The Hartford 2008 Annual Report Download - page 10

Table of Contents
Life
Life’s business is conducted by Hartford Life, Inc. (“Hartford Life” or “Life”), an indirect wholly-owned subsidiary of The
Hartford, headquartered in Simsbury, Connecticut. Life provides (i) retail and institutional investment products, including
variable annuities, fixed market value adjusted (“Fixed MVA”) annuities, mutual funds, private placement life insurance,
which includes life insurance products purchased by a company on the lives of its employees, and retirement plan services
for the savings and retirement needs of over 7 million customers, (ii) life insurance for wealth protection, accumulation and
transfer needs for approximately 760,000 customers, (iii) group benefits products such as group life and group disability
insurance for the benefit of millions of individuals, and (iv) fixed and variable annuity products through its international
operations for the savings and retirement needs of approximately 490,000 customers. Life is a large seller of individual
variable annuities, variable universal life insurance and group life and disability insurance in the United States. Life’s
position in each of its core businesses provides an opportunity to sell Life’s products and services as individuals save and
plan for retirement, protect themselves and their families against the financial uncertainties associated with disability or
death and engage in estate planning.
In the past year, primarily as a result of effects of the financial crisis, Life’s total assets under management declined to
$298.0 billion at December 31, 2008 from $371.7 billion and $327.3 billion as of December 31, 2007 and 2006,
respectively, which include $50.1 billion, $55.5 billion and $43.7 billion of third party assets invested in Life’s mutual funds
and 529 College Savings Plans for the same respective periods. The effects of the financial crisis, primarily due to declines
in net investment income on equity securities held for trading and investment impairments, also impacted revenues which
were $(1.1) billion in 2008, declining from $13.4 billion and $14.1 billion in 2007 and 2006, respectively, and net income
(loss) of $(2.4) billion in 2008, declining from $1.6 billion and $1.4 billion in 2007 and 2006, respectively.
Customer Service, Technology and Efficiencies
Life currently maintains operating efficiencies due to Life’s attention to expense and claims management and commitment
to customer service and technology. In addition, Life utilizes technology to enhance communications within Life and
throughout its distribution network in order to improve Life’s efficiency in marketing, selling and servicing its products and,
as a result, provides high-quality customer service. In recognition of excellence in customer service for individual annuities,
Hartford Life was awarded the 2008 Annuity Service Award by DALBAR Inc., a recognized independent financial services
research organization, for the thirteenth consecutive year. Hartford Life has received this prestigious award in every year of
the award’s existence. Also, in 2008 Life earned its sixth DALBAR Award for Mutual Fund and Retirement Plan Service.
Continuing the trend of service excellence, Life’s Individual Life segment won its eighth consecutive DALBAR award for
service of life insurance customers, where they finished the year ranked number one and was the only life insurance
company to win the service award this year. Additionally, Life’s Individual Life segment also won its seventh consecutive
DALBAR Financial Intermediary Service Quality Evaluation Award in 2008, where they finished the year ranked number
nine and was the only life insurance company to win the service award this year. In 2008, Life’s International segment
received two 5-Star Financial Adviser Service Awards, voted by independent financial advisers, for providing service
excellence for their United Kingdom operations.
Risk Management
Life’s product designs, prudent underwriting standards and risk management techniques are intended to mitigate against
disintermediation risk, greater than expected mortality and morbidity experience, foreign currency risk and risks associated
with certain product features, specifically the guaranteed minimum death benefit (“GMDB”), guaranteed minimum
withdrawal benefit (“GMWB”), guaranteed minimum income benefit (“GMIB”) and the guaranteed minimum accumulation
benefit (“GMAB”) offered with variable annuity products. Life seeks to effectively utilize prudent underwriting to select and
price insurance risks and regularly monitors mortality and morbidity assumptions to determine if experience remains
consistent with these assumptions and to ensure that its product pricing remains appropriate. Life also employs disciplined
claims management to protect itself against greater than expected morbidity experience. Life uses reinsurance structures and
has modified benefit features to mitigate the mortality exposure associated with GMDB. Life also uses reinsurance and
derivative instruments to attempt to mitigate risks associated with GMWB, GMIB and GMAB liabilities. In managing the
various aspects of these risks, during the fourth quarter 2008, the Company placed a greater relative emphasis on protection
of statutory surplus, which will likely result in greater U.S. GAAP earnings volatility. See Item 1A, Risk Factors, for a
further discussion on the Company’s risks and Capital Markets Risk Management for a discussion of Life Equity Risk
Management.
Retail
The Retail segment focuses, through the sale of individual variable and fixed annuities, mutual funds and other investment
products to customers principally in the U.S., on the savings and retirement needs of the growing number of individuals who
are preparing for retirement or who have already retired. This segment’s total assets were $97.2 billion, $136.0 billion and
$130.0 billion at December 31, 2008, 2007 and 2006, respectively, excluding mutual funds of $32.7 billion, $50.5 billion
and $40.0 billion for the same respective periods. Retail generated revenues of $1.6 billion, $3.5 billion and $3.4 billion in
2008, 2007 and 2006, respectively, of which individual annuities accounted for $797, $2.7 billion and $2.7 billion for 2008,
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009