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| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
Delaware
(State or other jurisdiction of incorporation or organization) |
13-3317783
(I.R.S. Employer Identification No.) |
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
| Item | Description | Page | ||||||
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| Exhibit 3.01 | ||||||||
| Exhibit 15.01 | ||||||||
| Exhibit 31.01 | ||||||||
| Exhibit 31.02 | ||||||||
| Exhibit 32.01 | ||||||||
| Exhibit 32.02 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
2
| • |
significant risks and uncertainties related to the Company’s current operating environment,
which reflects continued volatility in financial markets, constrained capital and credit
markets and uncertainty about the timing and strength of an economic recovery and the impact
of governmental budgetary and regulatory initiatives and whether management’s initiatives to
address these risks will be effective;
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| • |
the risk that our actual sources and uses of capital in a stress scenario may vary
materially and adversely from our modeled projected sources and uses of capital that we
disclosed in connection with our repurchase of the Series E Fixed Rate Cumulative Preferred
Stock (the “Series E Preferred Stock”), whether as a result of one or more assumptions proving
to be materially inaccurate or as a result of the Company’s exposure to other risks during
stressed economic conditions that were not taken into account in preparing such modeled
projections;
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risks associated with our continued execution of steps to realign our business and
reposition our investment portfolio, including the potential need to adjust our plans to take
other restructuring actions, such as divestitures;
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market risks associated with our business, including changes in interest rates, credit
spreads, equity prices, foreign exchange rates, as well as challenging or deteriorating
conditions in key sectors such as the commercial real estate market, that have pressured our
results and are expected to continue to do so in 2010;
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volatility in our earnings resulting from our adjustment of our risk management program to
emphasize protection of statutory surplus;
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the impact on our statutory capital of various factors, including many that are outside the
Company’s control, which can in turn affect our credit and financial strength ratings, cost of
capital, regulatory compliance and other aspects of our business and results;
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risks to our business, financial position, prospects and results associated with negative
ratings actions or downgrades in the Company’s financial strength and credit ratings or
negative rating actions or downgrades relating to our investments;
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the potential for differing interpretations of the methodologies, estimations and
assumptions that underlie the valuation of the Company’s financial instruments that could
result in changes to investment valuations;
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the subjective determinations that underlie the Company’s evaluation of
other-than-temporary impairments on available-for-sale securities;
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losses due to nonperformance or defaults by others;
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the potential for further acceleration of deferred policy acquisition cost amortization;
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the potential for further impairments of our goodwill or the potential for establishing
valuation allowances against deferred tax assets;
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| • |
the possible occurrence of terrorist attacks and the Company’s ability to contain its
exposure, including the effect of the absence or insufficiency of applicable terrorism
legislation on coverage;
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the difficulty in predicting the Company’s potential exposure for asbestos and
environmental claims;
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the possibility of a pandemic or other man-made disaster that may adversely affect the
Company’s businesses and cost and availability of reinsurance;
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weather and other natural physical events, including the severity and frequency of storms,
hail, snowfall and other winter conditions, natural disasters such as hurricanes and
earthquakes, as well as climate change, including effects on weather patterns, greenhouse
gases, sea, land and air temperatures, sea levels, rain and snow;
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the response of reinsurance companies under reinsurance contracts and the availability,
pricing and adequacy of reinsurance to protect the Company against losses;
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the possibility of unfavorable loss development;
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3
| • |
actions by our competitors, many of which are larger or have greater financial resources than we
do;
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the restrictions, oversight, costs and other consequences of being a savings and loan
holding company, including from the supervision, regulation and examination by the Office of
Thrift Supervision (the “OTS”), and arising from our participation in the Capital Purchase
Program (the “CPP”), under the Emergency Economic Stabilization Act of 2008, certain elements
of which will continue to apply to us for so long as the U.S. Department of the Treasury
(“Treasury”), holds the warrant or shares of our common stock received on exercise of the
warrant that we issued to Treasury as part of our participation in the CPP even after the
Company’s repurchase of the preferred stock issued in connection therewith;
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unfavorable judicial or legislative developments;
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the potential effect of domestic and foreign regulatory developments, including those that
could adversely impact the demand for the Company’s products, operating costs and required
capital levels, including changes to statutory reserves and/or risk-based capital requirements
related to secondary guarantees under universal life and variable annuity products;
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the Company’s ability to distribute its products through distribution channels, both
current and future;
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the uncertain effects of emerging claim and coverage issues;
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the ability of the Company’s subsidiaries to pay dividends to the Company;
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| • |
the Company’s ability to effectively price its property and casualty policies, including
its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal
of certain product lines;
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the Company’s ability to maintain the availability of its systems and safeguard the
security of its data in the event of a disaster or other unanticipated events;
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the risk that our framework for managing business risks may not be effective in mitigating
risk and loss to us that could adversely affect our businesses;
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the potential for difficulties arising from outsourcing relationships;
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the impact of potential changes in federal or state tax laws, including changes affecting
the availability of the separate account dividend received deduction;
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the impact of potential changes in accounting principles and related financial reporting
requirements;
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the Company’s ability to protect its intellectual property and defend against claims of
infringement; and
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other factors described in such forward-looking statements.
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4
| Item 1. |
Financial Statements
|
5
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In millions, except for per share data) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
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Revenues
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||||||||
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Earned premiums
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$ | 3,527 | $ | 3,829 | ||||
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Fee income
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1,189 | 1,167 | ||||||
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Net investment income (loss):
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||||||||
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Securities available-for-sale and other
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1,060 | 920 | ||||||
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Equity securities, trading
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701 | (724 | ) | |||||
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Total net investment income
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1,761 | 196 | ||||||
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Net realized capital gains (losses):
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||||||||
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Total other-than-temporary impairment (“OTTI”) losses
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(340 | ) | (224 | ) | ||||
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OTTI losses recognized in other comprehensive income
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188 | — | ||||||
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Net OTTI losses recognized in earnings
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(152 | ) | (224 | ) | ||||
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Net realized capital gains (losses), excluding net OTTI losses recognized in earnings
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(124 | ) | 308 | |||||
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Total net realized capital gains (losses)
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(276 | ) | 84 | |||||
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Other revenues
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118 | 118 | ||||||
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Total revenues
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6,319 | 5,394 | ||||||
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Benefits, losses and expenses
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||||||||
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Benefits, losses and loss adjustment expenses
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3,133 | 4,637 | ||||||
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Benefits,
losses and loss adjustment expenses — returns
credited on International variable annuities
|
701 | (724 | ) | |||||
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Amortization of deferred policy acquisition costs and
present value of future profits
|
651 | 2,259 | ||||||
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Insurance operating costs and expenses
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919 | 898 | ||||||
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Interest expense
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120 | 120 | ||||||
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Goodwill impairment
|
— | 32 | ||||||
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Other expenses
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260 | 189 | ||||||
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||||||||
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Total benefits, losses and expenses
|
5,784 | 7,411 | ||||||
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Income (loss) before income taxes
|
535 | (2,017 | ) | |||||
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Income tax expense (benefit)
|
216 | (808 | ) | |||||
|
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||||||||
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Net income (loss)
|
$ | 319 | $ | (1,209 | ) | |||
|
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||||||||
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Preferred stock dividends and accretion of discount
|
483 | — | ||||||
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||||||||
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Net loss available to common shareholders
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$ | (164 | ) | $ | (1,209 | ) | ||
|
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||||||||
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||||||||
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Earnings (Loss) per common share
|
||||||||
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Basic
|
$ | (0.42 | ) | $ | (3.77 | ) | ||
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Diluted
|
$ | (0.42 | ) | $ | (3.77 | ) | ||
|
Weighted average common shares outstanding
|
393.7 | 320.8 | ||||||
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Weighted average common shares outstanding and
dilutive potential common shares
|
393.7 | 320.8 | ||||||
|
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||||||||
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Cash dividends declared per common share
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$ | 0.05 | $ | 0.05 | ||||
|
|
||||||||
6
| March 31, | December 31, | |||||||
| (In millions, except for share and per share data) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
|
Assets
|
||||||||
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Investments
|
||||||||
|
Fixed maturities, available-for-sale, at fair value (amortized cost of $78,707 and $76,015) (includes variable interest entity assets, at fair value, of
$953 as of March 31, 2010)
|
$ | 75,584 | $ | 71,153 | ||||
|
Equity securities, trading, at fair value (cost of $32,089 and $33,070)
|
32,053 | 32,321 | ||||||
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Equity securities, available-for-sale, at fair value (cost of $1,197 and $1,333)
|
1,153 | 1,221 | ||||||
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Mortgage loans (net of allowances for loan losses of $385 and $366)
|
5,162 | 5,938 | ||||||
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Policy loans, at outstanding balance
|
2,177 | 2,174 | ||||||
|
Limited partnerships and other alternative investments (includes variable interest entity assets of $27 as of March 31, 2010)
|
1,736 | 1,790 | ||||||
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Other investments
|
941 | 602 | ||||||
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Short-term investments
|
8,545 | 10,357 | ||||||
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|
||||||||
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Total investments
|
127,351 | 125,556 | ||||||
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Cash
|
2,079 | 2,142 | ||||||
|
Premiums receivable and agents’ balances
|
3,402 | 3,404 | ||||||
|
Reinsurance recoverables
|
5,179 | 5,384 | ||||||
|
Deferred policy acquisition costs and present value of future profits
|
10,270 | 10,686 | ||||||
|
Deferred income taxes
|
3,322 | 3,940 | ||||||
|
Goodwill
|
1,204 | 1,204 | ||||||
|
Property and equipment, net
|
1,032 | 1,026 | ||||||
|
Other assets
|
3,245 | 3,981 | ||||||
|
Separate account assets
|
160,198 | 150,394 | ||||||
|
|
||||||||
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Total assets
|
$ | 317,282 | $ | 307,717 | ||||
|
|
||||||||
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|
||||||||
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Liabilities
|
||||||||
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Reserve for future policy benefits and unpaid losses and loss adjustment expenses
|
||||||||
|
Property and casualty
|
$ | 21,560 | $ | 21,651 | ||||
|
Life
|
17,990 | 17,980 | ||||||
|
Other policyholder funds and benefits payable
|
45,388 | 45,852 | ||||||
|
Other
policyholder funds and benefits payable — International variable annuities
|
32,027 | 32,296 | ||||||
|
Unearned premiums
|
5,293 | 5,221 | ||||||
|
Short-term debt
|
275 | 343 | ||||||
|
Long-term debt
|
6,597 | 5,496 | ||||||
|
Consumer notes
|
834 | 1,136 | ||||||
|
Other liabilities (includes variable interest entity liabilities of $423 as of March 31, 2010)
|
9,280 | 9,454 | ||||||
|
Separate account liabilities
|
160,198 | 150,394 | ||||||
|
|
||||||||
|
Total liabilities
|
299,442 | 289,823 | ||||||
|
Commitments and Contingencies (Note 9)
|
||||||||
|
Equity
|
||||||||
|
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 and 3,400,000 shares issued, liquidation preference $1,000 per share
|
556 | 2,960 | ||||||
|
Common stock, $0.01 par value — 1,500,000,000 shares authorized,
469,769,804 and 410,184,182 shares issued
|
5 | 4 | ||||||
|
Additional paid-in capital
|
10,475 | 8,985 | ||||||
|
Retained earnings
|
11,006 | 11,164 | ||||||
|
Treasury stock, at cost — 25,842,652 and 27,177,019 shares
|
(1,825 | ) | (1,936 | ) | ||||
|
Accumulated other comprehensive loss, net of tax
|
(2,377 | ) | (3,312 | ) | ||||
|
|
||||||||
|
Total stockholders’ equity
|
17,840 | 17,865 | ||||||
|
Noncontrolling interest
|
— | 29 | ||||||
|
|
||||||||
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Total equity
|
17,840 | 17,894 | ||||||
|
|
||||||||
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Total liabilities and equity
|
$ | 317,282 | $ | 307,717 | ||||
|
|
||||||||
7
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In millions, except for share data) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
|
Preferred Stock
|
||||||||
|
Balance at beginning of period
|
$ | 2,960 | $ | — | ||||
|
Issuance of mandatory convertible preferred stock
|
556 | — | ||||||
|
Accelerated accretion of discount from redemption of preferred stock issued to the U.S. Treasury
|
440 | — | ||||||
|
Redemption of preferred stock issued to the U.S. Treasury
|
(3,400 | ) | — | |||||
|
|
||||||||
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Balance at end of period
|
556 | — | ||||||
|
|
||||||||
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Common Stock
|
5 | 4 | ||||||
|
Additional Paid-in Capital
|
||||||||
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Balance at beginning of period
|
8,985 | 7,569 | ||||||
|
Issuance of shares under public offering
|
1,599 | — | ||||||
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Issuance of shares under incentive and stock compensation plans
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(103 | ) | (51 | ) | ||||
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Reclassification of warrants from other liabilities to equity
|
— | 93 | ||||||
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Tax expense on employee stock options and awards
|
(6 | ) | (11 | ) | ||||
|
|
||||||||
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Balance at end of period
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10,475 | 7,600 | ||||||
|
|
||||||||
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Retained Earnings
|
||||||||
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Balance at beginning of period, before cumulative effect of accounting change, net of tax
|
11,164 | 11,336 | ||||||
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Cumulative effect of accounting change, net of tax
|
26 | — | ||||||
|
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||||||||
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Balance at beginning of period, as adjusted
|
11,190 | 11,336 | ||||||
|
Net income (loss)
|
319 | (1,209 | ) | |||||
|
Accelerated accretion of discount from redemption of preferred stock issued to the U.S. Treasury
|
(440 | ) | — | |||||
|
Dividends on preferred stock
|
(43 | ) | — | |||||
|
Dividends declared on common stock
|
(20 | ) | (16 | ) | ||||
|
|
||||||||
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Balance at end of period
|
11,006 | 10,111 | ||||||
|
|
||||||||
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Treasury Stock, at Cost
|
||||||||
|
Balance at beginning of period
|
(1,936 | ) | (2,120 | ) | ||||
|
Issuance of shares under incentive and stock compensation plans from treasury stock
|
114 | 69 | ||||||
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Return of shares under incentive and stock compensation plans to treasury stock
|
(3 | ) | (3 | ) | ||||
|
|
||||||||
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Balance at end of period
|
(1,825 | ) | (2,054 | ) | ||||
|
|
||||||||
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Accumulated Other Comprehensive Loss, Net of Tax
|
||||||||
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Balance at beginning of period
|
(3,312 | ) | (7,520 | ) | ||||
|
Total other comprehensive income (loss)
|
935 | (281 | ) | |||||
|
|
||||||||
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Balance at end of period
|
(2,377 | ) | (7,801 | ) | ||||
|
|
||||||||
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Total Stockholders’ Equity
|
17,840 | 7,860 | ||||||
|
|
||||||||
|
|
||||||||
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Noncontrolling Interest (Note 13)
|
||||||||
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Balance at beginning of period
|
29 | 92 | ||||||
|
Change in noncontrolling interest ownership
|
— | (64 | ) | |||||
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Noncontrolling loss
|
— | (1 | ) | |||||
|
Recognition of noncontrolling interest in other liabilities
|
(29 | ) | — | |||||
|
|
||||||||
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Balance at end of period
|
— | 27 | ||||||
|
|
||||||||
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Total Equity
|
$ | 17,840 | $ | 7,887 | ||||
|
|
||||||||
|
|
||||||||
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Outstanding Preferred Shares (in thousands)
|
||||||||
|
Balance at beginning of period
|
3,400 | 6,048 | ||||||
|
Conversion of preferred to common shares
|
— | (6,048 | ) | |||||
|
Issuance of mandatory convertible preferred shares
|
575 | — | ||||||
|
Redemption of preferred shares issued to the U.S. Treasury
|
(3,400 | ) | — | |||||
|
|
||||||||
|
Balance at end of period
|
575 | — | ||||||
|
|
||||||||
|
|
||||||||
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Outstanding Common Shares (in thousands)
|
||||||||
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Balance at beginning of period
|
383,007 | 300,579 | ||||||
|
Treasury stock acquired
|
— | (15 | ) | |||||
|
Conversion of preferred to common shares
|
— | 24,194 | ||||||
|
Issuance of shares under public offering
|
59,590 | — | ||||||
|
Issuance of shares under incentive and stock compensation plans
|
1,455 | 860 | ||||||
|
Return of shares under incentive and stock compensation plans to treasury stock
|
(125 | ) | (183 | ) | ||||
|
|
||||||||
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Balance at end of period
|
443,927 | 325,435 | ||||||
|
|
||||||||
8
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In millions) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
|
Comprehensive Income (Loss)
|
||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | |||
|
|
||||||||
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Other comprehensive income (loss)
|
||||||||
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Change in net unrealized loss on securities
|
859 | (33 | ) | |||||
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Change in OTTI losses recognized in other comprehensive income
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32 | — | ||||||
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Change in net gain (loss) on cash-flow hedging instruments
|
66 | (48 | ) | |||||
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Change in foreign currency translation adjustments
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(36 | ) | (209 | ) | ||||
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Amortization of prior service cost and actuarial net losses
included in net periodic benefit costs
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14 | 9 | ||||||
|
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||||||||
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Total other comprehensive income (loss)
|
935 | (281 | ) | |||||
|
|
||||||||
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Total comprehensive income (loss)
|
$ | 1,254 | $ | (1,490 | ) | |||
|
|
||||||||
9
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In millions) | 2010 | 2009 | ||||||
| (Unaudited) | ||||||||
|
Operating Activities
|
||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities
|
||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
651 | 2,259 | ||||||
|
Additions to deferred policy acquisition costs and present value of future profits
|
(680 | ) | (734 | ) | ||||
|
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums
|
33 | 1,700 | ||||||
|
Change in reinsurance recoverables
|
45 | (334 | ) | |||||
|
Change in receivables and other assets
|
(180 | ) | (21 | ) | ||||
|
Change in payables and accruals
|
(109 | ) | (396 | ) | ||||
|
Change in accrued and deferred income taxes
|
128 | (276 | ) | |||||
|
Net realized capital (gains) losses
|
276 | (84 | ) | |||||
|
Net disbursements from investment contracts related to policyholder funds — International variable annuities
|
(257 | ) | (387 | ) | ||||
|
Net decrease in equity securities, trading
|
268 | 449 | ||||||
|
Depreciation and amortization
|
144 | 137 | ||||||
|
Goodwill impairment
|
— | 32 | ||||||
|
Other operating activities, net
|
(150 | ) | (126 | ) | ||||
|
|
||||||||
|
Net cash provided by operating activities
|
488 | 1,010 | ||||||
|
Investing Activities
|
||||||||
|
Proceeds from the sale/maturity/prepayment of:
|
||||||||
|
Fixed maturities, available-for-sale
|
11,534 | 22,195 | ||||||
|
Equity securities, available-for-sale
|
108 | 311 | ||||||
|
Mortgage loans
|
726 | 27 | ||||||
|
Partnerships
|
145 | 153 | ||||||
|
Payments for the purchase of:
|
||||||||
|
Fixed maturities, available-for-sale
|
(11,973 | ) | (22,655 | ) | ||||
|
Equity securities, available-for-sale
|
(15 | ) | (207 | ) | ||||
|
Mortgage loans
|
(18 | ) | (20 | ) | ||||
|
Partnerships
|
(72 | ) | (81 | ) | ||||
|
Derivatives, net
|
(252 | ) | 894 | |||||
|
Change in policy loans, net
|
(3 | ) | 11 | |||||
|
Change in payables for collateral under securities lending, net
|
(23 | ) | (1,450 | ) | ||||
|
Other investing activities, net
|
(58 | ) | (189 | ) | ||||
|
|
||||||||
|
Net cash provided by (used for) investing activities
|
99 | (1,011 | ) | |||||
|
Financing Activities
|
||||||||
|
Deposits and other additions to investment and universal life-type contracts
|
5,468 | 2,872 | ||||||
|
Withdrawals and other deductions from investment and universal life-type contracts
|
(5,614 | ) | (4,715 | ) | ||||
|
Net transfers from separate accounts related to investment and universal life-type contracts
|
124 | 2,136 | ||||||
|
Proceeds from issuance of long-term debt
|
1,090 | — | ||||||
|
Payments on capital lease obligations
|
(68 | ) | (24 | ) | ||||
|
Change in commercial paper
|
— | (21 | ) | |||||
|
Repayments at maturity or settlement of consumer notes
|
(302 | ) | (8 | ) | ||||
|
Net proceeds from issuance of mandatory convertible preferred stock
|
556 | — | ||||||
|
Net proceeds from issuance of shares under public offering
|
1,600 | — | ||||||
|
Redemption of preferred stock issued to the U.S. Treasury
|
(3,400 | ) | — | |||||
|
Proceeds from net issuance of shares under incentive and stock compensation plans and excess tax benefit
|
8 | (7 | ) | |||||
|
Dividends paid on preferred stock
|
(64 | ) | (8 | ) | ||||
|
Dividends paid on common stock
|
(20 | ) | (99 | ) | ||||
|
Changes in bank deposits and payments on bank advances
|
(30 | ) | — | |||||
|
|
||||||||
|
Net cash provided by (used for) financing activities
|
(652 | ) | 126 | |||||
|
Foreign exchange rate effect on cash
|
2 | (85 | ) | |||||
|
Net increase (decrease) in cash
|
(63 | ) | 40 | |||||
|
Cash — beginning of period
|
2,142 | 1,811 | ||||||
|
|
||||||||
|
Cash — end of period
|
$ | 2,079 | $ | 1,851 | ||||
|
|
||||||||
|
Supplemental Disclosure of Cash Flow Information
|
||||||||
|
Net Cash Paid (Received) During the Period For:
|
||||||||
|
Income taxes
|
$ | 87 | $ | (598 | ) | |||
|
Interest
|
$ | 61 | $ | 70 | ||||
10
11
12
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (In millions, except for per share data) | 2010 | 2009 | ||||||
|
|
||||||||
|
Income (loss)
|
||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | |||
|
Less: Preferred stock dividends and accretion of discount
|
483 | — | ||||||
|
|
||||||||
|
Net loss available to common shareholders
|
$ | (164 | ) | $ | (1,209 | ) | ||
|
|
||||||||
|
|
||||||||
|
Common shares
|
||||||||
|
Basic
|
||||||||
|
Weighted average common shares outstanding
|
393.7 | 320.8 | ||||||
|
|
||||||||
|
Diluted
|
||||||||
|
Weighted average shares outstanding and dilutive potential common shares
|
393.7 | 320.8 | ||||||
|
|
||||||||
|
|
||||||||
|
Earnings (loss) per common share
|
||||||||
|
Basic
|
$ | (0.42 | ) | $ | (3.77 | ) | ||
|
Diluted
|
$ | (0.42 | ) | $ | (3.77 | ) | ||
|
|
||||||||
13
| As Reported in the | Realignment of | Movement of | Segment | |||||||||||||
| 2009 Annual Report | Mutual Fund | Non-Proprietary | Results, | |||||||||||||
| Revenues | on Form 10-K | Businesses | Product Results | As Revised | ||||||||||||
|
For the year ended December 31, 2009
|
||||||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | 2,132 | $ | (517 | ) | $ | (149 | ) | $ | 1,466 | ||||||
|
Retirement
|
324 | 517 | — | 841 | ||||||||||||
|
Life Other
|
58 | — | 149 | 207 | ||||||||||||
|
|
||||||||||||||||
|
For the year ended December 31, 2008
|
||||||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | 2,753 | $ | (666 | ) | $ | (150 | ) | $ | 1,937 | ||||||
|
Retirement
|
338 | 666 | — | 1,004 | ||||||||||||
|
Life Other
|
60 | — | 150 | 210 | ||||||||||||
|
|
||||||||||||||||
|
For the year ended December 31, 2007
|
||||||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | 3,055 | $ | (688 | ) | $ | (140 | ) | $ | 2,227 | ||||||
|
Retirement
|
242 | 688 | — | 930 | ||||||||||||
|
Life Other
|
67 | — | 140 | 207 | ||||||||||||
| As Reported in the | Realignment of | Segment | ||||||||||
| 2009 Annual Report | Mutual Fund | Results, | ||||||||||
| Net Income (Loss) | on Form 10-K | Businesses | As Revised | |||||||||
|
For the year ended December 31, 2009
|
||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | (410 | ) | $ | (34 | ) | $ | (444 | ) | |||
|
Retirement
|
(222 | ) | 34 | (188 | ) | |||||||
|
|
||||||||||||
|
For the year ended December 31, 2008
|
||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | (1,399 | ) | $ | (37 | ) | $ | (1,436 | ) | |||
|
Retirement
|
(157 | ) | 37 | (120 | ) | |||||||
|
|
||||||||||||
|
For the year ended December 31, 2007
|
||||||||||||
|
Global Annuity — U.S. (formerly Retail)
|
$ | 812 | $ | (65 | ) | $ | 747 | |||||
|
Retirement
|
61 | 65 | 126 | |||||||||
14
| Three Months Ended | ||||||||
| Net assumed (ceded) earned premiums under | March 31, | |||||||
| inter-segment arrangements | 2010 | 2009 | ||||||
|
Personal Lines
|
$ | (1 | ) | $ | (1 | ) | ||
|
Small Commercial
|
(6 | ) | (6 | ) | ||||
|
Middle Market
|
(5 | ) | (6 | ) | ||||
|
Specialty Commercial
|
12 | 13 | ||||||
|
|
||||||||
|
Total
|
$ | — | $ | — | ||||
|
|
||||||||
15
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Revenues by Product Line | 2010 | 2009 | ||||||
|
Life
|
||||||||
|
Earned premiums, fees, and other considerations
|
||||||||
|
Global Annuity — U.S.
|
||||||||
|
Variable annuity
|
$ | 402 | $ | 414 | ||||
|
Fixed MVA annuity [1]
|
3 | (1 | ) | |||||
|
|
||||||||
|
Total Global Annuity — U.S.
|
405 | 413 | ||||||
|
Global Annuity — International
|
||||||||
|
Variable annuity
|
198 | 168 | ||||||
|
Fixed MVA annuity
|
8 | 6 | ||||||
|
Other
|
4 | 8 | ||||||
|
|
||||||||
|
Total Global Annuity — International
|
210 | 182 | ||||||
|
Retirement
|
||||||||
|
401(k)
|
76 | 63 | ||||||
|
403(b)/457
|
11 | 10 | ||||||
|
Retail mutual funds
|
142 | 106 | ||||||
|
Other [2]
|
31 | 2 | ||||||
|
|
||||||||
|
Total Retirement
|
260 | 181 | ||||||
|
Individual Life
|
||||||||
|
Variable life
|
102 | 164 | ||||||
|
Universal life
|
105 | 97 | ||||||
|
Term / Other life
|
13 | 12 | ||||||
|
|
||||||||
|
Total Individual Life
|
220 | 273 | ||||||
|
Group Benefits
|
||||||||
|
Group disability
|
531 | 529 | ||||||
|
Group life and accident
|
512 | 544 | ||||||
|
Other
|
59 | 65 | ||||||
|
|
||||||||
|
Total Group Benefits
|
1,102 | 1,138 | ||||||
|
Institutional
|
||||||||
|
Institutional investment products
|
13 | 214 | ||||||
|
PPLI [3]
|
40 | 34 | ||||||
|
|
||||||||
|
Total Institutional
|
53 | 248 | ||||||
|
Other
|
43 | 47 | ||||||
|
|
||||||||
|
Total earned premiums, fees, and other considerations
|
2,293 | 2,482 | ||||||
|
Net investment income (loss)
|
||||||||
|
Securities available-for-sale and other
|
744 | 689 | ||||||
|
Equity securities, trading
|
701 | (724 | ) | |||||
|
|
||||||||
|
Total net investment income (loss)
|
1,445 | (35 | ) | |||||
|
Net realized capital gains (losses)
|
(236 | ) | 365 | |||||
|
|
||||||||
|
Total Life
|
$ | 3,502 | $ | 2,812 | ||||
|
|
||||||||
| [1] |
Single premium immediate annuities were transferred from Institutional to Global Annuity — U.S. effective January 1, 2010.
|
|
| [2] |
Includes fee income earned on Insurance Product, Investment-Only and Canadian mutual funds and 529 college savings plan
assets under management.
|
|
| [3] |
Includes Leveraged PPLI transferred from Life Other effective January 1, 2010.
|
16
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Revenues by Product Line (continued) | 2010 | 2009 | ||||||
|
Property & Casualty
|
||||||||
|
Ongoing Operations
|
||||||||
|
Earned premiums
|
||||||||
|
Personal Lines
|
||||||||
|
Automobile
|
$ | 712 | $ | 704 | ||||
|
Homeowners
|
283 | 275 | ||||||
|
|
||||||||
|
Total Personal Lines
|
995 | 979 | ||||||
|
Small Commercial
|
||||||||
|
Workers’ Compensation
|
292 | 296 | ||||||
|
Package Business
|
279 | 283 | ||||||
|
Automobile
|
66 | 73 | ||||||
|
|
||||||||
|
Total Small Commercial
|
637 | 652 | ||||||
|
Middle Market
|
||||||||
|
Workers’ Compensation
|
212 | 213 | ||||||
|
Property
|
132 | 146 | ||||||
|
Automobile
|
65 | 77 | ||||||
|
Liability
|
92 | 112 | ||||||
|
|
||||||||
|
Total Middle Market
|
501 | 548 | ||||||
|
Specialty Commercial
|
||||||||
|
Workers’ Compensation
|
71 | 65 | ||||||
|
Property
|
8 | 16 | ||||||
|
Automobile
|
22 | 22 | ||||||
|
Liability
|
47 | 58 | ||||||
|
Fidelity and surety
|
56 | 67 | ||||||
|
Professional Liability
|
83 | 104 | ||||||
|
|
||||||||
|
Total Specialty Commercial
|
287 | 332 | ||||||
|
|
||||||||
|
Total Ongoing Operations
|
2,420 | 2,511 | ||||||
|
Other Operations
|
— | — | ||||||
|
|
||||||||
|
Total earned premiums
|
2,420 | 2,511 | ||||||
|
Other revenues [1]
|
118 | 118 | ||||||
|
Net investment income
|
309 | 225 | ||||||
|
Net realized capital losses
|
(40 | ) | (323 | ) | ||||
|
|
||||||||
|
Total Property & Casualty
|
2,807 | 2,531 | ||||||
|
Corporate
|
10 | 51 | ||||||
|
|
||||||||
|
Total revenues
|
$ | 6,319 | $ | 5,394 | ||||
|
|
||||||||
| [1] |
Represents servicing revenue.
