Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

(Mark	One)

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES EXCHANGE	ACT	OF	1934

For	the	fiscal	year	ended	December	31,	2011

# TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES EXCHANGE	ACT	OF	1934

# THE	HARTFORD	FINANCIAL	SERVICES	GROUP,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of	incorporation	or	organization)

(I.R.S.	Employer	Identification	No.)

One	Hartford	Plaza,	Hartford,	Connecticut	06155

(Address	of	principal	executive	offices)	(Zip	Code)

(Registrant's	telephone	number,	including	area	code)

# SECURITIES	REGISTERED	PURSUANT	TO	SECTION	12	(b)	OF	THE	ACT

# (ALL	OF	WHICH	ARE	LISTED	ON	THE	NEW	YORK	STOCK	EXCHANGE	INC.):

Common	Stock,	par	value	$0.01	per	share

Depositary	shares,	representing	interests	in	7.25%	Mandatory	Convertible	Preferred	Stock,	Series	F,	par	value	$0.01	per	share

# SECURITIES	REGISTERED	PURSUANT	TO	SECTION	12	(g)	OF	THE	ACT:

•if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Exchange	Act. þ

•whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of 1934	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and (2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days. þ

•whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data File	required	to	be	submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	during	the	preceding	12	months	(or	for such	shorter	period	that	the	registrant	was	required	to	submit	and	post	such	files). þ

•if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be contained,	to	the	best	of	registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K. þ

•whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting company.	See	definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2 of	the	Exchange	Act.

	 Large	accelerated	filer	þ							Accelerated	filer	o						Non-accelerated	filer	o							Smaller	reporting	company	o

•	 whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Exchange	Act.)

The	aggregate	market	value	of	the	shares	of	Common	Stock	held	by	non-affiliates	of	the	registrant	as	of	June	30,	2011	was	approximately $11.7	billion,	based	on	the	closing	price	of	$26.37	per	share	of	the	Common	Stock	on	the	New	York	Stock	Exchange	on	June	30,	2011.

# Documents	Incorporated	by	Reference

Portions	of	the	registrant's	definitive	proxy	statement	for	its	2012	annual	meeting	of	shareholders	are	incorporated	by	reference	in	Part	III of	this	Form	10-K.

# ANNUAL	REPORT	ON	FORM	10-K

| 1. | Business | 5 |
| :--- | :--- | :--- |
| 1A. | Risk\tFactors | 14 |
| 1B. | Unresolved\tStaff\tComments | 27 |
| 2. | Properties | 27 |
| 3. | Legal\tProceedings | 28 |
| 4. | Mine\tSafety\tDisclosures | 29 |
|  | Part\tII |  |
| 5. | Market\tfor\tThe\tHartford's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 30 |
| 6. | Selected\tFinancial\tData | 32 |
| 7. | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 33 |
| 7A. | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 131 |
| 8. | Financial\tStatements\tand\tSupplementary\tData | 131 |
| 9. | Changes\tin\tand\tDisagreements\tWith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 131 |
| 9A. | Controls\tand\tProcedures | 131 |
| 9B. | Other\tInformation | 133 |
|  | Part\tIII |  |
| 10. | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance\tof\tThe\tHartford | 133 |
| 11. | Executive\tCompensation | 134 |
| 12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 134 |
| 13. | Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 135 |
| 14. | Principal\tAccounting\tFees\tand\tServices | 135 |
|  | Part\tIV |  |
| 15. | Exhibits,\tFinancial\tStatement\tSchedules | 135 |

# Part	IV

	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

# Forward-Looking	Statements

Certain	of	the	statements	contained	herein	are	forward-looking	statements	made	pursuant	to	the	safe	harbor	provisions	of	the	Private Securities	 Litigation	 Reform	Act	 of	 1995.	 Forward-looking	 statements	 can	 be	 identified	 by	 words	 such	 as	 "anticipates,"	 "intends," "plans,"	"seeks,"	"believes,"	"estimates,"	"expects,"	"projects,"	and	similar	references	to	future	periods.

Forward-looking	statements	are	based	on	our	current	expectations	and	assumptions	regarding	economic,	competitive	and	 legislative developments.	Because	forward-looking	statements	relate	to	the	future,	they	are	subject	to	inherent	uncertainties,	risks	and	changes	in circumstances	that	are	difficult	to	predict.	They	have	been	made	based	upon	management's	expectations	and	beliefs	concerning	future developments	 and	 their	 potential	 effect	 upon	 The	 Hartford	 Financial	 Services	 Group,	 Inc.	 and	 its	 subsidiaries	 (collectively,	 the "Company").	Future	developments	may	not	be	in	line	with	management's	expectations	or	have	unanticipated	effects.	Actual	results	could differ	materially	from	expectations,	depending	on	the	evolution	of	various	factors,	including	those	set	forth	in	Part	I,	Item	1A.	Risk Factors	and	those	identified	from	time	to	time	in	our	other	filings	with	the	Securities	and	Exchange	Commission.	These	important	risks and	uncertainties	include:

•challenges	related	to	the	Company's	current	operating	environment,	including	continuing	uncertainty	about	the	strength	and	speed	of the	recovery	 in	 the	United	States	and	other	key	economies	and	 the	 impact	of	governmental	stimulus	and	austerity	 initiatives, sovereign	credit	concerns,	including	the	potential	consequences	associated	with	recent	and	further	potential	downgrades	to	the	credit ratings	 of	 debt	 issued	 by	 the	 United	 States	 government,	 European	 sovereigns	 and	 other	 adverse	 developments	 on	 financial, commodity	and	credit	markets	and	consumer	spending	and	investment,	including	in	respect	of	Europe,	and	the	effect	of	these	events on	our	returns	 in	our	 life	and	property	and	casualty	 investment	portfolios	and	our	hedging	costs	associated	with	our	variable annuities	business;

•the	potential	impact	or	consequences	of	our	ongoing	evaluation	of	the	Company's	strategy	and	business	portfolio,	which	may	lead us	to	pursue	one	or	more	transactions	or	take	other	actions,	including	the	discontinuance	or	placing	in	run-off	of	certain	lines	of business	 and/or	 the	 pursuit	 of	 strategic	 acquisitions,	 divestitures	 or	 restructurings,	 and	 the	 potential	 that	 any	 of	 the	 foregoing transactions	or	actions	may	not	be	achievable	or	that	the	benefits	anticipated	to	be	gained	thereby	may	not	be	obtained;

•the	success	of	our	initiatives	relating	to	the	realignment	of	our	business,	including	the	continuing	realignment	of	our	hedge	program for	our	variable	annuity	business,	and	plans	 to	 improve	 the	profitability	and	 long-term	growth	prospects	of	our	key	divisions, including	through	opportunistic	acquisitions	or	divestitures	or	other	actions	or	initiatives,	and	the	impact	of	regulatory	or	other constraints	on	our	ability	to	complete	these	initiatives	and	deploy	capital	among	our	businesses	as	and	when	planned;

•	 market	risks	associated	with	our	business,	including	changes	in	interest	rates,	credit	spreads,	equity	prices,	market	volatility	and foreign	exchange	rates,	and	implied	volatility	levels,	as	well	as	continuing	uncertainty	in	key	sectors	such	as	the	global	real	estate market;

•the	impact	on	our	investment	portfolio	if	our	investment	portfolio	is	concentrated	in	any	particular	segment	of	the	economy;

•	 volatility	 in	our	earnings	and	potential	material	changes to	our	results	resulting	from	our	adjustment	of	our	risk	management program	to	emphasize	protection	of	statutory	surplus	and	cash	flows;

•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;

•risks	 to	 our	 business,	 financial	 position,	 prospects	 and	 results	 associated	 with	 negative	 rating	 actions	 or	 downgrades in the Company's	financial	strength	and	credit	ratings	or	negative	rating	actions	or	downgrades	relating	to	our	investments;

•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;

•the	subjective	determinations	that	underlie	the	Company's	evaluation	of	other-than-temporary	impairments	on	available-for-sale securities;

•losses	due	to	nonperformance	or	defaults	by	others;

•the	potential	for	further	acceleration	of	deferred	policy	acquisition	cost	amortization;

•the	potential	for	further	impairments	of	our	goodwill	or	the	potential	for	changes	in	valuation	allowances	against	deferred	tax	assets;

•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;

•the	possibility	of	unfavorable	loss	development	including	with	respect	to	long-tailed	exposures;

•the	difficulty	in	predicting	the	Company's	potential	exposure	for	asbestos	and	environmental	claims;

•the	possibility	of	a	pandemic,	earthquake,	or	other	natural	or	man-made	disaster	that	may	adversely	affect	our	businesses	and	cost and	availability	of	reinsurance;

•	 weather	and	other	natural	physical	events,	including	the	severity	and	frequency	of	storms,	hail,	winter	storms,	hurricanes	and	tropical storms,	as	well	as	climate	change	and	its	potential	impact	on	weather	patterns;

•the	response	of	reinsurance	companies	under	reinsurance	contracts	and	the	availability,	pricing	and	adequacy	of	reinsurance	to protect	the	Company	against	losses;

•actions	by	our	competitors,	many	of	which	are	larger	or	have	greater	financial	resources	than	we	do;

•the	Company's	ability	to	distribute	its	products	through	distribution	channels,	both	current	and	future;

•the	cost	and	other	effects	of	increased	regulation	as	a	result	of	the	enactment	of	the	Dodd-Frank	Wall	Street	Reform	and	Consumer Protection	Act	of	2010	(the	"Dodd-Frank	Act"),	which,	among	other	effects,	has	resulted	in	the	establishment	of	a	newly	created Financial	Services	Oversight	Council	with	the	power	to	designate	"systemically	important"	institutions,	will	require	central	clearing of,	and/or	impose	new	margin	and	capital	requirements	on,	derivatives	transactions,	and	created	a	new	"Federal	Insurance	Office"

within	the	U.S.	Department	of	the	Treasury	("Treasury");

•	 unfavorable	judicial	or	legislative	developments;

•the	uncertain	effects	of	emerging	claim	and	coverage	issues;

•the	potential	effect	of	other	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	or	changes	in	U.S.	federal	or other	tax	laws	that	affect	the	relative	attractiveness	of	our	investment	products;

•regulatory	limitations	on	the	ability	of	the	Company	and	certain	of	its	subsidiaries	to	declare	and	pay	dividends;

•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;

•the	Company's	ability	to	maintain	the	availability	of	its	systems	and	safeguard	the	security	of	its	data	in	the	event	of	a	disaster,	cyber or	other	information	security	incident	or	other	unanticipated	event;

•the	risk	that	our	framework	for	managing	business	risks	may	not	be	effective	in	mitigating	material	risk	and	loss	to	the	Company;

•the	potential	for	difficulties	arising	from	outsourcing	relationships;

•the	impact	of	potential	changes	in	federal	or	state	tax	laws,	including	changes	affecting	the	availability	of	the	separate	account dividend	received	deduction;

•the	impact	of	potential	changes	in	accounting	principles	and	related	financial	reporting	requirements;

•the	Company's	ability	to	protect	its	intellectual	property	and	defend	against	claims	of	infringement;	and

•	 other	factors	described	in	such	forward-looking	statements.

Any	forward-looking	statement	made	by	the	Company	in	this	document	speaks	only	as	of	the	date	of	the	filing	of	this	Form	10-K.	Factors or	events	that	could	cause	the	Company's	actual	results	to	differ	may	emerge	from	time	to	time,	and	it	is	not	possible	for	the	Company	to predict	all	of	them.	The	Company	undertakes	no	obligation	to	publicly	update	any	forward-looking	statement,	whether	as	a	result	of	new information,	future	developments	or	otherwise.

