The Hartford 2008 Annual Report Download - page 114

Table of Contents
Operating Results
Year ended December 31, 2008 compared to the year ended December 31, 2007
Net income decreased primarily due to decreases in Life of $4.0 billion for the year ended December 31, 2008 compared to
the year ended December 31, 2007. Additionally, Property & Casualty net income decreased $1.4 billion for the year ended
December 31, 2008 compared to the year ended December 31, 2007. Corporate results decreased primarily due to a goodwill
impairment charge of $323, after-tax.
The decrease in Life’s net income was due to the following:
• Realized losses increased as compared to the comparable prior year period primarily due to impairments on investment
securities and net losses from the adoption of SFAS 157. For further discussion, please refer to the Realized Capital
Gains and Losses by Segment table under Life’s Operating Section of the MD&A.
• Life recorded a DAC unlock charge of $941, after-tax, during the third quarter of 2008 as compared to a DAC unlock
benefit of $210, after-tax, during the third quarter of 2007. See Critical Accounting Estimates with Managements
Discussion and Analysis for a further discussion on the DAC unlock.
• Declines in assets under management in Retail, primarily driven by market depreciation of $37.8 billion for Individual
Annuity and $20.2 billion for retail mutual funds during 2008, drove declines in fee income compared to 2007.
• Net investment income on securities, available-for-sale, and other declined primarily due to declines in limited
partnership and other alternative investments income and a decrease in investment yield for fixed maturities.
• A goodwill impairment of $274, after-tax, in Retail.
• The effect of the triggering of the guaranteed minimum income benefit for the 3 Win product was $151, after-tax.
Property & Casualty results changed from net income of $1.5 billion in 2007 to net income of $92 in 2008, largely due to a
$1.1 billion after-tax increase in net realized capital losses on investments, a $325 after-tax decrease in net investment
income and a $238 after-tax increase in current accident year catastrophes, partially offset by a $147 after-tax net release of
prior accident year reserves in 2008.
• Ongoing Operations’ net income decreased by $1.3 billion in 2008, from net income of $1.5 billion in 2007 to net
income of $189 in 2008. Before income taxes, Ongoing Operations’ results deteriorated by $1.9 billion, primarily due
to a $1.5 billion increase in net realized capital losses on investments, a $383 decrease in net investment income and a
$366 increase in current accident year catastrophes, partially offset by a $210 increase in net favorable prior accident
year development and more favorable underwriting results from personal auto and workers’ compensation lines of
business. The increase in net realized capital losses of $1.5 billion in 2008 was primarily due to impairments of
subordinated fixed maturities and preferred equity securities in the financial services sector as well as of securitized
assets. Contributing to the $383 decrease in net investment income was a change from net income to net losses on
limited partnerships and other alternative investments in 2008 and decreased fixed maturity income. The $366 increase
in current accident year catastrophes was largely due to losses incurred from hurricane Ike in September of 2008 and an
increase in losses from tornadoes and thunderstorms in the South and Midwest. The $210 increase in net favorable prior
accident year development was primarily due to larger net reserve releases for workers’ compensation, professional
liability and personal auto liability claims.
• Other Operations reported a net loss of $97 in 2008 compared to net income of $30 in 2007. Before income taxes,
Other Operations’ results deteriorated by $184, primarily due to a $196 increase in net realized capital losses on
investments, largely driven by impairments of subordinated fixed maturities and preferred equity securities in the
financial services sector as well as of securitized assets, and a $51 decrease in net investment income, partially offset by
a $64 decrease in net unfavorable prior accident year reserve development.
Year ended December 31, 2007 compared to the year ended December 31, 2006
Net income increased primarily due to increases in Life of $117 for the year ended December 31, 2007 compared to the year
ended December 31, 2006. Additionally, Property & Casualty net income decreased $12 for the year ended December 31,
2007 compared to the year ended December 31, 2006. Also included in the year ended December 31, 2007 is an increase in
reserve for regulatory matters of $30, after-tax, of which $21 and $9 relates to Life and Property & Casualty, respectively.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009