The Hartford 2014 Annual Report Download - page 9

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Talcott Resolution is comprised of the runoff of the Company's U.S. annuity and institutional and private-placement life insurance businesses, and the
retained Japan fixed payout annuity liabilities. Talcott Resolution's mission is to pursue opportunities to reduce the size and risk of the annuity book of
business while honoring the Company's obligations to its annuity contractholders. Talcott Resolution manages approximately 930 thousand annuity
contracts with account value of approximately $77 billion and private placement life insurance with account value of approximately $40 billion as of
December 31, 2014.
In 2014, the Company completed the sale of its Japan annuity business. The Talcott Resolution business segment includes our Retirement Plans and
Individual Life businesses sold in 2013 through reinsurance agreements with the respective buyers. In addition, the Company completed the sale of its U.K.
annuity business in 2013. For further discussion of these transactions, see Note 2 - Business Dispositions and Note 19 - Discontinued Operations of Notes to
Consolidated Financial Statements.
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The Hartford establishes and carries as liabilities reserves for its insurance products to estimate for the following:
• a liability for unpaid losses, including those that have been incurred but not yet reported, as well as estimates of all expenses associated with
processing and settling these claims;
• a liability equal to the balance that accrues to the benefit of the life insurance policyholder as of the consolidated financial statement date, otherwise
known as the account value;
• a liability for future policy benefits, representing the present value of future benefits to be paid to or on behalf of policyholders less the present value
of future net premiums;
• fair value reserves for living benefits embedded derivative guarantees; and
• death and living benefit reserves which are computed based on a percentage of revenues less actual claim costs.
Further discussion of The Hartford’s property and casualty insurance product reserves, including asbestos and environmental claims reserves, may be found in
Part II, Item 7, MD&A — Critical Accounting Estimates — Property and Casualty Insurance Product Reserves, Net of Reinsurance. Additional discussion may
be found in the Company’s accounting policies for insurance product reserves within Note 1 - Basis of Presentation and Significant Accounting Policies of
Notes to Consolidated Financial Statements.
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The Hartford cedes insurance to affiliated and unaffiliated insurers for both its property and casualty and life insurance products. Such arrangements do not
relieve The Hartford of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to The Hartford. For further
discussion of reinsurance, see Part II, Item 7, MD&A — Enterprise Risk Management and Note 7 - Reinsurance of Notes to Consolidated Financial
Statements.
For property and casualty insurance products, reinsurance arrangements are intended to provide greater diversification of business and limit The Hartford’s
maximum net loss arising from large risks or catastrophes. A major portion of The Hartford’s property and casualty insurance product reinsurance is effected
under general reinsurance contracts known as treaties, or, in some instances, is negotiated on an individual risk basis, known as facultative reinsurance. The
Hartford also has in-force excess of loss contracts with reinsurers that protect it against a specified part or all of a layer of losses over stipulated amounts.
For life insurance products, The Hartford is involved in both the cession and assumption of insurance with other insurance and reinsurance companies. The
Company has ceded reinsurance in connection with the sales of its Retirement Plans and Individual Life businesses in 2013. For further discussion of these
transactions, see Note 2 - Business Dispositions of Notes to Consolidated Financial Statements. In addition, the Company has reinsured to third parties a
portion of the risk associated with U.S. individual variable annuities and the associated guaranteed minimum death benefit (“GMDB”) and guaranteed
minimum withdrawal benefit (“GMWB”) riders.
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