The Hartford 2015 Annual Report Download - page 206

Table of Contents THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies (continued)
F-75
Future minimum lease commitments as of December 31, 2015 are as follows:
Operating Leases
2016 $ 39
2017 33
2018 27
2019 19
2020 12
Thereafter 13
Total minimum lease payments [1] $ 143
[1] Excludes expected future minimum sublease income of approximately $3, $2, $2, $2, $2 and $0 in 2016, 2017, 2018, 2019, 2020 and thereafter
respectively.
The Company’s lease commitments consist primarily of lease agreements for office space, data processing, furniture and fixtures, office
equipment, and transportation equipment that expire at various dates. Capital lease assets are included in property and equipment.
Unfunded Commitments
As of December 31, 2015, the Company has outstanding commitments totaling $1.0 billion, of which $748 is committed to fund limited
partnership and other alternative investments, which may be called by the partnership during the commitment period to fund the
purchase of new investments and partnership expenses. Additionally, $236 of the outstanding commitments relate to various funding
obligations associated with private placement securities. The remaining outstanding commitments of $31 relate to mortgage loans the
Company is expecting to fund in the first half of 2016.
Guaranty Funds and Other Insurance-related Assessments
In all states, insurers licensed to transact certain classes of insurance are required to become members of a guaranty fund. In most states,
in the event of the insolvency of an insurer writing any such class of insurance in the state, members of the funds are assessed to pay
certain claims of the insolvent insurers. A particular state’s fund assesses its members based on their respective written premiums in the
state for the classes of insurance in which the insolvent insurer was engaged. Assessments are generally limited for any year to one or
two percent of the premiums written per year depending on the state.
Liabilities for guaranty fund and other insurance-related assessments are accrued when an assessment is probable, when it can be
reasonably estimated, and when the event obligating the Company to pay an imposed or probable assessment has occurred. Liabilities
for guaranty funds and other insurance-related assessments are not discounted and are included as part of other liabilities in the
Consolidated Balance Sheets. As of December 31, 2015 and 2014 the liability balance was $138 and $131, respectively. As of
December 31, 2015 and 2014 amounts related to premium tax offsets of $44 and $42, respectively, were included in other assets.
Derivative Commitments
Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally
recognized statistical agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial
strength were to fall below certain ratings, the counterparties to the derivative agreements could demand immediate and ongoing full
collateralization and in certain instances demand immediate settlement of all outstanding derivative positions traded under each
impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement.
If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities
by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair
value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of December 31, 2015
was $1.3 billion. Of this $1.3 billion the legal entities have posted collateral of $1.5 billion in the normal course of business. In addition,
the Company has posted collateral of $34 associated with a customized GMWB derivative. Based on derivative market values as of
December 31, 2015, a downgrade of one or two levels below the current financial strength ratings by either Moody’s or S&P would not
require additional assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result
of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we
would post, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.