The Hartford 2014 Annual Report Download - page 170

Table of Contents











  



Interest rate derivative
Interest rate swaps (29) Discounted cash flows Swap curve beyond 30 years 3% 3% Decrease
Interest rate swaptions 22 Option model Interest rate volatility 1% 1% Increase
GMWB hedging instruments
Equity options 46 Option model Equity volatility 22% 34% Increase
Customized swaps 124 Discounted cash flows Equity volatility 10% 40% Increase
Macro hedge program
Equity options 141 Option model Equity volatility 27% 28% Increase








  



Interest rate derivative
Interest rate swaps (24) Discounted cash flows Swap curve beyond 30 years 4% 4% Increase
Long interest rate swaptions 42 Option model Interest rate volatility 1% 1% Increase
GMWB hedging instruments
Equity options 72 Option model Equity volatility 21% 29% Increase
Customized swaps 74 Discounted cash flows Equity volatility 10% 50% Increase
Macro hedge program
Equity options 139 Option model Equity volatility 24% 31% Increase
International program hedging [2]
Equity options (35) Option model Equity volatility 24% 37% Increase
Short interest rate swaptions (13) Option model Interest rate volatility —% 1% Decrease
Long interest rate swaptions 50 Option model Interest rate volatility 1% 1% Increase
[1] Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless
otherwise noted. Changes in fair value will be inversely impacted for short positions.
[2] Excludes derivatives for which the Company based fair value on broker quotations.
Securities and derivatives for which the Company bases fair value on broker quotations predominately include ABS, CDOs, corporate, fixed maturities, FVO
and certain credit derivatives. Due to the lack of transparency in the process brokers use to develop prices for these investments, the Company does not have
access to the significant unobservable inputs brokers use to price these securities and derivatives. The Company believes however, the types of inputs brokers
may use would likely be similar to those used to price securities and derivatives for which inputs are available to the Company, and therefore may include,
but not be limited to, loss severity rates, constant prepayment rates, constant default rates and credit spreads. Therefore, similar to non broker priced securities
and derivatives, generally, increases in these inputs would cause fair values to decrease. For the year ended December 31, 2014, no significant adjustments
were made by the Company to broker prices received.
As of December 31, 2014 and 2013, excluded from the tables above are hedge funds where investment company accounting has been applied to a wholly-
owned fund of funds measured at fair value which total $189 and $108, respectively, of Level 3 assets. The predominant valuation method uses a NAV
calculated on a monthly basis and represents funds where the Company does not have the ability to redeem the investment in the near-term at that NAV,
including an assessment of the investee's liquidity.
F-34