The Hartford 2011 Annual Report Download - page 147

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-12
2. Earnings (Loss) per Share (continued)
Basic earnings per share is computed based on the weighted average number of common shares outstanding during the year. Diluted
earnings per share includes the dilutive effect of warrants, stock compensation plans, and assumed conversion of preferred shares to
common using the treasury stock method. Contingently issuable shares are included for the number of shares issuable assuming the end
of the reporting period was the end of the contingency period, if dilutive.
Under the treasury stock method for the warrants issued as a result of the Company’ s participation in the Capital Purchase Program, see
Note 15, exercise shall be assumed at the beginning of the period. The proceeds from exercise of $9.699 per share in 2011 and 9.790
per share in 2010 and 2009 shall be assumed to be used to purchase common shares at the average market price during the period.
Under the treasury stock method for the warrants issued to Allianz, see Note 15, exercise shall be assumed at the beginning of the
period. The proceeds from exercise of $25.23 in 2011, $25.23 in 2010 and $25.25 in 2009 per share shall be assumed to be used to
purchase common shares at the average market price during the period.
Under the treasury stock method for stock compensation plans, shares are assumed to be issued and then reduced for the number of
shares repurchaseable with theoretical proceeds at the average market price for the period. Theoretical proceeds for the stock
compensation plans include option exercise price payments, unamortized stock compensation expense and tax benefits realized in excess
of the tax benefit recognized in net income. The difference between the number of shares assumed issued and number of shares
purchased represents the dilutive shares. Upon exercise of outstanding options or vesting of other stock compensation plan awards, the
additional shares issued and outstanding are included in the calculation of the Company’ s weighted average shares from the date of
exercise or vesting.
Under the if-converted method for mandatory convertible preferred stock, see Note 15, the conversion to common shares is assumed if
the inclusion of these shares and the related dividend adjustment are dilutive to the earnings per share calculation. For the year ended
December 31, 2011, 20.7 million shares and the related dividend adjustment would have been antidilutive to the earnings per share
calculations and therefore are excluded. Assuming the impact of the mandatory convertible preferred shares was dilutive, weighted
average common shares outstanding and dilutive potential common shares would have totaled 498.7 million shares. For the year ended
December 31, 2010, these shares and the related dividend adjustment are included in the diluted earnings per share calculation.
As a result of the net loss in the year ended December 31, 2009, the Company used basic weighted average common shares outstanding
in the calculation of diluted loss per share, since the inclusion of shares for warrants of 14.6 million, stock compensation plans of 0.9
million, would have been antidilutive to the earnings per share calculation. In the absence of the net loss, weighted average common
shares outstanding and dilutive potential common shares would have totaled 361.8 million for the year ended December 31, 2009.