# PART	I

# Item	1. 	 BUSINESS

(Dollar	amounts	in	millions,	except	for	per	share	data,	unless	otherwise	stated)

# General

The	Hartford	Financial	Services	Group,	Inc.	(together	with	 its	subsidiaries,	"The	Hartford",	 the	"Company",	"we",	or	"our")	 is	an insurance	and	financial	services	company.	The	Hartford,	headquartered	in	Connecticut,	is	among	the	largest	providers	of	investment products	and	life,	property,	and	casualty	insurance	to	both	individual	and	business	customers	in	the	United	States	of	America.	Also,	The Hartford	continues	to	administer	business	previously	sold	in	Japan	and	the	United	Kingdom.	Hartford	Fire	Insurance	Company,	founded in	1810,	is	the	oldest	of	The	Hartford's	subsidiaries.	At	December	31,	2011,	total	assets	and	total	stockholders'	equity	of	The	Hartford were	$304.1	billion	and	$22.9	billion,	respectively.

# Organization

The	Hartford	strives	to	maintain	and	enhance	its	position	as	a	market	leader	within	the	financial	services	industry.	The	Company	sells diverse	and	 innovative	products	 through	multiple	distribution	channels	 to	consumers	and	businesses.	The	Company	 is	continuously seeking	to	develop	and	expand	its	distribution	channels,	achieving	cost	efficiencies	through	economies	of	scale	and	improved	technology, and	capitalizes	on	its	brand	name	and	The	Hartford	Stag	Logo,	one	of	the	most	recognized	symbols	in	the	financial	services	industry.

The	Company	is	currently	focused	on	a	customer-oriented	strategy	and	organized	around	four	divisions:	Commercial	Markets,	Consumer Markets,	Wealth	Management	and	Runoff	Operations.	In	the	last	two	years,	the	Company	announced	the	sales	of	certain	businesses	that are	not	core	to	its	focus	and	strategy.	The	Company	continues	to	evaluate	its	strategy	and	business	portfolio	with	the	goal	of	delivering shareholder	value.	As	this	review	is	ongoing	and	no	decisions	have	yet	been	made,	the	following	discussions	of	the	Company's	business and	any	forward-looking	statements	contained	herein	assume	a	continuation	of	the	Company's	current	business	focus	and,	as	such,	are subject	to	change	based	on	any	actions	taken	as	a	result	of	the	Company's	ongoing	review.

As	a	holding	company	that	is	separate	and	distinct	from	its	subsidiaries,	The	Hartford	Financial	Services	Group,	Inc.	has	no	significant business	operations	of	its	own.	Therefore,	it	relies	on	the	dividends	from	its	insurance	companies	and	other	subsidiaries	as	the	principal source	of	cash	flow	to	meet	its	obligations.	Additional	information	regarding	the	cash	flow	and	liquidity	needs	of	The	Hartford	Financial Services	Group,	Inc.	may	be	found	in	the	Capital	Resources	and	Liquidity	section	of	Part	II,	Item	7,	Management's	Discussion	and Analysis	of	Financial	Condition	and	Results	of	Operations	("MD&A").

The	Company	maintains	a	retail	mutual	fund	operation	whereby	the	Company,	through	wholly-owned	subsidiaries,	provides	investment management	and	administrative	services	to	The	Hartford	Mutual	Funds,	Inc.	and	The	Hartford	Mutual	Funds	II,	Inc.	(collectively,	"mutual funds"),	consisting	of	57	non-proprietary	mutual	funds,	as	of	December	31,	2011.	The	Company	charges	fees	to	these	mutual	funds,	which are	recorded	as	revenue	by	the	Company.	These	mutual	funds	are	registered	with	the	Securities	and	Exchange	Commission	("SEC")	under the	Investment	Company	Act	of	1940.	The	mutual	funds	are	owned	by	the	shareholders	of	those	funds	and	not	by	the	Company.	In	the fourth	 quarter	 of	 2011,	 the	 Company	 entered	 into	 a	 preferred	 partnership	 agreement	 with	Wellington	 Management	 Company,	 LLP ("Wellington	Management")	and	announced	that	Wellington	Management	will	serve	as	the	sole	sub-advisor	for	The	Hartford's	mutual funds,	including	equity	and	fixed	income	funds,	pending	a	fund-by-fund	review	by	The	Hartford's	mutual	funds	board	of	directors.	As	of December	31,	2011,	Wellington	Management	served	as	the	sub-advisor	for	29	of	The	Hartford's	non-proprietary	mutual	funds	and	has been	the	primary	manager	for	the	Company's	equity	funds.

# Reporting	Segments

The	Hartford	is	organized	into	four	divisions:	Commercial	Markets,	Consumer	Markets,	Wealth	Management	and	Runoff	Operations.	In 2011,	the	Runoff	Operations	division	was	formed	to	reflect	the	manner	in	which	the	Company	is	currently	organized	for	purposes	of making	 operating	 decisions	 and	 assessing	 performance.	As	 a	 result,	 the	 Company	 conducts	 business	 principally	 in	 nine	 reporting segments,	and	segment	data	for	prior	reporting	periods	has	been	adjusted	accordingly.	The	Hartford	includes	in	its	Corporate	category	the Company's	debt	financing	and	related	interest	expense,	as	well	as	other	capital	raising	activities;	banking	operations;	certain	fee	income and	 commission	 expenses	 associated	 with	 sales	 of	 non-proprietary	 products	 by	 broker-dealer	 subsidiaries;	 and	 certain	 purchase accounting	adjustments	and	other	charges	not	allocated	to	the	reporting	segments.

The	following	discussion	describes	 the	principal	products	and	services,	marketing	and	distribution,	and	competition	of	Commercial Markets,	Consumer	Markets	and	Wealth	Management.	For	further	discussion	on	the	reporting	segments,	including	financial	disclosures on	revenues	by	product,	net	income	(loss),	and	assets	for	each	reporting	segment,	see	Note	3	of	the	Notes	to	Consolidated	Financial Statements.

# Commercial	Markets

The	Commercial	Markets	division	is	organized	into	two	reporting	segments;	Property	&	Casualty	Commercial	and	Group	Benefits.

# Principal	Products	and	Services

Property	&	Casualty	Commercial	provides	workers'	compensation,	property,	automobile,	liability	and	umbrella	coverages	under	several different	products,	primarily	throughout	the	United	States,	within	its	standard	commercial	lines,	which	consists	of	The	Hartford's	small commercial	and	middle	market	lines	of	business.	Additionally,	a	variety	of	customized	insurance	products	and	risk	management	services including	workers'	compensation,	automobile,	general	liability,	professional	liability,	fidelity,	surety,	livestock	and	specialty	casualty coverages	are	offered	to	large	companies	through	the	segment's	specialty	lines.

Standard	commercial	 lines	seeks	 to	offer	products	with	more	coverage	options	and	customized	pricing	based	on	 the	policyholder's individualized	risk	characteristics.	For	small	businesses,	those	businesses	whose	annual	payroll	is	under	$5	and	whose	revenue	and property	values	are	less	than	$15	each,	coverages	are	bundled	as	part	of	a	single	multi-peril	package	policy	marketed	under	the	Spectrum name.	Medium-sized	businesses,	companies	whose	payroll,	revenue	and	property	values	exceed	the	small	business	definition,	are	served within	middle	market.	The	middle	market	line	of	business	provides	workers'	compensation,	property,	automobile,	liability,	umbrella	and marine	coverages.	The	sale	of	Spectrum	business	owners'	package	policies	and	workers'	compensation	policies	accounts	for	the	majority of	the	written	premium	in	the	standard	commercial	lines.

Within	the	specialty	lines,	a	significant	portion	of	the	specialty	casualty	business,	including	workers'	compensation	business,	is	written through	large	deductible	programs	where	the	insured	typically	provides	collateral	to	support	loss	payments	made	within	their	deductible.

The	specialty	casualty	business	also	provides	retrospectively-rated	programs	where	the	premiums	are	adjustable	based	on	loss	experience.

Captive	and	Specialty	Programs	provide	 insurance	products	and	services	primarily	 to	captive	 insurance	companies,	pools	and	self- insurance	groups.

Group	Benefits	provides	group	life,	accident	and	disability	coverage,	group	retiree	health	and	voluntary	benefits	to	individual	members	of employer	groups,	associations,	affinity	groups	and	financial	institutions.	Group	Benefits	offers	disability	underwriting,	administration, claims	processing	and	reinsurance	to	other	insurers	and	self-funded	employer	plans.	Policies	sold	in	this	segment	are	generally	term insurance,	allowing	Group	Benefits	to	adjust	the	rates	or	terms	of	its	policies	in	order	to	minimize	the	adverse	effect	of	market	trends, declining	interest	rates,	and	other	factors.	Policies	are	typically	sold	with	one,	two	or	three-year	rate	guarantees	depending	upon	the product.

In	addition	to	the	products	and	services	traditionally	offered	within	each	of	its	lines	of	business,	Commercial	Markets	offers	The	Hartford Productivity	Advantage	("THPA"),	a	single-company	solution	for	 leave	 management,	 integrating	 the	 insurer's	 short-	 and	 long-term group	disability	and	workers'	compensation	insurance	with	its	leave	management	administration	services.

# Marketing	and	Distribution

Standard	commercial	lines	provide	insurance	products	and	services	through	the	Company's	home	office	located	in	Hartford,	Connecticut, and	 multiple	 domestic	 regional	 office	 locations	 and	 insurance	 centers.	The	 products	 are	 marketed	 nationwide	 utilizing	 brokers	 and independent	agents.	The	current	pace	of	consolidation	within	the	independent	agent	and	broker	distribution	channel	will	likely	continue such	that,	in	the	future	a	larger	proportion	of	written	premium	will	likely	be	concentrated	among	fewer	agents	and	brokers.	Additionally the	Company	offers	insurance	products	to	customers	of	payroll	service	providers	through	its	relationships	with	major	national	payroll companies.

Specialty	 lines	 also	 provide	 insurance	 products	 and	 services	 through	 its	 home	 office	 located	 in	 Hartford,	 Connecticut	 and	 multiple domestic	 office	 locations.	 Specialty	 lines	 markets	 its	 products	 nationwide	 utilizing	 a	 variety	 of	 distribution	 networks	 including independent	retail	agents,	brokers	and	wholesalers.

The	Group	Benefits	distribution	network	includes	an	experienced	group	of	Company	employees,	managed	through	a	regional	sales	office system,	to	distribute	its	group	insurance	products	and	services	through	a	variety	of	distribution	outlets	including	brokers,	consultants, third-party	administrators	and	trade	associations.

The	Company	is	engaged	in	a	nationwide	joint	sales	initiative	across	standard	commercial	lines,	specialty	lines	and	Group	Benefits, facilitating	the	marketing	of	both	integrated	and	traditional	products	and	services	across	commercial	markets.

# Competition

In	the	small	commercial	marketplace,	The	Hartford	competes	against	a	number	of	large	national	carriers,	as	well	as	regional	competitors in	certain	territories.	Competitors	include	other	stock	companies,	mutual	companies	and	other	underwriting	organizations.	The	small commercial	market	has	become	increasingly	competitive	as	favorable	loss	costs	in	the	past	few	years	have	led	carriers	to	differentiate themselves	 through	 product	 expansion,	 price	 reduction,	 enhanced	 service	 and	 cutting-edge	 technology.	 Larger	 carriers	 such	 as	The Hartford	have	improved	their	pricing	sophistication	and	ease	of	doing	business	with	agents	through	the	use	of	predictive	modeling	tools and	automation	which	speeds	up	the	process	of	evaluating	a	risk	and	quoting	new	business.

Written	premium	growth	rates	in	the	small	commercial	market	have	begun	to	rebound,	while	underwriting	margins	have	been	pressured by	increases	in	loss	costs,	particularly	in	workers'	compensation,	and	higher	catastrophes.	A	number	of	companies	have	sought	to	grow their	business	by	increasing	their	underwriting	appetite,	appointing	new	agents	and	expanding	business	with	existing	agents.	Also,	carriers serving	middle	market-sized	accounts	are	more	aggressively	competing	for	small	commercial	accounts	as	small	commercial	business	has generally	been	less	price-sensitive.

