, $40 and $43 in Corporate at December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008 respectively.

 

I-7


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
LIFE
                                                                                 
    December 31,     March 31,     June 30,     September 30,     December 31,  
    2007     2008     2008     2008     2008  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
                                                                               
Fixed maturities, available-for-sale, at fair value
  $ 52,542       52.6 %   $ 50,615       50.4 %   $ 49,683       49.7 %   $ 46,292       48.7 %   $ 45,182       48.0 %
Equity securities, at fair value
                                                                               
Available-for-sale
    1,284       1.3 %     1,202       1.2 %     1,194       1.2 %     908       1.0 %     711       0.8 %
Held for trading [1]
    36,182       36.3 %     37,406       37.3 %     36,853       36.8 %     33,655       35.4 %     30,820       32.7 %
 
                                                           
Total equity securities, at fair value
    37,466       37.6 %     38,608       38.5 %     38,047       38.0 %     34,563       36.4 %     31,531       33.5 %
Policy loans, at outstanding balance
    2,061       2.1 %     2,118       2.1 %     2,146       2.1 %     2,159       2.3 %     2,208       2.3 %
Mortgage loans, at cost
    4,739       4.7 %     4,821       4.8 %     5,135       5.1 %     5,460       5.7 %     5,684       6.0 %
Limited partnerships and other alternative investments [2]
    1,306       1.3 %     1,329       1.3 %     1,407       1.4 %     1,410       1.5 %     1,129       1.2 %
Short-term
    1,158       1.2 %     1,807       1.8 %     2,756       2.8 %     3,793       4.0 %     6,937       7.4 %
Other investments [3]
    534       0.5 %     1,086       1.1 %     894       0.9 %     1,308       1.4 %     1,473       1.6 %
 
                                                           
 
                                                                               
Total investments
  $ 99,806       100.0 %   $ 100,384       100.0 %   $ 100,068       100.0 %   $ 94,985       100.0 %   $ 94,144       100.0 %
Less: Equity securities held for trading
    36,182       36.3 %     37,406       37.3 %     36,853       36.8 %     33,655       35.4 %     30,820       32.7 %
 
                                                           
 
                                                                               
Total investments excluding trading securities
  $ 63,624       63.7 %   $ 62,978       62.7 %   $ 63,215       63.2 %   $ 61,330       64.6 %   $ 63,324       67.3 %
 
                                                           
 
                                                                               
ABS
  $ 7,556       14.4 %   $ 6,948       13.7 %   $ 6,920       13.9 %   $ 6,453       13.9 %   $ 5,401       12.0 %
CMBS
    12,056       22.9 %     10,679       21.1 %     10,006       20.1 %     8,666       18.7 %     6,248       13.8 %
CMO
    1,366       2.6 %     1,215       2.4 %     1,014       2.0 %     932       2.0 %     882       2.0 %
Corporate
    24,583       46.8 %     24,739       48.9 %     25,131       50.6 %     23,292       50.3 %     20,630       45.6 %
Government/Government agencies — Foreign
    571       1.1 %     563       1.1 %     537       1.1 %     493       1.1 %     2,236       4.9 %
Government/Government agencies — U.S.
    616       1.2 %     994       2.0 %     1,048       2.1 %     1,466       3.2 %     5,156       11.4 %
MBS — agency
    1,913       3.6 %     1,738       3.4 %     1,633       3.3 %     1,747       3.8 %     1,535       3.4 %
Municipal — taxable
    1,244       2.4 %     1,219       2.4 %     883       1.8 %     890       1.9 %     758       1.7 %
Municipal — tax-exempt
    2,634       5.0 %     2,520       5.0 %     2,511       5.1 %     2,353       5.1 %     2,336       5.2 %
Redeemable preferred stock
    3                                                        
 
                                                           
 
                                                                               
Total fixed maturities
  $ 52,542       100.0 %   $ 50,615       100.0 %   $ 49,683       100.0 %   $ 46,292       100.0 %   $ 45,182       100.0 %
 
                                                           
 
                                                                               
AAA
  $ 16,638       31.6 %   $ 14,630       28.9 %   $ 12,386       24.9 %   $ 11,242       24.3 %   $ 8,533       18.8 %
AA
    6,914       13.2 %     6,404       12.7 %     7,479       15.1 %     6,663       14.4 %     7,231       16.0 %
A
    12,335       23.5 %     12,363       24.4 %     12,926       26.0 %     11,992       25.9 %     11,018       24.4 %
BBB
    11,070       21.1 %     11,413       22.5 %     11,014       22.2 %     10,245       22.1 %     9,401       20.8 %
U.S. Government/Government agencies
    3,668       7.0 %     3,755       7.4 %     3,533       7.1 %     4,036       8.7 %     7,614       16.9 %
BB & below
    1,917       3.6 %     2,050       4.1 %     2,345       4.7 %     2,114       4.6 %     1,385       3.1 %
 
