The Hartford 2012 Annual Report Download - page 38

Table of Contents
Atlantic states. The losses in 2011 primarily relate to more severe tornadoes and wind storms in the Midwest and Southeast, Hurricane Irene, and winter
storms in the Northeast and Midwest.
See the segment sections of the MD&A for a discussion on their respective performances.
Year ended December 31, 2011 compared to the year ended December 31, 2010
The decrease in net income from 2010 to 2011 was primarily due to the following items:
•An Unlock charge of $473, after-tax, in 2011 compared to an Unlock benefit of $93, after-tax, in 2010. The Unlock charge in 2011 was primarily due
to the impact of changes to the international variable annuity hedge program. The Unlock benefit for 2010 was attributable to actual separate account
returns being above our aggregated estimated return and the impact of assumption updates primarily related to decreasing lapse and withdrawal rates
and lower hedge costs. For further discussion of Unlocks see the Critical Accounting Estimates within the MD&A.
•Current accident year catastrophe losses of $484, after-tax, in 2011 compared to $294, after-tax, in 2010. The losses in 2011 primarily relate to more
severe tornadoes and wind storms in the Midwest and Southeast, Hurricane Irene, and winter storms in the Northeast and Midwest. The losses in 2010
include severe windstorm events, including a hail storm in Arizona, tornadoes and hail in the Midwest, Plains States and the Southeast and winter
storms in the Mid-Atlantic and Northeast.
•The Company recorded reserve strengthening of $31, after-tax, in 2011, compared to reserve releases of $294, after-tax, in 2010, in its property and
casualty insurance prior accident years development, excluding asbestos and environmental reserves. For additional information regarding prior accident
years development, see Critical Accounting Estimates within the MD&A.
•An asbestos reserve strengthening of $189, after-tax, in 2011, compared to $110, after-tax, in 2010 resulting from the Company’s annual review of its
asbestos liabilities in Property & Casualty Other Operations. The reserve strengthening in 2011 was primarily driven by higher frequency and severity
of mesothelioma claims, particularly against certain smaller, more peripheral insureds, while the reserve strengthening in 2010 was primarily driven by
increases in claim severity and expenses. For further information, see Property & Casualty Other Operations Claims within the Property and Casualty
Insurance Product Reserves, Net of Reinsurance section in Critical Accounting Estimates.
•A $73, after-tax, charge in 2011 related to the write-off of capitalized costs associated with a policy administration software project that was
discontinued.
Partially offsetting these decreases in net income were the following items:
•Income (loss) from discontinued operations, net of tax, increased due to a realized gain on the sale of Specialty Risk Services of $150, after-tax, in
2011, which was partially offset by a loss of $74, after-tax, from the disposition of Federal Trust Corporation in 2011. In 2010, loss from discontinued
operations, net of tax, primarily relates to goodwill impairment on Federal Trust Corporation of approximately $100, after-tax.
•2010 includes an accrual for a litigation settlement of $73, before-tax, for a class action lawsuit related to structured settlements.
•Income tax expense (benefit) in 2010 includes a valuation allowance expense of $87 compared to a benefit of $86 in 2011. See Note 14 of the Notes to
Consolidated Financial Statements for a reconciliation of the tax provision at the U.S. Federal statutory rate to the provision for income taxes.
•In 2011, the Company recorded a $52 income tax benefit related to a resolution of a tax matter with the IRS for the computation of dividends received
deduction (“DRD”) for years 1998, 2000 and 2001. For additional information see Note 14 of the Notes to Consolidated Financial Statements.
See the segment sections of the MD&A for a discussion on their respective performances.
37