The Hartford 2008 Annual Report Download - page 260

Table of Contents
Investment Results
The following table summarizes Life’s net investment income.
2008 2007 2006
(Before-tax) Amount Yield [1] Amount Yield [1] Amount Yield [1]
Fixed maturities [2] $ 2,858 5.2% $ 3,114 5.9% $ 2,860 5.8%
Equity securities,
available-for-sale 96 7.5% 86 7.0% 56 7.3%
Mortgage loans 293 5.7% 255 6.2% 142 6.3%
Policy loans 139 6.5% 135 6.5% 142 6.9%
Limited partnerships and other
alternative investments (233) (17.2%) 115 12.0% 69 12.6%
Other [3] (36) — (133) — (22) —
Investment expense (72) — (75) — (63) —
Total net investment income
excluding equity securities
held for trading 3,045 4.8% 3,497 6.0% 3,184 5.8%
Equity securities held for
trading [4] (10,340) 145 1,824
Total net investment income
(loss) $ (7,295) $ 3,642 $ 5,008
[1] Yields calculated using investment income before investment expenses divided by the monthly weighted average
invested assets at cost, amortized cost, or adjusted carrying value, as applicable excluding collateral received
associated with the securities lending program and consolidated variable interest entity minority interests. Included in
the fixed maturity yield is Other income (loss) as it primarily relates to fixed maturities (see footnote [3] below).
Included in the total net investment income yield is investment expense.
[2] Includes net investment income on short-term bonds.
[3] Includes fees associated with securities lending activities of $70, $97 and $0, respectively, for the years ended
December 31, 2008, 2007 and 2006. The income from securities lending activities is included within fixed maturities.
Also included are derivatives that qualify for hedge accounting under SFAS 133. These derivatives hedge fixed
maturities.
[4] Includes investment income and mark-to-market effects of equity securities, held for trading.
Year ended December 31, 2008 compared to the year ended December 31, 2007
Net investment income, excluding equity securities, held for trading, decreased $452, or 13%, for the year ended
December 31, 2008, compared to the prior year period. The decrease in net investment income was primarily due to lower
yield on variable rate securities due to declines in short term interest rates, increased allocation to lower yielding U.S.
Treasuries and short-term investments, and a decrease in investment yield for limited partnership and other alternative
investments. The decrease in limited partnerships and other alternative investments yield was 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 a wider credit
spread environment. Based upon the current interest rate and credit environment, Life expects a slightly higher average
portfolio yield for 2009 as compared to 2008.
The decrease in net investment income on equity securities, held for trading, for the year ended December 31, 2008
compared to the prior year period was primarily attributed to a decline in the value of the underlying investment funds
supporting the Japanese variable annuity product due to negative market performance year over year.
Year ended December 31, 2007 compared to the year ended December 31, 2006
Net investment income, excluding securities held for trading, increased $313, or 10%, for the year ended December 31,
2007, compared to the prior year period. The increase in net investment income was primarily due to a higher average
invested asset base and a higher total portfolio yield. The increase in the average invested assets base as compared to the
prior year period was primarily due to positive operating cash flows, investment contract sales such as retail and institutional
notes, and universal life-type product sales. Limited partnerships and other alternative investments contributed to the
increase in income compared to the prior year period, despite a lower yield, due to a greater allocation of investments to this
asset class. While the limited partnership and other alternative investment yield continued to exceed the overall portfolio
yield, it decreased compared to the prior year period primarily due to the market performance of Life’s hedge fund
investments largely due to disruptions in the credit market associated with structured securities.
Net investment income on equity securities, held for trading, for the year ended December 31, 2007 was primarily attributed
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009