                                                           
 
                                                                               
Total fixed maturities
  $ 52,542       100.0 %   $ 50,615       100.0 %   $ 49,683       100.0 %   $ 46,292       100.0 %   $ 45,182       100.0 %
 
                                                           
     
[1]   These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities.
 
[2]   Includes a real estate joint venture.
 
[3]   Primarily relates to derivative instruments.

 

I-8


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY
                                                                                 
    December 31,     March 31,     June 30,     September 30,     December 31,  
    2007     2008     2008     2008     2008  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
                                                                               
Fixed maturities, available-for-sale, at fair value
  $ 27,205       88.8 %   $ 25,683       86.8 %   $ 25,234       84.6 %   $ 23,727       86.2 %   $ 19,775       81.7 %
Equity securities, available-for-sale, at fair value
    1,208       3.9 %     1,162       3.9 %     1,327       4.4 %     741       2.7 %     674       2.8 %
Mortgage loans, at cost
    671       2.2 %     682       2.3 %     747       2.5 %     762       2.8 %     785       3.2 %
Limited partnerships and other alternative investments [1]
    1,260       4.1 %     1,290       4.4 %     1,398       4.7 %     1,407       5.1 %     1,166       4.8 %
Short-term
    284       0.9 %     711       2.4 %     1,073       3.6 %     827       3.0 %     1,597       6.6 %
Other investments [2]
    38       0.1 %     58       0.2 %     58       0.2 %     62       0.2 %     207       0.9 %
 
                                                           
 
                                                                               
Total investments
  $ 30,666       100.0 %   $ 29,586       100.0 %   $ 29,837       100.0 %   $ 27,526       100.0 %   $ 24,204       100.0 %
 
                                                           
 
                                                                               
ABS
  $ 1,359       5.0 %   $ 1,426       5.6 %   $ 1,262       5.0 %   $ 1,171       4.9 %   $ 867       4.4 %
CMBS
    4,975       18.3 %     4,377       17.0 %     4,022       16.0 %     3,616       15.2 %     2,528       12.8 %
CMO
    379       1.4 %     319       1.2 %     312       1.3 %     303       1.3 %     295       1.5 %
Corporate
    9,307       34.2 %     8,975       34.9 %     9,099       36.0 %     8,168       34.5 %     6,396       32.3 %
Government/Government agencies — Foreign
    482       1.8 %     485       1.9 %     442       1.8 %     382       1.6 %     585       3.0 %
Government/Government agencies — U.S.
    239       0.9 %     356       1.4 %     335       1.3 %     386       1.6 %     800       4.0 %
MBS — agency
    850       3.1 %     552       2.2 %     739       2.9 %     975       4.1 %     743       3.8 %
Municipal — taxable
    142       0.5 %     155       0.6 %     134       0.5 %     139       0.6 %     136       0.7 %
Municipal — tax-exempt
    9,469       34.8 %     9,038       35.2 %     8,889       35.2 %     8,587       36.2 %     7,425       37.5 %
Redeemable preferred stock
    3                                                        
 
                                                           
 
                                                                               
Total fixed maturities
  $ 27,205       100.0 %   $ 25,683       100.0 %   $ 25,234       100.0 %   $ 23,727       100.0 %   $ 19,775       100.0 %
 
                                                           
 
                                                                               
AAA
  $ 11,660       42.9 %   $ 9,767       38.0 %   $ 6,844       27.2 %   $ 6,366       26.8 %   $ 4,939       25.0 %
AA
    3,915       14.4 %     4,354       17.1 %     6,144       24.3 %     5,701       24.0 %     4,346       22.0 %
A
    4,586       16.9 %     4,865       18.9 %     5,374       21.3 %     5,057       21.3 %     4,747       24.0 %
BBB
    3,895       14.3 %     3,885       15.1 %     3,890       15.4 %     3,548       15.0 %     3,390       17.1 %
U.S. Government/Government agencies
    1,561       5.7 %     1,316       5.1 %     1,472       5.8 %     1,749       7.4 %     1,954       9.9 %
BB & below
    1,588       5.8 %     1,496       5.8 %     1,510       6.0 %     1,306       5.5 %     399       2.0 %
 
                                                           
 
                                                                               
Total fixed maturities
  $ 27,205       100.0 %   $ 25,683       100.0 %   $ 25,234       100.0 %   $ 23,727       100.0 %   $ 19,775       100.0 %
 
                                                           
     
[1]   Includes hedge fund investments outside of limited partnerships and a real estate joint venture.  
 
