The Hartford 2008 Annual Report Download - page 399

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Fair Value Measurements (continued)
The following table summarizes the notional amount and fair value of freestanding derivatives in other investments,
reinsurance recoverables, embedded derivatives in other policyholder funds and benefits payable and consumer notes as of
December 31, 2008, and December 31, 2007. The notional amount of derivative contracts represents the basis upon which
pay or receive amounts are calculated and are not necessarily reflective of credit risk. The fair value amounts of derivative
assets and liabilities are presented on a net basis in the following table.
December 31, 2008 December 31, 2007
Notional Fair Notional Fair
Amount Value Amount Value
Reinsurance recoverables for US GMWB [1] $ 11,437 $ 1,302 $ 6,579 $ 128
Customized derivatives used to hedge US
GMWB [2] 10,464 941 12,784 50
Freestanding derivatives used to hedge US
GMWB 8,156 1,723 8,573 592
US GMWB [3] 46,734 (6,526) 44,852 (707)
UK GMWB[3] 1,672 (64) 1,048 (8)
Japan GMWB[3] 361 (30) — —
Japan GMAB[4] 206 — 2,768 2
Macro Hedge Program [5] 2,188 137 661 18
Consumer Notes 70 (5) 19 (5)
Equity Linked Notes 55 (8) 50 (21)
Total $ 81,343 $ (2,530) $ 77,334 $ 49
[1] The increase in notional amount of the reinsurance recoverables for U.S. GMWB was primarily due to the execution of
a reinsurance transaction in July 2008.
[2] The decrease in notional amount of customized derivatives used to hedge U.S. GMWB was primarily due to current
market conditions causing policyholder account values to decrease. The notional on these customized derivatives is the
policyholder account value.
[3] The increase in notional amount of embedded derivatives associated with GMWB riders is primarily due to additional
product sales.
[4] The decrease in notional amount of the Japan GMAB embedded derivative is primarily due to a significant decline in
the equity markets triggering policyholders to elect the GMIB feature or lump sum payout in Japan’s 3Win product.
[5] The increase in notional amount of the macro hedge program is primarily due to the rebalancing of the Company’s risk
management program to place a greater relative emphasis on protection of statutory surplus.
The decrease in the net fair value of the derivative instruments in the table above was primarily due to the adoption of SFAS
157 and the net effects of capital market movements during the third and fourth quarters of 2008.
F-42
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009