EXHIBIT 99.02

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollar amounts in millions, unless otherwise stated)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of Hartford Life Insurance Company and its subsidiaries (“Hartford Life Insurance Company” or “the Company”) as of December 31, 2009, compared with December 31, 2008, and its results of operations for each of the three years in the period ended December 31, 2009. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes beginning on page F-1. Certain reclassifications have been made to prior year financial information to conform to the current year presentation.

INDEX

Consolidated Results of Operations			2
Critical Accounting Estimates			4
Investment Results			12
Investment Credit Risk			15
Capital Markets Risk Management			26
Capital Resources and Liquidity			33
Impact of New Accounting Standards			39

CONSOLIDATED RESULTS OF OPERATIONS

		2009				2008				2007
Fee income and other		$	3,752			$	4,155			$	4,470
Earned premiums			377				984				983
Net investment income
Securities available-for-sale and other			2,505				2,588				3,056
Equity securities, trading(3)			343				(246	)			1
Total net investment income			2,848				2,342				3,057
Net realized capital gains (losses):
Total other-than-impairment (“OTTI”) losses			(1,722	)			(1,888	)			(339	)
OTTI losses recognized to other comprehensive income			530				—				—
Net OTTI losses recognized in earnings			(1,192	)			(1,888	)			(339	)
Net realized capital gains (losses), excluding net OTTI losses recognized in earnings			315				(3,875	)			(595	)
Total net realized capital losses			(877	)			(5,763	)			(934	)
Total revenues(1)			6,100				1,718				7,576
Benefits, losses and loss adjustment expenses			3,716				4,047				3,982
Benefits, losses and loss adjustment expenses — returns credited on international unit — linked bonds and pension products(3)			343				(246	)			1
Insurance operating costs and other expenses			1,850				1,940				1,832
Amortization of deferred policy acquisition costs and present value of future profits			3,727				1,620				605
Goodwill impairment			—				184				—
Dividends to policyholders			12				13				11
Total benefits, claims and expenses			9,648				7,558				6,431
Income (loss) before income taxes			(3,548	)			(5,840	)			1,145
Income tax expense (benefit)			(1,401	)			(2,181	)			252
Net income (loss)(2)		$	(2,147	)		$	(3,659	)		$	893
Net (income) loss attributable to the noncontrolling interest			(10	)			105				(7	)
Net income (loss) attributable to Hartford Life Insurance Company		$	(2,157	)		$	(3,554	)		$	886

Net loss improved as a result of lower net realized losses. The following factors detail changes in operating results on a comparative period basis:

•		Lower realized losses were primarily due to lower net losses from impairments on investment securities, as well as decreased credit related losses and gains on GMWB/GMIB/GMAB reinsurance compared to 2008 and the impact of the adoption of fair value accounting guidance in 2008. For further discussion refer to Note 16, Transactions with Affiliates, of the Notes to Consolidated Financial Statements.
•		In the fourth quarter of 2009, Global Annuity recorded a DAC Unlock charge of $1.9 billion, pre-tax at the inception of a reinsurance transaction with an affiliated captive reinsurer. For further discussion refer to Note 16 of the Notes to Consolidated Financial Statements.
•		Earned premiums declined in Other as a result of ceded premiums upon inception of an October 1, 2009 reinsurance transaction with an affiliated captive reinsurer. For further discussion on transactions with affiliates, refer to Note 16 of the Notes to Consolidated Financial Statements. Additionally, declines resulted from ratings downgrades in the later half of 2008 restricting sales of institutional investment payout annuities within Global Annuity which have a corresponding decrease in losses and loss adjustment expenses.
•		Fee income and other decreased as a result of the decline in average account values of the variable annuity and mutual fund assets.

•

In the fourth quarter of 2009, the Company recorded an increase in benefits, losses and loss adjustments expense as a result of a reinsurance transaction with an affiliated captive reinsurer. For further discussion on this reinsurance transaction with an affiliated captive reinsurer, refer to Note 16 of the Notes to Consolidated Financial Statements. Interest credited recorded in Global Annuity decreased by $152 primarily as a result of the reinsurance transaction.

The decrease in the Company’s net income was due to the following:

•		Realized losses increased as compared to the comparable prior year period primarily due to net losses from impairments on investment securities as well as increased credit related losses and increased losses on GMWB/GMIB/GMAB reinsurance and the adoption of fair value guidance.
•		The Company recorded a DAC Unlock charge of $825, after-tax, during the third quarter of 2008 as compared to a DAC Unlock benefit of $188, after tax, during the third quarter of 2007. See the Critical Accounting Estimates section of the MD&A for a further discussion on the DAC Unlock.
•		Declines in assets under management, primarily driven by market depreciation of $37.8 billion on the account values of U.S. individual variable annuities and $20.2 billion for retail mutual funds during 2008, drove declines in fee income compared to 2007.
•		Net investment income on securities available-for-sale and other declined primarily due to declines in limited partnership and other alternative investment income and a decrease in investment yield for fixed maturities.

For further discussion of net realized capital gains and losses, see “Investment Results” within the Investments section.

The effective tax rate for 2009, 2008 and 2007 were 39%, 38%, and 22%, respectively. The principal cause of the difference between the effective rate and the U.S. statutory rate of 35% for 2009, 2008 and 2007 was the separate account dividends received deduction (“DRD”). This caused an increase in the tax benefit on the 2009 and 2008 pretax losses and a decrease in the tax expense on the 2007 pretax income. Income taxes refunded in 2009 and 2008 were $(282) and $(183), respectively; in 2007 income taxes paid were $329.

The separate account DRD is estimated for the current year using information from the prior year-end, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments. The actual current year DRD can vary from estimates based on, but not limited to, changes in eligible dividends received by the mutual funds, amounts of distributions from these mutual funds, amounts of short-term capital gains at the mutual fund level and the Company’s taxable income before the DRD. The Company recorded benefits of $181, $176 and $155 related to the separate account DRD in the years ended December 31, 2009, 2008 and 2007, respectively, which included a benefit (charge) in 2009 of $29 related to prior year tax returns, in 2008 of $9 related to a true-up of the prior year tax return, and in 2007 of $(1) related to a true-up of the prior year tax return.

In Revenue Ruling 2007-61, issued on September 25, 2007, the IRS announced its intention to issue regulations with respect to certain computational aspects of the DRD on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-61 suspended Revenue Ruling 2007-54, issued in August 2007 which purported to change accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS may ultimately propose for issuance in this area will be subject to public notice and comment, at which time insurance companies and other members of the public will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown, but they could result in the elimination of some or all of the separate account DRD tax benefit that the Company receives. Management believes that it is highly likely that any such regulations would apply prospectively only.

