The Hartford 2011 Annual Report Download - page 211

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-76
15. Equity (continued)
Statutory Results (Unaudited)
The domestic insurance subsidiaries of The Hartford prepare their statutory financial statements in conformity with statutory accounting
practices prescribed or permitted by the applicable state insurance department which vary materially from U.S. GAAP. Prescribed
statutory accounting practices include publications of the National Association of Insurance Commissioners (“NAIC”), as well as state
laws, regulations and general administrative rules. The differences between statutory financial statements and financial statements
prepared in accordance with U.S. GAAP vary between domestic and foreign jurisdictions. The principal differences are that statutory
financial statements do not reflect deferred policy acquisition costs and limit deferred income taxes, life benefit reserves predominately
use interest rate and mortality assumptions prescribed by the NAIC, bonds are generally carried at amortized cost and reinsurance assets
and liabilities are presented net of reinsurance.
The statutory net income amounts for the years ended December 31, 2011, 2010 and 2009, and the statutory surplus amounts as of
December 31, 2011 and 2010 in the table below are based on actual statutory filings with the applicable U.S. regulatory authorities.
Statutory Net Income (Loss)
For the years ended December 31,
2011
2010
2009
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries
$
(1,272)
$
(140)
$
1,714
Property and casualty insurance subsidiaries
514
1,477
889
Total
$
(758)
$
1,337
$
2,603
Statutory Surplus
As of December 31,
2011
2010
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries
$
7,388
$
7,731
Property and casualty insurance subsidiaries
7,412
7,721
Total
$
14,800
$
15,452
The Company also holds regulatory capital and surplus for its operations in Japan. Under the accounting practices and procedures
governed by Japanese regulatory authorities, the Company’ s statutory capital and surplus was $1.3 billion, as of December 31, 2011 and
2010.
Dividends from Insurance Subsidiaries
Dividends to the HFSG Holding Company from its insurance subsidiaries are restricted. The payment of dividends by Connecticut-
domiciled insurers is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by
the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions
made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’ s policyholder surplus as of December 31 of the
preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period
ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In
addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’ s earned surplus, it requires the prior approval of the
Connecticut Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford’ s
insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances
somewhat more restrictive) limitations on the payment of dividends. Dividends paid to HFSG Holding Company by its life insurance
subsidiaries are further dependent on cash requirements of HLI and other factors. The Company’ s property-casualty insurance
subsidiaries are permitted to pay up to a maximum of approximately $1.4 billion in dividends to HFSG Holding Company in 2012
without prior approval from the applicable insurance commissioner. The Company’ s life insurance subsidiaries are permitted to pay up
to a maximum of approximately $625 in dividends to HLI in 2012 without prior approval from the applicable insurance commissioner.
The aggregate of these amounts is the maximum the insurance subsidiaries could pay to HFSG Holding Company in 2012 without prior
approval from the applicable insurance commissioner. In addition to statutory limitations on paying dividends, the Company also takes
other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to
expected earnings and capitalization of the subsidiary, regulatory capital requirements and liquidity requirements of the individual
operating company. In 2012, HFSG Holding Company anticipates receiving $800 in dividends from its property-casualty insurance
subsidiaries, net of dividends to fund interest payments on an intercompany note between Hartford Holdings, Inc. and Hartford Fire
Insurance Company, and no dividends from the life insurance subsidiaries. In 2011, HFSG Holding Company and HLI received $80 in
dividends from the life insurance subsidiaries, and HFSG Holding Company received $1.1 billion in dividends from its property-
casualty insurance subsidiaries, including $150 reflecting the net realized capital gain on the sale of SRS, $160 related to funding
interest payments on an intercompany note between Hartford Holdings Inc. and Hartford Fire Insurance Company and $800 used in
conjunction with other resources at the HFSG Holding Company principally to fund dividends, interest, capital contributions to
subsidiaries and debt maturities.