The Hartford 2008 Annual Report Download - page 144

Table of Contents
Net investment income • Net investment income was lower primarily due to a $77 decline in income from limited
partnerships and other alternative investments, combined with lower yields on fixed
maturity investments due to interest rate declines, partially offset by an increase in general
account assets from increased fixed account sales.
Net realized capital
losses
• Net realized capital losses increased primarily as a result of losses on GMWB derivatives
of $(631); the adoption of SFAS 157 during the first quarter of 2008, which resulted in
realized capital losses of $(616); and impairments of $(474).
Benefits, losses and
loss adjustment
expenses
• Benefits, losses and loss adjustment expenses increased primarily as a result of the impact
of the 2008 Unlock which increased the benefit ratio used in the calculation of GMDB
reserves.
Insurance operating
costs and other
expenses
• Insurance operating costs and other expenses decreased primarily as a result of lower non
deferrable asset based trail commissions due to equity market declines.
Amortization of
deferred policy
acquisition costs
and present value of
future profits
(“DAC”)
• Amortization of DAC increased primarily due to the impact of the 2008 Unlock charge as
compared to the 2007 Unlock benefit. This was partially offset by a DAC benefit
associated with the adoption of SFAS 157 at the beginning of the first quarter of 2008.
Goodwill impairment • As a result of testing performed during the fourth quarter of 2008, all goodwill attributed to
the individual annuity business in Retail was deemed to be impaired and was written down
to $0. For further discussion of this impairment, see the Critical Accounting Estimates
section of the MD&A.
Income tax expense
(benefit)
• The effective tax rate increased from 21% to 41% for the year ended December 31, 2008 as
compared to the prior year primarily due to losses before income taxes in 2008 compared
to pre-tax earnings in 2007. The impact of DRD and other permanent differences caused an
increase in the tax benefit to above 35% on the 2008 pre tax loss and a decrease in the tax
expense on the 2007 pre tax income.
81
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009