The Hartford 2012 Annual Report Download - page 128

Table of Contents
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Total Life contractholder obligations $ 231,907
Less: Separate account assets [1] 141,569
International statutory separate accounts [1] 28,922
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
Contracts without a surrender provision and/or fixed payout dates [2] $26,767
U.S. Fixed MVA annuities and Other [3] 10,847
International Fixed MVA annuities 2,054
Guaranteed investment contracts (“GIC”) [4] 158
Other [5] 21,590
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[1] In the event customers elect to surrender separate account assets or international statutory separate accounts, Life Operations will use the
proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In many instances Life
Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’
liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see below) will decrease Life
Operations’ obligation for payments on guaranteed living and death benefits.
[2] Relates to contracts such as payout annuities or institutional notes, other than guaranteed investment products with an MVA feature (discussed
below) or surrenders of term life, group benefit contracts or death and living benefit reserves for which surrenders will have no current effect on
Life Operations’ liquidity requirements.
[3] Relates to annuities that are recorded in the general account (under U.S. GAAP), although these annuities are held in a statutory separate
account, as the contractholders are subject to the Company's credit risk. In the statutory separate account, Life Operations is required to maintain
invested assets with a fair value equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate
than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate
account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating
cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss,
potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are generally equal to
the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity
requirements of Life Operations.
[4] GICs are subject to discontinuance provisions which allow the policyholders to terminate their contracts prior to scheduled maturity at the lesser
of the book value or market value. Generally, the market value adjustment reflects changes in interest rates and credit spreads. As a result, the
market value adjustment feature in the GIC serves to protect the Company from interest rate risks and limit Life Operations’ liquidity requirements
in the event of a surrender.
[5] Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Talcott
Resolution’s individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for
annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, may be funded through
operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to
fund the surrender payment. Sales of fixed maturity investments could result in the recognition of realized losses and insufficient proceeds to fully
fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions
which could restrict surrenders and/or slow or defer payouts. 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.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of
operations, liquidity, or capital resources of the Company, except for the contingent capital facility described above and the following:
•The Company has unfunded commitments to purchase investments in limited partnerships, private placements and mortgage loans of approximately
$598 as disclosed in Note 13 of Notes to Consolidated Financial Statements.
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