The Hartford 2012 Annual Report Download - page 129

Table of Contents
The following table identifies the Company’s aggregate contractual obligations as of December 31, 2012:
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Property and casualty obligations [1] $22,254 $5,670 $4,692 $2,764 $9,128
Life, annuity and disability obligations [2] 323,903 25,265 48,260 39,194 211,184
Operating lease obligations [3] 237 61 82 51 43
Long-term debt obligations [4] 14,216 754 1,518 1,875 10,069
Consumer notes [5] 176 85 51 32 8
Purchase obligations [6] 2,125 1,490 510 106 19
Other long-term liabilities reflected on the balance sheet [7] 2,799 2,663 136 — —
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[1] The following points are significant to understanding the cash flows estimated for obligations under property and casualty contracts:
•Reserves for Property & Casualty unpaid losses and loss adjustment expenses include IBNR and case reserves. While payments due on claim reserves are considered
contractual obligations because they relate to insurance policies issued by the Company, the ultimate amount to be paid to settle both case reserves
and IBNR is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a
settlement with the claimant. Final claim settlements may vary significantly from the present estimates, particularly since many claims will not be
settled until well into the future.
•In estimating the timing of future payments by year, the Company has assumed that its historical payment patterns will continue. However, the actual timing of future
payments could vary materially from these estimates due to, among other things, changes in claim reporting and payment patterns and large
unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and environmental claims. In
addition, the table does not include future cash flows related to the receipt of premiums that may be used, in part, to fund loss payments.
•Under U.S. GAAP, the Company is only permitted to discount reserves for losses and loss adjustment expenses in cases where the payment pattern and ultimate loss
costs are fixed and determinable on an individual claim basis. For the Company, these include claim settlements with permanently disabled claimants.
As of December 31, 2012, the total property and casualty reserves in the above table are gross of a reserve discount of $538.
[2] Estimated life, annuity and disability obligations include death and disability claims, policy surrenders, policyholder dividends and trail
commissions offset by expected future deposits and premiums on in-force contracts. Estimated life, annuity and disability obligations are based on
mortality, morbidity and lapse assumptions comparable with the Company’s historical experience, modified for recent observed trends. The
Company has also assumed market growth and interest crediting consistent with other assumptions. In contrast to this table, the majority of the
Company’s obligations are recorded on the balance sheet at the current account values and do not incorporate an expectation of future market
growth, interest crediting, or future deposits. Therefore, the estimated obligations presented in this table significantly exceed the liabilities
recorded in reserve for future policy benefits and unpaid losses and loss adjustment expenses, other policyholder funds and benefits payable and
separate account liabilities. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results.
See Note 2 - Business Dispositions of Notes to Consolidated Financial Statements for further information as to Retirement Plans and
Individual Life reinsurance transactions.
[3] Includes future minimum lease payments on operating lease agreements. See Note 13 of Notes to Consolidated Financial Statements for additional
discussion on lease commitments.
[4] Includes contractual principal and interest payments. See Note 15 of Notes to Consolidated Financial Statements for additional discussion of
long-term debt obligations.
[5] Consumer notes include principal payments and contractual interest for fixed rate notes and interest based on current rates for floating rate notes.
See Note 15 of Notes to Consolidated Financial Statements for additional discussion of consumer notes.
[6] Includes $598 in commitments to purchase investments including approximately $562 of limited partnership, $6 of private placements and $30 of
mortgage loans. Outstanding commitments under these limited partnerships and mortgage loans are included in payments due in less than 1 year
since the timing of funding these commitments cannot be reliably estimated. The remaining commitments to purchase investments primarily
represent payables for securities purchased which are reflected on the Company’s consolidated balance sheet.
Also included in purchase obligations is $1.0 billion relating to contractual commitments to purchase various goods and services such as
maintenance, human resources, information technology, and transportation in the normal course of business. Purchase obligations exclude
contracts that are cancelable without penalty or contracts that do not specify minimum levels of goods or services to be purchased.
[7] Includes cash collateral of $1.4 billion which the Company has accepted in connection with the Company’s derivative instruments. Since the
timing of the return of the collateral is uncertain, the return of the collateral has been included in the payments due in less than 1 year.
Also included in other long term liabilities is $48 of net unrecognized tax benefits.
[8] Does not include estimated voluntary contribution of $100 to the Company’s pension plan in 2013.
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