The Hartford 2012 Annual Report Download - page 107

Table of Contents
The following table presents our estimates of the potential instantaneous impacts from sudden market stresses related to equity market prices, interest rates,
implied market volatilities, and foreign currency exchange rates. The sensitivities below represent: (1) the net estimated difference between the change in the fair
value of GMWB liabilities and the underlying hedge instruments and (2) the estimated change in fair value of the hedge instruments for the macro and
international hedge programs, before the impacts of amortization of DAC, and taxes. As noted in the table above, certain hedge assets are used to hedge
liabilities that are not carried at fair value and will not have a liability offset in the U.S. GAAP sensitivity analysis. All sensitivities are measured as of year
end and are related to the fair value of liabilities and hedge instruments in place as of year end for the Company’s variable annuity hedge programs. The
impacts presented in the table below are estimated individually and measured without consideration of any correlation among market risk factors.

 
  
  
         
Potential Net Fair Value
Impact $(150)$(66)$ 41 $ 407 $ 70 $ (36)$ 509 $ 247 $ (248)
         
Potential Net Fair Value
Impact $(61)$(32)$ 34 $ 27 $ 13 $ (13)$ 135 $ 72 $ (86)
         
Potential Net Fair Value
Impact $(398)$(78)$ 358 $ 101 $ 20 $ (97)$ 99 $ 19 $ (71)

         
Potential Net Fair Value
Impact N/A N/A N/A N/A N/A N/A $1,131 $ 353 $ (242)
[1] These sensitivities are based on the following key market levels as of December 31, 2012: 1) S&P of 1426; 2) 10yr US swap rate of 1.91%; 3) S&P
10yr volatility of 25.87% and 4) FX rates of USDJPY @86.75 and EURJPY @114.46.
[2] Subsequent to December 31, 2012, the Company added additional currency protection. This action resulted in changes in Yen sensitivities from those
disclosed above. As of February 21, 2013, the potential net fair value impact for the additional currency protection from Yen instantaneously
strengthening by 20% and 10% are $333 and $90, respectively; and Yen instantaneously weakening by (10)% is $(58).
The above sensitivity analysis is an estimate and should not be used to predict the Company’s future financial performance of its variable annuity hedge
programs. The actual net changes in the fair value liability and the hedging assets illustrated in the above table may vary materially depending on a variety of
factors which include but are not limited to:
•The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to
rebalance hedge positions prior to the market changes;
•Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which
could materially impact the liability; and
•The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.
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