The Hartford 2012 Annual Report Download - page 127

Table of Contents
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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”) an d
life insurance and legacy annuity 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.
As of December 31, 2012, Property & Casualty Operations’ fixed maturities, short-term investments, and cash are summarized as follows:
Fixed maturities $26,503
Short-term investments 802
Cash 190
Less: Derivative collateral 169
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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 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.
As of December 31, 2012, Life Operations’ fixed maturities, short-term investments, and cash are summarized as follows:
Fixed maturities $59,964
Short-term investments 2,947
Cash 2,231
Less: Derivative collateral 1,151
Cash associated with Japan variable annuities 622
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Capital resources available to fund liquidity, upon contractholder 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 Talcott Resolution will generally be
funded by Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company, while obligations of the Company’s international annuity
subsidiaries will generally be funded by the legal entity in the country in which the obligation was generated. C ontractholder obligations of the former
Retirement Plans business were funded by Hartford Life Insurance Company and of the former Individual Life business were funded by both Hartford Life
Insurance Company and Hartford Life and Annuity Insurance Company. See Note 2 - Business Dispositions of Notes to the Consolidated Financial
Statements as to the sale of the Retirement Plans and Individual Life businesses and related transfer of invested assets in January 2013.
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 $1.25 billion in qualifying assets to secure
FHLBB advances for 2013. 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, 2012, HLIC had no advances outstanding under the FHLBB facility.
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