[2]   Primarily relates to derivative instruments.

 

I-9


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
CONSOLIDATED [1] [2]
                                                 
    December 31, 2008     September 30, 2008  
    Amortized     Fair     Unrealized     Amortized     Fair     Unrealized  
    Cost     Value     Loss     Cost     Value     Loss  
Total AFS [3] Securities
                                               
 
                                               
Three months or less
  $ 16,425     $ 14,992     $ (1,433 )   $ 19,417     $ 18,324     $ (1,093 )
Greater than three months to six months
    6,533       5,247       (1,286 )     8,280       7,575       (705 )
Greater than six months to nine months
    7,053       5,873       (1,180 )     5,899       5,047       (852 )
Greater than nine months to twelve months
    6,459       4,957       (1,502 )     5,175       4,151       (1,024 )
Greater than twelve months
    25,279       16,071       (9,208 )     20,710       16,576       (4,134 )
 
                                   
Total
  $ 61,749     $ 47,140     $ (14,609 )   $ 59,481     $ 51,673     $ (7,808 )
 
                                   
 
                                               
Securitized Assets
                                               
 
                                               
Three months or less
  $ 2,142     $ 1,852     $ (290 )   $ 5,518     $ 5,164     $ (354 )
Greater than three months to six months
    3,052       2,256       (796 )     1,660       1,452       (208 )
Greater than six months to nine months
    1,284       910       (374 )     2,054       1,699       (355 )
Greater than nine months to twelve months
    1,847       1,189       (658 )     3,338       2,559       (779 )
Greater than twelve months
    15,352       8,718       (6,634 )     11,907       9,107       (2,800 )
 
                                   
Total
  $ 23,677     $ 14,925     $ (8,752 )   $ 24,477     $ 19,981     $ (4,496 )
 
                                   
 
                                               
BIG [4] and Equity AFS [3] Securities
                                               
 
                                               
Three months or less
  $ 1,106     $ 852     $ (254 )   $ 1,461     $ 1,345     $ (116 )
Greater than three months to six months
    307       214       (93 )     348       294       (54 )
Greater than six months to nine months
    349       260       (89 )     259       229       (30 )
Greater than nine months to twelve months
    204       145       (59 )     284       225       (59 )
Greater than twelve months
    1,044       609       (435 )     813       603       (210 )
 
                                   
Total
  $ 3,010     $ 2,080     $ (930 )   $ 3,165     $ 2,696     $ (469 )
 
                                   
     
[1]   As of December 31, 2008, fixed maturities represented $14,310, or 98%, of the Company’s total unrealized loss of available-for-sale securities. The Company held no securities of a single   issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed discussion of the other-than-temporary   impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting Estimates section of the Management’s   Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements, both of which are included in   The Hartford’s 2007 Form 10-K Annual Report.
 
[2]   Includes investments held in Corporate.
 
[3]   Represents available-for-sale (“AFS”) securities.
 
[4]   Represents below investment grade (“BIG”) securities.

 

I-10


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
LIFE [1]
                                                 
    December 31, 2008     September 30, 2008  
    Amortized     Fair     Unrealized     Amortized     Fair     Unrealized  
    Cost     Value     Loss     Cost     Value     Loss  
Total AFS Securities
                                               
 
                                               
Three months or less
  $ 12,857     $ 11,776     $ (1,081 )   $ 12,335     $ 11,639     $ (696 )
Greater than three months to six months
    4,100       3,235       (865 )     5,119       4,678       (441 )
Greater than six months to nine months
    5,292       4,356       (936 )     3,790       3,205       (585 )
Greater than nine months to twelve months
    3,503       2,504       (999 )     4,185       3,324       (861 )
Greater than twelve months
    18,034       11,149       (6,885 )     14,208       11,171       (3,037 )
 
                                   
Total
  $ 43,786     $ 33,020     $ (10,766 )   $ 39,637     $ 34,017     $ (5,620 )
 
                                   
 
                                               
Securitized Assets
                                               
 
                                               
