The Hartford 2007 Annual Report Download - page 7

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and banks across the United States. Owning PLANCO secures an important distribution channel for Life and gives Life a wholesale
distribution platform which it can expand in terms of both the number of individuals wholesaling its products and the portfolio of
products which they wholesale.
Competition
Retail competes with numerous other insurance companies as well as certain banks, securities brokerage firms, asset management
organizations and other financial intermediaries marketing annuities, mutual funds and other retirement-oriented products. Product
sales are affected by competitive factors such as investment performance ratings, product design, visibility in the marketplace, financial
strength ratings, distribution capabilities, levels of charges and credited rates, reputation and customer service.
Competition continues to be very strong in the variable annuities market as the focus on guaranteed lifetime income has caused most
major variable annuity writers to upgrade their suite of living benefits. Upgrades to competitor living benefits include enhanced lifetime
GMWBs, increased deferral bonuses and increased step-up frequency. The Company is committed to maintaining a product suite that
delivers a strong value proposition to our consumers and brokers and intends to refresh its suite of living benefits in May 2008.
The retail mutual fund market continues to be highly competitive, with mutual fund companies looking to differentiate themselves
through product solutions, performance, expenses, wholesaling and service. In this non-proprietary broker sold space, The Hartford
and its competitors compete aggressively for net flows.
Another source of competition for the Company’ s retail mutual funds is products that are seen as mutual fund alternatives. Exchange
traded funds (“ETFs”), separately managed accounts (“SMAs”) and closed end funds are a few examples of these types of products.
SMAs, or individual investment accounts offered by financial consultants and managed by independent money managers under an asset
based fee structure, are primarily attractive to the emerging affluent and high net worth segments. Conversely an ETF, which is a fund
that tracks an index but can be traded like a stock, is available to virtually any investor. These types of mutual fund alternatives have
become increasingly popular and The Hartford continues to review opportunities to expand our presence in these markets through
innovative product solutions.
Retirement Plans
Life is among the top providers of retirement products and services. Products and services offered by Retirement Plans include asset
management and plan administration sold to municipalities and not-for-profit organizations pursuant to Section 457 and 403(b) of the
Internal Revenue Code of 1986, as amended (referred to as “Section 457” and “403(b)”, respectively). Life also provides retirement
products and services, including asset management and plan administration sold to small and medium-size corporations pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended (referred to as “401(k)”).
In December 2007, the Company announced three Retirement Plans acquisitions. The acquisition of part of the defined contribution
recordkeeping business of Princeton Retirement Group will give Life a foothold in the business of providing recordkeeping services to
large financial firms which offer defined contribution plans to their clients. The acquisition of Sun Life Retirement Services, Inc. will
add $17 billion in Retirement Plan assets across 6,000 plans and will provide new service locations in Boston, Massachusetts and
Phoenix, Arizona. The acquisition of TopNoggin LLC, which closed in January 2008, provides web-based technology to address data
management, administration and benefit calculations. These acquisitions, including the two which have not closed but are expected to
close in the first quarter of 2008, will increase scale in the Retirement Plans segment and grow its offering to serve additional markets,
customers and types of retirement plans across the defined contribution and defined benefit spectrum.
403(b)/457 account values were $12.4 billion, $11.5 billion and $10.5 billion as of December 31, 2007, 2006 and 2005, respectively.
401(k) products account values were $14.7 billion, $12.0 billion and $8.8 billion as of December 31, 2007, 2006 and 2005,
respectively. Retirement Plans total assets were $28.0 billion and $24.4 billion as of December 31, 2007 and 2006, respectively,
excluding mutual funds of $1.5 billion and $1.1 billion for the same respective period. Retirement Plans generated revenues of $556,
$522 and $487 in 2007, 2006 and 2005, respectively, and net income of $61, $101 and $82 in 2007, 2006 and 2005, respectively.
Principal Products
403(b)/457 — Life sells retirement plan products and services to municipalities under Section 457 plans and to not-for-profits under
Section 403(b) plans. Life offers a number of different investment products, including variable annuities and fixed products, to the
employees in Section 457 and 403(b) plans. Generally, with the variable products, Life manages the fixed income funds and certain
other outside money managers act as advisors to the equity funds offered in Section 457 and 403(b) plans administered by Life. As of
December 31, 2007, Life administered over 3,800 plans under Sections 457 and 403(b). Total assets under management were $12.4
billion, $11.5 billion and $10.5 billion as of December 31, 2007, 2006 and 2005, respectively.
401(k) — Life sells retirement plan products and services to corporations under 401(k) plans targeting the small and medium case
markets. Life believes these markets are under-penetrated in comparison to the large case market. The number of 401(k) plans
administered as of December 31, 2007 was over 15,200. Total assets under management were $16.2 billion, $13.2 billion and $9.8
billion as of December 31, 2007, 2006 and 2005, respectively.
Marketing and Distribution
In the Section 457 and 403(b) markets, Retirement Plan’s distribution network uses internal personnel with extensive experience to sell
its products and services in the retirement plan and institutional markets. The success of Life’s marketing and distribution system