Middle	market	business	is	characterized	as	"high	touch"	and	involves	case-by-case	underwriting	and	pricing	decisions.	Compared	to	small commercial	 lines,	 the	pricing	of	middle	market	accounts	 is	prone	 to	more	significant	variation	or	cyclicality	over	 time,	with	more sensitivity	to	legislative	and	macro-economic	forces.	The	economic	downturn	which	began	in	2008	has	driven	a	reduction	in	average premium	size	as	shrinking	company	payrolls,	smaller	auto	fleets,	and	fewer	business	locations	depress	insurance	exposures.	Additionally, various	state	legislative	reforms	in	recent	years	designed	to	control	workers	compensation	indemnity	costs	have	led	to	rate	reductions	in many	states.	These	factors,	characterized	by	highly	competitive	pricing	on	new	business,	have	resulted	in	more	new	business	opportunities in	the	marketplace	as	customers	shop	their	policies	for	a	better	price.	In	the	face	of	this	competitive	environment,	The	Hartford	continues to	maintain	a	disciplined	underwriting	approach.	To	gain	a	competitive	advantage	in	this	environment,	carriers	are	improving	automation with	agents	and	brokers,	increasing	pricing	sophistication,	and	enhancing	their	product	offerings.	These	enhancements	include	industry specialization,	 with	 The	 Hartford	 and	 other	 national	 carriers	 tailoring	 products	 and	 services	 to	 specific	 industry	 verticals	 such	 as technology,	health	care	and	renewable	energy.

Specialty	lines	is	comprised	of	a	diverse	group	of	businesses	that	operate	independently	within	their	specific	industries.	These	businesses, while	somewhat	interrelated,	have	different	business	models	and	operating	cycles.	Specialty	lines	competes	on	an	account-	by-account basis	due	to	the	complex	nature	of	each	transaction.	Competition	in	this	market	includes	other	stock	companies,	mutual	companies, alternative	risk	sharing	groups	and	other	underwriting	organizations.	The	relatively	large	size	and	underwriting	capacity	of	The	Hartford provides	opportunities	not	available	to	smaller	companies.	Disciplined	underwriting	and	targeted	returns	are	the	objectives	of	specialty lines	since	premium	writings	may	fluctuate	based	on	the	segment's	view	of	perceived	market	opportunity.

For	specialty	casualty	businesses,	written	pricing	competition	continues	to	be	significant,	particularly	for	the	larger	individual	accounts. Carriers	are	protecting	their	in-force	casualty	business	by	initiating	the	renewal	process	well	in	advance	of	the	policy	renewal	date, effectively	 preventing	 other	 carriers	 from	 quoting	 on	 the	 business	 and	 resulting	 in	 fewer	 new	 business	 opportunities	 within	 the marketplace.	Within	the	national	account	business,	as	the	market	firms,	more	insureds	may	opt	for	loss-sensitive	products	in	lieu	of guaranteed	cost	policies.

Carriers	writing	professional	liability	business	are	increasingly	focused	on	profitable	private,	middle	market	companies.	This	trend	has continued	as	the	downturn	in	the	economy	has	led	to	a	significant	drop	in	the	number	of	initial	public	offerings,	and	volatility	for	all public	companies.	Also,	carriers'	new	business	opportunities	in	the	marketplace	for	directors	&	officers	and	errors	&	omissions	insurance have	been	significantly	influenced	by	customer	perceptions	of	financial	strength,	as	investment	portfolio	losses	have	had	a	negative	effect on	the	financial	strength	ratings	of	some	insurers.

In	the	surety	business,	favorable	underwriting	results	over	the	past	couple	of	years	have	led	to	increased	competition	for	market	share, setting	the	stage	for	potential	written	price	declines	and	less	favorable	terms	and	conditions.	Driven	by	the	upheaval	in	the	credit	markets, new	private	construction	activity	has	declined	dramatically,	resulting	in	lower	demand	for	contract	surety	business.

Group	Benefits	competes	with	numerous	other	insurance	companies	and	other	financial	intermediaries	marketing	insurance	products.	This line	of	business	focuses	on	both	its	risk	management	expertise	and	economies	of	scale	to	derive	a	competitive	advantage.	Competitive factors	affecting	Group	Benefits	include	the	variety	and	quality	of	products	and	services	offered,	the	price	quoted	for	coverage	and services,	 the	Company's	relationships	with	 its	 third-party	distributors,	and	 the	quality	of	customer	service.	In	addition,	active	price competition	continues	in	the	marketplace	resulting	in	longer	rate	guarantee	periods	being	offered	to	customers.	Top	tier	carriers	in	the marketplace	also	offer	on-line	and	self	service	capabilities	to	agents	and	consumers.	The	relatively	large	size	and	underwriting	capacity	of the	Group	Benefits	business	provides	opportunities	not	available	to	smaller	companies.

In	the	commercial	marketplace,	the	weak	economy	has	prompted	carriers	to	offer	differentiated	products	and	services	as	a	means	of gaining	a	competitive	advantage.	In	addition	to	the	initiatives	specific	to	each	of	The	Hartford's	Commercial	Markets'	lines	of	business noted	above,	the	Company	is	leveraging	its	diverse	product,	service	and	distribution	capabilities	to	deliver	differentiated	value	in	the market,	while	simultaneously	increasing	its	ability	to	access	to	its	own	diverse	customer	base.

# Consumer	Markets

The	Consumer	Markets	division	constitutes	the	reporting	segment.

Consumer	Markets	provides	standard	automobile,	homeowners	and	home-based	business	coverages	 to	 individuals	across	 the	United States,	including	a	special	program	designed	exclusively	for	members	of	AARP	("AARP	Program").	The	Hartford's	auto	and	homeowners products	provide	coverage	options	and	customized	pricing	tailored	to	a	customer's	individual	risk.	The	Hartford	has	individual	customer relationships	with	AARP	Program	policyholders	and	as	a	group	these	customers	represent	a	significant	portion	of	the	total	Consumer Markets'	business.	Business	sold	to	AARP	members,	either	direct	or	through	independent	agents,	amounted	to	earned	premiums	of $2.8	billion,	$2.9	billion	and	$2.8	billion	in	2011,	2010	and	2009,	respectively.	Consumer	Markets	also	operates	a	member	contact	center for	health	insurance	products	offered	through	the	AARP	Health	program,	which	is	in	place	through	2018.

Consumer	Markets	reaches	diverse	customers	through	multiple	distribution	channels	including	direct	sales	to	the	consumer,	brokers	and independent	agents.	In	direct	sales	to	the	consumer,	the	Company	markets	its	products	through	a	mix	of	media,	including	direct	mail	and ecommerce	marketing,	television	and	advertising,	both	digitally	and	in	publications.	Most	of	Consumer	Markets'	direct	sales	to	the consumer	 are	 associated	 with	 its	 exclusive	 licensing	 arrangement	 with	 AARP,	 which	 continues	 until	 January	 1,	 2020,	 to	 market automobile,	homeowners	and	home-based	business	insurance	products	to	AARP's	nearly	37	million	members.	This	agreement	provides Consumer	Markets	with	an	important	competitive	advantage	given	the	number	of	"baby	boomers"	over	age	50,	many	of	whom	become AARP	members	during	this	period.

Consumer	Markets	is	focused	on	targeting	specific	customer	groups	and	writing	business	through	partnerships	and	affinities	other	than AARP.	During	2011,	 the	Company	entered	 into	affinity	agreements	with	 the	American	Kennel	Club,	Sierra	Club	and	 the	National Wildlife	 Federation.	 In	 addition	 to	 selling	 product	 through	 its	 relationship	 with	AARP	 and	 other	 affinities,	 beginning	 in	 2012,	 the Company	will	market	direct	to	the	consumer	within	select	underwriting	markets,	acquired	through	partnerships	or	list	acquisitions,	and	to consumers	in	geographies	where	it	is	especially	competitive.

The	agency	channel	provides	customized	products	and	services	to	customers	through	a	network	of	independent	agents	in	the	standard personal	lines	market.	These	independent	agents	are	not	employees	of	The	Hartford.	An	important	strategic	objective	of	the	Company	is to	develop	common	products	and	processes	for	all	of	its	personal	lines	business	regardless	of	the	distribution	channel.	During	2011,	the Company	substantially	completed	the	rollout	of	its	Open	Road	Advantage	product	and,	as	of	December	31,	2011,	this	product	was available	in	44	states	across	the	Company's	distribution	channels,	including	direct	and	through	independent	agents.	In	addition,	as	of December	31,	2011,	the	Hartford	Home	Advantage	product	was	available	in	38	states	across	similar	distribution	channels	as	the	Open Road	Advantage	product.

The	personal	 lines	automobile	and	homeowners	businesses	are	highly	competitive.	Personal	 lines	 insurance	 is	written	by	 insurance companies	of	varying	sizes	that	compete	on	the	basis	of	price,	product,	service	(including	claims	handling),	stability	of	the	insurer	and brand	recognition.	Companies	with	recognized	brands,	direct	sales	capability	and	economies	of	scale	will	have	a	competitive	advantage. In	recent	years,	a	number	of	carriers	have	increased	their	advertising	in	an	effort	to	gain	new	business	and	retain	profitable	business.	This has	been	particularly	true	of	carriers	that	sell	directly	to	the	consumer.	Industry	sales	of	personal	lines	insurance	direct	to	the	consumer have	been	growing	faster	than	sales	through	agents,	particularly	for	auto	insurance.

Carriers	that	distribute	products	mainly	through	agents	compete	by	offering	agents	commissions	and	additional	incentives	to	attract	new business.	To	distinguish	themselves	in	the	marketplace,	top	tier	carriers	are	offering	on-line	and	self	service	capabilities	to	agents	and consumers.	More	agents	have	been	using	"comparative	rater"	tools	that	allow	the	agent	to	compare	premium	quotes	among	several insurance	 companies.	The	 use	 of	 comparative	 rater	 tools	 has	 further	 increased	 price	 competition.	 Carriers	 with	 more	 efficient	 cost structures	will	have	an	advantage	in	competing	for	new	business	through	price.	The	use	of	data	mining	and	predictive	modeling	is	used	by more	and	more	carriers	to	target	the	most	profitable	business	and	carriers	have	further	segmented	their	pricing	plans	to	expand	market share	in	what	they	believe	to	be	the	most	profitable	segments.	Some	companies,	including	The	Hartford,	have	written	a	greater	percentage of	their	new	business	in	preferred	market	segments	which	tend	to	have	better	loss	experience	but	also	lower	average	premiums.	In addition,	a	number	of	companies	have	invested	in	telematics	—	the	use	of	devices	in	insured	vehicles	to	transmit	information	about driving	behavior	such	as	miles	driven,	speed,	acceleration,	deceleration	—	and	are	using	that	information	to	price	the	risk.	Companies	that are	the	first	to	introduce	telematics	may	enjoy	a	competitive	advantage	through	favorable	risk	selection.

# Wealth	Management

The	Wealth	Management	division	consists	of	the	following	reporting	segments:	Individual	Annuity,	Individual	Life,	Retirement	Plans	and Mutual	Funds.	Wealth	Management	provides	investment	products	for	over	7	million	customers	and	life	insurance	for	approximately 711,000	customers.

In	the	fourth	quarter	of	2011,	the	Company	announced	that	Wellington	Management	Company,	LLP	("Wellington	Management")	will serve	as	the	sole	sub-advisor	for	The	Hartford's	non-proprietary	mutual	funds,	including	equity	and	fixed	income	funds,	pending	a	fund-

by-fund	review	by	The	Hartford's	mutual	funds	board	of	directors.	As	of	December	31,	2011,	Wellington	Management	served	as	the	sub- advisor	for	29	of	The	Hartford's	non-proprietary	mutual	funds	and	has	been	the	primary	manager	for	the	Company's	equity	funds.

As	part	of	the	Company's	strategic	decision	to	focus	on	its	U.S.	businesses,	the	Company	suspended	all	new	sales	in	its	Japan	and European	operations	in	the	second	quarter	of	2009	and	divested	its	Brazil	joint	venture,	Canadian	mutual	fund	business	and	its	offshore insurance	business	in	2010.	Runoff	businesses,	including	International	Annuity,	Institutional	Annuity	and	the	Private	Placement	Life Insurance	business,	previously	reported	as	part	of	Wealth	Management	are	now	included	in	the	Life	Other	Operations	segment	of	the Runoff	Operations	division	formed	in	2011.