The Company receives a foreign tax credit against its U.S. tax liability for foreign taxes paid by the Company including payments from its separate account assets. The separate account foreign tax credit is estimated for the current year using information from the most recent filed return, adjusted for the change in the allocation of separate account investments to the international equity markets during the current year. The actual current year foreign tax credit can vary from the estimates due to actual foreign tax credits passed through by the mutual funds. The Company recorded benefits of $16, $16 and $11 related to separate account foreign tax credit in the years ended December 31, 2009, 2008 and, 2007 respectively. These amounts included benefits related to true-ups of prior years’ tax returns of $3, $4 and $0 in 2009, 2008 and 2007, respectively.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts; living benefits required to be fair valued; valuation of investments and derivative instruments; evaluation of other-than-temporary impairments on available-for-sale securities and contingencies relating to corporate litigation and regulatory matters; DTA and goodwill impairment. In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements.

Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts

Estimated gross profits (“EGPs”) are used in the amortization of: the Company’s deferred policy acquisition cost (“DAC”) asset, which includes the present value of future profits; sales inducement assets (“SIA”); and unearned revenue reserves (“URR”). See Note 6 of the Notes to Consolidated Financial Statements for additional information on DAC. See Note 9 of the Notes to Consolidated Financial Statements for additional information on SIA. EGPs are also used in the valuation of reserves for death and other insurance benefit features on variable annuity and universal life-type contracts. See Note 8 of the Notes to Consolidated Financial Statements for additional information on death and other insurance benefit feature reserves.

For most contracts, the Company estimates gross profits over 20 years as EGPs emerging subsequent to that timeframe are immaterial. Products sold in a particular year are aggregated into cohorts. Future gross profits for each cohort are projected over the estimated lives of the underlying contracts, based on future account value projections for variable annuity and variable universal life products. The projection of future account values requires the use of certain assumptions including: separate account returns; separate account fund mix; fees assessed against the contract holder’s account balance; surrender and lapse rates; interest margin; mortality; and hedging costs. Changes in these assumptions and, in addition, changes to other policyholder behavior assumptions such as resets, partial surrenders, reaction to price increases, and asset allocations causes EGPs to fluctuate which impacts earnings.

Prior to the second quarter of 2009, the Company determined EGPs using the mean derived from stochastic scenarios that had been calibrated to the estimated separate account return. The Company also completed a comprehensive assumption study in the third quarter of each year and revised best estimate assumptions used to estimate future gross profits when the EGPs in the Company’s models fell outside of an independently determined reasonable range of EGPs. The Company also considered, on a quarterly basis, other qualitative factors such as product, regulatory and policyholder behavior trends and revised EGPs if those trends were expected to be significant.

Beginning with the second quarter of 2009, the Company now determines EGPs from a single deterministic reversion to mean (“RTM”) separate account return projection which is an estimation technique commonly used by insurance entities to project future separate account returns. Through this estimation technique, the Company’s DAC model is adjusted to reflect actual account values at the end of each quarter. Through a consideration of recent market returns, the Company will unlock, or adjust, projected returns over a future period so that the account value returns to the long-term expected rate of return, providing that those projected returns do not exceed certain caps or floors. This DAC Unlock, for future separate account returns, is determined each quarter. Under RTM, the expected long term rate of return is 7.1%, on a weighted average basis, including 9.5% for equities and 6.0% for fixed income.

In the third quarter of each year, the Company completes a comprehensive non-market related policyholder behavior assumption study and incorporates the results of those studies into its projection of future gross profits. Additionally, throughout the year, the Company evaluates various aspects of policyholder behavior and periodically revises its policyholder assumptions as credible emerging data indicates that changes are warranted. In the fourth quarter of 2009, recent market volatility provided the Company additional credible information regarding policyholder behavior, related to living benefit lapses, withdrawal rates and GMDB lapses. This information was incorporated into the Company’s assumptions used in determining estimated gross profits. Upon completion of an assumption study or evaluation of credible new information, the Company will revise its assumptions to reflect its current best estimate. These assumption revisions will change the projected account values and the related EGPs in the DAC, SIA and URR amortization models, as well as the death and other insurance benefit reserving model.

All assumption changes that affect the estimate of future EGPs including: the update of current account values; the use of the RTM estimation technique; and policyholder behavior assumptions, are considered an Unlock in the period of revision. An Unlock adjusts DAC, SIA, URR and death and other insurance benefit reserve balances in the Consolidated Balance Sheets with an offsetting benefit or charge in the Consolidated Statements of Operations in the period of the revision. An Unlock that results in an after-tax benefit generally occurs as a result of actual experience or future expectations of product profitability being favorable compared to previous estimates. An Unlock that results in an after-tax charge generally occurs as a result of actual experience or future expectations of product profitability being unfavorable compared to previous estimates.

An Unlock revises EGPs, on a quarterly basis, to reflect the Company’s current best estimate assumptions. After each quarterly Unlock, the Company also tests the aggregate recoverability of DAC by comparing the DAC balance to the present value of future EGPs. As of December 31, 2009, the margin between the DAC balance and to the present value of future EGPs was 1% for U.S. individual variable annuities, reflective of the reinsurance of a block of individual variable annuities with an affiliated captive reinsurer. If the margin between the DAC asset and the present value of future EGPs is exhausted, further reductions in EGPs would cause portions of DAC to be unrecoverable.

Estimated gross profits are also used to determine the expected excess benefits and assessments included in the measurement of death and other insurance benefit reserves. These excess benefits and assessments are derived from a range of stochastic scenarios that have been calibrated to the Company’s RTM separate account returns. The determination of death and other insurance benefit reserves is also impacted by discount rates, lapses, volatilities and mortality assumptions.

Effective October 1, 2009, a subsidiary of HLIC, Hartford Life and Annuity Insurance Company (“HLAI”) entered into a reinsurance agreement with an affiliated captive reinsurer, White River Life Reinsurance Company (“the affiliated captive reinsurer” or “WRR”). This agreement provides that HLAI will cede, and WRR will reinsure 100% of the in-force and prospective U.S. variable annuities and the associated GMDB and GMWB riders. This transaction resulted in an Unlock charge of $2.0 billion, pre-tax, and $1.3 billion, after-tax, as the related EGP’s were ceded to the affiliate. See Note 16, Transactions with Affiliates, of the Notes to Consolidated Financial Statements for further information on the transaction.

