Attached files

file filename
8-K - FORM 8-K - HARTFORD FINANCIAL SERVICES GROUP, INC.c20647e8vk.htm
EX-99.1 - EXHIBIT 99.1 - HARTFORD FINANCIAL SERVICES GROUP, INC.c20647exv99w1.htm
Exhibit 99.2
(THE HARTFORD LOGO)
INVESTOR FINANCIAL SUPPLEMENT
JUNE 30, 2011

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Address:
One Hartford Plaza
Hartford, CT 06155
Internet address:
http://www.thehartford.com
Contacts:
Sabra Purtill
Senior Vice President
Investor Relations
Phone (860) 547-8691
Ryan Greenier
Assistant Vice President
Investor Relations
Phone (860) 547-8844
Margaret Mann
Program Assistant
Investor Relations
Phone (860) 547-3800
                 
As of July 28, 2011   A.M. Best   Fitch   Standard & Poor’s   Moody’s
Insurance Financial Strength Ratings:
               
Hartford Fire Insurance Company
  A   A+   A   A2
Hartford Life Insurance Company
  A   A-   A   A3
Hartford Life and Accident Insurance Company
  A   A-   A   A3
Hartford Life and Annuity Insurance Company
  A   A-   A   A3
 
               
Other Ratings:
               
The Hartford Financial Services Group, Inc.:
               
Senior debt
  bbb+   BBB-   BBB   Baa3
Commercial paper
  AMB-2   F2   A-2   P-3
TRANSFER AGENT
The Bank of New York Mellon
BNY Mellon Shareowner Services
480 Washington Boulevard
Jersey City, NJ 07310
1 (877) 272-7740
COMMON STOCK
Common stock of The Hartford Financial Services Group, Inc. is traded on the New York Stock Exchange under the symbol “HIG”.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
       
Basis of Presentation
  i, ii, iii
 
     
CONSOLIDATED
     
Consolidated Financial Results
    1
Operating Results by Segment
    2
Consolidated Statements of Operations
    3
Consolidating Balance Sheets
    4
Capital Structure
    5
Statutory Surplus to GAAP Stockholders’ Equity Reconciliation
    6
Accumulated Other Comprehensive Loss
    7
Computation of Basic and Diluted Earnings (Losses) Per Common Share
    8
Analysis of Net Realized Capital Gains (Losses) After-tax and DAC
    9
Computation of Return-on-Equity Measures
    10
Components of Net Realized Capital Gains (Losses) After-tax and DAC and Excluded From Core Earnings
     
Three Months Ended June 30, 2010, September 30, 2010,
     
December 31, 2010, March 31, 2011 and June 30, 2011
    11
Six Months Ended June 30, 2010 and 2011
    12
 
     
COMMERCIAL MARKETS
     
Income Statements
    13
Property & Casualty Commercial
     
Operating Results
    14
Underwriting Results
    15
Group Benefits
     
Income Statements
    16
Supplemental Data
    17
 
     
CONSUMER MARKETS
     
Income Statements
    18
Operating Results
    19
Underwriting Results
    20
Written and Earned Premiums
    21
 
     
WEALTH MANAGEMENT
     
Operating Results
    22
Financial Highlights Excluding Impacts of DAC Unlocks
    23
Deferred Policy Acquisition Costs and Present Value of Future Profits
    24
Supplemental Data — Annuity Death and Income Benefits
    25
Global Annuity
     
Income Statements
    26
Supplemental Data
     
U.S.-Account Value Rollforward
    27
International-Account Value Rollforward
    28
Other-Account Value and Asset Rollforward
    29
Life Insurance
     
Income Statements
    30
Supplemental Data — Individual Life
    31
Account Value Rollforward — Individual Life
    32
Account Value and Account Value Rollforward-Private Placement Life Insurance
    33
Retirement Plans
     
Income Statements
    34
Supplemental Data
     
Assets Under Management
    35
Account Value and Asset Rollforward
    36
Mutual Funds
     
Income Statements
    37
Supplemental Data
     
Deposits and Assets Under Management
    38
Asset Rollforward
    39
 
     
CORPORATE AND OTHER
     
Income Statements
    40
Other Operations
     
Operating Results
    41
 
     
INVESTMENTS
     
Investment Earnings Before-tax
    42
Composition of Invested Assets
     
Consolidated
    43
Life
    44
Property & Casualty
    45
Unrealized Loss Aging
    46
Invested Asset Exposures
     
As of June 30, 2011
    47

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
  All amounts are in millions, except for per share and ratio information unless otherwise stated.
  The Hartford Financial Services Group, Inc. (“The Hartford” or the “Company”) is organized into three customer-oriented divisions, Commercial Markets, Consumer Markets and Wealth Management, conducting business principally in seven reporting segments.
  The Commercial Markets division consists of the reporting segments of Property & Casualty Commercial and Group Benefits. Property & Casualty Commercial provides workers’ compensation, property, automobile, liability and umbrella coverages, primarily throughout the United States (“U.S.”), along with a variety of customized insurance products and risk management services including professional liability, fidelity, surety, specialty casualty coverages and third-party administrator services.
  Group Benefits provides employers, associations, affinity groups and financial institutions with group life, accident and disability coverage, along with other products and services, including voluntary benefits and group retiree health.
  Consumer Markets provides standard automobile, homeowners and home-based business coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. Consumer Markets also operates a member contact center for health insurance products offered through the AARP Health program.
  The Wealth Management division includes the reporting segments of Global Annuity, Life Insurance, Retirement Plans and Mutual Funds. Global Annuity offers individual variable, fixed market value adjusted, and single premium immediate annuities in the U.S. and administers investments, retirement savings and other insurance and savings products to individuals and groups outside of the U.S., primarily in Japan and Europe. Life insurance sells a variety of life insurance products, including variable universal life, universal life, and term life, as well as variable private placement life insurance owned by corporations and high net worth individuals. Retirement Plans provides products and services to corporations pursuant to Section 401(k)of the Internal Revenue Code of 1986, as amended (“IRS code”) and products and services to municipalities and not-for-profit organizations under Sections 457 and 403(b) of the IRS code. Mutual Funds offers retail, proprietary and investment-only mutual funds and college savings plans under section 529 of the IRS code.
  The Hartford includes in Corporate and Other the Company’s debt financing and related interest expense, as well as other capital raising activities, certain property and casualty insurance operations of The Hartford that have discontinued writing new business and includes substantially all of the Company’s asbestos and environmental exposures, banking operations and certain purchase accounting adjustments and other charges not allocated to the segments.
  The balance sheet and certain balance sheet measures incorporated herein are presented in the statutory legal entity views for Life and Property & Casualty. Life consists of the Wealth Management division, Group Benefits and an Other category. Property & Casualty consists of Property & Casualty Commercial, Other Operations and the Consumer Markets Division. Corporate primarily includes the Company’s debt financing and related interest expense, as well as other capital raising, banking operations and certain purchase accounting adjustment activities.
  Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in The 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, other than temporary impairment losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign currency translation adjustments and pension and other postretirement adjustments.
  Mutual fund assets are an internal measure of assets under management used by the Company because a portion of revenues are based upon asset levels. Mutual funds assets are not included on the balance sheet.
  Return on assets (“ROA”) is calculated using annualized earnings divided by a two-point average of assets under management.
  Assets under management (“AUM”) is a measure used by the Company because a significant portion of the 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 capital markets or through net flow.
  Assets under administration (“AUA”) 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.
  Yields are calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, and consolidated variable interest entity non-controlling interests.
  NM — Not meaningful means increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa.

 

i


 

THE HARTFORD 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 before the net effect of certain realized capital gains and losses and discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting 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 certain net realized gains and losses such as net periodic settlements on credit derivatives and net periodic settlements on the Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the statement of operations such as net investment income (loss). Net income is the most directly comparable GAAP measure. Core earnings should not be considered as a substitute for net income and does not reflect the overall profitability of the Company’s 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 2.
  Core earnings per share is calculated based on the non-GAAP financial measure core earnings. The Hartford believes that the measure core earnings per share provides investors with a valuable measure of the Company’s operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance. A reconciliation of net income per share to core earnings per share for the periods presented herein is set forth on page 8.
  Core earnings per diluted common share is calculated based on the non-GAAP financial measure core earnings. The Hartford believes that the measure core earnings per diluted common share provides investors with a valuable measure of the company’s operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per diluted common share is the most directly comparable GAAP measure. Core earnings per diluted common share should not be considered as a substitute for net income per diluted common share and does not reflect the overall profitability of the company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate both net income per diluted common share and core earnings per diluted common share when reviewing the company’s performance. A reconciliation of core earnings per diluted common share to net income per diluted common share for the periods presented herein is set forth on page 8.
  Written premiums is a statutory accounting financial measure used by The Hartford as an important indicator of the operating performance of the Company’s Property & Casualty Commercial and Consumer Markets operations. Because written premiums represents the amount of premium charged for policies issued, net of reinsurance, during a fiscal period, The Hartford believes it is useful to investors because it reflects current trends in The Hartford’s sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves. A reconciliation of written premiums to earned premiums for Property & Casualty Commercial and Consumer Markets is set forth at pages 14 and 19, respectively.
  The Hartford’s management evaluates profitability of the Property & Casualty Commercial and Consumer Markets segments primarily on the basis of underwriting results. Underwriting results is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) 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, as management strives to manage exposure to loss through favorable risk selection and diversification, management of claims, use of reinsurance and its ability to manage its expense ratio. The Hartford believes that underwriting results provide investors with a valuable measure of before-tax profitability derived from underwriting activities, which are managed separately from the Company’s investing activities. A reconciliation of underwriting results to net income (loss) for Property & Casualty Commercial and Consumer Markets is set forth at pages 14 and 19, respectively.
  A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Hartford believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
  Core earnings ROA is a non-GAAP financial measure that the Company uses for certain segments in its Wealth Management Division to evaluate, and believes is an important measure of, operating performance. Core earnings ROA excludes the (i) net realized gains (losses), net of tax and DAC, excluded from core earnings, and (ii) the effect of discontinued operations. ROA is the most directly comparable U.S. GAAP measure. The Hartford believes that the measure core earnings ROA provides investors with a valuable measure of the performance of the company’s on-going businesses because it reveals trends in our businesses that may be obscured by the effect of including net realized gains (losses), net of tax and DAC, excluded from core earnings, and the effect of including discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to insurance aspects of our business. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings ROA should not be considered a substitute for ROA and does not reflect the overall profitability of our businesses. Therefore, the company believes it is important for investors to evaluate both core earnings ROA and ROA when reviewing the company’s performance.

 

ii


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION (CONTINUED)
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
  After-tax margin, excluding net realized gains (losses), net of tax and DAC, excluded from core earnings, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, segment operating performance. After-tax margin is the most directly comparable U.S. GAAP measure. The Hartford believes that the measure after-tax margin, excluding net realized gains (losses), net of tax and DAC, excluded from core earnings, provides investors with a valuable measure of the performance of the Company’s on-going businesses because it reveals trends in our businesses that may be obscured by the effect of including certain realized gains (losses). Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to insurance aspects of our businesses. Accordingly, these non-GAAP measures exclude the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so after-tax margin, excluding net realized gains (losses), net of tax and DAC, excluded from core earnings, should include net realized gains and losses on net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the statement of operations such as net investment income. After-tax margin, excluding net realized gains (losses), net of tax and DAC, excluded from core earnings, should not be considered as a substitute for after-tax margin and does not reflect the overall profitability of our businesses. Therefore, the Company believes it is important for investors to evaluate both after-tax margin, excluding net realized gains (losses), net of tax and DAC, excluded from core earnings, and after-tax margin when reviewing the Company’s performance.
  Book value per common share excluding AOCI is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) common stockholders’ equity, excluding AOCI, net of tax, by (b) common shares outstanding. The Hartford provides book value per common share excluding AOCI to enable investors to analyze the amount of the Company’s net worth that is primarily attributable to the Company’s business operations. The Hartford believes book value per common share, excluding AOCI, is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per common share is the most directly comparable GAAP measure. A reconciliation of book value per common share to book value per common share, excluding AOCI, for the periods presented herein is set forth at page 1.
  Book value per diluted common share, excluding AOCI, is a non-GAAP financial measure based on a GAAP financial measure. It is calculated by dividing (a) common stockholders’ equity, excluding AOCI, net of tax, by (b) diluted common shares outstanding. The Hartford provides book value per diluted common share excluding AOCI to enable investors to analyze the Company’s shareholders’ equity excluding the effect of changes in the value of the Company’s investment portfolio and other assets due to interest rates, currency and other factors. The Hartford believes book value per diluted common share, excluding AOCI, is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in market value. Book value shareholders equity per diluted common share is the most directly comparable GAAP measure. A reconciliation of shareholders’ equity per diluted share to book value per diluted common share, excluding AOCI, for the periods presented herein is set forth at page 1.
  The Hartford provides different measures of the return on common equity (“ROE”) of the Company. ROE (core earnings last twelve months to common equity, excluding AOCI), is calculated based on non-GAAP financial measures. ROE (core earnings last twelve months to common equity, excluding AOCI) is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders’ equity, excluding AOCI. When calculating ROE, the Mandatory Convertible preferred stock (“MCP”) is included in average common stockholders’ equity and MCP dividends are added back to net income (loss) available to common shareholders and core earnings (losses) available to common shareholders. The Hartford provides to investors return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above. The Hartford excludes AOCI in the calculation of these return-on-equity measures to provide investors with a measure of how effectively the Company is investing the portion of the Company’s net worth that is primarily attributable to the Company’s business operations. ROE (net income last twelve months to common equity, including AOCI) is the most directly comparable GAAP measure. A reconciliation of the non-GAAP return-on-equity measures for the periods presented herein to ROE (net income last twelve months to common equity, including AOCI) is set forth at page 10.
  Combined ratio before catastrophes and prior accident year development is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio measures the cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100% demonstrates a positive underwriting result, a non-GAAP financial measure described below. A combined ratio above 100% indicates a negative underwriting result. The combined ratio before catastrophes and prior year accident year development represents the combined ratio for the current accident year, excluding the impact of catastrophes. The company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss development. A reconciliation of the combined ratio to the combined ratio before catastrophes and prior year development for Property & Casualty Commercial and Consumer Markets is set forth at pages 15 and 20, respectively.

 

iii


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTH ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
HIGHLIGHTS
                                                                               
Net income
  $ 76     $ 666     $ 619     $ 511     $ 24       (68 %)     (95 %)   $ 395     $ 535       35 %
Core earnings
  $ 193     $ 705     $ 529     $ 586     $ 12       (94 %)     (98 %)   $ 738     $ 598       (19 %)
Total revenues [1]
  $ 3,265     $ 6,602     $ 5,930     $ 6,300     $ 5,401       65 %     (14 %)   $ 9,517     $ 11,701       23 %
Total assets
  $ 314,150     $ 313,926     $ 318,346     $ 322,538     $ 317,469       1 %     (2 %)                        
 
                                                                               
PER SHARE AND SHARES DATA [2]
                                                                               
Basic earnings (losses) per common share
                                                                               
Net income (loss) available to common shareholders
  $ 0.15     $ 1.48     $ 1.37     $ 1.13     $ 0.03       (80 %)     (97 %)   $ (0.24 )   $ 1.16     NM  
Core earnings available to common shareholders
  $ 0.41     $ 1.56     $ 1.17     $ 1.30     $ 0.00       (100 %)     (100 %)   $ 0.58     $ 1.30       123 %
Diluted earnings (losses) per common share
                                                                               
Net income (loss) available to common shareholders
  $ 0.14     $ 1.34     $ 1.24     $ 1.01     $ 0.03       (79 %)     (97 %)   $ (0.24 )   $ 1.06     NM  
Core earnings available to common shareholders
  $ 0.38     $ 1.42     $ 1.06     $ 1.15     $ 0.00       (100 %)     (100 %)   $ 0.56     $ 1.18       111 %
Weighted average common shares outstanding (basic)
    443.9       444.1       444.3       444.6       445.1     1.2 sh   0.5 sh     418.8       444.9     26.1 sh
Weighted average common shares outstanding and dilutive potential common shares (diluted)
    480.2       495.3       497.8       508.2       482.4     2.2 sh   (25.8 )sh     454.4       505.6     51.2 sh
Common shares outstanding
    444.1       444.4       444.5       445.1       445.3     1.2 sh   0.2 sh     444.1       445.3     1.2 sh
Book value per common share
  $ 41.29     $ 45.80     $ 44.44     $ 45.93     $ 47.43       15 %     3 %                        
Per common share impact of AOCI
  $ (3.10 )   $ 0.44     $ (2.26 )   $ (1.72 )   $ (0.17 )     95 %     90 %                        
Book value per common share (excluding AOCI)
  $ 44.39     $ 45.36     $ 46.70     $ 47.65     $ 47.60       7 %                              
 
Book value per diluted share
  $ 38.16     $ 42.11     $ 40.40     $ 41.57     $ 43.11       13 %     4 %                        
Per diluted share impact of AOCI
  $ (2.79 )   $ 0.39     $ (2.00 )   $ (1.52 )   $ (0.15 )     95 %     90 %                        
Book value per diluted share (excluding AOCI)
  $ 40.95     $ 41.72     $ 42.40     $ 43.09     $ 43.26       6 %                              
Common shares outstanding and dilutive potential common shares
    495.0       496.5       502.7       505.1       502.8     7.8 sh   (2.3 )sh                        
 
                                                                               
FINANCIAL RATIOS
                                                                               
ROE (net income last 12 months to common stockholder equity including AOCI) [3]
    0.9 %     6.1 %     6.8 %     9.6 %     9.0 %     8.1       (0.6 )                        
ROE (core earnings last 12 months to common stockholder equity excluding AOCI) [3]
    7.9 %     8.3 %     7.5 %     9.6 %     8.7 %     0.8       (0.9 )                        
Debt to capitalization, including AOCI
    25.9 %     24.0 %     24.5 %     23.9 %     23.4 %     (2.5 )     (0.5 )                        
Annualized investment yield, after-tax
    3.3 %     3.1 %     3.1 %     3.2 %     3.1 %     (0.2 )     (0.1 )     3.1 %     3.1 %      
[1]   Total revenues of The Hartford are impacted by net investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which have corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses. See page 3 for the impact to total revenues along with the corresponding amounts in benefits, losses and loss adjustment expenses in the three months ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011, respectively.
 
[2]   See page 8 for computation of basic and diluted earnings (losses) per common share.
 
[3]   See page 10 for a computation of ROE measures.

 

1


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT

(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTH ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
                                                                               
Property & Casualty Commercial
  $ 256     $ 294     $ 201     $ 181     $ 99       (61 %)     (45 %)   $ 496     $ 280       (44 %)
Group Benefits
    34       44       30       19       30       (12 %)     58 %     84       49       (42 %)
 
                                                           
Commercial Markets core earnings
    290       338       231       200       129       (56 %)     (36 %)     580       329       (43 %)
 
                                                                               
Consumer Markets core earnings (losses)
    (15 )     69       28       113       (179 )   NM     NM       48       (66 )   NM  
 
                                                                               
Global Annuity [1]
    (9 )     262       238       228       209     NM       (8 %)     200       437       119 %
Life Insurance
    60       85       50       53       60             13 %     108       113       5 %
Retirement Plans
    10       35       14       21       16       60 %     (24 %)     21       37       76 %
Mutual Funds
    23       20       24       27       27       17 %           50       54       8 %
 
                                                           
Wealth Management core earnings [1]
    84       402       326       329       312       NM       (5 %)     379       641       69 %
 
                                                                               
Corporate and Other core losses
    (166 )     (104 )     (56 )     (56 )     (250 )     (51 %)   NM       (269 )     (306 )     (14 %)
 
                                                           
 
                                                                               
CONSOLIDATED
                                                                               
Core earnings
    193       705       529       586       12       (94 %)     (98 %)     738       598       (19 %)
Add: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [2][3]
    (18 )     (40 )     55       (237 )     92     NM     NM       (243 )     (145 )     40 %
Add: Income (loss) from discontinued operations
    (99 )     1       35       162       (80 )     19 %   NM       (100 )     82     NM  
 
                                                           
Net income
  $ 76     $ 666     $ 619     $ 511     $ 24       (68 %)     (95 %)   $ 395     $ 535       35 %
 
                                                           
 
                                                                               
PER SHARE DATA [4]
                                                                               
Diluted earnings (losses) per common share
                                                                               
Core earnings available to common shareholders
  $ 0.38     $ 1.42     $ 1.06     $ 1.15     $ 0.00       (100 %)     (100 %)   $ 0.56     $ 1.18       111 %
Net income (loss) available to common shareholders
  $ 0.14     $ 1.34     $ 1.24     $ 1.01     $ 0.03       (79 %)     (97 %)   $ (0.24 )   $ 1.06     NM
[1]   Included in the three months ended December 31, 2010 is a benefit of $24, after-tax, related to a true-up of reserves associated with certain non-dollar denominated investor notes.
 
