The Hartford 2014 Annual Report Download - page 10

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The majority of the Company’s investment portfolios are managed by Hartford Investment Management Company (“HIMCO”). HIMCO manages the
portfolios to maximize economic value, and generate the income necessary to support the Company’s various product obligations, within internally
established objectives, guidelines and risk tolerances. The portfolio objectives and guidelines are developed based upon the asset/liability profile, including
duration, convexity and other characteristics within specified risk tolerances. The risk tolerances considered include, for example, asset sector, credit issuer
allocation limits, maximum portfolio limits for below investment grade holdings and foreign currency exposure limits. The Company attempts to minimize
adverse impacts to the portfolio and the Company’s results of operations from changes in economic conditions through asset diversification, asset allocation
limits, asset/liability duration matching and through the use of derivatives. For further discussion of HIMCO’s portfolio management approach, see Part II,
Item 7, MD&A — Enterprise Risk Management.
In addition to managing the general account assets of the Company, HIMCO is also a SEC registered investment adviser for a variable insurance trust and
third party institutional clients, a sub-advisor for certain mutual funds and serves as the sponsor and collateral manager for capital markets transactions.
HIMCO specializes in investment management that incorporates proprietary research and active portfolio management within a disciplined risk framework
that seeks to provide value added returns versus peers and benchmarks. As of December 31, 2014 and 2013, the fair value of HIMCO’s total assets under
management was approximately $109.5 billion and $112.6 billion, respectively, of which $6.2 billion and $6.1 billion, respectively, were held in HIMCO
managed third party accounts.
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The Company has an enterprise risk management function (“ERM”) that is charged with providing analysis of the Company's risks on an individual and
aggregated basis and with ensuring that the Company's risks remain within its risk appetite and tolerances. ERM plays an integral role at The Hartford by
fostering a strong risk management culture and discipline. The mission of ERM is to support the Company in achieving its strategic priorities by:
• Providing a comprehensive view of the risks facing the Company, including risk concentrations and correlations;
• Helping management define the Company's overall capacity and appetite for risk by evaluating the risk/return profile of the business relative to the
Company's strategic intent and financial underpinning;
• Assisting management in setting specific risk tolerances and limits that are measurable, actionable, and comply with the Company's overall risk
philosophy;
• Communicating and monitoring the Company's risk exposures relative to set limits and recommending, or implementing as appropriate, mitigating
strategies; and
• Providing insight to assist leaders in growing the businesses and achieving optimal risk-adjusted returns within established guidelines.
Enterprise Risk Management Structure and Governance
At The Hartford, the Board of Directors (“the Board”) has ultimate responsibility for risk oversight. It exercises its oversight function through its standing
committees, each of which has primary risk oversight responsibility with respect to all matters within the scope of its duties as contemplated by its charter. In
addition, the Finance, Investment and Risk Management Committee (“FIRMCo”), which is comprised of all members of the Board, has responsibility for the
oversight of the investment, financial, and risk management activities of the Company, except as otherwise provided in the Company Governance
Guidelines. The oversight of all risk exposures includes, but is not limited to:
• Market risk, including credit, interest rate, equity market, and foreign exchange;
• Liquidity and capital requirements of the Company;
• Insurance risks, including those arising out of catastrophes and acts of terrorism;
• Cybersecurity risk; and
• Any other risk that poses a material threat to the strategic viability of the Company.
The Audit Committee is responsible for, among other things, discussing with management policies with respect to risk assessment and risk management.
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