The Hartford 2008 Annual Report Download - page 165

Table of Contents
Net income
2008 2007 2006
Underwriting results before catastrophes and prior accident year
development $ 1,129 $ 984 $ 1,240
Current accident year catastrophes 543 177 199
Unfavorable (favorable) prior accident year reserve development (226) 48 296
Underwriting results 812 759 745
Net servicing and other income [1] 31 52 53
Net investment income 1,253 1,687 1,486
Other expenses (222) (249) (223)
Net realized capital gains (losses) (1,877) (172) 9
Income (loss) before income taxes (3) 2,077 2,070
Income tax benefit (expense) 95 (570) (551)
Net income $ 92 $ 1,507 $ 1,519
[1] Net of expenses related to service business.
Net realized capital gains (losses)
2008 2007 2006
Gross gains on sales $ 180 $ 159 $ 205
Gross losses on sales (448) (121) (164)
Impairments (1,533) (125) (45)
Periodic net coupon settlements on credit derivatives 2 15 4
Other, net (78) (100) 9
Net realized capital gains (losses), before-tax $ (1,877) $ (172) $ 9
Year ended December 31, 2008 compared to the year ended December 31, 2007
Net income decreased by $1,415, from net income of $1,507 in 2007 to net income of $92 in 2008, primarily driven by an
increase in net realized capital losses and a decrease in net investment income.
Realized capital gains
(losses)
Gross gains (losses) on sales, net
• Gross gains and losses on sales in 2008 primarily resulted from the sale of corporate
fixed maturities resulting from the decision to reallocate the portfolio to securities with
more favorable risk/return profiles. Also included were losses on sales of CLOs in the
first quarter for which HIMCO is the collateral manager. For more information regarding
losses on the sale of HIMCO managed CLOs, refer to the Variable Interest Entities
section of the “Investments” section of the MD&A.
• Gross gains and losses on sales in 2007 were primarily comprised of sales of foreign
government, corporate, and municipal fixed maturity securities.
Impairments
• Impairments of $1.5 billion in 2008 were primarily of subordinated fixed maturities and
preferred equities within the financial services sector, as well as of securitized assets.
(See the Other-Than-Temporary Impairments discussion within “Investment Results” in
the “Investments” section of the MD&A for more information on the impairments
recorded in 2008).
Other, net
• Other, net realized capital losses in 2008 were primarily related to net losses on credit
derivatives as a result of credit spread widening on credit derivatives that assume credit
exposure. Also included were derivative related losses of $7 for the year ended
December 31, 2008 due to counterparty default related to the bankruptcy of Lehman
Brothers Holdings Inc.
• Other, net realized capital losses in 2007 primarily resulted from the change in value
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009