[2]   See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax and DAC, for the periods presented herein.
 
[3]   Includes those net realized capital losses excluded from core earnings (losses). See page 9 for further analysis.
 
[4]   See page 8 for the reconciliation of net income (loss) per common share to core earnings (losses) per common share.

 

2


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Earned premiums
  $ 3,506     $ 3,513     $ 3,509     $ 3,519     $ 3,545       1 %     1 %   $ 7,033     $ 7,064        
Fee income
    1,186       1,164       1,218       1,209       1,219       3 %     1 %     2,366       2,428       3 %
Net investment income (loss):
                                                                               
Securities available-for-sale and other
    1,148       1,073       1,089       1,108       1,104       (4 %)           2,202       2,212        
Equity securities, trading [1]
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
 
                                                           
Total net investment income (loss)
    (1,501 )     2,116       1,220       1,911       507     NM       (73 %)     254       2,418     NM  
Realized capital gains (losses):
                                                                               
Total other-than-temporary impairment (“OTTI”) losses
    (292 )     (146 )     (74 )     (119 )     (31 )     89 %     74 %     (632 )     (150 )     76 %
OTTI losses recognized in other comprehensive income
    184       31       15       64       8       (96 %)     (88 %)     372       72       (81 %)
 
                                                           
Net OTTI losses recognized in earnings
    (108 )     (115 )     (59 )     (55 )     (23 )     79 %     58 %     (260 )     (78 )     70 %
Net realized capital gains (losses), excluding OTTI losses recognized in earnings
    117       (142 )     (30 )     (348 )     92       (21 %)   NM       (5 )     (256 )   NM  
 
                                                           
Total net realized capital gains (losses)
    9       (257 )     (89 )     (403 )     69     NM     NM       (265 )     (334 )     (26 %)
Other revenues
    65       66       72       64       61       (6 %)     (5 %)     129       125       (3 %)
 
                                                           
Total revenues
    3,265       6,602       5,930       6,300       5,401       65 %     (14 %)     9,517       11,701       23 %
 
Benefits, losses and loss adjustment expenses
    3,592       3,037       3,263       3,178       3,976       11 %     25 %     6,725       7,154       6 %
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities [1]
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
Amortization of deferred policy acquisition costs and present value of future profits
    935       431       514       664       835       (11 %)     26 %     1,582       1,499       (5 %)
Insurance operating costs and expenses
    1,111       1,046       1,135       1,120       1,224       10 %     9 %     2,226       2,344       5 %
Interest expense
    132       128       128       128       128       (3 %)           252       256       2 %
 
                                                           
Total benefits and expenses
    3,121       5,685       5,171       5,893       5,566       78 %     (6 %)     8,837       11,459       30 %
 
Income (loss) from continuing operations before income taxes
    144       917       759       407       (165 )   NM     NM       680       242       (64 %)
 
Income tax expense (benefit) [2][3][4]
    (31 )     252       175       58       (269 )   NM     NM       185       (211 )   NM  
 
                                                           
 
Income from continuing operations
    175       665       584       349       104       (41 %)     (70 %)     495       453       (8 %)
 
Income (loss) from discontinued operations, net of tax
    (99 )     1       35       162       (80 )     19 %   NM       (100 )     82     NM
 
                                                           
 
Net income
    76       666       619       511       24       (68 %)     (95 %)     395       535       35 %
 
Less: Income (loss) from discontinued operations, net of tax
    (99 )     1       35       162       (80 )     19 %   NM       (100 )     82     NM  
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [5]
    (18 )     (40 )     55       (237 )     92     NM     NM       (243 )     (145 )     40 %
 
                                                           
 
Core earnings
  $ 193     $ 705     $ 529     $ 586     $ 12       (94 %)     (98 %)   $ 738     $ 598       (19 %)
 
                                                           
[1]   Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses.
 
[2]   The three months ended December 31, 2010 includes an income tax benefit of $18 related to tax adjustments for prior years.
 
[3]   The three and six months ended June 30, 2011 includes a tax benefit of $52 related to a resolution of a tax matter with the IRS for the computation of dividends received deduction for the years 1998, 2000 and 2001.
 
[4]   The three and six months ended June 30, 2011 includes a benefit of $86 related to the release of a deferred tax valuation allowance.
 
[5]   See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax and DAC, for the periods presented herein.

 

3


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND JUNE 30, 2011
                                                                                                 
    LIFE [1]     PROPERTY & CASUALTY [1]     CORPORATE [1]     CONSOLIDATED  
    Dec. 31,     Jun. 30,             Dec. 31,     Jun. 30,             Dec. 31,     Jun. 30,             Dec. 31,     Jun. 30,        
    2010     2011     Change     2010     2011     Change     2010     2011     Change     2010     2011     Change  
Investments
                                                                                               
Fixed maturities, available-for-sale, at fair value
  $ 52,429     $ 52,834       1 %   $ 25,114     $ 25,273       1 %   $ 277     $ 25       (91 %)   $ 77,820     $ 78,132        
Fixed maturities, at fair value using the fair value option
    639       1,214       90 %     10       13       30 %                       649       1,227       89 %
Equity securities, trading, at fair value
    32,820       32,278       (2 %)                                         32,820       32,278       (2 %)
Equity securities, available-for-sale, at fair value
    502       603       20 %     374       378       1 %     97       100       3 %     973       1,081       11 %
Mortgage loans
    3,915       4,578       17 %     372       588       58 %     202       138       (32 %)     4,489       5,304       18 %
Policy loans, at outstanding balance
    2,181       2,188                                                 2,181       2,188        
Limited partnerships and other alternative investments
    957       1,024       7 %     961       1,004       4 %                       1,918       2,028       6 %
Other investments
    1,486       799       (46 %)     83       147       77 %     48       27       (44 %)     1,617       973       (40 %)
Short-term investments
    5,631       5,565       (1 %)     1,117       1,022       (9 %)     1,780       2,274       28 %     8,528       8,861       4 %
 
                                                                       
Total investments
    100,560       101,083       1 %     28,031       28,425       1 %     2,404       2,564       7 %     130,995       132,072       1 %
Cash
    1,809       1,638       (9 %)     250       255       2 %     3       5       67 %     2,062       1,898       (8 %)
Premiums receivable and agents’ balances
    362       335       (7 %)     2,911       3,083       6 %                       3,273       3,418       4 %
Reinsurance recoverables
    1,991       1,970       (1 %)     2,871       2,881                               4,862       4,851        
Deferred policy acquisition costs and present value of future profits
    8,594       8,302       (3 %)     1,263       1,282       2 %                       9,857       9,584       (3 %)
Deferred income taxes
    1,786       1,538       (14 %)     966       763       (21 %)     973       1,061       9 %     3,725       3,362       (10 %)
Goodwill
    470       470             149       149             432       417       (3 %)     1,051       1,036       (1 %)
Property and equipment, net
    398       387       (3 %)     729       620       (15 %)     23       13       (43 %)     1,150       1,020       (11 %)
Other assets
    573       1,651       188 %     952       956             104       136       31 %     1,629       2,743       68 %
Separate account assets
    159,742       157,485       (1 %)                                         159,742       157,485       (1 %)
 
                                                                       
 
                                                                                               
Total assets
  $ 276,285     $ 274,859       (1 %)   $ 38,122     $ 38,414       1 %   $ 3,939     $ 4,196       7 %   $ 318,346     $ 317,469        
 
                                                                       
Future policy benefits, unpaid losses and loss adjustment expenses
    18,573       18,724       1 %   $ 21,025     $ 21,460       2 %   $     $           $ 39,598     $ 40,184       1 %
Other policyholder funds and benefits payable
    44,550       44,073       (1 %)                                         44,550       44,073       (1 %)
Other policyholder funds and benefits payable — International variable annuities
    32,793       32,237       (2 %)                                         32,793       32,237       (2 %)
Unearned premiums
    173       178       3 %     5,005       5,139       3 %     (2 )     (2 )           5,176       5,315       3 %
Debt
                                        6,607       6,614             6,607       6,614        
Consumer notes
    382       368       (4 %)                                         382       368       (4 %)
Other liabilities
    5,604       6,226       11 %     1,756       1,422       (19 %)     1,827       1,870       2 %     9,187       9,518       4 %
Separate account liabilities
    159,742       157,485       (1 %)                                         159,742       157,485       (1 %)
 
                                                                       
Total liabilities
    261,817       259,291       (1 %)     27,786       28,021       1 %     8,432       8,482       1 %     298,035       295,794       (1 %)
 
                                                                       
 
                                                                                               
Common equity, excluding AOCI
    14,247       14,839       4 %     10,379       10,070       (3 %)     (3,870 )     (3,713 )     4 %     20,756       21,196       2 %
Preferred stock
                                        556       556             556       556        
AOCI, net of tax
    221       729     NM       (43 )     323     NM       (1,179 )     (1,129 )     4 %     (1,001 )     (77 )     92 %
 
                                                                       
Total stockholders’ equity
    14,468       15,568       8 %     10,336       10,393       1 %     (4,493 )     (4,286 )     5 %     20,311       21,675       7 %
 
                                                                                               
Total liabilities and equity
  $ 276,285     $ 274,859       (1 %)   $ 38,122     $ 38,414       1 %   $ 3,939     $ 4,196       7 %   $ 318,346     $ 317,469        
 
                                                                       
[1]   Please refer to the basis of presentation on page i for a description of Life, Property & Casualty and Corporate.

 

4


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
                                                         
                                            Year Over        
    THREE MONTHS ENDED     Year     Sequential  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month  
    2010     2010     2010     2011     2011     Change     Change  
DEBT
                                                       
Short-term debt (includes current maturities of long-term debt and capital lease obligations)
  $     $     $ 400     $ 400     $ 400     NM        
Senior notes
    4,879       4,880       4,480       4,480       4,480       (8 %)      
Junior subordinated debentures
    1,721       1,723       1,727       1,730       1,734       1 %      
 
                                         
Total debt [1]
  $ 6,600     $ 6,603     $ 6,607     $ 6,610     $ 6,614              
 
                                         
 
                                                       
STOCKHOLDERS’ EQUITY
                                                       
Common stockholders’ equity, excluding AOCI, net of tax
  $ 19,714     $ 20,159     $ 20,756     $ 21,207     $ 21,196       8 %      
Preferred stock
    556       556       556       556       556              
AOCI, net of tax
    (1,379 )     194       (1,001 )     (764 )     (77 )     94 %     90 %
 
                                         
 
                                                       
Total stockholders’ equity
  $ 18,891     $ 20,909     $ 20,311     $ 20,999     $ 21,675       15 %     3 %
 
                                         
 
                                                       
CAPITALIZATION
                                                       
Total capitalization, including AOCI, net of tax
  $ 25,491     $ 27,512     $ 26,918     $ 27,609     $ 28,289       11 %     2 %
 
Total capitalization, excluding AOCI, net of tax
  $ 26,870     $ 27,318     $ 27,919     $ 28,373     $ 28,366       6 %      
 
                                         
 
                                                       
DEBT TO CAPITALIZATION RATIOS [1]
                                                       
Total debt to capitalization, including AOCI
    25.9 %     24.0 %     24.5 %     23.9 %     23.4 %     (2.5 )     (0.5 )
 
                                                       
Total debt to capitalization, excluding AOCI
    24.6 %     24.2 %     23.7 %     23.3 %     23.3 %     (1.3 )      
 
                                                       
Total rating agency adjusted debt to capitalization [2] [3]
    29.7 %     27.6 %     28.5 %     27.9 %     27.2 %     (2.5 )     (0.7 )
[1]   The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $452, $384, $382, $382 and $368 as of June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011, 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 $1.4 billion, $1.4 billion, $1.5 billion, $1.6 billion and $1.5 billion for the three months ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011, respectively.
 
[3]   Reflects 25% equity credit for all junior subordinated debentures and the discount value of the Allianz junior subordinated debentures. Reflects 100% equity credit for the MCP stock.

 

5


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
                 
    June 30, 2011     December 31, 2010  
 
               
P&C U.S. Statutory Capital and Surplus [1]
  $ 7,627     $ 7,721  
 
               
GAAP Adjustments
               
Deferred policy acquisition costs
    1,282       1,263  
Benefit reserves
    (64 )     (70 )
GAAP unrealized losses on investments, net of tax
    306       (57 )
Goodwill
    149       149  
Non-admitted assets
    1,155       1,247  
Other, net
    (62 )     83  
 
           
P&C GAAP Stockholders’ Equity
  $ 10,393     $ 10,336  
 
           
 
               
Life U.S. Statutory Capital and Surplus [1]
  $ 7,951     $ 7,731  
 
GAAP Adjustments
               
Investment in subsidiaries
    3,060       2,699  
Deferred policy acquisition costs
    8,302       8,594  
Deferred taxes
    (1,257 )     (777 )
Benefit reserves
    (3,739 )     (4,097 )
Unrealized losses on investments, net of impairments
    835       306  
Asset valuation reserve and interest maintenance reserve
    522       420  
Goodwill
    470       461  
Other, net
    (576 )     (869 )
 
           
Life GAAP Stockholders’ Equity
  $ 15,568     $ 14,468  
 
           
[1]   Please refer to the basis of presentation on page i for a description of Life and Property & Casualty.

 

6


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
                                                         
                                            Year Over        
    THREE MONTHS ENDED     Year     Sequential  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month  
    2010     2010     2010     2011     2011     Change     Change  
 
                                                       
Fixed maturities net unrealized gain (loss)
  $ (819 )   $ 389     $ (562 )   $ (306 )   $ 251     NM     NM  
Equities net unrealized gain (loss)
    (92 )     (42 )     (26 )     28       7     NM       (75 %)
Other-than-temporary impairment losses recognized in AOCI
    (171 )     (127 )     (108 )     (103 )     (107 )     37 %     (4 %)
Net deferred gain on cash-flow hedging instruments
    486       565       385       317       388       (20 %)     22 %
 
                                         
Total net unrealized gain (loss)
    (596 )     785       (311 )     (64 )     539     NM     NM  
Foreign currency translation adjustments
    240       404       488       456       514       114 %     13 %
Pension and other postretirement adjustment
    (1,023 )     (995 )     (1,178 )     (1,156 )     (1,130 )     (10 %)     2 %
 
                                         
Total accumulated other comprehensive income (loss)
  $ (1,379 )   $ 194     $ (1,001 )   $ (764 )   $ (77 )     94 %     90 %
 
                                         

 

7


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE
                                                         
    THREE MONTHS ENDED     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
 
Numerator:
                                                       
Net income
  $ 76     $ 666     $ 619     $ 511     $ 24     $ 395     $ 535  
Less: MCP dividends
    11       10       11       10       11       12       21  
Less: Capital Purchase Program (“CPP”) preferred dividends and accretion of discount
                                  482        
 
                                         
Net income (loss) available to common shareholders
    65       656       608       501       13       (99 )     514  
Add: Impact of assumed conversion of preferred shares to common [4]
          10       11       10                   21  
 
                                         
Net income (loss) available to common shareholders and assumed conversion of preferred shares
    65       666       619       511       13       (99 )     535  
 
                                                       
Net income (loss) available to common shareholders
    65       656       608       501       13       (99 )     514  
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings [1]
    (18 )     (40 )     55       (237 )     92       (243 )     (145 )
Less: Income (loss) from discontinued operations
    (99 )     1       35       162       (80 )     (100 )     82  
 
                                         
Core earnings available to common shareholders
    182       695       518       576       1       244       577  
Add: Impact of assumed conversion of preferred shares to common [4]
          10       11       10             12       21  
 
                                         
Core earnings available to common shareholders and assumed conversion of preferred shares
  $ 182     $ 705     $ 529     $ 586     $ 1     $ 256     $ 598  
 
                                                       
Denominator:
                                                       
Weighted average common shares outstanding (basic)
    443.9       444.1       444.3       444.6       445.1       418.8       444.9  
Dilutive effect of stock compensation
    1.1       1.4       1.3       1.8       1.0       1.2       1.4  
Dilutive effect of CPP Warrants [2]
    32.6       29.0       31.4       34.0       32.9       32.5       33.4  
Dilutive effect of Allianz warrants [3]
    2.6                   7.1       3.4       1.9       5.2  
 
                                         
Weighted average common shares outstanding and dilutive potential common shares (diluted), before assumed conversion of preferred shares
    480.2       474.5       477.0       487.5       482.4       454.4       484.9  
Dilutive effect of assumed conversion of MCP [4]
          20.8       20.8       20.7                   20.7  
 
                                         
Weighted average common shares outstanding and dilutive potential common shares (diluted) and assumed conversion of preferred shares
    480.2       495.3       497.8       508.2       482.4       454.4       505.6  
 
                                                       
Basic earnings (losses) per common share
                                                       
Net income (loss) available to common shareholders
  $ 0.15     $ 1.48     $ 1.37     $ 1.13     $ 0.03     $ (0.24 )   $ 1.16  
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings, and MCP dividends
    (0.04 )     (0.08 )     0.12       (0.53 )     0.21       (0.58 )     (0.33 )
Less: Income (loss) from discontinued operations
    (0.22 )           0.08       0.36       (0.18 )     (0.24 )     0.18  
 
                                         
Core earnings available to common shareholders
  $ 0.41     $ 1.56     $ 1.17     $ 1.30     $ 0.00     $ 0.58     $ 1.30  
 
                                                       
Diluted earnings (losses) per common share [5]
                                                       
Net income (loss) available to common shareholders
  $ 0.14     $ 1.38     $ 1.27     $ 1.03     $ 0.03     $ (0.24 )   $ 1.06  
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings, and MCP dividends
          (0.04 )     (0.03 )     (0.02 )                  
 
                                         
Net income (loss) available to common shareholders and assumed conversion of preferred shares
  $ 0.14     $ 1.34     $ 1.24     $ 1.01     $ 0.03     $ (0.24 )   $ 1.06  
 
                                                       
Net income (loss) available to common shareholders
  $ 0.14     $ 1.38     $ 1.27     $ 1.03     $ 0.03     $ (0.24 )   $ 1.06  
Add: Difference arising from shares used for the denominator between net loss and core earnings
                                  0.02        
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings
    (0.04 )     (0.08 )     0.11       (0.47 )     0.19       (0.54 )     (0.30 )
Less: Income (loss) from discontinued operations
    (0.20 )           0.07       0.32       (0.16 )     (0.22 )     0.17  
 
                                         
Core earnings available to common shareholders
    0.38       1.46       1.09       1.18       0.00       0.54       1.19  
Add: Impact of assumed conversion of preferred shares to common
          (0.04 )     (0.03 )     (0.03 )           (0.02 )     (0.01 )
 
                                         
Core earnings available to common shareholders and assumed conversion of preferred shares
  $ 0.38     $ 1.42     $ 1.06     $ 1.15       0.00     $ 0.56     $ 1.18  
 
                                         
[1]   See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax and DAC, for the periods presented herein.
 
[2]   The Hartford issued 52.1 million warrants to purchase The Hartford Common Stock to the U.S. Department of the Treasury on June 26, 2009 at a strike price of $9.79. The declaration of a quarterly common stock dividend of $0.10 during the second quarter of 2011 triggered a provision in The Hartford’s Warrant Agreement with The Bank of New York Mellon resulting in an adjustment to the warrant exercise price to $9.754 from $9.773.
 
[3]   The Hartford issued 69.4 million warrants to purchase The Hartford Common Stock to Allianz on October 17, 2008 at a strike price of $25.23.
 
[4]   The Hartford issued $575 of mandatory convertible preferred stock which, at June 30, 2010 and June 30, 2011, would have been convertible into 20.8 million and 20.7 million weighted average shares of common stock, respectively. However, the impact of applying the “if-converted” method to these shares was anti-dilutive and, therefore, the shares were not included in core earnings available to common shareholders and assumed conversion of preferred shares.
 
[5]   As a result of anti-dilutive impact, in periods of a loss, weighted average common shares outstanding (basic) are used in the calculation of diluted earnings per share.