Individual	Annuity	offers	individual	variable,	fixed	market	value	adjusted	("fixed	MVA"),	fixed	index	and	single	premium	immediate annuities	in	the	U.S.

Individual	Life	sells	a	variety	of	life	insurance	products,	including	variable	universal	life,	universal	life,	and	term	life.

Retirement	 Plans	 provides	 products	 and	 services	 to	 corporations,	 municipalities,	 and	 not-for-profit organizations pursuant to Sections	401(k),	457	and	403(b)	of	the	Internal	Revenue	Code	of	1986,	as	amended	(the	"Code"),	respectively.

Mutual	 Funds	 offers	 retail	 mutual	 funds,	 investment-only	 mutual funds	 and	 college	 savings	 plans	 under	 Section	 529	 of the	 Code (collectively	referred	to	as	non-proprietary)	and	proprietary	mutual	funds.

Individual	 Annuity's	 distribution	 network	 includes	 national	 and	 regional	 broker-dealer	 organizations,	 banks	 and	 other	 financial institutions	 and	 independent	 financial	 advisors.	The	 Company	 periodically	 negotiates	 provisions	 and	 terms	 of	 its	 relationships	 with unaffiliated	parties.	The	Company's	primary	wholesaler	of	its	individual	annuities	is	Hartford	Life	Distributors,	LLC,	and	its	affiliate, PLANCO,	LLC	(collectively	"HLD")	which	are	indirect	wholly-owned	subsidiaries	of	Hartford	Life,	Inc.	HLD	provides	sales	support	to registered	representatives,	financial	planners	and	broker-dealers	at	brokerage	firms	and	banks	across	the	United	States.

Individual	Life's	distribution	network	includes	national	and	regional	broker-dealer	organizations,	banks,	independent	agents,	independent life	and	property-casualty	agents,	and	Woodbury	Financial	Services,	an	indirect,	wholly-owned	subsidiary	retail	broker-dealer.

Retirement	 Plans	 distribution	 network	 includes	 Company	 employees	 with	 extensive	 retirement	 experience	 selling its	 products	 and services	through	national	and	regional	broker-dealer	firms,	banks	and	other	financial	institutions.

Mutual	Fund	sales	professionals	are	segmented	into	two	teams;	a	retail	team	and	an	institutional	team.	The	retail	team	distributes	The Hartford's	open-end	funds	and	markets	529	college	savings	plans	to	national	and	regional	broker-dealer	organizations,	banks	and	other financial	institutions,	independent	financial	advisors	and	registered	investment	advisors.	The	institutional	team	distributes	The	Hartford's funds	to	professional	buyers,	such	as	broker-dealers,	consultants,	record	keepers,	and	bank	trust	groups.

Individual	Annuity	competes	with	other	 life	 insurance	companies,	as	well	as	certain	banks,	securities	brokerage	firms,	 independent financial	advisors,	asset	managers,	and	other	financial	intermediaries	marketing	annuities,	mutual	funds	and	other	retirement-oriented products.	Product	sales	are	affected	by	competitive	factors	such	as	investment	performance	ratings,	product	design,	visibility	in	the marketplace,	financial	strength	ratings,	distribution	capabilities,	levels	of	charges	and	credited	rates,	reputation	and	customer	service. Individual	Annuity's	annuity	deposits	continue	to	decline	due	to	competitive	activity	and	the	Company's	product	and	risk	decisions. Many	competitors	have	responded	to	the	equity	market	volatility	by	increasing	the	price	of	their	living	benefit	products	and	changing	the level	of	the	guarantee	offered.	Management	believes	that	the	most	significant	industry	de-risking	changes	have	occurred.	In	2011,	the Company	continued	to	enhance	its	variable	annuity	product	designed	to	meet	customers	future	income	needs	while	abiding	by	the	risk tolerances	of	the	Company.

Individual	Life	competes	with	other	life	insurance	companies	in	the	United	States,	as	well	as	other	financial	intermediaries	marketing insurance	products.	Product	sales	are	affected	primarily	by	the	availability	and	price	of	reinsurance,	volatility	in	the	equity	markets, breadth	 and	 quality	 of	 life	 insurance	 products	 being	 offered,	 pricing,	 relationships	 with	 third-party	 distributors,	 effectiveness	 of wholesaling	support,	and	the	quality	of	underwriting	and	customer	service.	The	individual	life	industry	continues	to	see	a	distribution	shift away	from	the	traditional	life	insurance	sales	agents	to	the	consultative	financial	advisor	as	the	place	people	go	to	buy	their	life	insurance. Individual	 Life's	 regional	 sales	 office	 system	 is	 a	 differentiator	 in	 the	 market	 and	 allows	 it	 to	 compete	 effectively	 across	 multiple distribution	outlets.

Retirement	Plans	compete	with	other	insurance	carriers,	large	investment	brokerage	companies	and	large	mutual	fund	companies.	The 401(k),	 457,	 and	 403(b)	 products	 offer	 mutual	 funds	 wrapped	 in	 variable	 annuities,	 variable	 funding	 agreements,	 or	 mutual	 fund retirement	products.	Plan	sponsors	seek	a	diversity	of	available	funds	and	favorable	fund	performance.	Consolidation	among	industry providers	has	continued	as	competitors	increase	scale	advantages.

Mutual	Funds	compete	with	other	mutual	fund	companies	along	with	 investment	brokerage	companies	and	differentiate	 themselves through	 product	 solutions,	 performance,	 and	 service.	 In	 this	 non-proprietary	 broker	 sold	 market,	 the	 Company	 and	 its	 competitors compete	aggressively	for	net	sales.

# Reserves

The	Hartford	establishes	and	carries	as	liabilities	reserves	for	its	insurance	products	to	estimate	for	the	following:

•a	liability	for	unpaid	losses,	including	those	that	have	been	incurred	but	not	yet	reported,	as	well	as	estimates	of	all	expenses associated	with	processing	and	settling	these	claims;

•a	liability	equal	to	the	balance	that	accrues	to	the	benefit	of	the	life	insurance	policyholder	as	of	the	consolidated	financial	statement date,	otherwise	known	as	the	account	value;

•a	liability	for	future	policy	benefits,	representing	the	present	value	of	future	benefits	to	be	paid	to	or	on	behalf	of	policyholders	less the	present	value	of	future	net	premiums;

•fair	value	reserves	for	living	benefits	embedded	derivative	guarantees;	and

•	 death	and	living	benefit	reserves	which	are	computed	based	on	a	percentage	of	revenues	less	actual	claim	costs.

Further	discussion	of	The	Hartford's	property	and	casualty	insurance	product	reserves,	including	asbestos	and	environmental	claims reserves,	may	be	found	in	Part	II,	Item	7,	MD&A	—	Critical	Accounting	Estimates	—	Property	and	Casualty	Insurance	Product	Reserves, Net	of	Reinsurance.	Additional	discussion	may	be	found	in	the	Company's	accounting	policies	for	insurance	product	reserves	within	Note 11	of	the	Notes	to	Consolidated	Financial	Statements.

# Reinsurance

The	Hartford	cedes	insurance	to	affiliated	and	unaffiliated	insurers	for	both	its	property	and	casualty	and	life	insurance	products.	Such arrangements	do	not	relieve	The	Hartford	of	its	primary	liability	to	policyholders.	Failure	of	reinsurers	to	honor	their	obligations	could result	in	losses	to	The	Hartford.

For	property	and	casualty	insurance	products,	reinsurance	arrangements	are	intended	to	provide	greater	diversification	of	business	and limit	The	Hartford's	maximum	net	loss	arising	from	large	risks	or	catastrophes.	A	major	portion	of	The	Hartford's	property	and	casualty insurance	product	reinsurance	is	effected	under	general	reinsurance	contracts	known	as	treaties,	or,	in	some	instances,	is	negotiated	on	an individual	risk	basis,	known	as	facultative	reinsurance.	The	Hartford	also	has	in-force	excess	of	loss	contracts	with	reinsurers	that	protect it	against	a	specified	part	or	all	of	a	layer	of	losses	over	stipulated	amounts.

For	life	insurance	products,	The	Hartford	is	involved	in	both	the	cession	and	assumption	of	insurance	with	other	insurance	and	reinsurance companies.	As	of	December	31,	2011,	2010	and	2009,	the	Company's	policy	for	the	largest	amount	of	life	insurance	retained	on	any	one life	by	any	one	of	its	operations	was	$10.	For	the	years	ended	December	31,	2011,	2010	and	2009,	the	Company	did	not	make	any significant	changes	in	the	terms	under	which	reinsurance	is	ceded	to	other	insurers.	In	addition,	the	Company	has	reinsured	a	portion	of the	 risk	 associated	 with	 U.S.	 variable	 annuities	 and	 the	 associated	 guaranteed	 minimum	 death	 benefit	 ("GMDB")	 and	 guaranteed minimum	 withdrawal	 benefit	 ("GMWB")	 riders,	 Hartford	 Life	 Insurance	 K.K.'s	 ("HLIKK"),	 an	 indirect	 wholly	 owned	 subsidiary, variable	annuity	contract	and	rider	benefits,	and	Hartford	Life	Limited	Ireland's	("HLL"),	an	indirect	wholly	owned	subsidiary,	GMDB and	GMWB	annuity	contract	and	rider	benefits.

For	further	discussion	on	reinsurance,	see	Part	II,	Item	7,	MD&A	—	Enterprise	Risk	Management.	Additional	discussion	may	be	found	in the	Company's	accounting	policies	for	reinsurance	within	Note	6	of	the	Notes	to	Consolidated	Financial	Statements.

# Investment	Operations

The	majority	of	the	Company's	investment	portfolios	are	managed	by	Hartford	Investment	Management	Company	("HIMCO").	HIMCO manages	the	portfolios	to	maximize	economic	value,	while	attempting	to	generate	the	income	necessary	to	support	the	Company's	various product	obligations,	within	internally	established	objectives,	guidelines	and	risk	tolerances.	The	portfolio	objectives	and	guidelines	are developed	based	upon	the	asset/liability	profile,	including	duration,	convexity	and	other	characteristics	within	specified	risk	tolerances. The	 risk	 tolerances	 considered	 include,	 for	 example,	 asset	 and	 credit	 issuer	 allocation	 limits,	 maximum	 portfolio	 limits	 for	 below investment	grade	holdings	and	foreign	currency	exposure	limits.	The	Company	attempts	to	minimize	adverse	impacts	to	the	portfolio	and the	Company's	results	of	operations	from	changes	in	economic	conditions	through	asset	allocation	limits,	asset/liability	duration	matching and	through	the	use	of	derivatives.	For	further	discussion	of	HIMCO's	portfolio	management	approach,	see	Part	II,	Item	7,	MD&A	— Enterprise	Risk	Management	—	Credit	Risk.

In	addition	to	managing	the	general	account	assets	of	the	Company,	HIMCO	is	also	a	SEC	registered	investment	adviser	for	third	party institutional	 clients,	 a	 sub-advisor	 for	 certain	 mutual	 funds	 and	 serves	 as	 the	 sponsor	 and	 collateral	 manager	 for	 capital	 markets transactions.	HIMCO	specializes	 in	 investment	management	 that	 incorporates	proprietary	research	and	active	portfolio	management within	a	disciplined	risk	framework	that	seeks	to	provide	value	added	returns	versus	peers	and	benchmarks.	As	of	December	31,	2011	and 2010,	the	fair	value	of	HIMCO's	total	assets	under	management	was	approximately	$165.0	billion	and	$159.7	billion,	respectively,	of which	$7.1	billion	and	$8.7	billion,	respectively,	were	held	in	HIMCO	managed	third	party	accounts.

