The Hartford 2008 Annual Report Download - page 18

Table of Contents
In the first quarter of 2008, the Company completed three Retirement Plans acquisitions. The acquisition of part of the
defined contribution record keeping business of Princeton Retirement Group gives Life a foothold in the business of
providing recordkeeping services to large financial firms which offer defined contribution plans to their clients and at
acquisition added $2.9 billion in mutual funds to Retirement Plans assets under management and $5.7 billion of assets under
administration. The acquisition of Sun Life Retirement Services, Inc., at acquisition added $15.8 billion in Retirement Plans
assets under management across 6,000 plans and provides new service locations in Boston, Massachusetts and Phoenix,
Arizona. The acquisition of TopNoggin LLC., provides web-based technology to address data management, administration
and benefit calculations.
403(b)/457 account values were $10.2 billion, $12.4 billion and $11.5 billion as of December 31, 2008, 2007 and 2006,
respectively. 401(k) products account values were $12.0 billion, $14.7 billion and $12.0 billion as of December 31, 2008,
2007 and 2006, respectively. Retirement Plans’ total assets were $22.6 billion, $28.0 billion and $24.4 billion as of
December 31, 2008, 2007 and 2006, respectively, excluding mutual funds of $14.8 billion, $1.5 billion and $1.1 billion for
the same respective periods. Retirement Plans generated revenues of $408, $556 and $522 in 2008, 2007 and 2006,
respectively, and net income (loss) of $(157), $61 and $101 in 2008, 2007 and 2006, 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 group 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, 2008, Life administered over 4,300 plans under
Sections 457 and 403(b). Total assets under management were $10.3 billion, $12.4 billion and $11.5 billion as of
December 31, 2008, 2007 and 2006, 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, 2008 was over 25,400. Total assets under management were $26.7 billion,
$16.2 billion and $13.2 billion as of December 31, 2008, 2007 and 2006, respectively.
Marketing and Distribution
In the Section 457, 403(b) and 401(k) markets, Retirement Plans’ 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 depends on its product offerings, fund performance, successful utilization of wholesaling
organizations, quality of customer service, and relationships with national and regional broker-dealer firms, banks and other
financial institutions.
Competition
Retirement Plans competes with numerous other insurance companies as well as certain banks, securities brokerage firms,
independent financial advisors 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.
For the Section 457 and 403(b) as well as the 401(k) markets, which offer mutual funds wrapped in a variable annuity,
variable funding agreement, or mutual fund retirement program, the variety of available funds and their performance is most
important to plan sponsors. The competitors tend to be the major mutual fund companies.
The competitive landscape for providers of group retirement plans has, and will continue to, intensify. The past few years
have seen consolidation among industry providers seeking to increase scale, improve cost efficiencies, and enter new market
segments. The consolidation of providers is expected to continue as smaller providers exit the market.
In addition, many providers are attempting to expand their market share by extending their target markets across plan size
and tax code segments (401(k), 457, 403(b)), some of which they may not have previously served. Competition increases as
the number of providers selling business in each segment grows.
The long-awaited, landmark 403(b) regulations, finalized in July 2007, have contributed to the increased activity in the
403(b) market. The regulations, in general, align an employer’s responsibilities more closely with those of a 401(k), making
403(b) plans more attractive to providers who have experience with 401(k) plans. Final Pension Provider Act regulations
have also increased competition over features key to those regulations, such as automatic enrollment capabilities and
differentiation of target date fund offerings, when used as qualified default investment alternatives.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009