The Hartford 2011 Annual Report Download - page 143

F-8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, except for per share data, unless otherwise stated)
1. Basis of Presentation and Accounting Policies
Basis of Presentation
The Hartford Financial Services Group, Inc. is a holding company for insurance and financial services subsidiaries that provide
investment products and life and property and casualty insurance to both individual and business customers in the United States
(collectively, “The Hartford”, the “Company”, “we” or “our”). Also, The Hartford continues to administer business previously sold in
Japan and the U.K.
The Consolidated Financial Statements have been prepared on the basis of accounting principles generally accepted in the United States
of America (“U.S. GAAP”), which differ materially from the accounting practices prescribed by various insurance regulatory
authorities.
Consolidation
The Consolidated Financial Statements include the accounts of The Hartford Financial Services Group, Inc., companies in which the
Company directly or indirectly has a controlling financial interest and those variable interest entities (“VIEs”) in which the Company is
required to consolidate. Entities in which the Company has significant influence over the operating and financing decisions but are not
required to consolidate are reported using the equity method. For further discussions on VIEs see Note 5 of the Notes to Consolidated
Financial Statements. Material intercompany transactions and balances between The Hartford and its subsidiaries and affiliates have
been eliminated.
Discontinued Operations
The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in
discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations
of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the
operations of the component after the disposal transaction.
The Company is presenting the operations of certain businesses that meet the criteria for reporting as discontinued operations. Amounts
for prior periods have been retrospectively reclassified. See Note 20 of the Notes to Consolidated Financial Statements for information
on the specific subsidiaries and related impacts.
Use of Estimates
The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
The most significant estimates include those used in determining property and casualty insurance product reserves, net of reinsurance;
estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other
universal life-type contracts; evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances
on investments; living benefits required to be fair valued; goodwill impairment; valuation of investments and derivative instruments;
pension and other postretirement benefit obligations; valuation allowance on deferred tax assets; and contingencies relating to corporate
litigation and regulatory matters. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or
volatility in the worldwide debt or equity markets could have a material impact on the Consolidated Financial Statements.
Mutual Funds
The Company maintains a retail mutual fund operation whereby the Company, through wholly-owned subsidiaries, provides investment
management and administrative services to The Hartford Mutual Funds, Inc. and The Hartford Mutual Funds II, Inc. (collectively,
“mutual funds”), consisting of 57 non-proprietary mutual funds, as of December 31, 2011. The Company charges fees to these mutual
funds, which are recorded as revenue by the Company. These mutual funds are registered with the Securities and Exchange
Commission (“SEC”) under the Investment Company Act of 1940. The mutual funds are owned by the shareholders of those funds and
not by the Company. In the fourth quarter of 2011, the Company entered into a preferred partnership agreement with Wellington
Management Company, LLP (“Wellington Management”) and announced that Wellington Management will serve as the sole sub-
advisor for The Hartford’ s non-proprietary mutual funds, including equity and fixed income funds, pending a fund-by-fund review by
The Hartford’ s mutual funds board of directors. As of December 31, 2011, Wellington Management served as the sub-advisor for 29 of
The Hartford’ s non-proprietary mutual funds and has been the primary manager for the Company’ s equity funds.
The mutual funds are owned by the shareholders of those funds and not by the Company. As such, the mutual fund assets and liabilities
and related investment returns are not reflected in the Company’ s Consolidated Financial Statements since they are not assets, liabilities
and operations of the Company
Reclassifications
Certain reclassifications have been made to prior year financial information to conform to the current year presentation.