The Hartford 2008 Annual Report Download - page 282

Table of Contents
Sub-Prime Residential Mortgage Loans
The Company has exposure to sub-prime and Alt-A residential mortgage backed securities included in the Consolidated
Available-for-Sale Securities by Type table above. These securities continue to be affected by uncertainty surrounding the
decline in home prices, negative technical factors and deterioration in collateral performance.
The following table presents the Company’s exposure to ABS supported by sub-prime mortgage loans by current credit
quality and vintage year, including direct investments in CDOs that contain a sub-prime loan component, included in the
RMBS and ABS other line in the Consolidated Available-for-Sale Securities by Type table above. A comparison of fair
value to amortized cost is not indicative of the pricing of individual securities as rating downgrades and impairments have
occurred. Credit protection represents the current weighted average percentage, excluding wrapped securities, of the
outstanding capital structure subordinated to the Company’s investment holding that is available to absorb losses before the
security incurs the first dollar loss of principal. The table below excludes the Company’s exposure to Alt-A residential
mortgage loans, with an amortized cost and fair value of $305 and $197, respectively, as of December 31, 2008, and $366
and $357, respectively, as of December 31, 2007. These securities were primarily backed by 2007 vintage year collateral
and rated A and above.
Sub-Prime Residential Mortgage Loans [1] [2] [3] [4]
December 31, 2008 [5]
AAA AA A BBB BB and Below Total
Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value Cost Value Cost Value
2003 & Prior $ 49 $ 41 $ 162 $ 136 $ 60 $ 43 $ 32 $ 26 $ 34 $ 20 $ 337 $ 266
2004 112 81 349 277 8 7 10 7 — — 479 372
2005 90 71 543 367 154 77 24 16 23 18 834 549
2006 77 69 126 56 18 9 120 50 143 54 484 238
2007 42 27 40 10 38 18 47 26 134 75 301 156
Total $ 370 $ 289 $ 1,220 $ 846 $ 278 $ 154 $ 233 $ 125 $ 334 $ 167 $ 2,435 $ 1,581
Credit
protection 40.5% 47.6% 31.4% 21.9% 19.9% 41.0%
December 31, 2007
AAA AA A BBB BB and Below Total
Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value Cost Value Cost Value
2003 & Prior $ 93 $ 92 $ 213 $ 199 $ 113 $ 94 $ 8 $ 7 $ 7 $ 7 $ 434 $ 399
2004 133 131 358 324 2 2 2 1 — — 495 458
2005 113 107 796 713 8 5 10 3 33 23 960 851
2006 457 413 67 55 2 3 3 2 8 2 537 475
2007 280 241 71 39 56 47 21 20 25 27 453 374
Total $ 1,076 $ 984 $ 1,505 $ 1,330 $ 181 $ 151 $ 44 $ 33 $ 73 $ 59 $ 2,879 $ 2,557
Credit
protection 32.7% 47.3% 21.1% 19.6% 17.1% 39.8%
[1] The vintage year represents the year the underlying loans in the pool were originated.
[2] The Company’s exposure to second lien residential mortgages is composed primarily of loans to prime and Alt-A
borrowers, of which approximately over half were wrapped by monoline insurers. These securities are included in the
table above and have an amortized cost and fair value of $173 and $82, respectively, as of December 31, 2008 and
$260 and $217, respectively, as of December 31, 2007.
[3] As of December 31, 2008, the weighted average life of the sub-prime residential mortgage portfolio was 3.8 years.
[4] Approximately 84% of the portfolio is backed by adjustable rate mortgages.
[5] The credit qualities above include downgrades which have shifted the portfolio from higher rated assets to lower rated
assets since December 31, 2007.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009