The Hartford 2008 Annual Report Download - page 130

Table of Contents
• Retirement Plans mutual funds reflects an increase of $18.7 billion from the acquisition of servicing rights of Sun Life
Retirement Services, Inc and Princeton Retirement Group, both of which closed in the first quarter of 2008. Net sales
for 2008 reflect expected outflows on the acquired business.
• International — Japan Annuities has seen positive net flows and favorable effects from currency exchange rates for
2008. Net flows have decreased in Japan annuities due the 3 Win trigger and to increased competition from domestic
and foreign insurers, particularly competition relating to products offered with living benefit guarantees.
Year ended December 31, 2007 compared to year ended December 31, 2006
• Increases in Retail U.S. individual variable annuity account values as of December 31, 2007 can be primarily attributed
to market growth during the year and improved net flows due to an increase in sales.
• In addition to strong positive net flows, market appreciation and diversified sales growth during the year contributed to
Retail mutual funds assets under management growth.
• Individual Life variable universal life account values increased primarily due to market appreciation and positive net
flows. Life insurance in-force increased from the prior periods due to business growth.
• Retirement Plans account values increased for the year ended December 31, 2007 due to positive net flows driven by
ongoing contributions and market appreciation during the year.
• International — Japan annuity account values continue to grow as a result of positive net flows and a strengthening of
the yen versus the dollar offset by a decline in market performance throughout the year
Net Investment Spread
Management evaluates performance of certain products based on net investment spread. These products include those that
have insignificant mortality risk, such as fixed annuities, certain general account universal life contracts and certain
institutional contracts. Net investment spread is determined by taking the difference between the earned rate and the related
crediting rates on average general account assets under management. The net investment spreads shown below are for the
total portfolio of relevant contracts in each segment and reflect business written at different times. When pricing products,
the Company considers current investment yields and not the portfolio average. Net investment spread can be volatile period
over period, which can have a significant positive or negative effect on the operating results of each segment. Investment
earnings can also be influenced by factors such as the actions of the Federal Reserve and a decision to hold higher levels of
short-term investments. The volatile nature of net investment spread is driven primarily by prepayment premiums on
securities and earnings on limited partnership and other alternative investments.
Net investment spread is calculated as a percentage of general account assets and expressed in basis points (“bps”):
For the years ended December 31,
2008 2007 2006
Retail — Individual Annuity 73.1 bps 173.5 bps 153.0 bps
Individual Life 89.6 bps 130.3 bps 123.9 bps
Retirement Plans 92.3 bps 161.9 bps 152.0 bps
Institutional — Stable Value 20.5 bps 100.6 bps 84.8 bps
Year ended December 31, 2008 compared to year ended December 31, 2007
• Retail — Individual Annuity, Individual Life, Retirement Plans and Institutional net investment spread decreased
primarily due to negative earnings on limited partnership and other alternative investment income in 2008 compared to
strong earnings in these classes in 2007 and lower yields on fixed maturities, partially offset by reduced credited rates.
Year ended December 31, 2007 compared to year ended December 31, 2006
• Retail — Individual Annuity, Individual Life, Retirement Plans and Institutional net investment spreads increased
primarily due to a higher allocation of investments in higher yield/higher risk investment classes, including limited
partnerships and other alternative investments and relative strong performance of this asset class in 2007.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009