Three months or less
  $ 1,848     $ 1,614     $ (234 )   $ 3,874     $ 3,624     $ (250 )
Greater than three months to six months
    2,188       1,629       (559 )     1,342       1,162       (180 )
Greater than six months to nine months
    1,063       732       (331 )     1,646       1,346       (300 )
Greater than nine months to twelve months
    1,398       908       (490 )     2,986       2,286       (700 )
Greater than twelve months
    11,890       6,727       (5,163 )     8,765       6,588       (2,177 )
 
                                   
Total
  $ 18,387     $ 11,610     $ (6,777 )   $ 18,613     $ 15,006     $ (3,607 )
 
                                   
 
                                               
BIG and Equity AFS Securities
                                               
 
                                               
Three months or less
  $ 749     $ 564     $ (185 )   $ 773     $ 695     $ (78 )
Greater than three months to six months
    218       144       (74 )     256       217       (39 )
Greater than six months to nine months
    238       164       (74 )     170       150       (20 )
Greater than nine months to twelve months
    148       105       (43 )     145       107       (38 )
Greater than twelve months
    757       413       (344 )     547       377       (170 )
 
                                   
Total
  $ 2,110     $ 1,390     $ (720 )   $ 1,891     $ 1,546     $ (345 )
 
                                   
     
[1]   As of December 31, 2008, fixed maturities represented $10,538, or 98%, of Life’s total unrealized loss of available-for-sale securities. Life held no securities of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed   discussion of the other-than-temporary impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting   Estimates section of the Management’s Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements,   both of which are included in The   Hartford’s 2007 Form 10-K Annual Report.
 
       

 

I-11


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
UNREALIZED LOSS AGING
PROPERTY & CASUALTY
                                                 
    December 31, 2008     September 30, 2008  
    Amortized     Fair     Unrealized     Amortized     Fair     Unrealized  
    Cost     Value     Loss     Cost     Value     Loss  
Total AFS Securities
                                               
 
                                               
Three months or less
  $ 3,541     $ 3,191     $ (350 )   $ 7,021     $ 6,628     $ (393 )
Greater than three months to six months
    2,396       1,980       (416 )     3,153       2,889       (264 )
Greater than six months to nine months
    1,757       1,513       (244 )     2,099       1,833       (266 )
Greater than nine months to twelve months
    2,953       2,451       (502 )     976       813       (163 )
Greater than twelve months
    7,243       4,920       (2,323 )     6,486       5,389       (1,097 )
 
                                   
Total
  $ 17,890     $ 14,055     $ (3,835 )   $ 19,735     $ 17,552     $ (2,183 )
 
                                   
 
                                               
Securitized Assets
                                               
 
                                               
Three months or less
  $ 294     $ 238     $ (56 )   $ 1,644     $ 1,540     $ (104 )
Greater than three months to six months
    864       627       (237 )     318       290       (28 )
Greater than six months to nine months
    221       178       (43 )     408       353       (55 )
Greater than nine months to twelve months
    449       281       (168 )     352       273       (79 )
Greater than twelve months
    3,462       1,991       (1,471 )     3,142       2,519       (623 )
 
                                   
Total
  $ 5,290     $ 3,315     $ (1,975 )   $ 5,864     $ 4,975     $ (889 )
 
                                   
 
                                               
BIG and Equity AFS Securities
                                               
 
                                               
Three months or less
  $ 330     $ 263     $ (67 )   $ 633     $ 599     $ (34 )
Greater than three months to six months
    52       38       (14 )     90       75       (15 )
Greater than six months to nine months
    107       92       (15 )     85       76       (9 )
Greater than nine months to twelve months
    53       38       (15 )     139       118       (21 )
Greater than twelve months
    285       194       (91 )     264       224       (40 )
 
                                   
Total
  $ 827     $ 625     $ (202 )   $ 1,211     $ 1,092     $ (119 )
 
                                   
     
[1]   As of December 31, 2008, fixed maturities represented $3,772, or 98%, of Property & Casualty’s total unrealized loss of available-for-sale securities. Property & Casualty held no securities   of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of December 31, 2008 and 2007. For a detailed discussion of the other-than-   temporary impairment criteria, see “Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities” included in the Critical Accounting Estimates section of the   Management’s Discussion & Analysis and “Other-Than-Temporary Impairments on Available-for-Sale Securities” in Note 1 of Notes to Consolidated Financial Statements, both of which   are included in The Hartford’s 2007 Form 10-K Annual Report.
 
