The Hartford 2008 Annual Report Download - page 369

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Earnings per Share
Earnings per share amounts have been computed in accordance with the provisions of SFAS No. 128, “Earnings per Share”
(“SFAS 128”). The following tables present a reconciliation of net income and shares used in calculating basic earnings per
share to those used in calculating diluted earnings per share.
Net Per Share
(In millions, except for per share data) Income (Loss) Shares Amount
2008
Basic Loss per Share [1] [2]
Net loss $ (2,749)
Less: Preferred stock dividends 8
Net loss available to common shareholders (2,757) 306.7 $ (8.99)
Diluted Loss per Share [2] [3]
Stock compensation plans — —
Net loss available to common shareholders plus assumed
conversions $ (2,757) 306.7 $ (8.99)
2007
Basic Earnings per share
Net income available to common shareholders $ 2,949 316.3 $ 9.32
Diluted Earnings per Share
Stock compensation plans — 2.8
Net income available to common shareholders plus assumed
conversions $ 2,949 319.1 $ 9.24
2006
Basic Earnings per Share
Net income available to common shareholders $ 2,745 308.8 $ 8.89
Diluted Earnings per Share
Stock compensation plans — 3.0
Equity Units — 4.1
Net income available to common shareholders plus assumed
conversions $ 2,745 315.9 $ 8.69
[1] Due to the net loss for the year ended December 31, 2008, no allocation of the net loss was made to the preferred
shareholders under the two-class method in the calculation of basic earnings per share, as the preferred shareholders
had no contractual obligation to fund the net losses of the Company. In the absence of the net loss, any such income
would be allocated to the preferred shareholders based on the weighted average number of preferred shares
outstanding as of December 31, 2008.
[2] As a result of the net loss in the year ended December 31, 2008, SFAS 128 requires the Company to use basic weighted
average common shares outstanding in the calculation of the year ended December 31, 2008 diluted loss per share,
since the inclusion of shares for stock compensation plans of 1.3 million and the assumed conversion of the preferred
shares to common of 5.0 million would have been antidilutive to the earnings per share calculation. In the absence of
the net loss, weighted average common shares outstanding and dilutive potential common shares would have totaled
313.0 million.
[3] Effective January 9, 2009, 6.0 million preferred shares converted to 24.2 million common shares.
Basic earnings per share is computed based on the weighted average number of common shares outstanding during the year.
Diluted earnings per share include the dilutive effect of stock compensation plans, warrants, and the Company’s equity
units, if any, using the treasury stock method. Contingently issuable shares are included for the number of shares issuable
assuming the end of the reporting period was the end of the contingency period, if dilutive.
Under the treasury stock method for stock compensation plans, shares are assumed to be issued and then reduced for the
number of shares repurchaseable with theoretical proceeds at the average market price for the period. Theoretical proceeds
for the stock compensation plans include option exercise price payments, unamortized stock compensation expense and tax
benefits realized in excess of the tax benefit recognized in net income. The difference between the number of shares
assumed issued and number of shares purchased represents the dilutive shares. Upon exercise of outstanding options or
vesting of other stock compensation plan awards, the additional shares issued and outstanding are included in the calculation
of the Company’s weighted average shares from the date of exercise or vesting.
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009