The Hartford 2010 Annual Report Download - page 31

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CONSOLIDATED RESULTS OF OPERATIONS
Segment Results 2010 2009 2008
Increase
(Decrease) From
2009 to 2010
Increase
(Decrease) From
2008 to 2009
Property & Casualty Commercial $ 995 $ 899 $ 133 $ 96 $ 766
Group Benefits 185 193 (6) (8) 199
Commercial Markets 1,180 1,092 127 88 965
Consumer Markets 143 140 102 3 38
Global Annuity 404 (1,166) (2,287) 1,570 1,121
Life Insurance 262 39 (19) 223 58
Retirement Plans 47 (222) (157) 269 (65)
Mutual Funds 132 34 37 98 (3)
Wealth Management 845 (1,315) (2,426) 2,160 1,111
Corporate and Other (488) (804) (552) 316 (252)
Net income (loss) $ 1,680 $ (887) $ (2,749) $ 2,567 $ 1,862
Year ended December 31, 2010 compared to the year ended December 31, 2009
The change from consolidated net loss to consolidated net income was primarily due to a DAC Unlock charge of $1.0 billion, after-tax,
in 2009 compared to a benefit of $111, after-tax, in 2010, net realized capital losses of $1.7 billion, after-tax, in 2009 compared to losses
of $184, after-tax, in 2010, partially offset by a goodwill impairment of approximately $32, after-tax, in 2009, compared to
approximately $100, after-tax, in 2010.
Excluding the after-tax impacts of net realized capital losses, DAC Unlocks and goodwill impairments, earnings decreased $46 from
2009 to 2010. See the segment sections of the MD&A for a discussion on their respective performances.
Year ended December 31, 2009 compared to the year ended December 31, 2008
The decrease in consolidated net loss was primarily due to a decrease in net realized losses, which included other-than-temporary
impairments of $1.5 billion in 2009 compared to $4.0 billion in 2008, and gains on the variable annuity hedge program of $631 in 2009
compared to losses of $639 in 2008. Partially offsetting the decrease in realized losses was approximately $300 in net realized capital
losses in 2009 related to the settlement of a contingent obligation to Allianz SE (“Allianz”). Goodwill impairments of $32, after-tax, in
2009 compared to impairments of $597, after-tax, in 2008 also contributed to the decrease in net loss.
Excluding the after-tax impacts of net realized capital losses and goodwill impairments, earnings decreased $608 from 2008 to 2009
driven by decreases in fee income due to lower average assets under management primarily in Global Annuity, lower net investment
income on available-for-sale and other securities primarily due to lower income on fixed maturities, and restructuring costs. See the
segment sections of the MD&A for a discussion on their respective performances.
Income Taxes
The effective tax rates for 2010, 2009 and 2008 were 26%, 49%, and 40%, respectively. The principal causes of the differences between
the effective rate and the U.S. statutory rate of 35% for 2010, 2009 and 2008 were tax-exempt interest earned on invested assets and the
separate account dividends received deduction (“DRD”). This caused a decrease in the tax expense on the 2010 pre-tax income and an
increase in the tax benefit on the 2009 and 2008 pre-tax losses. The effective tax rate for 2010 also includes the effect of an increase in
the valuation allowance on the deferred tax asset and the effective tax rate for 2009 includes the tax effect of a non-deductible expense
related to the settlement of a contingent obligation to Allianz. For additional information, see Note 13 of the Notes to Consolidated
Financial Statements.
The separate account DRD is estimated for the current year using information from the prior year-end, adjusted for current year equity
market performance and other appropriate factors, including estimated levels of corporate dividend payments. The actual current year
DRD can vary from estimates based on, but not limited to, changes in eligible dividends received by the mutual funds, amounts of
distribution from these mutual funds, amounts of short-term capital gains at the mutual fund level and the Company’ s taxable income
before the DRD. The Company recorded benefits of $145, $181 and $176 related to the separate account DRD in the years ended
December 31, 2010, 2009 and 2008, respectively. These amounts included benefits (charges) related to prior years' tax returns of $(3),
$29 and $9 in 2010, 2009 and 2008, respectively.