|
17
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Net Income (Loss) | 2010 | 2009 | ||||||
|
Life
|
||||||||
|
Global Annuity — U.S.
|
$ | 153 | $ | (746 | ) | |||
|
Global Annuity — International
|
23 | (293 | ) | |||||
|
Retirement
|
20 | (86 | ) | |||||
|
Individual Life
|
16 | (18 | ) | |||||
|
Group Benefits
|
51 | 69 | ||||||
|
Institutional
|
(88 | ) | (174 | ) | ||||
|
Other
|
11 | (10 | ) | |||||
|
|
||||||||
|
Total Life
|
186 | (1,258 | ) | |||||
|
Property & Casualty
|
||||||||
|
Ongoing Operations
|
||||||||
|
Underwriting results
|
||||||||
|
Personal Lines
|
54 | 75 | ||||||
|
Small Commercial
|
83 | 87 | ||||||
|
Middle Market
|
12 | 69 | ||||||
|
Specialty Commercial
|
52 | 23 | ||||||
|
|
||||||||
|
Total Ongoing Operations underwriting results
|
201 | 254 | ||||||
|
Net servicing income [1]
|
7 | 8 | ||||||
|
Net investment income
|
268 | 185 | ||||||
|
Net realized capital losses
|
(36 | ) | (289 | ) | ||||
|
Other expenses
|
(54 | ) | (50 | ) | ||||
|
|
||||||||
|
Income before income taxes
|
386 | 108 | ||||||
|
Income tax expense (benefit)
|
148 | (3 | ) | |||||
|
|
||||||||
|
Ongoing Operations
|
238 | 111 | ||||||
|
Other Operations
|
19 | 1 | ||||||
|
|
||||||||
|
Total Property & Casualty
|
257 | 112 | ||||||
|
Corporate
|
(124 | ) | (63 | ) | ||||
|
|
||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | |||
|
|
||||||||
| [1] |
Net of expenses related to service business.
|
18
| Level 1 |
Observable inputs that reflect quoted prices for identical assets
or liabilities in active markets that the Company has the ability
to access at the measurement date. Level 1 securities include
highly liquid U.S. Treasuries, money market funds and exchange
traded equity, open-ended mutual funds reported in separate
account assets and derivative securities, including futures and
certain option contracts.
|
| Level 2 |
Observable inputs, other than quoted prices included in Level 1,
for the asset or liability or prices for similar assets and
liabilities. Most fixed maturities and preferred stocks,
including those reported in separate account assets, are model
priced by vendors using observable inputs and are classified
within Level 2. Also included in the Level 2 category are
derivative instruments that are priced using models with
significant observable market inputs, including interest rate,
foreign currency and certain credit swap contracts and have no
significant unobservable market inputs.
|
| Level 3 |
Valuations that are derived from techniques in which one or more
of the significant inputs are unobservable (including assumptions
about risk). Level 3 securities include less liquid securities
such as highly structured and/or lower quality asset-backed
securities (“ABS”), commercial mortgage-backed securities
(“CMBS”), commercial real estate (“CRE”) collateralized debt
obligations (“CDOs”), residential mortgage-backed securities
(“RMBS”) primarily backed by below- prime loans, and private
placement securities. Also included in Level 3 are guaranteed
product embedded and reinsurance derivatives and other complex
derivative securities, including customized guaranteed minimum
withdrawal benefit (“GMWB”) hedging derivatives (see Note 4a for
further information on GMWB product related financial
instruments), equity derivatives, long dated derivatives, swaps
with optionality, certain complex credit derivatives and certain
other liabilities. Because Level 3 fair values, by their nature,
contain unobservable market inputs as there is little or no
observable market for these assets and liabilities, considerable
judgment is used to determine the Level 3 fair values. Level 3
fair values represent the Company’s best estimate of an amount
that could be realized in a current market exchange absent actual
market exchanges.
|
19
| March 31, 2010 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||
|
ABS
|
$ | 2,885 | $ | — | $ | 2,352 | $ | 533 | ||||||||
|
CDOs
|
2,790 | — | 41 | 2,749 | ||||||||||||
|
CMBS
|
8,716 | — | 8,274 | 442 | ||||||||||||
|
Corporate
|
38,593 | — | 29,981 | 8,612 | ||||||||||||
|
Foreign government/government agencies
|
1,483 | — | 1,424 | 59 | ||||||||||||
|
States, municipalities and political subdivisions (“Municipal”)
|
12,349 | — | 12,027 | 322 | ||||||||||||
|
RMBS
|
4,389 | — | 3,215 | 1,174 | ||||||||||||
|
U.S. Treasuries
|
4,379 | 1,270 | 3,109 | — | ||||||||||||
|
|
||||||||||||||||
|
Total fixed maturities, AFS
|
75,584 | 1,270 | 60,423 | 13,891 | ||||||||||||
|
Equity securities, trading
|
32,053 | 2,331 | 29,722 | — | ||||||||||||
|
Equity securities, AFS
|
1,153 | 263 | 825 | 65 | ||||||||||||
|
Derivative assets
|
||||||||||||||||
|
Credit derivatives
|
8 | — | (22 | ) | 30 | |||||||||||
|
Equity derivatives
|
3 | — | — | 3 | ||||||||||||
|
Foreign exchange derivatives
|
207 | — | 207 | — | ||||||||||||
|
Interest rate derivatives
|
107 | — | 100 | 7 | ||||||||||||
|
Other derivative contracts
|
35 | — | — | 35 | ||||||||||||
|
|
||||||||||||||||
|
Total derivative assets [1]
|
360 | — | 285 | 75 | ||||||||||||
|
Short-term investments
|
8,545 | 2,713 | 5,832 | — | ||||||||||||
|
Separate account assets [2]
|
150,210 | 115,740 | 33,515 | 955 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 267,905 | $ | 122,317 | $ | 130,602 | $ | 14,986 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
Institutional notes
|
$ | (7 | ) | $ | — | $ | — | $ | (7 | ) | ||||||
|
Equity linked notes
|
(9 | ) | — | — | (9 | ) | ||||||||||
|
|
||||||||||||||||
|
Total other policyholder funds and benefits payable
|
(16 | ) | — | — | (16 | ) | ||||||||||
|
Derivative liabilities
|
||||||||||||||||
|
Credit derivatives
|
(610 | ) | — | (89 | ) | (521 | ) | |||||||||
|
Equity derivatives
|
(4 | ) | — | — | (4 | ) | ||||||||||
|
Foreign exchange derivatives
|
(45 | ) | — | (45 | ) | — | ||||||||||
|
Interest rate derivatives
|
(42 | ) | — | (29 | ) | (13 | ) | |||||||||
|
|
||||||||||||||||
|
Total derivative liabilities [3]
|
(701 | ) | — | (163 | ) | (538 | ) | |||||||||
|
Other liabilities
|
(22 | ) | — | — | (22 | ) | ||||||||||
|
Consumer notes [4]
|
(5 | ) | — | — | (5 | ) | ||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring basis
|
$ | (744 | ) | $ | — | $ | (163 | ) | $ | (581 | ) | |||||
|
|
||||||||||||||||
| [1] |
Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge
collateral to the Company. As of March 31, 2010, $492 of a cash collateral liability was netted against the derivative asset value
in the Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities.
|
|
| [2] |
As of March 31, 2010, excludes approximately $10 billion of investment sales receivable that are not subject to fair value accounting.
|
|
| [3] |
Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3
roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives”
and are presented on a net basis.
|
|
| [4] |
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
20
| December 31, 2009 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||
|
ABS
|
$ | 2,523 | $ | — | $ | 1,943 | $ | 580 | ||||||||
|
CDOs
|
2,892 | — | 57 | 2,835 | ||||||||||||
|
CMBS
|
8,544 | — | 8,237 | 307 | ||||||||||||
|
Corporate
|
35,243 | — | 27,216 | 8,027 | ||||||||||||
|
Foreign government/government agencies
|
1,408 | — | 1,315 | 93 | ||||||||||||
|
Municipal
|
12,065 | — | 11,803 | 262 | ||||||||||||
|
RMBS
|
4,847 | — | 3,694 | 1,153 | ||||||||||||
|
U.S. Treasuries
|
3,631 | 526 | 3,105 | — | ||||||||||||
|
|
||||||||||||||||
|
Total fixed maturities, AFS
|
71,153 | 526 | 57,370 | 13,257 | ||||||||||||
|
Equity securities, trading
|
32,321 | 2,443 | 29,878 | — | ||||||||||||
|
Equity securities, AFS
|
1,221 | 259 | 904 | 58 | ||||||||||||
|
Derivative assets [1]
|
178 | — | 97 | 81 | ||||||||||||
|
Short-term investments
|
10,357 | 6,846 | 3,511 | — | ||||||||||||
|
Separate account assets [2]
|
147,432 | 112,877 | 33,593 | 962 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 262,662 | $ | 122,951 | $ | 125,353 | $ | 14,358 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
Institutional notes
|
$ | (2 | ) | $ | — | $ | — | $ | (2 | ) | ||||||
|
Equity linked notes
|
(10 | ) | — | — | (10 | ) | ||||||||||
|
|
||||||||||||||||
|
Total other policyholder funds and benefits payable
|
(12 | ) | — | — | (12 | ) | ||||||||||
|
Derivative liabilities [3]
|
(214 | ) | — | 56 | (270 | ) | ||||||||||
|
Consumer notes [4]
|
(5 | ) | — | — | (5 | ) | ||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring basis
|
$ | (231 | ) | $ | — | $ | 56 | $ | (287 | ) | ||||||
|
|
||||||||||||||||
| [1] |
Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge collateral
to the Company. As of December 31, 2009, $149 of a cash collateral liability was netted against the derivative asset value in the
Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities.
|
|
| [2] |
As of December 31, 2009, excludes approximately $3 billion of investment sales receivable that are not subject to fair value accounting.
|
|
| [3] |
Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3
roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives” and
are presented on a net basis.
|
|
| [4] |
Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.
|
21
22
23
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | gains (losses) included in | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | net income related to | ||||||||||||||||||||||||||
| January 1, | Net | and | in to | out of | March 31, | financial instruments still | ||||||||||||||||||||||||||
| Asset (liability) | 2010 | income [1] | OCI [2] | settlements | Level 3 [3] | Level 3 [3] | 2010 | held at March 31, 2010 [1] | ||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||||||
|
ABS
|
$ | 580 | $ | — | $ | 28 | $ | (10 | ) | $ | — | $ | (65 | ) | $ | 533 | $ | — | ||||||||||||||
|
CDO
|
2,835 | (63 | ) | 215 | (19 | ) | 16 | (235 | ) | 2,749 | (63 | ) | ||||||||||||||||||||
|
CMBS
|
307 | (72 | ) | 86 | (6 | ) | 127 | — | 442 | (71 | ) | |||||||||||||||||||||
|
Corporate
|
8,027 | 2 | 129 | 216 | 336 | (98 | ) | 8,612 | — | |||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
93 | — | 2 | (6 | ) | 6 | (36 | ) | 59 | — | ||||||||||||||||||||||
|
Municipal
|
262 | — | 18 | 46 | — | (4 | ) | 322 | — | |||||||||||||||||||||||
|
RMBS
|
1,153 | (13 | ) | 89 | (32 | ) | — | (23 | ) | 1,174 | (13 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
13,257 | (146 | ) | 567 | 189 | 485 | (461 | ) | 13,891 | (147 | ) | |||||||||||||||||||||
|
Equity securities, AFS
|
58 | (1 | ) | 7 | 1 | — | — | 65 | (1 | ) | ||||||||||||||||||||||
|
Freestanding derivatives
|
||||||||||||||||||||||||||||||||
|
Credit derivatives
|
(228 | ) | 27 | — | — | (290 | ) | — | (491 | ) | 27 | |||||||||||||||||||||
|
Equity derivatives
|
(2 | ) | 1 | — | — | — | — | (1 | ) | 1 | ||||||||||||||||||||||
|
Interest rate derivatives
|
5 | — | — | — | — | (11 | ) | (6 | ) | — | ||||||||||||||||||||||
|
Other derivative contracts
|
36 | (1 | ) | — | — | — | — | 35 | (1 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total freestanding derivatives [4]
|
(189 | ) | 27 | — | — | (290 | ) | (11 | ) | (463 | ) | 27 | ||||||||||||||||||||
|
Separate accounts [5]
|
962 | 18 | — | 77 | 6 | (108 | ) | 955 | 3 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||||||||||||||||||
|
Institutional notes
|
$ | (2 | ) | $ | (5 | ) | $ | — | $ | — | $ | — | $ | — | $ | (7 | ) | $ | (5 | ) | ||||||||||||
|
Equity linked notes
|
(10 | ) | 1 | — | — | — | — | (9 | ) | 1 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total other policyholder funds and benefits
payable
|
(12 | ) | (4 | ) | — | — | — | — | (16 | ) | (4 | ) | ||||||||||||||||||||
|
Other liabilities
|
— | — | — | — | (22 | ) | — | (22 | ) | — | ||||||||||||||||||||||
|
Consumer notes
|
(5 | ) | — | — | — | — | — | (5 | ) | — | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains (losses) except for less than $1, which is reported in
benefits, losses and loss adjustment expenses. All amounts are
before income taxes and amortization of DAC.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are primarily attributable to
changes in the availability of market observable information and
re-evaluation of the observability of pricing inputs. Transfers
in also include the consolidation of additional VIEs due to the
adoption of new accounting guidance on January 1, 2010, as well as
the election of fair value option for one of these VIEs.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis
for asset/(liability) positions and reported in the Condensed
Consolidated Balance Sheet in other investments and other
liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for separate
account liabilities, which results in a net zero impact on net
income for the Company.
|
24
| Changes in unrealized | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | gains (losses) included in | ||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | net income related to | |||||||||||||||||||||||
| January 1, | Net | and | and/or (out) | March 31, | financial instruments still | |||||||||||||||||||||||
| Asset (Liability) | 2009 | income [1] | OCI [2] | settlements | of Level 3 [3] | 2009 | held at March 31, 2009 [1] | |||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||
|
Fixed maturities, AFS
|
||||||||||||||||||||||||||||
|
ABS
|
$ | 536 | $ | (2 | ) | $ | (39 | ) | $ | 30 | $ | 19 | $ | 544 | $ | (2 | ) | |||||||||||
|
CDO
|
2,612 | (22 | ) | (148 | ) | (20 | ) | — | 2,422 | (23 | ) | |||||||||||||||||
|
CMBS
|
341 | (13 | ) | (19 | ) | (4 | ) | (117 | ) | 188 | — | |||||||||||||||||
|
Corporate
|
6,396 | (66 | ) | (20 | ) | 234 | 53 | 6,597 | (30 | ) | ||||||||||||||||||
|
Foreign govt./govt. agencies
|
100 | — | (6 | ) | (9 | ) | (20 | ) | 65 | — | ||||||||||||||||||
|
Municipal
|
163 | — | (7 | ) | — | 24 | 180 | — | ||||||||||||||||||||
|
RMBS
|
1,662 | (118 | ) | (210 | ) | (56 | ) | — | 1,278 | (38 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total fixed maturities, AFS
|
11,810 | (221 | ) | (449 | ) | 175 | (41 | ) | 11,274 | (93 | ) | |||||||||||||||||
|
Equity securities, AFS
|
541 | (1 | ) | (75 | ) | (4 | ) | 49 | 510 | (1 | ) | |||||||||||||||||
|
Freestanding derivatives [4]
|
(281 | ) | (90 | ) | (5 | ) | (1 | ) | (3 | ) | (380 | ) | (82 | ) | ||||||||||||||
|
Separate accounts [5]
|
786 | (123 | ) | — | 87 | (111 | ) | 639 | (85 | ) | ||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||||||||||||||
|
Institutional notes
|
$ | (41 | ) | $ | 16 | $ | — | $ | — | $ | — | $ | (25 | ) | $ | 16 | ||||||||||||
|
Equity linked notes
|
(8 | ) | 3 | — | — | — | (5 | ) | 3 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total other policyholder funds and benefits payable
|
(49 | ) | 19 | — | — | — | (30 | ) | 19 | |||||||||||||||||||
|
Other derivative liabilities [6]
|
(163 | ) | 70 | — | 93 | — | — | — | ||||||||||||||||||||
|
Consumer notes
|
(5 | ) | 1 | — | — | — | (4 | ) | 1 | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
| [1] |
All amounts in these columns are reported in net realized capital
gains (losses) except for $1, which is reported in benefits,
losses and loss adjustment expenses. All amounts are before
income taxes and amortization of DAC.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
Transfers in and/or (out) of Level 3 are attributable to a change
in the availability of market observable information and
re-evaluation of the observability of pricing inputs.
|
|
| [4] |
Derivative instruments are reported in this table on a net basis
for asset/(liability) positions and reported in the Condensed
Consolidated Balance Sheet in other investments and other
liabilities.
|
|
| [5] |
The realized/unrealized gains (losses) included in net income for
separate account assets are offset by an equal amount for
separate account liabilities, which results in a net zero impact
on net income for the Company.
|
|
| [6] |
On March 26, 2009, certain of the Allianz warrants were
reclassified to equity, at their current fair value, as
shareholder approval of the conversion of these warrants to
common shares was received. See Note 21 of the Notes to
Consolidated Financial Statements included in The Hartford’s 2009
Form 10-K Annual Report for further discussion.
|
25
| Three Months Ended | ||||
| March 31, 2010 | ||||
|
Assets
|
||||
|
Fixed maturities
|
$ | 1 | ||
|
Other liabilities
|
||||
|
Credit-linked notes
|
(11 | ) | ||
|
|
||||
|
Total realized capital gains (losses)
|
$ | (10 | ) | |
|
|
||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Fair | Carrying | Fair | |||||||||||||
| Amount | Value | Amount | Value | |||||||||||||
|
Assets
|
||||||||||||||||
|
Policy loans
|
$ | 2,177 | $ | 2,309 | $ | 2,174 | $ | 2,321 | ||||||||
|
Mortgage loans
|
5,162 | 4,733 | 5,938 | 5,091 | ||||||||||||
|
Liabilities
|
||||||||||||||||
|
Other policyholder funds and benefits payable [1]
|
$ | 12,159 | $ | 12,340 | $ | 12,330 | $ | 12,513 | ||||||||
|
Senior notes [2]
|
5,152 | 5,272 | 4,054 | 4,037 | ||||||||||||
|
Junior subordinated debentures [2]
|
1,720 | 2,450 | 1,717 | 2,338 | ||||||||||||
|
Consumer notes [3]
|
827 | 852 | 1,131 | 1,194 | ||||||||||||
| [1] |
Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including
corporate owned life insurance.
|
|
| [2] |
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included
in short-term debt.
|
|
| [3] |
Excludes amounts carried at fair value and included in disclosures above.
|
| • |
Fair value for policy loans and consumer notes were estimated using discounted cash flow
calculations using current interest rates.
|
| • |
Fair values for mortgage loans were estimated using discounted cash flow calculations based
on current lending rates for similar type loans. Current lending rates reflect changes in
credit spreads and the remaining terms of the loans.
|
| • |
Other policyholder funds and benefits payable, not carried at fair value, is determined by
estimating future cash flows, discounted at the current market rate.
|
| • |
Fair value for long-term debt is based primarily on market quotations from independent
third-party pricing services.
|
26
| March 31, 2010 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Variable annuity hedging derivatives
|
$ | 270 | $ | — | $ | — | $ | 270 | ||||||||
|
Macro hedge program
|
139 | 4 | 30 | 105 | ||||||||||||
|
Reinsurance recoverable for U.S. GMWB
|
295 | — | — | 295 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 704 | $ | 4 | $ | 30 | $ | 670 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
U.S. guaranteed withdrawal benefits
|
$ | (1,655 | ) | $ | — | $ | — | $ | (1,655 | ) | ||||||
|
International guaranteed withdrawal benefits
|
(31 | ) | — | — | (31 | ) | ||||||||||
|
International other guaranteed living benefits
|
4 | — | — | 4 | ||||||||||||
|
Variable annuity hedging derivatives
|
(125 | ) | — | (166 | ) | 41 | ||||||||||
|
Macro hedge program
|
66 | — | 20 | 46 | ||||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a recurring
basis
|
$ | (1,741 | ) | $ | — | $ | (146 | ) | $ | (1,595 | ) | |||||
|
|
||||||||||||||||
| December 31, 2009 | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | Significant | ||||||||||||||
| Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Variable annuity hedging derivatives
|
$ | 9 | $ | — | $ | — | $ | 9 | ||||||||
|
Macro hedge program
|
203 | 8 | 16 | 179 | ||||||||||||
|
Reinsurance recoverable for U.S. GMWB
|
347 | — | — | 347 | ||||||||||||
|
|
||||||||||||||||
|
Total assets accounted for at fair value on a recurring basis
|
$ | 559 | $ | 8 | $ | 16 | $ | 535 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Liabilities accounted for at fair value on a recurring basis
|
||||||||||||||||
|
Other policyholder funds and benefits payable
|
||||||||||||||||
|
U.S. guaranteed withdrawal benefits
|
$ | (1,957 | ) | $ | — | $ | — | $ | (1,957 | ) | ||||||
|
International guaranteed withdrawal benefits
|
(45 | ) | — | — | (45 | ) | ||||||||||
|
International other guaranteed living benefits
|
2 | — | — | 2 | ||||||||||||
|
Variable annuity hedging derivatives
|
43 | — | (184 | ) | 227 | |||||||||||
|
Macro hedge program
|
115 | (2 | ) | 6 | 111 | |||||||||||
|
|
||||||||||||||||
|
Total liabilities accounted for at fair value on a
basis recurring
|
$ | (1,842 | ) | $ | (2 | ) | $ | (178 | ) | $ | (1,662 | ) | ||||
|
|
||||||||||||||||
27
| • |
The relative outperformance of the underlying actively managed funds as compared to their
respective indices resulting in pre-tax realized gains of approximately $27 and $152 for the
three months ended March 31, 2010 and 2009, respectively;
|
| • |
Assumption updates, including policyholder behavior assumptions, affected best estimates
and margins for total pre-tax realized gains of approximately $0 and $314 for the three months
ended March 31, 2010 and 2009, respectively; and
|
| • |
Updates to the credit
standing adjustment assumption net of reinsurance, resulting in
pre-tax realized gains of approximately $7 and $222 for the three months ended March 31, 2010 and 2009,
respectively.
|
28
| Changes in unrealized | ||||||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | gains (losses) included in | ||||||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers | Transfers | as of | net income related to | ||||||||||||||||||||||||||
| January 1, | Net income | and | in to | out of | March 31, | financial instruments still | ||||||||||||||||||||||||||
| Asset (liability) | 2010 | [1][2][6] | OCI [2] | settlements [3] | Level 3 | Level 3 | 2010 | held at March 31, 2010 [1] | ||||||||||||||||||||||||
|
Variable annuity hedging
derivatives [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | (184 | ) | $ | (744 | ) | $ | — | $ | 762 | $ | — | $ | — | $ | (166 | ) | $ | [4] | |||||||||||||
|
Level 3
|
236 | 581 | — | (506 | ) | — | — | 311 | (115 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total variable annuity
hedging derivatives
|
52 | (163 | ) | — | 256 | — | — | 145 | ||||||||||||||||||||||||
|
Reinsurance recoverable
for GMWB
|
347 | (61 | ) | — | 9 | — | — | 295 | (61 | ) | ||||||||||||||||||||||
|
U.S. guaranteed
withdrawal benefits
— Level 3
|
(1,957 | ) | 338 | — | (36 | ) | — | — | (1,655 | ) | 338 | |||||||||||||||||||||
|
International
guaranteed withdrawal
benefits — Level 3
|
(45 | ) | 15 | 1 | (2 | ) | — | — | (31 | ) | 15 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Guaranteed
withdrawal benefits net
of reinsurance and
hedging derivatives
|
(1,603 | ) | 129 | 1 | 227 | — | — | (1,246 | ) | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||||||
|
Levels 1 and 2
|
28 | (25 | ) | — | 51 | — | — | 54 | [4] | |||||||||||||||||||||||
|
Level 3
|
290 | (139 | ) | — | — | — | — | 151 | (139 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total macro hedge program
|
318 | (164 | ) | — | 51 | — | — | 205 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
International other
guaranteed living
benefits — Level 3
|
2 | 3 | — | (1 | ) | — | — | 4 | 3 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
29
| Changes in unrealized | ||||||||||||||||||||||||||||
| Fair value | Total realized/unrealized | Purchases, | Fair value | gains (losses) included in | ||||||||||||||||||||||||
| as of | gains (losses) included in: | issuances, | Transfers in | as of | net income related to | |||||||||||||||||||||||
| January 1, | Net income | and | and/or (out) | March 31, | financial instruments still | |||||||||||||||||||||||
| Asset (liability) | 2009 | [1] [2] [6] | OCI [2] | settlements [3] | of Level 3 | 2009 | held at March 31, 2009 [1] | |||||||||||||||||||||
|
Variable annuity hedging derivatives [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
$ | 27 | $ | (11 | ) | $ | — | $ | (73 | ) | $ | — | $ | (57 | ) | $ | [4] | |||||||||||
|
Level 3
|
2,637 | 129 | — | (387 | ) | — | 2,379 | 112 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total variable annuity hedging
derivatives
|
2,664 | 118 | — | (460 | ) | — | 2,322 | |||||||||||||||||||||
|
Reinsurance recoverable for GMWB
|
1,302 | (252 | ) | — | 8 | — | 1,058 | (252 | ) | |||||||||||||||||||
|
U.S. guaranteed withdrawal benefits
— Level 3
|
(6,526 | ) | 728 | — | (31 | ) | — | (5,829 | ) | 728 | ||||||||||||||||||
|
International guaranteed withdrawal
benefits — Level 3
|
(94 | ) | (5 | ) | 4 | (3 | ) | — | (98 | ) | (5 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total Guaranteed withdrawal benefits
net of reinsurance and hedging
derivatives
|
(2,654 | ) | 589 | 4 | (486 | ) | — | (2,547 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Macro hedge program [5]
|
||||||||||||||||||||||||||||
|
Levels 1 and 2
|
— | 225 | — | (201 | ) | — | 24 | [4] | ||||||||||||||||||||
|
Level 3
|
137 | (21 | ) | — | 57 | — | 173 | (21 | ) | |||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Total macro hedge program
|
137 | 204 | — | (144 | ) | — | 197 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
International other guaranteed living
benefits — Level 3
|
— | (2 | ) | — | (1 | ) | — | (3 | ) | (2 | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||||||
| [1] |
The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as
unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract
basis the realized gains (losses) for these derivatives and embedded derivatives.
|
|
| [2] |
All amounts are before income taxes and amortization of DAC.
|
|
| [3] |
The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified
as Level 1 and interest rate, currency and credit default swaps classified as Level 2.
|
|
| [4] |
Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.
|
|
| [5] |
The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for
asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.
|
|
| [6] |
Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
|
30
31
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (Before-tax) | 2010 | 2009 | ||||||
|
Gross gains on sales
|
$ | 132 | $ | 208 | ||||
|
Gross losses on sales
|
(111 | ) | (720 | ) | ||||
|
Net OTTI losses recognized in earnings
|
(152 | ) | (224 | ) | ||||
|
Japanese fixed annuity contract hedges, net [1]
|
(16 | ) | 41 | |||||
|
Periodic net coupon settlements on credit derivatives/Japan
|
(7 | ) | (19 | ) | ||||
|
Results of variable annuity hedge program
|
||||||||
|
GMWB derivatives, net
|
129 | 589 | ||||||
|
Macro hedge program
|
(164 | ) | 204 | |||||
|
|
||||||||
|
Total results of variable annuity hedge program
|
(35 | ) | 793 | |||||
|
Other, net [2]
|
(87 | ) | 5 | |||||
|
|
||||||||
|
Net realized capital gains (losses)
|
$ | (276 | ) | $ | 84 | |||
|
|
||||||||
| [1] |
Relates to derivative hedging instruments, excluding periodic net
coupon settlements, and is net of the Japanese fixed annuity product
liability adjustment for changes in the dollar/yen exchange spot rate.
|
|
| [2] |
Primarily consists of valuation allowances on mortgage loans of $112
in 2010, losses on Japan 3Win related foreign currency swaps, changes
in fair value on non-qualifying derivatives, and other investment
gains and losses.
|
| Credit Impairment | ||||
|
Balance as of January 1, 2010
|
$ | (2,200 | ) | |
|
Additions for credit impairments recognized on [1]:
|
||||
|
Securities not previously impaired
|
(112 | ) | ||
|
Securities previously impaired
|
(39 | ) | ||
|
Reductions for credit impairments previously recognized on:
|
||||
|
Securities that matured or were sold during the period
|
3 | |||
|
Securities that the Company intends to sell or more likely than not will be required to sell before recovery
|
— | |||
|
Securities due to an increase in expected cash flows
|
7 | |||
|
|
||||
|
Balance as of March 31, 2010
|
$ | (2,341 | ) | |
|
|
||||
| [1] |
These additions are included in the net OTTI losses recognized in earnings of $152 in the
Condensed Consolidated Statements of Operations, along with impairments on equity securities.