# Enterprise	Risk	Management

The	Company	has	an	enterprise	risk	management	function	("ERM")	that	is	charged	with	providing	analysis	of	the	Company's	risks	on	an individual	and	aggregated	basis	and	with	ensuring	that	the	Company's	risks	remain	within	its	risk	appetite	and	tolerances.	ERM	plays	an integral	role	at	The	Hartford	by	fostering	a	strong	risk	management	culture	and	discipline.	The	mission	of	ERM	is	to	support	the	Company in	achieving	its	strategic	priorities	by:

•	 Providing	a	comprehensive	view	of	the	risks	facing	the	Company,	including	risk	concentrations	and	correlations;

•	 Helping	management	define	the	Company's	overall	capacity	and	appetite	for	risk	by	evaluating	the	risk	return	profile	of	the business	relative	to	the	Company's	strategic	intent	and	financial	underpinning;

•	 Assisting	management	 in	setting	specific	risk tolerances	and limits that	are	measurable,	actionable,	and	comply	with the Company's	overall	risk	philosophy;

•	 Communicating	 and	 monitoring	 the firm's risk	 exposures relative to set limits	 and recommending,	 or implementing	 as appropriate,	mitigating	strategies;	and

•	 Providing	 valuable	 insight to	 assist leaders in	 growing the	 businesses	 and	 achieving	 optimal	 risk-adjusted	 returns	 within established	guidelines.

# Enterprise	Risk	Management	Structure	and	Governance

At	The	Hartford,	the	Board	of	Directors	("the	Board")	has	ultimate	responsibility	for	risk	oversight.	It	exercises	its	oversight	function through	its	standing	committees,	each	of	which	has	primary	risk	oversight	responsibility	with	respect	to	all	matters	within	the	scope	of	its duties	as	contemplated	by	its	charter.	In	addition,	the	Finance,	Investment	and	Risk	Management	Committee	("FIRMCo"),	which	is comprised	of	all	members	of	the	Board,	has	responsibility	for	oversight	of	all	financial	risk	exposures	facing	the	Company,	and	all	risks that	do	not	fall	within	the	oversight	responsibility	of	any	other	standing	committee.	The	Audit	Committee	is	responsible	for	discussing with	management	risk	assessment	policies	and	overseeing	enterprise	operational	risk.

At	the	corporate	level,	the	Company's	Enterprise	Chief	Risk	Officer	("ECRO"	or	"Chief	Risk	Officer")	leads	ERM.	The	Chief	Risk Officer	reports	directly	to	the	Company's	Chief	Executive	Officer	("CEO").	Reporting	to	the	ECRO	are	the	Chief	Insurance	Risk	Officer ("CIRO"),	Chief	Operational	Risk	Officer	("CORO"),	and	the	Chief	Market	Risk	Officer	("CMRO").	The	Company	has	established	the Enterprise	Risk	and	Capital	Committee	("ERCC")	that	includes	the	Company's	CEO,	Chief	Financial	Officer	("CFO"),	Chief	Investment Officer	("CIO"),	Chief	Risk	Officer,	the	divisional	Presidents	and	the	General	Counsel.	The	ERCC	is	responsible	for	managing	the Company's	risks	and	overseeing	the	enterprise	risk	management	program.	The	ERCC	reports	to	the	Board	primarily	through	FIRMCo and	through	interactions	with	the	Audit	Committee.

The	Company	also	has	committees	that	manage	specific	risks	and	recommend	risk	mitigation	strategies	to	the	ERCC.	These	committees include,	 the	 Company	 and	 Division	 Asset	 Liability	 Committees,	 Catastrophe	 Risk	 Committee,	 Emerging	 Risk	 Committees,	 and Operational	Risk	Committee	("ORC").

# Risk	Management	Framework

At	the	Company,	risk	is	managed	at	multiple	levels.	The	first	line	of	risk	management	is	generally	the	responsibility	of	the	lines	of business.	 Senior	 business	 leaders	 are	 responsible	 for	 taking	 and	 managing	 risks	 specific	 to	 their	 business	 objectives	 and	 business environment.	In	many	cases,	the	second	line	of	risk	management	is	the	principal	responsibility	of	ERM.	ERM	has	the	responsibility	to ensure	the	Company	has	insight	into	its	aggregate	risk	and	that	risks	are	managed	within	the	Company's	overall	risk	tolerance.	Internal Audit	forms	the	third	line	of	risk	management	by	helping	assess	and	ensure	that	risk	controls	are	present	and	effective.

The	Company's	Risk	Management	Framework	consists	of	four	core	elements:

1. 	 Risk	Culture	and	Governance:	The	Company	has	established	policies	for	its	major	risks	and	a	formal	governance	structure	with leadership	oversight	and	an	assignment	of	accountability	and	authority.	The	governance	structure	starts	at	 the	Board	and cascades	to	a	central	executive	risk	management	committee	and	then	to	individual	risk	committees	across	the	Company.	In addition,	the	Company	promotes	a	strong	risk	management	culture	and	high	expectations	around	ethical	behavior.

2. 	 Risk	 Identification	 and	 Assessment:	 Through	 its	 ERM	 organization,	 the	 Company	 has	 developed	 processes	 for	 the identification,	assessment,	and,	when	appropriate,	response	to	internal	and	external	risks	to	the	Company's	operations	and business	objectives.	Risk	identification	and	prioritization	has	been	established	within	each	area,	including	processes	around emerging	risks.

3. 	 Risk	Appetite	and	Limits:	The	Company	has	a	formal	risk	appetite	statement	that	is	approved	by	the	Company's	ERCC	and reviewed	by	the	Board.	Based	on	its	risk	appetite,	the	Company	has	implemented	stated	risk	tolerances	and	an	associated	limit structure	for	each	of	its	major	insurance	and	financial	risks.	These	formal	limits	are	encapsulated	in	formal	risk	policies	that	are reviewed	at	least	annually	by	the	ERCC.

4. 	 Risk	 Monitoring,	 Controls	 and	 Communication:	The	 Company	 monitors	 its	 major	 risks	 at	 the	 enterprise	 level	 through	 a number	of	enterprise	reports,	including	but	not	limited	to,	a	monthly	risk	dashboard,	tracking	the	return	on	risk-capital	across products,	and	regular	stress	testing.	ERM	communicates	the	Company's	risk	exposures	to	senior	and	executive	management and	the	Board,	and	reviews	key	business	performance	metrics,	risk	indicators,	audit	reports,	risk/control	self	assessments	and risk	event	data.

# Risk	Exposures	and	Quantification

The	Company	quantifies	its	enterprise	insurance	and	financial	risk	exposures	using	multiple	lenses	including	statutory,	economic	and, where	appropriate,	U.S.	GAAP.	ERM	 leverages	various	modeling	 techniques	and	metrics	 to	provide	a	view	of	 the	Company's	risk exposure	in	both	normal	and	stressed	environments.	ERM	regularly	monitors	the	Company's	risk	exposure	as	compared	to	defined statutory	limits	and	provides	regular	reporting	to	the	ERCC.

In	order	to	quantify	group	capital	levels,	risk	correlations	and	concentrations,	and	the	potential	benefits	of	risk	diversification	at	an enterprise	level,	the	Company	performs	stress	testing	and	scenario	analysis.	The	Company	uses	its	Economic	Capital	Model	("ECM")	to quantify	the	value	of	risk	management	across	the	business	lines	and	to	advance	its	risk-based	decision-making	and	optimization	across risk	and	business.	The	Company	also	uses	the	ECM	to	inform	the	attribution	of	risk	capital	to	each	line	of	business.	ERM	supports	the attribution	of	risk	capital	by	line	of	business	and	the	analysis	of	returns	on	risk	capital	in	conjunction	with	the	Chief	Financial	Officer.

The	Company	categorizes	its	main	risks	as	follows	in	order	to	achieve	a	consistent	and	disciplined	approach	to	quantifying,	evaluating, and	managing	risk:

# •Insurance	Risk

•	 Operational	Risk

•	 Financial	Risk

# •	 Business	Risk

The	Company	defines	insurance	risk	as	its	exposure	to	loss	due	to	property,	liability,	mortality,	morbidity,	disability,	longevity	and	other perils	 and	 risks	 covered	 under	 its	 policies,	 including	 adverse	 development	 on	 loss	 reserves	 supporting	 its	 products	 and	 geographic accumulations	of	loss	over	time	due	to	property	or	casualty	catastrophes.

The	Company	defines	operational	risk	as	the	risk	of	loss	resulting	from	inadequate	or	failed	internal	processes,	people	and	systems,	or from	external	events.

Financial	risk	is	broadly	defined	by	the	Company	to	include	liquidity,	interest	rate,	equity,	foreign	exchange,	and	credit	risks,	all	of	which have	the	potential	to	materially	impact	the	Company's	financial	condition.	Financial	risk	also	includes	exposure	to	events	that	may	cause correlated	movement	in	the	above	risk	factors.

The	Company	manages	its	business	risk	at	all	levels	of	the	organization.	The	Company	categorizes	its	business	risk	as	strategic	risk	and management	risk.	Strategic	risk	is	defined	as	the	risk	to	the	defined	company	objectives	from	adverse	developments	in	the	Company's strategy	 vis-à-vis	 changing	 market	 conditions	 and	 competitor	 actions.	 Management	 risk	 is	 defined	 as	 the	 risk	 to	 defined	 company objectives	 from	 the	 ineffective	 or	 inefficient	 execution	 of	 the	 Company's	 strategic	 and	 business	 decisions.	 Enterprise	 strategic	 and management	risks	are	assessed	through	strategic,	business	and	operating	plan	reviews,	as	well	as	through	management	self-assessment processes	and	benchmarking.

For	further	discussion	on	risk	management,	see	Part	II,	Item	7,	MD&A	—	Enterprise	Risk	Management.

# Regulation

Insurance	companies	are	subject	to	comprehensive	and	detailed	regulation	and	supervision	throughout	the	United	States.	The	extent	of such	regulation	varies,	but	generally	has	its	source	in	statutes	which	delegate	regulatory,	supervisory	and	administrative	powers	to	state insurance	departments.	Such	powers	relate	 to,	among	other	 things,	 the	standards	of	solvency	 that	must	be	met	and	maintained;	 the licensing	of	insurers	and	their	agents;	the	nature	of	and	limitations	on	investments;	establishing	premium	rates;	claim	handling	and	trade practices;	 restrictions	 on	 the	 size	 of	 risks	 which	 may	 be	 insured	 under	 a	 single	 policy;	 deposits	 of	 securities	 for	 the	 benefit	 of policyholders;	approval	of	policy	forms;	periodic	examinations	of	the	affairs	of	companies;	annual	and	other	reports	required	to	be	filed on	the	financial	condition	of	companies	or	for	other	purposes;	fixing	maximum	interest	rates	on	life	insurance	policy	loans	and	minimum rates	for	accumulation	of	surrender	values;	and	the	adequacy	of	reserves	and	other	necessary	provisions	for	unearned	premiums,	unpaid losses	and	loss	adjustment	expenses	and	other	liabilities,	both	reported	and	unreported.

Most	states	have	enacted	legislation	that	regulates	insurance	holding	company	systems	such	as	The	Hartford.	This	legislation	provides	that each	insurance	company	in	the	system	is	required	to	register	with	the	insurance	department	of	its	state	of	domicile	and	furnish	information concerning	the	operations	of	companies	within	the	holding	company	system	that	may	materially	affect	the	operations,	management	or financial	condition	of	the	insurers	within	the	system.	All	transactions	within	a	holding	company	system	affecting	insurers	must	be	fair	and equitable.	Notice	to	the	insurance	departments	is	required	prior	to	the	consummation	of	transactions	affecting	the	ownership	or	control	of an	insurer	and	of	certain	material	transactions	between	an	insurer	and	any	entity	in	its	holding	company	system.	In	addition,	certain	of such	transactions	cannot	be	consummated	without	the	applicable	insurance	department's	prior	approval.	In	the	jurisdictions	in	which	the Company's	insurance	company	subsidiaries	are	domiciled,	the	acquisition	of	more	than	10%	of	The	Hartford's	outstanding	common	stock would	require	the	acquiring	party	to	make	various	regulatory	filings.

