The Hartford 2008 Annual Report Download - page 16

Table of Contents
Variable Universal Life — Variable universal life provides life insurance with an investment return linked to underlying
investments as policyholders are allowed to invest premium dollars among a variety of underlying mutual funds. As the
return on the investment portfolios increase or decrease, the surrender value of the variable universal life policy will increase
or decrease, and, under certain policyholder options or market conditions, the death benefit may also increase or decrease.
Life’s second-to-die products are distinguished from other products in that two lives are insured rather than one, and the
policy proceeds are paid upon the deaths of both insureds. Second-to-die policies are frequently used in estate planning for a
married couple as the policy proceeds are paid out at the time an estate tax liability is incurred. Variable universal life
account values were $4.8 billion, $7.3 billion and $6.6 billion as of December 31, 2008, 2007 and 2006, respectively.
Universal Life and Interest Sensitive Whole Life — Universal life and interest sensitive whole life insurance coverages
provide life insurance with adjustable rates of return based on current interest rates and on the returns of the underlying
investment portfolios. Universal life provides policyholders with flexibility in the timing and amount of premium payments
and the amount of the death benefit, provided there are sufficient policy funds to cover all policy charges for the coming
period, unless guaranteed no-lapse coverage is in effect. At December 31, 2008 and 2007, guaranteed no-lapse universal life
represented approximately 9% and 8% of life insurance in-force, respectively. Life also sells second-to-die universal life
insurance policies.
Term Life — Term life provides basic life insurance coverage at guaranteed level premium payments for a specific period of
time and generally has no cash value. As of December 31, 2008 and 2007, term life accounted for 32% and 29% of life
insurance in-force, respectively.
Marketing and Distribution
Consistent with Life’s strategy to access multiple distribution outlets, the Individual Life distribution organization has been
developed to penetrate multiple retail sales channels. Life sells both variable and fixed individual life products through a
wide distribution network of national and regional broker-dealer organizations, banks and independent financial advisors.
Life is a market leader in selling individual life insurance through national stockbroker and financial institutions channels. In
addition, Life distributes individual life products through independent life and property-casualty agents and Woodbury
Financial Services, an indirect and wholly-owned subsidiary retail broker-dealer. To wholesale Life’s products, Life has a
group of highly qualified life insurance professionals with specialized training in sophisticated life insurance sales. These
individuals are generally employees of Life who are managed through a regional sales office system.
Competition
Individual Life competes with approximately 1,000 life insurance companies in the United States, as well as other financial
intermediaries marketing insurance products. Competitive factors related to this segment are primarily the breadth and
quality of life insurance products offered, pricing, relationships with third-party distributors, effectiveness of wholesaling
support, pricing and availability of reinsurance, and the quality of underwriting and customer service.
The individual life industry continues to see a move in distribution away from the traditional life insurance sales agents, to
the consultative financial advisor as the place people go to buy their life insurance. In 2008, traditional career agents
accounted for approximately thirty percent of sales, while the independent channels, including brokerage, financial
institutions and banks, and stockbrokers, sold the remainder. Companies who distribute products through financial advisors
and independent agents have increased commissions or offered additional incentives to attract new business. Competition is
most intense among the largest brokerage general agencies. Individual Life’s regional sales office system is a differentiator
in the market and allows it to compete across multiple distribution outlets.
The individual life market has seen a shift in product mix towards universal life products over the past few years, which now
represents 42% of life insurance sales as of September 30, 2008 as reported through LIMRA. Both consumers and producers
have been demanding fixed products and more guarantees, which can be demonstrated by the shift in the mix of products
being sold. Due to this shifting market demand, enhanced product features are becoming an increasingly important factor in
competition. The Company has updated its universal life product set and sales of universal life have increased. The
Company is ranked number two in total variable universal life sales according to LIMRA as of September 30, 2008.
As of September 30, 2008 The Hartford is ranked number seven in total premium sales of life insurance and number
fourteen in annualized premium according to LIMRA’s quarterly U.S. Individual Life Insurance Sales Survey.
Retirement Plans
Life is among the top providers of retirement products and services. Products and services offered by Retirement Plans
include asset management and plan administration sold to municipalities and not-for-profit organizations pursuant to
Section 457 and 403(b) of the Internal Revenue Code of 1986, as amended (referred to as “Section 457” and “403(b)”,
respectively). Life also provides retirement products and services, including asset management and plan administration sold
to small and medium-size corporations pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended
(referred to as “401(k)”).
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009