|
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||||||||||
| Cost or | Gross | Gross | Non- | Cost or | Gross | Gross | Non- | |||||||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Credit | Amortized | Unrealized | Unrealized | Fair | Credit | |||||||||||||||||||||||||||||||
| Cost | Gains | Losses | Value | OTTI [1] | Cost | Gains | Losses | Value | OTTI [1] | |||||||||||||||||||||||||||||||
|
ABS
|
$ | 3,320 | $ | 49 | $ | (484 | ) | $ | 2,885 | $ | (40 | ) | $ | 3,040 | $ | 36 | $ | (553 | ) | $ | 2,523 | $ | (48 | ) | ||||||||||||||||
|
CDOs
|
3,732 | 45 | (987 | ) | 2,790 | (186 | ) | 4,054 | 27 | (1,189 | ) | 2,892 | (174 | ) | ||||||||||||||||||||||||||
|
CMBS
|
10,309 | 191 | (1,784 | ) | 8,716 | 3 | 10,736 | 114 | (2,306 | ) | 8,544 | (6 | ) | |||||||||||||||||||||||||||
|
Corporate
|
38,005 | 1,606 | (1,018 | ) | 38,593 | (14 | ) | 35,318 | 1,368 | (1,443 | ) | 35,243 | (23 | ) | ||||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
1,449 | 57 | (23 | ) | 1,483 | 1 | 1,376 | 52 | (20 | ) | 1,408 | — | ||||||||||||||||||||||||||||
|
Municipal
|
12,364 | 304 | (319 | ) | 12,349 | — | 12,125 | 318 | (378 | ) | 12,065 | (3 | ) | |||||||||||||||||||||||||||
|
RMBS
|
4,947 | 111 | (669 | ) | 4,389 | (137 | ) | 5,512 | 104 | (769 | ) | 4,847 | (185 | ) | ||||||||||||||||||||||||||
|
U.S. Treasuries
|
4,581 | 16 | (218 | ) | 4,379 | — | 3,854 | 14 | (237 | ) | 3,631 | — | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total fixed maturities
|
78,707 | 2,379 | (5,502 | ) | 75,584 | (373 | ) | 76,015 | 2,033 | (6,895 | ) | 71,153 | (439 | ) | ||||||||||||||||||||||||||
|
Equity securities
|
1,197 | 100 | (144 | ) | 1,153 | — | 1,333 | 80 | (192 | ) | 1,221 | — | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total AFS securities
|
$ | 79,904 | $ | 2,479 | $ | (5,646 | ) | $ | 76,737 | $ | (373 | ) | $ | 77,348 | $ | 2,113 | $ | (7,087 | ) | $ | 72,374 | $ | (439 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities
that also had credit impairments. These losses are included in gross unrealized losses as of
March 31, 2010 and December 31, 2009.
|
32
| March 31, 2010 | ||||||||
| Contractual Maturity | Amortized Cost | Fair Value | ||||||
|
One year or less
|
$ | 1,601 | $ | 1,628 | ||||
|
Over one year through five years
|
16,216 | 16,731 | ||||||
|
Over five years through ten years
|
14,375 | 14,732 | ||||||
|
Over ten years
|
24,207 | 23,713 | ||||||
|
|
||||||||
|
Subtotal
|
56,399 | 56,804 | ||||||
|
Mortgage-backed and asset-backed securities
|
22,308 | 18,780 | ||||||
|
|
||||||||
|
Total
|
$ | 78,707 | $ | 75,584 | ||||
|
|
||||||||
| March 31, 2010 | ||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||
| Cost or | Cost or | Cost or | ||||||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | ||||||||||||||||||||||||||||
| Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses | ||||||||||||||||||||||||||||
|
ABS
|
$ | 469 | $ | 424 | $ | (45 | ) | $ | 1,518 | $ | 1,079 | $ | (439 | ) | $ | 1,987 | $ | 1,503 | $ | (484 | ) | |||||||||||||||
|
CDOs
|
850 | 737 | (113 | ) | 2,839 | 1,965 | (874 | ) | 3,689 | 2,702 | (987 | ) | ||||||||||||||||||||||||
|
CMBS
|
1,088 | 972 | (116 | ) | 5,783 | 4,115 | (1,668 | ) | 6,871 | 5,087 | (1,784 | ) | ||||||||||||||||||||||||
|
Corporate
|
5,854 | 5,587 | (267 | ) | 6,087 | 5,336 | (751 | ) | 11,941 | 10,923 | (1,018 | ) | ||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
534 | 520 | (14 | ) | 59 | 50 | (9 | ) | 593 | 570 | (23 | ) | ||||||||||||||||||||||||
|
Municipal
|
2,679 | 2,631 | (48 | ) | 2,137 | 1,866 | (271 | ) | 4,816 | 4,497 | (319 | ) | ||||||||||||||||||||||||
|
RMBS
|
619 | 575 | (44 | ) | 1,887 | 1,262 | (625 | ) | 2,506 | 1,837 | (669 | ) | ||||||||||||||||||||||||
|
U.S. Treasuries
|
1,724 | 1,689 | (35 | ) | 676 | 493 | (183 | ) | 2,400 | 2,182 | (218 | ) | ||||||||||||||||||||||||
|
Total fixed maturities
|
13,817 | 13,135 | (682 | ) | 20,986 | 16,166 | (4,820 | ) | 34,803 | 29,301 | (5,502 | ) | ||||||||||||||||||||||||
|
Equity securities
|
280 | 241 | (39 | ) | 628 | 523 | (105 | ) | 908 | 764 | (144 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total securities in an unrealized loss
|
$ | 14,097 | $ | 13,376 | $ | (721 | ) | $ | 21,614 | $ | 16,689 | $ | (4,925 | ) | $ | 35,711 | $ | 30,065 | $ | (5,646 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||||||||
| Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||||||||||||||
| Cost or | Cost or | Cost or | ||||||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | ||||||||||||||||||||||||||||
| Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses | ||||||||||||||||||||||||||||
|
ABS
|
$ | 445 | $ | 376 | $ | (69 | ) | $ | 1,574 | $ | 1,090 | $ | (484 | ) | $ | 2,019 | $ | 1,466 | $ | (553 | ) | |||||||||||||||
|
CDOs
|
1,649 | 1,418 | (231 | ) | 2,388 | 1,430 | (958 | ) | 4,037 | 2,848 | (1,189 | ) | ||||||||||||||||||||||||
|
CMBS
|
1,951 | 1,628 | (323 | ) | 6,330 | 4,347 | (1,983 | ) | 8,281 | 5,975 | (2,306 | ) | ||||||||||||||||||||||||
|
Corporate
|
5,715 | 5,314 | (401 | ) | 6,675 | 5,633 | (1,042 | ) | 12,390 | 10,947 | (1,443 | ) | ||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
543 | 530 | (13 | ) | 43 | 36 | (7 | ) | 586 | 566 | (20 | ) | ||||||||||||||||||||||||
|
Municipal
|
2,339 | 2,283 | (56 | ) | 2,184 | 1,862 | (322 | ) | 4,523 | 4,145 | (378 | ) | ||||||||||||||||||||||||
|
RMBS
|
855 | 787 | (68 | ) | 1,927 | 1,226 | (701 | ) | 2,782 | 2,013 | (769 | ) | ||||||||||||||||||||||||
|
U.S. Treasuries
|
2,592 | 2,538 | (54 | ) | 648 | 465 | (183 | ) | 3,240 | 3,003 | (237 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total fixed maturities
|
16,089 | 14,874 | (1,215 | ) | 21,769 | 16,089 | (5,680 | ) | 37,858 | 30,963 | (6,895 | ) | ||||||||||||||||||||||||
|
Equity securities
|
419 | 356 | (63 | ) | 676 | 547 | (129 | ) | 1,095 | 903 | (192 | ) | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Total securities in an unrealized loss
|
$ | 16,508 | $ | 15,230 | $ | (1,278 | ) | $ | 22,445 | $ | 16,636 | $ | (5,809 | ) | $ | 38,953 | $ | 31,866 | $ | (7,087 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
33
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Amortized | Valuation | Carrying | Amortized | Valuation | Carrying | |||||||||||||||||||
| Cost [1] | Allowance | Value | Cost [1] | Allowance | Value | |||||||||||||||||||
|
Agricultural
|
$ | 525 | $ | (24 | ) | $ | 501 | $ | 604 | $ | (8 | ) | $ | 596 | ||||||||||
|
Commercial
|
4,827 | (361 | ) | 4,466 | 5,492 | (358 | ) | 5,134 | ||||||||||||||||
|
Residential
|
195 | — | 195 | 208 | — | 208 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total mortgage loans
|
$ | 5,547 | $ | (385 | ) | $ | 5,162 | $ | 6,304 | $ | (366 | ) | $ | 5,938 | ||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Amortized cost represents carrying value prior to valuation allowances, if any.
|
| 2010 | 2009 | |||||||
|
Balance as of January 1
|
$ | (366 | ) | $ | (26 | ) | ||
|
Additions
|
(112 | ) | (74 | ) | ||||
|
Deductions from sales
|
93 | 1 | ||||||
|
|
||||||||
|
Balance as of March 31
|
$ | (385 | ) | $ | (99 | ) | ||
|
|
||||||||
| Mortgage Loans by Region | ||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Percent of | Carrying | Percent of | |||||||||||||
| Value | Total | Value | Total | |||||||||||||
|
East North Central
|
$ | 115 | 2.2 | % | $ | 125 | 2.1 | % | ||||||||
|
Middle Atlantic
|
588 | 11.4 | % | 689 | 11.6 | % | ||||||||||
|
Mountain
|
132 | 2.6 | % | 138 | 2.3 | % | ||||||||||
|
New England
|
414 | 8.0 | % | 449 | 7.6 | % | ||||||||||
|
Pacific
|
1,331 | 25.8 | % | 1,377 | 23.2 | % | ||||||||||
|
South Atlantic
|
1,174 | 22.7 | % | 1,213 | 20.4 | % | ||||||||||
|
West North Central
|
42 | 0.8 | % | 51 | 0.9 | % | ||||||||||
|
West South Central
|
246 | 4.8 | % | 297 | 5.0 | % | ||||||||||
|
Other [1]
|
1,120 | 21.7 | % | 1,599 | 26.9 | % | ||||||||||
|
|
||||||||||||||||
|
Total mortgage loans
|
$ | 5,162 | 100.0 | % | $ | 5,938 | 100.0 | % | ||||||||
|
|
||||||||||||||||
| [1] |
Primarily represents multi-regional properties.
|
| Mortgage Loans by Property Type | ||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||
| Carrying | Percent of | Carrying | Percent of | |||||||||||||
| Value | Total | Value | Total | |||||||||||||
|
Agricultural
|
$ | 501 | 9.7 | % | $ | 596 | 10.0 | % | ||||||||
|
Industrial
|
1,065 | 20.6 | % | 1,068 | 18.0 | % | ||||||||||
|
Lodging
|
346 | 6.7 | % | 421 | 7.1 | % | ||||||||||
|
Multifamily
|
814 | 15.8 | % | 835 | 14.1 | % | ||||||||||
|
Office
|
1,215 | 23.5 | % | 1,727 | 29.1 | % | ||||||||||
|
Residential
|
195 | 3.8 | % | 208 | 3.5 | % | ||||||||||
|
Retail
|
656 | 12.7 | % | 712 | 12.0 | % | ||||||||||
|
Other
|
370 | 7.2 | % | 371 | 6.2 | % | ||||||||||
|
|
||||||||||||||||
|
Total mortgage loans
|
$ | 5,162 | 100.0 | % | $ | 5,938 | 100.0 | % | ||||||||
|
|
||||||||||||||||
34
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Maximum | Maximum | |||||||||||||||||||||||
| Total | Total | Exposure | Total | Total | Exposure | |||||||||||||||||||
| Assets | Liabilities [1] | to Loss [2] | Assets | Liabilities | to Loss [2] | |||||||||||||||||||
|
CDOs [3]
|
$ | 875 | $ | 413 | $ | 438 | $ | 226 | $ | 32 | $ | 196 | ||||||||||||
|
Limited partnerships
|
27 | 1 | 26 | 31 | 1 | 30 | ||||||||||||||||||
|
Other investments [3]
|
78 | 9 | 60 | 111 | 20 | 87 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 980 | $ | 423 | $ | 524 | $ | 368 | $ | 53 | $ | 313 | ||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.
|
|
| [2] |
The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net
investment income or as a realized capital loss and is the cost basis of the Company’s investment.
|
|
| [3] |
Total assets included in fixed maturities in the Company’s Condensed Consolidated Balance Sheets.
|
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Maximum | Maximum | |||||||||||||||||||||||
| Exposure | Exposure | |||||||||||||||||||||||
| Assets | Liabilities | to Loss | Assets | Liabilities | to Loss | |||||||||||||||||||
|
CDOs [1]
|
$ | — | $ | — | $ | — | $ | 262 | $ | — | $ | 273 | ||||||||||||
|
Other [2]
|
35 | 34 | 4 | 36 | 36 | 5 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 35 | $ | 34 | $ | 4 | $ | 298 | $ | 36 | $ | 278 | ||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Maximum exposure to loss represents the Company’s investment in securities issued by CDOs at cost.
|
|
| [2] |
Maximum exposure to loss represents issuance costs that were incurred to establish a contingent capital facility.
|
35
36
37
| Notional Amount | Fair Value | |||||||||||||||
| March 31, | December 31, | March 31, | December 31, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Customized swaps
|
$ | 10,751 | $ | 10,838 | $ | 174 | $ | 234 | ||||||||
|
Equity swaps, options, and futures
|
3,475 | 2,994 | 144 | 9 | ||||||||||||
|
Interest rate swaps and futures
|
2,381 | 1,735 | (173 | ) | (191 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 16,607 | $ | 15,567 | $ | 145 | $ | 52 | ||||||||
|
|
||||||||||||||||
| Notional Amount | Fair Value | |||||||||||||||
| March 31, | December 31, | March 31, | December 31, | |||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Equity options and futures
|
$ | 15,327 | $ | 25,373 | $ | 154 | $ | 296 | ||||||||
|
Long currency options
|
2,867 | 1,000 | 59 | 22 | ||||||||||||
|
Short currency options
|
3,480 | 1,075 | (8 | ) | — | |||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 21,674 | $ | 27,448 | $ | 205 | $ | 318 | ||||||||
|
|
||||||||||||||||
38
| Net Derivatives | Asset Derivatives | Liability Derivatives | ||||||||||||||||||||||||||||||
| Notional Amount | Fair Value | Fair Value | Fair Value | |||||||||||||||||||||||||||||
| Mar. 31, | Dec. 31, | Mar. 31, | Dec. 31, | Mar. 31, | Dec. 31, | Mar. 31, | Dec. 31, | |||||||||||||||||||||||||
| Hedge Designation/ Derivative Type | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||||||
|
Cash flow hedges
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps
|
$ | 10,956 | $ | 11,170 | $ | 174 | $ | 123 | $ | 294 | $ | 294 | $ | (120 | ) | $ | (171 | ) | ||||||||||||||
|
Forward rate agreements
|
— | 6,355 | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Foreign currency swaps
|
372 | 381 | 5 | (3 | ) | 30 | 30 | (25 | ) | (33 | ) | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total cash flow hedges
|
11,328 | 17,906 | 179 | 120 | 324 | 324 | (145 | ) | (204 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Fair value hedges
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps
|
1,621 | 1,745 | (25 | ) | (21 | ) | 13 | 16 | (38 | ) | (37 | ) | ||||||||||||||||||||
|
Foreign currency swaps
|
696 | 696 | (39 | ) | (9 | ) | 48 | 53 | (87 | ) | (62 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total fair value hedges
|
2,317 | 2,441 | (64 | ) | (30 | ) | 61 | 69 | (125 | ) | (99 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Non-qualifying strategies
|
||||||||||||||||||||||||||||||||
|
Interest rate contracts
|
||||||||||||||||||||||||||||||||
|
Interest rate swaps, caps, floors, and futures
|
8,105 | 8,355 | (84 | ) | (84 | ) | 279 | 250 | (363 | ) | (334 | ) | ||||||||||||||||||||
|
Foreign exchange contracts
|
||||||||||||||||||||||||||||||||
|
Foreign currency swaps and forwards
|
632 | 1,296 | (3 | ) | (21 | ) | 10 | 14 | (13 | ) | (35 | ) | ||||||||||||||||||||
|
Japan 3Win related foreign currency swaps
|
2,514 | 2,514 | (75 | ) | (19 | ) | 10 | 35 | (85 | ) | (54 | ) | ||||||||||||||||||||
|
Japanese fixed annuity hedging instruments
|
2,227 | 2,271 | 274 | 316 | 276 | 319 | (2 | ) | (3 | ) | ||||||||||||||||||||||
|
Credit contracts
|
||||||||||||||||||||||||||||||||
|
Credit derivatives that purchase credit protection
|
2,382 | 2,606 | (26 | ) | (50 | ) | 40 | 45 | (66 | ) | (95 | ) | ||||||||||||||||||||
|
Credit derivatives that assume credit risk [1]
|
1,459 | 1,158 | (497 | ) | (240 | ) | 2 | 2 | (499 | ) | (242 | ) | ||||||||||||||||||||
|
Credit derivatives in offsetting positions
|
6,392 | 6,176 | (80 | ) | (71 | ) | 174 | 185 | (254 | ) | (256 | ) | ||||||||||||||||||||
|
Equity contracts
|
||||||||||||||||||||||||||||||||
|
Equity index swaps, options, and futures
|
197 | 220 | (15 | ) | (16 | ) | 3 | 3 | (18 | ) | (19 | ) | ||||||||||||||||||||
|
Variable annuity hedge program
|
||||||||||||||||||||||||||||||||
|
GMWB product derivatives [2]
|
46,350 | 47,329 | (1,686 | ) | (2,002 | ) | — | — | (1,686 | ) | (2,002 | ) | ||||||||||||||||||||
|
GMWB reinsurance contracts
|
9,947 | 10,301 | 295 | 347 | 295 | 347 | — | — | ||||||||||||||||||||||||
|
GMWB hedging instruments
|
16,607 | 15,567 | 145 | 52 | 373 | 264 | (228 | ) | (212 | ) | ||||||||||||||||||||||
|
Macro hedge program
|
21,674 | 27,448 | 205 | 318 | 213 | 558 | (8 | ) | (240 | ) | ||||||||||||||||||||||
|
Other
|
||||||||||||||||||||||||||||||||
|
GMAB product derivatives [2]
|
221 | 226 | 4 | 2 | 4 | 2 | — | — | ||||||||||||||||||||||||
|
Contingent capital facility put option
|
500 | 500 | 35 | 36 | 35 | 36 | — | — | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total non-qualifying strategies
|
119,207 | 125,967 | (1,508 | ) | (1,432 | ) | 1,714 | 2,060 | (3,222 | ) | (3,492 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total cash flow hedges, fair value hedges, and
non-qualifying strategies
|
$ | 132,852 | $ | 146,314 | $ | (1,393 | ) | $ | (1,342 | ) | $ | 2,099 | $ | 2,453 | $ | (3,492 | ) | $ | (3,795 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance Sheet Location
|
||||||||||||||||||||||||||||||||
|
Fixed maturities, available-for-sale
|
$ | 242 | $ | 269 | $ | (1 | ) | $ | (8 | ) | $ | — | $ | — | $ | (1 | ) | $ | (8 | ) | ||||||||||||
|
Other investments
|
38,145 | 24,006 | 769 | 390 | 1,188 | 492 | (419 | ) | (102 | ) | ||||||||||||||||||||||
|
Other liabilities
|
37,847 | 64,061 | (760 | ) | (56 | ) | 612 | 1,612 | (1,372 | ) | (1,668 | ) | ||||||||||||||||||||
|
Consumer notes
|
41 | 64 | (5 | ) | (5 | ) | — | — | (5 | ) | (5 | ) | ||||||||||||||||||||
|
Reinsurance recoverables
|
9,947 | 10,301 | 295 | 347 | 295 | 347 | — | — | ||||||||||||||||||||||||
|
Other policyholder funds and benefits payable
|
46,630 | 47,613 | (1,691 | ) | (2,010 | ) | 4 | 2 | (1,695 | ) | (2,012 | ) | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total derivatives
|
$ | 132,852 | $ | 146,314 | $ | (1,393 | ) | $ | (1,342 | ) | $ | 2,099 | $ | 2,453 | $ | (3,492 | ) | $ | (3,795 | ) | ||||||||||||
|
|
||||||||||||||||||||||||||||||||
| [1] |
The derivative instruments related to these hedging strategies are held for other investment purposes.
|
|
| [2] |
These derivatives are embedded within liabilities and are not held for risk management purposes.
|
39
| • |
The Company terminated $6.4 billion notional of forward rate agreements. The $6.4 billion
notional was comprised of a series of one month forward contracts that were hedging the
variability of cash flows related to coupon payments on $555 of variable rate securities for
consecutive monthly periods during 2010.
|
| • |
The notional amount related to the macro hedge program declined $5.8 billion primarily due
to the expiration of certain equity index options during January of 2010.
|
| • |
The fair value related to credit derivatives that assume credit risk decreased as a result
of the Company adopting new accounting guidance related to the consolidation of VIEs, see
Adoption of New Accounting Standards in Note 1. As a result of this new guidance, the Company
has consolidated a Company sponsored CDO that included credit default swaps with a notional
amount of $353 and a fair value of ($283) as of March 31, 2010. These swaps reference a
standard market basket of corporate issuers.
|
| • |
The decrease in fair value of the macro hedge program is primarily due to higher equity
market valuation, lower implied market volatility, and time decay.
|
| • |
Offset by the net improvement in the fair value of GMWB related derivatives primarily due
to lower implied market volatility and the relative outperformance of the underlying actively
managed funds as compared to their respective indices, partially offset by trading costs given
actual volatility in equity markets.
|
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||||||
| Net Realized Capital Gains | ||||||||||||||||
| Gain (Loss) Recognized in | (Losses) Recognized in | |||||||||||||||
| OCI on Derivative | Income on Derivative | |||||||||||||||
| (Effective Portion) | (Ineffective Portion) | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Interest rate swaps
|
$ | 100 | $ | (85 | ) | $ | (1 | ) | $ | (1 | ) | |||||
|
Foreign currency swaps
|
9 | 15 | — | 14 | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 109 | $ | (70 | ) | $ | (1 | ) | $ | 13 | ||||||
|
|
||||||||||||||||
| Derivatives in Cash Flow Hedging Relationships For The Three Months Ended March 31, | ||||||||||||
| Gain or (Loss) Reclassified from AOCI into Income (Effective Portion) | ||||||||||||
| Location | 2010 | 2009 | ||||||||||
|
Interest rate swaps
|
Net realized capital gain/(loss) | $ | — | $ | (9 | ) | ||||||
|
Interest rate swaps
|
Net investment income | 12 | 9 | |||||||||
|
Foreign currency swaps
|
Net realized capital gain/(loss) | (5 | ) | (18 | ) | |||||||
|
Foreign currency swaps
|
Net investment income | — | 1 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 7 | $ | (17 | ) | |||||||
|
|
||||||||||||
40
| Derivatives in Fair-Value Hedging Relationships | ||||||||||||||||
| Gain or (Loss) Recognized in Income [1] | ||||||||||||||||
| Derivative | Hedge Item | |||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Interest rate swaps
|
||||||||||||||||
|
Net realized capital gain/(loss)
|
$ | (12 | ) | $ | 17 | $ | 10 | $ | (17 | ) | ||||||
|
Benefits, losses and loss adjustment expenses
|
5 | (16 | ) | (5 | ) | 17 | ||||||||||
|
Foreign currency swaps
|
||||||||||||||||
|
Net realized capital gain/(loss)
|
(29 | ) | (16 | ) | 29 | 16 | ||||||||||
|
Benefits, losses and loss adjustment expenses
|
(1 | ) | 5 | 1 | (5 | ) | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | (37 | ) | $ | (10 | ) | $ | 35 | $ | 11 | ||||||
|
|
||||||||||||||||
| [1] |
The amounts presented do not include the periodic net coupon settlements of the derivative or
the coupon income (expense) related to the hedged item. The net of the amounts presented
represents the ineffective portion of the hedge.
|
| Derivatives Used in Non-Qualifying Strategies | ||||||||
| Gain or (Loss) Recognized within Net Realized Capital Gains and Losses | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Interest rate contracts
|
||||||||
|
Interest rate swaps, caps, floors, and forwards
|
$ | — | $ | 15 | ||||
|
Foreign exchange contracts
|
||||||||
|
Foreign currency swaps and forwards
|
19 | (1 | ) | |||||
|
Japan 3Win related foreign currency swaps [1]
|
(56 | ) | (229 | ) | ||||
|
Japanese fixed annuity hedging instruments [2]
|
(19 | ) | (168 | ) | ||||
|
Credit contracts
|
||||||||
|
Credit derivatives that purchase credit protection
|
— | (111 | ) | |||||
|
Credit derivatives that assume credit risk
|
37 | (80 | ) | |||||
|
Equity contracts
|
||||||||
|
Equity index swaps, options, and futures
|
1 | (3 | ) | |||||
|
Warrants
|
— | 70 | ||||||
|
Variable annuity hedge program
|
||||||||
|
GMWB product derivatives
|
353 | 723 | ||||||
|
GMWB reinsurance contracts
|
(61 | ) | (252 | ) | ||||
|
GMWB hedging instruments
|
(163 | ) | 118 | |||||
|
Macro hedge program
|
(164 | ) | 204 | |||||
|
Other
|
||||||||
|
GMAB product derivatives
|
3 | (2 | ) | |||||
|
Contingent capital facility put option
|
(1 | ) | (4 | ) | ||||
|
|
||||||||
|
Total
|
$ | (51 | ) | $ | 280 | |||
|
|
||||||||
| [1] |
The associated liability is adjusted for changes in dollar/yen
exchange spot rates through realized capital gains and losses and was
$7 and $184 for the three months ended March 31, 2010 and 2009,
respectively.
|
|
| [2] |
The associated liability is adjusted for changes in dollar/yen
exchange spot rates through realized capital gains and losses and was
$7 and $205 for the three months ended March 31, 2010 and 2009,
respectively.
|
41
| • |
The net loss associated with the macro hedge program is primarily due to higher equity
market valuation, lower implied market volatility, and time decay.
|
| • |
The net loss related to the Japan 3Win hedging derivatives is primarily due to a decrease
in U.S. interest rates as well as the Japanese Yen weakening in comparison to the U.S. dollar.
|
| • |
The net gain on all GMWB related derivatives is primarily driven by lower implied market
volatility and the relative outperformance of the underlying actively managed funds as
compared to their respective indices, partially offset by trading costs given actual
volatility in equity markets.
|
| • |
The net gain related to credit derivatives that assume credit risk is primarily a result of
corporate credit spreads tightening.
|
| • |
The net gain associated with all GMWB related derivatives was primarily driven by liability
model assumption updates for withdrawals, lapses, and credit standing. For further discussion
liability model assumption updates, refer to Note 4a.
|
| • |
The net gain on the macro hedge program was primarily the result of a decline in the equity
markets.
|
| • |
The gain on warrants associated with the Allianz transaction was primarily due to a
decrease in the Company’s stock price. See Note 21 of Notes to Consolidated Financial
Statements in The Hartford’s 2009 Form 10-K Annual Report for a discussion of Allianz SE’s
investment in The Hartford.
|
| • |
The losses on the Japanese fixed annuity hedging instruments and the Japan 3Win hedging
derivatives were primarily a result of the Japanese Yen weakening against the U.S. dollar.
|
| • |
The loss on credit derivatives that purchase credit protection was primarily due to
corporate credit spreads tightening while the loss on credit derivatives that assume credit
risk was driven by credit spreads widening on certain credit default basket swaps.
|
42
| As of March 31, 2010 | ||||||||||||||||||||||
| Underlying Referenced | ||||||||||||||||||||||
| Weighted | Credit Obligation(s) [1] | |||||||||||||||||||||
| Average | Average | Offsetting | ||||||||||||||||||||
| Credit Derivative type by derivative | Notional | Fair | Years to | Credit | Notional | Offsetting | ||||||||||||||||
| risk exposure | Amount [2] | Value | Maturity | Type | Rating | Amount [3] | Fair Value [3] | |||||||||||||||
|
Single name credit default swaps
|
||||||||||||||||||||||
|
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
$ | 1,360 | $ | (2 | ) | 4 years | Corporate Credit/ Foreign Gov. | AA- | $ | 1,335 | $ | (62 | ) | |||||||||
|
Below investment grade risk exposure
|
138 | (5 | ) | 3 years | Corporate Credit | B+ | 92 | (12 | ) | |||||||||||||
|
Basket credit default swaps [4]
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
1,344 | 22 | 4 years | Corporate Credit | BBB+ | 1,219 | (22 | ) | ||||||||||||||
|
Investment grade risk exposure
|
525 | (131 | ) | 7 years | CMBS Credit | A | 525 | 131 | ||||||||||||||
|
Below investment grade risk exposure
|
1,228 | (495 | ) | 5 years | Corporate Credit | BBB | 25 | — | ||||||||||||||
|
Credit linked notes
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
60 | 59 | 2 years | Corporate Credit | BBB | — | — | |||||||||||||||
|
|
||||||||||||||||||||||
|
Total
|
$ | 4,655 | $ | (552 | ) | $ | 3,196 | $ | 35 | |||||||||||||
|
|
||||||||||||||||||||||
| As of December 31, 2009 | ||||||||||||||||||||||
| Underlying Referenced | ||||||||||||||||||||||
| Weighted | Credit Obligation(s) [1] | |||||||||||||||||||||
| Average | Average | Offsetting | ||||||||||||||||||||
| Credit Derivative type by derivative | Notional | Fair | Years to | Credit | Notional | Offsetting | ||||||||||||||||
| risk exposure | Amount [2] | Value | Maturity | Type | Rating | Amount [3] | Fair Value [3] | |||||||||||||||
|
Single name credit default swaps
|
||||||||||||||||||||||
|
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
$ | 1,226 | $ | 4 | 4 years | Corporate Credit/ Foreign Gov. | AA- | $ | 1,201 | $ | (59 | ) | ||||||||||
|
Below investment grade risk exposure
|
156 | (4 | ) | 3 years | Corporate Credit | B+ | 85 | (12 | ) | |||||||||||||
|
Basket credit default swaps [4]
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
2,052 | (54 | ) | 4 years | Corporate Credit | BBB+ | 1,277 | (21 | ) | |||||||||||||
|
Investment grade risk exposure
|
525 | (141 | ) | 7 years | CMBS Credit | A | 525 | 141 | ||||||||||||||
|
Below investment grade risk exposure
|
200 | (157 | ) | 5 years | Corporate Credit | BBB+ | — | — | ||||||||||||||
|
Credit linked notes
|
||||||||||||||||||||||
|
Investment grade risk exposure
|
87 | 83 | 2 years | Corporate Credit | BBB+ | — | — | |||||||||||||||
|
|
||||||||||||||||||||||
|
Total
|
$ | 4,246 | $ | (269 | ) | $ | 3,088 | $ | 49 | |||||||||||||
|
|
||||||||||||||||||||||
| [1] |
The average credit ratings are based on availability and the midpoint
of the applicable ratings among Moody’s, S&P, and Fitch. If no rating
is available from a rating agency, then an internally developed rating
is used.
|
|
| [2] |
Notional amount is equal to the maximum potential future loss amount.
