The Hartford 2014 Annual Report Download - page 86

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Results of Operations
   
Fee income [1] $ 10 $ 12 $ 168
Net investment income 22 27 31
Net realized capital gains (losses) 7 (89) 125
   
Insurance operating costs and other expenses 114 78 365
Pension settlement 128 — —
Loss on extinguishment of debt — 213 910
Reinsurance loss on disposition in 2013, and goodwill impairment in 2012 — 69 118
Interest expense 376 397 457
   
   
Income tax benefit (204) (252) (517)
      
[1] Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting
commission expense in insurance operating costs and other expenses.
Year ended December 31, 2014 compared to the year ended December 31, 2013
Net loss, as compared to the prior year period, decreased in 2014 primarily due to decreases in the loss on extinguishment of debt, a change to net realized
capital gains, decreases in the reinsurance loss on disposition, and a lower effective income tax rate benefit in 2013.
The pension settlement charge in 2014 is related to voluntary lump-sum settlements with vested participants in the Company's defined benefit pension plan
who had separated from service, but who had not yet commenced annuity benefits. For additional information regarding the pension settlement, see Note 17 -
Employee Benefit Plans of Notes to Consolidated Financial Statements.
Insurance operating costs and other expenses increased in 2014 primarily due to benefits recognized in 2013 related to an insurance company recovery and
the favorable resolution in 2013 of items under the Company's spin-off agreement with its former parent company. Interest expense declined in 2014 due to a
decrease in outstanding debt from debt maturities and the paydown of $800 of senior notes in 2013.
In 2014, $200 of the Company's senior notes matured. For additional information regarding debt, see Note 12 - Debt of Notes to Consolidated Financial
Statements.
For a reconciliation of the tax provision at the U.S. Federal statutory rate to the provision (benefit) for income taxes, see Note 13 - Income Taxes of Notes to
Consolidated Financial Statements.
Year ended December 31, 2013 compared to the year ended December 31, 2012
Net loss, as compared to the prior year period, decreased in 2013 primarily due to decreases in insurance operating costs and other expenses, the reinsurance
loss on disposition, the loss on extinguishment of debt and interest expense. The net loss in 2013 was partially driven by net realized capital losses due to
higher long-term interest rates and global credit hedging losses due to increases in the equity market as compared with net realized capital gains in 2012.
Insurance operating costs and other expenses decreased due to a benefit of $57, before tax, for an insurance recovery from the Company's insurers for past
legal expenses associated with closed litigation and a benefit of $19, before tax, from the resolution of items under the Company's spin-off agreement with
its former parent company. Restructuring costs, included in Corporate insurance operating costs and other expenses and related to the implementation of
certain strategic initiatives, decreased to $64 in 2013 from $121 in 2012.
The reinsurance loss on disposition of $69 in 2013 consisted of the write-off of all of the goodwill held in Corporate allocated to the Retirement Plans
business sold in 2013. The reinsurance loss on disposition of $118 in 2012 consisted of an impairment of goodwill related to the Individual Life business
sold in 2013. For additional information regarding goodwill, see Note 9 - Goodwill of Notes to Consolidated Financial Statements.
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