The Hartford 2008 Annual Report Download - page 444

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies (continued)
The Company receives a foreign tax credit (“FTC”) against its U.S. tax liability for foreign taxes paid by the Company
including payments from its separate account assets. The separate account FTC is estimated for the current year using
information from the most recent filed return, adjusted for the change in the allocation of separate account investments to the
international equity markets during the current year. The actual current year FTC can vary from the estimates due to actual
FTCs passed through by the mutual funds. The Company recorded benefits of $16, $11 and $17 related to separate account
FTC in the years ended December 31, 2008, December 31, 2007 and December 31, 2006, respectively. These amounts
included benefits related to true-ups of prior years’ tax returns of $4, $0 and $7 in 2008, 2007 and 2006 respectively.
The Company’s unrecognized tax benefits increased by $15 during 2008 as a result of tax positions taken on the Company’s
2007 tax return and expected to be taken on its 2008 tax return, bringing the total unrecognized tax benefits to $91 as of
December 31, 2008. This entire amount, if it were recognized, would affect the effective tax rate.
13. Income Tax
The provision (benefit) for income taxes consists of the following:
For the years ended December 31,
2008 2007 2006
Income Tax Expense (Benefit)
Current - U.S. Federal $ (247) $ 436 $ 519
- International –– — —
Total current (247) 436 519
Deferred - U.S. Federal Excluding NOL Carryforward (1,574) 473 169
- Net Operating Loss Carryforward (742) — —
- International 721 147 169
Total deferred (1,595) 620 338
Total income tax expense (benefit) $ (1,842) $ 1,056 $ 857
Deferred tax assets (liabilities) include the following as of December 31:
Deferred Tax Assets 2008 2007
Tax discount on loss reserves $ 725 $ 742
Tax basis deferred policy acquisition costs 703 724
Unearned premium reserve and other underwriting related reserves 405 405
Investment-related items 2,000 467
Employee benefits 419 119
Net unrealized losses on investments 4,265 302
Minimum tax credit 641 773
Capital loss carryover 195 —
Net operating loss carryover 850 80
Other 25 39
Total Deferred Tax Assets 10,228 3,651
Valuation Allowance (75) (43)
Deferred Tax Assets, Net of Valuation Allowance 10,153 3,608
Deferred Tax Liabilities
Financial statement deferred policy acquisition costs and reserves (4,816) (3,169)
Other depreciable & amortizable assets (13) (24)
Other (85) (107)
Total Deferred Tax Liabilities (4,914) (3,300)
Net Deferred Tax Asset $ 5,239 $ 308
The Company had a current income tax receivable of $539 and $28 as of December 31, 2008 and 2007, respectively.
In management’s judgment, the net deferred tax asset will more likely than not be realized. Included in the deferred tax asset
is the expected tax benefit attributable to net operating losses of $2,468, consisting of U.S. losses of $2,192, which expire
from 2012-2026, and foreign losses of $276. The foreign losses consist of $97, which expire from 2012-2013, and $179,
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009