Certain	of	the	Company's	life	insurance	subsidiaries	sell	variable	life	insurance,	variable	annuity,	and	some	fixed	guaranteed	products	that are	"securities"	registered	with	the	SEC	under	the	Securities	Act	of	1933,	as	amended.	Some	of	the	products	have	separate	accounts	that are	registered	as	investment	companies	under	the	Investment	Company	Act	of	1940,	as	amended	(the	"1940	Act")	and/or	are	regulated	by state	 law.	 Separate	 account	 investment	 products	 are	 also	 subject	 to	 state	 insurance	 regulation.	 Moreover,	 each	 separate	 account	 is generally	divided	into	sub-accounts,	each	of	which	invests	in	an	underlying	mutual	fund	that	is	also	registered	as	an	investment	company under	the	1940	Act	("Underlying	Funds").	The	Company	offers	these	Underlying	Funds	and	retail	mutual	funds	that	are	registered	with and	regulated	by	the	SEC.

In	addition,	other	subsidiaries	of	the	Company	are	involved	in	the	offering,	selling	and	distribution	of	the	Company's	variable	insurance products,	Underlying	Funds	and	retail	mutual	funds	as	broker	dealers	and	are	subject	to	regulation	promulgated	and	enforced	by	the Financial	Industry	Regulatory	Authority	("FINRA"),	the	SEC	and/or	in,	some	instances,	state	securities	administrators.	Other	entities operate	as	investment	advisers	registered	with	the	SEC	under	the	Investment	Advisers	Act	of	1940	and	are	registered	as	investment advisers	under	certain	state	laws,	as	applicable.	One	subsidiary	is	an	investment	company	registered	under	the	1940	Act.	Because	federal and	state	laws	and	regulations	are	primarily	intended	to	protect	investors	in	securities	markets,	they	generally	grant	regulators	broad rulemaking	and	enforcement	authority.	Some	of	these	regulations	include,	among	other	things,	regulations	impacting	sales	methods, trading	practices,	suitability	of	investments,	use	and	safekeeping	of	customers'	funds,	corporate	governance,	capital,	record	keeping,	and reporting	requirements.

The	extent	of	insurance	regulation	on	business	outside	the	United	States	varies	significantly	among	the	countries	in	which	The	Hartford operates.	Some	countries	have	minimal	regulatory	requirements,	while	others	regulate	insurers	extensively.	Foreign	insurers	in	certain countries	 are	 faced	 with	 greater	 restrictions	 than	 domestic	 competitors	 domiciled	 in	 that	 particular	 jurisdiction.	 The	 Hartford's international	operations	are	comprised	of	insurers	licensed	in	their	respective	countries.

In	addition,	as	described	under	"Legislative	Developments,"	we	are	subject	to	a	number	of	Dodd-Frank	Act	provisions.	Failure	to	comply with	federal	and	state	laws	and	regulations	may	result	in	censure,	fines,	the	issuance	of	cease-and-desist	orders	or	suspension,	termination or	limitation	of	the	activities	of	our	operations	and/or	our	employees.	We	cannot	predict	the	impact	of	these	actions	on	our	businesses, results	of	operations	or	financial	condition.

# Intellectual	Property

We	rely	on	a	combination	of	contractual	rights	and	copyright, trademark,	patent	and trade	secret laws to	establish	and	protect	our intellectual	property.

We	have	a	worldwide	trademark	portfolio	that	we	consider	important	in	the	marketing	of	our	products	and	services,	including,	among others,	 the	 trademarks	 of	The	 Hartford	 name,	 the	 Stag	 Logo	 and	 the	 combination	 of	 these	 two	 marks.	The	 duration	 of	 trademark registrations	varies	from	country	to	country	and	may	be	renewed	indefinitely	subject	to	country-specific	use	and	registration	requirements. We	regard	our	trademarks	as	extremely	valuable	assets	in	marketing	our	products	and	services	and	vigorously	seek	to	protect	them	against infringement.

# Employees

The	Hartford	has	approximately	24,400	employees	as	of	December	31,	2011.

# Available	Information

The	Hartford	makes	available,	free	of	charge,	on	or	through	its	Internet	website	(http://www.thehartford.com)	The	Hartford's	annual report	on	Form	10-K,	quarterly	reports	on	Form	10-Q,	current	reports	on	Form	8-K,	and	amendments	to	those	reports	filed	or	furnished pursuant	to	Section	13(a)	of	the	Exchange	Act	as	soon	as	reasonably	practicable	after	The	Hartford	electronically	files	such	material	with, or	furnishes	it	to,	the	SEC.	None	of	the	information	made	available	on	The	Hartford's	Internet	website	shall	be	deemed	to	be	incorporated by	reference	herein.	Information	filed	or	furnished	to	the	SEC	may	be	read	and	copied	at	the	SEC's	Public	Reference	Room	at	100	F Street,	NE,	Washington,	DC	20549	or	by	calling	 the	SEC	at	1-800-SEC-0330.	In	addition,	 the	SEC	maintains	an	Internet	website (http://sec.gov)	that	contains	reports,	proxy	and	information	statements,	and	other	information	regarding	issuers	that	file	electronically with	the	SEC.

# Item	1A.	 RISK	FACTORS

Investing	in	The	Hartford	involves	risk.	In	deciding	whether	to	invest	in	The	Hartford,	you	should	carefully	consider	the	following	risk factors,	any	of	which	could	have	a	significant	or	material	adverse	effect	on	the	business,	financial	condition,	results	of	operations,	or liquidity	of	The	Hartford	and	could	also	cause	the	trading	price	of	our	securities,	including	our	common	stock	and	other	equity-related securities,	 to	experience	significant	fluctuations	and	volatility.	The	Hartford	may	also	be	subject	 to	other	general	risks	 that	are	not specifically	enumerated.	This	information	should	be	considered	carefully	together	with	the	other	information	contained	in	this	report	and the	other	reports	and	materials	filed	by	The	Hartford	with	the	Securities	and	Exchange	Commission	("SEC").	The	following	risk	factors are	not	necessarily	listed	in	order	of	importance.

# Our	operating	environment	remains	subject	to	uncertainty	about	the	timing	and	strength	of	an	economic	recovery.	The	steps	we	have taken	to	realign	our	businesses	and	strengthen	our	capital	position	may	not	be	adequate	to	mitigate	the	financial,	competitive	and other	risks	associated	with	our	operating	environment,	which	could	adversely	affect	our	business	and	results	of	operations.

The	decline	of	certain	global	economies,	including	Europe,	and	the	possible	contagion	effect,	cast	uncertainty	regarding	the	timing	and strength	of	an	economic	recovery,	which	negatively	affected	our	operating	environment	in	2011.	Continued	high	unemployment,	lower family	income,	lower	business	investment	and	lower	consumer	spending	in	most	geographic	markets	we	serve	have	adversely	affected	the demand	for	financial	and	insurance	products,	as	well	as	their	profitability	in	some	cases.	Our	results,	financial	condition	and	statutory capital	remain	sensitive	to	equity	and	credit	market	performance	and	effects	of	interest	rates	and	foreign	currency,	and	we	expect	that market	conditions	will	put	pressure	on	returns	in	our	life	and	property	and	casualty	investment	portfolios	and	that	our	hedging	costs	(in particular	with	respect	to	our	variable	annuities	businesses)	will	remain	higher	than	historical	levels.	If	global	economies	continue	to decline,	economic	conditions	do	not	broadly	improve	and	real	estate	valuations	do	not	stabilize	and	over	time	increase,	we	would	expect to	experience	additional	realized	and	unrealized	investment	losses,	particularly	in	the	real	estate	and	financial	services	sectors.	Negative rating	agency	actions	with	respect	to	our	investments	could	also	indirectly	adversely	affect	our	statutory	capital	and	risk-based	capital ("RBC")	ratios,	which	could	in	turn	have	other	negative	consequences	for	our	business	and	results.

The	steps	we	have	taken	to	realign	our	businesses	and	strengthen	our	capital	position	may	not	be	adequate	if	economic	conditions	do	not continue	to	improve	in	line	with	our	forecasts.	These	steps	include	ongoing	initiatives,	particularly	the	execution	risk	relating	to	the continued	repositioning	of	our	 investment	portfolios	and	 the	continuing	refinement	of	our	hedge	programs	for	our	variable	annuity businesses.	If	our	actions	are	not	adequate,	our	ability	to	support	the	scale	of	our	business	and	to	absorb	operating	losses	and	liabilities under	our	customer	contracts	could	be	impaired,	which	would	in	turn	adversely	affect	our	overall	competitiveness	and	the	capital	position of	the	Company.

Even	if	the	measures	we	have	taken	(or	take	in	the	future)	are	effective	to	mitigate	the	risks	associated	with	our	current	operating environment,	they	may	have	unintended	consequences.	For	example,	rebalancing	our	hedging	program	to	protect	economic	value,	while being	mindful	of	statutory	surplus,	may	result	in	greater	earnings	volatility	under	generally	accepted	accounting	principles	in	the	U.S. ("U.S.	GAAP").	We	could	be	required	to	consider	actions	to	manage	our	capital	position	and	liquidity	or	further	reduce	our	exposure	to market	and	financial	risks.	We	may	also	be	forced	to	sell	assets	on	unfavorable	terms	that	could	cause	us	to	incur	charges	or	lose	the potential	for	market	upside	on	those	assets	in	a	market	recovery.	We	could	also	face	other	pressures,	such	as	employee	recruitment	and retention	issues	and	potential	loss	of	distribution	for	our	products.	Additionally,	if	there	was	concern	over	the	Company's	capital	position that	creates	an	anticipation	of	the	Company	issuing	additional	common	stock	or	equity	linked	instruments,	trading	prices	for	our	common stock	could	decline.

As	a	result	of	our	ongoing	evaluation	of	the	Company's	strategy	and	business	portfolio,	we	may	pursue	one	or	more	transactions	or take	 other	 actions,	 which	 may	 include	 discontinuance	 or	 placing	 in	 run-off	 certain	 lines	 of	 business	 and/or	 pursuing	 strategic acquisitions,	divestitures	or	restructurings,	any	of	which	could	subject	the	Company	to	a	number	of	challenges,	uncertainties	and risks	or	negatively	impact	our	business,	financial	condition,	results	of	operations	or	liquidity.

As	previously	announced,	we	are	evaluating	our	strategy	and	business	portfolio	with	the	goal	of	delivering	greater	shareholder	value.	In particular,	we	noted	 that	while	we	recognize	 there	are	potential	benefits	 to	a	separation	of	our	P&C	and	 life	companies,	 there	are challenges	to	successfully	executing	such	a	separation.

As	a	result	of	these	or	other	evaluations	of	the	Company's	strategy	and	business	portfolio,	we	may	pursue	one	or	more	transactions	or	take other	actions,	which	may	include	discontinuing	or	placing	in	run-off	certain	lines	of	business	and/or	pursuing	strategic	acquisitions, divestitures	or	restructurings.	Because	these	transactions	involve	a	number	of	challenges,	uncertainties	and	risks,	we	may	not	be	able	to consummate	any	such	transaction	or,	if	concluded,	achieve	some	or	all	of	the	benefits,	including	in	respect	of	shareholder	value,	that	we expect	to	derive	from	it.	Pursuit	of	these	initiatives	may	also,	among	other	things,	divert	management's	attention	and	resources	or	result	in a	loss	of	employees	or	clients,	surrenders,	withdrawals,	contract	terminations	or	potential	adverse	capital	or	tax	impacts.	Completion	of certain	divestitures	or	restructurings	might	require	consents	under	the	covenants	of	our	indentures	(including	in	respect	of	allocation	of our	indebtedness),	might	require	actions	to	satisfy	certain	rating	agency	criteria	and	could	result	in	our	retaining	insurance	or	reinsurance obligations	or	result	in	recognition	of	other	contingent	liabilities	(including	in	respect	of	intercompany	guarantees).	Any	such	transactions could	also	involve	related	financing	transactions,	including	the	issuance	of	equity	or	equity-related	securities	that	could	have	a	dilutive effect	on	our	shareholders.	In	addition,	 the	completion	of	an	acquisition	may	require	use	of	our	capital	and	may	 involve	difficulty integrating	acquired	businesses	into	our	existing	operations.	Moreover,	completion	of	an	acquisition,	divestiture	or	restructuring	may require	regulatory	approvals	or	other	third-party	approvals	(including	the	consents	noted	above),	and	these	may	not	be	able	to	be	obtained or	may	involve	significant	additional	cost,	time,	regulatory	capital	commitments	and	other	regulatory	conditions	and	obligations.	Any such	transactions	may	also	be	subject	to	additional	significant	execution	risks,	costs	and	delays.	As	a	result	of	any	of	the	foregoing,	our business,	financial	condition,	results	of	operations	and	liquidity	could	be	negatively	impacted.

