The Hartford 2008 Annual Report Download - page 148

Table of Contents
Insurance operating
costs and other
expenses
• Insurance operating costs and other increased less than the growth of in-force business as a
result of active expense management efforts.
Amortization of
deferred policy
acquisition costs
and present value of
future profits
(“DAC”)
• Amortization of DAC increased primarily as a result of the unlock expense in 2008 as
compared to the unlock benefit in 2007, partially offset by reduced DAC amortization
primarily attributed to net realized capital losses. This increase in DAC amortization had a
partial offset in amortization of deferred revenues, included in fee income.
Income tax expense
(benefit)
• Income tax benefits were a result of lower income before income taxes primarily due to an
increase in realized capital losses and DAC amortization.
Year ended December 31, 2007 compared to the year ended December 31, 2006
Net income increased for the year ended December 31, 2007, driven primarily by the unlock benefit in the third quarter of
2007 as compared to an unlock expense in the fourth quarter of 2006 partially offset by unfavorable mortality in 2007. For
further discussion on the Unlock, see Unlock and Sensitivity Analysis in the Critical Accounting Estimates section of the
MD&A. The year ended December 31, 2006 also included favorable revisions to prior period DAC estimates of $7,
after-tax. A more expanded discussion of income growth is presented below:
Fee income and other • Fee income and other decreased primarily due to the impacts of the 2007 and 2006
Unlocks. Offsetting the impacts of the Unlocks, fee income increased primarily due to
higher cost of insurance charges, the largest component of fee income, of $35 primarily
driven by growth in variable universal and universal life insurance in-force. Variable fee
income increased consistent with the growth in variable universal life insurance account
value.
Earned premiums • Earned premiums, which include premiums for ceded reinsurance, decreased primarily due
to increased ceded reinsurance premiums.
Net investment income • Net investment income increased consistent with growth in general account values.
Individual Life earned additional net investment income throughout 2007 associated with
higher returns from limited partnerships and other alternative investments.
Benefits, losses and
loss adjustment
expenses
• Benefits, losses and loss adjustment expenses increased due to life insurance in-force
growth and unfavorable mortality.
Insurance operating
costs and other
expenses
• Insurance operating costs and other expenses increased in 2007 consistent with life
insurance in-force growth.
Amortization of
deferred policy
acquisition costs
and present value of
future profits
(“DAC”)
• Lower amortization of DAC resulted from the unlock benefit in 2007 as compared to an
unlock expense in 2006. This decrease in DAC amortization had a partial offset in
amortization of deferred revenues, included in fee income.
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Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009