The Hartford 2010 Annual Report Download - page 56

56
An Unlock revises EGPs, on a quarterly basis, to reflect market updates of policyholder account value and the Company's current best
estimate assumptions. After each quarterly Unlock, the Company also tests the aggregate recoverability of DAC by comparing the DAC
balance to the present value of future EGPs. The margin between the DAC balance and the present value of future EGPs for U.S. and
Japan individual variable annuities was 29% and 38% as of December 31, 2010, respectively. If the margin between the DAC asset and
the present value of future EGPs is exhausted, further reductions in EGPs would cause portions of DAC to be unrecoverable and the
DAC asset would be written down to equal future EGPs.
Unlocks
The after-tax impact on the Company’ s assets and liabilities as a result of the Unlocks for years ended 2010, 2009 and 2008, were:
For the year ended December 31, 2010:
Segment
After-tax (Charge) Benefit DAC URR
Death and Other
Insurance
Benefit Reserves SIA Total
Global Annuity $ 42 $ 7 $ 16 $ — $ 65
Life Insurance 23 5 1 (1) 28
Retirement Plans 18 — — — 18
Total $ 83 $ 12 $ 17 $ (1) $ 111
The most significant contributors to the Unlock benefit recorded during the year ended December 31, 2010 were actual separate account
returns being above our aggregated estimated return. Also included in the benefit are assumption updates related to benefits from
withdrawals and lapses, offset by hedging, annuitization estimates on Japan products, and long-term expected rate of return updates.
For the year ended December 31, 2009:
Segment
After-tax (charge) benefit DAC URR
Death and Other
Insurance
Benefit Reserves SIA Total [1]
Global Annuity $ (533) $ 23 $ (368) $ (46) $ (924)
Life Insurance (101) 54 (4) — (51)
Retirement Plans (55) — — (1) (56)
Corporate and Other (3) — — — (3)
Total $ (692) $ 77 $ (372) $ (47) $ (1,034)
[1] Includes $(49) related to DAC recoverability impairment associated with the decision to suspend sales in the U.K variable annuity business.
The most significant contributors to the Unlock was a result of actual separate account returns being significantly below our
aggregated estimated return for the first quarter of 2009, partially offset by actual returns being greater than our aggregated estimated
return for the period from April 1, 2009 to December 31, 2009.
For the year ended December 31, 2008:
Segment
After-tax (charge) benefit DAC URR
Death and Other
Insurance Benefit
Reserves SIA Total
Global Annuity $ (671) $ 17 $ (165) $ (29) $ (848)
Life Insurance (29) (12) (3) — (44)
Retirement Plans (49) — — — (49)
Corporate and Other 9 — — — 9
Total $ (740) $ 5 $ (168) $ (29) $ (932)
The most significant contributors to the Unlock was a result of actual separate account returns were significantly below our aggregated
estimated return. Furthermore, the Company reduced its 20 year projected separate account return assumption from 7.8% to 7.2% in
the U.S. In addition, Retirement Plans reduced its estimate of future fees as plans met contractual size limits (“breakpoints”), causing a
lower fee schedule to apply, and the Company increased its assumption for future deposits by existing plan participants.
Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities and Valuation Allowances on Investments
The Company has a monitoring process overseen by a committee of investment and accounting professionals that identifies investments
that are subject to an enhanced evaluation on a quarterly basis to determine if an other-than-temporary impairment (“impairment”) is
present for AFS securities or a valuation allowance is required for mortgage loans. This evaluation is a quantitative and qualitative
process, which is subject to risks and uncertainties. For further discussion of the accounting policies, see the Significant Investment
Accounting Policies Section in Note 5 of the Notes to Consolidated Financial Statements. For a discussion of results, see the Other-
Than-Temporary Impairments within the Investment Credit Risk section of the MD&A.