The Hartford 2014 Annual Report Download - page 126

The agencies consider many factors in determining the final rating of an insurance company. One consideration is the relative level of statutory surplus
necessary to support the business written. Statutory surplus represents the capital of the insurance company reported in accordance with accounting practices
prescribed by the applicable state insurance department. See Part I, Item 1A. Risk Factors — “Downgrades in our financial strength or credit ratings, which
may make our products less attractive, could increase our cost of capital and inhibit our ability to refinance our debt, which would have a material adverse
effect on our business, financial condition, results of operations and liquidity.”
Statutory Surplus
The table below sets forth statutory surplus for the Company’s insurance companies as of December 31, 2014 and 2013:
 
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries in 2013 $ 7,157 $ 6,639
Property and casualty insurance subsidiaries 8,069 8,022
    
Statutory capital and surplus for the U.S. life insurance subsidiaries, including domestic captive insurance subsidiaries in 2013, increased by $518, primarily
due to variable annuity surplus impacts of $788, net income from non-variable annuity business of $187, increases in unrealized gains from other invested
assets carrying values of $138, partially offset by returns of capital of $500, and changes in reserves on account of change in valuation basis of $100.
Effective April 30, 2014 the last domestic captive ceased operations.
Statutory capital and surplus for the property and casualty insurance increased by $47, primarily due to statutory net income of $1.1 billion, and unrealized
gains on investments of $1.4 billion, largely offset by dividends to the HFSG Holding Company of $2.5 billion.
The Company also held regulatory capital and surplus for its former operations in Japan until the sale of those operations on June 30, 2014. Under the
accounting practices and procedures governed by Japanese regulatory authorities, the Company’s statutory capital and surplus was $1.2 billion as of
December 31, 2013.
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