The after-tax impact on the Company’s assets and liabilities as a result of the Unlocks for the years ended 2009, 2008 and 2007 were:

										Death and
										Insurance
Reporting Segment										Benefit
After-tax (Charge) Benefit		DAC				URR				Reserves(1)				SIA				Total(2)
Global Annuity (3) (4)			(1,760	)			84			$	(160	)		$	(188	)			(2,024	)
Life Insurance			(100	)			54				(4	)			—				(50	)
Retirement Plans			(55	)			—				—				(1	)			(56	)
Other			—				—				(15	)			—				(15	)
Total		$	(1,915	)		$	138			$	(179	)		$	(189	)		$	(2,145	)

										Death and
										Insurance
Reporting Segment										Benefit
After-tax (Charge) Benefit		DAC				URR				Reserves(1)				SIA				Total(2)
Global Annuity		$	(648	)		$	18			$	(75	)		$	(27	)		$	(732	)
Life Insurance			(29	)			(12	)			(3	)			—				(44	)
Retirement Plans			(49	)			—				—				—				(49	)
Total		$	(726	)		$	6			$	(78	)		$	(27	)		$	(825	)

	•		Actual separate account returns were significantly below our aggregated estimated return.
	•		The Company reduced its 20 year projected separate account return assumption from 7.8% to 7.2% in the U.S.
	•		Retirement Plans reduced its estimate of future fees as plans met contractual size limits (“breakpoints”), causing a lower fee schedule to apply, and the Company increased its assumption for future deposits by existing plan participants.

										Death and
										Insurance
Reporting Segment										Benefit
After-tax (Charge) Benefit		DAC				URR				Reserves(1)				SIA				Total(2)
Global Annuity		$	181			$	(5	)		$	(4	)		$	9			$	181
Life Insurance			24				(8	)			—				—				16
Retirement Plans			(9	)			—				—				—				(9	)
Total		$	196			$	(13	)		$	(4	)		$	9			$	188

	•		Actual separate account returns were above our aggregated estimated return.
	•		During the third quarter of 2007, the Company estimated gross profits using the mean of EGPs derived from a set of stochastic scenarios that have been calibrated to our estimated separate account return as compared to prior year where we used a single deterministic estimation. The impact of this change in estimation was a benefit of $20, after-tax, for U.S. variable annuities.
	•		Dynamic lapse behavior assumptions, reflecting that lapse behavior will be different depending upon market movements, along with other base lapse rate assumption changes resulted in an approximate benefit of $40, after-tax, for U.S. variable annuities.

The Company offers certain variable annuity products with a GMWB rider in the U.S. and formerly in the U.K. The Company has also assumed, through reinsurance, GMWB, GMIB and GMAB risks underwritten by Hartford Life Insurance KK (“HLIKK”), a wholly-owned Japanese subsidiary of Hartford Life. The fair value of the GMWB, GMIB and GMAB are liabilities of approximately $2.0 billion, $1.4 billion and $1 as of December 31, 2009, respectively. Effective October 1, 2009, the Company ceded U.S. and international variable annuity contracts to an affiliated captive reinsurer including assumed GMWB, GMIB and GMAB. The initial fair value of the derivative associated with the business was approximately $1.3 billion.

Fair values for direct, assumed and ceded GMWB, GMIB and GMAB contracts are calculated based upon internally developed models because active, observable markets do not exist for those items. The fair value of the Company’s guaranteed benefit liabilities, classified as embedded derivatives, and the related reinsurance and customized freestanding derivatives is calculated as an aggregation of the following components: Best Estimate Claims Costs; Credit Standing Adjustment; and Margins. The resulting aggregation is reconciled or calibrated, if necessary, to market information that is, or may be, available to the Company, but may not be observable by other market participants, including reinsurance discussions and transactions. The Company believes the aggregation of each of these components, as necessary and as reconciled or calibrated to the market information available to the Company, results in an amount that the Company would be required to transfer, or receive, to or from market participants in an active liquid market, if one existed, for those market participants to assume the risks associated with the guaranteed minimum benefits and the related reinsurance and customized derivatives. The fair value is likely to materially diverge from the ultimate settlement of the liability as the Company believes settlement will be based on our best estimate assumptions rather than those best estimate assumptions plus risk margins. In the absence of any transfer of the guaranteed benefit liability to a third party, the release of risk margins is likely to be reflected as realized gains in future periods’ net income. Each of the components described below are unobservable in the marketplace and require subjectivity by the Company in determining their value.

Best Estimate Claims Costs

The Best Estimate Claims Costs is calculated based on actuarial and capital market assumptions related to projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior such as lapses, fund selection, resets and withdrawal utilization (for the customized derivatives, policyholder behavior is prescribed in the derivative contract). Because of the dynamic and complex nature of these cash flows, best estimate assumptions and a Monte Carlo stochastic process involving the generation of thousands of scenarios that assume risk neutral returns consistent with swap rates and a blend of observable implied index volatility levels were used. Estimating these cash flows involves numerous estimates and subjective judgments including those regarding expected markets rates of return, market volatility, correlations of market index returns to funds, fund performance, discount rates and policyholder behavior. At each valuation date, the Company assumes expected returns based on:

•		risk-free rates as represented by the current LIBOR forward curve rates;
•		forward market volatility assumptions for each underlying index based primarily on a blend of observed market “implied volatility” data;
•		correlations of market returns across underlying indices based on actual observed market returns and relationships over the ten years preceding the valuation date;
•		three years of history for fund regression; and
•		current risk-free spot rates as represented by the current LIBOR spot curve to determine the present value of expected future cash flows produced in the stochastic projection process.

As many guaranteed benefit obligations are relatively new in the marketplace, actual policyholder behavior experience is limited. As a result, estimates of future policyholder behavior are subjective and based on analogous internal and external data. As markets change, mature and evolve and actual policyholder behavior emerges, management continually evaluates the appropriateness of its assumptions for this component of the fair value model.

On a daily basis, the Company updates capital market assumptions used in the GMWB liability model such as interest rates and equity indices. On a weekly basis, the blend of implied equity index volatilities is updated. The Company continually monitors various aspects of policyholder behavior and may modify certain of its assumptions, including living benefit lapses and withdrawal rates, if credible emerging data indicates that changes are warranted. At a minimum, all policyholder behavior assumptions are reviewed and updated, as appropriate, in conjunction with the completion of the Company’s comprehensive study to refine its estimate of future gross profits during the third quarter of each year.

Credit Standing Adjustment

This assumption makes an adjustment that market participants would make to reflect the risk that guaranteed benefit obligations or the GMWB reinsurance recoverables will not be fulfilled (“nonperformance risk”). As a result of sustained volatility in the Company’s credit default spreads, during 2009 the Company changed its estimate of the credit standing adjustment to incorporate observable Company and reinsurer credit default spreads from capital markets, adjusted for market recoverability. Prior to the first quarter of 2009, the Company calculated the credit standing adjustment by using default rates published by rating agencies, adjusted for market recoverability. For the twelve months ended December 31, 2009 and 2008, the credit standing adjustment resulted in pre-tax gains of $135 and $6, respectively, for U.S. GMWB liabilities, net of reinsurance.