There is no specific collateral related to these contracts or recourse
provisions included in the contracts to offset losses.
|
|
| [3] |
The Company has entered into offsetting credit default swaps to
terminate certain existing credit default swaps, thereby offsetting
the future changes in value of, or losses paid related to, the
original swap.
|
|
| [4] |
Includes $2.4 billion and $2.5 billion as of March 31, 2010 and
December 31, 2009, respectively, of standard market indices of
diversified portfolios of corporate issuers referenced through credit
default swaps. These swaps are subsequently valued based upon the
observable standard market index. Also includes $678 and $325 as of
March 31, 2010 and December 31, 2009, respectively, of customized
diversified portfolios of corporate issuers referenced through credit
default swaps.
|
43
| 2010 | 2009 | |||||||
|
Balance, January 1
|
$ | 9,423 | $ | 11,988 | ||||
|
Deferred Costs
|
170 | 222 | ||||||
|
Amortization — DAC
|
(222 | ) | (392 | ) | ||||
|
Amortization — Unlock, pre-tax [1], [2]
|
79 | (1,344 | ) | |||||
|
Adjustments to unrealized gains and losses on securities available-for-sale and other [3]
|
(441 | ) | 513 | |||||
|
Effect of currency translation
|
(4 | ) | (159 | ) | ||||
|
|
||||||||
|
Balance, March 31
|
$ | 9,005 | $ | 10,828 | ||||
|
|
||||||||
| [1] |
The most significant contributor to the Unlock benefit recorded during the first quarter of 2010 was actual separate
account returns from January 1, 2010 to March 31, 2010 being above our aggregated estimated return.
|
|
| [2] |
The most significant contributor to the Unlock amounts recorded during the first quarter of 2009 was actual separate
account returns from the period ending October 1, 2008 to March 31, 2009 being significantly below our aggregated estimated
return.
|
|
| [3] |
The adjustment reflects the effect of credit spreads tightening, resulting in unrealized gains on securities in 2010.
|
| 2010 | 2009 | |||||||
|
Balance, January 1
|
$ | 1,263 | $ | 1,260 | ||||
|
Deferred costs
|
510 | 512 | ||||||
|
Amortization — Deferred policy acquisition costs
|
(508 | ) | (523 | ) | ||||
|
|
||||||||
|
Balance, March 31
|
$ | 1,265 | $ | 1,249 | ||||
|
|
||||||||
| UL Secondary | |||||||||||||||
| U.S. GMDB [1] | Japan GMDB/GMIB [1] | Guarantees [1] | |||||||||||||
|
Liability balance as of January 1, 2010
|
$ | 1,233 | $ | 580 | $ | 76 | |||||||||
|
Incurred
|
63 | 28 | 9 | ||||||||||||
|
Paid
|
(78 | ) | (29 | ) | — | ||||||||||
|
Unlock
|
(58 | ) | (20 | ) | — | ||||||||||
|
Currency translation adjustment
|
— | (2 | ) | — | |||||||||||
|
|
|||||||||||||||
|
Liability balance as of March 31, 2010
|
$ | 1,160 | $ | 557 | $ | 85 | |||||||||
|
|
|||||||||||||||
| [1] |
The reinsurance recoverable asset related to the U.S. GMDB was $748 as of March 31, 2010.
The reinsurance recoverable asset related to the Japan GMDB was $33 as of March 31, 2010.
The reinsurance recoverable asset related to the UL secondary guarantees was $24 as of March
31, 2010.
|
| UL Secondary | ||||||||||||
| U.S. GMDB [1] | Japan GMDB/GMIB [1] | Guarantees [1] | ||||||||||
|
Liability balance as of January 1, 2009
|
$ | 870 | $ | 229 | $ | 40 | ||||||
|
Incurred
|
108 | 29 | 7 | |||||||||
|
Paid
|
(161 | ) | (41 | ) | — | |||||||
|
Unlock
|
1,051 | 534 | — | |||||||||
|
Currency translation adjustment
|
— | (23 | ) | — | ||||||||
|
|
||||||||||||
|
Liability balance as of March 31, 2009
|
$ | 1,868 | $ | 728 | $ | 47 | ||||||
|
|
||||||||||||
| [1] |
The reinsurance recoverable asset related to the U.S. GMDB was $1,116 as of March 31, 2009.
The reinsurance recoverable asset related to the Japan GMDB was $49 as of March 31, 2009.
The reinsurance recoverable asset related to the UL secondary guarantees was $17 as of March
31, 2009.
|
44
| Breakdown of Individual Variable and Group Annuity Account Value by GMDB/GMIB Type | ||||||||||||||||
| Retained Net | Weighted Average | |||||||||||||||
| Account | Net Amount | Amount | Attained Age of | |||||||||||||
| Maximum anniversary value (“MAV”) [1] | Value | at Risk [10] | at Risk [10] | Annuitant | ||||||||||||
|
MAV only
|
$ | 27,277 | $ | 7,358 | $ | 2,054 | 67 | |||||||||
|
With 5% rollup [2]
|
1,857 | 595 | 223 | 67 | ||||||||||||
|
With Earnings Protection Benefit Rider (EPB) [3]
|
6,640 | 1,210 | 123 | 64 | ||||||||||||
|
With 5% rollup & EPB
|
780 | 197 | 40 | 66 | ||||||||||||
|
|
||||||||||||||||
|
Total MAV
|
36,554 | 9,360 | 2,440 | |||||||||||||
|
|
||||||||||||||||
|
Asset Protection Benefit (“APB”) [4]
|
28,770 | 4,571 | 2,932 | 64 | ||||||||||||
|
Lifetime Income Benefit (“LIB”) — Death Benefit [5]
|
1,343 | 169 | 169 | 62 | ||||||||||||
|
Reset [6] (5-7 years)
|
3,811 | 389 | 386 | 67 | ||||||||||||
|
Return of Premium (“ROP”) [7]/Other
|
22,216 | 1,156 | 1,120 | 64 | ||||||||||||
|
|
||||||||||||||||
|
Subtotal U.S. GMDB [8]
|
92,694 | 15,645 | 7,047 | 65 | ||||||||||||
|
Less: General Account Value Subject to U.S. GMDB
|
6,753 | |||||||||||||||
|
|
||||||||||||||||
|
Subtotal Separate Account Liabilities with U.S. GMDB
|
85,941 | |||||||||||||||
|
Separate Account Liabilities without U.S. GMDB
|
74,257 | |||||||||||||||
|
|
||||||||||||||||
|
Total Separate Account Liabilities
|
$ | 160,198 | ||||||||||||||
|
|
||||||||||||||||
|
Japan GMDB and GMIB [9]
|
$ | 30,379 | $ | 5,852 | $ | 4,856 | 68 | |||||||||
|
|
||||||||||||||||
| [1] |
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age 80 (adjusted
for withdrawals).
|
|
| [2] |
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated
at generally 5% simple interest up to the earlier of age 80 or 100% of adjusted premiums.
|
|
| [3] |
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The
contract’s growth is AV less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.
|
|
| [4] |
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus 25% times the greater of net premiums and MAV
(each adjusted for premiums in the past 12 months).
|
|
| [5] |
LIB GMDB is the greatest of current AV, net premiums paid, or for certain contracts a benefit amount that ratchets over
time, generally based on market performance.
|
|
| [6] |
Reset GMDB is the greatest of current AV, net premiums paid and the most recent five to seven year anniversary AV before
age 80 (adjusted for withdrawals).
|
|
| [7] |
ROP GMDB is the greater of current AV and net premiums paid.
|
|
| [8] |
AV includes the contract holder’s investment in the separate account and the general account.
|
|
| [9] |
GMDB includes a ROP and MAV (before age 80) paid in a single lump sum. GMIB is a guarantee to return initial investment,
adjusted for earnings liquidity, paid through a fixed annuity, after a minimum deferral period of 10, 15 or 20 years. The
guaranteed remaining balance (“GRB”) related to the Japan GMIB was $28.2 billion and $28.6 billion as of March 31, 2010
and December 31, 2009, respectively. The GRB related to the Japan GMAB and GMWB was $636 and $648 as of March 31, 2010 and
December 31, 2009, respectively. These liabilities are not included in the Separate Account as they are not legally
insulated from the general account liabilities of the insurance enterprise. As of March 31, 2010, 59% of the AV and 53% of
RNAR is reinsured to a Hartford affiliate.
|
|
| [10] |
NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR
and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
|
| Asset type | As of March 31, 2010 | As of December 31, 2009 | ||||||
|
Equity securities (including mutual funds)
|
$ | 77,000 | $ | 75,720 | ||||
|
Cash and cash equivalents
|
8,941 | 9,298 | ||||||
|
|
||||||||
|
Total
|
$ | 85,941 | $ | 85,018 | ||||
|
|
||||||||
45
| 2010 | 2009 | |||||||
|
Balance, January 1
|
$ | 438 | $ | 553 | ||||
|
Sales inducements deferred
|
8 | 15 | ||||||
|
Amortization
|
(8 | ) | (39 | ) | ||||
|
Amortization — Unlock
|
4 | (69 | ) | |||||
|
|
||||||||
|
Balance, March 31
|
$ | 442 | $ | 460 | ||||
|
|
||||||||
46
47
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Service cost
|
$ | 27 | $ | 26 | $ | 2 | $ | 1 | ||||||||
|
Interest cost
|
62 | 60 | 5 | 6 | ||||||||||||
|
Expected return on plan assets
|
(71 | ) | (69 | ) | (3 | ) | (3 | ) | ||||||||
|
Amortization of prior service credit
|
(2 | ) | (2 | ) | — | — | ||||||||||
|
Amortization of actuarial loss
|
26 | 18 | — | — | ||||||||||||
|
|
||||||||||||||||
|
Net periodic benefit cost
|
$ | 42 | $ | 33 | $ | 4 | $ | 4 | ||||||||
|
|
||||||||||||||||
48
49
| Description | Page | |||
|
|
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|
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| 115 | ||||
50
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Earned premiums
|
$ | 3,527 | $ | 3,829 | (8 | %) | ||||||
|
Fee income
|
1,189 | 1,167 | 2 | % | ||||||||
|
Net investment income (loss):
|
||||||||||||
|
Securities available-for-sale and other
|
1,060 | 920 | 15 | % | ||||||||
|
Equity securities, trading [1]
|
701 | (724 | ) | NM | ||||||||
|
|
||||||||||||
|
Total net investment income
|
1,761 | 196 | NM | |||||||||
|
|
||||||||||||
|
Net realized capital gains (losses):
|
||||||||||||
|
Total other-than-temporary impairment (“OTTI”) losses
|
(340 | ) | (224 | ) | (52 | %) | ||||||
|
OTTI losses recognized in other comprehensive income
|
188 | — | — | |||||||||
|
|
||||||||||||
|
Net OTTI losses recognized in earnings
|
(152 | ) | (224 | ) | 32 | % | ||||||
|
Net realized capital gains (losses), excluding net OTTI
losses recognized in earnings
|
(124 | ) | 308 | NM | ||||||||
|
|
||||||||||||
|
Total net realized capital gains (losses)
|
(276 | ) | 84 | NM | ||||||||
|
|
||||||||||||
|
Other revenues
|
118 | 118 | — | |||||||||
|
|
||||||||||||
|
Total revenues
|
6,319 | 5,394 | 17 | % | ||||||||
|
Benefits, losses and loss adjustment expenses
|
3,133 | 4,637 | (32 | %) | ||||||||
|
Benefits,
losses and loss adjustment expenses — returns
credited on International variable annuities [1]
|
701 | (724 | ) | NM | ||||||||
|
Amortization of deferred policy acquisition costs and
present value of future profits
|
651 | 2,259 | (71 | %) | ||||||||
|
Insurance operating costs and expenses
|
919 | 898 | 2 | % | ||||||||
|
Interest expense
|
120 | 120 | — | |||||||||
|
Goodwill impairment
|
— | 32 | (100 | %) | ||||||||
|
Other expenses
|
260 | 189 | 38 | % | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
5,784 | 7,411 | (22 | %) | ||||||||
|
Income (loss) before income taxes
|
535 | (2,017 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
216 | (808 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | NM | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Supplemental Operating Data
|
||||||||||||
|
Diluted loss per common share
|
$ | (0.42 | ) | $ | (3.77 | ) | 89 | % | ||||
|
Total revenues, excluding net
investment income (loss) on equity
securities, trading
|
5,618 | 6,118 | (8 | %) | ||||||||
|
DAC Unlock benefit (charge), after-tax
|
85 | (1,494 | ) | NM | ||||||||
|
|
||||||||||||
| March 31, | December 31, | |||||||
| Summary of Financial Condition | 2010 | 2009 | ||||||
|
Total assets
|
$ | 317,282 | $ | 307,717 | ||||
|
Total investments, excluding equity securities, trading
|
95,298 | 93,235 | ||||||
|
Total stockholders’ equity
|
17,840 | 17,865 | ||||||
| [1] |
Includes investment income and mark-to-market effects of equity securities, trading,
supporting the Global Annuity — International variable annuity business, which are
classified in net investment income with corresponding amounts credited to policyholders
within benefits, losses and loss adjustment expenses.
|
51
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Increase | ||||||||||||
| (Decrease) From | ||||||||||||
| Segment Results | 2010 | 2009 | 2009 to 2010 | |||||||||
|
Life
|
||||||||||||
|
Global Annuity — U.S.
|
$ | 153 | $ | (746 | ) | $ | 899 | |||||
|
Global Annuity — International
|
23 | (293 | ) | 316 | ||||||||
|
Retirement
|
20 | (86 | ) | 106 | ||||||||
|
Individual Life
|
16 | (18 | ) | 34 | ||||||||
|
Group Benefits
|
51 | 69 | (18 | ) | ||||||||
|
Institutional
|
(88 | ) | (174 | ) | 86 | |||||||
|
Other
|
11 | (10 | ) | 21 | ||||||||
|
|
||||||||||||
|
Total Life
|
186 | (1,258 | ) | 1,444 | ||||||||
|
Property & Casualty
|
||||||||||||
|
Ongoing Operations
|
||||||||||||
|
Underwriting results
|
||||||||||||
|
Personal Lines
|
54 | 75 | (21 | ) | ||||||||
|
Small Commercial
|
83 | 87 | (4 | ) | ||||||||
|
Middle Market
|
12 | 69 | (57 | ) | ||||||||
|
Specialty Commercial
|
52 | 23 | 29 | |||||||||
|
|
||||||||||||
|
Ongoing Operations underwriting results
|
201 | 254 | (53 | ) | ||||||||
|
Net servicing income [1]
|
7 | 8 | (1 | ) | ||||||||
|
Net investment income
|
268 | 185 | 83 | |||||||||
|
Net realized capital losses
|
(36 | ) | (289 | ) | 253 | |||||||
|
Other expenses
|
(54 | ) | (50 | ) | (4 | ) | ||||||
|
|
||||||||||||
|
Income (loss) before income taxes
|
386 | 108 | 278 | |||||||||
|
Income tax expense (benefit)
|
148 | (3 | ) | 151 | ||||||||
|
|
||||||||||||
|
Ongoing Operations
|
238 | 111 | 127 | |||||||||
|
Other Operations
|
19 | 1 | 18 | |||||||||
|
|
||||||||||||
|
Total Property & Casualty
|
257 | 112 | 145 | |||||||||
|
Corporate
|
(124 | ) | (63 | ) | (61 | ) | ||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 319 | $ | (1,209 | ) | $ | 1,528 | |||||
|
|
||||||||||||
| [1] |
Net of expenses related to service business.
|
52
53
54
55
56
57
58
| Three Months Ended March 31, 2010 | ||||||||||||||||||||||||
| Personal | Small | Middle | Specialty | Other | Total | |||||||||||||||||||
| Lines | Commercial | Market | Commercial | Operations | P&C | |||||||||||||||||||
|
Beginning liabilities for unpaid losses and
loss adjustment expenses-gross
|
$ | 2,070 | $ | 3,603 | $ | 4,442 | $ | 7,044 | $ | 4,492 | $ | 21,651 | ||||||||||||
|
Reinsurance and other recoverables
|
20 | 137 | 305 | 2,118 | 861 | 3,441 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Beginning liabilities for unpaid losses and
loss adjustment expenses-net
|
2,050 | 3,466 | 4,137 | 4,926 | 3,631 | 18,210 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Provision for unpaid losses and loss
adjustment expenses
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
666 | 366 | 331 | 197 | — | 1,560 | ||||||||||||||||||
|
Current accident year catastrophes
|
41 | 21 | 15 | 2 | — | 79 | ||||||||||||||||||
|
Prior accident years
|
(7 | ) | (18 | ) | (16 | ) | (49 | ) | 1 | (89 | ) | |||||||||||||
|
|
||||||||||||||||||||||||
|
Total provision for unpaid losses and loss
adjustment expenses
|
700 | 369 | 330 | 150 | 1 | 1,550 | ||||||||||||||||||
|
Payments
|
(681 | ) | (331 | ) | (326 | ) | (175 | ) | (117 | ) | (1,630 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Ending liabilities for unpaid losses and loss
adjustment expenses-net
|
2,069 | 3,504 | 4,141 | 4,901 | 3,515 | 18,130 | ||||||||||||||||||
|
Reinsurance and other recoverables
|
19 | 121 | 311 | 2,124 | 855 | 3,430 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Ending liabilities for unpaid losses and loss
adjustment expenses-gross
|
$ | 2,088 | $ | 3,625 | $ | 4,452 | $ | 7,025 | $ | 4,370 | $ | 21,560 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Earned premiums
|
$ | 995 | $ | 637 | $ | 501 | $ | 287 | $ | — | $ | 2,420 | ||||||||||||
|
Loss and loss expense paid ratio [1]
|
68.3 | 52.0 | 65.2 | 60.8 | ||||||||||||||||||||
|
Loss and loss expense incurred ratio
|
70.3 | 57.9 | 65.9 | 52.2 | ||||||||||||||||||||
|
Prior accident years development (pts) [2]
|
(0.8 | ) | (2.8 | ) | (3.3 | ) | (16.6 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| [1] |
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
|
| [2] |
“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.
|
| Personal | Small | Middle | Specialty | Other | Total | |||||||||||||||||||
| Lines | Commercial | Market | Commercial | Operations | P&C | |||||||||||||||||||
|
Professional liability
|
$ | — | $ | — | $ | — | $ | (22 | ) | $ | — | $ | (22 | ) | ||||||||||
|
General liability umbrella
|
— | — | (10 | ) | — | — | (10 | ) | ||||||||||||||||
|
Personal auto liability
|
(17 | ) | — | — | — | — | (17 | ) | ||||||||||||||||
|
Other reserve re-estimates, net [1] [2]
|
10 | (18 | ) | (6 | ) | (27 | ) | 1 | (40 | ) | ||||||||||||||
|
|
||||||||||||||||||||||||
|
Total prior accident years development
for the three months ended March 31,
2010
|
$ | (7 | ) | $ | (18 | ) | $ | (16 | ) | $ | (49 | ) | $ | 1 | $ | (89 | ) | |||||||
|
|
||||||||||||||||||||||||
| [1] |
Includes reserve discount accretion of $7, including $2 in Small Commercial, $3 in Middle Market and $2 in Specialty Commercial.
|
|
| [2] |
Other reserve re-estimates include a number of reserve changes across multiple lines of business. These re-estimates include,
among other reserve changes, reserve releases in Small Commercial for package business, general liability and auto liability
and in Specialty Commercial for general liability and property.
|
| • |
Released reserves for professional liability claims by $22 in the first quarter of 2010, primarily related to directors’ and
officers’ (“D&O”) claims in accident years 2006 and prior. For these accident years, reported losses for claims under D&O and
E&O policies have been emerging favorably to initial expectations due to lower than expected claim severity. Any continued
favorable emergence of claims under D&O and E&O insurance policies for prior accident years could lead the Company to reduce
reserves for these liabilities in future quarters.
|
59
| • |
Released reserves for Personal Lines auto liability claims by $17 in the first quarter of 2010. During 2009, the Company
recognized that favorable development in reported severity, due in part to changes made to claim handling procedures in 2007,
was a sustained trend for accident years 2005 through 2008 and, accordingly, management reduced its reserve estimate. The
first quarter 2010 reserve release is in response to a continuation of these same favorable trends, primarily affecting
accident years 2005 through 2009.
|
|
| • |
Released reserves for umbrella claims by $10 in the first quarter of 2010, primarily related to accident years 2004 to 2008.
The Company observed that reported losses for umbrella general liability claims continue to emerge favorably and this caused
management to reduce its estimate of the cost of future reported claims for these accident years.
|
| Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
| Personal | Small | Middle | Specialty | Other | Total | |||||||||||||||||||
| Lines | Commercial | Market | Commercial | Operations | P&C | |||||||||||||||||||
|
Beginning liabilities for unpaid losses and
loss adjustment expenses-gross
|
$ | 2,052 | $ | 3,572 | $ | 4,744 | $ | 6,981 | $ | 4,584 | $ | 21,933 | ||||||||||||
|
Reinsurance and other recoverables
|
60 | 176 | 437 | 2,110 | 803 | 3,586 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Beginning liabilities for unpaid losses and
loss adjustment expenses-net
|
1,992 | 3,396 | 4,307 | 4,871 | 3,781 | 18,347 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Provision for unpaid losses and loss
adjustment expenses
|
||||||||||||||||||||||||
|
Current accident year before catastrophes
|
627 | 362 | 359 | 233 | — | 1,581 | ||||||||||||||||||
|
Current accident year catastrophes
|
42 | 6 | 16 | 1 | — | 65 | ||||||||||||||||||
|
Prior accident years
|
10 | 5 | (58 | ) | (25 | ) | — | (68 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||
|
Total provision for unpaid losses and loss
adjustment expenses
|
679 | 373 | 317 | 209 | — | 1,578 | ||||||||||||||||||
|
Payments
|
(705 | ) | (349 | ) | (343 | ) | (156 | ) | (110 | ) | (1,663 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Ending liabilities for unpaid losses and loss
adjustment expenses-net
|
1,966 | 3,420 | 4,281 | 4,924 | 3,671 | 18,262 | ||||||||||||||||||
|
Reinsurance and other recoverables
|
58 | 170 | 458 | 2,063 | 793 | 3,542 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Ending liabilities for unpaid losses and loss
adjustment expenses-gross
|
$ | 2,024 | $ | 3,590 | $ | 4,739 | $ | 6,987 | $ | 4,464 | $ | 21,804 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Earned premiums
|
$ | 979 | $ | 652 | $ | 548 | $ | 332 | $ | — | $ | 2,511 | ||||||||||||
|
Loss and loss expense paid ratio [1]
|
72.1 | 53.6 | 62.7 | 46.3 | ||||||||||||||||||||
|
Loss and loss expense incurred ratio
|
69.4 | 57.3 | 57.8 | 62.6 | ||||||||||||||||||||
|
Prior accident year development (pts) [2]
|
1.1 | 0.8 | (10.5 | ) | (7.9 | ) | ||||||||||||||||||
| [1] |
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
|
| [2] |
“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
|
| Personal | Small | Middle | Specialty | Other | Total | |||||||||||||||||||
| Lines | Commercial | Market | Commercial | Operations | P&C | |||||||||||||||||||
|
General liability
|
$ | — | $ | — | $ | (38 | ) | $ | — | $ | — | $ | (38 | ) | ||||||||||
|
Workers’ compensation
|
— | (13 | ) | (10 | ) | — | — | (23 | ) | |||||||||||||||
|
Directors’ and officers’ claims
|
— | — | — | (20 | ) | — | (20 | ) | ||||||||||||||||
|
Personal auto liability
|
(18 | ) | — | — | — | — | (18 | ) | ||||||||||||||||
|
Homeowners’ claims
|
18 | — | — | — | — | 18 | ||||||||||||||||||
|
Package business
|
— | 16 | — | — | — | 16 | ||||||||||||||||||
|
Surety business
|
— | — | — | 10 | — | 10 | ||||||||||||||||||
|
Other reserve re-estimates, net [1]
|
10 | 2 | (10 | ) | (15 | ) | — | (13 | ) | |||||||||||||||
|
|
||||||||||||||||||||||||
|
Total prior accident year
development for the three months
ended March 31, 2009
|
$ | 10 | $ | 5 | $ | (58 | ) | $ | (25 | ) | $ | — | $ | (68 | ) | |||||||||
|
|
||||||||||||||||||||||||
| [1] |
Includes reserve discount accretion of $6, including $2 in Small Commercial, $2 in Middle Market and $2 in Specialty Commercial.
|
| • |
Released reserves for general liability claims by $38, primarily related to the 2005 to 2007 accident years. Beginning in the
third quarter of 2007, the Company observed that reported losses for high hazard and umbrella general liability claims,
primarily related to the 2001 to 2006 accident years, were emerging favorably and this caused management to reduce its estimate
of the cost of future reported claims for these accident years, resulting in a reserve release in each quarter since the third
quarter of 2007. During the first quarter of 2009, management determined that the lower level of loss emergence would likely
continue for recent accident years, including the 2007 accident year and, as a result, the Company reduced the reserves.
|
60
| • |
Released workers’ compensation reserves by $23, primarily related to allocated loss adjustment expense reserves in accident
years 2003 to 2007. During the first quarter of 2008, the Company observed lower than expected expense payments on older
accident years. As a result, the Company reduced its estimate for future expense payments on more recent accident years.
|
| • |
Released reserves for professional liability claims for the 2006 accident year by $20.
Beginning in 2008, the Company observed that claim severity for both directors’ and officers’
and errors and omissions claims for the 2003 to 2006 accident years was developing favorably to
previous expectations and the Company released reserves for these accident years in 2008. During
the first three months of 2009, the Company updated its analysis of certain professional
liability claims and the new analysis showed that claim severity for directors and officers
losses in the 2006 accident year continued to develop favorably to previous expectations,
resulting in a $20 reduction of reserves in the first quarter.
|
| • |
Released reserves for Personal Lines auto liability claims by $18, principally related to
AARP business for the 2005 through 2007 accident years. Beginning in the first quarter of
2008, management observed an improvement in emerged claim severity for the 2005 through 2007
accident years attributed, in part, to changes made in claim handling procedures in 2007. In
the first quarter of 2009, the Company recognized that favorable development in reported
severity was a sustained trend and, accordingly, management reduced its reserve estimate.
|
| • |
Strengthened reserves for homeowners’ claims by $18, primarily driven by increased claim
settlement costs in recent accident years and increased losses from underground storage tanks
in older accident years. In 2008, the Company began to observe increasing claim settlement
costs for the 2005 to 2008 accident years and, in the first quarter of 2009, determined that
this higher cost level would continue, resulting in a reserve strengthening of $9 for these
accident years. In addition, beginning in 2008, the Company observed unfavorable emergence of
homeowners’ casualty claims for accident years 2003 and prior, primarily related to
underground storage tanks. Following a detailed review of these claims in the first quarter of
2009, management increased its estimate of the magnitude of this exposure and strengthened
homeowners’ casualty claim reserves by $9.
|
| • |
Strengthened reserves for liability claims under Small Commercial package policies by $16,
primarily related to allocated loss adjustment expenses for accident years 2000 to 2005.
During the first quarter of 2009, the Company identified higher than expected expense payments
on older accident years related to the liability coverage. As a result, the Company increased
its estimate for future expense payments on more recent accident years.
|
| • |
Strengthened reserves for surety business by a net of $10, primarily related to accident
years 2004 to 2007. The net $10 of strengthening consists of $20 strengthening of reserves for
customs bonds, partially offset by a $10 release of reserve for contract surety claims.
During 2008, the Company became aware that there were a large number of late reported surety
claims related to customs bonds. During the first quarter of 2009, the high volume of late
reported claims continued and the Company determined that the higher level of reported claims
would continue to emerge and, as a result, strengthened reserves by $20.
|
61
| For the Three Months Ended March 31, 2010 | Asbestos | Environmental | All Other [1] | Total | |||||||||||||||
|
Beginning liability — net [2][3]
|
$ | 1,892 | $ | 307 | $ | 1,432 | $ | 3,631 | |||||||||||
|
Losses and loss adjustment expenses incurred
|
2 | — | (1 | ) | 1 | ||||||||||||||
|
Losses and loss adjustment expenses paid
|
(72 | ) | (7 | ) | (38 | ) | (117 | ) | |||||||||||
|
|
|||||||||||||||||||
|
Ending
liability — net [2][3]
|
$ | 1,822 | [4] | $ | 300 | $ | 1,393 | $ | 3,515 | ||||||||||
|
|
|||||||||||||||||||
| [1] |
“All Other” includes unallocated loss adjustment expense reserves.