 

8


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ANALYSIS OF NET REALIZED CAPITAL GAINS (LOSSES) AFTER-TAX AND DAC
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Net Realized Capital Gains (Losses), After-Tax and DAC
                                                                               
 
                                                                               
Gains/losses on sales, net
  $ 150     $ 88     $ (29 )   $ (49 )   $ 151       1 %   NM     $ 121     $ 102       (16 %)
Net impairment losses
    (62 )     (104 )     (38 )     (29 )     (1 )     98 %     97 %     (178 )     (30 )     83 %
Japanese fixed annuity contract hedges, net [1]
    17       7       4       (11 )     15       (12 %)   NM       7       4       (43 %)
Results of variable annuity hedge program
                                                                               
GMWB derivatives, net
    (235 )     132       126       33       (70 )     70 %   NM       (151 )     (37 )     75 %
Macro hedge program
    193       (187 )     (79 )     (196 )     56       (71 %)   NM       118       (140 )   NM  
 
                                                           
Total results of variable annuity hedge program
    (42 )     (55 )     47       (163 )     (14 )     67 %     91 %     (33 )     (177 )   NM  
Other net gain (loss) [2]
    (80 )     24       80       20       (59 )     26 %   NM       (160 )     (39 )     76 %
 
                                                           
 
                                                                               
Total net realized capital gains (losses), after-tax and DAC
  $ (17 )   $ (40 )   $ 64     $ (232 )   $ 92     NM     NM     $ (243 )   $ (140 )     42 %
 
                                                                               
Reconciliation of Net Realized Capital Gains (Losses), net of tax and DAC, excluded from Core Earnings (Losses) to Total Net Realized Capital Gains (Losses) — After-Tax and DAC
                                                                               
 
                                                                               
Total net realized capital losses
  $ (17 )   $ (40 )   $ 64     $ (232 )   $ 92     NM     NM     $ (243 )   $ (140 )     42 %
Less: total net realized capital gains (losses) included in core earnings (losses)
    1             9       5             (100 %)     (100 %)           5     NM  
 
                                                           
Total net realized capital losses, after tax and DAC, excluded from core earnings (losses)
  $ (18 )   $ (40 )   $ 55     $ (237 )   $ 92     NM     NM     $ (243 )   $ (145 )     40 %
 
                                                           
[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 gain (loss) of $(8), $(12), $8, $3 and $(3) would have been recognized as an adjustment to this amount in the three months ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011, respectively, and an estimated realized gain (loss) of $0 and $(5) would have been recognized as an adjustment to this amount in the six months ended June 30, 2010 and 2011, respectively.
 
[2]   Other net gain (loss) includes losses on Japan 3 Win related foreign currency swaps, changes in fair value on non-qualifying derivatives and fixed maturities, at fair value using the fair value option, and other investment gains and losses.

 

9


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPUTATION OF RETURN-ON-EQUITY MEASURES
                                         
    THREE MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,  
    2010     2010     2010     2011     2011  
 
                                       
Numerator [1]:
                                       
Net income available to common shareholders — last 12 months
  $ 126     $ 1,074     $ 1,198     $ 1,872     $ 1,820  
Core earnings available to common shareholders — last 12 months
  $ 1,475     $ 1,588     $ 1,490     $ 2,013     $ 1,832  
 
                                       
Denominator [2]:
                                       
Average common stockholders’ equity, including AOCI
    14,706.0       17,712.5       17,608.0       19,419.5       20,283.0  
Less: Average AOCI
    (3,994.5 )     (1,511.5 )     (2,156.5 )     (1,570.5 )     (728.0 )
 
                             
Average common stockholders’ equity, excluding AOCI
    18,700.5       19,224.0       19,764.5       20,990.0       21,011.0  
 
                                       
ROE (net income last 12 months to common stockholders’ equity, including AOCI) [3]
    0.9 %     6.1 %     6.8 %     9.6 %     9.0 %
ROE (core earnings last 12 months to common stockholders’ equity, excluding AOCI) [3]
    7.9 %     8.3 %     7.5 %     9.6 %     8.7 %
 
[1]   For a reconciliation of net income to core earnings, see page 8.
 
[2]   Average equity is calculated by taking the sum of common stockholders’ equity at the beginning of the twelve month period and common stockholders’ equity at the end of the twelve month period and dividing by 2.
 
[3]   When calculating return-on-equity, the MCP preferred stock is included in average common stockholders’ equity and MCP preferred dividends are added back to net income available to common shareholders and core earnings available to common shareholders.

 

10


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX AND DAC, EXCLUDED FROM CORE EARNINGS (LOSSES) [1]
                                                                                         
    Property &             Total     Total                                                
    Casualty             Commercial     Consumer                     Retirement     Mutual     Total Wealth     Corporate and        
    Commercial     Group Benefits     Markets     Markets     Global Annuity     Life Insurance     Plans     Funds     Management     Other     Consolidated  
Three months ended June 30, 2010
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ 15     $ 23     $ 38     $ 3     $ (110 )   $ 59     $ 7     $     $ (44 )   $ 16     $ 13  
Less: Impacts of DAC
                            53       (7 )                 46             46  
Less: Impacts of tax
    4       9       13       1       (58 )     23       3       (1 )     (33 )     4       (15 )
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ 11     $ 14     $ 25     $ 2     $ (105 )   $ 43     $ 4     $ 1     $ (57 )   $ 12     $ (18 )
 
                                                                 
 
                                                                                       
Three months ended September 30, 2010
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ 8     $     $ 8     $ 1     $ (329 )   $ 11     $ 2     $ (1 )   $ (317 )   $ 48     $ (260 )
Less: Impacts of DAC
                            (202 )     (8 )     10             (200 )     2       (198 )
Less: Impacts of tax
    3       (2 )     1             (42 )     7       (3 )           (38 )     15       (22 )
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ 5     $ 2     $ 7     $ 1     $ (85 )   $ 12     $ (5 )   $ (1 )   $ (79 )   $ 31     $ (40 )
 
                                                                 
 
                                                                                       
Three months ended December 31, 2010
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ 16     $ 16     $ 32     $ 3     $ (143 )   $ (21 )   $ (7 )   $     $ (171 )   $ 37     $ (99 )
Less: Impacts of DAC
                            (192 )     (2 )     1             (193 )     2       (191 )
Less: Impacts of tax
    5       6       11       1       20       (7 )     (3 )     (1 )     9       16       37  
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ 11     $ 10     $ 21     $ 2     $ 29     $ (12 )   $ (5 )   $ 1     $ 13     $ 19     $ 55  
 
                                                                 
 
                                                                                       
Three months ended March 31, 2011
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ (21 )   $ (13 )   $ (34 )   $ (4 )   $ (312 )   $ (32 )   $ (9 )   $ 1     $ (352 )   $ (15 )   $ (405 )
Less: Impacts of DAC
                            (34 )     (3 )     (1 )           (38 )     1       (37 )
Less: Impacts of tax
    (7 )     (5 )     (12 )     (1 )     (100 )     (11 )     (2 )           (113 )     (5 )     (131 )
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ (14 )   $ (8 )   $ (22 )   $ (3 )   $ (178 )   $ (18 )   $ (6 )   $ 1     $ (201 )   $ (11 )   $ (237 )
 
                                                                 
 
                                                                                       
Three months ended June 30, 2011
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ 14     $ 10     $ 24     $ 3     $ 13     $ 10     $ 11     $     $ 34     $ 12     $ 73  
Less: Impacts of DAC
                            51       9       6             66       1       67  
Less: Impacts of tax
    (11 )     (1 )     (12 )     (2 )     (57 )     (5 )     (9 )           (71 )     (1 )     (86 )
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ 25     $ 11     $ 36     $ 5     $ 19     $ 6     $ 14     $     $ 39     $ 12     $ 92  
 
                                                                 
[1]   The above tables show the components of net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses). The impacts of DAC are calculated consistent with the Company’s accounting policy on amortization of DAC.
 
    The impacts of tax are calculated at an effective tax rate of 35% as applicable. Impacts of tax also includes any increase in the deferred tax asset valuation allowance.

 

11


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES), AFTER-TAX AND DAC, EXCLUDED FROM CORE EARNINGS (LOSSES) [1]
                                                                                         
    Property &             Total     Total                                                
    Casualty     Group     Commercial     Consumer                     Retirement     Mutual     Total Wealth     Corporate and        
    Commercial     Benefits     Markets     Markets     Global Annuity     Life Insurance     Plans     Funds     Management     Other     Consolidated  
Six months ended June 30, 2010
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ (12 )   $ 33     $ 21     $ (2 )   $ (308 )   $ 32     $ (7 )   $ 1     $ (282 )   $ 6     $ (257 )
Less: Impacts of DAC
                            (8 )     (7 )     (3 )           (18 )     1       (17 )
Less: Impacts of tax
    12       18       30       3       (66 )     20       9             (37 )     7       3  
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ (24 )   $ 15     $ (9 )   $ (5 )   $ (234 )   $ 19     $ (13 )   $ 1     $ (227 )   $ (2 )   $ (243 )
 
                                                                 
 
                                                                                       
Six months ended June 30, 2011
                                                                                       
 
                                                                                       
Total net realized capital gains (losses) and other, before-tax and DAC, excluded from core earnings (losses)
  $ (7 )   $ (3 )   $ (10 )   $ (1 )   $ (299 )   $ (22 )   $ 2     $ 1     $ (318 )   $ (3 )   $ (332 )
Less: Impacts of DAC
                            17       6       5             28       2       30  
Less: Impacts of tax
    (18 )     (6 )     (24 )     (3 )     (157 )     (16 )     (11 )           (184 )     (6 )     (217 )
 
                                                                 
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses)
  $ 11     $ 3     $ 14     $ 2     $ (159 )   $ (12 )   $ 8     $ 1     $ (162 )   $ 1     $ (145 )
 
                                                                 
[1]   The above tables show the components of net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses). The impacts of DAC are calculated consistent with the Company’s accounting policy on amortization of DAC.
 
    The impacts of tax are calculated at an effective tax rate of 35%, as applicable. Impacts of tax also includes any increase in the deferred tax asset valuation allowance.

 

12


 

COMMERCIAL MARKETS

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 30,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
Earned premiums
  $ 2,477     $ 2,482     $ 2,496     $ 2,526     $ 2,579       4 %     2 %   $ 4,990     $ 5,105       2 %
Fee income
    12       15       14       16       14       17 %     (13 %)     25       30       20 %
Net investment income
    355       333       347       346       345       (3 %)           684       691       1 %
Other revenues
    25       26       24       23       26       4 %     13 %     46       49       7 %
Net realized capital gains (losses)
    36       4       29       (37 )     23       (36 %)   NM       16       (14 )   NM  
 
                                                           
Total revenues
    2,905       2,860       2,910       2,874       2,987       3 %     4 %     5,761       5,861       2 %
 
                                                                               
Losses and loss adjustment expenses
    1,645       1,599       1,767       1,830       1,997       21 %     9 %     3,335       3,827       15 %
Amortization of deferred policy acquisition costs
    355       353       350       350       353       (1 %)     1 %     711       703       (1 %)
Insurance operating costs and other expenses
    468       427       454       472       461       (1 %)     (2 %)     895       933       4 %
 
                                                           
Total benefits and expenses
    2,468       2,379       2,571       2,652       2,811       14 %     6 %     4,941       5,463       11 %
 
                                                                               
Income from continuing operations before income taxes
    437       481       339       222       176       (60 %)     (21 %)     820       398       (51 %)
 
                                                                               
Income tax expense [1]
    122       136       87       44       11       (91 %)     (75 %)     249       55       (78 %)
 
                                                           
 
                                                                               
Income from continuing operations
    315       345       252       178       165       (48 %)     (7 %)     571       343       (40 %)
 
                                                                               
Income (loss) from discontinued operations, net of tax
    3       7       1       160       (3 )   NM     NM       4       157     NM  
 
                                                           
 
                                                                               
Net income
    318       352       253       338       162       (49 %)     (52 %)     575       500       (13 %)
 
                                                                               
Less: Income (loss) from discontinued operations, net of tax
    3       7       1       160       (3 )   NM     NM       4       157     NM  
Less: Net realized capital gains (losses), after-tax, excluded from core earnings [1][2]
    25       7       21       (22 )     36       44 %   NM       (9 )     14     NM  
 
                                                           
 
                                                                               
Core earnings
  $ 290     $ 338     $ 231     $ 200     $ 129       (56 %)     (36 %)   $ 580     $ 329       (43 %)
 
                                                           
     
[1]  
The three and six months ended June 30, 2011 includes a benefit of $21, related to the release of a tax valuation allowance.
 
[2]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein.

 

13


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
OPERATING RESULTS
                                                                                 
          Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 1,388     $ 1,447     $ 1,449     $ 1,645     $ 1,498       8 %     (9 %)   $ 2,900     $ 3,143       8 %
Change in unearned premium reserve
    (27 )     8       (17 )     147       (19 )     30 %   NM       61       128       110 %
 
                                                           
Earned premiums
    1,415       1,439       1,466       1,498       1,517       7 %     1 %     2,839       3,015       6 %
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    855       888       945       962       950       11 %     (1 %)     1,746       1,912       10 %
Current accident year catastrophes
    83       13       18       46       166       100 %   NM       121       212       75 %
Prior accident years [1]
    (139 )     (118 )     (22 )     (6 )     31     NM     NM       (221 )     25     NM  
 
                                                           
Total losses and loss adjustment expenses
    799       783       941       1,002       1,147       44 %     14 %     1,646       2,149       31 %
 
                                                                               
Underwriting expenses [2]
    466       434       443       455       455       (2 %)           902       910       1 %
Dividends to policyholders
    4       4       5       4       4                   (4 )     8     NM  
 
                                                           
Underwriting results
    146       218       77       37       (89 )     NM       NM       295       (52 )     NM  
 
                                                           
 
                                                                               
Net investment income
    245       226       242       242       239       (2 %)     (1 %)     467       481       3 %
Periodic net coupon settlements on credit derivatives, before-tax
    (2 )     (3 )     (2 )     (2 )     (1 )     50 %     50 %     (4 )     (3 )     25 %
Other expenses
    (32 )     (26 )     (45 )     (40 )     (34 )     (6 %)     15 %     (67 )     (74 )     (10 %)
Income tax expense
    (101 )     (121 )     (71 )     (56 )     (16 )     84 %     71 %     (195 )     (72 )     63 %
 
                                                           
Core earnings
    256       294       201       181       99       (61 %)     (45 %)     496       280       (44 %)
 
                                                                               
Add: Net realized capital gains (losses), after-tax [3]
    11       5       11       (14 )     25       127 %   NM       (24 )     11     NM  
 
                                                           
 
                                                                               
Income from continuing operations, net of tax
  $ 267     $ 299     $ 212     $ 167     $ 124       (54 %)     (26 %)   $ 472     $ 291       (38 %)
 
                                                                               
Add: Income (loss) from discontinued operations, net of tax
    3       7       1       160       (3 )   NM     NM       4       157     NM  
 
                                                           
 
                                                                               
Net Income
  $ 270     $ 306     $ 213     $ 327     $ 121       (55 %)     (63 %)   $ 476     $ 448       (6 %)
 
                                                           
     
[1]  
Included within prior accident years development were the following reserve strengthenings (releases):
                                                         
    THREE MONTHS ENDED     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Auto liability
  $ (16 )   $ (26 )   $ (3 )   $ (1 )   $     $ (25 )   $ (1 )
Workers’ compensation
    (10 )     (34 )     (17 )     (1 )     4       (19 )     3  
Package business
    1       (11 )     1       (7 )     3       (9 )     (4 )
General liability
    (32 )     (47 )     (14 )     6       6       (47 )     12  
Professional liability
    (61 )     (8 )     (1 )     (9 )     2       (79 )     (7 )
Fidelity & Surety
    (5 )           4             (2 )     (9 )     (2 )
Commercial Property
    (2 )     1       (3 )     2       (7 )     (14 )     (5 )
Uncollectible reinsurance
    (30 )                             (30 )      
Discount accretion on workers’ compensation
    6       7       6       7       10       13       17  
Catastrophes
    4       1             (5 )     10             5  
Other reserve re-estimates, net
    6       (1 )     5       2       5       (2 )     7  
 
                                         
Total prior accident years development
  $ (139 )   $ (118 )   $ (22 )   $ (6 )   $ 31     $ (221 )   $ 25  
     
[2]  
The three months ended June 30, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes.
 
[3]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein.

 

14


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
PROPERTY & CASUALTY COMMERCIAL
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 1,388     $ 1,447     $ 1,449     $ 1,645     $ 1,498       8 %     (9 %)   $ 2,900     $ 3,143       8 %
Change in unearned premium reserve
    (27 )     8       (17 )     147       (19 )     30 %   NM       61       128       110 %
 
                                                           
Earned premiums
    1,415       1,439       1,466       1,498       1,517       7 %     1 %     2,839       3,015       6 %
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    855       888       945       962       950       11 %     (1 %)     1,746       1,912       10 %
Current accident year catastrophes
    83       13       18       46       166       100 %   NM       121       212       75 %
Prior accident years [1]
    (139 )     (118 )     (22 )     (6 )     31     NM     NM       (221 )     25     NM  
 
                                                           
Total losses and loss adjustment expenses
    799       783       941       1,002       1,147       44 %     14 %     1,646       2,149       31 %
 
                                                                               
Underwriting expenses [2]
    466       434       443       455       455       (2 %)           902       910       1 %
Dividends to policyholders
    4       4       5       4       4                   (4 )     8     NM  
 
                                                           
Underwriting results
  $ 146     $ 218     $ 77     $ 37     $ (89 )     NM       NM     $ 295     $ (52 )     NM  
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    60.3       61.8       64.4       64.3       62.6       (2.3 )     1.7       61.5       63.4       (1.9 )
Current accident year catastrophes
    5.9       0.9       1.2       3.0       11.0       (5.1 )     (8.0 )     4.3       7.0       (2.7 )
Prior accident years [1] [3]
    (9.9 )     (8.2 )     (1.5 )     (0.4 )     2.1       (12.0 )     (2.5 )     (7.8 )     0.8       (8.6 )
 
                                                           
Total losses and loss adjustment expenses
    56.4       54.5       64.2       66.9       75.6       (19.2 )     (8.7 )     57.9       71.3       (13.4 )
 
                                                                               
Expenses
    33.0       30.1       30.2       30.4       30.0       3.0       0.4       31.8       30.2       1.6  
Policyholder dividends
    0.3       0.3       0.3       0.3       0.3                   (0.1 )     0.3       (0.4 )
 
                                                           
 
                                                                               
Combined ratio
    89.6       84.9       94.7       97.5       105.8       (16.2 )     (8.3 )     89.6       101.7       (12.1 )
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    5.9       0.9       1.2       3.0       11.0       (5.1 )     (8.0 )     4.3       7.0       (2.7 )
Prior year
    0.3                   (0.3 )     0.7       (0.4 )     (1.0 )           0.2       (0.2 )
 
                                                           
Catastrophe ratio
    6.2       0.9       1.3       2.7       11.6       (5.4 )     (8.9 )     4.3       7.2       (2.9 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    83.5       84.0       93.5       94.8       94.2       (10.7 )     0.6       85.3       94.5       (9.2 )
 
                                                                               
Combined ratio before catastrophes and prior year development
    93.6       92.2       95.0       94.9       92.8       0.8       2.1       93.1       93.9       (0.8 )
 
                                                           
 
                                                                               
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
                                                                               
 
                                                                               
Standard Commercial Lines Renewal Written Price Increases/(Decreases) [4]
    1 %     1 %     1 %     3 %     3 %     2 %           1 %     3 %     2 %
 
                                                                               
Standard Commercial Lines Policy Count Retention [4]
    83 %     83 %     83 %     83 %     82 %     (1 %)     (1 %)     84 %     83 %     (1 %)
 
                                                                               
New Business Premium $
  $ 276     $ 279     $ 270     $ 303     $ 286       4 %     (5 %)   $ 573     $ 589       3 %
 
                                                                               
Standard Commercial Lines Policies in Force [4]
    1,191,477       1,201,862       1,211,047       1,229,758       1,250,152       5 %     2 %                        
     
[1]  
Refer to footnote 1 on page 14 for a summary of reserve strengthenings (releases) that are included within prior accident years development.
 
[2]  
The three months ended June 30, 2010 included taxes, licenses and fees reserve strengthening of $20 due to an increase in the assessment for New York state funds and taxes.
 
[3]  
Included in the prior year losses and loss adjustment expenses ratio is prior accident year development on catastrophe losses.
 
[4]  
Standard commercial lines consist of The Hartford’s small commercial and middle market lines of business.

