The Hartford 2010 Annual Report Download - page 111

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CAPITAL RESOURCES AND LIQUIDITY
Capital resources and liquidity represent the overall financial strength of The Hartford and its insurance operations and their ability to
generate cash flows from each of their business segments, borrow funds at competitive rates and raise new capital to meet operating and
growth needs over the next twelve months.
Liquidity Requirements and Sources of Capital
The Hartford Financial Services Group, Inc. (Holding Company)
The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. (“HFSG Holding Company”) have
been and will continue to be met by HFSG Holding Company’ s fixed maturities, short-term investments and cash of $2.0 billion at
December 31, 2010, dividends from its insurance operations, as well as the issuance of common stock, debt or other capital securities
and borrowings from its credit facilities. Expected liquidity requirements of the HFSG Holding Company for the next twelve months
include interest on debt of approximately $500, common stockholder dividends, subject to the discretion of the Board of Directors, of
approximately $158, and preferred stock dividends of approximately $42.
In addition, in 2010 The Hartford entered into an intercompany liquidity agreement that allows for short-term advances of funds among
the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. The
Connecticut Insurance Department granted approval for the Connecticut domiciled insurance companies that are parties to the
agreement to treat receivables from a parent, including the HFSG Holding Company, as admitted assets for statutory accounting
purposes.
Debt
HFSG Holding Company’ s debt maturities over the next twelve months include $400 aggregate principal amount of its 5.25% senior
notes that mature in October 2011.
On June 15, 2010, The Hartford repaid its $275, 7.9% senior notes at maturity with funds from its capital raise in the first quarter of
2010.
On March 23, 2010, The Hartford issued $1.1 billion aggregate principal amount of its senior notes. The issuance consisted of $300 of
4.0% senior notes due March 30, 2015, $500 of 5.5% senior notes due March 30, 2020 and $300 of 6.625% senior notes due March 30,
2040. The senior notes bear interest at their respective rate, payable semi-annually in arrears on March 30 and September 30 of each
year, beginning September 30, 2010. The issuance was made pursuant to the Company’ s shelf registration statement (Registration No.
333-142044). The Hartford used approximately $425 of the net proceeds from the debt issuances to repurchase the Series E Preferred
Stock issued to the U.S. Treasury as a part of its participation in the Capital Purchase Program, $275 to repay senior notes at maturity in
2010, and intends to use the remaining proceeds to repay senior notes at maturity in 2011. For further discussion on the repurchase of
the Series E Preferred Stock see the Capital Purchase Program discussion below.
For additional information regarding debt, see Note 14 of the Notes to Consolidated Financial Statements.
Preferred Stock Issuance
On March 23, 2010, The Hartford issued 23 million depositary shares, each representing 1/40th interest in the Series F Preferred Stock,
at a price of $25 per depositary share and received net proceeds of $556 under the program. The Hartford used the net proceeds from
the preferred stock issuance to repurchase the Series E Preferred Stock issued to the U.S. Treasury as a part of its participation in the
Capital Purchase Program. For further discussion on the repurchase of the Series E Preferred Stock see the Capital Purchase Program
discussion below.
Common Stock Issuance
On March 23, 2010, The Hartford issued approximately 59.6 million shares of common stock at a price to the public of $27.75 per share
and received net proceeds of $1.6 billion. The Hartford used the net proceeds from the common stock issuance to repurchase the Series
E Preferred Stock issued to the U.S. Treasury as a part of its participation in the Capital Purchase Program. For further discussion on
the repurchase of the Series E Preferred Stock see the Capital Purchase Program discussion below.
Preferred and Common Stock Dividends
On February 2, 2011, The Hartford’ s Board of Directors declared a quarterly dividend of $0.10 per common share payable on April 1,
2011 to common shareholders of record as of March 1, 2011.
On February 24, 2011, The Hartford’ s Board of Directors declared a dividend of $18.125 on each share of Series F preferred stock
payable on April 1, 2011 to shareholders of record as of March 15, 2011.
Pension Plans and Other Postretirement Benefits
While the Company has significant discretion in making voluntary contributions to the U. S. qualified defined benefit pension plan, the
Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the
Worker, Retiree, and Employer Recovery Act of 2008, and Internal Revenue Code regulations mandate minimum contributions in
certain circumstances. The Company made contributions to its pension plans of $201, $201, and $2 in 2010, 2009 and 2008. No
contributions were made to the other postretirement plans in 2010, 2009 and 2008. The Company’ s 2010 required minimum funding
contribution was immaterial. The Company presently anticipates contributing approximately $201 to its pension plans in 2011, based