“All Other” also includes The Company’s allowance for
uncollectible reinsurance. When the Company commutes a ceded
reinsurance contract or settles a ceded reinsurance dispute, the
portion of the allowance for uncollectible reinsurance
attributable to that commutation or settlement, if any, is
reclassified to the appropriate cause of loss.
|
|
| [2] |
Excludes asbestos and environmental net liabilities reported in
Ongoing Operations of $10 and $4, respectively, as of March 31,
2010 and $10 and $5, respectively, as of December 31, 2009. Total
net losses and loss adjustment expenses incurred in Ongoing
Operations for the three months ended March 31, 2010 includes $2
related to asbestos and environmental claims. Total net losses and
loss adjustment expenses paid in Ongoing Operations for the three
months ended March 31, 2010 includes $3 related to asbestos and
environmental claims.
|
|
| [3] |
Gross of reinsurance, asbestos and environmental reserves,
including liabilities in Ongoing Operations, were $2,412 and $359,
respectively, as of March 31, 2010 and $2,484 and $367,
respectively, as of December 31, 2009.
|
|
| [4] |
The one year and average three year net paid amounts for asbestos
claims, including Ongoing Operations, are $223 and $224,
respectively, resulting in a one year net survival ratio of 8.2
and a three year net survival ratio of 8.2. Net survival ratio is
the quotient of the net carried reserves divided by the average
annual payment amount and is an indication of the number of years
that the net carried reserve would last (i.e. survive) if the
future annual claim payments were consistent with the calculated
historical average.
|
62
| Asbestos [1] | Environmental [1] | |||||||||||||||
| Paid | Incurred | Paid | Incurred | |||||||||||||
| Three Months Ended March 31, 2010 | Losses & LAE | Losses & LAE | Losses & LAE | Losses & LAE | ||||||||||||
|
Gross
|
||||||||||||||||
|
Direct
|
$ | 30 | $ | — | $ | 7 | $ | — | ||||||||
|
Assumed Reinsurance
|
33 | — | — | — | ||||||||||||
|
London Market
|
8 | — | 1 | — | ||||||||||||
|
|
||||||||||||||||
|
Total
|
71 | — | 8 | — | ||||||||||||
|
Ceded
|
1 | 2 | (1 | ) | — | |||||||||||
|
|
||||||||||||||||
|
Net
|
$ | 72 | $ | 2 | $ | 7 | $ | — | ||||||||
|
|
||||||||||||||||
| [1] |
Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing
Operations. Total gross losses and LAE incurred in Ongoing Operations for the three months
ended March 31, 2010 includes $2, related to asbestos and environmental claims. Total gross
losses and LAE paid in Ongoing Operations for the three months ended March 31, 2010 includes
$3 related to asbestos and environmental claims.
|
| Individual Variable | Individual Variable | |||||||||||||||||||||||
| Annuities — U.S. | Annuities — Japan | Individual Life | ||||||||||||||||||||||
| March 31, | December 31, | March 31, | December 31, | March 31, | December 31, | |||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
|
DAC
|
$ | 3,307 | $ | 3,378 | $ | 1,518 | $ | 1,566 | $ | 2,485 | $ | 2,528 | ||||||||||||
|
SIA
|
$ | 324 | $ | 324 | $ | 30 | $ | 28 | $ | 42 | $ | 42 | ||||||||||||
|
URR
|
$ | 87 | $ | 85 | $ | 1 | $ | 1 | $ | 1,208 | $ | 1,185 | ||||||||||||
|
Death and Other
Insurance Benefit
Reserves
|
$ | 1,159 | $ | 1,232 | $ | 557 | $ | 580 | $ | 85 | $ | 76 | ||||||||||||
63
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves [1] | SIA | Total [2] | |||||||||||||||
|
Global Annuity — U.S.
|
$ | 41 | $ | (1 | ) | $ | 18 | $ | 2 | $ | 60 | |||||||||
|
Global Annuity — International
|
8 | — | 13 | — | 21 | |||||||||||||||
|
Retirement
|
1 | — | — | — | 1 | |||||||||||||||
|
Individual Life
|
2 | 1 | — | — | 3 | |||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 52 | $ | — | $ | 31 | $ | 2 | $ | 85 | ||||||||||
|
|
||||||||||||||||||||
| [1] |
As a result of the Unlock, Global Annuity — U.S. reserves
decreased $58, pre-tax, offset by a decrease in reinsurance
recoverables of $30, pre-tax. Global Annuity — International
reserves decreased $32, pre-tax, offset by an increase in
reinsurance recoverables of $12, pre-tax.
|
|
| [2] |
The most significant contributor to the Unlock benefit recorded
during the first quarter of 2010 was actual separate account
returns from January 1, 2010 to March 31, 2010 being above our
aggregated estimated return.
|
| Death and | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Segment | Benefit | |||||||||||||||||||
| After-tax (Charge) Benefit | DAC | URR | Reserves [1] | SIA | Total [2] | |||||||||||||||
|
Global Annuity — U.S.
|
$ | (666 | ) | $ | 52 | $ | (328 | ) | $ | (43 | ) | $ | (985 | ) | ||||||
|
Global Annuity — International
|
(88 | ) | — | (333 | ) | (1 | ) | (422 | ) | |||||||||||
|
Retirement
|
(54 | ) | — | (2 | ) | (1 | ) | (57 | ) | |||||||||||
|
Individual Life
|
(67 | ) | 41 | — | — | (26 | ) | |||||||||||||
|
Corporate
|
(4 | ) | — | — | — | (4 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | (879 | ) | $ | 93 | $ | (663 | ) | $ | (45 | ) | $ | (1,494 | ) | ||||||
|
|
||||||||||||||||||||
| [1] |
As a result of the Unlock, Global Annuity — U.S. reserves
increased $1,048, pre-tax, offset by an increase in reinsurance
recoverables of $543, pre-tax. Global Annuity — International
reserves increased $536, pre-tax, offset by an increase in
reinsurance recoverable of $25, pre-tax.
|
|
| [2] |
The most significant contributor to the Unlock amounts recorded
during the first quarter of 2009 was actual separate account
returns from the period ending October 1, 2008 to March 31, 2009
being significantly below our aggregated estimated return.
|
64
65
66
67
| Three Months Ended | ||||||||
| March 31, | ||||||||
| Ratios | 2010 | 2009 | ||||||
|
Global Annuity
|
||||||||
|
U.S. — ROA [1]
|
62.6 | bps | (360.0 | )bps | ||||
|
Effect of net realized gains (losses), net of tax and DAC on ROA
|
(0.5 | )bps | 83.9 | bps | ||||
|
Effect of DAC Unlock on ROA [2]
|
24.6 | bps | (475.3 | )bps | ||||
|
ROA excluding realized gains (losses) and DAC Unlock
|
38.5 | bps | 31.4 | bps | ||||
|
|
||||||||
|
International — Japan ROA
|
32.2 | bps | (321.5 | )bps | ||||
|
Effect of net realized gains (losses) excluding net periodic settlements, net
of tax and DAC on ROA [3]
|
(52.9 | )bps | 201.7 | bps | ||||
|
Effect of DAC Unlock on ROA [2]
|
24.1 | bps | (511.0 | )bps | ||||
|
ROA excluding realized gains (losses) and DAC Unlock
|
61.0 | bps | (12.2 | )bps | ||||
|
|
||||||||
|
|
||||||||
|
Retirement
|
||||||||
|
Retirement Plans ROA
|
(5.3 | )bps | (96.4 | )bps | ||||
|
Effect of net realized losses, net of tax and DAC on ROA
|
(15.9 | )bps | (35.1 | )bps | ||||
|
Effect of DAC Unlock on ROA [2]
|
0.9 | bps | (62.4 | )bps | ||||
|
ROA excluding realized losses and DAC Unlock
|
9.7 | bps | 1.1 | bps | ||||
|
Mutual Funds ROA [1] [4]
|
10.9 | bps | 2.6 | bps | ||||
|
Effect of net realized gains, net of tax and DAC on ROA
|
— | bps | 1.3 | bps | ||||
|
ROA excluding realized gains
|
10.9 | bps | 1.3 | bps | ||||
|
|
||||||||
|
|
||||||||
|
Individual Life [1]
|
||||||||
|
After-tax margin
|
5.6 | % | (5.6 | %) | ||||
|
Effect of net realized losses, net of tax and DAC on after-tax margin
|
(8.8 | %) | (4.3 | %) | ||||
|
Effect of DAC Unlock on after-tax margin [2]
|
1.0 | % | (10.2 | %) | ||||
|
After-tax margin excluding realized losses and DAC Unlock
|
13.4 | % | 8.9 | % | ||||
|
|
||||||||
|
|
||||||||
|
Group Benefits
|
||||||||
|
After-tax margin (excluding buyouts)
|
4.3 | % | 5.6 | % | ||||
|
Effect of net realized gains, net of tax on after-tax margin (excluding buyouts)
|
— | 0.2 | % | |||||
|
After-tax margin (excluding buyouts) excluding realized gains
|
4.3 | % | 5.4 | % | ||||
|
|
||||||||
|
|
||||||||
|
Institutional
|
||||||||
|
Institutional ROA
|
(62.3 | )bps | (117.3 | )bps | ||||
|
Effect of net realized losses, net of tax and DAC on ROA
|
(57.7 | )bps | (104.5 | )bps | ||||
|
Effect of DAC Unlock on ROA [2]
|
— | bps | — | bps | ||||
|
ROA excluding realized losses and DAC Unlock
|
(4.6 | )bps | (12.8 | )bps | ||||
| [1] |
Insurance Product mutual fund assets are included in Mutual Funds and those same assets are also included in Global
Annuity — U.S., Retirement Plans, and Individual Life as those same assets generate earnings for each of these
segments.
|
|
| [2] |
See Unlocks within the Critical Accounting Estimates section of the MD&A.
|
|
| [3] |
Included in the net realized capital gain (losses) are amounts that represent the net periodic accruals on currency
rate swaps used in the risk management of Japan fixed annuity products.
|
|
| [4] |
Includes assets attributed to the transfer of Insurance Product mutual funds, Investment-Only mutual funds, Canada
Operations, and 529 college savings plans effective January 1, 2010.
|
68
| • |
Global Annuity — U.S. ROA, excluding realized gains (losses) and DAC Unlock, increased
primarily due to improved net investment income, a lower DAC amortization rate and improved
operating expenses.
|
| • |
Global Annuity — International’s Japan ROA, excluding realized gains (losses) and DAC
Unlock, increased primarily due to the lack of a 3 Win charge in 2010 versus a $40, after-tax
charge in 2009. Excluding the effects of the 3 Win charge, ROA, excluding realized gains
(losses) and DAC Unlock, DAC amortization would have been 37 bps in 2009. The increase of
ROA, excluding 3 Win charge, is driven by improvement in the equity markets, reduced DAC
amortization and lower expenses associated with the restructuring of Japan’s operations.
|
| • |
The increase in Retirement Plans ROA, excluding realized losses and DAC Unlock, was
primarily driven by improved performance on limited partnerships and other alternative
investments.
|
| • |
The increase in Mutual Funds ROA, excluding realized gains and DAC unlock, was driven by
improvement in the equity markets, which enabled this business to partially return to scale,
the impact of lower operating expenses, partially offset by the addition of Insurance Product
mutual fund assets to this line of business which has a lower ROA.
|
| • |
The increase in Individual Life’s after-tax margin, excluding realized losses and DAC
Unlock, was primarily due to death benefits and operating expenses being slightly lower
compared to prior year.
|
| • |
The decrease in Group Benefits after-tax margin, excluding realized gains, was primarily
due to a higher loss ratio due to unfavorable morbidity and higher expense ratio due to higher
commission expense on experience rated financial institution business.
|
| • |
The increases in Institutional’s ROA, excluding realized losses, is primarily due to
improved performance on limited partnerships and other alternative investments.
|
69
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Ongoing Operations earned premium growth
|
||||||||
|
Personal Lines
|
2 | % | — | |||||
|
Small Commercial
|
(2 | %) | (5 | %) | ||||
|
Middle Market
|
(9 | %) | (8 | %) | ||||
|
Specialty Commercial
|
(14 | %) | (5 | %) | ||||
|
|
||||||||
|
Total Ongoing Operations
|
(4 | %) | (4 | %) | ||||
|
|
||||||||
|
|
||||||||
|
Ongoing Operations combined ratio
|
||||||||
|
Combined ratio before catastrophes and prior year development
|
92.1 | 90.0 | ||||||
|
Catastrophe ratio
|
||||||||
|
|
||||||||
|
Current year
|
3.3 | 2.6 | ||||||
|
Prior years
|
(0.2 | ) | 0.2 | |||||
|
|
||||||||
|
Total catastrophe ratio
|
3.1 | 2.8 | ||||||
|
Non-catastrophe prior year development
|
(3.5 | ) | (2.9 | ) | ||||
|
|
||||||||
|
Combined ratio
|
91.7 | 89.9 | ||||||
|
|
||||||||
|
|
||||||||
|
Other Operations net income
|
$ | 19 | $ | 1 | ||||
|
|
||||||||
|
Personal Lines
|
•
The change from no growth in
2009 to earned premium growth of 2%
in 2010 was primarily due to new
business growth on both AARP and
Agency, partially offset by lower
average renewal earned premium on
Agency auto business.
|
|
|
|
||
|
Small Commercial
|
•
The change from a 5% earned
premium decline in 2009 to a 2%
decline in 2010 was primarily
attributable to the effect of
year-over-year changes in earned
audit premiums.
|
|
|
|
||
|
Middle Market
|
•
The steeper earned premium
decline in 2010 was primarily driven
by the effect of non-renewals
outpacing new business in all lines
except for workers’ compensation.
|
|
|
|
||
|
Specialty Commercial
|
•
The steeper earned premium
decline in 2010 was primarily due to
the effects of lower new business
and earned pricing decreases in
professional liability, fidelity and
surety.
|
70
|
Combined ratio before catastrophes
and prior accident years development
|
•
In 2010, the 2.1 point
increase in the combined ratio
before catastrophes and prior
accident year development was
primarily driven by a 1.4 point
increase in the current accident
year loss and loss adjustment
expense ratio before catastrophes
and a 1.2 point increase in the
expense ratio.
|
|
|
|
||
|
|
•
Among other factors, the
increase in the current loss and
loss adjustment expense ratio before
catastrophes was driven by an
increase for Personal Lines auto
business.
|
|
|
|
||
|
|
•
The increase in the expense
ratio in the 2010 period includes
the effects of the decrease in
earned premiums, a $14 reduction in
TWIA assessments recognized in 2009
related to hurricane Ike and
increased compensation-related
costs.
|
|
|
|
||
|
Catastrophes
|
•
The catastrophe ratio
increased 0.3 points in 2010, as
losses in 2010 from East coast
winter storms and from wind and rain
storms in the Northeast, California
and Arizona were higher than losses
in 2009 from ice storms and
windstorms in the Southeast and
Midwest.
|
|
|
|
||
|
Non-catastrophe prior accident years
development |
•
Favorable reserve
development in 2010 included, among
other reserve changes, the release
of reserves for directors’ and
officers’ claims, primarily related
to the 2006 and prior accident
years, the release of reserves for
Personal Lines auto liability
claims, primarily affecting accident
years 2005 through 2009 and the
release of reserves for general
liability umbrella claims, primarily
related to accident years 2004 to
2008. See “Reserve Rollforwards and
Development” in the Critical
Accounting Estimates Section of the
MD&A for a discussion of prior
accident year reserve development in
2010.
|
| • |
Other Operations reported a higher net income in 2010 as compared to 2009 primarily due to
a decrease in net realized capital losses.
|
71
| March 31, 2010 | December 31, 2009 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
|
Fixed maturities, AFS, at fair value
|
$ | 75,584 | 79.3 | % | $ | 71,153 | 76.3 | % | ||||||||
|
Equity securities, AFS, at fair value
|
1,153 | 1.2 | % | 1,221 | 1.3 | % | ||||||||||
|
Mortgage loans
|
5,162 | 5.4 | % | 5,938 | 6.4 | % | ||||||||||
|
Policy loans, at outstanding balance
|
2,177 | 2.3 | % | 2,174 | 2.3 | % | ||||||||||
|
Limited partnerships and other alternative investments
|
1,736 | 1.8 | % | 1,790 | 1.9 | % | ||||||||||
|
Other investments [1]
|
941 | 1.0 | % | 602 | 0.7 | % | ||||||||||
|
Short-term investments
|
8,545 | 9.0 | % | 10,357 | 11.1 | % | ||||||||||
|
|
||||||||||||||||
|
Total investments excluding equity securities, trading
|
95,298 | 100.0 | % | 93,235 | 100.0 | % | ||||||||||
|
Equity securities, trading, at fair value [2]
|
32,053 | 32,321 | ||||||||||||||
|
|
||||||||||||||||
|
Total investments
|
$ | 127,351 | $ | 125,556 | ||||||||||||
|
|
||||||||||||||||
| [1] |
Primarily relates to derivative instruments. Also includes investments in real estate.
|
|
| [2] |
These assets primarily support the Global Annuity – International variable annuity business. Changes in these balances
are also reflected in the respective liabilities.
|
| Three Months Ended | ||||||||||||||||
| March 31, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
| (Before-tax) | Amount | Yield [1] | Amount | Yield [1] | ||||||||||||
|
Fixed maturities [2]
|
$ | 874 | 4.4 | % | $ | 953 | 4.7 | % | ||||||||
|
Equity securities, AFS
|
14 | 4.3 | % | 27 | 7.3 | % | ||||||||||
|
Mortgage loans
|
71 | 5.1 | % | 79 | 4.9 | % | ||||||||||
|
Policy loans
|
33 | 6.1 | % | 36 | 6.5 | % | ||||||||||
|
Limited partnerships and other alternative investments
|
6 | 1.4 | % | (209 | ) | (36.9 | %) | |||||||||
|
Other [3]
|
85 | — | 58 | — | ||||||||||||
|
Investment expense
|
(23 | ) | — | (24 | ) | — | ||||||||||
|
|
||||||||||||||||
|
Total net investment income excluding equity securities, trading
|
1,060 | 4.3 | % | 920 | 3.7 | % | ||||||||||
|
Equity securities, trading
|
701 | (724 | ) | |||||||||||||
|
|
||||||||||||||||
|
Total net investment income
|
$ | 1,761 | $ | 196 | ||||||||||||
|
|
||||||||||||||||
| [1] |
Yields calculated using annualized investment income before investment expenses divided by the monthly average invested
assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding securities lending collateral and
consolidated variable interest entity noncontrolling interests. Included in the fixed maturity yield is Other, which
primarily relates to fixed maturities (see footnote [3] below). Included in the total net investment income yield is
investment expense.
|
|
| [2] |
Includes net investment income on short-term investments.
|
|
| [3] |
Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
72
| Three Months Ended | ||||||||
| March 31, | ||||||||
| (Before-tax) | 2010 | 2009 | ||||||
|
Gross gains on sales
|
$ | 132 | $ | 208 | ||||
|
Gross losses on sales
|
(111 | ) | (720 | ) | ||||
|
Net OTTI losses recognized in earnings
|
(152 | ) | (224 | ) | ||||
|
Japanese fixed annuity contract hedges, net [1]
|
(16 | ) | 41 | |||||
|
Periodic net coupon settlements on credit derivatives/Japan
|
(7 | ) | (19 | ) | ||||
|
Results of variable annuity hedge program
|
||||||||
|
GMWB derivatives, net
|
129 | 589 | ||||||
|
Macro hedge program
|
(164 | ) | 204 | |||||
|
|
||||||||
|
Total results of variable annuity hedge program
|
(35 | ) | 793 | |||||
|
Other, net
|
(87 | ) | 5 | |||||
|
|
||||||||
|
Net realized capital gains (losses)
|
$ | (276 | ) | $ | 84 | |||
|
|
||||||||
| [1] |
Relates to derivative hedging instruments, excluding periodic net coupon settlements,
and is net of the Japanese fixed annuity product liability adjustment for changes in the
dollar/yen exchange spot rate.
|
|
Gross gains and losses on sales
|
•
Gross gains and losses on
sales for the three months ended
March 31, 2010 were predominantly
from real estate related and
subordinated financial investments
due to efforts to reduce portfolio
risk. In addition, gross losses
included U.S. Treasuries in order to
manage duration.
|
|
|
|
||
|
|
•
Gross gains and losses on
sales for the three months ended
March 31, 2009 were predominantly
within financial services,
structured and government securities
due to efforts to reduce portfolio
risk and improve liquidity while
simultaneously reallocating the
portfolio to securities with more
favorable risk/return profiles.
|
|
|
|
||
|
Net OTTI losses
|
•
For further information, see
Other-Than-Temporary Impairments
within the Investment Credit Risk
section of the MD&A.
|
|
|
|
||
|
Variable annuity hedge program
|
•
The net gain on GMWB related
derivatives for the three months
ended March 31, 2010 was primarily
due to gains on lower implied market
volatility of $114 and the relative
outperformance of the underlying
actively managed funds as compared
to their respective indices of $27,
partially offset by losses of $36
due to trading costs given actual
volatility in equity markets. The
net loss on the macro hedge program
was primarily the result of higher
equity market valuation, lower
implied market volatility, and time
decay.
|
|
|
|
||
|
|
•
The net gain on GMWB
derivatives for the three months
ended March 31, 2009 was primarily
due to liability model changes and
assumption updates of $314 and the
impacts of the Company’s own credit
standing of $222. For more
information, see Note 4a of the
Notes to Condensed Consolidated
Financial Statements. The net gain
on the macro hedge program was
primarily the result of a decline in
the equity markets.
|
|
|
|
||
|
Other, net
|
•
Other, net losses for the
three months ended March 31, 2010
primarily resulted from additions to
valuation allowances on impaired
mortgage loans of $112, which
includes $78 on mortgage loans held
for sale, and losses of $49 on Japan
3Win related foreign currency swaps
primarily driven by a decrease in
U.S. interest rates. These losses
were partially offset by gains of
$33 on credit derivatives that
assume credit risk due to credit
spread tightening, $15 on credit
derivatives that purchase credit
protection due to credit spreads
widening on certain specific
referenced corporate entities, and
$13 on the Japan variable annuity
hedge due to the strengthening of
the yen as compared to the euro.
|
|
|
|
||
|
|
•
Other, net gains for the
three months ended March 31, 2009
primarily resulted from $220 of
transactional foreign currency gains
predominantly on the internal
reinsurance of the Japan variable
annuity business, which is offset in
AOCI, and $70 of gains associated
with the Allianz warrants. These
gains were partially offset by net
losses on credit derivatives of
$177, valuation allowances on
impaired mortgage loans of $74, and
losses on the Japan 3Win contract
hedges of $45.
|
73
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income and other
|
$ | 376 | $ | 411 | (9 | %) | ||||||
|
Earned premiums
|
29 | 2 | NM | |||||||||
|
Net investment income
|
200 | 184 | 9 | % | ||||||||
|
Net realized capital gains (losses)
|
(48 | ) | 470 | NM | ||||||||
|
|
||||||||||||
|
Total revenues
|
557 | 1,067 | (48 | %) | ||||||||
|
Benefits, losses and loss adjustment expenses
|
231 | 856 | (73 | %) | ||||||||
|
Insurance operating costs and other expenses
|
131 | 123 | 7 | % | ||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
2 | 1,287 | (100 | %) | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
364 | 2,266 | (84 | %) | ||||||||
|
Income (loss) before income taxes
|
193 | (1,199 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
40 | (453 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 153 | $ | (746 | ) | NM | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Assets Under Management
|
||||||||||||
|
Variable annuity account values
|
$ | 85,320 | $ | 68,166 | ||||||||
|
Fixed annuity and other account values [4]
|
12,823 | 11,747 | ||||||||||
|
|
||||||||||||
|
Total account values [1]
|
$ | 98,143 | $ | 79,913 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Account Value and Assets Under Management Roll Forward
|
||||||||||||
|
Variable Annuities
|
||||||||||||
|
Account value, beginning of period
|
$ | 84,679 | $ | 74,578 | ||||||||
|
Net flows
|
(2,319 | ) | (1,964 | ) | ||||||||
|
Change in market value and other
|
2,960 | (4,448 | ) | |||||||||
|
|
||||||||||||
|
Account value, end of period
|
$ | 85,320 | $ | 68,166 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net Investment Spread
|
40 | bps | (19 | )bps | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Expense Ratios
|
||||||||||||
|
Individual Annuities
|
||||||||||||
|
General insurance expense ratio
|
17.6 | bps | 23.6 | bps | ||||||||
|
DAC amortization ratio
|
22.7 | % | (316.8 | %) | ||||||||
|
DAC amortization ratio, excluding realized losses and DAC Unlocks [2] [3]
|
55.1 | % | 64.5 | % | ||||||||
| [1] |
Includes policyholders’ balances for investment contracts and reserves for future policy benefits for insurance contracts.
|
|
| [2] |
Excludes the effects of realized gains and losses.
|
|
| [3] |
See Critical Accounting Estimates in the MD&A.
|
|
| [4] |
Includes $683 attributed to the transfer of Single Premium Immediate Annuity from Institutional effective January 1, 2010.
|
74
|
Fee income and other
|
•
Fee income and other
decreased primarily as a result of
the impact of the 2009 Unlock on
unearned revenue reserves, which
increased fee income and other by
$80 in the first quarter of 2009,
partially offset by higher
maintenance and expense fees in 2010
driven by increased average account
values. Average variable annuity
account values increased from $71.4
billion in 2009 to $85.0 billion in
2010 driven by equity market
appreciation. Net outflows remain
high as deposit activity has
declined driven by increased
competition, particularly
competition related to guaranteed
living benefits.
|
|
|
|
||
|
Net investment income
|
•
Net investment income
increased primarily as a result of
improved performance on limited
partnership and other alternative
investments in 2010 partially offset
by a decrease in income on fixed
maturities.
|
|
|
|
||
|
Net investment spread
|
•
Net investment spread
increased primarily as a result of
higher earned rates driven primarily
by improved performance on limited
partnerships and other alternative
investments in 2010 which added 67
bps of return, partially offset by
lower returns on mortgage loans of 7
bps.
|
|
|
|
||
|
Net realized capital gains (losses)
|
•
The change in net realized
capital gains (losses) is primarily
related to results from the
Company’s variable annuity hedge
program which generated losses of
$19 in 2010 and gains of $752 in
2009. Partially offsetting this
activity were net gains on sales of
securities of $25 in 2010 compared
with net losses on sales of
securities of $204 in 2009.
|
|
|
|
||
|
Benefits, losses and loss adjustment
expenses
|
•
Benefits, losses and loss
adjustment expenses are lower on a
comparable period basis as a result
of the impact of the 2009 and 2010
Unlocks which resulted in a charge
to earnings of $571 in 2009 compared
with a benefit of $32 in 2010.
|
|
|
|
||
|
Insurance operating costs and other
expenses
|
•
Insurance operating costs
and other expenses have increased
slightly as compared to 2009 as an
increase in trail commissions driven
by increases in assets under
management as a result of improved
equity markets, was largely offset
by lower operating and wholesaling
expenses driven by management’s
active efforts to reduce expenses
and lower sales levels.
|
|
|
|
||
|
General insurance expense ratio
|
•
The general insurance
expense ratio declined as a result
of management’s efforts to reduce
expenses and an increase in the
average asset base.
|
|
|
|
||
|
Amortization of DAC
|
•
Amortization of DAC is lower
on a comparative period basis as a
result of the Unlocks in 2009 and
2010 which resulted in additional
amortization of $1.0 billion in 2009
compared with a reduction in
amortization of $61 in 2010.
|
|
|
|
||
|
DAC amortization ratio, excluding
realized gains (losses) and DAC
Unlocks
|
•
The DAC amortization ratio
decreased due to rising gross
profits from March 31, 2009 to March
31, 2010, driven by equity market
appreciation as discussed above.
|
|
|
|
||
|
Income tax expense (benefit)
|
•
The effective tax rate
decreased from 38% in 2009 to 21% in
2010. The decrease in effective tax
rate was principally driven by
pre-tax losses caused by the 2009
Unlock as the permanent difference
for the separate account DRD was
consistent with prior year.
Additionally, for 2010 there was a
valuation allowance on deferred tax
benefits related to certain realized
losses.
|
75
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income
|
$ | 212 | $ | 184 | 15 | % | ||||||
|
Earned premiums
|
(2 | ) | (2 | ) | — | |||||||
|
Net investment income
|
33 | 44 | (25 | %) | ||||||||
|
Net realized capital gains (losses)
|
(73 | ) | 246 | NM | ||||||||
|
|
||||||||||||
|
Total revenues
|
170 | 472 | (64 | %) | ||||||||
|
Benefits, losses and loss adjustment expenses
|
34 | 630 | (95 | %) | ||||||||
|
Insurance operating costs and other expenses
|
50 | 84 | (40 | %) | ||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
50 | 196 | (74 | %) | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
134 | 910 | (85 | %) | ||||||||
|
Income (loss) before income taxes
|
36 | (438 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
13 | (145 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 23 | $ | (293 | ) | NM | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Assets
Under Management — Japan
|
||||||||||||
|
Japan variable annuity account values
|
$ | 30,379 | $ | 26,567 | ||||||||
|
Japan fixed annuity and other account values
|
4,294 | 4,379 | ||||||||||
|
|
||||||||||||
|
Total
assets under management — Japan
|
$ | 34,673 | $ | 30,946 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Account Value and Assets Under Management Roll Forward
|
||||||||||||
|
Japan Annuities
|
||||||||||||
|
Account value, beginning of period
|
$ | 34,886 | $ | 34,495 | ||||||||
|
Net flows
|
(515 | ) | (129 | ) | ||||||||
|
Change in market value and other
|
433 | (722 | ) | |||||||||
|
Effect of currency translation
|
(131 | ) | (2,698 | ) | ||||||||
|
|
||||||||||||
|
Account value, end of period
|
$ | 34,673 | $ | 30,946 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Expense Ratios
|
||||||||||||
|
Global
Annuity — International — Japan
|
||||||||||||
|
General insurance expense ratio
|
27.6 | bps | 47.7 | bps | ||||||||
|
DAC amortization ratio [1]
|
53.3 | % | (40.9 | %) | ||||||||
|
DAC amortization ratio excluding realized gains (losses) and DAC Unlocks [1] [2]
|
42.0 | % | 52.6 | % | ||||||||
| [1] |
Excludes the effects of realized gains and losses except for net
periodic settlements. Included in the net realized capital gain
(losses) are amounts that represent the net periodic accruals on
currency rate swaps used in the risk management of Japan fixed
annuity products.
|
|
| [2] |
Excludes the effects of 3 Wins related charges for the three
months ended March 31, 2009, of $62, pre-tax, on net income.