 

15


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Direct premiums
  $ 1,060     $ 1,036     $ 1,025     $ 1,024     $ 1,058             3 %   $ 2,139     $ 2,082       (3 %)
Reinsurance premiums
    2       7       5       4       4       100 %           12       8       (33 %)
 
                                                           
Net premiums
    1,062       1,043       1,030       1,028       1,062             3 %     2,151       2,090       (3 %)
 
                                                                               
Administrative Services Only (“ASO”) fees
    9       10       10       11       11       22 %           19       22       16 %
Other fees
    3       5       4       5       3             (40 %)     6       8       33 %
 
                                                           
Total fee income
    12       15       14       16       14       17 %     (13 %)     25       30       20 %
 
                                                           
Total premiums and other considerations
    1,074       1,058       1,044       1,044       1,076             3 %     2,176       2,120       (3 %)
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    101       96       95       95       96       (5 %)     1 %     200       191       (5 %)
Net investment income on assigned capital
    9       11       10       9       10       11 %     11 %     17       19       12 %
 
                                                           
Total net investment income
    110       107       105       104       106       (4 %)     2 %     217       210       (3 %)
Net realized capital losses — core
          (1 )     (1 )     (1 )                 100 %     (1 )     (1 )      
 
                                                           
Total core revenues
    1,184       1,164       1,148       1,147       1,182             3 %     2,392       2,329       (3 %)
Net realized gains (losses), before tax and DAC, excluded from core revenues
    23             16       (13 )     10       (57 %)   NM       33       (3 )   NM  
 
                                                           
Total revenues
    1,207       1,164       1,164       1,134       1,192       (1 %)     5 %     2,425       2,326       (4 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits
    300       296       286       340       319       6 %     (6 %)     635       659       4 %
Other contract benefits
    445       479       481       488       478       7 %     (2 %)     905       966       7 %
Change in reserve
    101       41       59             53       (48 %)           149       53       (64 %)
 
                                                           
Total benefits and losses
    846       816       826       828       850             3 %     1,689       1,678       (1 %)
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    138       139       125       136       136       (1 %)           282       272       (4 %)
Operating expenses
    129       127       133       133       135       5 %     2 %     262       268       2 %
Premium taxes and other expenses [1]
    24       22       25       31       23       (4 %)     (26 %)     46       54       17 %
 
                                                           
Subtotal — expenses before deferral
    291       288       283       300       294       1 %     (2 %)     590       594       1 %
Deferred policy acquisition costs
    (10 )     (13 )     (11 )     (14 )     (13 )     (30 %)     7 %     (26 )     (27 )     (4 %)
 
                                                           
Total other insurance expense
    281       275       272       286       281             (2 %)     564       567       1 %
Amortization of deferred policy acquisition costs
    15       15       15       14       14       (7 %)           31       28       (10 %)
 
                                                           
Total benefits and expenses
    1,142       1,106       1,113       1,128       1,145             2 %     2,284       2,273        
Core earnings before income taxes
    42       58       35       19       37       (12 %)     95 %     108       56       (48 %)
Income tax expense
    8       14       5             7       (12 %)           24       7       (71 %)
 
                                                           
Core Earnings
    34       44       30       19       30       (12 %)     58 %     84       49       (42 %)
Net realized gains (losses), net of tax and DAC, excluded from core earnings [2]
    14       2       10       (8 )     11       (21 %)   NM       15       3       (80 %)
 
                                                           
Net income
  $ 48     $ 46     $ 40     $ 11     $ 41       (15 %)     NM     $ 99     $ 52       (47 %)
 
                                                           
 
                                                                               
After-Tax Profit as % of Revenues
                                                                               
Core earnings
    2.9 %     3.8 %     2.6 %     1.7 %     2.6 %     (0.3 )     0.9       3.6 %     2.1 %     (1.5 )
Net income
    4.0 %     4.0 %     3.4 %     1.0 %     3.6 %     (0.4 )     2.6       4.2 %     2.3 %     (1.9 )
     
[1]  
The three months ended March 31, 2011 includes a one-time payment to a third-party administrator of $8, before-tax.
 
[2]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.

 

16


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL MARKETS
GROUP BENEFITS
SUPPLEMENTAL DATA
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
PREMIUMS
                                                                               
Fully Insured — Ongoing Premiums
                                                                               
Group disability
  $ 469     $ 472     $ 470     $ 462     $ 452       (4 %)     (2 %)   $ 950     $ 914       (4 %)
Group life
    514       513       513       516       512             (1 %)     1,026       1,028        
Other
    58       58       47       50       49       (16 %)     (2 %)     117       99       (15 %)
 
                                                           
Total fully insured — ongoing premiums
  $ 1,041     $ 1,043     $ 1,030     $ 1,028     $ 1,013       (3 %)     (1 %)   $ 2,093     $ 2,041       (2 %)
 
                                                           
 
                                                                               
Total buyouts [1]
    21                         49       133 %           58       49       (16 %)
 
                                                           
Total premiums
    1,062       1,043       1,030       1,028     $ 1,062             3 %     2,151       2,090       (3 %)
Group disability — premium equivalents [2]
    98       101       99       105       107       9 %     2 %     194       212       9 %
 
                                                           
Total premiums and premium equivalent
  $ 1,160     $ 1,144     $ 1,129     $ 1,133     $ 1,169       1 %     3 %   $ 2,345     $ 2,302       (2 %)
 
                                                           
 
                                                                               
SALES (GROSS ANNUALIZED NEW PREMIUMS)
                                                                               
Fully Insured — Ongoing Sales
                                                                               
Group disability
  $ 43     $ 37     $ 37     $ 109     $ 41       (5 %)     (62 %)   $ 163     $ 150       (8 %)
Group life
    55       58       47       128       48       (13 %)     (63 %)     227       176       (22 %)
Other
    3       5       2       7       3             (57 %)     7       10       43 %
 
                                                           
Total fully insured — ongoing sales
    101       100       86       244       92       (9 %)     (62 %)     397       336       (15 %)
 
                                                           
 
                                                                               
Total buyouts [1]
    21                         49       133 %           58       49       (16 %)
 
                                                           
Total sales
    122       100       86       244       141       16 %     (42 %)     455       385       (15 %)
Group disability premium equivalents [2]
    12       18       8       47       22       83 %     (53 %)     66       69       5 %
 
                                                           
Total sales and premium equivalents
  $ 134     $ 118     $ 94     $ 291     $ 163       22 %     (44 %)   $ 521     $ 454       (13 %)
 
                                                           
 
                                                                               
RATIOS [3]
                                                                               
Loss Ratio
    78.3 %     77.1 %     79.1 %     79.3 %     78.0 %     (0.3 )     (1.3 )     77.0 %     78.7 %     1.7  
Expense Ratio [4]
    28.1 %     27.4 %     27.5 %     28.7 %     28.7 %     0.6             28.1 %     28.7 %     0.6  
 
                                                                               
GAAP RESERVES [5]
                                                                               
Group disability
  $ 4,996     $ 5,069     $ 5,127     $ 5,164       5,225       5 %     1 %                        
Group life
    1,269       1,244       1,250       1,217       1,210       (5 %)     (1 %)                        
Other
    83       82       79       76       75       (10 %)     (1 %)                  
 
                                                           
Total GAAP reserves
  $ 6,348     $ 6,395     $ 6,456     $ 6,457     $ 6,510       3 %     1 %                  
 
                                                           
     
[1]  
Takeover of open claim liabilities and other non-recurring premium amounts.
 
[2]  
ASO fees and claims under claim management agreements.
 
[3]  
Ratios calculated excluding the effects of buyout premiums.
 
[4]  
The three months ended March 31, 2011 includes a one-time payment to a third-party administrator totaling 0.7 points.
 
[5]  
Reserve balances for the three months ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011 are net of reinsurance recoverables of $199, $200, $209, $212, and 219, respectively.

 

17


 

CONSUMER MARKETS

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
Earned premiums
  $ 995     $ 985     $ 971     $ 956     $ 939       (6 %)     (2 %)   $ 1,991     $ 1,895       (5 %)
Net investment income
    49       46       48       50       49             (2 %)     93       99       6 %
Other revenues
    40       40       49       40       36       (10 %)     (10 %)     83       76       (8 %)
Net realized capital gains (losses)
    2       1       2       (4 )     2           NM       (3 )     (2 )     33 %
 
                                                           
Total revenues
    1,086       1,072       1,070       1,042       1,026       (6 %)     (2 %)     2,164       2,068       (4 %)
 
                                                                               
Losses and loss adjustment expenses
    822       689       739       599       904       10 %     51 %     1,523       1,503       (1 %)
Amortization of deferred policy acquisition costs
    168       167       164       161       160       (5 %)     (1 %)     336       321       (4 %)
Insurance operating costs and other expenses [1]
    123       118       128       120       240       95 %     100 %     247       360       46 %
 
                                                           
Total benefits and expenses
    1,113       974       1,031       880       1,304       17 %     48 %     2,106       2,184       4 %
 
                                                                               
Income (loss) before income taxes
    (27 )     98       39       162       (278 )     NM       NM       58       (116 )     NM  
 
                                                                               
Income tax expense (benefit)
    (14 )     28       9       52       (104 )   NM     NM       15       (52 )   NM  
 
                                                           
 
                                                                               
Net income (loss)
    (13 )     70       30       110       (174 )     NM       NM       43       (64 )     NM  
 
                                                                               
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (losses) [2]
    2       1       2       (3 )     5       150 %   NM       (5 )     2     NM  
 
                                                           
 
                                                                               
Core earnings (losses)
  $ (15 )   $ 69     $ 28     $ 113     $ (179 )     NM       NM     $ 48     $ (66 )     NM  
 
                                                           
     
[1]  
The three and six months ended June 30, 2011 includes a charge of $113, before-tax, related to a discontinued software program.
 
[2]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein.

 

18


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 1,033     $ 1,014     $ 896     $ 884     $ 969       (6 %)     10 %   $ 1,976     $ 1,853       (6 %)
Change in unearned premium reserve
    38       29       (75 )     (72 )     30       (21 %)   NM       (15 )     (42 )     (180 %)
 
                                                           
Earned premiums
    995       985       971       956       939       (6 %)     (2 %)     1,991       1,895       (5 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    686       681       703       616       623       (9 %)     1 %     1,353       1,239       (8 %)
Current accident year catastrophes
    146       42       71       32       281       92 %   NM       187       313       67 %
Prior accident years [1]
    (10 )     (34 )     (35 )     (49 )           100 %     100 %     (17 )     (49 )     (188 %)
 
                                                           
Total losses and loss adjustment expenses
    822       689       739       599       904       10 %     51 %     1,523       1,503       (1 %)
 
                                                                               
Underwriting expenses
    241       238       237       233       236       (2 %)     1 %     482       469       (3 %)
 
                                                           
Underwriting results
    (68 )     58       (5 )     124       (201 )     (196 %)     NM       (14 )     (77 )     NM  
 
                                                           
 
                                                                               
Net investment income
    49       46       48       50       49             (2 %)     93       99       6 %
Periodic net coupon settlements on credit derivatives, before-tax
    (1 )           (1 )           (1 )         NM       (1 )     (1 )      
Other expenses [2]
    (10 )     (7 )     (6 )     (8 )     (128 )   NM     NM       (18 )     (136 )   NM  
Income tax benefit (expense)
    15       (28 )     (8 )     (53 )     102     NM     NM       (12 )     49     NM  
 
                                                           
Core earnings (losses)
    (15 )     69       28       113       (179 )     NM       NM       48       (66 )     NM  
 
                                                                               
Add: Net realized capital gains (losses), after-tax [3]
    2       1       2       (3 )     5       150 %   NM       (5 )     2     NM  
 
                                                           
 
                                                                               
Net income (loss)
  $ (13 )   $ 70     $ 30     $ 110     $ (174 )     NM       NM     $ 43     $ (64 )     NM  
 
                                                           
     
[1]  
Included within prior accident years development were the following reserve strengthenings (releases):
                                                         
    THREE MONTHS ENDED     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Auto liability
  $ (24 )   $ (41 )   $ (33 )   $ (55 )   $ (9 )   $ (41 )   $ (64 )
Homeowners
    9       3       (4 )     (14 )     1       24       (13 )
Catastrophes
    4       8       (1 )     19       9       3       28  
Other reserve re-estimates, net
    1       (4 )     3       1       (1 )     (3 )      
 
                                         
Total prior accident years development
  $ (10 )   $ (34 )   $ (35 )   $ (49 )   $     $ (17 )   $ (49 )
     
[2]  
The three and six months ended June 30, 2011 includes a charge of $113, before-tax, related to a discontinued software program.
 
[3]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein.

 

19


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
UNDERWRITING RESULTS
                                                                               
Written premiums
  $ 1,033     $ 1,014     $ 896     $ 884     $ 969       (6 %)     10 %   $ 1,976     $ 1,853       (6 %)
Change in unearned premium reserve
    38       29       (75 )     (72 )     30       (21 %)   NM       (15 )     (42 )     (180 %)
 
                                                           
Earned premiums
    995       985       971       956       939       (6 %)     (2 %)     1,991       1,895       (5 %)
 
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    686       681       703       616       623       (9 %)     1 %     1,353       1,239       (8 %)
Current accident year catastrophes
    146       42       71       32       281       92 %   NM       187       313       67 %
Prior accident years [1]
    (10 )     (34 )     (35 )     (49 )           100 %     100 %     (17 )     (49 )     (188 %)
 
                                                           
Total losses and loss adjustment expenses
    822       689       739       599       904       10 %     51 %     1,523       1,503       (1 %)
 
                                                                               
Underwriting expenses
    241       238       237       233       236       (2 %)     1 %     482       469       (3 %)
 
                                                           
Underwriting results
  $ (68 )   $ 58     $ (5 )   $ 124     $ (201 )     (196 %)     NM     $ (14 )   $ (77 )     NM  
 
                                                           
 
                                                                               
UNDERWRITING RATIOS
                                                                               
Losses and loss adjustment expenses
                                                                               
Current accident year before catastrophes
    69.0       69.2       72.4       64.3       66.5       2.5       (2.2 )     68.0       65.4       2.6  
Current accident year catastrophes
    14.6       4.3       7.3       3.4       29.9       (15.3 )     (26.5 )     9.4       16.5       (7.1 )
Prior accident years [1]
    (0.9 )     (3.5 )     (3.6 )     (5.1 )           (0.9 )     (5.1 )     (0.8 )     (2.6 )     1.8  
 
                                                           
Total losses and loss adjustment expenses
    82.6       70.0       76.0       62.6       96.4       (13.8 )     (33.8 )     76.5       79.4       (2.9 )
 
                                                                               
Expenses
    24.3       24.1       24.4       24.4       25.1       (0.8 )     (0.7 )     24.2       24.7       (0.5 )
 
                                                           
 
                                                                               
Combined ratio
    106.9       94.1       100.4       87.0       121.5       (14.6 )     (34.5 )     100.7       104.1       (3.4 )
 
                                                           
 
                                                                               
Catastrophes
                                                                               
Current year
    14.6       4.3       7.3       3.4       29.9       (15.3 )     (26.5 )     9.4       16.5       (7.1 )
Prior year
    0.5       0.7             2.0       1.0       (0.5 )     1.0       0.2       1.5       (1.3 )
 
                                                           
Catastrophe ratio
    15.0       5.1       7.2       5.4       30.8       (15.8 )     (25.4 )     9.5       18.0       (8.5 )
 
                                                           
 
                                                                               
Combined ratio before catastrophes
    91.8       89.1       93.2       81.6       90.6       1.2       (9.0 )     91.2       86.1       5.1  
 
                                                                               
Combined ratio before catastrophes and prior year development
    93.2       93.3       96.8       88.7       91.6       1.6       (2.9 )     92.2       90.1       2.1  
 
                                                           
 
                                                                               
PRODUCT
                                                                               
Automobile
    98.7       93.3       103.1       85.7       99.5       (0.8 )     (13.8 )     96.2       92.5       3.7  
Homeowners
    128.8       96.3       94.1       89.2       172.8       (44.0 )     (83.6 )     112.9       130.8       (17.9 )
 
                                                           
Total
    106.9       94.1       100.4       87.0       121.5       (14.6 )     (34.5 )     100.7       104.1       (3.4 )
 
                                                           
     
[1]  
Refer to footnote 1 on page 19 for a summary of reserve strengthenings (releases) that are included within prior accident years development.

 

20


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
WRITTEN AND EARNED PREMIUMS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec, 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
BUSINESS UNIT
                                                                               
WRITTEN PREMIUMS [1]
                                                                               
 
                                                                               
AARP
  $ 752     $ 743     $ 653     $ 647     $ 724       (4 %)     12 %   $ 1,423     $ 1,371       (4 %)
Agency
    267       258       231       224       233       (13 %)     4 %     525       457       (13 %)
Other
    14       13       12       13       12       (14 %)     (8 %)     28       25       (11 %)
 
                                                           
Total
  $ 1,033     $ 1,014     $ 896     $ 884     $ 969       (6 %)     10 %   $ 1,976     $ 1,853       (6 %)
 
                                                                               
EARNED PREMIUMS [1]
                                                                               
 
                                                                               
AARP
  $ 716     $ 712     $ 707     $ 698     $ 694       (3 %)     (1 %)   $ 1,431     $ 1,392       (3 %)
Agency
    264       259       251       243       234       (11 %)     (4 %)     530       477       (10 %)
Other
    15       14       13       15       11       (27 %)     (27 %)     30       26       (13 %)
 
                                                           
Total
  $ 995     $ 985     $ 971     $ 956     $ 939       (6 %)     (2 %)   $ 1,991     $ 1,895       (5 %)
 
                                                           
 
                                                                               
PRODUCT LINE
                                                                               
WRITTEN PREMIUMS [1]
                                                                               
 
                                                                               
Automobile
  $ 719     $ 700     $ 630     $ 641     $ 665       (8 %)     4 %   $ 1,415     $ 1,306       (8 %)
Homeowners
    314       314       266       243       304       (3 %)     25 %     561       547       (2 %)
 
                                                           
Total
  $ 1,033     $ 1,014     $ 896     $ 884     $ 969       (6 %)     10 %   $ 1,976     $ 1,853       (6 %)
 
                                                                               
EARNED PREMIUMS [1]
                                                                               
 
                                                                               
Automobile
  $ 711     $ 698     $ 684     $ 672     $ 657       (8 %)     (2 %)   $ 1,424     $ 1,329       (7 %)
Homeowners
    284       287       287       284       282       (1 %)     (1 %)     567       566        
 
                                                           
Total
  $ 995     $ 985     $ 971     $ 956     $ 939       (6 %)     (2 %)   $ 1,991     $ 1,895       (5 %)
 
                                                           
 
                                                                               
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
                                                                               
 
                                                                               
Renewal Written Price Increases
                                                                               
Automobile
    6 %     8 %     7 %     7 %     6 %           (1 %)     6 %     6 %      
Homeowners
    9 %     11 %     10 %     9 %     9 %                 9 %     9 %      
 
                                                                               
Policy Count Retention
                                                                               
Automobile
    84 %     82 %     81 %     82 %     82 %     (2 %)           84 %     82 %     (2 %)
Homeowners
    85 %     84 %     84 %     83 %     84 %     (1 %)     1 %     85 %     83 %     (2 %)
 
                                                                               
New Business Premium $
                                                                               
Automobile
  $ 82     $ 74     $ 62     $ 66     $ 75       (9 %)     14 %   $ 175     $ 141       (19 %)
Homeowners
  $ 30     $ 26     $ 20     $ 19     $ 23       (23 %)     21 %   $ 60     $ 42       (30 %)
 
                                                                               
Policies in force
                                                                               
Automobile
    2,341,594       2,287,845       2,226,351       2,178,719       2,137,351       (9 %)     (2 %)                        
Homeowners
    1,479,749       1,455,921       1,426,107       1,402,264       1,380,301       (7 %)     (2 %)                        
     
[1]  
The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.

