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associated with credit derivatives due to credit spreads widening. 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.

Net investment income

• Investment income decreased $434, or 26%, due to a change from net income to net

losses on limited partnerships and other alternative investments in 2008 and decreased

fixed maturity income. The net losses on limited partnerships and other alternative

investments were largely due to negative returns on hedge funds and real estate

partnerships as a result of the lack of liquidity in the financial markets and credit spreads

widening. The decrease in income from fixed maturities was attributable to lower income

on variable rate securities due to declines in short term interest rates as well as an

increased allocation to lower yielding U.S. Treasuries and short-term investments.

96

Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009