The Hartford 2008 Annual Report Download - page 318

Table of Contents
Stockholders’ Equity
Preferred stock — On October 17, 2008, the Company issued in a private placement to Allianz SE, 6,048,387 shares of the
Company’s Series D non-voting contingent convertible preferred stock. Effective January 9, 2009, Allianz SE converted the
preferred shares into 24.2 million shares of common stock.
Treasury stock acquired — For the year ended December 31, 2008, The Hartford repurchased $1.0 billion of its common
stock (14.7 million shares), of which $500 (7.3 million shares) were repurchased under an accelerated share repurchase
transaction described below. For additional information regarding the share repurchase program, see the Liquidity
Requirements section above.
On June 4, 2008, the Company entered into a collared accelerated share repurchase agreement (“ASR”) with a major
financial institution. Under the terms of the agreement, The Hartford paid $500 and received 7.3 million shares. The
Company has accounted for this transaction in accordance with EITF Issue No. 99-7, “Accounting for an Accelerated Share
Repurchase Program.”
Dividends — The Hartford declared $598 and paid $660 in dividends to shareholders in 2008 and declared $643 and paid
$636 in dividends to shareholders in 2007.
On February 10, 2009, The Hartford’s Board of Directors declared a quarterly dividend of $0.05 per share payable on
April 1, 2009 to shareholders of record as of March 2, 2009.
AOCI — AOCI, net of tax, decreased by $6.7 billion as of December 31, 2008 compared with December 31, 2007. The
decrease in AOCI, net of tax, includes unrealized losses on securities of $7.1 billion, primarily due to widening credit
spreads associated with fixed maturities, partially offset by gains on cash-flow hedging instruments of $784, change in
foreign currency translation adjustments of $196, and pension and other postretirement plan adjustments of $(515). Because
The Hartford’s investment portfolio has a duration of approximately 5 years, a 100 basis point parallel movement in rates
would result in approximately a 5% change in fair value. Movements in short-term interest rates without corresponding
changes in long-term rates will impact the fair value of our fixed maturities to a lesser extent than parallel interest rate
movements.
For additional information on stockholders’ equity, AOCI, net of tax, pension and other postretirement plans and Allianz’s
investment in The Hartford see Notes 15, 16, 17 and 21, respectively, of Notes to Consolidated Financial Statements.
Cash Flow
2008 2007 2006
Net cash provided by operating activities $ 4,192 $ 5,991 $ 5,638
Net cash used for investing activities $ (8,827) $ (6,176) $ (7,410)
Net cash provided by financing activities $ 4,274 $ 499 $ 1,915
Cash — end of year $ 1,811 $ 2,011 $ 1,424
Year ended December 31, 2008 compared to the year ended December 31, 2007
The decrease in cash from operating activities compared to prior year period was primarily the result of a decrease in net
investment income as a result of lower yields and reduced fee income as a result of declines in equity markets. Net
purchases of available-for-sale securities continue to account for the majority of cash used for investing activities. Cash from
financing activities increased primarily due to $2.5 billion in investment in The Hartford by Allianz SE, increased transfers
from the separate account to the general account for investment and universal life-type contracts and net issuances of
long-term debt and consumer notes, offset by treasury stock acquired and dividends paid.
Year ended December 31, 2007 compared to the year ended December 31, 2006
The increase in cash from operating activities compared to prior year period was primarily the result of premium cash flows
in excess of claim payments, partially offset by increases in taxes paid. Net purchases of available-for-sale securities
accounted for the majority of cash used for investing activities. Cash from financing activities decreased primarily due to
treasury stock acquired and increases in dividends paid; partially offset by higher net receipts from policyholder’s accounts
related to investment and universal life contracts, proceeds from consumer notes, and issuance of long-term debt, net of
repayments.
Operating cash flows in each of the last three years have been adequate to meet liquidity requirements.
Equity Markets
For a discussion of the potential impact of the equity markets on capital and liquidity, see “Ratings” below.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009