Margins

The behavior risk margin adds a margin that market participants would require for the risk that the Company’s assumptions about policyholder behavior could differ from actual experience. The behavior risk margin is calculated by taking the difference between adverse policyholder behavior assumptions and best estimate assumptions. The Company revised certain adverse assumptions in the behavior risk margin for withdrawals, lapses and annuitization behavior as emerging policyholder behavior experience suggested the prior adverse policyholder behavior assumptions were no longer representative of an appropriate margin for risk.

Assumption updates, including policyholder behavior assumptions, affected best estimates and margins for a total realized gain before-tax of $495 and $470 for the years ended December 31, 2009 and 2008 for U.S. GMWB liabilities net of third party reinsurance. For the year ended December 31, 2007, these updates affected best estimates resulting in a pre-tax loss of $(158).

In addition to the non-market-based updates described above, for the twelve months ended December 31, 2009, 2008, and 2007, the Company recognized non-market-based updates to the U.S. GMWB fair value driven by:

•

The relative outperformance/(underperformance) of the underlying actively managed funds as compared to their respective indices resulting in a pre-tax gain/(loss) of approximately $481, $(355) and $(2), respectively.

In addition to the non-market based updates described above, the Company recognized non-market based updates to the reinsured Japan GMWB, GMIB, and GMAB fair values primarily driven by:

•		Updates to assumptions, including policyholder behavior resulting in a pre-tax loss of approximately $(264) for the year ended December 31, 2009; and
•		The credit standing adjustment (described above), resulting in a pre-tax gain/(loss) of approximately $155 and $(115) for the years ended December 31, 2009 and 2008, respectively.

The Company’s investments in fixed maturities include bonds, redeemable preferred stock and commercial paper. These investments, along with certain equity securities, which include common and non-redeemable preferred stocks, are classified as “available-for-sale” (“AFS”) and are carried at fair value. The after-tax difference from cost or amortized cost is reflected in stockholders’ equity as a component of Other Comprehensive Income/(Loss), after adjustments for the effect of deducting the life and pension policyholders’ share of the immediate participation guaranteed contracts and certain life and annuity deferred policy acquisition costs and reserve adjustments. The equity investments associated with the variable annuity products offered in the U.K. are recorded at fair value and are classified as “trading” with changes in fair value recorded in net investment income. Policy loans are carried at outstanding balance. Mortgage loans are recorded at the outstanding principal balance adjusted for amortization of premiums or discounts and net of valuation allowances. Short-term investments are carried at amortized cost, which approximates fair value. Limited partnerships and other alternative investments are reported at their carrying value with the change in carrying value accounted for under the equity method and accordingly the Company’s share of earnings are included in net investment income. Recognition of limited partnerships and other alternative investment income is delayed due to the availability of the related financial information, as private equity and other funds are generally on a three-month delay and hedge funds are on a one-month delay. Accordingly, income for the years ended December 31, 2009, 2008 and 2007 may not include the full impact of current year changes in valuation of the underlying assets and liabilities, which are generally obtained from the limited partnerships and other alternative investments’ general partners. Other investments primarily consist of derivative instruments which are carried at fair value.

The fair value of AFS securities and short-term investments in an active and orderly market (i.e. not distressed or forced liquidation) is determined by management after considering one of three primary sources of information: third-party pricing services, independent broker quotations or pricing matrices. Security pricing is applied using a “waterfall” approach whereby prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, and/or estimated cash flows and prepayments speeds. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities, third-party pricing services will normally derive the security prices through recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. For further discussion, see the Available-for-Sale and Short-term Investments section in Note 3 of the Notes to the Consolidated Financial Statements.

The Company has analyzed the third-party pricing services valuation methodologies and related inputs, and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. For further discussion of fair value measurement, see Note 3 of the Notes to the Consolidated Financial Statements.

The following table presents the fair value of AFS securities and short-term investments by pricing source and hierarchy level as of December 31, 2009.

		Quoted Prices in				Significant				Significant
		Active Markets for				Observable				Unobservable
		Identical Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Priced via third party pricing services		$	438			$	30,945			$	1,448			$	32,831
Priced via independent broker quotations			—				—				3,101				3,101
Priced via matrices			—				—				4,542				4,542
Priced via other methods(1)			—				—				348				348
Short-term investments			3,785				1,343				—				5,128
Total		$	4,223			$	32,288			$	9,439			$	45,950
% of Total			9.2	%			70.3	%			20.5	%			100.0	%

The fair value is the amount at which the security could be exchanged in a current transaction between knowledgeable, unrelated willing parties using inputs, including assumptions and estimates, a market participant would utilize. As the estimated fair value of a security utilizes assumptions and estimates, the amount that may be realized may differ significantly.

Derivative instruments are reported on the Consolidated Balance Sheets at fair value and are reported in Other Investments and Other Liabilities. Derivative instruments are fair valued using pricing valuation models, which utilize market data inputs or independent broker quotations. Excluding embedded and reinsurance related derivatives, as December 31, 2009 and 2008, 96% and 95% of derivatives, respectively, based upon notional values, were priced by valuation models, which utilize independent market data. The remaining derivatives were priced by broker quotations. The derivatives are valued using mid-market level inputs that are predominantly observable in the market, with the exception of the customized swap contracts that hedge guaranteed minimum withdrawal benefits (“GMWB”) liabilities. Inputs used to value derivatives include, but are not limited to, swap interest rates, foreign currency forward and spot rates, credit spreads and correlations, interest and equity volatility and equity index levels. The Company performs a monthly analysis on derivative valuations which includes both quantitative and qualitative analysis. Examples of procedures performed include, but are not limited to, review of pricing statistics and trends, back testing recent trades, analyzing the impacts of changes in the market environment, and review of changes in market value for each derivative including those derivatives priced by brokers.

The following table presents the notional value and net fair value of derivative instruments by hierarchy level as of December 31, 2009.

		Notional Value				Fair Value
Quoted prices in active markets for identical assets (Level 1)		$	2,276			$	6
Significant observable inputs (Level 2)			29,764				(41	)
Significant unobservable inputs (Level 3)			42,533				368
Total		$	74,573			$	333

The following table presents the notional value and net fair value of the derivative instruments within the Level 3 securities classification as of December 31, 2009.

		Notional Value				Fair Value
Credit derivatives		$	2,782			$	(162	)
Interest derivatives			2,591				(2	)
Equity derivatives			37,136				532
Other			24				—
Total Level 3		$	42,533			$	368

Derivative instruments classified as Level 3 include complex derivatives, primarily consisting of equity options and swaps, interest rate derivatives which have interest rate optionality, certain credit default swaps, and long-dated interest rate swaps. These derivative instruments are valued using pricing models which utilize both observable and unobservable inputs and, to a lesser extent, broker quotations. A derivative instrument that is priced using both observable and unobservable inputs will be classified as a Level 3 financial instrument in its entirety if the unobservable input is significant in developing the price. The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified with the same fair value hierarchy level as the associated assets and liabilities.