 

21


 

WEALTH MANAGEMENT

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
OPERATING RESULTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
REVENUES
                                                                               
Earned premiums [1]
  $ 36     $ 45     $ 39     $ 38     $ 26       (28 %)     (32 %)   $ 53     $ 64       21 %
Fee income [1]
    1,117       1,108       1,164       1,142       1,146       3 %           2,237       2,288       2 %
Net investment income (loss)
                                                                               
Securities available-for-sale and other
    673       649       640       656       660       (2 %)     1 %     1,280       1,316       3 %
Equity securities held for trading [2]
    (2,649 )     1,043       131       804       (597 )     77 %   NM       (1,948 )     207     NM  
 
                                                           
Total net investment income (loss)
    (1,976 )     1,692       771       1,460       63     NM       (96 %)     (668 )     1,523     NM  
Net realized capital gains — core
    7       3       8       2       6       (14 %)   NM       7       8       14 %
 
                                                           
Total core revenues
    (816 )     2,848       1,982       2,642       1,241     NM       (53 %)     1,629       3,883       138 %
 
                                                           
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues
    (44 )     (317 )     (171 )     (352 )     34     NM     NM       (282 )     (318 )     (13 %)
 
                                                           
Total revenues
    (860 )     2,531       1,811       2,290       1,275     NM       (44 %)     1,347       3,565       165 %
 
                                                           
 
                                                                               
BENEFITS AND EXPENSES
                                                                               
Benefits, losses and loss adjustment expenses [1][3]
    949       706       761       747       780       (18 %)     4 %     1,694       1,527       (10 %)
Benefits, losses and loss adjustment expenses — Returns credited on International variable annuities [2]
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
Amortization of deferred policy acquisition costs and present value of future profits [1]
    372       90       176       188       264       (29 %)     40 %     554       452       (18 %)
Insurance operating costs and other expenses
    438       442       468       461       452       3 %     (2 %)     873       913       5 %
 
                                                           
Total benefits and expenses
    (890 )     2,281       1,536       2,199       899     NM       (59 %)     1,173       3,098       164 %
 
                                                           
 
                                                                               
CORE EARNINGS
                                                                               
Core earnings before income taxes
    74       567       446       443       342     NM       (23 %)     456       785       72 %
Income tax expense (benefit) [1][3][4]
    (10 )     165       120       114       30     NM       (74 %)     77       144       87 %
 
                                                           
Core earnings
    84       402       326       329       312     NM       (5 %)     379       641       69 %
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [1][4][5]
    (57 )     (79 )     13       (201 )     39     NM     NM       (227 )     (162 )     29 %
Income (loss) from discontinued operations
    (1 )     (3 )     36                   100 %           (2 )           100 %
 
                                                           
Net income
    26       320       375       128       351     NM       174 %     150       479     NM  
 
                                                           
[1]  
The DAC unlock recorded in the periods presented below affected each income statement line item as follows:
                                                         
    THREE MONTHS ENDED     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Earned Premiums
  $ (1 )   $ (5 )   $     $     $ 1     $ (1 )   $ 1  
Fee Income
    8       5             (1 )     2       12       1  
Benefits, losses and loss adjustment expense
    135       (124 )     3       (49 )     8       84       (41 )
Amortization of deferred policy acquisition costs
    122       (136 )     (85 )     (45 )     27       56       (18 )
Income tax expense (benefit)
    (82 )     91       33       32       (11 )     (40 )     21  
 
                                         
Core earnings (loss)
    (168 )     169       49       61       (21 )     (89 )     40  
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    (62 )     27       15       1       (56 )     (56 )     (55 )
Loss from discontinued operations
          (3 )     (1 )                        
 
                                         
Net income (loss)
    (230 )     193       63       62       (77 )     (145 )     (15 )
[2]  
Includes dividend income and mark-to-market effects of trading securities supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within interest credited.
 
[3]  
The three and six months ended June 30, 2011 includes a tax benefit of $52 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001.
 
[4]  
The three and six months ended June 30, 2011 includes a benefit of $55 related to the release of a deferred tax valuation allowance.
 
[5]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.

 

22


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
FINANCIAL HIGHLIGHTS EXCLUDING IMPACTS OF DAC UNLOCKS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
CORE EARNINGS BY SEGMENT
                                                                               
 
Global Annuity
  $ 153     $ 146     $ 191     $ 169     $ 224       46 %     33 %   $ 283     $ 393       39 %
 
                                                                               
Life Insurance
    63       57       51       55       62       (2 %)     13 %     112       117       4 %
 
                                                                               
Retirement Plans
    13       10       11       17       20       54 %     18 %     23       37       61 %
 
                                                                               
Mutual Funds
    23       20       24       27       27       17 %           50       54       8 %
 
                                                           
Wealth Management core earnings, excluding DAC Unlock
    252       233       277       268       333       32 %     24 %     468       601       28 %
DAC unlock impacts on net income
    (230 )     193       63       62       (77 )     67 %   NM       (145 )     (15 )     90 %
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    5       (106 )     (2 )     (202 )     95     NM     NM       (171 )     (107 )     37 %
Income (loss) from discontinued operations
    (1 )           37                   100 %           (2 )           100 %
 
                                                           
Wealth Management net income
    26       320       375       128       351     NM       174 %     150       479     NM  
 
                                                                               
DAC UNLOCK IMPACT ON REVENUES
                                                                               
 
                                                                               
Global Annuity
  $ 1     $ 3     $ (2 )   $ (1 )   $ 2       100 %   NM     $     $ 1        
 
                                                                               
Life Insurance
    6       (3 )     2             1       (83 %)   NM       11       1       (91 %)
 
                                                           
Total DAC unlock impact on core revenues
    7                   (1 )     3       (57 %)   NM       11       2       (82 %)
DAC unlock impact on net realized gains (losses), before tax and DAC, excluded from core earnings
    5       (1 )     (1 )           3       (40 %)   NM       2       3       50 %
 
                                                           
Total DAC unlock impact on revenues
    12       (1 )     (1 )     (1 )     6       (50 %)   NM     13       5       (62 %)
 
                                                                               
DAC UNLOCK IMPACT ON CORE EARNINGS (LOSSES) BY SEGMENT
                                                                               
 
                                                                               
Global Annuity
    (162 )     116       47       59       (15 )     91 %   NM       (83 )     44     NM  
 
                                                                               
Life Insurance
    (3 )     28       (1 )     (2 )     (2 )     33 %           (4 )     (4 )      
 
                                                                               
Retirement Plans
    (3 )     25       3       4       (4 )     (33 %)   NM       (2 )           100 %
 
                                                           
DAC unlock impact on core earnings
(losses) [1]
    (168 )     169       49       61       (21 )     88 %   NM       (89 )     40     NM  
 
                                                           
 
                                                                               
DAC unlock impact on net realized gains (losses), net of tax and DAC, excluded from core earnings [2] [3]
    (62 )     27       15       1       (56 )     10 %   NM       (56 )     (55 )     2 %
 
                                                                               
DAC unlock impact from discontinued operations
          (3 )     (1 )                                          
 
                                                                               
DAC unlock impact on net income (loss)
  $ (230 )   $ 193     $ 63     $ 62     $ (77 )     67 %   NM     $ (145 )   $ (15 )     90 %
[1]   Included in the three months ended September 30, 2010 are the impacts of assumption updates of $(31), $28 and $18 for Global Annuity, Life Insurance and Retirement Plans, respectively.
 
[2]   Included in the three months ended June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011 and June 30, 2011 are income tax expense (benefits) of $(40), $13, $11, $0 and $(28), respectively. Included in the six months ended June 30, 2010 and 2011 are income tax benefits of $(35) and $(28), respectively.
 
[3]   Included in the three months ended September 30, 2010 are the impacts of assumption updates of $24, $1 and $(5) for Global Annuity, Life Insurance and Retirement Plans, respectively.

 

23


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
DEFERRED POLICY ACQUISITION COSTS and PRESENT VALUE OF FUTURE PROFITS (“DAC”)
                                                         
                                                    Total  
    U.S.     International     Other     Life     Retirement     Mutual     Wealth  
    Annuity     Annuity     Annuity     Insurance     Plans     Funds     Management  
YEAR-TO-DATE
                                                       
Balance, December 31, 2010
  $ 3,216     $ 1,680     $ 85     $ 2,661     $ 842     $ 43     $ 8,527  
Adjustments to unrealized gains and losses on securities available — for — sale and other
    240       (63 )     1       99       (25 )     1       253  
 
                                         
Balance excluding adjustments to unrealized gains and losses on securities available — for — sale and other
    3,456       1,617       86       2,760       817       44       8,780  
Capitalization
    31                   148       66       20       265  
Amortization — Deferred Policy Acquisition Costs
    (221 )     (124 )     (5 )     (54 )     (34 )     (24 )     (462 )
Amortization — Present Value of Future Profits
    (2 )           1       (7 )                 (8 )
Amortization — Realized Capital Gains / Losses
    (1 )     68       (1 )     (7 )     (4 )           55  
Amortization — Unlock — Core
    27       (1 )     (1 )     (7 )     0             18  
Amortization — Unlock — Non-core
    (78 )     (1 )     1       1       (1 )           (78 )
Effect of Currency Translation Adjustment
          8                               8  
 
                                         
Balance, June 30, 2011
    3,212       1,567       81       2,834       844       40       8,578  
Adjustments to unrealized gains and losses on securities available — for — sale and other
    (215 )     61             (153 )     (33 )     (2 )     (342 )
 
                                         
Balance, June 30, 2011 including adjustments to unrealized gains and losses on securities available-for-sale and other
  $ 2,997     $ 1,628     $ 81     $ 2,681     $ 811     $ 38     $ 8,236  
 
                                         

 

24


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
SUPPLEMENTAL DATA — ANNUITY DEATH AND LIVING BENEFITS
                                         
    As of     As of     As of     As of     As of  
    June 30,     September 30,     December 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
U.S. VARIABLE ANNUITY BUSINESS
                                       
S&P 500 Index Value at end of period
    1,030.71       1,141.20       1,257.64       1,325.83       1,320.64  
 
                                       
Total Account Value with Guaranteed Minimum Death Benefits (“GMDB”)
  $ 82,857     $ 87,742     $ 90,831     $ 90,968     $ 87,303  
GMDB Gross net amount of risk
    20,883       15,148       10,746       8,616       8,598  
% of GMDB NAR reinsured
    52 %     55 %     60 %     63 %     64 %
GMDB Retained net amount of risk
    10,040       6,756       4,331       3,152       3,136  
GMDB net GAAP liability [1]
    480       407       367       348       347  
 
                                       
Total Account Value with Guaranteed Minimum Withdrawal Benefits (“GMWB”)
    41,085       43,504       44,803       44,616       42,501  
GMWB Gross net amount of risk
    4,090       2,321       1,296       744       745  
% of GMWB NAR reinsured
    17 %     16 %     17 %     20 %     21 %
GMWB Retained net amount of risk
    3,392       1,941       1,080       595       592  
GMWB Net GAAP Liability [2]
    2,597       2,083       1,330       1,074       1,176  
 
                                       
JAPAN VARIABLE ANNUITY BUSINESS
                                       
Yen / $
    88.5       83.5       81.1       82.9       80.8  
 
                                       
Total Account Value with GMDB
  $ 28,888     $ 30,912     $ 31,249     $ 30,778     $ 30,785  
GMDB Gross net amount of risk
    8,870       8,569       8,847       7,962       8,469  
% of GMDB NAR reinsured
    14 %     16 %     14 %     15 %     15 %
GMDB Retained net amount of risk
    7,597       7,233       7,593       6,750       7,233  
 
                                       
Total Account Value with Guaranteed Minimum Income Benefits (“GMIB”)
    26,731       28,655       28,835       28,495       28,526  
GMIB Retained net amount of risk [2]
    5,846       5,410       5,777       4,991       5,442  
GMDB/GMIB net GAAP liability [1]
    616       592       652       607       635  
[1]   For the three months ended June 30, 2010, there was a increase to the GMDB/GMIB liability as a result of the unlock, for U.S. and Japan variable annuity businesses of $71 and $58, respectively. For the three months ended September 30, 2010 the liability decreased by $(69) and $(59), respectively. For the three months ended December 31, 2010 the amounts were $(51) and $(46), respectively. For the three months ended March 31, 2011 the amounts were $(25) and $(21), respectively. For the three months ended June 30, 2011, the amounts were $(10) and $17, respectively.
 
[2]   Policies with a guaranteed living benefit (a GMWB in the US or a GMIB in Japan) also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown, however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to $0. When a policy goes into benefit status on a GMIB, its GMDB NAR is released.

 

25


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
GLOBAL ANNUITY
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity fees
  $ 534     $ 533     $ 553     $ 545     $ 541       1 %     (1 %)   $ 1,076     $ 1,086       1 %
Other fees [1]
    45       58       55       47       51       13 %     9 %     90       98       9 %
 
                                                           
Total fee income
    579       591       608       592       592       2 %           1,166       1,184       2 %
 
                                                                             
Direct premiums
    82       97       86       81       70       (15 %)     (14 %)     142       151       6 %
Reinsurance premiums [1]
    (25 )     (28 )     (23 )     (22 )     (21 )     16 %     5 %     (48 )     (43 )     10 %
 
                                                           
Net premiums
    57       69       63       59       49       (14 %)     (17 %)     94       108       15 %
 
                                                           
Total premiums and other considerations
    636       660       671       651       641       1 %     (2 %)     1,260       1,292       3 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    420       377       369       381       380       (10 %)           815       761       (7 %)
Net investment income on equity securities held for trading
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
Other net investment income
    27       49       45       36       34       26 %     (6 %)     36       70       94 %
 
                                                           
Total net investment income
    (2,202 )     1,469       545       1,220       (183 )     92 %   NM       (1,097 )     1,037     NM  
Net realized capital gains — core
    8       5       10       2       6       (25 %)   NM       11       8       (27 %)
 
                                                           
Total core revenues
    (1,558 )     2,134       1,226       1,873       464     NM       (75 %)     174       2,337     NM  
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues
    (110 )     (329 )     (143 )     (312 )     13     NM     NM       (308 )     (299 )     3 %
 
                                                           
Total revenues
    (1,668 )     1,805       1,083       1,561       477     NM       (69 %)     (134 )     2,038     NM  
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits [1]
    207       (56 )     79       19       42       (80 %)     121 %     228       61       (73 %)
Other contract benefits
    142       146       148       145       143       1 %     (1 %)     277       288       4 %
Change in reserve [2]
    64       64       61       50       17       (73 %)     (66 %)     105       67       (36 %)
Sales inducements [1]
    18       11       3       8       14       (22 %)     75 %     26       22       (15 %)
Interest credited on G/A assets [3]
    246       243       192       217       252       2 %     16 %     506       469       (7 %)
Interest credited on International variable annuities
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
 
                                                           
Total benefits and losses
    (1,972 )     1,451       614       1,242       (129 )     93 %     NM       (806 )     1,113     NM  
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    114       117       108       114       111       (3 %)     (3 %)     247       225       (9 %)
Operating expenses
    85       83       98       87       88       4 %     1 %     164       175       7 %
Premium taxes and other expenses
    11       12       6       10       6       (45 %)     (40 %)     23       16       (30 %)
 
                                                           
Subtotal — expenses before deferral
    210       212       212       211       205       (2 %)     (3 %)     434       416       (4 %)
Deferred policy acquisition costs
    (25 )     (14 )     (18 )     (15 )     (16 )     36 %     (7 %)     (64 )     (31 )     52 %
 
                                                           
Total other insurance expense
    185       198       194       196       189       2 %     (4 %)     370       385       4 %
Amortization of deferred policy acquisition costs [1]
    288       112       99       132       194       (33 %)     47 %     402       326       (19 %)
 
                                                           
Total benefits and expenses
    (1,499 )     1,761       907       1,570       254     NM       (84 %)     (34 )     1,824     NM  
Core earnings (loss) before income taxes
    (59 )     373       319       303       210     NM       (31 %)     208       513       147 %
Income tax expense (benefit) [1] [4]
    (50 )     111       81       75       1     NM       (99 %)     8       76     NM  
 
                                                           
Core earnings (loss) [1]
    (9 )     262       238       228       209     NM       (8 %)     200       437       119 %
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings [5]
    (105 )     (85 )     29       (178 )     19     NM     NM       (234 )     (159 )     32 %
Loss from discontinued operations
          (2 )     (4 )                                          
 
                                                           
Net income (loss) [1]
  $ (114 )   $ 175     $ 263     $ 50     $ 228     NM     NM     $ (34 )   $ 278     NM  
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    (2.4 )     71.1       63.0       60.4       56.2     NM       (7 %)     26.6       58.6       120 %
Net income (loss)
    (30.3 )     47.4       69.5       13.2       61.3     NM             (4.5 )     37.3     NM  
[1]  
The DAC unlock recorded in the periods presented below affected each income statement line item as follows:
                                                         
    THREE MONTH ENDED     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Other Fees
  $ 2     $ 8     $ (2 )   $ (1 )   $ 1     $ 1     $  
Reinsurance Premiums
    (1 )     (5 )                 1       (1 )     1  
Death Benefits
    129       (123 )     9       (46 )     6       81       (40 )
Sales Inducements
    6             (6 )     (3 )     2       3       (1 )
Amortization of deferred policy acquisition costs
    107       (53 )     (84 )     (42 )     17       37       (25 )
Income tax expense (benefit)
    (79 )     63       32       31       (8 )     (38 )     23  
 
                                         
Core earnings (loss)
    (162 )     116       47       59       (15 )     (83 )     44  
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings
    (60 )     32       15             (55 )     (58 )     (55 )
Loss from discontinued operations
          (3 )     (1 )                        
 
                                         
Net income (loss)
    (222 )     145       61       59       (70 )     (141 )     (11 )
[2]  
The three and six months ended June 30, 2011 include a benefit of $28, before-tax, related to the release of reserves associated with the 3 Win product.
 
[3]  
Included in the three months ended, December 31, 2010 is a benefit of $36, before-tax, related to a true-up of reserves associated with certain non-dollar denominated investor notes.
 
[4]  
The three and six months ended June 30, 2011 include a tax benefit of $45 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001.
 
[5]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.

 

26


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
GLOBAL ANNUITY
SUPPLEMENTAL DATA — U.S. ANNUITY — ACCOUNT VALUE ROLL FORWARD
                                         
    THREE MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
VARIABLE ANNUITIES
                                       
Beginning balance
  $ 85,320     $ 75,961     $ 80,357     $ 83,013     $ 82,977  
Deposits
    386       297       286       250       227  
Surrenders
    (2,430 )     (2,275 )     (2,723 )     (2,963 )     (3,141 )
Death benefits/annuitizations/annuity payouts [1]
    (393 )     (361 )     (398 )     (419 )     (392 )
Transfers
    (17 )     (16 )     (3 )     (47 )     (44 )
 
                             
Net Flows
    (2,454 )     (2,355 )     (2,838 )     (3,179 )     (3,350 )
Change in market value/change in reserve/interest credited
    (6,900 )     6,757       5,498       3,142       (281 )
Other [2]
    (5 )     (6 )     (4 )     1       1  
 
                             
Ending balance
  $ 75,961     $ 80,357     $ 83,013     $ 82,977     $ 79,347  
 
                             
 
                                       
FIXED MARKET VALUE ADJUSTED (“MVA”) AND OTHER
                                       
 
                                       
Beginning balance
  $ 12,823     $ 12,579     $ 12,397     $ 12,223     $ 12,136  
Deposits
    36       16       19       13       20  
Surrenders
    (318 )     (256 )     (241 )     (173 )     (203 )
Death benefits/annuitizations/annuity payouts [1]
    (142 )     (136 )     (150 )     (152 )     (167 )
Transfers
    51       39       51       66       68  
 
                             
Net Flows
    (373 )     (337 )     (321 )     (246 )     (282 )
Change in market value/change in reserve/interest credited
    129       155       147       159       124  
 
                             
Ending balance
  $ 12,579     $ 12,397     $ 12,223     $ 12,136     $ 11,978  
 
                             
 
                                       
TOTAL U.S. ANNUITY
                                       
 
                                       
Beginning balance
  $ 98,143     $ 88,540     $ 92,754     $ 95,236     $ 95,113  
Deposits
    422       313       305       263       247  
Surrenders
    (2,748 )     (2,531 )     (2,964 )     (3,136 )     (3,344 )
Death benefits/annuitizations/annuity payouts [1]
    (535 )     (497 )     (548 )     (571 )     (559 )
Transfers
    34       23       48       19       24  
 
                             
Net Flows
    (2,827 )     (2,692 )     (3,159 )     (3,425 )     (3,632 )
Change in market value/change in reserve/interest credited
    (6,771 )     6,912       5,645       3,301       (157 )
Other [2]
    (5 )     (6 )     (4 )     1       1  
 
                             
Ending balance
  $ 88,540     $ 92,754     $ 95,236     $ 95,113     $ 91,325  
 
                             
[1]  
Includes transfers from the accumulation phase to the annuitization phase.
 
[2]  
Includes a bonus on certain products, front end loads on A share products and annual maintenance fees.

