The Hartford 2007 Annual Report Download - page 224

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-47
5. Fair Value of Financial Instruments
SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, requires disclosure of fair value information of financial
instruments.
For certain financial instruments where quoted market prices are not available, other independent valuation techniques and assumptions
are used. Because considerable judgment is used, these estimates are not necessarily indicative of amounts that could be realized in a
current market exchange. SFAS No. 107 excludes certain financial instruments from disclosure, including insurance contracts, other
than financial guarantees and investment contracts.
The Hartford uses the following methods and assumptions in estimating the fair value of each class of financial instrument. Fair value
for fixed maturities and marketable equity securities approximates those quotations published by applicable stock exchanges or
received from other reliable sources.
For policy loans and short-term investments, carrying amounts approximate fair value.
For mortgage loans on real estate, fair values were estimated using discounted cash flow calculations based on current incremental
lending rates for similar type loans.
Derivative instruments are reported at fair value based upon either pricing valuation models, which utilize market data inputs or
independent broker quotations.
Other policyholder funds and benefits payable fair value information is determined by estimating future cash flows, discounted at the
current market rate. For further discussion of other policyholder funds and derivatives, see Note 1.
For commercial paper, carrying amounts approximate fair value.
Fair value for long-term debt is based on market quotations from independent third party pricing services.
Fair value for consumer notes is based on discounted cash flow calculations based on current market rates.
The carrying amounts and fair values of The Hartford’ s financial instruments at December 31, 2007 and 2006 were as follows:
2007 2006
Assets
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Fixed maturities $80,055 $80,055 $79,074 $79,074
Equity securities 38,777 38,777 31,132 31,132
Policy loans 2,061 2,061 2,051 2,051
Mortgage loans on real estate 5,410 5,407 3,318 3,298
Other investments [1] 569 569 287 287
Short-term investments 1,602 1,602 1,681 1,681
Liabilities
Other policyholder funds and benefits payable [2] $15,480 $15,429 $14,233 $13,488
Commercial paper [3] 373 373 299 299
Long-term debt [4] 4,100 4,118 3,804 3,974
Consumer notes 809 814 258 260
Derivative related liabilities [5] 617 617 770 770
[1] 2007 and 2006 include $528 and $285 of derivative related assets, respectively.
[2] Excludes group accident and health and universal life insurance contracts, including corporate owned life insurance.
[3] Included in short-term debt in the consolidated balance sheets.
[4] Excludes capital lease obligations and includes current maturities of long-term debt.
[5] Included in other liabilities in the consolidated balance sheets.