Including the effects of 3 Wins related charges DAC amortization
ratio would have been 148.6%.
|
76
|
Fee income
|
•
Fee income increased primarily as a result of higher variable annuity fee income due to an
increase of Japan’s average variable annuity account values. Average variable annuity account value
increased due to the market and yen appreciation partially offset by net outflows due to the
suspension of new sales in the second quarter of 2009.
|
|
|
|
||
|
Benefits, losses
and loss adjustment
expenses
|
•
Benefits, losses and loss adjustment expense decreased because of financial impacts
associated with the improvement of the equity markets since first quarter 2009. In the first quarter
2009, depressed equity markets caused; a higher GMDB net amount at risk, higher claims costs and 3
Win related charges of $60.
|
|
|
|
||
|
Net realized
capital gains (losses) |
•
Losses increased due to current macro hedge losses of ($30), impairments of ($10) and hedging
losses associated with the fixed annuity business of ($16). Gains for the three months ended March
31, 2009 included $218 of transactional foreign currency gains predominately on the internal
reinsurance of the Japan variable annuity business, which is entirely offset in AOCI, macro hedge
gains of $46, and gains on hedges associated with the fixed annuity business of $41, partially offset
by net losses on credit derivatives and losses on the Japan 3Win contract hedges of $(45).
|
|
|
|
||
|
Insurance operating
costs and other
expenses
|
•
Insurance operating costs and other expenses decreased due to expense savings associated with
the restructuring of the Global Annuity – International operations.
|
|
|
|
||
|
General insurance
expense ratio |
•
Japan general insurance expense ratio decreased due to the restructuring of Japan’s
operations.
|
|
|
|
||
|
Amortization of DAC
|
•
Amortization of DAC decreased as a result of the negative impacts of the Unlock in the first
quarter of 2009.
|
|
|
|
||
|
Income tax benefit
|
•
Income tax benefit declined as a result of improved earnings. The effective tax rate ending
March 31, 2010 and March 31, 2009 is 36% and 33%, respectively.
|
77
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income and other
|
$ | 258 | $ | 180 | 43 | % | ||||||
|
Earned premiums
|
2 | 1 | 100 | % | ||||||||
|
Net investment income
|
79 | 73 | 8 | % | ||||||||
|
Net realized capital losses
|
(15 | ) | (59 | ) | 75 | % | ||||||
|
|
||||||||||||
|
Total revenues
|
324 | 195 | 66 | % | ||||||||
|
Benefits, losses and loss adjustment expenses
|
63 | 74 | (15 | %) | ||||||||
|
Insurance operating costs and other expenses
|
201 | 167 | 20 | % | ||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
20 | 95 | (79 | %) | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
284 | 336 | (15 | %) | ||||||||
|
Income (loss) before income taxes
|
40 | (141 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
20 | (55 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 20 | $ | (86 | ) | NM | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Assets Under Management
|
||||||||||||
|
Retirement Plans
|
||||||||||||
|
403(b)/457 account values
|
$ | 11,502 | $ | 10,004 | ||||||||
|
401(k) account values
|
17,776 | 11,848 | ||||||||||
|
401(k)/403(b) mutual funds
|
17,186 | 14,144 | ||||||||||
|
|
||||||||||||
|
Total Retirement Plans assets under management
|
46,464 | 35,996 | ||||||||||
|
|
||||||||||||
|
Mutual Funds
|
||||||||||||
|
Mutual fund assets under management [1] [2]
|
97,702 | 29,543 | ||||||||||
|
|
||||||||||||
|
Total assets under management
|
$ | 144,166 | $ | 65,539 | ||||||||
|
|
||||||||||||
|
Total assets under administration – 401(k)
|
$ | 5,755 | $ | 5,024 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Account Value and Assets Under Management Roll Forward
|
||||||||||||
|
Retirement Plans Group Annuities
|
||||||||||||
|
Account value, beginning of period
|
$ | 27,258 | $ | 22,198 | ||||||||
|
Net flows
|
930 | 631 | ||||||||||
|
Transfers in of Maturity Funding
|
194 | — | ||||||||||
|
Change in market value and other
|
896 | (977 | ) | |||||||||
|
|
||||||||||||
|
Account value, end of period [3]
|
$ | 29,278 | $ | 21,852 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
401(k) / 403(b) Mutual Funds
|
||||||||||||
|
Assets under management, beginning of period
|
$ | 16,704 | $ | 14,838 | ||||||||
|
Net sales/(redemptions)
|
(235 | ) | 57 | |||||||||
|
Change in market value and other
|
717 | (751 | ) | |||||||||
|
|
||||||||||||
|
Assets under management, end of period
|
$ | 17,186 | $ | 14,144 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Mutual Funds [4]
|
||||||||||||
|
Assets under management, beginning of period
|
$ | 44,031 | $ | 32,710 | ||||||||
|
Transfer in of Investment-Only and Canadian mutual funds
|
5,617 | — | ||||||||||
|
Net sales
|
1,466 | (467 | ) | |||||||||
|
Change in market value and other [1]
|
2,185 | (2,700 | ) | |||||||||
|
|
||||||||||||
|
Assets under management, end of period [1]
|
$ | 53,299 | $ | 29,543 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Insurance Product Mutual Funds[5]
|
||||||||||||
|
Assets under management, beginning of period
|
$ | — | $ | — | ||||||||
|
Transfers in of Insurance Product mutual funds
|
43,890 | — | ||||||||||
|
Net sales
|
(1,324 | ) | — | |||||||||
|
Change in market value and other
|
1,837 | — | ||||||||||
|
|
||||||||||||
|
Assets under management, end of period
|
$ | 44,403 | $ | — | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net Investment Spread
|
||||||||||||
|
Retirement Plans
|
115 | bps | 44 | bps | ||||||||
| [1] |
Includes amount attributed to the transfer of Investment-Only mutual funds and Canada Operations effective January 1, 2010.
|
|
| [2] |
Includes Insurance Product mutual funds effective January 1, 2010.
|
|
| [3] |
Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
|
|
| [4] |
Includes Retail mutual funds, Investment-Only mutual funds, Canadian mutual funds and 529 college savings plan assets.
|
|
| [5] |
Includes mutual funds sponsored by the Company which are owned by the separate accounts of the Company to support
insurance and investment products sold by the Company.
|
78
|
Fee income and other
|
•
Fee income and other
increased primarily due to increases
in average assets under management
resulting from improvements in
equity markets and increased deposit
activity as equity market
improvements created an environment
where investors were willing to
re-enter the capital markets.
Retail mutual funds experienced
record growth in the first quarter
2010 increasing fee income by $36
over the prior year comparable
period.
|
|
|
|
||
|
Net investment income
|
•
Net investment income
increased due to improved
performance on limited partnerships
and other alternative investments.
|
|
|
|
||
|
Net investment spread
|
•
The increase in net
investment spread is attributable to
improved performance on limited
partnerships and other alternative
investments.
|
|
|
|
||
|
Net realized capital losses
|
•
Net realized capital losses
were lower during the first quarter
of 2010 compared to the prior year
comparable period due to losses on
derivatives, trading losses and
impairments in the first quarter
2009.
|
|
|
|
||
|
Insurance operating costs and other
expenses
|
•
Insurance operating costs
and other expenses increased
primarily due to higher trail
commissions driven by higher average
account value as a result of
improvements in equity markets, and
the inclusion of expenses of $6
associated with Investment-Only and
Insurance Product mutual funds.
|
|
|
|
||
|
Amortization of DAC
|
•
Amortization of deferred
policy acquisition costs and present
value of future profits decreased on
a comparative period prior year
basis as a result of the DAC Unlock
in the first quarter of 2009.
|
|
|
|
||
|
Income tax expense (benefit)
|
•
Income tax expense was
recorded during the first quarter of
2010 as opposed to a benefit in 2009
due to pre-tax income in the first
quarter of 2010. The change in
effective rate of 50% from 39% is
due to the change in the level of
losses in 2009 compared to the level
of earnings in 2010, while the
permanent tax differences for DRD
have remained relatively constant.
Also increasing the 2010 rate was a
valuation allowance on deferred tax
benefits related to certain realized
losses.
|
79
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income and other
|
$ | 242 | $ | 292 | (17 | %) | ||||||
|
Earned premiums
|
(22 | ) | (19 | ) | (16 | %) | ||||||
|
Net investment income
|
93 | 79 | 18 | % | ||||||||
|
Net realized capital losses
|
(28 | ) | (33 | ) | 15 | % | ||||||
|
|
||||||||||||
|
Total revenues
|
285 | 319 | (11 | %) | ||||||||
|
Benefits, losses and loss adjustment expenses
|
165 | 164 | 1 | % | ||||||||
|
Insurance operating costs and other expenses
|
46 | 48 | (4 | %) | ||||||||
|
Amortization of deferred policy acquisition costs and present value of future profits
|
47 | 139 | (66 | %) | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
258 | 351 | (26 | %) | ||||||||
|
Income (loss) before income taxes
|
27 | (32 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
11 | (14 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 16 | $ | (18 | ) | NM | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Account Values
|
||||||||||||
|
Variable universal life insurance
|
$ | 5,900 | $ | 4,550 | ||||||||
|
Universal life insurance [1]
|
5,781 | 5,431 | ||||||||||
|
|
||||||||||||
|
Total account values
|
$ | 11,681 | $ | 9,981 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Life Insurance In-Force
|
||||||||||||
|
Variable universal life insurance
|
$ | 77,592 | $ | 77,913 | ||||||||
|
Universal life insurance
|
55,806 | 53,576 | ||||||||||
|
Term life
|
71,078 | 65,364 | ||||||||||
|
|
||||||||||||
|
Total life insurance in-force
|
$ | 204,476 | $ | 196,853 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net Investment Spread
|
128 | bps | 64 | bps | ||||||||
|
|
||||||||||||
|
Death Benefits
|
$ | 93 | $ | 94 | ||||||||
|
|
||||||||||||
| [1] |
Includes Universal Life, Interest Sensitive Whole Life, Modified Guaranteed Life Insurance
and other.
|
|
Fee income and other
|
•
Fee income and other decreased primarily due to the impact of the 2009
Unlock.
|
|
|
|
||
|
Earned premiums
|
•
Earned premiums, which include premiums for ceded reinsurance, decreased
primarily due to higher ceded reinsurance premiums due to the aging of the life
insurance in-force.
|
|
|
|
||
|
Net investment income
|
•
Net investment income increased primarily due to improved performance of
limited partnerships and other alternative investments.
|
|
|
|
||
|
Net investment spread
|
•
Net investment spread increased 64 bps primarily related to improved
performance of limited partnerships and other alternative investments of 65 bps and
lower average credited rates of 15 bps.
|
|
|
|
||
|
Amortization of DAC
|
•
Amortization of DAC decreased primarily as a result of the 2010 Unlock
benefit compared to the 2009 Unlock charge. DAC amortization had a partial offset
in amortization of deferred revenues, which drove the decrease in fee income noted
above.
|
|
|
|
||
|
Income tax expense
(benefit) |
•
Income tax expense (benefit) increased as a result of improved earnings
before income taxes primarily due to a 2010 Unlock benefit compared to a 2009 Unlock
charge. The effective tax rate for 2010 differs from the statutory rate of 35%
primarily due to the recognition of a valuation allowance on deferred tax benefits
related to certain realized losses, partially offset by the recognition of DRD tax
benefit.
|
80
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Premiums and other considerations
|
$ | 1,102 | $ | 1,138 | (3 | %) | ||||||
|
Net investment income
|
107 | 91 | 18 | % | ||||||||
|
Net realized capital gains
|
9 | 3 | NM | |||||||||
|
|
||||||||||||
|
Total revenues
|
1,218 | 1,232 | (1 | %) | ||||||||
|
Benefits, losses and loss adjustment expenses
|
843 | 860 | (2 | %) | ||||||||
|
Insurance operating costs and other expenses
|
283 | 264 | 7 | % | ||||||||
|
Amortization of deferred policy acquisition costs
|
16 | 14 | 14 | % | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
1,142 | 1,138 | — | |||||||||
|
Income before income taxes
|
76 | 94 | (19 | %) | ||||||||
|
Income tax expense
|
25 | 25 | — | |||||||||
|
|
||||||||||||
|
Net income
|
$ | 51 | $ | 69 | (26 | %) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Earned Premiums and Other
|
||||||||||||
|
Fully insured — ongoing premiums
|
$ | 1,052 | $ | 1,126 | ||||||||
|
Buyout premiums
|
37 | — | ||||||||||
|
Other
|
13 | 12 | ||||||||||
|
|
||||||||||||
|
Total earned premiums and other
|
$ | 1,102 | $ | 1,138 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Fully insured ongoing sales, excluding buyouts
|
$ | 296 | $ | 400 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Ratios, excluding buyouts
|
||||||||||||
|
Loss ratio
|
75.7 | % | 75.6 | % | ||||||||
|
Loss ratio, excluding financial institutions
|
81.2 | % | 78.7 | % | ||||||||
|
Expense ratio
|
28.1 | % | 24.4 | % | ||||||||
|
Expense ratio, excluding financial institutions
|
23.0 | % | 21.4 | % | ||||||||
|
Premiums and other considerations
|
•
Premiums and other
considerations decreased due to
lower sales and reduced persistency
in the employer markets business and
reductions in covered lives within
our customer base.
|
|
|
|
||
|
Net investment income
|
•
Net investment income
increased due to higher weighted
average portfolio yields primarily
due to improved performance on
limited partnerships and other
alternative investments.
|
|
|
|
||
|
Benefits, losses and loss adjustment
expenses/Loss ratio
|
•
The segment’s loss ratio
(defined as benefits, losses and
loss adjustment expenses as a
percentage of premiums and other
considerations excluding buyouts)
was essentially flat year over year.
However, the loss ratio excluding
the financial institution experience
rated business increased due
primarily to unfavorable morbidity
experience from higher incidence.
|
|
|
|
||
|
Expense ratio and insurance
operating costs and other expenses
|
•
The segment’s expense ratio,
excluding buyouts, increased
compared to the prior year primarily
due to higher commission expense in
2010 on the experience rated
financial institution business.
|
|
|
|
||
|
Income tax benefit
|
•
Taxes stayed the same year
over year despite a decrease in
pretax income as a result of a
valuation allowance on deferred tax
benefits related to certain realized
losses for 2010.
|
81
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income and other
|
$ | 43 | $ | 40 | 8 | % | ||||||
|
Earned premiums
|
10 | 208 | (95 | %) | ||||||||
|
Net investment income
|
221 | 194 | 14 | % | ||||||||
|
Net realized capital losses
|
(76 | ) | (239 | ) | 68 | % | ||||||
|
|
||||||||||||
|
Total revenues
|
198 | 203 | (2 | %) | ||||||||
|
Benefits, losses and loss adjustment expenses
|
266 | 447 | (40 | %) | ||||||||
|
Insurance operating costs and other expenses
|
13 | 27 | (52 | %) | ||||||||
|
Amortization of deferred policy acquisition costs
|
8 | 5 | 60 | % | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
287 | 479 | (40 | %) | ||||||||
|
Loss before income taxes
|
(89 | ) | (276 | ) | 68 | % | ||||||
|
Income tax benefit
|
(1 | ) | (102 | ) | 99 | % | ||||||
|
|
||||||||||||
|
Net loss
|
$ | (88 | ) | $ | (174 | ) | 49 | % | ||||
|
|
||||||||||||
|
|
||||||||||||
|
Assets Under Management
|
||||||||||||
|
Institutional account values [1]
|
$ | 21,060 | $ | 24,954 | ||||||||
|
Private Placement Life Insurance account values [1][2]
|
35,241 | 32,154 | ||||||||||
|
|
||||||||||||
|
Total assets under management
|
$ | 56,301 | $ | 57,108 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net Investment Spread
|
||||||||||||
|
Stable Value (GICs, Funding Agreements, Funding
Agreement Backed Notes and Consumer Notes)
|
(73 | )bps | (78 | )bps | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Expense Ratios
|
||||||||||||
|
General insurance expense ratio
|
7.1 | bps | 10.8 | bps | ||||||||
| [1] |
Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
|
|
| [2] |
Includes Leverage PPLI amounts transferred from Life Other effective January 1, 2010.
|
|
Earned premiums
|
•
Earned premiums
decreased compared to the prior
year due to management’s
decision to discontinue sales.
The decrease in earned premiums
was offset by a decrease in
benefits, losses and loss
adjustment expenses.
|
|
|
|
||
|
Net investment income
|
•
Net investment income
increased primarily due to the
improved performance on limited
partnerships and other
alternative investments. This
increase is partially offset by
lower yield on fixed maturity
assets that are driven by a
decline in short term interest
rates.
|
|
|
|
||
|
Net investment spread
|
•
Stable Value, net
investment spreads were slightly
favorable due to improved
performance on limited
partnership and other
alternative investments of 97
bps and a decline in interest
credited due to retail notes
called early of 18 bps. The
favorable variance is partially
offset by a decline in yields on
fixed maturity assets of 110
bps.
|
|
|
|
||
|
Net realized capital losses
|
•
Net realized capital
losses were lower due to
significantly less impairments
on investment securities.
|
|
|
|
||
|
Benefits, losses and loss adjustment
expenses
|
•
Benefits, losses and
loss adjustment expenses were
lower driven by lower interest
credited due to an overall
smaller block of business.
|
|
|
|
||
|
Insurance operating costs and expenses
and general insurance expense ratio
|
•
Insurance operating
costs and other expenses
decreased due to active expense
management efforts and reduced
information technology expenses.
|
|
|
|
||
|
Income tax benefit
|
•
The income tax benefit
declined in comparison to prior
year due primarily to a 2010
deferred tax benefit valuation
allowance related to certain
realized losses.
|
82
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income and other [1]
|
$ | 43 | $ | 47 | (9 | %) | ||||||
|
Net investment income (loss):
|
||||||||||||
|
Securities available-for sale and other
|
11 | 24 | (54 | %) | ||||||||
|
Equity securities, trading [2]
|
701 | (724 | ) | NM | ||||||||
|
|
||||||||||||
|
Total net investment income (loss)
|
712 | (700 | ) | NM | ||||||||
|
Net realized capital losses
|
(5 | ) | (23 | ) | 78 | % | ||||||
|
|
||||||||||||
|
Total revenues
|
750 | (676 | ) | NM | ||||||||
|
Benefits, losses and loss adjustment expenses
|
(19 | ) | 28 | NM | ||||||||
|
Benefits, losses and loss adjustment expenses –
returns credited on International variable
annuities [2]
|
701 | (724 | ) | NM | ||||||||
|
Insurance operating costs and other expenses [1]
|
42 | 39 | 8 | % | ||||||||
|
|
||||||||||||
|
Total benefits, losses and expenses
|
724 | (657 | ) | NM | ||||||||
|
Income (loss) before income taxes
|
26 | (19 | ) | NM | ||||||||
|
Income tax expense (benefit)
|
15 | (9 | ) | NM | ||||||||
|
|
||||||||||||
|
Net income (loss)
|
$ | 11 | $ | (10 | ) | NM | ||||||
|
|
||||||||||||
| [1] |
Includes the fee income and commission expense associated with the
sales of non-proprietary insurance products in the Company’s
broker-dealer subsidiaries.
|
|
| [2] |
Includes investment income and mark-to-market effects of equity
securities, trading, supporting the Global Annuity — International
variable annuity business, which are classified in net investment
income with corresponding amounts credited to policyholders within
benefits, losses and loss adjustment expenses.
|
|
Benefits losses and loss
adjustment expenses
|
•
Benefits losses and loss
adjustment expense declined from the
comparable prior year period due to
the prospective transfer of Leverage
COLI. The 2010 amounts are
reflective of intersegment
eliminations.
|
83
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Underwriting Summary | 2010 | 2009 | Change | |||||||||
|
Written premiums
|
$ | 941 | $ | 944 | — | |||||||
|
Change in unearned premium reserve
|
(54 | ) | (35 | ) | (54 | %) | ||||||
|
|
||||||||||||
|
Earned premiums
|
995 | 979 | 2 | % | ||||||||
|
Losses and loss adjustment expenses
|
||||||||||||
|
Current accident year before catastrophes
|
666 | 627 | 6 | % | ||||||||
|
Current accident year catastrophes
|
41 | 42 | (2 | %) | ||||||||
|
Prior accident years
|
(7 | ) | 10 | NM | ||||||||
|
|
||||||||||||
|
Total losses and loss adjustment expenses
|
700 | 679 | 3 | % | ||||||||
|
Amortization of deferred policy acquisition costs
|
168 | 166 | 1 | % | ||||||||
|
Insurance operating costs and expenses
|
73 | 59 | 24 | % | ||||||||
|
|
||||||||||||
|
Underwriting results
|
$ | 54 | $ | 75 | (28 | %) | ||||||
|
|
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
| Written Premiums | ||||||||||||
|
Business Unit
|
||||||||||||
|
AARP
|
$ | 671 | $ | 681 | (1 | %) | ||||||
|
Agency
|
258 | 249 | 4 | % | ||||||||
|
Other
|
12 | 14 | (14 | %) | ||||||||
|
|
||||||||||||
|
Total
|
$ | 941 | $ | 944 | — | |||||||
|
|
||||||||||||
|
Product Line
|
||||||||||||
|
Automobile
|
$ | 694 | $ | 707 | (2 | %) | ||||||
|
Homeowners
|
247 | 237 | 4 | % | ||||||||
|
|
||||||||||||
|
Total
|
$ | 941 | $ | 944 | — | |||||||
|
|
||||||||||||
|
Earned Premiums
|
||||||||||||
|
Business Unit
|
||||||||||||
|
AARP
|
$ | 715 | $ | 703 | 2 | % | ||||||
|
Agency
|
266 | 261 | 2 | % | ||||||||
|
Other
|
14 | 15 | (7 | %) | ||||||||
|
|
||||||||||||
|
Total
|
$ | 995 | $ | 979 | 2 | % | ||||||
|
|
||||||||||||
|
Product Line
|
||||||||||||
|
Automobile
|
$ | 712 | $ | 704 | 1 | % | ||||||
|
Homeowners
|
283 | 275 | 3 | % | ||||||||
|
|
||||||||||||
|
Total
|
$ | 995 | $ | 979 | 2 | % | ||||||
|
|
||||||||||||
|
|
||||||||||||
| Premium Measures | 2010 | 2009 | ||||||||||
|
Policies in-force end of period
|
||||||||||||
|
Automobile
|
2,376,660 | 2,347,967 | ||||||||||
|
Homeowners
|
1,487,782 | 1,460,172 | ||||||||||
|
|
||||||||||||
|
Total policies in-force end of period
|
3,864,442 | 3,808,139 | ||||||||||
|
|
||||||||||||
|
|
||||||||||||
|
New business written premium
|
||||||||||||
|
Automobile
|
$ | 93 | $ | 115 | ||||||||
|
Homeowners
|
$ | 30 | $ | 31 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Policy count retention
|
||||||||||||
|
Automobile
|
84 | % | 86 | % | ||||||||
|
Homeowners
|
85 | % | 86 | % | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Renewal written pricing increase
|
||||||||||||
|
Automobile
|
5 | % | 3 | % | ||||||||
|
Homeowners
|
9 | % | 6 | % | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Renewal earned pricing increase
|
||||||||||||
|
Automobile
|
4 | % | 4 | % | ||||||||
|
Homeowners
|
6 | % | 6 | % | ||||||||
84
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Ratios and Supplemental Data | 2010 | 2009 | Change | |||||||||
|
|
||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||
|
Current accident year before catastrophes
|
66.9 | 64.1 | (2.8 | ) | ||||||||
|
Current accident year catastrophes
|
4.2 | 4.3 | 0.1 | |||||||||
|
Prior accident years
|
(0.8 | ) | 1.1 | 1.9 | ||||||||
|
|
||||||||||||
|
Total loss and loss adjustment expense ratio
|
70.3 | 69.4 | (0.9 | ) | ||||||||
|
Expense ratio
|
24.2 | 23.0 | (1.2 | ) | ||||||||
|
|
||||||||||||
|
Combined ratio
|
94.5 | 92.4 | (2.1 | ) | ||||||||
|
|
||||||||||||
|
Catastrophe ratio
|
||||||||||||
|
Current year
|
4.2 | 4.3 | 0.1 | |||||||||
|
Prior years
|
(0.1 | ) | 1.1 | 1.2 | ||||||||
|
|
||||||||||||
|
Total catastrophe ratio
|
4.0 | 5.4 | 1.4 | |||||||||
|
|
||||||||||||
|
Combined ratio before catastrophes
|
90.5 | 87.0 | (3.5 | ) | ||||||||
|
Combined ratio before catastrophes and prior accident years development
|
91.1 | 87.0 | (4.1 | ) | ||||||||
|
|
||||||||||||
|
Other revenues [1]
|
$ | 42 | $ | 37 | 14 | % | ||||||
|
|
||||||||||||
| [1] |
Represents servicing revenues.
|
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Combined Ratios | 2010 | 2009 | Change | |||||||||
|
Automobile
|
93.7 | 89.3 | (4.4 | ) | ||||||||
|
Homeowners
|
96.8 | 100.3 | 3.5 | |||||||||
|
|
||||||||||||
|
Total
|
94.5 | 92.4 | (2.1 | ) | ||||||||
|
|
||||||||||||
| • |
AARP earned premiums grew $12, in 2010, due primarily to new business written premium
growth through the third quarter of 2009 driven by increased direct marketing spend, higher
auto policy conversion rates and cross-selling homeowners’ insurance to insureds who have auto
policies. Partly offsetting the growth was the effect of a decrease in policy count retention
since the second quarter of 2009.
|
| • |
Agency earned premiums increased by $5, due primarily to new business written premium
growth in 2009 driven by an increase in the number of agency appointments, an increase in the
number of policy quotes and an increase in the policy issue rate. Partly offsetting the
growth was the effect of a decrease in average renewal earned premium per policy for auto
business.
|
|
New business written premium
|
•
Auto new business written
premium decreased by $22, or 19%, in
2010 due primarily to the effect of
written pricing increases and
underwriting actions that lowered
policy issue rate on direct
marketing responses and agency
business quotes. Homeowners’ new
business written premium was down
slightly as the effect of pricing
and underwriting actions lowering
the policy issue rate on direct
marketing responses and agency
business quotes was largely offset
by an increase in the cross-sale of
homeowners’ insurance to insureds
who have auto policies.
|
|
|
|
||
|
Policy count retention
|
•
Policy count retention for
auto decreased by 2 points in the
three months ended March 31, 2010
driven by the effect of 5% renewal
written pricing increases,
underwriting actions and a decrease
in policy retention on AARP
business. Policy count retention
for homeowners decreased 1 point in
the three months ended March 31,
2010, driven by the effect of 9%
renewal written pricing increases
and underwriting actions, partially
offset by the effect of the
Company’s non-renewal of Florida
homeowners’ Agency business in 2009.
|
85
|
Renewal earned pricing increase
|
•
Auto renewal earned pricing
increased by 4% in 2010 due to rate
increases and the effect of
policyholders purchasing newer
vehicle models in place of older
models. Homeowners’ renewal earned
pricing increased by 6% in 2010 due
to rate increases and increased
coverage amounts reflecting higher
rebuilding costs. For both auto and
home, the Company has increased
rates in certain states for certain
classes of business to maintain
profitability in the face of rising
loss costs.
|
|
|
|
||
|
Policies in-force
|
•
Compared to the prior year
period, the number of policies
in-force increased 1% in auto in
2010, driven by an increase in
Agency and increased 2% for
homeowners, driven by an increase in
AARP. Since the fourth quarter of
2009, the number of policies
in-force decreased 1% in auto driven
by a decrease in AARP and was flat
in homeowners.
