The Hartford 2008 Annual Report Download - page 24

Table of Contents
Marketing and Distribution
The International distribution network is based on management’s strategy of developing and utilizing multiple and
competing distribution channels to achieve the broadest distribution to reach target customers. The success of the
Company’s marketing and distribution system depends on its product offerings, fund performance, successful utilization of
wholesaling, quality of customer service, financial regulations or laws that impact distribution and relationships with
securities firms, banks and other financial institutions, and independent financial advisors (through which the sale of the
Company’s retail investment products to customers is consummated). Specifically, in 2008, the Company entered into a new
relationship with the second largest variable annuity distributor in Japan for an existing product. As of December 31, 2008,
the Japan operation employed a wholesaling network that supports sales through 50 banks and securities firms.
Competition
The International segment competes with a number of domestic and international insurance companies. 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, customer service and
policyholders’ perception of the Company and its financial strength. Competition has continued to increase, especially in the
Japanese market as the result of the strengthening of both domestic and foreign competitors. In addition to seeing new
entrants in the Japanese market, our existing competitors are rapidly introducing new products, some of which include
shorter guarantee periods as well as ratcheting guarantee features and higher equity asset allocation.
The Hartford is the largest variable annuity provider in Japan with 21.6% market share based on September 30, 2008 assets
under management as published in Hoken Mainichi Shimbun newspaper, but its share of new deposits has been declining. In
2009, the Company intends to review its variable annuity product features in an effort to reduce risks and costs associated
with variable annuity benefit features in the current economic environment. Competitor reaction, including the extent of
competitor risk limiting strategies, is difficult to predict and may result in a further decline in market share.
Institutional
Life provides structured settlement contracts, institutional annuities, longevity assurance, income annuities, institutional
mutual funds and stable value investment products. Additionally, Life is a leader in the variable private placement life
insurance (“PPLI”) market, which includes life insurance policies purchased by a company or a trust on the lives of its
employees, with Life or a trust sponsored by Life named as the beneficiary under the policy.
Institutional’s total account values were $56.5 billion, $57.9 billion and $48.3 billion as of December 31, 2008, 2007 and
2006, respectively. Institutional’s total assets were $59.9 billion, $78.8 billion and $66.2 billion as of December 31, 2008,
2007 and 2006, respectively, excluding mutual funds of $2.6 billion, $3.6 billion and $2.6 billion, respectively. Institutional
generated revenues of $1.3 billion, $2.3 billion and $1.7 billion in 2008, 2007 and 2006, respectively and net income
(loss) of $(502), $17 and $78 in 2008, 2007 and 2006, respectively.
Principal Products
PPLI Products — PPLI products are typically utilized by employers to fund non-qualified benefits or other
post-employment benefit liabilities. Plan sponsors have the opportunity to select from a range of tax advantaged investment
allocations. PPLI has also been widely used in the high net worth marketplace due to its low costs and range of investment
choices.
Structured Settlements — Structured settlement annuity contracts provide periodic payments to an injured person or
survivor, typically in settlement of a claim under a liability policy in lieu of a lump sum settlement. Contracts pay either life
contingent and/or period certain benefits, at the discretion of the contract holder.
Institutional Annuities — Institutional annuities arrangements are group annuity contracts used to fund pension liabilities
that exist when a qualified retirement plan sponsor decides to terminate some or all of its liabilities under an existing defined
benefit pension plan. In addition, institutional annuities are used when a qualified retirement plan sponsor purchases a group
annuity contract to offer annuitization benefit options to retiring plan participants. Group annuity contracts are usually very
long-term in nature and typically pay monthly benefits to participants covered under the pension plan which is being
terminated.
Longevity assurance — Longevity assurance is an individual fixed deferred payout annuity that provides life contingent
benefits to individuals with the purpose of providing individuals with protection from the risk of outliving retirement
income.
Income Annuities — Income annuities are individual contracts that provide a fixed payout. Contracts pay either life
contingent or period certain benefits, at the discretion of the contract holder.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009