The Hartford 2011 Annual Report Download - page 124

124
Insurance Operations
Current and expected patterns of claim frequency and severity or surrenders may change from period to period but continue to be within
historical norms and, therefore, the Company’ s insurance operations’ current liquidity position is considered to be sufficient to meet
anticipated demands over the next twelve months, including any obligations related to the Company’ s restructuring activities. For a
discussion and tabular presentation of the Company’ s current contractual obligations by period, refer to Off-Balance Sheet
Arrangements and Aggregate Contractual Obligations within the Capital Resources and Liquidity section of the MD&A.
The principal sources of operating funds are premiums, fees earned from assets under management and investment income, while
investing cash flows originate from maturities and sales of invested assets. The primary uses of funds are to pay claims, claim
adjustment expenses, commissions and other underwriting expenses, to purchase new investments and to make dividend payments to the
HFSG Holding Company.
The Company’ s insurance operations consist of property and casualty insurance products (collectively referred to as “Property &
Casualty Operations”) and life insurance products (collectively referred to as “Life Operations”).
Property & Casualty Operations
Property & Casualty Operations holds fixed maturity securities including a significant short-term investment position (securities with
maturities of one year or less at the time of purchase) to meet liquidity needs.
The following table summarizes Property & Casualty Operations’ fixed maturities, short-term investments, and cash, as of December
31, 2011:
Fixed maturities
$
26,034
Short-term investments
658
Cash
203
Less: Derivative collateral
(222)
Total
$
26,673
Liquidity requirements that are unable to be funded by Property & Casualty Operation’ s short-term investments would be satisfied with
current operating funds, including premiums received or through the sale of invested assets. A sale of invested assets could result in
significant realized losses.
Life Operations
Life Operations’ total general account contractholder obligations are supported by $76 billion of cash and total general account invested
assets, excluding equity securities, trading, which includes a significant short-term investment position to meet liquidity needs.
The following table summarizes Life Operations’ fixed maturities, short-term investments, and cash, as of December 31, 2011:
Fixed maturities
$
56,950
Short-term investments
5,641
Cash
2,377
Less: Derivative collateral
(2,836)
Cash associated with Japan variable annuities
(684)
Total
$
61,448
Capital resources available to fund liquidity, upon contract holder surrender, are a function of the legal entity in which the liquidity
requirement resides. Generally, obligations of Group Benefits will be funded by Hartford Life and Accident Insurance Company;
obligations of Individual Annuity, Individual Life and private placement life insurance products will be generally funded by both
Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company; obligations of Retirement Plans and institutional
investment products will be generally funded by Hartford Life Insurance Company; and obligations of the Company’ s international
annuity subsidiaries will be generally funded by the legal entity in the country in which the obligation was generated.
Hartford Life Insurance Company (“HLIC”), an indirect wholly owned subsidiary, became a member of the Federal Home Loan Bank
of Boston (“FHLBB”) in May 2011. Membership allows HLIC access to collateralized advances, which may be used to support various
spread-based business and enhance liquidity management. The Connecticut Department of Insurance (“CTDOI”) will permit HLIC to
pledge up to $1.48 billion in qualifying assets to secure FHLBB advances for 2012. The amount of advances that can be taken are
dependent on the asset types pledged to secure the advances. The pledge limit is recalculated annually based on statutory admitted
assets and capital and surplus. HLIC would need to seek the prior approval of the CTDOI if there were a desire to exceed these limits.
As of December 31, 2011, HLIC had no advances outstanding under the FHLBB facility.