|
86
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Underwriting Summary | 2010 | 2009 | Change | |||||||||
|
Written premiums
|
$ | 694 | $ | 693 | — | |||||||
|
Change in unearned premium reserve
|
57 | 41 | 39 | % | ||||||||
|
|
||||||||||||
|
Earned premiums
|
637 | 652 | (2 | %) | ||||||||
|
Losses and loss adjustment expenses
|
||||||||||||
|
Current accident year before catastrophes
|
366 | 362 | 1 | % | ||||||||
|
Current accident year catastrophes
|
21 | 6 | NM | |||||||||
|
Prior accident years
|
(18 | ) | 5 | NM | ||||||||
|
|
||||||||||||
|
Total losses and loss adjustment expenses
|
369 | 373 | (1 | %) | ||||||||
|
Amortization of deferred policy acquisition costs
|
154 | 157 | (2 | %) | ||||||||
|
Insurance operating costs and expenses
|
31 | 35 | (11 | %) | ||||||||
|
|
||||||||||||
|
Underwriting results
|
$ | 83 | $ | 87 | (5 | %) | ||||||
|
|
||||||||||||
| Premium Measures | 2010 | 2009 | ||||||
|
|
||||||||
|
New business premium
|
$ | 130 | $ | 119 | ||||
|
Policy count retention
|
85 | % | 81 | % | ||||
|
Renewal written pricing increase
|
1 | % | — | |||||
|
Renewal earned pricing decrease
|
— | (1 | %) | |||||
|
Policies in-force end of period
|
1,091,270 | 1,053,568 | ||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Ratios | 2010 | 2009 | Change | |||||||||
|
|
||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||
|
Current accident year before catastrophes
|
57.5 | 55.5 | (2.0 | ) | ||||||||
|
Current accident year catastrophes
|
3.3 | 1.0 | (2.3 | ) | ||||||||
|
Prior accident years
|
(2.8 | ) | 0.8 | 3.6 | ||||||||
|
|
||||||||||||
|
Total loss and loss adjustment expense ratio
|
57.9 | 57.3 | (0.6 | ) | ||||||||
|
Expense ratio
|
30.8 | 29.3 | (1.5 | ) | ||||||||
|
Policyholder dividend ratio
|
(1.8 | ) | 0.1 | 1.9 | ||||||||
|
|
||||||||||||
|
Combined ratio
|
86.9 | 86.6 | (0.3 | ) | ||||||||
|
|
||||||||||||
|
Catastrophe ratio
|
||||||||||||
|
Current year
|
3.3 | 1.0 | (2.3 | ) | ||||||||
|
Prior years
|
(0.3 | ) | 0.1 | 0.4 | ||||||||
|
|
||||||||||||
|
Total catastrophe ratio
|
3.0 | 1.1 | (1.9 | ) | ||||||||
|
|
||||||||||||
|
Combined ratio before catastrophes
|
84.0 | 85.5 | 1.5 | |||||||||
|
Combined ratio before catastrophes and prior accident years development
|
86.5 | 84.8 | (1.7 | ) | ||||||||
87
|
New business premium
|
• | New business written premium was up $11, or 9%, in 2010 primarily driven by an increase in package business and the impact from the rollout of a new business owners policy product during 2009. | ||
|
|
||||
|
Policy count retention
|
• | Policy count retention increased in all lines of business, as the trend in mid-term cancellations improved in 2010. | ||
|
|
||||
|
Renewal earned pricing decrease
|
• | Renewal earned pricing was flat as an increase in renewal earned pricing for package business and commercial auto was offset by a decrease for workers’ compensation. The earned pricing changes were primarily a reflection of written pricing changes over the last year. In addition to the effect of written pricing decreases in workers’ compensation in 2009, average premium per policy in Small Commercial has declined due to a reduction in the payrolls of workers’ compensation insureds. | ||
|
|
||||
|
Policies in-force
|
• | The number of policies-in-force increased by 4% in 2010. Despite the growth in policies, earned premiums have decreased by 2%, reflecting the decrease in average premium per policy. The growth in policies in-force does not correspond directly with the change in earned premiums due to the effect of changes in earned pricing and changes in the average premium per policy. |
88
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Underwriting Summary | 2010 | 2009 | Change | |||||||||
|
Written premiums
|
$ | 510 | $ | 526 | (3 | %) | ||||||
|
Change in unearned premium reserve
|
9 | (22 | ) | NM | ||||||||
|
|
||||||||||||
|
Earned premiums
|
501 | 548 | (9 | %) | ||||||||
|
Losses and loss adjustment expenses
|
||||||||||||
|
Current accident year before catastrophes
|
331 | 359 | (8 | %) | ||||||||
|
Current accident year catastrophes
|
15 | 16 | (6 | %) | ||||||||
|
Prior accident years
|
(16 | ) | (58 | ) | 72 | % | ||||||
|
|
||||||||||||
|
Total losses and loss adjustment expenses
|
330 | 317 | 4 | % | ||||||||
|
Amortization of deferred policy acquisition costs
|
117 | 125 | (6 | %) | ||||||||
|
Insurance operating costs and expenses
|
42 | 37 | 14 | % | ||||||||
|
|
||||||||||||
|
Underwriting results
|
$ | 12 | $ | 69 | (83 | %) | ||||||
|
|
||||||||||||
| Premium Measures | 2010 | 2009 | ||||||
|
New business premium
|
$ | 119 | $ | 115 | ||||
|
Policy count retention
|
82 | % | 78 | % | ||||
|
Renewal written pricing decrease
|
— | (2 | %) | |||||
|
Renewal earned pricing decrease
|
(1 | %) | (5 | %) | ||||
|
Policies in-force as of end of period
|
95,998 | 97,176 | ||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Ratios | 2010 | 2009 | Change | |||||||||
|
|
||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||
|
Current accident year before catastrophes
|
66.0 | 65.5 | (0.5 | ) | ||||||||
|
Current accident year catastrophes
|
3.1 | 2.8 | (0.3 | ) | ||||||||
|
Prior accident years
|
(3.3 | ) | (10.5 | ) | (7.2 | ) | ||||||
|
|
||||||||||||
|
Total loss and loss adjustment expense ratio
|
65.9 | 57.8 | (8.1 | ) | ||||||||
|
Expense ratio
|
31.3 | 29.3 | (2.0 | ) | ||||||||
|
Policyholder dividend ratio
|
0.4 | 0.4 | — | |||||||||
|
|
||||||||||||
|
Combined ratio
|
97.6 | 87.5 | (10.1 | ) | ||||||||
|
|
||||||||||||
|
Catastrophe ratio
|
||||||||||||
|
Current year
|
3.1 | 2.8 | (0.3 | ) | ||||||||
|
Prior years
|
(0.4 | ) | (1.0 | ) | (0.6 | ) | ||||||
|
|
||||||||||||
|
Total catastrophe ratio
|
2.7 | 1.8 | (0.9 | ) | ||||||||
|
|
||||||||||||
|
Combined ratio before catastrophes
|
94.9 | 85.7 | (9.2 | ) | ||||||||
|
Combined ratio before catastrophes and prior accident years development
|
97.7 | 95.2 | (2.5 | ) | ||||||||
89
|
New business premium
|
• | New business written premium increased by $4, primarily due to an increase in new business written premium for workers’ compensation, partially offset by a decrease in new business for marine and general liability. Despite continued pricing competition, the Company has increased new business for workers’ compensation by targeting business in selected industries and regions of the country where attractive new business opportunities remain. | ||
|
|
||||
|
Policy count retention
|
• | Policy count retention increased in all lines of business except for general liability. | ||
|
|
||||
|
Renewal earned pricing decrease
|
• | Earned pricing decreased in workers’ compensation, general liability and marine. The earned pricing changes were primarily a reflection of written pricing changes over the last year. A number of carriers have continued to compete fairly aggressively on price, particularly on larger accounts within Middle Market. Beginning in the second quarter of 2009, however, written pricing decreases moderated for workers’ compensation, general liability and marine and were flat or slightly positive for property and commercial auto. | ||
|
|
||||
|
Policies in-force
|
• | The number of policies in-force decreased slightly, consistent with the decline in earned premiums. |
90
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Underwriting Summary | 2010 | 2009 | Change | |||||||||
|
Written premiums
|
$ | 309 | $ | 295 | 5 | % | ||||||
|
Change in unearned premium reserve
|
22 | (37 | ) | NM | ||||||||
|
|
||||||||||||
|
Earned premiums
|
287 | 332 | (14 | %) | ||||||||
|
Losses and loss adjustment expenses
|
||||||||||||
|
Current accident year before catastrophes
|
197 | 233 | (15 | %) | ||||||||
|
Current accident year catastrophes
|
2 | 1 | 100 | % | ||||||||
|
Prior accident years
|
(49 | ) | (25 | ) | (96 | %) | ||||||
|
|
||||||||||||
|
Total losses and loss adjustment expenses
|
150 | 209 | (28 | %) | ||||||||
|
Amortization of deferred policy acquisition costs
|
69 | 75 | (8 | %) | ||||||||
|
Insurance operating costs and expenses
|
16 | 25 | (36 | %) | ||||||||
|
|
||||||||||||
|
Underwriting results
|
$ | 52 | $ | 23 | 126 | % | ||||||
|
|
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
| Written Premiums | ||||||||||||
|
Property
|
$ | — | $ | (16 | ) | 100 | % | |||||
|
Casualty
|
174 | 150 | 16 | % | ||||||||
|
Professional Liability, Fidelity and Surety
|
120 | 143 | (16 | %) | ||||||||
|
Other
|
15 | 18 | (17 | %) | ||||||||
|
|
||||||||||||
|
Total
|
$ | 309 | $ | 295 | 5 | % | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Earned Premiums
|
||||||||||||
|
Property
|
$ | — | $ | 13 | (100 | %) | ||||||
|
Casualty
|
134 | 130 | 3 | % | ||||||||
|
Professional Liability, Fidelity and Surety
|
139 | 171 | (19 | %) | ||||||||
|
Other
|
14 | 18 | (22 | %) | ||||||||
|
|
||||||||||||
|
Total
|
$ | 287 | $ | 332 | (14 | %) | ||||||
|
|
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Ratios | 2010 | 2009 | Change | |||||||||
|
|
||||||||||||
|
Loss and loss adjustment expense ratio
|
||||||||||||
|
Current accident year before catastrophes
|
68.3 | 70.3 | 2.0 | |||||||||
|
Current accident year catastrophes
|
0.5 | 0.1 | (0.4 | ) | ||||||||
|
Prior accident years
|
(16.6 | ) | (7.9 | ) | 8.7 | |||||||
|
|
||||||||||||
|
Total loss and loss adjustment expense ratio
|
52.2 | 62.6 | 10.4 | |||||||||
|
Expense ratio
|
29.3 | 29.5 | 0.2 | |||||||||
|
Policyholder dividend ratio
|
0.4 | 0.7 | 0.3 | |||||||||
|
|
||||||||||||
|
Combined ratio
|
81.9 | 92.8 | 10.9 | |||||||||
|
|
||||||||||||
|
Catastrophe ratio
|
||||||||||||
|
Current year
|
0.5 | 0.1 | (0.4 | ) | ||||||||
|
Prior years
|
0.1 | (0.2 | ) | (0.3 | ) | |||||||
|
|
||||||||||||
|
Total catastrophe ratio
|
0.6 | (0.1 | ) | (0.7 | ) | |||||||
|
|
||||||||||||
|
Combined ratio before catastrophes
|
81.3 | 92.9 | 11.6 | |||||||||
|
Combined ratio before catastrophes and prior accident years development
|
98.0 | 100.5 | 2.5 | |||||||||
|
Other revenues [1]
|
$ | 76 | $ | 80 | (5 | %) | ||||||
| [1] |
Represents servicing
revenue.
|
91
| • |
Property earned premiums decreased by $13, primarily due to the sale of the Company’s core
excess and surplus lines property business on March 31, 2009 to Beazley Group PLC. Concurrent
with the sale, the in-force book of business was ceded to Beazley under a separate reinsurance
agreement, whereby the Company ceded $26 of unearned premium, net of $10 in ceding commission.
The ceding of the unearned premium was reflected as a reduction of written premium as of
March 31, 2009.
|
| • |
Casualty earned premiums increased by $4, primarily due to a reduction in earned audit
premiums in the first quarter of 2009.
|
| • |
Professional liability, fidelity and surety earned premium decreased by $32, primarily due
to the effects of lower new business and earned pricing decreases. Increased market capacity,
driven largely by favorable loss performance, is driving significant pricing deterioration
leading to the reduction in attractive new business opportunities and renewal pricing
reductions.
|
| • |
Within the “Other” category, earned premium decreased by $4 in 2010. The “Other” category
of earned premiums includes premiums assumed under inter-segment arrangements.
|
92
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Written premiums
|
$ | 1 | $ | 1 | — | |||||||
|
Change in unearned premium reserve
|
1 | 1 | — | |||||||||
|
|
||||||||||||
|
Earned premiums
|
— | — | — | |||||||||
|
Losses and loss adjustment expenses — prior years
|
1 | — | — | |||||||||
|
Insurance operating costs and expenses
|
7 | 5 | 40 | % | ||||||||
|
|
||||||||||||
|
Underwriting results
|
(8 | ) | (5 | ) | (60 | %) | ||||||
|
Net investment income
|
41 | 40 | 3 | % | ||||||||
|
Net realized capital losses
|
(4 | ) | (34 | ) | 88 | % | ||||||
|
Other expenses
|
1 | 1 | — | |||||||||
|
|
||||||||||||
|
Income before income taxes
|
30 | 2 | NM | |||||||||
|
Income tax expense
|
11 | 1 | NM | |||||||||
|
|
||||||||||||
|
Net income
|
$ | 19 | $ | 1 | NM | |||||||
|
|
||||||||||||
93
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| Operating Summary | 2010 | 2009 | Change | |||||||||
|
Fee income
|
$ | 3 | $ | 3 | — | |||||||
|
Net investment income
|
7 | 6 | 17 | % | ||||||||
|
Net realized capital gains
|
— | 42 | (100 | %) | ||||||||
|
|
||||||||||||
|
Total revenues
|
10 | 51 | (80 | %) | ||||||||
|
Interest expense
|
120 | 120 | — | |||||||||
|
Goodwill impairment
|
— | 32 | (100 | %) | ||||||||
|
Other expenses
|
80 | 15 | NM | |||||||||
|
|
||||||||||||
|
Total expenses
|
200 | 167 | 20 | % | ||||||||
|
Loss before income taxes
|
(190 | ) | (116 | ) | (64 | %) | ||||||
|
Income tax benefit
|
(66 | ) | (53 | ) | (25 | %) | ||||||
|
|
||||||||||||
|
Net loss
|
$ | (124 | ) | $ | (63 | ) | (97 | %) | ||||
|
|
||||||||||||
|
Net realized capital gains
|
• | The change was primarily due to net realized capital gains of $70 recorded in the first quarter of 2009 on the change in fair value of the liability related to warrants issued to Allianz, which was offset by $20 in valuation allowance recorded in the same period. | ||
|
|
||||
|
Goodwill impairment
|
• | The Company’s goodwill impairment test performed during the three months ended March 31, 2009 resulted in a write-down of $32 in Corporate related to the Institutional segment. | ||
|
|
||||
|
Other expenses
|
• | Other expenses increased primarily due to an accrual for a litigation settlement of $73 in 2010, for further information see Structured Settlement Class Action within Note 9 of the Notes to Condensed Consolidated Financial Statements. | ||
|
|
||||
|
Income tax benefit
|
• | The effective tax rate of 46% in 2009 was primarily due to no income tax on the $70 net realized capital gain from the change in fair value of the liability related to Allianz warrants and the $32 goodwill impairment. |
94
95
| Fixed Maturities by Credit Quality | ||||||||||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Percent of | Percent of | |||||||||||||||||||||||
| Amortized | Total Fair | Amortized | Total Fair | |||||||||||||||||||||
| Cost | Fair Value | Value | Cost | Fair Value | Value | |||||||||||||||||||
|
United States Government/Government agencies
|
$ | 7,626 | $ | 7,517 | 9.9 | % | $ | 7,299 | $ | 7,172 | 10.1 | % | ||||||||||||
|
AAA
|
11,441 | 11,047 | 14.6 | % | 11,974 | 11,188 | 15.7 | % | ||||||||||||||||
|
AA
|
15,378 | 14,766 | 19.6 | % | 14,845 | 13,932 | 19.6 | % | ||||||||||||||||
|
A
|
20,182 | 19,598 | 25.9 | % | 19,822 | 18,664 | 26.2 | % | ||||||||||||||||
|
BBB
|
19,637 | 19,092 | 25.3 | % | 17,886 | 17,071 | 24.0 | % | ||||||||||||||||
|
BB & below
|
4,443 | 3,564 | 4.7 | % | 4,189 | 3,126 | 4.4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total fixed maturities
|
$ | 78,707 | $ | 75,584 | 100.0 | % | $ | 76,015 | $ | 71,153 | 100.0 | % | ||||||||||||
|
|
||||||||||||||||||||||||
96
| Available-for-Sale Securities by Type | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||||||||||
| Percent | Percent | |||||||||||||||||||||||||||||||||||||||
| Cost or | Gross | Gross | of Total | Cost or | Gross | Gross | of Total | |||||||||||||||||||||||||||||||||
| Amortized | Unrealized | Unrealized | Fair | Fair | Amortized | Unrealized | Unrealized | Fair | Fair | |||||||||||||||||||||||||||||||
| Cost | Gains | Losses | Value | Value | Cost | Gains | Losses | Value | Value | |||||||||||||||||||||||||||||||
|
Asset-backed securities (“ABS”)
|
||||||||||||||||||||||||||||||||||||||||
|
Consumer loans
|
$ | 2,392 | $ | 25 | $ | (240 | ) | $ | 2,177 | 2.9 | % | $ | 2,087 | $ | 15 | $ | (277 | ) | $ | 1,825 | 2.6 | % | ||||||||||||||||||
|
Small business
|
536 | 1 | (211 | ) | 326 | 0.4 | % | 548 | 1 | (232 | ) | 317 | 0.4 | % | ||||||||||||||||||||||||||
|
Other
|
392 | 23 | (33 | ) | 382 | 0.5 | % | 405 | 20 | (44 | ) | 381 | 0.5 | % | ||||||||||||||||||||||||||
|
CDOs
|
||||||||||||||||||||||||||||||||||||||||
|
CLOs [1]
|
2,474 | 1 | (236 | ) | 2,239 | 3.0 | % | 2,727 | — | (288 | ) | 2,439 | 3.5 | % | ||||||||||||||||||||||||||
|
CREs
|
1,247 | 32 | (751 | ) | 528 | 0.7 | % | 1,319 | 21 | (901 | ) | 439 | 0.6 | % | ||||||||||||||||||||||||||
|
Other
|
11 | 12 | — | 23 | — | 8 | 6 | — | 14 | — | ||||||||||||||||||||||||||||||
|
CMBS
|
||||||||||||||||||||||||||||||||||||||||
|
Agency backed [2]
|
159 | 4 | — | 163 | 0.2 | % | 62 | 3 | — | 65 | 0.1 | % | ||||||||||||||||||||||||||||
|
Bonds
|
9,141 | 105 | (1,744 | ) | 7,502 | 9.9 | % | 9,600 | 52 | (2,241 | ) | 7,411 | 10.4 | % | ||||||||||||||||||||||||||
|
Interest only (“IOs”)
|
1,009 | 82 | (40 | ) | 1,051 | 1.4 | % | 1,074 | 59 | (65 | ) | 1,068 | 1.5 | % | ||||||||||||||||||||||||||
|
Corporate
|
||||||||||||||||||||||||||||||||||||||||
|
Basic industry
|
2,863 | 134 | (32 | ) | 2,965 | 3.9 | % | 2,642 | 112 | (56 | ) | 2,698 | 3.8 | % | ||||||||||||||||||||||||||
|
Capital goods
|
3,138 | 164 | (34 | ) | 3,268 | 4.3 | % | 3,085 | 140 | (51 | ) | 3,174 | 4.5 | % | ||||||||||||||||||||||||||
|
Consumer cyclical
|
2,029 | 104 | (29 | ) | 2,104 | 2.8 | % | 1,946 | 75 | (45 | ) | 1,976 | 2.8 | % | ||||||||||||||||||||||||||
|
Consumer non-cyclical
|
5,650 | 312 | (21 | ) | 5,941 | 7.9 | % | 4,737 | 281 | (22 | ) | 4,996 | 7.0 | % | ||||||||||||||||||||||||||
|
Energy
|
3,293 | 180 | (12 | ) | 3,461 | 4.6 | % | 3,070 | 163 | (18 | ) | 3,215 | 4.5 | % | ||||||||||||||||||||||||||
|
Financial services
|
8,539 | 176 | (634 | ) | 8,081 | 10.7 | % | 8,059 | 118 | (917 | ) | 7,260 | 10.1 | % | ||||||||||||||||||||||||||
|
Tech./comm.
|
4,158 | 224 | (70 | ) | 4,312 | 5.7 | % | 3,984 | 205 | (75 | ) | 4,114 | 5.8 | % | ||||||||||||||||||||||||||
|
Transportation
|
817 | 35 | (12 | ) | 840 | 1.1 | % | 698 | 22 | (23 | ) | 697 | 1.0 | % | ||||||||||||||||||||||||||
|
Utilities
|
6,253 | 264 | (68 | ) | 6,449 | 8.5 | % | 5,755 | 230 | (85 | ) | 5,900 | 8.3 | % | ||||||||||||||||||||||||||
|
Other [3]
|
1,265 | 13 | (106 | ) | 1,172 | 1.6 | % | 1,342 | 22 | (151 | ) | 1,213 | 1.7 | % | ||||||||||||||||||||||||||
|
Foreign govt./govt. agencies
|
1,449 | 57 | (23 | ) | 1,483 | 2.0 | % | 1,376 | 52 | (20 | ) | 1,408 | 2.0 | % | ||||||||||||||||||||||||||
|
Municipal
|
||||||||||||||||||||||||||||||||||||||||
|
Taxable
|
1,243 | 6 | (164 | ) | 1,085 | 1.4 | % | 1,176 | 4 | (205 | ) | 975 | 1.4 | % | ||||||||||||||||||||||||||
|
Tax-exempt
|
11,121 | 298 | (155 | ) | 11,264 | 14.9 | % | 10,949 | 314 | (173 | ) | 11,090 | 15.6 | % | ||||||||||||||||||||||||||
|
RMBS
|
||||||||||||||||||||||||||||||||||||||||
|
Agency
|
2,886 | 92 | (3 | ) | 2,975 | 3.9 | % | 3,383 | 99 | (6 | ) | 3,476 | 4.9 | % | ||||||||||||||||||||||||||
|
Non-agency
|
138 | — | (13 | ) | 125 | 0.2 | % | 143 | — | (16 | ) | 127 | 0.2 | % | ||||||||||||||||||||||||||
|
Alt-A
|
203 | 4 | (45 | ) | 162 | 0.2 | % | 218 | — | (58 | ) | 160 | 0.2 | % | ||||||||||||||||||||||||||
|
Sub-prime
|
1,720 | 15 | (608 | ) | 1,127 | 1.5 | % | 1,768 | 5 | (689 | ) | 1,084 | 1.5 | % | ||||||||||||||||||||||||||
|
U.S. Treasuries
|
4,581 | 16 | (218 | ) | 4,379 | 5.8 | % | 3,854 | 14 | (237 | ) | 3,631 | 5.1 | % | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total fixed maturities
|
78,707 | 2,379 | (5,502 | ) | 75,584 | 100.0 | % | 76,015 | 2,033 | (6,895 | ) | 71,153 | 100.0 | % | ||||||||||||||||||||||||||
|
Equity securities
|
||||||||||||||||||||||||||||||||||||||||
|
Financial Services
|
744 | 14 | (129 | ) | 629 | 836 | 7 | (164 | ) | 679 | ||||||||||||||||||||||||||||||
|
Other
|
453 | 86 | (15 | ) | 524 | 497 | 73 | (28 | ) | 542 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total equity securities
|
1,197 | 100 | (144 | ) | 1,153 | 1,333 | 80 | (192 | ) | 1,221 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total AFS securities [4]
|
$ | 79,904 | $ | 2,479 | $ | (5,646 | ) | $ | 76,737 | $ | 77,348 | $ | 2,113 | $ | (7,087 | ) | $ | 72,374 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
As of March 31, 2010, 72% of these senior secured bank loan
collateralized loan obligations (“CLOs”) were rated AA and above with
an average subordination of 29%.
|
|
| [2] |
Represents securities with pools of loans by the Small Business
Administration whose issued loans are backed by the full faith and
credit of the U.S. government.
|
|
| [3] |
Includes structured investments with an amortized cost and fair value
of $524 and $448, respectively, as of March 31, 2010 and $533 and
$433, respectively, as of December 31, 2009. The underlying
securities supporting these investments are primarily diversified
pools of investment grade corporate issuers which can withstand a 15%
cumulative default rate, assuming a 35% recovery.
|
|
| [4] |
Gross unrealized gains represent gains of $1,761, $709, and $9 for
Life, Property & Casualty, and Corporate, respectively, as of March
31, 2010 and $1,474, $633, and $6, respectively, as of December 31,
2009. Gross unrealized losses represent losses of $4,486, $1,157, and
$3 for Life, Property & Casualty, and Corporate, respectively, as of
March 31, 2010 and $5,592, $1,491, and $4, respectively, as of
December 31, 2009.
|
97
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Percent of | Percent of | |||||||||||||||||||||||
| Amortized | Total Fair | Amortized | Total Fair | |||||||||||||||||||||
| Cost | Fair Value | Value | Cost | Fair Value | Value | |||||||||||||||||||
|
AAA
|
$ | 259 | $ | 251 | 2.9 | % | $ | 299 | $ | 290 | 3.7 | % | ||||||||||||
|
AA
|
2,292 | 2,270 | 26.1 | % | 1,913 | 1,867 | 23.5 | % | ||||||||||||||||
|
A
|
4,355 | 4,076 | 46.8 | % | 4,510 | 3,987 | 50.2 | % | ||||||||||||||||
|
BBB
|
1,903 | 1,701 | 19.5 | % | 1,664 | 1,379 | 17.4 | % | ||||||||||||||||
|
BB & below
|
474 | 412 | 4.7 | % | 509 | 416 | 5.2 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 9,283 | $ | 8,710 | 100.0 | % | $ | 8,895 | $ | 7,939 | 100.0 | % | ||||||||||||
|
|
||||||||||||||||||||||||
| March 31, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 1,446 | $ | 1,451 | $ | 311 | $ | 261 | $ | 143 | $ | 116 | $ | 23 | $ | 18 | $ | 10 | $ | 9 | $ | 1,933 | $ | 1,855 | ||||||||||||||||||||||||
|
2004
|
620 | 627 | 68 | 49 | 45 | 33 | 30 | 18 | 6 | 4 | 769 | 731 | ||||||||||||||||||||||||||||||||||||
|
2005
|
907 | 887 | 256 | 180 | 216 | 126 | 209 | 122 | 100 | 69 | 1,688 | 1,384 | ||||||||||||||||||||||||||||||||||||
|
2006
|
1,972 | 1,798 | 393 | 294 | 408 | 226 | 365 | 186 | 298 | 152 | 3,436 | 2,656 | ||||||||||||||||||||||||||||||||||||
|
2007
|
409 | 356 | 192 | 154 | 112 | 64 | 364 | 183 | 235 | 115 | 1,312 | 872 | ||||||||||||||||||||||||||||||||||||
|
2008
|
3 | 4 | — | — | — | — | — | — | — | — | 3 | 4 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 5,357 | $ | 5,123 | $ | 1,220 | $ | 938 | $ | 924 | $ | 565 | $ | 991 | $ | 527 | $ | 649 | $ | 349 | $ | 9,141 | $ | 7,502 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
26.9% | 22.4% | 13.0% | 11.8% | 9.8% | 22.0% | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 1,732 | $ | 1,716 | $ | 297 | $ | 230 | $ | 150 | $ | 113 | $ | 20 | $ | 17 | $ | 11 | $ | 7 | $ | 2,210 | $ | 2,083 | ||||||||||||||||||||||||
|
2004
|
639 | 626 | 82 | 52 | 52 | 34 | 15 | 7 | — | — | 788 | 719 | ||||||||||||||||||||||||||||||||||||
|
2005
|
1,011 | 930 | 356 | 230 | 228 | 123 | 100 | 64 | 89 | 54 | 1,784 | 1,401 | ||||||||||||||||||||||||||||||||||||
|
2006
|
1,945 | 1,636 | 430 | 275 | 536 | 247 | 323 | 132 | 231 | 83 | 3,465 | 2,373 | ||||||||||||||||||||||||||||||||||||
|
2007
|
498 | 408 | 139 | 101 | 169 | 68 | 346 | 160 | 201 | 98 | 1,353 | 835 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 5,825 | $ | 5,316 | $ | 1,304 | $ | 888 | $ | 1,135 | $ | 585 | $ | 804 | $ | 380 | $ | 532 | $ | 242 | $ | 9,600 | $ | 7,411 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
26.5% | 21.2% | 13.1% | 11.6% | 8.7% | 22.0% | ||||||||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year the pool of loans was originated.
|
98
| March 31, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 59 | $ | 46 | $ | 30 | $ | 14 | $ | 66 | $ | 42 | $ | 166 | $ | 47 | $ | 85 | $ | 15 | $ | 406 | $ | 164 | ||||||||||||||||||||||||
|
2004
|
19 | 13 | 70 | 21 | 35 | 19 | 29 | 5 | 18 | 5 | 171 | 63 | ||||||||||||||||||||||||||||||||||||
|
2005
|
16 | 10 | 36 | 12 | 56 | 19 | 51 | 25 | 12 | 5 | 171 | 71 | ||||||||||||||||||||||||||||||||||||
|
2006
|
23 | 13 | 94 | 36 | 80 | 22 | 70 | 34 | 22 | 16 | 289 | 121 | ||||||||||||||||||||||||||||||||||||
|
2007
|
60 | 36 | 11 | 3 | 10 | 4 | 32 | 11 | 12 | 16 | 125 | 70 | ||||||||||||||||||||||||||||||||||||
|
2008
|
21 | 13 | 1 | — | — | — | 18 | 5 | 11 | 6 | 51 | 24 | ||||||||||||||||||||||||||||||||||||
|
2009
|
14 | 8 | — | — | — | — | 6 | 2 | 9 | 2 | 29 | 12 | ||||||||||||||||||||||||||||||||||||
|
2010
|
3 | 2 | — | — | — | — | 2 | 1 | — | — | 5 | 3 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 215 | $ | 141 | $ | 242 | $ | 86 | $ | 247 | $ | 106 | $ | 374 | $ | 130 | $ | 169 | $ | 65 | $ | 1,247 | $ | 528 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
40.0% | 12.4% | 20.3% | 36.2% | 33.6% | 28.7% | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
| AAA | AA | A | BBB | BB and Below | Total | |||||||||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 60 | $ | 41 | $ | 30 | $ | 15 | $ | 69 | $ | 26 | $ | 165 | $ | 44 | $ | 95 | $ | 14 | $ | 419 | $ | 140 | ||||||||||||||||||||||||
|
2004
|
19 | 11 | 70 | 22 | 37 | 11 | 27 | 4 | 23 | 4 | 176 | 52 | ||||||||||||||||||||||||||||||||||||
|
2005
|
17 | 8 | 72 | 12 | 35 | 14 | 49 | 8 | 26 | 6 | 199 | 48 | ||||||||||||||||||||||||||||||||||||
|
2006
|
23 | 13 | 108 | 33 | 82 | 28 | 69 | 22 | 23 | 12 | 305 | 108 | ||||||||||||||||||||||||||||||||||||
|
2007
|
62 | 33 | 12 | 3 | 20 | 5 | 26 | 9 | 15 | 10 | 135 | 60 | ||||||||||||||||||||||||||||||||||||
|
2008
|
22 | 12 | — | — | 5 | 1 | 15 | 4 | 13 | 3 | 55 | 20 | ||||||||||||||||||||||||||||||||||||
|
2009
|
15 | 8 | — | — | 2 | — | 4 | 1 | 9 | 2 | 30 | 11 | ||||||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 218 | $ | 126 | $ | 292 | $ | 85 | $ | 250 | $ | 85 | $ | 355 | $ | 92 | $ | 204 | $ | 51 | $ | 1,319 | $ | 439 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Credit protection
|
40.0% | 10.5% | 25.5% | 34.9% | 31.6% | 28.1% | ||||||||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year that the underlying collateral in
the pool was originated. Individual CRE CDO fair value is allocated
by the proportion of collateral within each vintage year.