# We	are	exposed	to	significant	financial	and	capital	markets	risk,	including	changes	in	interest	rates,	credit	spreads,	equity	prices, market	volatility,	foreign	exchange	rates	and	global	real	estate	market	deterioration	that	may	have	a	material	adverse	effect	on	our business,	financial	condition,	results	of	operations,	and	liquidity.

One	important	exposure	to	equity	risk	relates	to	the	potential	for	lower	earnings	associated	with	certain	of	our	businesses	in	Wealth Management	and	Runoff	Operations,	such	as	U.S.	and	international	variable	annuities,	where	fee	income	is	earned	based	upon	the	fair value	of	the	assets	under	management.	Should	equity	markets	decline	from	current	levels,	assets	under	management	and	related	fee income	will	be	reduced.	Such	a	decline	would	also	place	greater	stress	on	the	variable	annuities	businesses,	which	requires	significant allocated	capital	due	to	rating	agencies	and	regulatory	requirements,	including	with	respect	to	stress	scenarios.	Furthermore,	certain	of	our products	offer	guaranteed	benefits	that	increase	our	potential	obligation	and	statutory	capital	exposure	should	equity	markets	continue	to decline.	Sustained	declines	in	equity	markets	may	result	in	the	need	to	devote	significant	additional	capital	to	support	these	products.	We are	also	exposed	to	interest	rate	and	equity	risk	based	upon	the	discount	rate	and	expected	long-term	rate	of	return	assumptions	associated with	our	pension	and	other	post-retirement	benefit	obligations.	Prolonged	low	interest	rates	or	market	returns	are	likely	to	have	a	negative effect	on	the	funded	status	of	these	plans.

Our	exposure	to	interest	rate	risk	relates	primarily	to	the	market	price	and	cash	flow	variability	associated	with	changes	in	interest	rates.	A rise	in	interest	rates,	in	the	absence	of	other	countervailing	changes,	will	increase	the	net	unrealized	loss	position	of	our	investment portfolio	and,	 if	 long-term	 interest	rates	were	 to	rise	dramatically	within	a	six-to-twelve	month	 time	period,	certain	of	our	Wealth Management	businesses	might	be	exposed	to	disintermediation	risk.	Disintermediation	risk	refers	to	the	risk	that	our	policyholders	may surrender	their	contracts	in	a	rising	interest	rate	environment,	requiring	us	to	liquidate	assets	in	an	unrealized	loss	position.	Although	our products	have	features	such	as	surrender	charges,	market-value	adjustments	and	put	options	on	certain	retirement	plans,	we	are	subject	to disintermediation	risk.	An	increase	in	interest	rates	can	also	impact	our	tax	planning	strategies	and	in	particular	our	ability	to	utilize	tax benefits	to	offset	certain	previously	recognized	realized	capital	losses.	In	a	declining	rate	environment,	due	to	the	long-term	nature	of	the liabilities	associated	with	certain	of	our	life	businesses,	such	as	structured	settlements	and	guaranteed	benefits	on	variable	annuities, sustained	declines	in	long-term	interest	rates	may	subject	us	to	reinvestment	risks,	increased	hedging	costs,	spread	compression	and capital	volatility.	Our	exposure	to	credit	spreads	primarily	relates	to	market	price	and	cash	flow	variability	associated	with	changes	in credit	spreads.	If	issuer	credit	spreads	widen	significantly	or	retain	historically	wide	levels	over	an	extended	period	of	time,	additional other-than-temporary	 impairments	and	 increases	 in	 the	net	unrealized	 loss	position	of	our	 investment	portfolio	will	 likely	result.	In addition,	losses	have	also	occurred	due	to	the	volatility	in	credit	spreads.	When	credit	spreads	widen,	we	incur	losses	associated	with	the credit	derivatives	where	the	Company	assumes	exposure.	When	credit	spreads	tighten,	we	incur	losses	associated	with	derivatives	where the	Company	has	purchased	credit	protection.	If	credit	spreads	tighten	significantly,	the	Company's	net	investment	income	associated with	new	purchases	of	fixed	maturities	may	be	reduced.	In	addition,	a	reduction	in	market	liquidity	can	make	it	difficult	to	value	certain	of our	 securities	 when	 trading	 becomes	 less	 frequent.	As	 such,	 valuations	 may	 include	 assumptions	 or	 estimates	 that	 may	 be	 more susceptible	 to	significant	period-to-period	changes,	which	could	have	a	material	adverse	effect	on	our	business,	financial	condition, results	of	operations	or	liquidity.

Our	statutory	surplus	is	also	affected	by	widening	credit	spreads	as	a	result	of	the	accounting	for	the	assets	and	liabilities	on	our	fixed market	value	adjusted	("MVA")	annuities.	Statutory	separate	account	assets	supporting	the	fixed	MVA	annuities	are	recorded	at	fair value.	In	determining	the	statutory	reserve	for	the	fixed	MVA	annuities	we	are	required	to	use	current	crediting	rates	in	the	U.S.	and Japanese	LIBOR	in	Japan.	In	many	capital	market	scenarios,	current	crediting	rates	in	the	U.S.	are	highly	correlated	with	market	rates implicit	in	the	fair	value	of	statutory	separate	account	assets.	As	a	result,	the	change	in	the	statutory	reserve	from	period	to	period	will likely	substantially	offset	the	change	in	the	fair	value	of	the	statutory	separate	account	assets.	However,	in	periods	of	volatile	credit markets,	actual	credit	spreads	on	investment	assets	may	increase	sharply	for	certain	sub-sectors	of	the	overall	credit	market,	resulting	in statutory	separate	account	asset	market	value	losses.	As	actual	credit	spreads	are	not	fully	reflected	in	current	crediting	rates	in	the	U.S.	or Japanese	LIBOR	in	Japan,	the	calculation	of	statutory	reserves	will	not	substantially	offset	the	change	in	fair	value	of	the	statutory separate	account	assets	resulting	in	reductions	in	statutory	surplus.	This	has	resulted	and	may	continue	to	result	in	the	need	to	devote significant	additional	capital	to	support	the	fixed	MVA	product.

Our	primary	foreign	currency	exchange	risk	is	related	to	certain	guaranteed	benefits	associated	with	the	Japan	and	U.K.	variable	annuities.

The	strengthening	of	the	yen	compared	with	other	currencies	will	substantially	increase	our	exposure	to	pay	yen-denominated	obligations.

In	addition,	our	foreign	currency	exchange	risk	relates	to	net	income	from	foreign	operations,	non-U.S.	dollar	denominated	investments, investments	in	foreign	subsidiaries,	and	our	yen-denominated	individual	fixed	annuity	product.	In	general,	the	weakening	of	foreign currencies	versus	the	U.S.	dollar	will	unfavorably	affect	net	income	from	foreign	operations,	the	value	of	non-U.S.	dollar	denominated investments,	investments	in	foreign	subsidiaries	and	realized	gains	or	losses	on	the	yen	denominated	annuity	products.	A	strengthening	of the	 U.S.	 dollar	 compared	 to	 foreign	 currencies	 will	 increase	 our	 exposure	 to	 the	 U.S.	 variable	 annuity	 guarantee	 benefits	 where policyholders	have	elected	to	invest	in	international	funds,	generating	losses	and	statutory	surplus	strain.

Our	real	estate	market	exposure	includes	investments	in	commercial	mortgage-backed	securities,	residential	mortgage-backed	securities, commercial	real	estate	collateralized	debt	obligations,	mortgage	and	real	estate	partnerships,	and	mortgage	loans.	Significant	deterioration in	the	real	estate	market	in	the	recent	past	has	adversely	affected	our	business	and	results	of	operations.	Further	deterioration	in	the	real estate	market,	including	increases	in	property	vacancy	rates,	delinquencies	and	foreclosures,	could	have	a	negative	impact	on	property values	and	sources	of	refinancing	resulting	in	reduced	market	liquidity	and	higher	risk	premiums.	This	could	result	in	impairments	of	real estate	backed	securities,	a	reduction	in	net	investment	income	associated	with	real	estate	partnerships,	and	increases	in	our	valuation allowance	for	mortgage	loans.

Significant	declines	in	equity	prices,	changes	in	U.S.	interest	rates,	changes	in	credit	spreads,	inflation,	the	strengthening	or	weakening	of foreign	currencies	against	the	U.S.	dollar,	or	global	real	estate	market	deterioration,	individually	or	in	combination,	could	have	a	material adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

# Concentration	of	our	 investment	portfolio	 in	any	particular	segment	of the	economy	may	have	adverse	effects	on	our	business, financial	condition,	results	of	operations	and	liquidity.

The	concentration	of	our	investment	portfolios	in	any	particular	industry,	collateral	type,	group	of	related	industries	or	geographic	sector could	have	an	adverse	effect	on	our	investment	portfolios	and	consequently	on	our	business,	financial	condition,	results	of	operations	and liquidity.	Events	or	developments	that	have	a	negative	impact	on	any	particular	industry,	group	of	related	industries	or	geographic	region may	have	a	greater	adverse	effect	on	our	investment	portfolio	to	the	extent	that	the	portfolio	is	concentrated	rather	than	diversified.

Our	adjustment	of	our	risk	management	program	relating	to	products	we	offer	with	guaranteed	benefits	to	emphasize	protection	of statutory	surplus	and	cash	flows	will	likely	result	in	greater	U.S.	GAAP	volatility	in	our	earnings	and	potentially	material	charges	to net	income	in	periods	of	rising	equity	market	pricing	levels.

Some	of	the	products	offered	by	our	Wealth	Management	businesses	and	previously	offered	by	our	Life	Other	Operations	business, especially	variable	annuities,	offer	guaranteed	benefits	which,	in	the	event	of	a	decline	in	equity	markets,	would	not	only	result	in	lower earnings,	but	will	also	increase	our	exposure	to	liability	for	benefit	claims.	We	are	also	subject	to	equity	market	volatility	related	to	these benefits,	 including	 the	guaranteed	minimum	withdrawal	benefit	("GMWB"),	guaranteed	minimum	accumulation	benefit	("GMAB"), guaranteed	 minimum	 death	 benefit	 ("GMDB")	 and	 guaranteed	 minimum	 income	 benefit	 ("GMIB")	 offered	 with	 variable	 annuity products.	We	use	reinsurance	structures	and	have	modified	benefit	features	to	mitigate	the	exposure	associated	with	GMDB.	We	also	use reinsurance	in	combination	with	a	modification	of	benefit	features	and	derivative	instruments	to	attempt	to	minimize	the	claim	exposure and	to	reduce	the	volatility	of	net	income	associated	with	the	GMWB	liability.	However,	due	to	the	severe	economic	conditions	starting	in the	fourth	quarter	of	2008,	we	have	adjusted	our	risk	management	program	 to	place	greater	relative	emphasis	on	 the	protection	of statutory	surplus	and	cash	flows.	This	shift	in	relative	emphasis	has	resulted	in	greater	U.S.	GAAP	earnings	volatility	and,	based	upon	the types	of	hedging	instruments	used,	can	result	in	potentially	material	charges	to	net	income	in	periods	of	rising	equity	market	pricing levels,	lower	interest	rates,	rises	in	volatility	and	weakening	of	the	yen	against	other	currencies.	While	we	believe	that	these	actions	have improved	the	efficiency	of	our	risk	management	related	to	these	benefits,	we	remain	liable	for	the	guaranteed	benefits	in	the	event	that reinsurers	or	derivative	counterparties	are	unable	or	unwilling	to	pay.	We	are	also	subject	to	the	risk	that	these	management	procedures prove	ineffective	or	that	unanticipated	policyholder	behavior,	combined	with	adverse	market	events,	produces	economic	losses	beyond the	scope	of	the	risk	management	techniques	employed,	which	individually	or	collectively	may	have	a	material	adverse	effect	on	our business,	financial	condition,	results	of	operations	and	liquidity.

