The Hartford 2008 Annual Report Download - page 431

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)
The determination of the GMDB and GMIB liabilities and related GMDB reinsurance recoverable is based on models that
involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility,
contract surrender rates and mortality experience. The following assumptions were used to determine the GMDB, GMIB
and UL Secondary Guarantee liabilities as of December 31, 2008:
U.S. GMDB:
• 1000 stochastically generated investment performance scenarios for all issue years.
• For all issue years, the weighted average return is 8.3%; it varies by asset class with a low of 3% for cash and a high of
9% for aggressive equities.
• Discount rate of 7.5% for issue year 2002 & prior; discount rate of 7% for issue year 2003 & 2004 and discount rate of
5.6% for issue year 2005 — 2008.
• Volatilities also vary by asset class with a low of 1% for cash, a high of 15% for aggressive equities, and a weighted
average of 11%.
• 100% of the Hartford experience mortality table was used for the mortality assumptions.
• Lapse rates by calendar year vary from a low of 8% to a high of 11%, with an average of 10%.
Japan GMDB and GMIB:
• 1000 stochastically generated investment performance scenarios.
• Separate account returns, representing the Company’s long-term assumptions, varied by asset class with a low of 3%
for Japan bonds, a high of 9% for foreign equities and a weighted average of 6%.
• Volatilities also varied by asset class with a low of 0% for Japan bonds, a high of 5% for foreign equities and a
weighted average of 2%.
• 85% of the 1996 Japan Standard Mortality Table was used for mortality assumptions.
• Lapse rates by age vary from a low of 1% to a high of 25%, with an average of 3%.
• Average discount rate of 5.1%.
UL Secondary Guarantees:
• Discount rate of 4.75% for issue year 2004, discount rate of 4.50% for issue year 2005 & 2006, discount rate of 4.25%
for issue year 2007, and discount rate of 3.5% for issue year 2008.
• 100% of the Hartford pricing mortality table for mortality assumptions.
• Lapse rates for single life policies average 4% in policy years 1-10, declining to 0% by age 95. Lapse rate for last
survivor policies declining to 0.5% by age 91.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009