The Hartford 2014 Annual Report Download - page 123

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of
operations, liquidity, or capital resources of the Company, except for the contingent capital facility described above, as well as unfunded commitments to
purchase investments in limited partnerships and other alternative investments, private placements, and mortgage loans of $865 as disclosed in Note 14 -
Commitments and Contingencies of Notes to Consolidated Financial Statements.
The following table summarizes the Company’s aggregate contractual obligations as of December 31, 2014:










Property and casualty obligations [1] $ 22,362 $ 5,282 $ 5,377 $ 2,611 $ 9,092
Life, annuity and disability obligations [2] 272,187 20,308 35,122 28,151 188,606
Operating lease obligations [3] 154 42 64 36 12
Long-term debt obligations [4] 11,986 822 1,657 1,264 8,243
Purchase obligations [5] 1,990 1,215 433 331 11
Other liabilities reflected on the balance sheet [6] 1,362 593 392 376 1
          
[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, 2014, the total property and casualty reserves in the above table are gross of a reserve discount of $556.
[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 14 of Notes to Consolidated Financial Statements for additional discussion on lease
commitments.
[4] Includes contractual principal and interest payments. See Note 12 of Notes to Consolidated Financial Statements for additional discussion of long-term debt obligations.
[5] Includes $865 in commitments to purchase investments including approximately $604 of limited partnership and other alternative investments, $15 of private placements, and
$246 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 Sheets. Also included in purchase obligations is $980 relating to contractual commitments to purchase various goods
and services such as maintenance, human resources, and information technology 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.
[6] Includes cash collateral of $327 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 are net unrecognized tax benefits
of $48, retained Japan fixed payout annuity liabilities of $886, and consumer notes of $74. Consumer notes include principal payments and contractual interest for fixed rate
notes and interest based on current rates for floating rate notes.
123