The Hartford 2010 Annual Report Download - page 207

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-79
15. Equity (continued)
Statutory Results
The domestic insurance subsidiaries of The Hartford prepare their statutory financial statements in conformity with statutory accounting
practices prescribed or permitted by the applicable state insurance department which vary materially from U.S. GAAP. Prescribed
statutory accounting practices include publications of the National Association of Insurance Commissioners (“NAIC”), as well as state
laws, regulations and general administrative rules. The differences between statutory financial statements and financial statements
prepared in accordance with U.S. GAAP vary between domestic and foreign jurisdictions. The principal differences are that statutory
financial statements do not reflect deferred policy acquisition costs and limit deferred income taxes, life benefit reserves predominately
use interest rate and mortality assumptions prescribed by the NAIC, bonds are generally carried at amortized cost and reinsurance assets
and liabilities are presented net of reinsurance.
The statutory net income amounts for the years ended December 31, 2009 and 2008, and the statutory surplus amount as of December
31, 2009 in the table below are based on actual statutory filings with the applicable U.S. regulatory authorities. The statutory net income
(loss) amounts for the year ended December 31, 2010 and the statutory surplus amounts as of December 31, 2010 are estimates, as the
respective 2010 statutory filings have not yet been made.
Statutory Net Income (Loss) For the years ended December 31,
2010 2009 2008
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries $(140) $ 1,714 $(4,669)
Property and casualty insurance subsidiaries 1,477 889 497
Total $1,337 $ 2,603 $(4,172)
Statutory Surplus As of December 31,
2010 2009
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries $ 7,731 $7,324
Property and casualty insurance subsidiaries 7,721 7,364
Total $ 15,452 $14,688
The Company also holds regulatory capital and surplus for its operations in Japan. Using the investment in subsidiary accounting
requirements defined in the U.S. National Association of Insurance Commissioners Statements of Statutory Accounting Practices, the
Company’ s statutory capital and surplus attributed to the Japan operations was $1.2 billion and $1.3 billion as of December 31, 2010
and 2009, respectively. However, under the accounting practices and procedures governed by Japanese regulatory authorities, the
Company’ s statutory capital and surplus was $1.3 billion and $1.1 billion, as of December 31, 2010 and 2009, respectively.
Dividends from Insurance Subsidiaries
Dividends to The Hartford Financial Services Group, Inc. holding company (“HFSG Holding Company”) from its insurance subsidiaries
are restricted. The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of
Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any
dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10%
of the insurer’ s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such
company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each
case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer
exceeds the insurer’ s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. The insurance holding
company laws of the other jurisdictions in which The Hartford’ s insurance subsidiaries are incorporated (or deemed commercially
domiciled) generally contain similar (although in certain instances somewhat more restrictive) limitations on the payment of dividends.
Dividends paid to HFSG Holding Company by its insurance subsidiaries are further dependent on cash requirements of HLI and other
factors. The Company’ s property-casualty insurance subsidiaries are permitted to pay up to a maximum of approximately $1.5 billion in
dividends to HFSG Holding Company in 2011 without prior approval from the applicable insurance commissioner. The Company’ s life
insurance subsidiaries are permitted to pay up to a maximum of approximately $83 in dividends to HLI in 2011 without prior approval
from the applicable insurance commissioner. The aggregate of these amounts, net of amounts required by HLI, is the maximum the
insurance subsidiaries could pay to HFSG Holding Company in 2011. In 2010, HFSG Holding Company and HLI received no
dividends from the life insurance subsidiaries, and HFSG Holding Company received $1.0 billion in dividends from its property-
casualty insurance subsidiaries.