The Hartford 2007 Annual Report Download - page 167

167
The following table identifies the Company’ s aggregate contractual obligations as of December 31, 2007:
Payments due by Period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Property and casualty obligations [1] $ 22,721 $ 5,575 $ 5,638 $ 3,197 $ 8,311
Life, annuity and disability obligations [2] 457,882 29,588 60,778 65,671 301,845
Operating lease obligations [3] 482 147 199 105 31
Capital lease obligations [3] 141 41 100 — —
Long-term debt obligations [4] 6,709 1,191 638 708 4,172
Consumer notes [5] 874 257 555 49 13
Purchase obligations [6] 2,713 2,144 349 167 53
Other long-term liabilities reflected on the balance sheet [7] 4,914 4,821 68 — 25
Total [8] $ 496,436 $ 43,764 $ 68,325 $ 69,897 $ 314,450
[1] The following points are significant to understanding the cash flows estimated for obligations under property and casualty contracts:
• Reserves for Property & Casualty unpaid losses and loss adjustment expenses include case reserves for reported claims and reserves for claims
incurred but not reported (IBNR). While payments due on claim reserves are considered contractual obligations because they relate to
insurance policies issued by the Company, the ultimate amount to be paid to settle both case reserves and IBNR is an estimate, subject to
significant uncertainty. The actual amount to be paid is not finally determined until the Company reaches a settlement with the claimant. Final
claim settlements may vary significantly from the present estimates, particularly since many claims will not be settled until well into the future.
• In estimating the timing of future payments by year, the Company has assumed that its historical payment patterns will continue. However, the
actual timing of future payments could vary materially from these estimates due to, among other things, changes in claim reporting and payment
patterns and large unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of asbestos and
environmental claims. Also, estimated payments in 2008 do not include payments that will be made on claims incurred in 2008 on policies that
were in-force as of December 31, 2007. In addition, the table does not include future cash flows related to the receipt of premiums that may be
used, in part, to fund loss payments.
• Under U.S. GAAP, the Company is only permitted to discount reserves for losses and loss adjustment expenses in cases where the payment
pattern and ultimate loss costs are fixed and determinable on an individual claim basis. For the Company, these include claim settlements with
permanently disabled claimants and certain structured settlement contracts that fund loss runoffs for unrelated parties. As of December 31,
2007, the total property and casualty reserves in the above table are gross of a reserve discount of $568.
[2] Estimated life, annuity and disability obligations include death and disability claims, policy surrenders, policyholder dividends and trail
commissions offset by expected future deposits and premiums on in-force contracts. Estimated contractual policyholder obligations are based on
mortality, morbidity and lapse assumptions comparable with Life’s historical experience, modified for recent observed trends. Life has also
assumed market growth and interest crediting consistent with assumptions used in amortizing deferred acquisition costs. In contrast to this table,
the majority of Life’s obligations are recorded on the balance sheet at the current account values and do not incorporate an expectation of future
market growth, interest crediting, or future deposits. Therefore, the estimated contractual policyholder obligations presented in this table
significantly exceed the liabilities recorded in reserve for future policy benefits and unpaid losses and loss adjustment expenses, other policyholder
funds and benefits payable and separate account liabilities. Due to the significance of the assumptions used, the amounts presented could
materially differ from actual results. As separate account obligations are legally insulated from general account obligations, the separate account
obligations will be fully funded by cash flows from separate account assets. Life expects to fully fund the general account obligations from cash
flows from general account investments and future deposits and premiums.
[3] Includes future minimum lease payments on operating and capital lease agreements. See Notes 12 and 14 of Notes to Consolidated Financial
Statements for additional discussion on lease commitments.
[4] Includes contractual principal and interest payments. All long-term debt obligations have fixed rates of interest. See Note 14 of Notes to
Consolidated Financial Statements for additional discussion of long-term debt obligations.
[5] Consumer notes include principal payments and contractual interest for fixed rate notes and interest based on current rates for floating rate notes.
See Note 14 of Notes to Consolidated Financial Statements for additional discussion of consumer notes.
[6] Includes $1.8 billion in commitments to purchase investments including about $1.2 billion of limited partnership and $330 of mortgage and
construction loans. Outstanding commitments under these limited partnerships and mortgage and construction loans are included in payments due
in less than 1 year since the timing of funding these commitments cannot be reliably estimated. The remaining commitments to purchase
investments primarily represent payables for securities purchased which are reflected on the Company’s consolidated balance sheet.
Also included in purchase obligations is $790 relating to contractual commitments to purchase various goods and services such as maintenance,
human resources, information technology, and transportation in the normal course of business. Purchase obligations exclude contracts that are
cancelable without penalty or contracts that do not specify minimum levels of goods or services to be purchased.
[7] Includes cash collateral of $4.7 billion which the Company has accepted in connection with the Company’s securities lending program and
derivative instruments. Since the timing of the return of the collateral is uncertain, the return of the collateral has been included in the payments
due in less than 1 year.
[8] Does not include estimated voluntary contribution of $200 to the Company’s pension plan in 2008.