       

 

I-12


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF DECEMBER 31, 2008
                                                                                 
    LIFE         P&C         CONSOLIDATED [1]  
                    Percent of                         Percent of                         Percent of  
    Cost or             Total         Cost or             Total         Cost or             Total  
TOP TEN EXPOSURES   Amortized     Fair     Invested         Amortized     Fair     Invested         Amortized     Fair     Invested  
BY SECTOR [3]   Cost     Value     Assets [2]         Cost     Value     Assets [2]         Cost     Value     Assets [2]  
 
Financial services
  $ 6,762     $ 5,683       9.0 %   Financial services   $ 2,509     $ 2,116       8.7 %   Financial services   $ 9,395     $ 7,923       8.8 %
Utilities
    3,642       3,307       5.2 %   Utilities     1,386       1,226       5.1 %   Utilities     5,030       4,535       5.1 %
Technology and communications
    2,856       2,636       4.2 %   Technology and communications     915       803       3.3 %   Technology and communications     3,776       3,444       3.9 %
Consumer non cyclical
    2,627       2,488       3.9 %   Consumer non cyclical     802       749       3.1 %   Consumer non cyclical     3,437       3,245       3.6 %
Capital goods
    1,853       1,639       2.6 %   Basic industry     518       636       2.6 %   Basic industry     2,473       2,282       2.6 %
Basic industry
    1,872       1,570       2.5 %   Capital goods     624       548       2.3 %   Capital goods     2,481       2,191       2.5 %
Consumer cyclical
    1,840       1,567       2.5 %   Consumer cyclical     504       423       1.8 %   Consumer cyclical     2,353       1,999       2.2 %
Energy
    1,382       1,279       2.0 %   Energy     290       271       1.1 %   Energy     1,672       1,550       1.7 %
Other
    1,128       795       1.2 %   Other     360       249       1.0 %   Other     1,488       1,044       1.2 %
Transportation
    447       377       0.6 %   Transportation     61       49       0.2 %   Transportation     508       426       0.5 %
 
                                                             
 
                                                                               
Total
  $ 24,409     $ 21,341       33.7 %   Total   $ 7,969     $ 7,070       29.2 %   Total   $ 32,613     $ 28,639       32.1 %
 
                                                             
 
                                                                               
TOP TEN EXPOSURES BY ISSUER [4]
                                                                               
 
                                                                               
Government of Japan
  $ 2,280     $ 2,330       3.6 %   Government of Canada   $ 280     $ 282       1.2 %   Government of Japan   $ 2,280     $ 2,330       2.6 %
JPMorgan Chase & Co.
    376       300       0.5 %   State of Georgia     203       206       0.9 %   Government of Canada     448       450       0.5 %
General Electric Co.
    310       239       0.4 %   Federal Republic of Germany     211       205       0.8 %   JPMorgan Chase & Co.     522       438       0.5 %
Credit Suisse Group AG
    280       224       0.3 %   State of California     210       192       0.8 %   State of California     359       337       0.4 %
Citigroup Inc.
    250       197       0.3 %   New York, NY     183       179       0.7 %   General Electric Co.     426       326       0.3 %
Verizon Communications Inc.
    203       193       0.3 %   Insurance Services Office, Inc.           179       0.7 %   State of Massachusetts     268       278       0.3 %
Bank of America Corp.
    276       188       0.3 %   Government of United Kingdom     183       175       0.7 %   AT&T Inc.     258       257       0.3 %
AT&T Inc.
    191       188       0.3 %   State of Massachusetts     153       159       0.7 %   Citigroup Inc.     311       252       0.3 %
Diageo PLC
    189       184       0.3 %   State of Louisiana     142       142       0.6 %   Bank of America Corp.     344       250       0.3 %
Government of Canada
    168       168       0.3 %   State of Illinois     140       139       0.6 %   Verizon Communications Inc.     261       248       0.3 %
 
                                                             
 
                                                                               
Total
  $ 4,523     $ 4,211       6.6 %   Total   $ 1,705     $ 1,858       7.7 %   Total   $ 5,477     $ 5,166       5.8 %
 
                                                             
     
[1]   Includes investments held in Corporate.
 
[2]   Excludes equity securities, held for trading.
 
[3]   Includes corporate fixed maturities and equity securities, available-for-sale.
 
[4]   Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions, and securities classified as trading securities.

 

I-13

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-----END PRIVACY-ENHANCED MESSAGE-----