The Hartford 2015 Annual Report Download - page 121

121
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,
as well as unfunded commitments to purchase investments in limited partnerships and other alternative investments, private placements,
and mortgage loans as disclosed in Note 12 - Commitments and Contingencies of Notes to Consolidated Financial Statements.
The following table summarizes the Company’s aggregate contractual obligations as of December 31, 2015:
Payments due by period
Total Less than 1 year 1-3 years 3-5 years More than 5 years
Property and casualty obligations [1] $ 22,348 $ 5,228 $ 5,192 $ 2,539 $ 9,389
Life, annuity and disability obligations [2] 256,576 17,829 31,881 26,006 180,860
Operating lease obligations [3] 143 39 60 31 13
Long-term debt obligations [4] 11,016 612 1,328 891 8,185
Purchase obligations [5] 2,271 1,482 507 254 28
Other liabilities reflected on the balance sheet [6] 1,664 1,075 405 184 —
Total $ 294,018 $ 26,265 $ 39,373 $ 29,905 $ 198,475
[1] The following points are significant to understanding the cash flows estimated for obligations under property and casualty contracts:
• Reserves for Property & Casualty unpaid losses and loss adjustment expenses include IBNR and case reserves. While payments due on claim
reserves are considered contractual obligations because they relate to insurance policies issued by the Company, the ultimate amount to be
paid to settle both case reserves and IBNR is an estimate, subject to significant uncertainty. The actual amount to be paid is not finally
determined until the Company reaches a settlement with the claimant. Final claim settlements may vary significantly from the present
estimates, particularly since many claims will not be settled until well into the future.
• In estimating the timing of future payments by year, the Company has assumed that its historical payment patterns will continue. However, the
actual timing of future payments could vary materially from these estimates due to, among other things, changes in claim reporting and
payment patterns and large unanticipated settlements. In particular, there is significant uncertainty over the claim payment patterns of
asbestos and environmental claims. In addition, the table does not include future cash flows related to the receipt of premiums that may be
used, in part, to fund loss payments.
• Under U.S. GAAP, the Company is only permitted to discount reserves for losses and loss adjustment expenses in cases where the payment
pattern and ultimate loss costs are fixed and determinable on an individual claim basis. For the Company, these include claim settlements
with permanently disabled claimants. As of December 31, 2015, the total property and casualty reserves in the above table are gross of a
reserve discount of $523.
[2] Estimated life, annuity and disability obligations include death and disability claims, policy surrenders, policyholder dividends and trail
commissions offset by expected future deposits and premiums on in-force contracts. Estimated life, annuity and disability obligations are based on
mortality, morbidity and lapse assumptions comparable with the Company’s historical experience, modified for recent observed trends. The
Company has also assumed market growth and interest crediting consistent with other assumptions. In contrast to this table, the majority of the
Company’s obligations are recorded on the balance sheet at the current account values and do not incorporate an expectation of future market
growth, interest crediting, or future deposits. Therefore, the estimated obligations presented in this table significantly exceed the liabilities
recorded in reserve for future policy benefits and unpaid losses and loss adjustment expenses, other policyholder funds and benefits payable, and
separate account liabilities. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. See
Note 18 - Discontinued Operations and Business Dispositions of Notes to Consolidated Financial Statements for further information as to
Retirement Plans and Individual Life reinsurance transactions.
[3] Includes future minimum lease payments on operating lease agreements. See Note 12 - Commitments and Contingencies of Notes to Consolidated
Financial Statements for additional discussion on lease commitments.
[4] Includes contractual principal and interest payments. See Note 11 - Debt of Notes to Consolidated Financial Statements for additional discussion
of long-term debt obligations.
[5] Includes $1 billion in commitments to purchase investments including approximately $748 of limited partnership and other alternative investments,
$236 of private placements, and $31 of mortgage loans. Outstanding commitments under these limited partnerships and mortgage loans are
included in payments due in less than 1 year since the timing of funding these commitments cannot be reliably estimated. The remaining
commitments to purchase investments primarily represent payables for securities purchased which are reflected on the Company’s Consolidated
Balance Sheets. Also included in purchase obligations is $919 relating to contractual commitments to purchase various goods and services such as
maintenance, human resources, and information technology in the normal course of business. Purchase obligations exclude contracts that are
cancelable without penalty or contracts that do not specify minimum levels of goods or services to be purchased.
[6] Includes cash collateral of $369 which the Company has accepted in connection with the Company’s derivative instruments. Since the timing of the
return of the collateral is uncertain, the return of the collateral has been included in the payments due in less than 1 year. Also included in other
long-term liabilities are net unrecognized tax benefits of $12, retained yen denominated fixed payout annuity liabilities of $703, and consumer
notes of $40. Consumer notes include principal payments and contractual interest for fixed rate notes and interest based on current rates for
floating rate notes.