The Hartford 2014 Annual Report Download - page 145

Table of Contents
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Other revenues primarily consists of servicing revenues which are recognized as services are performed.
Dividends to Policyholders
Policyholder dividends are paid to certain property and casualty and life insurance policyholders. Policies that receive dividends are referred to as
participating policies. Participating dividends to policyholders are accrued and reported in insurance operating costs and other expenses and other liabilities
using an estimate of the amount to be paid based on underlying contractual obligations under policies and applicable state laws.
Net written premiums for participating property and casualty insurance policies represented 9%, 10% and 9% of total net written premiums for the years
ended December 31, 2014, 2013 and 2012, respectively. Participating dividends to policyholders were $15, $16 and $14 for the years ended December 31,
2014, 2013 and 2012, respectively.
Total participating policies in-force represented 1% of the total life insurance policies in-force as of December 31, 2014, 2013 and 2012. Participating
dividends to policyholders were $7, $18 and $20 for the years ended December 31, 2014, 2013 and 2012, respectively.
There were no additional amounts of income allocated to participating policyholders. If limitations exist on the amount of net income from participating life
insurance contracts that may be distributed to stockholders, the policyholder’s share of net income on those contracts that cannot be distributed is excluded
from stockholders' equity by a charge to operations and an increase to a liability.
Fair Value
The following financial instruments are carried at fair value in the Company’s Consolidated Financial Statements: fixed maturity and equity securities,
available-for-sale (“AFS”); fixed maturities at fair value using fair value option (“FVO”); equity securities, FVO; equity securities, trading; short-term
investments; freestanding and embedded derivatives; certain limited partnerships and other alternative investments; separate account assets and certain other
liabilities. For further discussion of fair value, see Note 5 - Fair Value Measurements of Notes to Consolidated Financial Statements.
Investments
Overview
The Company’s investments in fixed maturities include bonds, structured securities, redeemable preferred stock and commercial paper. These investments,
along with certain equity securities, which include common and non-redeemable preferred stocks, are classified as AFS and are carried at fair value. The after-
tax difference from cost or amortized cost is reflected in stockholders’ equity as a component of Accumulated Other Comprehensive Income (Loss) (“AOCI”),
after adjustments for the effect of deducting certain life and annuity deferred policy acquisition costs and reserve adjustments. Also included in equity
securities, AFS are certain equity securities for which the Company elected the fair value option. These equity securities are carried at fair value with changes
in value recorded in realized capital gains and losses on the Company's Consolidated Statements of Operations. Fixed maturities for which the Company
elected the fair value option are classified as FVO and are carried at fair value with changes in value recorded in realized capital gains and losses. The equity
investments associated with the Company's former variable annuity products offered in Japan are recorded at fair value and are classified as trading with
changes in fair value recorded in discontinued operations. Policy loans are carried at outstanding balance. Mortgage loans are recorded at the outstanding
principal balance adjusted for amortization of premiums or discounts and net of valuation allowances. Short-term investments are carried at amortized cost,
which approximates fair value. Limited partnerships and other alternative investments are reported at their carrying value with the change in carrying value
primarily accounted for under the equity method and accordingly the Company’s share of earnings are included in net investment income. Recognition of
income related to limited partnerships and other alternative investments is delayed due to the availability of the related financial information, as private
equity and other funds are generally on a three-month delay and hedge funds are on a one-month delay. Accordingly, income for the years ended
December 31, 2014, 2013, and 2012 may not include the full impact of current year changes in valuation of the underlying assets and liabilities of the funds,
which are generally obtained from the limited partnerships and other alternative investments’ general partners. In addition, for investments in a wholly-
owned hedge fund of funds, the Company recognizes changes in the fair value of the underlying funds in net investment income, which is consistent with
accounting requirements for investment companies. Other investments primarily consist of derivatives instruments which are carried at fair value.
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