The Hartford 2008 Annual Report Download - page 142

Table of Contents
RETAIL
Operating Summary 2008 2007 2006
Fee income and other $ 2,757 $ 3,117 $ 2,695
Earned premiums (4) (62) (86)
Net investment income 747 801 839
Net realized capital losses (1,910) (381) (87)
Total revenues [1] 1,590 3,475 3,361
Benefits, losses and loss adjustment expenses 1,008 820 819
Insurance operating costs and other expenses 1,187 1,221 994
Amortization of deferred policy acquisition costs and present value
of future profits 1,344 406 973
Goodwill impairment 422 — —
Total benefits, losses and expenses 3,961 2,447 2,786
Income (loss) before income taxes (2,371) 1,028 575
Income tax expense (benefit) (972) 216 39
Net income (loss) [2] $ (1,399) $ 812 $ 536
Assets Under Management 2008 2007 2006
Individual variable annuity account values $ 74,578 $ 119,071 $ 114,365
Individual fixed annuity and other account values 11,278 10,243 9,937
Other retail products account values 398 677 525
Total account values [3] 86,254 129,991 124,827
Retail mutual fund assets under management 31,032 48,383 38,536
Other mutual fund assets under management 1,678 2,113 1,489
Total mutual fund assets under management 32,710 50,496 40,025
Total assets under management $ 118,964 $ 180,487 $ 164,852
[1] For the year ended December 31, 2008, the transition impact related to the SFAS 157 adoption was a reduction in
revenues of $616. For further discussion of the SFAS 157 transition impact, refer to Note 4 in the Notes to the
Consolidated Financial Statements.
[2] For the year ended December 31, 2008, the transition impact related to the SFAS 157 adoption was a reduction in net
income of $209. For further discussion of the SFAS 157 transition impact, refer to Note 4 in the Notes to the
Consolidated Financial Statements.
[3] Includes policyholders’ balances for investment contracts and reserves for future policy benefits for insurance
contracts.
Retail focuses on the savings and retirement needs of the growing number of individuals who are preparing for retirement,
or have already retired, through the sale of individual variable and fixed annuities, mutual funds and other investment
products. Life is both a leading writer of individual variable annuities and a top seller of individual variable annuities
through banks in the United States.
Year ended December 31, 2008 compared to the year ended December 31, 2007
Net income decreased primarily as a result of increased realized capital losses, the impact of the 2008 Unlock charge, the
impairment of goodwill attributed to the individual annuity line of business and the effect of equity market declines on
variable annuity and mutual fund fee income. Included in net realized capital losses in 2008 were changes in value on
GMWB derivatives, impairments, and the adoption of SFAS 157 during the first quarter of 2008. For further discussion of
the SFAS 157 transition impact, see Note 4 in the Notes to the Consolidated Financial Statements. For further discussion of
realized capital losses, see the Realized Capital Gains and Losses by Segment table under Life’s Operating Section of the
MD&A. For further discussion of the 2008 and 2007 Unlock; and the impairment of goodwill, see the Critical Accounting
Estimates section of the MD&A. The following other factors contributed to the changes in net income:
Fee income and other • Fee income and other decreased $360 primarily as a result of lower variable annuity fee
income due to a decline in average account values. The decrease in average variable
annuity account values can be attributed to market depreciation of $38.2 billion and net
outflows of $6.2 billion during the year. Net outflows were driven by surrender activity
resulting from the aging of the variable annuity in-force block of business; increased sales
competition, particularly competition related to guaranteed living benefits, and volatility in
the equity markets. Also contributing to the decrease in fee income was lower mutual fund
fees due to declining assets under management primarily driven by market depreciation of
$20.1 billion, partially offset by $2.8 billion of net flows.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009