The Hartford 2008 Annual Report Download - page 262

Table of Contents
The following table summarizes Life’s net realized capital gains and losses results.
(Before-tax) 2008 2007 2006
Gross gains on sale $ 422 $ 213 $ 215
Gross losses on sale (399) (168) (257)
Impairments (2,424) (358) (76)
Japanese fixed annuity contract hedges, net [1] 64 18 (17)
Periodic net coupon settlements on credit derivatives/Japan (35) (40) (48)
SFAS 157 transition impact [2] (650) — —
Results of variable annuity hedge program
GMWB derivatives, net (713) (286) (26)
Macro hedge program 74 (12) (14)
Total results of variable annuity hedge program (639) (298) (40)
Other, net [3] (477) (186) (37)
Net realized capital losses, before-tax $ (4,138) $ (819) $ (260)
[1] Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic
net coupon settlements).
[2] Includes SFAS 157 implementation losses of $616, $10 and $24 related to the embedded derivatives within GMWB-US,
GMWB-UK and GMAB liabilities, respectively.
[3] Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative
instruments, foreign currency gains and losses, and other investment gains and losses.
The circumstances giving rise to the changes in these components are as follows:
Year ended December 31, 2008 compared to the years ended December 31, 2007 and 2006
Gross Gains and
Losses on Sale
• Gross gains and losses on sales for the year ended December 31, 2008 primarily resulted
from the decision to reallocate the portfolio to securities with more favorable risk/return
profiles. Also included was a gain of $141 from the sale of a synthetic CDO, as well as losses
on sales of HIMCO managed CLOs in the first quarter. For more information regarding these
CLO losses, refer to the Variable Interest Entities section below. During the year ended
December 31, 2008, securities sold at a loss were depressed, on average, approximately 2%
at the respective period’s impairment review date and were deemed to be temporarily
impaired.
• Gross gains and losses on sales for the year ended December 31, 2007 were primarily
comprised of corporate securities. During the year ended December 31, 2007, securities sold
at a loss were depressed, on average, approximately 1% at the respective period’s
impairment review date and were deemed to be temporarily impaired.
• Gross gains on sales for the year ended December 31, 2006 were primarily within fixed
maturities and were concentrated in U.S. government, corporate and foreign government
securities. Gross losses on sale for the year ended December 31, 2006 were primarily within
fixed maturities and were concentrated in the corporate and CMBS sectors.
Impairments • See the Other-Than-Temporary Impairments section that follows for information on
impairment losses.
SFAS 157 • See Note 4 in the Notes to the Consolidated Financial Statements for a discussion of the
SFAS 157 transition impact.
Variable Annuity
Hedge Program
• See Note 4 in the Notes to the Consolidated Financial Statements for a discussion of variable
annuity hedge program gains and losses.
Other • Other, net losses for the year ended December 31, 2008 were primarily related to net losses
of $291 related to transactional foreign currency losses predominately on the internal
reinsurance of the Japan variable annuity business, which is entirely offset in AOCI,
resulting from appreciation of the Yen and credit derivative losses of $222 due to significant
credit spread widening. Also included were losses on HIMCO managed CLOs in the first
quarter and derivative related losses of $39 in the third quarter due to counterparty default
related to the bankruptcy of Lehman Brothers Holdings Inc. For more information regarding
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009