The Hartford 2008 Annual Report Download - page 273

Table of Contents
The following table identifies the Company’s other-than-temporary impairments by type.
2008 2007 2006
ABS
Sub-prime residential mortgages $ 235 $ 212 $ 1
Other 27 19 7
CMBS
Bonds 141 18 —
IOs 61 — 2
CRE CDOs 398 — —
CMOs/MBS 37 — —
Corporate
Financial Services 1,342 67 —
Other 510 98 103
Equities
Financial Services 1,142 36 —
Other 19 20 8
Other 52 13 —
Total other-than-temporary impairments $ 3,964 $ 483 $ 121
The following discussion provides an analysis of significant other-than-temporary impairments (“impairments”) recognized
during 2008, 2007 and 2006 and the related circumstances giving rise to the impairments.
2008
For the year ended December 31, 2008, impairments of $3,964 were concentrated in subordinated fixed maturities and
preferred equities within the financial services sector, as well as, in CMBS securities.
Of the $2,484 of impairments on financial services companies for 2008, the Company does not anticipate substantial
recovery of $850 due to bankruptcy, financial restructurings or concerns about the issuer’s ability to continue to make
contractual payments. The remaining balance primarily relates to securities that experienced extensive credit spread
widening and the Company could not reasonably assert that the security would recover in value in a reasonable period of
time or the Company did not wish to assert its intent to hold the security until recovery. To the extent the Company does not
sell these securities, the Company expects to recover principal and interest in accordance with the security’s contractual
terms over a period up to and including the security’s contractual maturity.
Impairments on securitized securities totaled $899 for the year ended December 31, 2008. For these securities, the Company
determines impairments by modeling cash flows in a severe negative economic outlook scenario. If the results of this cash
flow modeling result in an economic loss, an impairment was taken. The Company continues to receive contractual principal
and interest payments on the majority of CMBS and sub-prime ABS securities impaired, however the Company is uncertain
of its ability to recover principal and interest in accordance with the security’s original contractual terms.
The remaining impairments of $581 were primarily recorded on securities in various sectors, primarily high yield
non-financial services corporate securities that experienced significant credit spread widening and for which the Company
was uncertain of its intent to retain the investments for a period of time sufficient to allow for recovery.
2007
For the year ended December 31, 2007, impairments of $483 were concentrated in securitized assets and corporate fixed
maturities. Impairments for securitized assets totaled $249 and were primarily on securities backed by sub-prime residential
mortgage loans rated A and below in the 2006 and 2007 vintage years. Impairments on corporate fixed maturities of $165
were primarily within the financial services and home builders sectors. The majority of these securities experienced
extensive credit spread widening and the Company could not reasonably assert that the security would recover in value in a
reasonable period of time. For the majority of these securities, the Company expects to recover principal and interest
substantially greater than what the market price indicates.
The remaining impairments were primarily recorded on securities in various sectors that had declined in value for which the
Company was uncertain of its intent to retain the investments for a period of time sufficient to allow for recovery.
2006
For the year ended December 31, 2006, impairments were primarily recorded on corporate fixed maturities and ABS. Other
than a $16 impairment on a single issuer in the utilities sector, there were no other significant impairments (i.e., $15 or
greater) recorded on any single security or issuer. The impairments on ABS primarily related to investments backed by
aircraft lease receivables. Impairments resulted from higher than expected maintenance expenses.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009