The Hartford 2015 Annual Report Download - page 190

Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments and Derivative Instruments (continued)
F-59
As of December 31, 2015, the before-tax deferred net gains on derivative instruments recorded in AOCI that are expected to be
reclassified to earnings during the next twelve months are $54. This expectation is based on the anticipated interest payments on hedged
investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the
deferred net gains (losses) as an adjustment to net investment income over the term of the investment cash flows. The maximum term
over which the Company is hedging its exposure to the variability of future cash flows for forecasted transactions, excluding interest
payments on existing variable-rate financial instruments, is approximately three years.
During the years ended December 31, 2015, 2014, and 2013, the Company had no net reclassifications from AOCI to earnings resulting
from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.
Fair Value Hedges
For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting
loss or gain on the hedged items attributable to the hedged risk are recognized in current earnings. The Company includes the gain or
loss on the derivative in the same line item as the offsetting loss or gain on the hedged item. All components of each derivative’s gain or
loss were included in the assessment of hedge effectiveness.
The Company recognized in income gains (losses) representing the ineffective portion of fair value hedges as follows:
Derivatives in Fair Value Hedging Relationships
Gain (Loss) Recognized in Income [1]
2015 2014 2013
Derivative Hedged Item Derivative Hedged Item Derivative Hedged Item
Interest rate swaps
Net realized capital gains (losses) $ — $ — $ (3) $ 1 $ 7 $ (12)
Foreign currency swaps
Net realized capital gains (losses) — — — — 1 (1)
Benefits, losses and loss adjustment expenses — — — — (2) 2
Total $ — $ — $ (3) $ 1 $ 6 $ (11)
[1] The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged
item. The net of the amounts presented represents the ineffective portion of the hedge.