The Hartford 2008 Annual Report Download - page 267

Table of Contents
The following table summarizes Property & Casualty’s net realized capital gains and losses results.
2008 2007 2006
Gross gains on sale $ 180 $ 159 $ 205
Gross losses on sale (448) (121) (164)
Impairments (1,533) (125) (45)
Periodic net coupon settlements on credit derivatives 2 15 4
Other, net [1] (78) (100) 9
Net realized capital gains (losses), before-tax $ (1,877) $ (172) $ 9
[1] Primarily consists of changes in fair value on non-qualifying derivatives, hedge ineffectiveness on qualifying derivative
instruments, and other investment gains and losses.
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 were 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 foreign government, corporate, and municipal 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 concentrated in the
corporate, foreign government and municipal sectors. Gross losses on sales for the year
ended December 31, 2006 were concentrated in the corporate and CMBS sectors.
Impairments • See the Other-Than-Temporary Impairments section that follows for information on
impairment losses.
Other • Other, net losses for the year ended December 31, 2008 were primarily related to net losses
on credit derivatives of $90 as a result of credit spread widening on credit derivatives that
assume credit exposure. Also included were losses on HIMCO managed CLOs in the first
quarter and derivative related losses of $7 during the third quarter due to counterparty default
related to the bankruptcy of Lehman Brothers Holdings Inc. For more information regarding
the CLO losses, refer to the Variable Interest Entities section below.
• Other, net losses for the year ended December 31, 2007 primarily resulted from the change in
value 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.
Corporate
The investment objective of Corporate is to raise capital through financing activities to support the Life and Property &
Casualty operations of the Company and to maintain sufficient funds to support the cost of those financing activities
including the payment of interest for The Hartford Financial Services Group, Inc. (“HFSG”) issued debt and dividends to
shareholders of The Hartford’s common stock. As of December 31, 2008 and 2007, Corporate held $155 and $308,
respectively, of fixed maturity investments, $1.5 billion and $160, respectively, of short-term investments and $73 and $103,
respectively, of equity securities, available-for-sale. Short-term investments are intended to be used for general corporate
purposes, which may include the capital and liquidity needs of our operations. For further information, see “Capital
Resources and Liquidity” section under Liquidity Requirements. As of December 31, 2008 and 2007, a put option
agreement for the Company’s contingent capital facility with a fair value of $43 was included in Other invested assets.
Realized capital gains for the year ended December 31, 2008, included gains of $110 resulting from a decrease in the
liability related to certain warrants associated with the Allianz transaction. For further discussion on Allianz, see the Capital
Resources and Liquidity section.
Securities Lending
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009