The Company has a monitoring process overseen by a committee of investment and accounting professionals that identifies investments that are subject to an enhanced evaluation on a quarterly basis to determine if an other-than-temporary impairment (“impairment”) is present for AFS securities or a valuation allowance is required for mortgage loans. This evaluation is a quantitative and qualitative process, which is subject to risks and uncertainties. For further discussion of the accounting policies, see the Significant Investment Accounting Policies Section in Note 4 of the Notes to the Consolidated Financial Statements. For a discussion of results, see the Other-Than-Temporary Impairments Section within the Investment Credit Risk section of the MD&A.

Goodwill balances are reviewed for impairment at least annually or more frequently if events occur or circumstances change that would indicate a triggering event for a potential impairment has occurred. A reporting unit is defined as an operating segment or one level below an operating segment. The Company’s reporting units, for which goodwill has been allocated, are equivalent to the Company’s operating segments because either there is no discrete financial information available for the separate components of a segment or all of the components of a segment have similar economic characteristics. The variable life, universal life and term life components of Life Insurance have been aggregated into one reporting unit. In circumstances where the components of an operating segment constitute a business for which discrete financial information is available and segment management regularly reviews the operating results of that component such as, with U.S. Individual Annuity within Global Annuity and Individual Life within Life Insurance, the Company has classified those components as reporting units.

As of December 31, 2009 and 2008, the Company had goodwill allocated to the following reporting units:

		December 31, 2009				December 31, 2008
Individual Life within Life Insurance		$	224			$	224
Retirement Plans [1]			87				79
Mutual Funds			159				159
Total		$	470			$	462

The goodwill impairment test follows a two step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for purposes of measuring the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit to determine an implied goodwill value. This allocation is similar to a purchase price allocation performed in purchase accounting. If the carrying amount of the reporting unit’s goodwill exceeds the implied goodwill value, an impairment loss shall be recognized in an amount equal to that excess.

Management’s determination of the fair value of each reporting unit incorporates multiple inputs including cash flow calculations, price to earnings multiples, the level of The Hartford’s share price and assumptions that market participants would make in valuing the reporting unit. Other assumptions include levels of economic capital, future business growth, earnings projections, assets under management and the weighted average cost of capital used for purposes of discounting. Decreases in the amount of economic capital allocated to a reporting unit, decreases in business growth, decreases in earnings projections and increases in the weighted average cost of capital will all cause the reporting unit’s fair value to decrease.

The Company completed its annual goodwill assessment for the individual reporting units of the Company as of January 1, 2009, and concluded that the fair value of each reporting unit, for which goodwill had been allocated, was in excess of the respective reporting unit’s carrying value (the first step of the goodwill impairment test).

However, as noted above, goodwill is reassessed at an interim date if certain circumstances occur which would cause the entity to conclude that it was more likely than not that the carrying value of one or more of its reporting units would be in excess of the respective reporting unit’s fair value. As a result of the continued decline in the equity markets from January 1, 2009, rating agency downgrades, and a decline in The Hartford’s share price, the Company concluded, during the first quarter of 2009, that the conditions had been met to warrant an interim goodwill impairment test. In performing step one of the impairment test, the fair value of the Retirement Plans and Mutual Funds reporting units was determined to be in excess of their carrying value. For the Individual Life reporting unit, the fair value was not in excess of the carrying value and the step two impairment analysis was required to be performed. The fair value in step two of the goodwill impairment analysis for the Individual Life reporting unit was determined to be in excess of its carrying value.

Deferred tax assets represent the tax benefit of future deductible temporary differences and operating loss and tax credit carryforwards. Deferred tax assets are measured using the enacted tax rates expected to be in effect when such benefits are realized if there is no change in tax law. Under U.S. GAAP, we test the value of deferred tax assets for impairment on a quarterly basis at the entity level within each tax jurisdiction, consistent with our filed tax returns. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The determination of the valuation allowance for our deferred tax assets requires management to make certain judgments and assumptions. In evaluating the ability to recover deferred tax assets, we have considered all available evidence including past operating results, the existence of cumulative losses in the most recent years, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. In the event we determine that we most likely would not be able to realize all or part of our deferred tax assets in the future, an increase to the valuation allowance would be charged to earnings in the period such determination is made. Likewise, if it is later determined that it is more likely than not that those deferred tax assets would be realized, the previously provided valuation allowance would be reversed. Our judgments and assumptions are subject to change given the inherent uncertainty in predicting future performance, which is impacted by such things as policyholder behavior, competitor pricing, new product introductions, and specific industry and investment market conditions.

In management’s judgment, the net deferred tax asset will more likely than not be realized. Included in the deferred tax asset is the expected tax benefit attributable to net operating losses of $290, which have no expiration. A valuation allowance of $80 has been recorded which relates to foreign operations. No valuation allowance has been recorded for realized or unrealized losses. In assessing the need for a valuation allowance, management considered taxable income in prior carryback years, future taxable income and tax planning strategies that include holding debt securities with market value losses until recovery, selling appreciated securities to offset capital losses, and sales of certain corporate assets. Such tax planning strategies are viewed by management as prudent and feasible and will be implemented if necessary to realize the deferred tax asset. However, we anticipate limited ability, going forward, to recognize a full tax benefit on realized losses, which will result in additional valuation allowances and, if interest rates rise, an increased likelihood of recording a valuation allowance on previously recognized realized capital losses.

If the Company were to follow a “separate entity” approach, it would have to record a valuation allowance of $387 related to realized capital losses. In addition, the current tax benefit related to any of the Company’s tax attributes realized by virtue of its inclusion in The Hartford’s consolidated tax return would have been recorded directly to surplus rather than income. These benefits were $65, $500 and $0 for 2009, 2008 and 2007 respectively.

INVESTMENT RESULTS

The primary investment objective of the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient after-tax income to support policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

		December 31,								December 31,
		2009								2008
		Amount				Percent				Amount				Percent
Fixed maturities, AFS, at fair value		$	40,403				75.6	%		$	39,560				71.9	%
Equity securities, AFS, at fair value			419				0.8	%			434				0.8	%
Mortgage loans			4,304				8.0	%			4,896				8.9	%
Policy loans, at outstanding balance			2,120				4.0	%			2,154				3.9	%
Limited partnerships and other alternative investments			759				1.4	%			1,033				1.9	%
Other investments(1)			338				0.6	%			1,237				2.2	%
Short-term investments			5,128				9.6	%			5,742				10.4	%
Total investments excluding equity securities, trading		$	53,471				100.0	%		$	55,056				100.0	%
Equity securities, trading, at fair value(2)			2,443								1,634
Total investments		$	55,914							$	56,690

Total investments decreased primarily due to declines in short-term investments largely due to funding liability outflows, mortgage loans resulting from valuation allowances and maturities, and limited partnerships and other alternative investments attributable to hedge fund redemptions and negative re-valuations of the underlying investments. These declines were offset by an increase in equity securities, trading, primarily due to positive cash flows generated from sales and deposits of the U.K. unit-linked and pension product foreign currency gains attributable to the appreciation of the British pound as compared to the U.S. dollar and positive market performance of the underlying investment funds.

