The Hartford 2012 Annual Report Download - page 193

Table of Contents




 
   
Commercial
Agricultural $142 2.1%$ 249 4.3%
Industrial 2,079 30.9%1,747 30.5%
Lodging 81 1.2%93 1.6%
Multifamily 1,200 17.9%1,070 18.7%
Office 1,510 22.5%1,078 18.8%
Retail 1,460 21.8%1,234 21.5%
Other 239 3.6%257 4.6%
     

The Company is involved with various special purpose entities and other entities that are deemed to be VIEs primarily as a collateral or investment manager
and as an investor through normal investment activities, as well as a means of accessing capital. A VIE is an entity that either has investors that lack certain
essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other
entities.
The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and
therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most
significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be
significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the
Company’s Consolidated Financial Statements.
Consolidated VIEs
The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to the VIEs for which the Company is the
primary beneficiary. Creditors have no recourse against the Company in the event of default by these VIEs nor does the Company have any implied or
unfunded commitments to these VIEs. The Company’s financial or other support provided to these VIEs is limited to its investment management services and
original investment.
 
 


  



CDOs [3] $89 $ 88 $ 7 $ 491 $ 471 $29
Investment funds [4] 163 — 162 — — —
Limited partnerships 6 1 5 7 — 7
      
[1] Included in other liabilities in the Company’s Consolidated Balance Sheets.
[2] The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a
realized capital loss and is the cost basis of the Company’s investment.
[3] Total assets included in fixed maturities, AFS in the Company’s Consolidated Balance Sheets.
[4] Total assets included in fixed maturities, FVO in the Company's Consolidated Balance Sheets.
CDOs represent structured investment vehicles for which the Company has a controlling financial interest as it provides collateral management services, earns
a fee for those services and also holds investments in the securities issued by these vehicles. Investment funds represent wholly-owned fixed income funds
established in 2012 for which the Company has management and control of the investments which is the activity that most significantly impacts its economic
performance. Limited partnerships represent one hedge fund for which the Company holds a majority interest in the fund as an investment.
In 2012, the Company disposed of substantially all of its interest in a consolidated VIE. Upon disposition, the Company determined that it was no longer the
primary beneficiary of the VIE. Therefore, the investment was deconsolidated as of the disposition date in the fourth quarter of 2012. The deconsolidation of
the VIE resulted in a decrease in assets of $344, liabilities of $319, and a maximum exposure to loss of $7 at the time of disposal. The deconsolidation did not
have a significant impact on the Company's results from operations.
F-51