The Hartford 2007 Annual Report Download - page 246

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-69
15. Stockholders’ Equity (continued)
Statutory Results
The domestic insurance subsidiaries of HFSG prepare their statutory financial statements in conformity with statutory accounting
practices prescribed or permitted by the applicable state insurance department which vary materially from U.S. GAAP. Prescribed
statutory accounting practices include publications of the National Association of Insurance Commissioners (“NAIC”), as well as state
laws, regulations and general administrative rules. The differences between statutory financial statements and financial statements
prepared in accordance with U.S. GAAP vary between domestic and foreign jurisdictions. The principal differences are that statutory
financial statements do not reflect deferred policy acquisition costs and limit deferred income taxes, life benefit reserves predominately
use interest rate and mortality assumptions prescribed by the NAIC, bonds are generally carried at amortized cost and reinsurance
assets and liabilities are presented net of reinsurance. The Company’ s use of permitted statutory accounting practices does not have a
significant impact on statutory surplus.
For the years ended December 31,
Statutory Net Income 2007 2006 2005
Life operations $729 $ 1,123 $821
Property & Casualty operations 1,803 1,326 1,382
Total $2,532 $ 2,449 $2,203
As of December 31,
Statutory Surplus 2007 2006
Life operations $ 5,786 $4,733
Japan life operations 1,620 1,380
Property & Casualty operations 8,509 8,230
Total $ 15,915 $14,343
Dividends to the Company from its insurance subsidiaries are restricted. The payment of dividends by Connecticut-domiciled insurers
is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance
commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the
preceding twelve months, exceeds the greater of (i) 10% of the insurer’ s policyholder surplus as of December 31 of the preceding year
or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the
thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In addition, if any
dividend of a Connecticut-domiciled insurer exceeds the insurer’ s earned surplus, it requires the prior approval of the Connecticut
Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford’ s insurance
subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances somewhat
more restrictive) limitations on the payment of dividends. Dividends paid to HFSG by its insurance subsidiaries are further dependent
on cash requirements of HLI and other factors. The Company’ s property-casualty insurance subsidiaries are permitted to pay up to a
maximum of approximately $1.6 billion in dividends to HFSG in 2008 without prior approval from the applicable insurance
commissioner. The Company’ s life insurance subsidiaries are permitted to pay up to a maximum of approximately $784 in dividends
to HLI in 2008 without prior approval from the applicable insurance commissioner. The aggregate of these amounts, net of amounts
required by HLI, is the maximum the insurance subsidiaries could pay to HFSG in 2007. In 2007, HFSG and HLI received a combined
total of $2.0 billion from their insurance subsidiaries.