Net Investment Income (Loss)

		For the Years Ended December 31,
		2009								2008								2007
(Before-tax)		Amount				Yield(1)				Amount				Yield(1)				Amount				Yield(1)
Fixed maturities(2)		$	2,094				4.5	%		$	2,458				5.0	%		$	2,714				5.9	%
Equity securities, AFS			43				8.3	%			65				9.3	%			54				9.9	%
Mortgage loans			232				4.9	%			251				5.6	%			227				6.4	%
Policy loans			136				6.3	%			136				6.5	%			132				6.5	%
Limited partnerships and other alternative investments			(171	)			(18.1	)%			(224	)			(16.3	)%			112				13.0	%
Other(3)			242				—				(33	)			—				(120	)			—
Investment expense			(71	)			—				(65	)			—				(63	)			—
Total net investment income excluding equity securities, trading		$	2,505				4.2	%		$	2,588				4.6	%		$	3,056				6.0	%
Equity securities, trading			343				—				(246	)			—				1
Total net investment income		$	2,848							$	2,342							$	3,057

Total net investment income increased primarily due to equity securities, trading resulting from improved market performance of the underlying investment funds supporting the U.K. unit-linked and pension product.

Total net investment income decreased primarily due to a negative yield on limited partnerships and other alternative investments and a lower yield on variable rate securities due to declines in short-term interest rates, increased allocation to lower yielding U.S. Treasuries and short-term investments. The decline in limited partnerships and other alternative investments yield was largely due to negative returns on hedge funds and real estate partnerships as a result of the lack of liquidity in the financial markets and a wider credit spread environment. Also contributing to the decline in net investment income was lower income on equity securities, trading due to a decline in the value of the underlying investment funds supporting the U.K. unit-linked and pension product as a result of negative market performance year over year.

Net Realized Capital Losses

		For the Years Ended December 31,
(Before-tax)		2009				2008				2007
Gross gains on sales		$	364			$	383			$	187
Gross losses on sales			(828	)			(398	)			(142	)
Net OTTI losses recognized in earnings			(1,192	)			(1,888	)			(339	)
Japanese fixed annuity contract hedges, net(1)			47				64				18
Periodic net coupon settlements on credit derivatives/Japan			(33	)			(34	)			(40	)
Fair value measurement transition impact			—				(798	)			—
Results of variable annuity hedge program GMWB derivatives, net			1,505				(687	)			(286	)
Macro hedge program			(895	)			74				(12	)
Total results of variable annuity hedge program			610				(613	)			(298	)
GMAB/GMWB/GMIB reinsurance			1,106				(1,986	)			(155	)
Coinsurance and modified coinsurance reinsurance contracts			(577	)			—				—
Other, net			(374	)			(493	)			(165	)
Net realized capital losses		$	(877	)		$	(5,763	)		$	(934	)

The circumstances giving rise to the changes in these components are as follows:

Gross gains and losses on sales		•		Gross gains and losses on sales for the year ended December 31, 2009 were predominantly within structured, government and corporate securities resulting primarily from efforts to reduce portfolio risk through sales of subordinated financials and real estate related securities and from sales of U.S. Treasuries to manage liquidity.
		•		Gross gains and losses on sales for the year ended December 31, 2008 primarily resulted from the decision to reallocate the portfolio to securities with more favorable risk/return profiles. Also included was a gain of $141 from the sale of a synthetic CDO.
Net OTTI losses		•		For further information, see Other- Than-Temporary Impairments within the Investment Credit Risk section of the MD&A.
Variable annuity hedge program		•		See Note 4 of the Notes to the Consolidated Financial Statements for a discussion of the gains related to the variable annuity hedge program.
GMAB/GMWB/GMIB reinsurance		•		The net gain on these reinsurance contracts was primarily due to an increase in interest rates, an increase in the Japan equity markets, a decline in Japan equity market volatility, and liability model assumption updates for credit standing.
Coinsurance and modified coinsurance reinsurance contracts		•		Under the reinsurance agreement with an affiliate, the gains experienced from the GMAB, GMWB, and GMIB reinsurance along with the net gains from liability model assumption updates, lower volatility, increases in long-term interest rates, and rising equity markets on the US GMWB are ceded to the affiliated reinsurer and result in a realized loss.
Other, net		•		Other, net losses for the year ended December 31, 2009 primarily resulted from net losses of $329 on credit derivatives where the company purchased credit protection due to credit spread tightening and $289 related to net additions to valuation allowances on impaired mortgage loans. These losses were partially offset by gains of $128 on credit derivatives that assume credit risk due to credit spread tightening, as well as $191 from a change in spot rates related to transactional foreign currency predominately on the internal reinsurance of the Japan variable annuity business, which is offset in accumulated other comprehensive income (“AOCI”).
		•		Other, net losses for the year ended December 31, 2008 were primarily related to net losses of $295 related to transactional foreign currency predominately on the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, resulting from appreciation of the yen, as well as credit derivatives losses of $191 due to significant credit spread widening. Also included were derivative related losses of $39 due to counterparty default related to the bankruptcy of Lehman Brothers Holdings Inc.
		•		Other, net losses for the year ended December 31, 2007 were primarily driven by the change in value of non-qualifying derivatives due to credit spread widening, as well as fluctuations in interest rates and foreign currency exchange rates.

INVESTMENT CREDIT RISK

The Company has established investment credit policies that focus on the credit quality of obligors and counterparties, limit credit concentrations, encourage diversification and require frequent creditworthiness reviews. Investment activity, including setting of policy and defining acceptable risk levels, is subject to regular review and approval by senior management.

The Company invests primarily in securities which are rated investment grade and has established exposure limits, diversification standards and review procedures for all credit risks including borrower, issuer and counterparty. Creditworthiness of specific obligors is determined by consideration of external determinants of creditworthiness, typically ratings assigned by nationally recognized ratings agencies and is supplemented by an internal credit evaluation. Obligor, asset sector and industry concentrations are subject to established Company limits and are monitored on a regular basis.

The Company is not exposed to any credit concentration risk of a single issuer greater than 10% of the Company’s stockholders’ equity other than U.S. government and government agencies backed by the full faith and credit of the U.S. government. For further discussion of concentration of credit risk, see the Concentration of Credit Risk section in Note 4 of the Notes to the Consolidated Financial Statements.

In the normal course of business, the Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction. The Company has developed a derivative counterparty exposure policy which limits the Company’s exposure to credit risk.

