The Hartford 2008 Annual Report Download - page 140

Table of Contents
Net realized gains (losses) for the year ended December 31, 2006
Individual Group
Retail Life Retirement Benefits International Institutional Other Total
Gains/losses on sales, net $ (44) $ (1) $ (9) $ (6) $ (4) $ 23 $ (1) $ (42)
Impairments (6) (18) (6) (3) (2) (32) (9) (76)
Japanese fixed annuity contract hedges, net — — — — (17) — — (17)
Periodic net coupon settlements on credit
derivatives/Japan 3 (1) — 1 (63) 1 11 (48)
Results of variable annuity hedge program
GMWB derivatives, net (26) — — — — — — (26)
Macro Hedge Program (14) –– –– –– –– –– –– (14)
Total results of variable annuity hedge
program (40) –– –– –– –– –– –– (40)
Other, net –– (5) (1) (5) (2) (29) 5 (37)
Total net realized capital gains (losses) (87) (25) (16) (13) (88) (37) 6 (260)
Income tax expense (benefit) and DAC 3 (8) (9) (5) (41) (13) 1 (72)
Total losses, net of tax and DAC $ (90) $ (17) $ (7) $ (8) $ (47) $ (24) $ 5 $ (188)
The circumstances giving rise to the changes in these components are as follows:
Year ended December 31, 2008 compared to the years ended December 31, 2007 and 2006
Gross Gains and
Losses on Sale
• Gross gains and losses on sales for the year ended December 31, 2008 primarily resulted
from the decision to reallocate the portfolio to securities with more favorable risk/return
profiles. Also included was a gain of $141 from the sale of a synthetic CDO, as well as
losses on sales of HIMCO managed CLOs in the first quarter. For more information
regarding these CLO losses, refer to the Variable Interest Entities section below. During
the year ended December 31, 2008, securities sold at a loss were depressed, on average,
approximately 2% at the respective period’s impairment review date and were deemed to
be temporarily impaired.
• Gross gains and losses on sales for the year ended December 31, 2007 were primarily
comprised of corporate securities. During the year ended December 31, 2007, securities
sold at a loss were depressed, on average, approximately 1% at the respective period’s
impairment review date and were deemed to be temporarily impaired.
• Gross gains on sales for the year ended December 31, 2006 were primarily within fixed
maturities and were concentrated in U.S. government, corporate and foreign government
securities. Gross losses on sale for the year ended December 31, 2006 were primarily
within fixed maturities and were concentrated in the corporate and CMBS sectors.
Impairments • See the Other-Than-Temporary Impairments section of the “Investments” section of the
MD&A for information on impairment losses.
SFAS 157 • See Note 4 of the Notes to the Consolidated Financial Statements for a discussion of the
SFAS 157 transition impact.
Variable Annuity
Hedge Program
• See Note 4 of the Notes to the Consolidated Financial Statements for a discussion of
variable annuity hedge program gains and losses.
Other • Other, net losses for the year ended December 31, 2008 were primarily related to net losses
of $291 related to transactional foreign currency losses predominately on the internal
reinsurance of the Japan variable annuity business, which is entirely offset in AOCI,
resulting from appreciation of the Yen and credit derivative losses of $222 due to
significant credit spread widening. Also included were losses on HIMCO managed CLOs
in the first quarter and derivative related losses of $39 in the third quarter due to
counterparty default related to the bankruptcy of Lehman Brothers Holdings Inc. For more
information regarding the CLO losses, refer to the Variable Interest Entities section below.
• Other, net losses for the year ended December 31, 2007 were primarily driven by the
change in value of non-qualifying derivatives due to credit spread widening as well as
fluctuations in interest rates and foreign currency exchange rates. Credit spreads widened
primarily due to the deterioration in the U.S. housing market, tightened lending conditions
and the market’s flight to quality securities.
•
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009