 

27


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
GLOBAL ANNUITY
SUPPLEMENTAL DATA — INTERNATIONAL ANNUITY [1] — ACCOUNT VALUE ROLL FORWARD
                                         
    THREE MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
 
                                       
VARIABLE ANNUITIES
                                       
Beginning balance
  $ 32,691     $ 30,973     $ 33,177     $ 33,507     $ 33,027  
Deposits/Premiums/other
    1       2       1       1       1  
Surrenders
    (295 )     (337 )     (363 )     (285 )     (291 )
Death benefits/annuitizations/other [2]
    (147 )     (145 )     (159 )     (192 )     (166 )
Transfers
                             
 
                             
Net Flows
    (441 )     (480 )     (521 )     (476 )     (456 )
Change in market value/currency/change in reserve/interest credited
    (2,833 )     850       (57 )     610       (404 )
Effect of currency translation
    1,556       1,834       908       (614 )     814  
 
                             
 
                                       
Ending balance
  $ 30,973     $ 33,177     $ 33,507     $ 33,027     $ 32,981  
 
                             
 
                                       
FIXED MVA AND OTHER [3]
                                       
 
                                       
Beginning balance
  $ 4,294     $ 4,488     $ 4,703     $ 4,596     $ 4,463  
Surrenders
    (27 )     (35 )     (58 )     (43 )     (31 )
Death benefits/annuitizations/other [2] [4]
    (32 )     (28 )     (209 )     (23 )     246  
Transfers
                             
 
                             
Net Flows
    (59 )     (63 )     (267 )     (66 )     215  
Change in market value/currency/change in reserve/interest credited
    15       13       23       31       22  
Effect of currency translation
    238       265       137       (98 )     124  
 
                             
 
                                       
Ending balance
  $ 4,488     $ 4,703     $ 4,596     $ 4,463     $ 4,824  
 
                             
 
                                       
TOTAL INTERNATIONAL ANNUITY
                                       
Beginning balance
  $ 36,985     $ 35,461     $ 37,880     $ 38,103     $ 37,490  
Deposits/Premiums/other
    1       2       1       1       1  
Surrenders
    (322 )     (372 )     (421 )     (328 )     (322 )
Death benefits/annuitizations/other [2]
    (179 )     (173 )     (368 )     (215 )     80  
Transfers
                             
 
                             
Net Flows
    (500 )     (543 )     (788 )     (542 )     (241 )
Change in market value/change in reserve/interest credited
    (2,818 )     863       (34 )     641       (382 )
Effect of currency translation
    1,794       2,099       1,045       (712 )     938  
 
                             
Ending balance
  $ 35,461     $ 37,880     $ 38,103     $ 37,490     $ 37,805  
 
                             
[1]  
Account value data related to the offshore business was removed from this schedule for all periods presented herein as a result of the sale of this business which occurred in the three months ended, December 31, 2010.
 
[2]  
Included in the three months ended June 30, 2011 are current period payments of $5 and interest credited of $16 related to 3 Win “GMIB” policies that triggered in fourth quarter 2008 and first quarter 2009 for option (2), which are included in the fixed MVA and other — death benefits/annuitizations/other and change in market value/change in reserve/interest credited. The 3 Win guaranteed minimum benefit “GMIB” requires the policyholder to elect one of the two options; either (1) receive 80% of their initial deposit without surrender penalty or (2) receive 100% of the initial deposit via a 15 year pay out annuity.
 
[3]  
Of the total ending fixed MVA and other balance as of June 30, 2011 of $4.8 billion, approximately $2.6 billion is related to the triggering of the guaranteed minimum income benefit for the 3 Win product. This account value is not expected to generate material future profit or loss to the Company.
 
[4]  
The three months ended June 30, 2011 includes an adjustment to reflect transfers from the accumulation phase to the annuitization phase, which previously were not included. The amount of transfers included in the three months ended June 30, 2011 were $162 for the years ended December 31, 2009 and prior, $78 for the year ended December 31, 2010 and $40 for the six months ended June  30, 2011. Amounts are net of annuitization payments to policyholders and prior periods include the effect of currency translation.

 

28


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
GLOBAL ANNUITY
SUPPLEMENTAL DATA — OTHER — ACCOUNT VALUE AND ASSET ROLL FORWARD
                                         
    THREE MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
INSTITUTIONAL INVESTMENT PRODUCTS ACCOUNT VALUE [1]
                                       
Beginning balance
  $ 21,060     $ 19,950     $ 20,086     $ 19,674     $ 19,326  
Deposits
    12       132       87       5       4  
Surrenders
    (895 )     (250 )     (478 )     (455 )     (234 )
Death benefits/annuity payouts
    (527 )     (260 )     (169 )     (179 )     (171 )
 
                             
Net Flows
    (1,410 )     (378 )     (560 )     (629 )     (401 )
Change in market value/change in reserve/interest credited
    300       514       148       281       305  
 
                             
 
                                       
Ending balance
  $ 19,950     $ 20,086     $ 19,674     $ 19,326     $ 19,230  
 
                             
[1]  
Included in the balance is approximately $1.6 billion for the three months ended June 30, 2010 and September 30, 2010, approximately $1.4 billion for the three months ended December 31, 2010 and March 31, 2011 and approximately $1.5 billion for the three months ended June 30, 2011 related to an intrasegment funding agreement which is eliminated in consolidation.

 

29


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
LIFE INSURANCE
INCOME STATEMENTS
                                                                                 
                                            Year Over              
  THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable life fees
  $ 25     $ 22     $ 25     $ 25     $ 25                 $ 48     $ 50       4 %
Cost of insurance charges
    186       194       194       194       197       6 %     2 %     371       391       5 %
Other fees [1]
    73       54       74       59       58       (21 %)     (2 %)     146       117       (20 %)
 
                                                           
Total fee income
    284       270       293       278       280       (1 %)     1 %     565       558       (1 %)
 
                                                                               
Direct premiums
    35       35       37       35       38       9 %     9 %     68       73       7 %
Reinsurance premiums
    (58 )     (60 )     (63 )     (59 )     (63 )     (9 %)     (7 %)     (113 )     (122 )     (8 %)
 
                                                           
Net premiums
    (23 )     (25 )     (26 )     (24 )     (25 )     (9 %)     (4 %)     (45 )     (49 )     (9 %)
 
                                                           
Total premiums and other considerations
    261       245       267       254       255       (2 %)           520       509       (2 %)
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    136       131       128       137       138       1 %     1 %     264       275       4 %
Other net investment income (loss)
    (1 )     1       3       5       9     NM       80 %     (5 )     14     NM  
 
                                                           
Total net investment income
    135       132       131       142       147       9 %     4 %     259       289       12 %
Net realized capital losses — core
                (1 )                             (1 )           100 %
 
                                                           
Total core revenues
    396       377       397       396       402       2 %     2 %     778       798       3 %
Net realized gains (losses) and other, before tax and DAC, excluded from core revenues
    59       11       (21 )     (32 )     10       (83 %)   NM       32       (22 )   NM  
 
                                                           
Total revenues
    455       388       376       364       412       (9 %)     13 %     810       776       (4 %)
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits
    100       134       113       129       134       34 %     4 %     214       263       23 %
Other contract benefits
    14       8       6       8       10       (29 %)     25 %     21       18       (14 %)
Change in reserve [1]
    (3 )     (1 )     (4 )     7       5     NM       (29 %)     4       12     NM  
Sales inducements
          2       1             1                   1       1        
Interest credited on G/A assets
    91       85       87       92       87       (4 %)     (5 %)     179       179        
 
                                                           
Total benefits and losses
    202       228       203       236       237       17 %           419       473       13 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    40       48       51       44       46       15 %     5 %     80       90       13 %
Operating expenses
    69       65       77       64       68       (1 %)     6 %     131       132       1 %
Premium taxes and other expenses
    16       10       26       14       17       6 %     21 %     31       31        
 
                                                           
Subtotal — expenses before deferral
    125       123       154       122       131       5 %     7 %     242       253       5 %
Deferred policy acquisition costs
    (68 )     (79 )     (85 )     (70 )     (78 )     (15 %)     (11 %)     (132 )     (148 )     (12 %)
 
                                                           
Total other insurance expense
    57       44       69       52       53       (7 %)     2 %     110       105       (5 %)
Amortization of deferred policy acquisition costs and present value of future profits [1]
    50       (13 )     52       34       34       (32 %)           98       68       (31 %)
 
                                                           
Total benefits and expenses
    309       259       324       322       324       5 %     1 %     627       646       3 %
Core earnings before income taxes
    87       118       73       74       78       (10 %)     5 %     151       152       1 %
Income tax expense (benefit) [1] [2]
    27       33       23       21       18       (33 %)     (14 %)     43       39       (9 %)
 
                                                           
Core earnings [1]
    60       85       50       53       60             13 %     108       113       5 %
Net realized gains (losses), net of tax and DAC, excluded from core earnings [3]
    43       12       (12 )     (18 )     6       (86 %)   NM       19       (12 )   NM  
 
                                                           
Net income [1]
  $ 103     $ 97     $ 38     $ 35     $ 66       (36 %)     89 %   $ 127     $ 101       (20 %)
 
                                                           
 
                                                                               
Earnings Margin (After-tax)
                                                                               
Core earnings
    15.2 %     22.5 %     12.6 %     13.4 %     14.9 %     (0.3 )     1.5       13.9 %     14.2 %     0.3  
Net income
    22.6 %     25.0 %     10.1 %     9.6 %     16.0 %     (6.6 )     6.4       15.7 %     13.0 %     (2.7 )
[1]  
The DAC unlock recorded in the periods presented below affected each income statement line item as follows:
                                                         
    THREE MONTH ENDED     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Other Fees
  $ 6     $ (3 )   $ 2     $     $ 1     $ 11     $ 1  
Change in reserve
          (2 )                              
Amortization of deferred policy acquisition costs
    11       (46 )     3       3       4       17       7  
Income tax expense (benefit)
    (2 )     15             (1 )     (1 )     (2 )     (2 )
 
                                         
Core earnings (loss)
    (3 )     28       (1 )     (2 )     (2 )     (4 )     (4 )
Net realized gains (losses) and other, net of tax and DAC, excluded from core earnings (losses)
          1             1             4       1  
 
                                         
Net income (loss)
    (3 )     29       (1 )     (1 )     (2 )           (3 )
[2]  
The three and six months ended June 30, 2011 include a tax benefit of $3 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001.
 
[3]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.

 

30


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
LIFE INSURANCE
SUPPLEMENTAL DATA — INDIVIDUAL LIFE
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
SALES BY DISTRIBUTION [1]
                                                                               
National Accounts
  $ 23     $ 26     $ 26     $ 22     $ 28       24 %     29 %   $ 46     $ 50       10 %
Independent
    23       28       25       28       25       8 %     (11 %)     45       53       18 %
Other
    3       3       3       4       3       (12 %)     (34 %)     6       7       11 %
 
                                                           
Total sales by distribution
  $ 49     $ 57     $ 54     $ 54     $ 56       14 %     4 %   $ 97     $ 110       13 %
 
                                                           
 
                                                                               
SALES BY PRODUCT [1]
                                                                               
Variable Life
  $ 9     $ 8     $ 7     $ 7     $ 8       (11 %)     14 %   $ 17     $ 15       (12 %)
Universal life
    36       45       43       43       43       19 %           71       86       21 %
Term/other life
    4       4       4       4       5       25 %     25 %     9       9        
 
                                                           
Total sales by product
  $ 49     $ 57     $ 54     $ 54     $ 56       14 %     4 %   $ 97     $ 110       13 %
 
                                                           
 
                                                                               
PREMIUMS & DEPOSITS
                                                                               
Variable life
  $ 136     $ 136     $ 148     $ 127     $ 130       (4 %)     2 %   $ 273     $ 257       (6 %)
Universal life/other life
    265       294       329       288       318       20 %     10 %     520       606       17 %
Term/other
    37       37       42       37       39       5 %     5 %     73       76       4 %
 
                                                           
Total Premiums & Deposits
  $ 438     $ 467     $ 519     $ 452     $ 487       11 %     8 %   $ 866     $ 939       8 %
 
                                                           
 
                                                                               
ACCOUNT VALUE
                                                                               
General account
  $ 6,429     $ 6,551     $ 6,690     $ 6,808     $ 6,954       8 %     2 %                        
Separate account
    4,951       5,201       5,553       5,662       5,412       9 %     (4 %)                        
 
                                                                 
Total account value
  $ 11,380     $ 11,752     $ 12,243     $ 12,470     $ 12,366       9 %     (1 %)                        
 
                                                                 
 
                                                                               
ACCOUNT VALUE BY PRODUCT
                                                                               
Variable life
  $ 5,507     $ 5,757     $ 6,115     $ 6,235     $ 5,993       9 %     (4 %)                        
Universal life/other life
    5,873       5,995       6,128       6,235       6,373       9 %     2 %                        
 
                                                                 
Total account value by product
  $ 11,380     $ 11,752     $ 12,243     $ 12,470     $ 12,366       9 %     (1 %)                        
 
                                                                 
 
                                                                               
LIFE INSURANCE IN-FORCE
                                                                               
Variable life
  $ 76,445     $ 75,399     $ 74,044     $ 72,946     $ 71,977       (6 %)     (1 %)                        
Universal life
    56,571       57,734       58,789       59,613       60,759       7 %     2 %                        
Term
    72,625       73,959       75,797       77,138       78,714       8 %     2 %                        
 
                                                                 
Total life insurance in-force
  $ 205,641     $ 207,092     $ 208,630     $ 209,697     $ 211,450       3 %     1 %                        
 
                                                                 
[1]  
Sales are reported using Commissionable Weighted Premium. Beginning in the first quarter of 2011, the Company now reports life insurance sales on a cash-received basis. Historical sales have been restated to a cash-received basis.

 

31


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
LIFE INSURANCE
SUPPLEMENTAL DATA — INDIVIDUAL LIFE — ACCOUNT VALUE ROLL FORWARD
                                         
    THREE MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
 
VARIABLE LIFE
                                       
Beginning balance
  $ 5,900     $ 5,507     $ 5,757     $ 6,115     $ 6,235  
First year & single premiums
    17       18       15       13       16  
Renewal premiums
    119       118       133       114       114  
 
                             
Premiums and deposits
    136       136       148       127       130  
Surrenders
    (89 )     (93 )     (106 )     (98 )     (102 )
Death benefits
    (24 )     (18 )     (14 )     (19 )     (17 )
 
                             
Net Flows
    23       25       28       10       11  
Policy fees
    (118 )     (118 )     (123 )     (108 )     (111 )
Change in market value/interest credited
    (298 )     343       453       218       (142 )
 
                             
Ending balance
  $ 5,507     $ 5,757     $ 6,115     $ 6,235     $ 5,993  
 
                             
 
                                       
UNIVERSAL LIFE [1]
                                       
Beginning balance
  $ 5,781     $ 5,873     $ 5,995     $ 6,128     $ 6,235  
First year & single premiums
    127       154       165       143       165  
Renewal premiums
    138       140       164       145       153  
 
                             
Premiums and deposits
    265       294       329       288       318  
Surrenders
    (40 )     (43 )     (49 )     (43 )     (36 )
Death benefits
    (36 )     (25 )     (30 )     (35 )     (29 )
 
                             
Net Flows
    189       226       250       210       253  
Policy fees
    (154 )     (161 )     (177 )     (160 )     (173 )
Change in market value/interest credited
    57       57       60       57       58  
 
                             
Ending balance
  $ 5,873     $ 5,995     $ 6,128     $ 6,235     $ 6,373  
 
                             
 
                                       
INDIVIDUAL LIFE
                                       
Beginning balance
  $ 11,681     $ 11,380     $ 11,752     $ 12,243     $ 12,470  
First year & single premiums
    144       172       180       156       181  
Renewal premiums
    257       258       297       259       267  
 
                             
Premiums and deposits
    401       430       477       415       448  
Surrenders
    (129 )     (136 )     (155 )     (141 )     (138 )
Death benefits
    (60 )     (43 )     (44 )     (54 )     (46 )
 
                             
Net Flows
    212       251       278       220       264  
Policy fees
    (272 )     (279 )     (300 )     (268 )     (284 )
Change in market value/interest credited
    (241 )     400       513       275       (84 )
 
                             
Ending balance
  $ 11,380     $ 11,752     $ 12,243     $ 12,470     $ 12,366  
 
                             
[1]  
Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance and Other.

 

32


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
LIFE INSURANCE
SUPPLEMENTAL DATA — PRIVATE PLACEMENT LIFE INSURANCE — ACCOUNT VALUE AND ACCOUNT VALUE ROLL FORWARD
                                                         
                                            Year Over        
    THREE MONTHS ENDED     Year     Sequential  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month  
    2010     2010     2010     2011     2011     Change     Change  
 
PRIVATE PLACEMENT LIFE INSURANCE ACCOUNT VALUE
                                                       
General account
  $ 1,732     $ 1,743     $ 1,756     $ 1,757     $ 1,760       2 %      
Non-guaranteed separate account
    33,317       33,815       34,286       34,667       34,940       5 %     1 %
 
                                         
Total Private Placement Life Insurance account value
  $ 35,049     $ 35,558     $ 36,042     $ 36,424     $ 36,700       5 %     1 %
 
                                                       
PRIVATE PLACEMENT LIFE INSURANCE ACCOUNT VALUE ROLL FORWARD
                                                       
Beginning balance
  $ 35,241     $ 35,049     $ 35,558     $ 36,042     $ 36,424                  
Deposits
    68       29       66       20       40                  
Surrenders
    (272 )     (11 )     1       (4 )     (8 )                
Death benefits/annuity payouts
    (38 )     (35 )     (37 )     (38 )     (49 )                
 
                                             
Net Flows
    (242 )     (17 )     30       (22 )     (17 )                
Change in market value/change in reserve/interest credited
    112       575       477       458       348                  
Other [1]
    (62 )     (49 )     (23 )     (54 )     (55 )                
 
                                             
Ending balance
  $ 35,049     $ 35,558     $ 36,042     $ 36,424     $ 36,700                  
 
                                             
[1]  
Primarily consists of cost of insurance and mortality & expense charges.

 

33


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Variable annuity and life fees
  $ 56     $ 57     $ 63     $ 65     $ 67       20 %     3 %   $ 110     $ 132       20 %
Mutual fund and other fees
    31       31       29       29       32       3 %     10 %     62       61       (2 %)
 
                                                           
Total fee income
    87       88       92       94       99       14 %     5 %     172       193       12 %
 
                                                                               
Direct premiums
    2       1       2       3       2             (33 %)     4       5       25 %
 
                                                           
Total premiums and other considerations
    89       89       94       97       101       13 %     4 %     176       198       13 %
 
                                                                               
Net investment income
                                                                               
Net investment income on G/A assets
    91       92       94       96       96       5 %           170       192       13 %
Other net investment income
    2       1       3       3       4       100 %     33 %     4       7       75 %
 
                                                           
Total net investment income
    93       93       97       99       100       8 %     1 %     174       199       14 %
Net realized losses — core
    (1 )     (2 )     (1 )                 100 %           (3 )           100 %
 
                                                           
Total core revenues
    181       180       190       196       201       11 %     3 %     347       397       14 %
 
Net realized gains (losses), before tax and DAC, excluded from core revenues
    7       2       (7 )     (9 )     11       57 %   NM       (7 )     2     NM  
 
                                                           
Total revenues
    188       182       183       187       212       13 %     13 %     340       399       17 %
 
                                                                               
Benefits and Expenses
                                                                               
Benefits and losses
                                                                               
Death benefits [1]
    1       (1 )           1       (2 )   NM     NM       1       (1 )   NM  
Other contract benefits
    15       15       15       16       15             (6 %)     30       31       3 %
Change in reserve
    (6 )     (6 )     (5 )     (7 )     (5 )     17 %     29 %     (17 )     (12 )     29 %
Sales inducements [1]
                            1                         1        
Interest credited on G/A assets
    60       63       64       62       66       10 %     6 %     119       128       8 %
 
                                                           
Total benefits and losses
    70       71       74       72       75       7 %     4 %     133       147       11 %
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    40       44       48       49       46       15 %     (6 %)     85       95       12 %
Operating expenses
    69       67       72       70       68       (1 %)     (3 %)     139       138       (1 %)
Premium taxes and other expenses
    4       6       6       7       6       50 %     (14 %)     10       13       30 %
 
                                                           
Subtotal — expenses before deferral
    113       117       126       126       120       6 %     (5 %)     234       246       5 %
Deferred policy acquisition costs
    (32 )     (33 )     (36 )     (36 )     (30 )     6 %     17 %     (68 )     (66 )     3 %
 
                                                           
Total other insurance expense
    81       84       90       90       90       11 %           166       180       8 %
Amortization of deferred policy acquisition costs [1]
    21       (22 )     12       10       24       14 %     140 %     29       34       17 %
 
                                                           
Total benefits and expenses
    172       133       176       172       189       10 %     10 %     328       361       10 %
 
Core earnings before income taxes
    9       47       14       24       12       33 %     (50 %)     19       36       89 %
Income tax expense (benefit) [1] [2]
    (1 )     12             3       (4 )   NM     NM       (2 )     (1 )     50 %
 
                                                           
Core earnings
    10       35       14       21       16       60 %     (24 %)     21       37       76 %
 
Net realized gains (losses), net of tax and DAC, excluded from core earnings [3]
    4       (5 )     (5 )     (6 )     14     NM     NM       (13 )     8     NM  
 
                                                           
Net income
  $ 14     $ 30     $ 9     $ 15     $ 30       114 %     100 %   $ 8     $ 45     NM
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    8.9       29.7       11.0       15.6       11.5       29 %     (26 %)     9.4       13.7       46 %
Net income (loss)
    12.4       25.4       7.1       11.1       21.6       74 %     95 %     3.6       16.7     NM  
[1]  
The DAC unlock recorded in the periods presented below affected each income statement line item as follows:
                                                         
    THREE MONTH ENDED     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     JUNE 30,  
    2010     2010     2010     2011     2011     2010     2011  
Death Benefits
  $     $     $     $     $     $     $  
Sales Inducements
          (1 )                              
Amortization of deferred policy acquisition costs
    4       (37 )     (4 )     (6 )     6       2        
Income tax expense (benefit)
    (1 )     13       1       2       (2 )            
 
                                         
Core earnings (loss)
    (3 )     25       3       4       (4 )     (2 )      
Less: Net realized gains (losses), net of tax and DAC, excluded from core earnings
    (2 )     (6 )                 (1 )     (2 )     (1 )
 
                                         
Net income (loss)
    (5 )     19       3       4       (5 )     (4 )     (1 )
[2]  
The three and six months ended June 30, 2011 include a tax benefit of $4 related to the resolution of a tax matter with the IRS for the computation of dividends received deductions for years 1998, 2000 and 2001.
 