The derivative counterparty exposure policy establishes market-based credit limits, favors long-term financial stability and creditworthiness of the counterparty and typically requires credit enhancement/credit risk reducing agreements.

The Company minimizes the credit risk of derivative instruments by entering into transactions with high quality counterparties rated A2/A or better, which are monitored by the Company’s internal compliance unit and reviewed frequently by senior management. In addition, the Company monitors counterparty credit exposure on a monthly basis to ensure compliance with Company policies and statutory limitations. The Company also maintains a policy of requiring that derivative contracts, other than exchange traded contracts, certain currency forward contracts, and certain embedded and reinsurance derivatives, be governed by an International Swaps and Derivatives Association Master Agreement, which is structured by legal entity and by counterparty and permits right of offset.

The Company has developed credit exposure thresholds which are based upon counterparty ratings. Credit exposures are measured using the market value of the derivatives, resulting in amounts owed to the Company by its counterparties or potential payment obligations from the Company to its counterparties. Credit exposures are generally quantified daily based on the prior business day’s market value and collateral is pledged to and held by, or on behalf of, the Company to the extent the current value of derivatives exceeds the contractual thresholds. In accordance with industry standards and the contractual agreements, collateral is typically settled on the next business day. The Company has exposure to credit risk for amounts below the exposure thresholds which are uncollateralized as well as for market fluctuations that may occur between contractual settlement periods of collateral movements.

The maximum uncollateralized threshold for a derivative counterparty for a single legal entity is $10. The Company currently transacts over-the-counter derivatives in two legal entities and therefore the maximum combined threshold for a single counterparty over all legal entities that use derivatives is $20. In addition, the Company may have exposure to multiple counterparties in a single corporate family due to a common credit support provider. As of December 31, 2009, the maximum combined threshold for all counterparties under a single credit support provider over all legal entities that use derivatives is $40. Based on the contractual terms of the collateral agreements, these thresholds may be immediately reduced due to a downgrade in a counterparty’s credit rating. For further discussion, see the Derivative Commitments section of Note 9 of the Notes to Consolidated Financial Statements.

For the year ended December 31, 2009, the Company has incurred no losses on derivative instruments due to counterparty default.

In addition to counterparty credit risk, the Company enters into credit default swaps to manage credit exposure. Credit default swaps involve a transfer of credit risk of one or many referenced entities from one party to another in exchange for periodic payments. The party that purchases credit protection will make periodic payments based on an agreed upon rate and notional amount, and for certain transactions there will also be an upfront premium payment. The second party, who sells credit protection, will typically only make a payment if there is a credit event and such payment will be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation. A credit event is generally defined as default on contractually obligated interest or principal payments or bankruptcy of the referenced entity.

The Company uses credit derivatives to purchase credit protection and, to a lesser extent, assume credit risk with respect to a single entity, referenced index, or asset pool. The Company purchases credit protection through credit default swaps to economically hedge and manage credit risk of certain fixed maturity investments across multiple sectors of the investment portfolio. The Company has also entered into credit default swaps that assume credit risk as part of replication transactions. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would otherwise be permissible investments under the Company’s investment policies. These swaps reference investment grade single corporate issuers and baskets, which include trades ranging from baskets of up to five corporate issuers to standard and customized diversified portfolios of corporate issuers. The baskets of diversified portfolios are established within sector concentration limits and are typically divided into tranches which possess different credit ratings ranging from AAA through the CCC rated first loss position.

The following table presents the Company’s fixed maturities by credit quality. The ratings referenced below are based on the ratings of a nationally recognized rating organization or, if not rated, assigned based on the Company’s internal analysis of such securities.

Fixed Maturities by Credit Quality

		December 31, 2009												December 31, 2008
										Percent												Percent
										of Total												of Total
		Amortized				Fair				Fair				Amortized				Fair				Fair
		Cost				Value				Value				Cost				Value				Value
U.S. government/government agencies		$	4,707			$	4,552				11.3	%		$	7,200			$	7,289				18.4	%
AAA			6,564				5,966				14.8	%			10,316				7,368				18.6	%
AA			6,701				5,867				14.5	%			7,304				5,704				14.4	%
A			11,957				11,093				27.4	%			11,590				9,626				24.4	%
BBB			11,269				10,704				26.5	%			10,292				8,288				21.0	%
BB & below			3,086				2,221				5.5	%			1,742				1,285				3.2	%
Total fixed maturities		$	44,284			$	40,403				100.0	%		$	48,444			$	39,560				100.0	%

The movement within the Company’s investment ratings was primarily attributable to rating agency downgrades across multiple sectors and sales of U.S. Treasuries that were re-deployed to securities with more favorable risk profiles, in particular investment grade corporate securities. The ratings associated with the Company’s commercial mortgage backed-securities (“CMBS”), commercial real estate (“CRE”) collateralized debt obligations (“CDOs”) and residential mortgage-backed securities (“RMBS”) may be negatively impacted as rating agencies continue to make changes to their methodologies and monitor security performance.

The following table presents the Company’s AFS securities by type.

