The Hartford 2008 Annual Report Download - page 361

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Basis of Presentation and Accounting Policies (continued)
Unlock Results
As described above, as of September 30, 2008, the Company completed a comprehensive study of assumptions underlying
EGPs, resulting in an Unlock. The study covered all assumptions, including mortality, lapses, expenses, interest rate spreads,
hedging costs, and separate account returns, in substantially all product lines. The new best estimate assumptions were
applied to the current policy related in-force or account values to project future gross profits. The after-tax impact on the
Company’s assets and liabilities as a result of the Unlock during the third quarter of 2008 was as follows:
Death and
DAC Unearned Income Sales
Segment and Revenue Benefit Inducement
After-tax (charge) benefit PVFP Reserves Reserves [1] Assets Total [2]
Retail $ (648) $ 18 $ (75) $ (27) $ (732)
Retirement Plans (49) — — — (49)
Institutional — — — — —
Individual Life (29) (12) (3) — (44)
International — Japan (23) (1) (90) (2) (116)
Corporate 9 — — — 9
Total $ (740) $ 5 $ (168) $ (29) $ (932)
[1] As a result of the Unlock, death benefit reserves in Retail, increased $389, pre-tax, offset by an increase of $273,
pre-tax, in reinsurance recoverables. In International, death benefit reserves increased $164, pre-tax, offset by an
increase of $25, pre-tax, in reinsurance recoverables.
[2] The following were the most significant contributors to the Unlock amounts recorded during the third quarter of 2008:
• Actual separate account returns from the period ending July 31, 2007 to September 30, 2008 were significantly
below our aggregated estimated return.
• The Company reduced its 20 year projected separate account return assumption from 7.8% to 7.2% in the U.S.
• In Retirement Plans, the Company reduced its estimate of future fees as plans meet contractual size limits
(“breakpoints”) causing a lower fee schedule to apply and the Company increased its assumption for future
deposits by existing plan participants.
The after-tax impact on the Company’s assets and liabilities as a result of the Unlock during the third quarter of 2007 was as
follows:
Death and
DAC Unearned Income Sales
Segment and Revenue Benefit Inducement
After-tax (charge) benefit PVFP Reserves Reserves [1] Assets Total [2]
Retail $ 180 $ (5) $ (4) $ 9 $ 180
Retirement Plans (9) — — — (9)
Institutional 1 — — — 1
Individual Life 24 (8) — — 16
International — Japan 16 — 6 — 22
Corporate 3 — — — 3
Total $ 215 $ (13) $ 2 $ 9 $ 213
[1] As a result of the unlock, death benefit reserves, in Retail, decreased $4, pre-tax, offset by a decrease of $10, pre-tax, in
reinsurance recoverables.
[2] The following were the most significant contributors to the unlock amounts recorded during the third quarter of 2007:
• Actual separate account returns were above our aggregated estimated return.
• During the third quarter of 2007, the Company estimated gross profits using the mean of EGPs derived from a set
of stochastic scenarios that have been calibrated to our estimated separate account return as compared to prior
year where we used a single deterministic estimation. The impact of this change in estimation was a benefit of $13,
after-tax, for Japan variable annuities and $20, after-tax, for U.S. variable annuities.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009