[3]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.

 

34


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATA — ASSETS UNDER MANAGEMENT
                                                         
                                            Year Over        
    THREE MONTHS ENDED     Year     Sequential  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month  
    2010     2010     2010     2011     2011     Change     Change  
 
                                                       
RETIREMENT PLANS TOTAL
                                                       
General account
  $ 6,929     $ 7,171     $ 7,280     $ 7,502     $ 7,638       10 %     2 %
Guaranteed separate account
    2       3       6                   (100 %)      
Non-guaranteed separate account
    21,012       23,464       25,654       27,522       27,443       31 %      
 
                                         
Total Retirement Plans account value
  $ 27,943     $ 30,638     $ 32,940     $ 35,024     $ 35,081       26 %      
401(k)/403(b)/457 mutual funds
    15,848       18,602       19,578       20,324       20,474       29 %     1 %
 
                                         
Total Retirement Plans Assets Under Management
  $ 43,791     $ 49,240     $ 52,518     $ 55,348     $ 55,555       27 %      
 
                                         

 

35


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
RETIREMENT PLANS
SUPPLEMENTAL DATA — ACCOUNT VALUE AND ASSET ROLL FORWARD
                                         
    THREE MONTHS ENDED,  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
401(k) GROUP ANNUITY ACCOUNT VALUE
                                       
Beginning balance
  $ 17,776     $ 16,926     $ 18,764     $ 20,291     $ 21,891  
Deposits
    1,155       1,108       1,211       1,807       1,194  
Surrenders
    (706 )     (688 )     (874 )     (921 )     (1,049 )
Death benefits/annuity payouts
    (17 )     (15 )     (18 )     (18 )     (20 )
Transfers [1]
                      (26 )     1  
 
                             
Net Flows
    432       405       319       842       126  
Change in market value/change in reserve/interest credited
    (1,283 )     1,415       1,209       758       (54 )
Other
    1       18       (1 )            
 
                             
Ending balance
  $ 16,926     $ 18,764     $ 20,291     $ 21,891     $ 21,963  
 
                             
 
                                       
403(b)/457 GROUP ANNUITY ACCOUNT VALUE
                                       
Beginning balance
  $ 11,502     $ 11,017     $ 11,874     $ 12,649     $ 13,133  
Deposits
    314       395       369       359       326  
Surrenders
    (195 )     (210 )     (239 )     (255 )     (347 )
Death benefits/annuity payouts
    (12 )     (11 )     (12 )     (12 )     (12 )
Net Flows
    107       174       118       92       (33 )
Change in market value/change in reserve/interest credited
    (592 )     680       658       392       18  
Other
          3       (1 )            
 
                             
Ending balance
  $ 11,017     $ 11,874     $ 12,649     $ 13,133     $ 13,118  
 
                             
 
                                       
401(k)/403(b)/457 MUTUAL FUNDS ASSETS
                                       
Beginning balance
  $ 17,186     $ 15,848     $ 18,602     $ 19,578     $ 20,324  
Reclassificiation of AUA to AUM [2]
          1,294                   267  
 
Deposits
    504       525       491       697       549  
Surrenders
    (804 )     (596 )     (825 )     (995 )     (814 )
Death benefits/annuity payouts
                            (2 )
Transfers [1]
                      26       (1 )
 
                             
Net Flows
    (300 )     (71 )     (334 )     (272 )     (268 )
Change in market value/change in reserve/interest credited
    (1,037 )     1,552       1,308       1,018       151  
Other
    (1 )     (21 )     2              
 
                             
Ending balance
  $ 15,848     $ 18,602     $ 19,578     $ 20,324     $ 20,474  
 
                             
 
                                       
TOTAL RETIREMENT
                                       
Beginning balance
  $ 46,464     $ 43,791     $ 49,240     $ 52,518     $ 55,348  
Reclassificiation of AUA to AUM [2]
          1,294                   267  
 
Deposits
    1,973       2,028       2,071       2,863       2,069  
Surrenders
    (1,705 )     (1,494 )     (1,938 )     (2,171 )     (2,210 )
Death benefits/annuity payouts
    (29 )     (26 )     (30 )     (30 )     (34 )
 
                             
Net Flows
    239       508       103       662       (175 )
Change in market value/change in reserve/interest credited
    (2,912 )     3,647       3,175       2,168       115  
 
                             
Ending balance
  $ 43,791     $ 49,240     $ 52,518     $ 55,348     $ 55,555  
 
                             
[1]  
Includes internal product exchanges, policyholder balance transfers from the accumulation phase to the annuitization phase, and death benefit remaining on deposit.
 
[2]  
Specific plans were identified that required reclassification from AUA to AUM.

 

36


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Revenues
                                                                               
Premiums and other considerations
                                                                               
Fee income
  $ 167     $ 159     $ 171     $ 178     $ 175       5 %     (2 %)   $ 334     $ 353       6 %
 
                                                                               
Net investment loss
                                                                               
Net investment income on G/A assets
    1                               (100 %)           1             (100 %)
Net investment loss on assigned capital
    (3 )     (2 )     (2 )     (1 )     (1 )     67 %           (5 )     (2 )     60 %
 
                                                           
Total net investment loss
    (2 )     (2 )     (2 )     (1 )     (1 )     50 %           (4 )     (2 )     50 %
Total core revenues
    165       157       169       177       174       5 %     (2 %)     330       351       6 %
Net realized capital gains (losses), before tax and DAC, excluded from core revenues
          (1 )           1                   (100 %)     1       1        
 
                                                           
Total revenues
    165       156       169       178       174       5 %     (2 %)     331       352       6 %
 
                                                                               
Benefits and Expenses
                                                                               
 
                                                                               
Benefits and claims
                                                                               
Interest credited on G/A assets
          (1 )     1                                            
 
                                                           
Total benefits and claims
          (1 )     1                                            
 
                                                                               
Other insurance expenses
                                                                               
Commissions & wholesaling expenses
    90       81       95       101       94       4 %     (7 %)     180       195       8 %
Operating expenses
    28       29       31       29       31       11 %     7 %     58       60       3 %
Premium taxes and other expenses
    6       13       (1 )     4       4       (33 %)           9       8       (11 %)
 
                                                           
Subtotal — expenses before deferral
    124       123       125       134       129       4 %     (4 %)     247       263       6 %
Deferred policy acquisition costs
    (9 )     (7 )     (10 )     (11 )     (9 )           18 %     (20 )     (20 )      
 
                                                           
Total other insurance expense
    115       116       115       123       120       4 %     (2 %)     227       243       7 %
Amortization of deferred policy acquisition costs
    13       13       13       12       12       (8 %)           25       24       (4 %)
 
                                                           
Total benefits and expenses
    128       128       129       135       132       3 %     (2 %)     252       267       6 %
 
Core earnings before income taxes
    37       29       40       42       42       14 %           78       84       8 %
Income tax expense
    14       9       16       15       15       7 %           28       30       7 %
 
                                                           
Core earnings
    23       20       24       27       27       17 %           50       54       8 %
Net realized gains (losses), net of tax and DAC, excluded from core earnings [1]
    1       (1 )     1       1             (100 %)     (100 %)     1       1        
Income (Loss) from discontinued operations [2]
    (1 )     (1 )     40                   100 %           (2 )           100 %
 
                                                           
Net income
  $ 23     $ 18     $ 65     $ 28       27       17 %     (4 %)   $ 49     $ 55       12 %
 
                                                           
 
                                                                               
RETURN ON ASSETS (After-tax bps)
                                                                               
Core earnings
    10.1       8.9       9.9       10.6       10.6       5 %           11.2       10.8       (4 %)
Net income
    9.9       7.9       26.6       11.0       10.6       7 %     (4 %)     10.9       11.0       1 %
[1]  
See pages 11 and 12 for disclosure of the components of net realized gains (losses), net of tax and DAC, for the periods presented herein.
 
[2]  
Included in the three months ended December 31, 2010 is a gain of $41, after-tax, from the sale of the Canadian mutual funds business.

 

37


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA [1]
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
                                                                               
NON-PROPRIETARY MUTUAL FUNDS DEPOSITS
                                                                               
Retail Mutual Funds
  $ 3,444     $ 2,505     $ 3,355     $ 3,934     $ 3,131       (9 %)     (20 %)   $ 6,872     $ 7,065       3 %
Investment Only Mutual Funds
    693       424       604       807       676       (2 %)     (16 %)     1,478       1,483        
529 College Savings Plan
    45       52       71       80       65       44 %     (19 %)     90       145       61 %
 
                                                           
Total Non-Proprietary Mutual Funds Deposits
  $ 4,182     $ 2,981     $ 4,030     $ 4,821     $ 3,872       (7 %)     (20 %)   $ 8,440     $ 8,693       3 %
 
                                                           
 
                                                                               
ASSETS UNDER MANAGEMENT
                                                                               
Retail mutual fund assets
  $ 41,162     $ 44,788     $ 48,753     $ 51,064     $ 49,584       20 %     (3 %)                        
Investment Only mutual fund assets
    4,919       5,570       6,659       7,298       6,954       41 %     (5 %)                        
Proprietary mutual fund assets [2]
    39,402       41,778       43,602       44,044       42,204       7 %     (4 %)                        
529 College Savings Plan assets
    1,202       1,328       1,472       1,583       1,612       34 %     2 %                        
 
                                                                 
Total Mutual Fund Assets
  $ 86,685     $ 93,464     $ 100,486     $ 103,989     $ 100,354       16 %     (3 %)                        
 
                                                           
[1]  
Supplemental data related to the Canadian business was removed from this schedule for all periods presented herein as a result of the sale of this business which occurred in the three months ended December 31, 2010. Approximately $1.8 billion of AUM were transferred out to a third party as a result of the sale.
 
[2]  
Includes Company sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products.

 

38


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
WEALTH MANAGEMENT
MUTUAL FUNDS
SUPPLEMENTAL DATA — ASSET ROLL FORWARD
                                         
    THREE MONTHS ENDED  
    June 30,     Sept. 30,     Dec. 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
 
                                       
NON-PROPRIETARY MUTUAL FUNDS
                                       
Beginning balance
  $ 51,747     $ 47,283     $ 51,686     $ 56,884     $ 59,945  
Deposits
    4,182       2,981       4,030       4,821       3,872  
Redemptions
    (3,357 )     (3,180 )     (3,471 )     (3,827 )     (5,054 )
 
                             
Net Flows
    825       (199 )     559       994       (1,182 )
Change in market value
    (5,261 )     4,623       4,749       2,095       (635 )
Other [1]
    (28 )     (21 )     (110 )     (28 )     22  
 
                             
Ending balance
  $ 47,283     $ 51,686     $ 56,884     $ 59,945     $ 58,150  
 
                             
 
                                       
PROPRIETARY MUTUAL FUNDS [2]
                                       
Beginning balance
  $ 44,403     $ 39,402     $ 41,778     $ 43,602     $ 44,044  
Net Flows
    (1,140 )     (1,299 )     (1,571 )     (1,507 )     (1,604 )
Change in market value
    (3,861 )     3,675       3,395       1,949       (236 )
 
                             
Ending balance
  $ 39,402     $ 41,778     $ 43,602     $ 44,044     $ 42,204  
 
                             
[1]  
Includes front end loads on A share products.
 
[2]  
Includes Company sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products.

 

39


 

CORPORATE AND OTHER

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE AND OTHER
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
Earned premiums
  $ (2 )   $ 1     $ 3     $ (1 )   $ 1     NM     NM     $ (1 )   $     NM  
Fee income
    52       46       44       53       53       2 %           97       106       9 %
Net investment income
    71       45       54       55       50       (30 %)     (9 %)     145       105       (28 %)
Net realized capital gains (losses)
    13       47       39       (14 )     10       (23 %)   NM       4       (4 )   NM  
Other revenues
                (1 )     1       (1 )   NM     NM                   100 %
 
                                                           
Total revenues
    134       139       139       94       113       (16 %)     20 %     245       207       (16 %)
 
                                                                               
Benefits, losses and loss adjustment expenses
    170       64       13       5       287       69 %   NM       172       292       70 %
Insurance operating costs and other expenses [1]
    82       59       85       67       71       (13 %)     6 %     211       138       (35 %)
Interest expense
    132       128       128       128       128       (3 %)           252       256       2 %
 
                                                           
Total benefits and expenses
    384       251       226       200       486       27 %     143 %     635       686       8 %
 
                                                                               
Loss from continuing operations before income taxes
    (250 )     (112 )     (87 )     (106 )     (373 )     (49 %)   NM       (390 )     (479 )     (23 %)
 
                                                                               
Income tax benefit [2]
    (96 )     (39 )     (50 )     (39 )     (135 )     (41 %)   NM       (119 )     (174 )     (46 %)
 
                                                           
 
                                                                               
Loss from continuing operations
    (154 )     (73 )     (37 )     (67 )     (238 )     (55 %)   NM       (271 )     (305 )     (13 %)
 
                                                                               
Add: Income (loss) from discontinued operations [3]
    (101 )     (3 )     (2 )     2       (77 )     24 %   NM       (102 )     (75 )     26 %
 
                                                           
 
                                                                               
Net Loss
    (255 )     (76 )     (39 )     (65 )     (315 )     (24 %)   NM       (373 )     (380 )     (2 %)
 
                                                                               
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core losses [4]
    12       31       19       (11 )     12           NM       (2 )     1     NM  
Less: Income (loss) from discontinued operations [3]
    (101 )     (3 )     (2 )     2       (77 )     24 %   NM       (102 )     (75 )     26 %
 
                                                           
 
                                                                               
Core losses
  $ (166 )   $ (104 )   $ (56 )   $ (56 )   $ (250 )     (51 %)   NM     $ (269 )   $ (306 )     (14 %)
 
                                                           
[1]  
Includes a before-tax charge of $73 for a litigation settlement in the six months ended June 30, 2010.
 
[2]  
The three months ended March 31, 2010 included a tax charge of $19 related to a decrease in deferred tax assets as a result of recent federal legislation that will reduce the tax deduction available to the Company related to retiree health care costs beginning in 2013.
 
[3]  
The three and six months ended June 30, 2010 includes a goodwill impairment of $101, after-tax, related to the purchase of the Federal Trust Corporation. Additionally, the three and six months ended June 30, 2011 includes an after-tax charge of $74 related to the disposition of Federal Trust Corporation.
 
[4]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax and DAC, for the periods presented herein.

 

40


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE AND OTHER
OTHER OPERATIONS
INCOME STATEMENTS
                                                                                 
                                            Year Over              
    THREE MONTHS ENDED     Year     Sequential     SIX MONTHS ENDED  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar, 31     Jun. 30,     3 Month     3 Month     JUNE 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
Earned premiums
  $ 1     $     $     $     $       (100 %)         $ 1     $       (100 %)
Net investment income
    42       40       40       39       37       (12 %)     (5 %)     83       76       (8 %)
Net realized capital gains (losses)
    20       7       1       (3 )     4       (80 %)   NM       16       1       (94 %)
Other revenues
                      1       (1 )         NM                    
 
                                                           
Total revenues
    63       47       41       37       40       (37 %)     8 %     100       77       (23 %)
 
                                                                               
Losses and loss adjustment expenses [1]
    172       63       15       4       286       66 %   NM       173       290       68 %
Insurance operating costs and expenses
    6       5       11       7       6             (14 %)     14       13       (7 %)
 
                                                           
Total benefits and expenses
    178       68       26       11       292       64 %   NM       187       303       62 %
 
                                                                               
Income (loss) before income taxes
    (115 )     (21 )     15       26       (252 )     (119 %)   NM       (87 )     (226 )     (160 %)
 
                                                                               
Income tax expense (benefit)
    (42 )     (9 )     1       5       (88 )     (110 %)   NM       (32 )     (83 )     (159 %)
 
                                                           
 
                                                                               
Net income (loss)
    (73 )     (12 )     14       21       (164 )     (125 %)   NM       (55 )     (143 )     (160 %)
 
                                                                               
Less: Net realized capital gains (losses), after-tax, excluded from core earnings (losses) [2]
    13       6       1       (2 )     3       (77 %)   NM       9       1       (89 %)
 
                                                           
 
                                                                               
Core earnings (losses)
  $ (86 )   $ (18 )   $ 13     $ 23     $ (167 )     (94 %)   NM     $ (64 )   $ (144 )     (125 %)
 
                                                           
[1]  
The three months ended June 30, 2010 included net asbestos reserve strengthening of $169. The three months ended September 30, 2010 included net environmental reserve strengthening of $62. The three months ended June 30, 2011 included net asbestos reserve strengthening of $290.
 
[2]  
See pages 11 and 12 for disclosure of the components of net realized capital gains (losses), net of tax, for the periods presented herein.

