The Hartford 2008 Annual Report Download - page 14

Table of Contents
Life charges fees to the shareholders of the mutual funds, which are recorded as revenue by Life. Investors can purchase
shares in the mutual funds, all of which are registered with the SEC, in accordance with the Investment Company Act of
1940. The mutual funds are owned by the shareholders of those funds and not by Life. Therefore, the mutual fund assets and
liabilities, as well as related investment returns, are not reflected in The Hartford’s consolidated financial statements.
Marketing and Distribution
Life’s distribution network is based on management’s strategy of utilizing multiple and competing distribution channels to
achieve the broadest distribution to reach target customers. The success of Life’s marketing and distribution system depends
on its product offerings, fund performance, successful utilization of wholesaling organizations, quality of customer service,
and relationships with national and regional broker-dealer firms, banks and other financial institutions, and independent
financial advisors (through which the sale of Life’s retail investment products to customers is consummated).
Life periodically negotiates provisions and terms of its relationships with unaffiliated parties, and there can be no assurance
that such terms will remain acceptable to Life or such third parties. Life’s primary wholesaler of its individual annuities is
PLANCO Financial Services, LLC and its affiliate, PLANCO, LLC (collectively “PLANCO”) which are indirect
wholly-owned subsidiaries of Hartford Life. PLANCO is one of the leading wholesalers of individual annuities and has
played a significant role in The Hartford’s growth over the past decade. As a wholesaler, PLANCO distributes Life’s fixed
and variable annuities, mutual funds, 529 plans and offshore products by providing sales support to registered
representatives, financial planners and broker-dealers at brokerage firms and banks across the United States. Owning
PLANCO secures an important distribution channel for Life and gives Life a wholesale distribution platform which it can
expand in terms of both the number of individuals wholesaling its products and the portfolio of products which they
wholesale.
Competition
Retail competes with numerous other insurance companies as well as certain banks, securities brokerage firms, independent
financial advisors and other financial intermediaries marketing annuities, mutual funds and other retirement-oriented
products. Product sales are affected by competitive factors such as investment performance ratings, product design, visibility
in the marketplace, financial strength ratings, distribution capabilities, levels of charges and credited rates, reputation and
customer service.
Near-term, the industry and the Company are experiencing lower variable annuity deposits as a result of recent market
turbulence and uncertainty in the U.S. financial system. Current market pressures are also increasing the expected claim
costs, the cost and volatility of hedging programs, and the level of capital needed to support living and death benefit
guarantees. Some companies have already begun to increase the price of their guaranteed living benefits and change the
level of guarantees offered. The new economic landscape has focused the Company’s attention to reconsider the structure
and scope of the variable annuity product line. In 2009, the Company intends to increase pricing levels and take certain
actions with respect to its variable annuity product features in an effort to reduce risks and costs associated with variable
annuity benefit features in the current economic environment and explore other risk-limiting techniques such as increased
hedging or other reinsurance structures. Competitor reactions, including the extent of competitor risk limiting techniques, to
these actions by the Company is difficult to predict and may result in a decline in Retail’s market share.
The retail mutual fund market continues to be highly competitive, with mutual fund companies looking to differentiate
themselves through product solutions, performance, expenses, wholesaling and service. In this non-proprietary broker sold
space, The Hartford and its competitors compete aggressively for net flows. As this business continues to evolve, success
will be driven by diversifying net sales across the mutual fund platform, delivering superior investment performance and
creating new investment solutions for current and future mutual fund shareholders.
Another source of competition for the Company’s retail mutual funds is products that are seen as mutual fund alternatives,
such as exchange traded funds (“ETFs”). An ETF is a fund that tracks an index but can be traded like a stock and is available
to virtually any investor.
Individual Life
The Individual Life segment provides life insurance strategies to a wide array of business intermediaries and partners to
solve the wealth protection, accumulation and transfer needs of its affluent, emerging affluent and business life insurance
clients. Life insurance in-force was $195.5 billion, $179.5 billion and $164.2 billion as of December 31, 2008, 2007 and
2006, respectively. Account values were $10.2 billion, $12.3 billion and $11.4 billion as of December 31, 2008, 2007 and
2006, respectively. Individual Life total assets were $13.8 billion, $15.6 billion and $14.2 billion as of December 31, 2008,
2007 and 2006, respectively. Revenues were $914, $1.1 billion and $1.1 billion in 2008, 2007 and 2006, respectively. Net
income (loss) in Individual Life was $(43), $182 and $150 in 2008, 2007 and 2006, respectively.
Principal Products
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009