The Hartford 2008 Annual Report Download - page 117

Table of Contents
The Company receives a foreign tax credit (“FTC”) against its U.S. tax liability for foreign taxes paid by the Company
including payments from its separate account assets. The separate account FTC is estimated for the current year using
information from the most recent filed return, adjusted for the change in the allocation of separate account investments to the
international equity markets during the current year. The actual current year FTC can vary from the estimates due to actual
FTCs passed through by the mutual funds. The Company recorded benefits of $16, $11 and $17 related to separate account
FTC in the years ended December 31, 2008, December 31, 2007 and December 31, 2006, respectively. These amounts
included benefits related to true-ups of prior years’ tax returns of $4, $0 and $7 in 2008, 2007 and 2006 respectively.
The Company’s unrecognized tax benefits increased by $15 during 2008 as a result of tax positions taken on the Company’s
2007 tax return and expected to be taken on its 2008 tax return, bringing the total unrecognized tax benefits to $91 as of
December 31, 2008. This entire amount, if it were recognized, would affect the effective tax rate.
Earnings (Losses) Per Common Share
The following table represents earnings per common share data for the past three years:
2008 2007 2006
Basic earnings (losses) per share $ (8.99) $ 9.32 $ 8.89
Diluted earnings (losses) per share $ (8.99) $ 9.24 $ 8.69
Weighted average common shares outstanding (basic) 306.7 316.3 308.8
Weighted average common shares outstanding and dilutive potential
common shares (diluted) 306.7 319.1 315.9
For additional information on earnings (losses) per common share see Note 2 of Notes to Consolidated Financial Statements.
Outlooks
The Hartford provides projections and other forward-looking information in the “Outlook” sections within MD&A. The
“Outlook” sections contain many forward-looking statements, particularly relating to the Company’s future financial
performance. These forward-looking statements are estimates based on information currently available to the Company, are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the
precautionary statements set forth in the introduction to MD&A above. Actual results are likely to differ, and in the past
have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but
not limited to, those set forth in each “Outlook” section and in Item 1A, Risk Factors.
Outlook
During 2008, the Company has been negatively impacted by conditions in the global financial markets and economic
conditions in general. As these conditions persist in 2009, the Company would anticipate that it would continue to be
negatively impacted, including the effect of rating downgrades that have occurred and those that could occur in the future.
See Risk Factors in Item 1A.
Life
Retail
In the long-term, management continues to believe the market for retirement products will expand as individuals
increasingly save and plan for retirement. Demographic trends suggest that as the “baby boom” generation matures, a
significant portion of the United States population will allocate a greater percentage of their disposable incomes to saving
for their retirement years due to uncertainty surrounding the Social Security system and increases in average life expectancy.
Near-term, the industry and the Company are experiencing lower variable annuity sales as a result of recent market
turbulence and uncertainty in the U.S. financial system. Current market pressures are also increasing the expected claim
costs, the cost and volatility of hedging programs, and the level of capital needed to support living benefit guarantees. Some
companies have already begun to increase the price of their guaranteed living benefits and change the level of guarantees
offered. In 2009, the Company intends to adjust pricing levels and take certain actions to reduce the risks in its variable
annuity product features in order to address the risks and costs associated with variable annuity benefit features in the
current economic environment and explore other risk limiting techniques such as increased hedging or other reinsurance
structures. Competitor reaction, including the extent of competitor risk limiting strategies, is difficult to predict and may
result in a decline in Retail’s market share.
Significant declines in equity markets and increased equity market volatility are also likely to continue to impact the cost
and effectiveness of our GMWB hedging program. Continued equity market volatility could result in material losses in our
hedging program. For more information on the GMWB hedging program, see the Equity Risk Management section within
Capital Markets Risk Management.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009