The Hartford 2010 Annual Report Download - page 87

87
CORPORATE AND OTHER
Operating Summary 2010 2009 2008
Earned premiums $ 3 $ (1) $ 8
Fee income [1] 187 220 227
Net investment income 268 344 308
Net realized capital gains (losses) 83 (433) (137)
Other revenues — 4 6
Total revenues 541 134 412
Benefits, losses and loss adjustment expenses 249 394 281
Insurance operating costs and other expenses [1] 382 365 220
Interest expense 508 476 343
Goodwill impairment 153 32 323
Total benefits, losses and expenses 1,292 1,267 1,167
Loss before income taxes (751) (1,133) (755)
Income tax benefit (263) (329) (203)
Net loss $ (488) $ (804) $ (552)
[1] Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that
has an offsetting commission expense in insurance operating costs and other expenses.
Year ended December 31, 2010 compared to the year ended December 31, 2009
The net loss in Corporate and Other decreased primarily due to improvements in net realized capital gains (losses), partially offset by an
increase in interest expense and goodwill impairments.
The change to net realized capital gains, from net realized capital losses was due to impairments on investment securities recorded in
2009. In addition, 2009 included a net realized capital loss of approximately $300 as a result of a contingency payment made to Allianz
due to the Company’ s participation in the Capital Purchase Program. See Note 21 of the Notes to Consolidated Financial Statements for
a further discussion on Allianz.
Interest expense increased primarily due to the issuance of $1.1 billion of senior notes in the first quarter of 2010. For further
information, see Senior Notes within Note 14 of the Notes to Consolidated Financial Statements.
Goodwill impairments were recorded for Federal Trust Corporation goodwill in 2010 of $100, after-tax, in 2010 compared to
impairments for the Institutional reporting unit in 2009 of $32, after-tax, see Note 8 of the Notes to Consolidated Financial Statements
for additional information regarding goodwill impairments.
The effective tax rate in 2009 differed from the U.S. Federal statutory rate due to nondeductible costs associated with the contingency
payment to Allianz and goodwill impairments.
Year ended December 31, 2009 compared to the year ended December 31, 2008
The net loss in Corporate and Other increased primarily due to higher net realized capital losses and increases in interest expense and
benefits, losses and loss adjustment expenses, partially offset by a decrease in goodwill impairments.
The net realized capital loss increased primarily due to approximately $300 in net realized losses a result of a contingency payment
made to Allianz due to the Company’ s participation in the Capital Purchase Program. Additionally, 2008 included realized gains of
$110 on the change in fair value of the liability related to warrants issued to Allianz. See Note 21 of the Notes to Consolidated
Financial Statements for a further discussion on Allianz.
Interest expense increased primarily due to the issuance of $1.75 billion of 10.0% junior subordinated debentures on October 17, 2008
partially offset by a reduction from debt repayments of $955 in 2008.
Benefits, losses and loss adjustment expenses increased as the unfavorable prior year loss development in 2009 was higher than 2008.
The 2009 reserve development included asbestos and environmental reserve strengthening of $138 and $75, respectively, while the
2008 reserve development included asbestos and environmental reserve strengthening of $50 and $53, respectively.
Goodwill impairments were recorded for the Institutional reporting unit in 2009 of $32, after-tax, compared to impairments for the
Individual Annuity and International reporting units in 2008 of $323, after-tax, see Note 8 of the Notes to Consolidated Financial
Statements for additional information regarding goodwill impairments.
The effective tax rate differs from the U.S. Federal statutory rate due to nondeductible costs associated with the contingency payment to
Allianz in 2009, and with goodwill impairments in both 2009 and 2008. Also 2008 included tax exemption for the realized gains on the
change in fair value of the liability related to warrants issued to Allianz.