 

41


 

CONSOLIDATED
INVESTMENTS

 

 


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
                                                                                 
                                            Year Over              
    Three Months Ended     Year     Sequential     Six Months Ended  
    Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     3 Month     3 Month     June 30,  
    2010     2010     2010     2011     2011     Change     Change     2010     2011     Change  
 
Net Investment Income (Loss)
                                                                               
Fixed maturities [1]
                                                                               
Taxable
  $ 754     $ 739     $ 736     $ 719     $ 744       (1 %)     3 %   $ 1,497     $ 1,463       (2 %)
Tax-exempt
    133       128       125       127       126       (5 %)     (1 %)     264       253       (4 %)
 
                                                           
Total fixed maturities
    887       867       861       846       870       (2 %)     3 %     1,761       1,716       (3 %)
Equity securities, trading
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
Equity securities, available-for-sale
    13       12       14       11       8       (38 %)     (27 %)     27       19       (30 %)
Mortgage loans
    63       64       67       63       67       6 %     6 %     129       130       1 %
Policy loans
    35       33       31       33       34       (3 %)     3 %     68       67       (1 %)
Limited partnerships and other alternative investments [2]
    86       49       75       100       78       (9 %)     (22 %)     92       178       93 %
Other [3]
    90       77       78       81       77       (14 %)     (5 %)     174       158       (9 %)
 
                                                           
Subtotal
    (1,475 )     2,145       1,257       1,937       537     NM       (72 %)     303       2,474     NM  
Less: Investment expense
    26       29       37       26       30       15 %     15 %     49       56       14 %
 
                                                           
 
Total net investment income
  $ (1,501 )   $ 2,116     $ 1,220     $ 1,911     $ 507       NM       (73 %)   $ 254     $ 2,418     NM
Less: Equity securities, trading
    (2,649 )     1,043       131       803       (597 )     77 %   NM       (1,948 )     206     NM  
 
                                                           
 
Total net investment income excluding trading securities
  $ 1,148     $ 1,073     $ 1,089     $ 1,108     $ 1,104       (4 %)         $ 2,202     $ 2,212        
 
                                                           
 
                                                                               
Annualized investment yield, before-tax [4]
    4.8 %     4.4 %     4.5 %     4.6 %     4.6 %     (0.2 )           4.5 %     4.6 %     0.1  
Annualized investment yield, after-tax [4]
    3.3 %     3.1 %     3.1 %     3.2 %     3.1 %     (0.2 )     (0.1 )     3.1 %     3.1 %      
 
                                                                               
Net Realized Capital Gains (Losses)
                                                                               
Gross gains on sales
  $ 343     $ 179     $ 182     $ 61     $ 261       (24 %)   NM     $ 475     $ 322       (32 %)
Gross losses on sales
    (94 )     (88 )     (229 )     (133 )     (98 )     (4 %)     26 %     (205 )     (231 )     (13 %)
Net impairment losses
    (108 )     (115 )     (59 )     (55 )     (23 )     79 %     58 %     (260 )     (78 )     70 %
Valuation allowances on mortgage loans
    (40 )     (4 )     2       (3 )     26     NM     NM       (152 )     23     NM  
Japanese fixed annuity contract hedges, net [5]
    27       11       5       (17 )     6       (78 %)   NM       11       (11 )   NM  
Periodic net coupon settlements on credit derivatives/Japan [6]
    (4 )     (4 )     (2 )     (7 )     (2 )     50 %     71 %     (11 )     (9 )     18 %
Results of variable annuity hedge program
                                                                               
GMWB derivatives, net
    (426 )     170       238       71       (37 )     91 %   NM       (297 )     34     NM  
Macro hedge
    397       (443 )     (352 )     (357 )     35       (91 %)   NM       233       (322 )   NM  
 
                                                           
Total results of variable annuity hedge program
    (29 )     (273 )     (114 )     (286 )     (2 )     93 %     99 %     (64 )     (288 )   NM  
Other net gain (loss) [7]
    (86 )     37       126       37       (99 )     (15 %)   NM       (59 )     (62 )     (5 %)
 
                                                           
 
                                                                               
Total net realized capital gains (losses)
  $ 9     $ (257 )   $ (89 )   $ (403 )   $ 69       NM       NM     $ (265 )   $ (334 )     (26 %)
 
                                                           
[1]  
Includes income on short-term bonds.
 
[2]  
Includes income on real estate joint ventures and hedge fund investments outside of limited partnerships.
 
[3]  
Primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities.
 
[4]  
Yields calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, and consolidated variable interest entity non-controlling interests.
 
[5]  
Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements), as well as Japan fair value option securities.
 
[6]  
Included in core earnings.
 
[7]  
Primarily due to losses on transactional foreign currency re-valuation due to an increase in value of the Japanese yen versus the U.S. dollar associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, and losses on credit derivatives driven by credit spread widening.

 

42


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
                                                                                 
    June 30,     September 30,     December 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
Fixed maturities, available-for-sale, at fair value [1]
  $ 77,132       60.2 %   $ 79,736       59.7 %   $ 77,820       59.4 %   $ 78,268       60.3 %   $ 78,132       59.3 %
Fixed maturities, at fair value using fair value option
                564       0.4 %     649       0.5 %     1,230       0.9 %     1,227       0.9 %
Equity securities, trading, at fair value [2]
    30,183       23.6 %     32,495       24.3 %     32,820       25.1 %     32,339       24.9 %     32,278       24.4 %
Equity securities, available-for-sale, at fair value [3]
    1,103       0.9 %     1,168       0.9 %     973       0.7 %     993       0.8 %     1,081       0.8 %
Mortgage loans [4]
    4,673       3.6 %     4,684       3.5 %     4,489       3.4 %     4,736       3.7 %     5,304       4.0 %
Policy loans, at outstanding balance
    2,182       1.7 %     2,180       1.6 %     2,181       1.7 %     2,181       1.7 %     2,188       1.7 %
Limited partnerships and other alternative investments [5]
    1,774       1.4 %     1,819       1.4 %     1,918       1.5 %     1,972       1.5 %     2,028       1.5 %
Other investments [6]
    2,293       1.8 %     1,427       1.1 %     1,617       1.2 %     640       0.5 %     973       0.7 %
Short-term investments [7]
    8,731       6.8 %     9,517       7.1 %     8,528       6.5 %     7,330       5.7 %     8,861       6.7 %
 
                                                           
 
                                                                               
Total investments
  $ 128,071       100.0 %   $ 133,590       100.0 %   $ 130,995       100.0 %   $ 129,689       100.0 %   $ 132,072       100.0 %
Less: Equity securities, trading
    30,183       23.6 %     32,495       24.3 %     32,820       25.1 %     32,339       24.9 %     32,278       24.4 %
 
                                                           
 
Total investments excluding trading securities
  $ 97,888       76.4 %   $ 101,095       75.7 %   $ 98,175       74.9 %   $ 97,350       75.1 %   $ 99,794       75.6 %
 
                                                           
 
                                                                               
Asset-backed securities (“ABS”)
  $ 3,012       3.9 %   $ 3,009       3.8 %   $ 2,889       3.7 %   $ 3,150       4.0 %   $ 3,297       4.2 %
Collateralized debt obligations (“CDOs”)
    2,824       3.7 %     2,563       3.2 %     2,611       3.4 %     2,674       3.4 %     2,575       3.3 %
Commercial mortgage-backed securities (“CMBS”)
    8,719       11.3 %     8,160       10.2 %     7,917       10.2 %     7,709       9.8 %     7,277       9.3 %
Corporate
    38,834       50.4 %     40,851       51.3 %     39,884       51.2 %     40,913       52.3 %     41,629       53.2 %
Foreign government/government agencies
    1,716       2.2 %     1,924       2.4 %     1,683       2.2 %     1,802       2.3 %     1,864       2.4 %
Municipal — taxable
    1,101       1.4 %     1,125       1.4 %     1,199       1.5 %     1,237       1.6 %     1,299       1.7 %
Municipal — tax-exempt
    11,415       14.8 %     11,598       14.5 %     10,925       14.0 %     11,090       14.2 %     11,482       14.7 %
Residential mortgage-backed securities (“RMBS”)
    4,772       6.2 %     5,551       7.0 %     5,683       7.3 %     5,014       6.4 %     5,214       6.7 %
U.S. Treasuries
    4,739       6.1 %     4,955       6.2 %     5,029       6.5 %     4,679       6.0 %     3,495       4.5 %
 
                                                           
 
                                                                               
Total fixed maturities, AFS [8]
  $ 77,132       100.0 %   $ 79,736       100.0 %   $ 77,820       100.0 %   $ 78,268       100.0 %   $ 78,132       100.0 %
 
                                                           
 
                                                                               
U.S. government/government agencies
  $ 8,428       10.9 %   $ 9,556       12.0 %   $ 9,918       12.7 %   $ 8,947       11.5 %   $ 8,073       10.3 %
AAA
    11,406       14.8 %     11,158       14.0 %     10,174       13.1 %     10,155       13.0 %     9,409       12.0 %
AA
    15,357       19.9 %     15,591       19.6 %     15,554       20.0 %     15,518       19.8 %     15,900       20.4 %
A
    19,150       24.8 %     19,922       25.0 %     19,460       25.0 %     19,723       25.2 %     20,470       26.2 %
BBB
    19,018       24.7 %     20,022       25.0 %     19,153       24.6 %     20,212       25.8 %     20,568       26.3 %
BB & below
    3,773       4.9 %     3,487       4.4 %     3,561       4.6 %     3,713       4.7 %     3,712       4.8 %
 
                                                           
 
Total fixed maturities, AFS [8]
  $ 77,132       100.0 %   $ 79,736       100.0 %   $ 77,820       100.0 %   $ 78,268       100.0 %   $ 78,132       100.0 %
 
                                                           
[1]  
Includes $284, $271, $277, $275, and $25 in Corporate at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.
 
[2]  
These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities.
 
[3]  
Includes $88, $93, $97, $100, and $100 in Corporate at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.
 
[4]  
Includes $243, $225, $202, $194, and $138 in Corporate at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.
 
[5]  
Includes real estate joint ventures and hedge fund investments outside of limited partnerships.
 
[6]  
Primarily relates to derivative instruments. Additionally, includes $51, $47, $48, $49, and $27 in Corporate at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.
 
[7]  
Includes $1,827, $1,890, $1,780, $1,999, and $2,274 in Corporate at June 30, 2010, September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011, respectively.
 
[8]  
Available-for-sale (“AFS”).

 

43


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
LIFE [1]
                                                                                 
    June 30,     September 30,     December 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
Fixed maturities, available-for-sale, at fair value
  $ 52,652       53.8 %   $ 54,253       53.0 %   $ 52,429       52.1 %   $ 52,781       53.3 %   $ 52,834       52.3 %
Fixed maturities, at fair value using fair value option
                554       0.5 %     639       0.6 %     1,217       1.2 %     1,214       1.2 %
Equity securities, trading, at fair value [2]
    30,183       30.8 %     32,495       31.8 %     32,820       32.6 %     32,339       32.7 %     32,278       31.9 %
Equity securities, available-for-sale, at fair value
    589       0.6 %     608       0.6 %     502       0.5 %     523       0.5 %     603       0.6 %
Mortgage loans
    3,956       4.0 %     4,066       4.0 %     3,915       3.9 %     4,162       4.2 %     4,578       4.5 %
Policy loans, at outstanding balance
    2,182       2.2 %     2,180       2.1 %     2,181       2.2 %     2,181       2.2 %     2,188       2.2 %
Limited partnerships and other alternative investments [3]
    878       0.9 %     910       0.9 %     957       1.0 %     985       1.0 %     1,024       1.0 %
Other investments [4]
    2,147       2.2 %     1,258       1.2 %     1,486       1.5 %     450       0.5 %     799       0.8 %
Short-term investments
    5,356       5.5 %     6,061       5.9 %     5,631       5.6 %     4,398       4.4 %     5,565       5.5 %
 
                                                           
 
                                                                               
Total investments
  $ 97,943       100.0 %   $ 102,385       100.0 %   $ 100,560       100.0 %   $ 99,036       100.0 %   $ 101,083       100.0 %
Less: Equity securities, trading
    30,183       30.8 %     32,495       31.8 %     32,820       32.6 %     32,339       32.7 %     32,278       31.9 %
 
                                                           
 
Total investments excluding trading securities
  $ 67,760       69.2 %   $ 69,890       68.2 %   $ 67,740       67.4 %   $ 66,697       67.3 %   $ 68,805       68.1 %
 
                                                           
 
                                                                               
ABS
  $ 2,506       4.8 %   $ 2,505       4.6 %   $ 2,442       4.7 %   $ 2,655       5.0 %   $ 2,732       5.2 %
CDOs
    2,271       4.3 %     2,043       3.8 %     2,087       4.0 %     2,144       4.1 %     2,047       3.9 %
CMBS
    6,046       11.5 %     5,696       10.5 %     5,495       10.5 %     5,364       10.2 %     4,967       9.4 %
Corporate
    29,290       55.6 %     30,861       56.9 %     30,204       57.6 %     31,218       59.0 %     31,595       59.7 %
Foreign government/government agencies
    1,280       2.4 %     1,431       2.6 %     1,160       2.2 %     1,200       2.3 %     1,285       2.4 %
Municipal — taxable
    970       1.8 %     999       1.8 %     1,068       2.0 %     1,110       2.1 %     1,167       2.2 %
Municipal — tax-exempt
    2,511       4.8 %     2,526       4.7 %     2,267       4.3 %     2,304       4.4 %     2,417       4.6 %
RMBS
    3,732       7.1 %     4,284       7.9 %     4,302       8.2 %     3,779       7.2 %     3,738       7.1 %
U.S. Treasuries
    4,046       7.7 %     3,908       7.2 %     3,404       6.5 %     3,007       5.7 %     2,886       5.5 %
 
                                                           
 
                                                                               
Total fixed maturities, AFS
  $ 52,652       100.0 %   $ 54,253       100.0 %   $ 52,429       100.0 %   $ 52,781       100.0 %   $ 52,834       100.0 %
 
                                                           
 
                                                                               
U.S. government/government agencies
  $ 6,661       12.7 %   $ 7,174       13.2 %   $ 6,809       13.0 %   $ 5,939       11.3 %   $ 5,869       11.1 %
AAA
    7,343       13.9 %     7,123       13.1 %     6,288       12.0 %     6,174       11.7 %     5,747       10.9 %
AA
    8,255       15.7 %     8,225       15.2 %     8,304       15.8 %     8,208       15.6 %     8,152       15.4 %
A
    13,444       25.5 %     14,217       26.2 %     14,177       27.1 %     14,551       27.5 %     14,873       28.2 %
BBB
    13,870       26.4 %     14,609       26.9 %     13,915       26.5 %     14,854       28.1 %     15,218       28.8 %
BB & below
    3,079       5.8 %     2,905       5.4 %     2,936       5.6 %     3,055       5.8 %     2,975       5.6 %
 
                                                           
 
Total fixed maturities, AFS
  $ 52,652       100.0 %   $ 54,253       100.0 %   $ 52,429       100.0 %   $ 52,781       100.0 %   $ 52,834       100.0 %
 
                                                           
[1]  
Please refer to the basis of presentation for a description of the statutory legal entity view for Life.
 
[2]  
These assets support the International variable annuity business. Changes in these balances are also reflected in the respective liabilities.
 
[3]  
Includes a real estate joint venture.
 
[4]  
Primarily relates to derivative instruments.

 

44


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
PROPERTY & CASUALTY [1]
                                                                                 
    June 30,     September 30,     December 31,     March 31,     June 30,  
    2010     2010     2010     2011     2011  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
 
Fixed maturities, available-for-sale, at fair value
  $ 24,196       87.6 %   $ 25,212       87.9 %   $ 25,114       89.7 %   $ 25,212       90.0 %   $ 25,273       88.9 %
Fixed maturities, at fair value using fair value option
                10             10             13             13       0.1 %
Equity securities, available-for-sale, at fair value
    426       1.5 %     467       1.6 %     374       1.3 %     370       1.3 %     378       1.3 %
Mortgage loans
    474       1.7 %     393       1.4 %     372       1.3 %     380       1.4 %     588       2.1 %
Limited partnerships and other alternative investments [2]
    896       3.3 %     909       3.2 %     961       3.4 %     987       3.5 %     1,004       3.5 %
Other investments [3]
    95       0.3 %     122       0.4 %     83       0.3 %     141       0.5 %     147       0.5 %
Short-term investments
    1,548       5.6 %     1,566       5.5 %     1,117       4.0 %     933       3.3 %     1,022       3.6 %
 
                                                           
 
                                                                               
Total investments
  $ 27,635       100.0 %   $ 28,679       100.0 %   $ 28,031       100.0 %   $ 28,036       100.0 %   $ 28,425       100.0 %
 
                                                           
 
                                                                               
ABS
  $ 506       2.1 %   $ 504       2.0 %   $ 447       1.8 %   $ 495       2.0 %   $ 565       2.2 %
CDOs
    553       2.3 %     520       2.1 %     524       2.1 %     530       2.1 %     528       2.1 %
CMBS
    2,673       11.0 %     2,464       9.8 %     2,422       9.6 %     2,345       9.3 %     2,310       9.1 %
Corporate
    9,539       39.5 %     9,990       39.5 %     9,680       38.5 %     9,695       38.5 %     10,034       39.7 %
Foreign government/government agencies
    429       1.8 %     493       2.0 %     523       2.1 %     602       2.4 %     579       2.3 %
Municipal — taxable
    131       0.5 %     126       0.5 %     131       0.5 %     127       0.5 %     132       0.5 %
Municipal — tax-exempt
    8,897       36.8 %     9,068       36.0 %     8,654       34.5 %     8,783       34.8 %     9,061       35.9 %
RMBS
    1,028       4.2 %     1,253       5.0 %     1,360       5.4 %     1,215       4.8 %     1,456       5.8 %
U.S. Treasuries
    440       1.8 %     794       3.1 %     1,373       5.5 %     1,420       5.6 %     608       2.4 %
 
                                                           
 
                                                                               
Total fixed maturities, AFS
  $ 24,196       100.0 %   $ 25,212       100.0 %   $ 25,114       100.0 %   $ 25,212       100.0 %   $ 25,273       100.0 %
 
                                                           
 
                                                                               
U.S. government/government agencies
  $ 1,503       6.2 %   $ 2,116       8.4 %   $ 2,837       11.3 %   $ 2,737       10.9 %   $ 2,183       8.6 %
AAA
    4,055       16.8 %     4,035       16.0 %     3,886       15.5 %     3,981       15.8 %     3,662       14.5 %
AA
    7,096       29.2 %     7,364       29.2 %     7,248       28.8 %     7,308       28.9 %     7,745       30.7 %
A
    5,700       23.6 %     5,702       22.6 %     5,280       21.0 %     5,170       20.5 %     5,596       22.1 %
BBB
    5,148       21.3 %     5,413       21.5 %     5,238       20.9 %     5,358       21.3 %     5,350       21.2 %
BB & below
    694       2.9 %     582       2.3 %     625       2.5 %     658       2.6 %     737       2.9 %
 
                                                           
 
                                                                               
Total fixed maturities, AFS
  $ 24,196       100.0 %   $ 25,212       100.0 %   $ 25,114       100.0 %   $ 25,212       100.0 %   $ 25,273       100.0 %
 
                                                           
[1]  
Please refer to the basis of presentation for a description of the statutory legal entity view for Property & Casualty.
 
[2]  
Includes a real estate joint venture and hedge fund investments outside of limited partnerships.
 
[3]  
Primarily relates to derivative instruments.

 

45


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROSS UNREALIZED LOSS AGING
AVAILABLE-FOR-SALE SECURITIES
                                                 
    June 30, 2011     December 31, 2010  
    Amortized     Fair     Unrealized     Amortized     Fair     Unrealized  
    Cost     Value     Loss [1] [2]     Cost     Value     Loss [1] [2]  
Total AFS Securities
                                               
 
                                               
Three months or less
  $ 6,867     $ 6,727     $ (140 )   $ 17,431     $ 16,783     $ (643 )
Greater than three months to six months
    636       600       (36 )     732       690       (42 )
Greater than six months to nine months
    6,569       6,312       (252 )     438       397       (41 )
Greater than nine months to twelve months
    484       461       (23 )     185       169       (16 )
Twelve months or more
    13,208       11,161       (2,009 )     15,599       12,811       (2,754 )
 
                                   
Total
  $ 27,764     $ 25,261     $ (2,460 )   $ 34,385     $ 30,850     $ (3,496 )
 
                                   
[1]  
As of June 30, 2011, fixed maturities, AFS, represented $2,359, or 96%, of the Company’s total unrealized loss on AFS securities. The Company held no securities of a single issuer that were in an unrealized loss position in excess of 5% of the total unrealized loss amount as of June 30, 2011 and December 31, 2010.
 
[2]  
Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Subsequent changes in fair value are recorded in net realized capital gains (losses).

 

46


 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF JUNE 30, 2011
                         
    Cost or             Percent of Total  
    Amortized Cost     Fair Value     Invested Assets [1]  
Top Ten Corporate and Equity, AFS, Exposures by Sector
                       
Financial services
  $ 8,506     $ 8,357       8.4 %
Utilities
    7,857       8,228       8.2 %
Consumer non-cyclical
    5,948       6,356       6.4 %
Technology and communications
    4,306       4,536       4.5 %
Basic industry
    3,719       3,925       3.9 %
Energy
    3,554       3,780       3.8 %
Capital goods
    3,246       3,461       3.5 %
Consumer cyclical
    1,986       2,099       2.1 %
Transportation
    1,118       1,176       1.2 %
Other
    802       792       0.8 %
 
                 
 
                       
Total
  $ 41,042     $ 42,710       42.8 %
 
                 
 
                       
Top Ten Exposures by Issuer [2]
                       
Government of United Kingdom
  $ 408     $ 418       0.4 %
JPMorgan Chase & Co.
    418       396       0.4 %
National Grid PLC
    333       350       0.4 %
AT&T Inc.
    311       331       0.3 %
Wells Fargo & Co.
    322       303       0.3 %
State of Califorina
    287       294       0.3 %
General Electric Co.
    331       292       0.3 %
Bank of America Corp.
    331       292       0.3 %
Massachusetts St.
    273       288       0.3 %
Verizon Communications Inc.
    260       281       0.3 %
 
                 
 
                       
Total
  $ 3,274     $ 3,245       3.3 %
 
                 
[1]  
Excludes equity securities, trading.
 
[2]  
Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions and equity securities, trading.

 

47