The Hartford 2012 Annual Report Download - page 91

Table of Contents
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   
Earned premiums $ — $ — $ 2
Fee income [1] 167 209 187
Net investment income 31 23 81
Net realized capital gains (losses) 125 (96)66
Other revenue 1 — (1)
   
Benefits, losses and loss adjustment expenses —(3)(2)
Insurance operating costs and other expenses 365 202 325
Loss on extinguishment of debt 910 — —
Reinsurance loss on disposition, including goodwill impairment of $118 118 — —
Interest expense 457 508 508
   
 
Income tax benefit (517) (201) (168)
 
Loss from discontinued operations, net of tax [2] —(64)(107)
     
[1] Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has
an offsetting commission expense in insurance operating costs and other expenses.
[2] Represents the loss from operations and sale of Federal Trust Corporation. For additional information, see Note 20 of the Notes to Consolidated
Financial Statements.
Year ended December 31, 2012 compared to the year ended December 31, 2011
The net loss in Corporate deteriorated in 2012 primarily due to a loss on extinguishment of debt related to the repurchase of all outstanding 10% fixed-to-
floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount all held by Allianz. The loss consisted of the premium
associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs
related to the 10% Debentures and other costs related to the repurchase transaction.
Also in 2012, the Company recorded a reinsurance loss on disposition consisting of an impairment of goodwill related to the disposition of the Individual Life
business. See Note 9 of the Notes to Consolidated Financial Statements for additional information on the goodwill impairment.
In addition, insurance operating costs and other expenses increased as a result of restructuring and other costs related to the Company’s implementation of its
strategic initiatives. See Note 21 of the Notes to Consolidated Financial Statements for additional information on restructuring and other costs.
Partially offsetting the losses was an increase in net realized capital gains (losses), primarily due to gains on derivatives as a result of credit spreads tightening.
For additional information on net realized capital gains, see the Investment Results section.
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
(benefit) for income taxes.
Year ended December 31, 2011 compared to the year ended December 31, 2010
The net loss in Corporate remained flat due to net realized capital losses in 2011, compared to gains in 2010, partially offset by a decrease in insurance
operating costs and other expenses. The net realized capital losses in 2011 primarily relate to losses on derivatives.
Insurance operating costs and other expenses decreased primarily as a result of an accrual for a litigation settlement of $73, before-tax, in 2010, for a class
action lawsuit related to structured settlements.
The loss from discontinued operations, net of tax, in 2011, is due to a net realized capital loss of $74, after-tax, from the disposition of Federal Trust
Corporation. Loss from discontinued operations, net of tax, in 2010, primarily relates to goodwill impairment on Federal Trust Corporation of approximately
$100, after-tax.
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
(benefit) for income taxes.
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