The Hartford 2015 Annual Report Download - page 10

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Investment Operations
The majority of the Company’s investment portfolios are managed by Hartford Investment Management Company (“HIMCO”). HIMCO
manages the portfolios to maximize economic value, and generate the returns necessary to support the Company’s various product
obligations, within internally established objectives, guidelines and risk tolerances. The portfolio objectives and guidelines are
developed based upon the asset/liability profile, including duration, convexity and other characteristics within specified risk tolerances.
The risk tolerances considered include, for example, asset sector, credit issuer allocation limits, and maximum portfolio limits for below
investment grade holdings. The Company attempts to minimize adverse impacts to the portfolio and the Company’s results of operations
from changes in economic conditions through asset diversification, asset allocation limits, asset/liability duration matching and through
the use of derivatives. For further discussion of HIMCO’s portfolio management approach, see Part II, Item 7, MD&A — Enterprise
Risk Management.
In addition to managing the general account assets of the Company, HIMCO is also a SEC registered investment adviser for a variable
insurance trust and third party institutional clients, a sub-advisor for certain mutual funds and serves as the sponsor and collateral
manager for capital markets transactions. HIMCO specializes in investment management that incorporates proprietary research and
active portfolio management within a disciplined risk framework that seeks to provide value added returns versus peers and benchmarks.
In January 2016, HIMCO announced the decision to no longer pursue new business in institutional separate accounts. The change is not
expected to have a significant impact on the Company's financial position or results of operations. As of December 31, 2015 and 2014,
the fair value of HIMCO’s total assets under management was approximately $102.9 billion and $109.5 billion, respectively, of which
$5.4 billion and $6.2 billion, respectively, were held in HIMCO managed third party accounts.
Enterprise Risk Management
The Company has an enterprise risk management function (“ERM”) that is charged with providing analysis of the Company's risks on an
individual and aggregated basis and with ensuring that the Company's risks remain within its risk appetite and tolerances. ERM plays an
integral role at The Hartford by fostering a strong risk management culture and discipline. The mission of ERM is to support the
Company in achieving its strategic priorities by:
• Providing a comprehensive view of the risks facing the Company, including risk concentrations and correlations;
• Helping management define the Company's overall capacity and appetite for risk by evaluating the risk/return profile of the
business relative to the Company's strategic intent and financial underpinning;
• Assisting management in setting specific risk tolerances and limits that are measurable, actionable, and comply with the
Company's overall risk philosophy;
• Communicating and monitoring the Company's risk exposures relative to set limits and recommending, or implementing as
appropriate, mitigating strategies; and
• Providing insight to assist leaders in growing the businesses and achieving optimal risk-adjusted returns within established
guidelines.
Enterprise Risk Management Structure and Governance
At The Hartford, the Board of Directors (“the Board”) has ultimate responsibility for risk oversight. It exercises its oversight function
through its standing committees, each of which has primary risk oversight responsibility with respect to all matters within the scope of
its duties as contemplated by its charter. In addition, the Finance, Investment and Risk Management Committee (“FIRMCo”), which is
comprised of all members of the Board, has responsibility for the oversight of the investment, financial, and risk management activities
of the Company, except as otherwise provided in the Company Governance Guidelines. The oversight of all risk exposures includes, but
is not limited to:
• Market risk, including credit, interest rate, equity market, and foreign exchange;
• Liquidity and capital requirements of the Company;
• Insurance risks, including those arising out of catastrophes and acts of terrorism;
• Cybersecurity risk; and
• Any other risk that poses a material threat to the strategic viability of the Company.
The Audit Committee is responsible for, among other things, discussing with management policies with respect to risk assessment and
risk management.