|
|
| [2] |
For certain CRE CDOs, the collateral manager has the ability to
reinvest proceeds that become available, primarily from collateral
maturities. The increase in recent vintage years represents
reinvestment under these CRE CDOs.
|
| March 31, 2010 | ||||||||||||||||||||||||||||||||||||||||
| AAA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 299 | $ | 327 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 299 | $ | 327 | ||||||||||||||||||||
|
2004
|
194 | 215 | — | — | — | — | — | — | 194 | 215 | ||||||||||||||||||||||||||||||
|
2005
|
271 | 276 | — | — | 1 | 2 | — | — | 272 | 278 | ||||||||||||||||||||||||||||||
|
2006
|
134 | 125 | — | — | — | — | 3 | 3 | 137 | 128 | ||||||||||||||||||||||||||||||
|
2007
|
107 | 103 | — | — | — | — | — | — | 107 | 103 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 1,005 | $ | 1,046 | $ | — | $ | — | $ | 1 | $ | 2 | $ | 3 | $ | 3 | $ | 1,009 | $ | 1,051 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
| AAA | A | BBB | BB and Below | Total | ||||||||||||||||||||||||||||||||||||
| Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
| Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
|
2003 & Prior
|
$ | 331 | $ | 352 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 331 | $ | 352 | ||||||||||||||||||||
|
2004
|
207 | 217 | — | — | — | — | — | — | 207 | 217 | ||||||||||||||||||||||||||||||
|
2005
|
284 | 275 | — | — | 1 | 2 | — | — | 285 | 277 | ||||||||||||||||||||||||||||||
|
2006
|
137 | 120 | 3 | 1 | — | — | 1 | 2 | 141 | 123 | ||||||||||||||||||||||||||||||
|
2007
|
110 | 99 | — | — | — | — | — | — | 110 | 99 | ||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
|
Total
|
$ | 1,069 | $ | 1,063 | $ | 3 | $ | 1 | $ | 1 | $ | 2 | $ | 1 | $ | 2 | $ | 1,074 | $ | 1,068 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||||||
| [1] |
The vintage year represents the year the pool of loans was originated.
|
99
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
| Amortized | Valuation | Carrying | Amortized | Valuation | Carrying | |||||||||||||||||||
| Cost [1] | Allowance | Value | Cost [1] | Allowance | Value | |||||||||||||||||||
|
Whole loans
|
$ | 3,258 | $ | (39 | ) | $ | 3,219 | $ | 3,319 | $ | (40 | ) | $ | 3,279 | ||||||||||
|
A-Note participations
|
390 | — | 390 | 391 | — | 391 | ||||||||||||||||||
|
B-Note participations
|
602 | (154 | ) | 448 | 701 | (176 | ) | 525 | ||||||||||||||||
|
Mezzanine loans
|
577 | (168 | ) | 409 | 1,081 | (142 | ) | 939 | ||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total [2]
|
$ | 4,827 | $ | (361 | ) | $ | 4,466 | $ | 5,492 | $ | (358 | ) | $ | 5,134 | ||||||||||
|
|
||||||||||||||||||||||||
| [1] |
Amortized cost represents carrying value prior to valuation allowances, if any.
|
|
| [2] |
Excludes agricultural and residential mortgage loans. For further information on the total mortgage loan portfolio, see
Note 5 of the Notes to Condensed Consolidated Financial Statements.
|
| March 31, 2010 | December 31, 2009 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
|
Hedge funds
|
$ | 521 | 30.0 | % | $ | 596 | 33.3 | % | ||||||||
|
Mortgage and real estate funds
|
275 | 15.9 | % | 302 | 16.9 | % | ||||||||||
|
Mezzanine debt funds
|
136 | 7.8 | % | 133 | 7.4 | % | ||||||||||
|
Private equity and other funds
|
804 | 46.3 | % | 759 | 42.4 | % | ||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 1,736 | 100.0 | % | $ | 1,790 | 100.0 | % | ||||||||
|
|
||||||||||||||||
100
101
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Items | Cost | Value | Loss | Items | Cost | Value | Loss | |||||||||||||||||||||||||
|
Three months or less
|
735 | $ | 6,882 | $ | 6,760 | $ | (122 | ) | 1,237 | $ | 11,197 | $ | 10,838 | $ | (359 | ) | ||||||||||||||||
|
Greater than three to six months
|
446 | 4,442 | 4,229 | (213 | ) | 105 | 317 | 289 | (28 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
54 | 229 | 206 | (23 | ) | 311 | 2,940 | 2,429 | (511 | ) | ||||||||||||||||||||||
|
Greater than nine to twelve months
|
234 | 2,544 | 2,181 | (363 | ) | 134 | 2,054 | 1,674 | (380 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
1,810 | 21,614 | 16,689 | (4,925 | ) | 2,020 | 22,445 | 16,636 | (5,809 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
3,279 | $ | 35,711 | $ | 30,065 | $ | (5,646 | ) | 3,807 | $ | 38,953 | $ | 31,866 | $ | (7,087 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Consecutive Months | Items | Cost | Value | Loss | Items | Cost | Value | Loss | ||||||||||||||||||||||||
|
Three months or less
|
78 | $ | 414 | $ | 307 | $ | (107 | ) | 161 | $ | 951 | $ | 672 | $ | (279 | ) | ||||||||||||||||
|
Greater than three to six months
|
71 | 377 | 243 | (134 | ) | 51 | 55 | 38 | (17 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
33 | 44 | 31 | (13 | ) | 159 | 2,046 | 1,397 | (649 | ) | ||||||||||||||||||||||
|
Greater than nine to twelve months
|
111 | 1,463 | 1,008 | (455 | ) | 86 | 1,398 | 913 | (485 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
627 | 7,213 | 3,909 | (3,304 | ) | 715 | 8,146 | 4,228 | (3,918 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
920 | $ | 9,511 | $ | 5,498 | $ | (4,013 | ) | 1,172 | $ | 12,596 | $ | 7,248 | $ | (5,348 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
| Cost or | Cost or | |||||||||||||||||||||||||||||||
| Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
| Consecutive Months | Items | Cost | Value | Loss | Items | Cost | Value | Loss | ||||||||||||||||||||||||
|
Three months or less
|
31 | $ | 95 | $ | 45 | $ | (50 | ) | 62 | $ | 169 | $ | 61 | $ | (108 | ) | ||||||||||||||||
|
Greater than three to six months
|
34 | 111 | 40 | (71 | ) | 28 | 5 | 2 | (3 | ) | ||||||||||||||||||||||
|
Greater than six to nine months
|
14 | 2 | 1 | (1 | ) | 54 | 190 | 74 | (116 | ) | ||||||||||||||||||||||
|
Greater than nine to twelve months
|
41 | 155 | 65 | (90 | ) | 58 | 592 | 210 | (382 | ) | ||||||||||||||||||||||
|
Greater than twelve months
|
222 | 2,413 | 790 | (1,623 | ) | 220 | 2,553 | 735 | (1,818 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total
|
342 | $ | 2,776 | $ | 941 | $ | (1,835 | ) | 422 | $ | 3,509 | $ | 1,082 | $ | (2,427 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
ABS
|
$ | — | $ | 4 | ||||
|
CRE CDOs
|
64 | 22 | ||||||
|
CMBS
|
||||||||
|
Bonds
|
72 | 1 | ||||||
|
IOs
|
— | 3 | ||||||
|
Corporate
|
— | 107 | ||||||
|
Equity
|
1 | 48 | ||||||
|
Municipal
|
— | 1 | ||||||
|
RMBS
|
||||||||
|
Alt-A
|
2 | — | ||||||
|
Sub-prime
|
13 | 38 | ||||||
|
|
||||||||
|
Total
|
$ | 152 | $ | 224 | ||||
|
|
||||||||
102
| • |
Commercial property value declines that averaged 40% to 45% from the valuation peak but
differed by property type and location.
|
|
| • |
Average cumulative CMBS collateral loss rates that varied by vintage year but reached
approximately 12% for the 2007 vintage year.
|
|
| • |
Residential property value declines that averaged 37% to 40% from the valuation peak but
differed by location.
|
|
| • |
Average cumulative RMBS collateral loss rates that varied by vintage year but reached
approximately 46% for the 2007 vintage year.
|
103
104
| • |
reduce the value of assets under management and the amount of fee income generated from
those assets;
|
|
| • |
reduce the value of equity securities, trading, for international variable annuities, the
related policyholder funds and benefits payable, and the amount of fee income generated from
those variable annuities;
|
|
| • |
increase the liability for GMWB benefits resulting in realized capital losses;
|
|
| • |
increase the value of derivative assets used to dynamically hedge product guarantees
resulting in realized capital gains;
|
|
| • |
increase costs under the Company’s hedging program;
|
|
| • |
increase the Company’s net amount at risk for GMDB and GMIB benefits;
|
|
| • |
decrease the Company’s actual gross profits, resulting in increased DAC amortization;
|
|
| • |
increase the amount of required statutory capital necessary to maintain targeted risk based
capital ratios;
|
|
| • |
turn customer sentiment toward equity-linked products negative, causing a decline in sales;
and
|
|
| • |
decrease the Company’s estimated future gross profits. See Life Estimated Gross Profits
Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable
Annuity and Other Universal Life-Type Contracts within the Critical Accounting Estimates
section of the MD&A for further information.
|
105
106
| GMWB | ||||||||||
| Account | % of GMWB | |||||||||
| Risk Management Strategy | Duration | Value | Account Value | |||||||
|
Entire GMWB risk reinsured with a third party
|
Life of the product | $ | 11,233 | 25 | % | |||||
|
Capital markets risk transferred to a third
party — behavior risk retained by the
Company
|
Designed to cover the effective life of the product | 10,751 | 23 | % | ||||||
|
Dynamic hedging of capital markets risk
using various derivative instruments [1]
|
Maturity of up to 10 years [2] | 24,017 | 52 | % | ||||||
|
|
||||||||||
|
|
$ | 46,001 | 100 | % | ||||||
|
|
||||||||||
| [1] |
Through the first quarter of 2010, the Company continued to maintain a
reduced level of dynamic hedge protection on U.S. GAAP earnings while
placing a greater relative emphasis on the protection of statutory
surplus including the macro hedging program.
|
|
| [2] |
This portion of the GMWB hedge strategy may include derivatives with
maturities of up to 10 years. Non-parallel shifts for both equity
implied volatility and LIBOR yield curves may increase U.S. GAAP
volatility.
|
| Net Impact on Hedging | ||||
| Program Pre-Tax/DAC Gain | ||||
| Capital Market Factor | (Loss) | |||
|
Equity markets increase 1% [1]
|
$ | (10 | ) | |
|
Equity markets decrease 1% [1]
|
10 | |||
|
Volatility increases 1% [2]
|
(10 | ) | ||
|
Volatility decreases 1% [2]
|
10 | |||
|
Interest rates increase 1 basis point [3]
|
2 | |||
|
Interest rates decrease 1 basis point [3]
|
(2 | ) | ||
|
Yen strengthens 1% vs. all other currencies [4]
|
7 | |||
|
Yen weakens 1% vs. all other currencies [4]
|
(7 | ) | ||
|
[1]
|
Represents the aggregate net impact of a 1% increase or decrease in broadly traded global equity indices. | |
|
[2]
|
Represents the aggregate net impact of a 1% increase or decrease in blended implied volatility that is generally skewed towards longer durations for broadly traded global equity indices. | |
|
[3]
|
Represents the aggregate net impact of a 1 basis point parallel shift on the global LIBOR yield curve. | |
|
[4]
|
Represents the aggregate net impact of a 1% strengthening or weakening in the yen vs. all other currencies. |
107
108
109
| Maximum Available As of | Outstanding As of | |||||||||||||||||||||||
| Effective | Expiration | March 31, | December 31, | March 31, | December 31, | |||||||||||||||||||
| Description | Date | Date | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
|
Commercial Paper
|
||||||||||||||||||||||||
|
The Hartford
|
11/10/86 | N/A | $ | 2,000 | $ | 2,000 | $ | — | $ | — | ||||||||||||||
|
Revolving Credit Facility
|
||||||||||||||||||||||||
|
5-year revolving credit facility
|
8/9/07 | 8/9/12 | 1,900 | 1,900 | — | — | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Commercial Paper
and Revolving Credit Facility
|
$ | 3,900 | $ | 3,900 | $ | — | $ | — | ||||||||||||||||
|
|
||||||||||||||||||||||||
| As of March 31, 2010 | ||||||||
| Ratings levels | Notional Amount | Fair Value | ||||||
|
Either BBB+ or Baa1
|
$ | 3,519 | $ | 154 | ||||
|
Both BBB+ and Baa1 [1] [2]
|
$ | 13,003 | $ | 328 | ||||
| [1] |
The notional amount and fair value include both the scenario where
only one rating agency takes action to this level as well as where
both rating agencies take action to this level.
|
|
| [2] |
The notional and fair value amounts include a customized GMWB
derivative with a notional amount of $5.4 billion and a fair value of
$107, for which the Company has a contractual right to make a
collateral payment in the amount of approximately $61 to prevent its
termination.
|
110
|
Fixed maturities [1]
|
$ | 24,525 | ||
|
Short-term investments
|
917 | |||
|
Cash
|
269 | |||
|
Less: Derivative collateral
|
(119 | ) | ||
|
|
||||
|
Total
|
$ | 25,592 | ||
|
|
||||
| [1] |
Includes $603 of U.S. Treasuries.
|
|
Fixed maturities [1]
|
$ | 50,743 | ||
|
Short-term investments
|
5,608 | |||
|
Cash
|
1,807 | |||
|
Less: Derivative collateral
|
(1,372 | ) | ||
|
Cash associated with Japan variable annuities
|
(639 | ) | ||
|
|
||||
|
Total
|
$ | 56,147 | ||
|
|
||||
| [1] |
Includes $3.5 billion of U.S. Treasuries.
|
111
| As of | ||||
| March 31, 2010 | ||||
|
Contractholder Obligations
|
||||
|
Total Life contractholder obligations
|
$ | 256,437 | ||
|
Less: Separate account assets [1]
|
(160,198 | ) | ||
|
International statutory separate accounts [1]
|
(32,027 | ) | ||
|
|
||||
|
General account contractholder obligations
|
$ | 64,212 | ||
|
|
||||
|
|
||||
|
Composition of General Account Contractholder Obligations
|
||||
|
Contracts without a surrender provision and/or fixed payout dates [2]
|
$ | 30,068 | ||
|
Global Annuity — U.S. fixed MVA annuities [3]
|
11,036 | |||
|
Global Annuity — International fixed MVA annuities
|
2,494 | |||
|
Guaranteed investment contracts (“GIC”) [4]
|
1,314 | |||
|
Other [5]
|
19,300 | |||
|
|
||||
|
General account contractholder obligations
|
$ | 64,212 | ||
|
|
||||
| [1] |
In the event customers elect to surrender separate account assets or
international statutory separate accounts, Life will use the proceeds
from the sale of the assets to fund the surrender, and Life’s
liquidity position will not be impacted. In many instances Life will
receive a percentage of the surrender amount as compensation for early
surrender (surrender charge), increasing Life’s liquidity position.
In addition, a surrender of variable annuity separate account or
general account assets (see below) will decrease Life’s obligation for
payments on guaranteed living and death benefits.
|
|
| [2] |
Relates to contracts such as payout annuities or institutional notes,
other than guaranteed investment products with an MVA feature
(discussed below) or surrenders of term life, group benefit contracts
or death and living benefit reserves for which surrenders will have no
current effect on Life’s liquidity requirements.
|
|
| [3] |
Relates to annuities that are held in a statutory separate account,
but under U.S. GAAP are recorded in the general account as Fixed MVA
annuity contract holders are subject to the Company’s credit risk. In
the statutory separate account, Life is required to maintain invested
assets with a fair value equal to the MVA surrender value of the Fixed
MVA contract. In the event assets decline in value at a greater rate
than the MVA surrender value of the Fixed MVA contract, Life is
required to contribute additional capital to the statutory separate
account. Life will fund these required contributions with operating
cash flows or short-term investments. In the event that operating
cash flows or short-term investments are not sufficient to fund
required contributions, the Company may have to sell other invested
assets at a loss, potentially resulting in a decrease in statutory
surplus. As the fair value of invested assets in the statutory
separate account are generally equal to the MVA surrender value of the
Fixed MVA contract, surrender of Fixed MVA annuities will have an
insignificant impact on the liquidity requirements of Life.
|
|
| [4] |
GICs are subject to discontinuance provisions which allow the
policyholders to terminate their contracts prior to scheduled maturity
at the lesser of the book value or market value. Generally, the
market value adjustment reflects changes in interest rates and credit
spreads. As a result, the market value adjustment feature in the GIC
serves to protect the Company from interest rate risks and limit
Life’s liquidity requirements in the event of a surrender.
|
|
| [5] |
Surrenders of, or policy loans taken from, as applicable, these
general account liabilities, which include the general account option
for Global Annuity — U.S.’s individual variable annuities and
Individual Life’s variable life contracts, the general account option
for Retirement’s annuities and universal life contracts sold by
Individual Life may be funded through operating cash flows of Life,
available short-term investments, or Life may be required to sell
fixed maturity investments to fund the surrender payment. Sales of
fixed maturity investments could result in the recognition of
significant realized losses and insufficient proceeds to fully fund
the surrender amount. In this circumstance, Life may need to take
other actions, including enforcing certain contract provisions which
could restrict surrenders and/or slow or defer payouts.
|
| As of March 31, 2010 | ||||||||||||||||
| Property & Casualty | Life | Corporate | Consolidated | |||||||||||||
|
Short-term investments
|
$ | 917 | $ | 5,608 | $ | 2,020 | $ | 8,545 | ||||||||
|
U.S. Treasuries
|
603 | 3,524 | 252 | 4,379 | ||||||||||||
|
Cash
|
269 | 1,807 | 3 | 2,079 | ||||||||||||
|
Less: Derivative collateral
|
(119 | ) | (1,372 | ) | — | (1,491 | ) | |||||||||
|
Cash associated with Japan variable annuities
|
— | (639 | ) | — | (639 | ) | ||||||||||
|
|
||||||||||||||||
|
Total available liquidity
|
$ | 1,670 | $ | 8,928 | $ | 2,275 | $ | 12,873 | ||||||||
|
|
||||||||||||||||
112
| March 31, | December 31, | |||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Short-term debt (includes current
maturities of long-term debt and
capital lease obligations)
|
$ | 275 | $ | 343 | (20 | %) | ||||||
|
Long-term debt
|
6,597 | 5,496 | 20 | % | ||||||||
|
|
||||||||||||
|
Total debt [1]
|
6,872 | 5,839 | 18 | % | ||||||||
|
Stockholders’ equity excluding
accumulated other comprehensive
loss, net of tax (“AOCI”)
|
20,217 | 21,177 | (5 | %) | ||||||||
|
AOCI, net of tax
|
(2,377 | ) | (3,312 | ) | 28 | % | ||||||
|
|
||||||||||||
|
Total stockholders’ equity
|
$ | 17,840 | $ | 17,865 | — | |||||||
|
|
||||||||||||
|
Total capitalization including AOCI
|
$ | 24,712 | $ | 23,704 | 4 | % | ||||||
|
|
||||||||||||
|
Debt to stockholders’ equity
|
39 | % | 33 | % | ||||||||
|
Debt to capitalization
|
28 | % | 25 | % | ||||||||
|
|
||||||||||||
| [1] |
Total debt of the Company excludes $834 and $1.1 billion of consumer notes as of March 31,
2010 and December 31, 2009, respectively, and $60 and $78 of Federal Home Loan Bank advances
recorded in other liabilities as of March 31, 2010 and December 31, 2009, respectively.
|
|
Total debt
|
•
Total debt increased primarily due to the
issuance of $1.1 billion in senior notes in March 2010
partially offset by payment of the capital lease
obligations in January 2010.
|
|
|
|
||
|
AOCI, net of tax
|
•
AOCI improved primarily due to decreases in
unrealized losses on available-for-sale securities of
$891 primarily due to tightening credit spreads.
|
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Net cash provided by operating activities
|
$ | 488 | $ | 1,010 | ||||
|
Net cash provided by (used for) investing activities
|
$ | 99 | $ | (1,011 | ) | |||
|
Net cash provided by (used for) financing activities
|
$ | (652 | ) | $ | 126 | |||
|
Cash — end of period
|
$ | 2,079 | $ | 1,851 | ||||
113
| A.M. Best | Fitch | Standard & Poor’s | Moody’s | |||||
|
Insurance Financial Strength Ratings:
|
||||||||
|
Hartford Fire Insurance Company
|
A | A+ | A | A2 | ||||
|
Hartford Life Insurance Company
|
A | A- | A | A3 | ||||
|
Hartford Life and Accident Insurance Company
|
A | A- | A | A3 | ||||
|
Hartford Life and Annuity Insurance Company
|
A | A- | A | A3 | ||||
|
|
||||||||
|
Other Ratings:
|
||||||||
|
The Hartford Financial Services Group, Inc.:
|
||||||||
|
Senior debt
|
bbb+ | BBB- | BBB | Baa3 | ||||
|
Commercial paper
|
AMB-2 | F2 | A-2 | P-3 | ||||
|
Junior subordinated debentures
|
bbb- | BB | BB+ | Ba1 | ||||
|
Mandatory convertible preferred shares
|
bbb- | BB | BB | — | ||||
|
Hartford Life, Inc.:
|
||||||||
|
Senior debt
|
bbb+ | BBB- | BBB | Baa3 | ||||
|
Hartford Life Insurance Company:
|
||||||||
|
Short term rating
|
— | — | A-1 | P-2 | ||||
|
Consumer notes
|
a | BBB+ | A | Baa1 |
| March 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
|
U.S. Life Operations, includes domestic captive insurance subsidiaries
|
$ | 7,822 | $ | 7,287 | ||||
|
Property & Casualty Operations, excluding non-Property & Casualty subsidiaries
|
7,328 | 7,364 | ||||||
|
|
||||||||
|
Total
|
$ | 15,150 | $ | 14,651 | ||||
|
|
||||||||
114
| Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
| Item 4. |
CONTROLS AND PROCEDURES
|
115
| Item 1. |
LEGAL PROCEEDINGS
|
| Item 1A. |
RISK FACTORS
|
116
117
| • |
As a savings and loan holding company, we are subject to regulation, supervision and
examination by the OTS, including with respect to required capital, cash flow, organizational
structure, risk management and earnings at the parent company level, and to the OTS reporting
requirements. All of our activities must be financially-related activities as defined by
federal law (which includes
insurance activities), and the OTS has enforcement authority over us, including the right to
pursue administrative orders or penalties and the right to restrict or prohibit activities
determined by the OTS to be a serious risk to FTB. We must also be a source of strength to FTB,
which could require further capital contributions.
|
|
| • |
We believe that the limitations on the amount and form of bonus, retention and other
incentive compensation that we may pay to executive officers and senior management no longer
apply to us from and after the date we repurchased all of the Series E Preferred Stock.
Nevertheless, recipients of federal assistance continue to be subject to intense scrutiny, and
future regulatory initiatives could be adopted at the federal or state level that have the
effect of constraining the business or management of those enterprises. These initiatives
include a pending proposal before the Connecticut legislature that would, if adopted, impose a
tax on bonuses paid by recipients of TARP funds. In addition, the Obama administration has
proposed a financial crisis responsibility tax that would be levied on the largest financial
institutions in terms of assets for at least the next ten years to recoup any shortfall from
the TARP. We cannot predict the scope or impact of future regulatory initiatives or the effect
that they may have on our ability to attract and retain key personnel, the cost and complexity
of our compliance programs or on required levels of regulatory capital.
|
|
| • |
Future federal statutes may adversely affect the terms of the CPP that remain applicable to
us, and Treasury may amend the terms of our agreement unilaterally if required by future
statutes, including in a manner materially adverse to us.
|
| • |
10% of the insurer’s policyholder surplus as of December 31 of the preceding year, and
|
|
| • |
net income, or net gain from operations if the subsidiary is a life insurance company, for
the previous calendar year, in each case determined under statutory insurance accounting
principles.
|
118
119
| Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
| Approximate Dollar | ||||||||||||||||
| Total Number of | Value of Shares that | |||||||||||||||
| Shares Purchased as | May Yet Be | |||||||||||||||
| Total Number | Average Price | Part of Publicly | Purchased Under | |||||||||||||
| of Shares | Paid Per | Announced Plans or | the Plans or | |||||||||||||
| Period | Purchased [1] | Share | Programs | Programs | ||||||||||||
| (in millions) | ||||||||||||||||
|
January 1, 2010 – January 31, 2010
|
2,588 | $ | 23.79 | — | $ | 807 | ||||||||||
|
February 1, 2010 – February 28, 2010
|
— | $ | — | — | $ | 807 | ||||||||||
|
March 1, 2010 – March 31, 2010
|
122,552 | $ | 24.36 | — | $ | 807 | ||||||||||
|
|
||||||||||||||||
|
Total
|
125,140 | $ | 24.35 | — | N/A | |||||||||||
|
|
||||||||||||||||
| [1] |
Represents shares acquired from employees of the Company for tax withholding purposes in
connection with the Company’s stock compensation plans.
|
| Item 6. |
EXHIBITS
|
120
|
|
The Hartford Financial Services Group, Inc. | |||
|
|
||||
|
|
(Registrant) | |||
|
|
||||
|
Date: April 29, 2010
|
/s/ Beth A. Bombara | |||
|
|
||||
|
|
Beth A. Bombara | |||
|
|
Senior Vice President and Controller | |||
|
|
(Chief accounting officer and duly | |||
|
|
authorized signatory) |
121
| Exhibit No. | Description | ||
|
3.01
|
Amended and Restated Certificate of Incorporation of The Hartford Financial Services Group, Inc. (as amended by the Certificate of Designation with respect to 7.25% Mandatory Convertible Preferred Stock Series F dated March 23, 2010 and the Certificate of Elimination of the Series A Participating Cumulative Preferred Stock, Series D Non-Voting Contingent Convertible Preferred Stock and Fixed Rate Cumulative Perpetual Preferred Stock, Series E, dated April 26, 2010). | ||
|
|
|||
|
3.02
|
Amended and Restated By-Laws of The Hartford, amended effective May 28, 2009 (incorporated herein by reference to Exhibit 3.1 to The Hartford’s Current Report on Form 8-K, filed on March 9, 2010). | ||
|
|
|||
|
4.01
|
4.00% Senior Note due 2015 (incorporated by reference to Exhibit 4.2 to The Hartford’s Current Report on Form 8-K, filed March 23, 2010). | ||
|
|
|||
|
4.02
|
5.50% Senior Note due 2020 (incorporated by reference to Exhibit 4.3 to The Hartford’s Current Report on Form 8-K, filed March 23, 2010). | ||
|
|
|||
|
4.03
|
6.625% Senior Note due 2040 (incorporated by reference to Exhibit 4.4 to The Hartford’s Current Report on Form 8-K, filed March 23, 2010). | ||
|
|
|||
|
4.04
|
Form of Certificate with respect to 7.25% Mandatory Convertible Preferred Stock, Series F (included as Exhibit A to Exhibit 3.03 (incorporated herein by reference to Exhibit 4.5 to the Hartford’s Current Report on Form 8-K, filed on March 23, 2010). | ||
|
|
|||
|
4.05
|
Deposit Agreement, dated as of March 23, 2010, among The Hartford Financial Services Group, Inc., The Bank of New York Mellon, as Depository, and holders from time to time of the Receipt issued thereunder (including form of Depository Receipt) (incorporated herein by reference to (incorporated by reference to Exhibit 4.6 to The Hartford’s Current Report on Form 8-K, filed March 23, 2010). | ||
|
|
|||
|
10.01
|
Form of Depository Receipt for the Depositary Shares (included as Exhibit A to Exhibit 4.05) (incorporated herein by reference to Exhibit 4.7 to The Hartford’s Current Report on Form 8-K, filed on March 9, 2010). | ||
|
|
|||
|
10.02
|
Letter Agreement, dated as of March 13, 2010, by and between The Hartford Financial Services Group, Inc., Allianz SE (including letter of Allianz SE of March 12, 2010 attached thereto) (incorporated herein by reference to Exhibit 10.1 to The Hartford’s Current Report on Form 8-K, filed March 16, 2010). | ||
|
|
|||
|
10.03
|
Repurchase Letter Agreement, dated as of March 31, 2010, between The Hartford Financial Services Group, Inc. and the United States Department of Treasury (incorporated herein by reference to Exhibit 99.1 to The Hartford’s Current Report on Form 8-K, filed on March 31, 2010). | ||
|
|
|||
|
15.01
|
Deloitte & Touche LLP Letter of Awareness. | ||
|
|
|||
|
31.01
|
Certification of Liam E. McGee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
|
|
|||
|
31.02
|
Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
|
|
|||
|
32.01
|
Certification of Liam E. McGee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
|
|
|||
|
32.02
|
Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
|
|
|||
|
101.INS
|
XBRL Instance Document. [1] | ||
|
|
|||
|
101.SCH
|
XBRL Taxonomy Extension Schema. | ||
|
|
|||
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase. | ||
|
|
|||
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase. | ||
|
|
|||
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase. | ||
|
|
|||
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase. | ||
| [1] |
Includes the following materials contained in this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010 formatted in XBRL (extensible Business Reporting Language) (i)
the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated
Balance Sheets, (iii) the Condensed Consolidated Statements of Changes in Equity, (iv) the
Condensed Consolidated Statements of Comprehensive Income (Loss), (v) the Condensed
Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial
Statements, which is tagged as blocks of text.
|
122
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| The Travelers Companies, Inc. | TRV |
| Kemper Corporation | KMPR |
| Unum Group | UNM |
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|