		Available-for-Sale Securities by Type
		December 31, 2009																			December 31, 2008
		Cost or				Gross				Gross								Percent of				Cost or				Gross				Gross								Percent of
		Amortized				Unrealized				Unrealized				Fair				Total Fair				Amortized				Unrealized				Unrealized				Fair				Total Fair
		Cost				Gains				Losses				Value				Value				Cost				Gains				Losses				Value				Value
Asset-backed securities (“ABS”)
Consumer loans		$	1,596			$	13			$	(248	)		$	1,361				3.4	%		$	1,880			$	—			$	(512	)		$	1,368				3.4	%
Small business			418				—				(185	)			233				0.6	%			428				—				(197	)			231				0.6	%
Other			330				18				(39	)			309				0.8	%			482				5				(110	)			377				1.0	%
CDOs
CLOs(1)			1,997				—				(208	)			1,789				4.4	%			2,107				—				(537	)			1,570				4.0	%
CRE			1,157				14				(804	)			367				0.9	%			1,566				2				(1,170	)			398				1.0	%
Other			4				5				—				9				—				19				—				(6	)			13				—
CMBS
Agency backed(2)			62				3				—				65				0.2	%			243				8				—				251				0.6	%
Bonds			6,138				33				(1,519	)			4,652				11.5	%			7,160				1				(2,719	)			4,442				11.2	%
Interest only (“IOs”)			644				40				(36	)			648				1.6	%			840				12				(196	)			656				1.7	%
Corporate
Basic industry			1,794				78				(45	)			1,827				4.5	%			1,459				5				(233	)			1,231				3.1	%
Capital goods			2,078				100				(33	)			2,145				5.3	%			1,656				26				(201	)			1,481				3.7	%
Consumer cyclical			1,324				53				(33	)			1,344				3.3	%			1,588				29				(244	)			1,373				3.5	%
Consumer non-cyclical			3,260				205				(15	)			3,450				8.6	%			2,455				46				(172	)			2,329				5.9	%
Energy			2,239				130				(13	)			2,356				5.8	%			1,320				19				(118	)			1,221				3.1	%
Financial services			5,054				84				(590	)			4,548				11.3	%			5,563				163				(994	)			4,732				12.0	%
Tech./comm			2,671				145				(40	)			2,776				6.9	%			2,597				69				(248	)			2,418				6.1	%
Transportation			544				16				(19	)			541				1.3	%			410				8				(67	)			351				0.9	%
Utilities			3,790				161				(52	)			3,899				9.7	%			3,189				76				(376	)			2,889				7.3	%
Other(3)			867				13				(99	)			781				1.9	%			1,015				—				(305	)			710				1.8	%
Foreign govt./govt. agencies			824				35				(13	)			846				2.1	%			2,094				86				(33	)			2,147				5.4	%
Municipal			971				3				(194	)			780				1.9	%			917				8				(220	)			705				1.8	%
RMBS
Agency			2,088				63				(5	)			2,146				5.3	%			1,924				53				(8	)			1,969				5.0	%
Non-agency			125				—				(14	)			111				0.3	%			159				—				(43	)			116				0.3	%
Alt-A			187				—				(52	)			135				0.3	%			256				—				(90	)			166				0.4	%
Sub-prime			1,565				5				(626	)			944				2.3	%			2,084				4				(741	)			1,347				3.4	%
U.S. Treasuries			2,557				5				(221	)			2,341				5.8	%			5,033				75				(39	)			5,069				12.8	%
Total fixed maturities			44,284				1,222				(5,103	)			40,403				100.0	%			48,444				695				(9,579	)			39,560				100.0	%
Equity securities
Financial Services			273				4				(51	)			226								334				—				(107	)			227
Other			174				34				(15	)			193								280				4				(77	)			207
Total equity securities			447				38				(66	)			419								614				4				(184	)			434
Total AFS securities		$	44,731			$	1,260			$	(5,169	)		$	40,822							$	49,058			$	699			$	(9,763	)		$	39,994

The Company reallocated its AFS investment portfolio to securities with more favorable risk profiles, in particular investment grade corporate securities, while reducing its exposure to real estate related securities. Additionally, the Company reduced its allocation to U.S. Treasuries in order to manage liquidity. The Company’s AFS net unrealized loss position decreased as a result of improved security valuations due to credit spread tightening, partially offset by rising interest rates and a $738 before-tax cumulative effect of accounting change related to impairments. For further discussion on the accounting change, see Note 1 of the Notes to Consolidated Financial Statements. The following sections highlight the Company’s significant investment sectors.

Several positive developments occurred in the financial services sectors during the second half of 2009. Earnings for large domestic banks surpassed expectations and losses for banks that underwent the Supervisory Capital Assessment Program (“SCAP”), or stress test, were less than the Federal Reserve’s projections. Unrealized losses on banks’ investment portfolios decreased as credit spreads tightened and the pace of deterioration of the credit quality of certain assets slowed. Banks and insurance firms were also able to access re-opened debt capital markets, reducing their dependence on government guarantee programs and enhancing their liquidity positions. In addition, certain financial institutions were able to improve their junior capital ratios through common equity capital raises, exchanges and tenders. Despite these positive developments, financial services companies continue to face a difficult macroeconomic environment and regulatory uncertainty which could affect future earnings.

The Company has exposure to the financial services sector predominantly through banking and insurance firms. The following table presents the Company’s exposure to the financial services sector included in the AFS Securities by Type table above. A comparison of fair value to amortized cost is not indicative of the pricing of individual securities as impairments have occurred.

		December 31, 2009												December 31, 2008
										Percent of												Percent of
		Amortized								Total Fair				Amortized								Total Fair
		Cost				Fair Value				Value				Cost				Fair Value				Value
AAA		$	151			$	152				3.2	%		$	463			$	394				8.0	%
AA			1,311				1,273				26.7	%			1,422				1,240				25.0	%
A			2,702				2,373				49.7	%			3,386				2,834				57.1	%
BBB			805				681				14.2	%			537				411				8.3	%
BB & below			358				295				6.2	%			89				80				1.6	%
Total(1)		$	5,327			$	4,774				100.0	%		$	5,897			$	4,959				100.0	%

The following table presents the Company’s exposure to RMBS supported by sub-prime mortgage loans by current credit quality and vintage year included in the AFS Securities by Type table above. These securities have been affected by deterioration in collateral performance caused by declining home prices and continued macroeconomic pressures including higher unemployment levels. A comparison of fair value to amortized cost is not indicative of the pricing of individual securities as impairments have occurred. Credit protection represents the current weighted average percentage, excluding wrapped securities, of the outstanding capital structure subordinated to the Company’s investment holding that is available to absorb losses before the security incurs the first dollar loss of principal. The ratings associated with the Company’s RMBS may be negatively impacted as rating agencies make changes to their methodologies and continue to monitor security performance.

Sub-Prime Residential Mortgage Loans(1)(2)(3)(4)(5)

		December 31, 2009
		AAA								AA								A								BBB								BB and Below								Total
		Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value				Cost				Value				Cost				Value				Cost				Value				Cost				Value
2003 & Prior		$	20			$	15			$	54			$	43			$	63			$	43			$	14			$	9			$	55			$	33			$	206			$	143
2004			79				66				243				178				60				37				6				4				—				—				388				285
2005			56				31				263				190				134				83				84				25				142				37				679				366
2006			4				3				11				8				11				8				27				10				133				65				186				94
2007			—				—				—				—				—				—				—				—				106				56				106				56
Total		$	159			$	115			$	571			$	419			$	268			$	171			$	131			$	48			$	436			$	191			$	1,565			$	944
Credit protection							46.1	%							54.4	%							41.1	%							36.5	%							25.8	%							41.8	%

		December 31, 2008
		AAA								AA								A								BBB								BB and Below								Total
		Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value				Cost				Value				Cost				Value				Cost				Value				Cost				Value
2003 & Prior		$	26			$	22			$	129			$	109			$	48			$	35			$	17			$	13			$	34			$	19			$	254			$	198
2004			108				79				303				240				—				—				8				7				—				—				419				326
2005			73				56				525				353				138				70				24				16				22				18				782				513
2006			45				41				109				50				10				5				87				35				96				36				347				167
2007			42				27				40				9				33				15				35				19				132				73				282				143
Total		$	294			$	225			$	1,106			$	761			$	229			$	125			$	171			$	90			$	284			$	146			$	2,084			$	1,347
Credit protection							39.3	%							48.3	%							32.1	%							23.5	%							20.1	%							41.4	%