# The	amount	of	statutory	capital	that	we	have,	and	the	amount	of	statutory	capital	that	we	must	hold	to	maintain	our	financial	strength

# and	credit	ratings	and	meet	other	requirements,	can	vary	significantly	from	time	to	time	and	is	sensitive	to	a	number	of	factors	outside of	our	control,	including	equity	market,	credit	market,	interest	rate	and	foreign	currency	conditions,	changes	in	policyholder	behavior and	changes	in	rating	agency	models.

We	conduct	 the	vast	majority	of	our	business	 through	 licensed	 insurance	company	subsidiaries.	Accounting	standards	and	statutory capital	and	reserve	requirements	for	these	entities	are	prescribed	by	the	applicable	insurance	regulators	and	the	National	Association	of Insurance	Commissioners	("NAIC").	Insurance	regulators	have	established	regulations	that	provide	minimum	capitalization	requirements based	on	RBC	formulas	for	both	life	and	property	and	casualty	companies.	The	RBC	formula	for	life	companies	establishes	capital requirements	 relating	 to	 insurance,	 business,	 asset	 and	 interest	 rate	 risks,	 including	 equity,	 interest	 rate	 and	 expense	 recovery	 risks associated	with	variable	annuities	and	group	annuities	that	contain	death	benefits	or	certain	living	benefits.	The	RBC	formula	for	property and	 casualty	 companies	 adjusts	 statutory	 surplus	 levels	 for	 certain	 underwriting,	 asset,	 credit	 and	 off-balance	 sheet	 risks.	 Our international	operations	are	subject	to	regulation	in	the	relevant	jurisdiction	in	which	they	operate,	which	in	many	ways	is	similar	to	the state	regulation	outlined	above,	with	similar	related	restrictions	and	obligations.

In	any	particular	year,	statutory	surplus	amounts	and	RBC	ratios	may	increase	or	decrease	depending	on	a	variety	of	factors,	including	the amount	of	statutory	income	or	losses	generated	by	our	insurance	subsidiaries	(which	itself	is	sensitive	to	equity	market	and	credit	market conditions),	the	amount	of	additional	capital	our	insurance	subsidiaries	must	hold	to	support	business	growth,	changes	in	equity	market levels,	the	value	of	certain	fixed-income	and	equity	securities	in	our	investment	portfolio,	the	value	of	certain	derivative	instruments, changes	in	interest	rates	and	foreign	currency	exchange	rates,	the	impact	of	internal	reinsurance	arrangements,	and	changes	to	the	NAIC RBC	formulas.	Most	of	these	factors	are	outside	of	the	Company's	control.	The	Company's	financial	strength	and	credit	ratings	are significantly	influenced	by	the	statutory	surplus	amounts	and	RBC	ratios	of	our	insurance	company	subsidiaries.	In	addition,	rating agencies	may	implement	changes	to	their	internal	models	that	have	the	effect	of	increasing	the	amount	of	statutory	capital	we	must	hold in	order	to	maintain	our	current	ratings.	Also,	in	extreme	scenarios	of	equity	market	declines	and	other	capital	market	volatility,	the amount	of	additional	statutory	reserves	that	we	are	required	to	hold	for	our	variable	annuity	guarantees	increases	at	a	greater	than	linear rate.	This	reduces	the	statutory	surplus	used	in	calculating	our	RBC	ratios.	When	equity	markets	increase,	surplus	levels	and	RBC	ratios will	generally	increase.	This	may	be	offset,	however,	as	a	result	of	a	number	of	factors	and	market	conditions,	including	the	level	of hedging	costs	and	other	risk	transfer	activities,	reserve	requirements	for	death	and	living	benefit	guarantees	and	RBC	requirements	could also	increase,	lowering	RBC	ratios.	For	example,	while	our	property	and	casualty	companies	are	expected	to	generate	statutory	surplus	in 2012,	our	life	companies'	statutory	surplus	is	expected	to	be	flat	to	negative	in	2012,	as	compared	to	2011,	primarily	due	to	high	variable annuity	hedge	losses	compared	to	fees	earned	and	a	depression	on	statutory	earnings	in	other	life	businesses	due	largely	to	continued	low interest	rates	and	high	loss	cost	trends	in	Group	Benefits.	Due	to	these	factors,	projecting	statutory	capital	and	the	related	RBC	ratios	is complex.	If	our	statutory	capital	resources	are	insufficient	to	maintain	a	particular	rating	by	one	or	more	rating	agencies,	we	may	seek	to raise	capital	through	public	or	private	equity	or	debt	financing.	If	we	were	not	to	raise	additional	capital,	either	at	our	discretion	or because	we	were	unable	to	do	so,	our	financial	strength	and	credit	ratings	might	be	downgraded	by	one	or	more	rating	agencies.

# Downgrades	in	our	financial	strength	or	credit	ratings,	which	may	make	our	products	less	attractive,	could	increase	our	cost	of	capital and	inhibit	our	ability	to	refinance	our	debt,	which	would	have	a	material	adverse	effect	on	our	business,	financial	condition,	results of	operations	and	liquidity.

Financial	 strength	 and	 credit	 ratings,	 including	 commercial	 paper	 ratings,	 are	 important	 in	 establishing	 the	 competitive	 position	 of insurance	companies.	Rating	agencies	assign	ratings	based	upon	several	factors.	While	most	of	the	factors	relate	to	the	rated	company, some	of	the	factors	relate	to	the	views	of	the	rating	agency,	general	economic	conditions,	and	circumstances	outside	the	rated	company's control.	In	addition,	rating	agencies	may	employ	different	models	and	formulas	to	assess	the	financial	strength	of	a	rated	company,	and from	time	to	time	rating	agencies	have,	at	their	discretion,	altered	these	models.	Changes	to	the	models,	general	economic	conditions,	or circumstances	outside	our	control	could	impact	a	rating	agency's	judgment	of	its	rating	and	the	rating	it	assigns	us.	We	cannot	predict what	actions	rating	agencies	may	take,	or	what	actions	we	may	take	in	response	to	the	actions	of	rating	agencies,	which	may	adversely affect	us.

Our	 financial	 strength	 ratings,	 which	 are	 intended	 to	 measure	 our	 ability	 to	 meet	 policyholder	 obligations,	 are	 an	 important	 factor affecting	public	confidence	in	most	of	our	products	and,	as	a	result,	our	competitiveness.	A	downgrade	or	a	potential	downgrade	in	the rating	of	our	financial	strength	or	of	one	of	our	principal	insurance	subsidiaries	could	affect	our	competitive	position	and	reduce	future sales	of	our	products.

Our	credit	ratings	also	affect	our	cost	of	capital.	A	downgrade	or	a	potential	downgrade	of	our	credit	ratings	could	make	it	more	difficult or	costly	to	refinance	maturing	debt	obligations,	to	support	business	growth	at	our	insurance	subsidiaries	and	to	maintain	or	improve	the financial	strength	ratings	of	our	principal	insurance	subsidiaries.	Downgrades	could	begin	to	trigger	potentially	material	collateral	calls	on certain	of	our	derivative	instruments	and	counterparty	rights	to	terminate	derivative	relationships,	both	of	which	could	limit	our	ability	to purchase	additional	derivative	instruments.	These	events	could	materially	adversely	affect	our	business,	financial	condition,	results	of operations	and	liquidity.

# Our	valuations	of	many	of	our	financial	instruments	include	methodologies,	estimations	and	assumptions	that	are	subject	to	differing

# interpretations	and	could	result	in	changes	to	investment	valuations	that	may	materially	adversely	affect	our	results	of	operations	and financial	condition.

The	following	financial	instruments	are	carried	at	fair	value	in	the	Company's	consolidated	financial	statements:	fixed	maturities,	equity securities,	freestanding	and	embedded	derivatives,	and	separate	account	assets.	The	determination	of	fair	values	is	made	at	a	specific	point in	time,	based	on	available	market	information	and	judgments	about	financial	instruments,	including	estimates	of	the	timing	and	amounts of	expected	future	cash	flows	and	the	credit	standing	of	the	issuer	or	counterparty.	The	use	of	different	methodologies	and	assumptions may	have	a	material	effect	on	the	estimated	fair	value	amounts.

During	periods	of	market	disruption,	including	periods	of	rapidly	widening	credit	spreads	or	illiquidity,	it	may	be	difficult	to	value	certain of	our	securities	if	trading	becomes	less	frequent	and/or	market	data	becomes	less	observable.	There	may	be	certain	asset	classes	that were	in	active	markets	with	significant	observable	data	that	become	illiquid	due	to	the	financial	environment.	In	such	cases,	securities may	require	more	subjectivity	and	management	judgment	in	determining	their	fair	values	and	those	fair	values	may	differ	materially	from the	 value	 at	 which	 the	 investments	 may	 be	 ultimately	 sold.	 Further,	 rapidly	 changing	 or	 unprecedented	 credit	 and	 equity	 market conditions	 could	 materially	 impact	 the	 valuation	 of	 securities	 and	 the	 period-to-period	 changes	 in	 value	 could	 vary	 significantly. Decreases	in	value	could	have	a	material	adverse	effect	on	our	results	of	operations	and	financial	condition.

# Evaluation of available-for-sale securities for other-than-temporary impairment involves subjective determinations and could materially	impact	our	results	of	operations.

The	evaluation	of	impairments	is	a	quantitative	and	qualitative	process,	which	is	subject	to	risks	and	uncertainties	and	is	intended	to determine	whether	a	credit	and/or	non-credit	 impairment	exists	and	whether	an	 impairment	should	be	recognized	 in	current	period earnings	or	in	other	comprehensive	income.	The	risks	and	uncertainties	include	changes	in	general	economic	conditions,	the	issuer's financial	condition	or	future	recovery	prospects,	the	effects	of	changes	in	interest	rates	or	credit	spreads	and	the	expected	recovery	period. For	securitized	financial	assets	with	contractual	cash	flows,	the	Company	currently	uses	its	best	estimate	of	cash	flows	over	the	life	of	the security.	In	addition,	estimating	future	cash	flows	 involves	 incorporating	 information	received	from	 third-party	sources	and	making internal	assumptions	and	judgments	regarding	the	future	performance	of	the	underlying	collateral	and	assessing	the	probability	that	an adverse	change	in	future	cash	flows	has	occurred.	The	determination	of	the	amount	of	other-than-temporary	impairments	is	based	upon our	quarterly	evaluation	and	assessment	of	known	and	inherent	risks	associated	with	the	respective	asset	class.	Such	evaluations	and assessments	are	revised	as	conditions	change	and	new	information	becomes	available.

Additionally,	our	management	considers	a	wide	range	of	factors	about	the	security	issuer	and	uses	their	best	judgment	in	evaluating	the cause	of	the	decline	in	the	estimated	fair	value	of	the	security	and	in	assessing	the	prospects	for	recovery.	Inherent	in	management's evaluation	of	the	security	are	assumptions	and	estimates	about	the	operations	of	the	issuer	and	its	future	earnings	potential.	Considerations in	the	impairment	evaluation	process	include,	but	are	not	limited	to:

•the	length	of	time	and	the	extent	to	which	the	fair	value	has	been	less	than	cost	or	amortized	cost;

•changes	in	the	financial	condition,	credit	rating	and	near-term	prospects	of	the	issuer;

•	 whether	the	issuer	is	current	on	contractually	obligated	interest	and	principal	payments;

•changes	in	the	financial	condition	of	the	security's	underlying	collateral;

•the	payment	structure	of	the	security;

•the	potential	for	impairments	in	an	entire	industry	sector	or	sub-sector;

•the	potential	for	impairments	in	certain	economically	depressed	geographic	locations;

•the	potential	for	impairments	of	securities	where	the	issuer,	series	of	issuers	or	industry	has	suffered	a	catastrophic	type	of	loss or	has	exhausted	natural	resources;

•	 unfavorable	changes	in	forecasted	cash	flows	on	mortgage-backed	and	asset-backed	securities;

•for	mortgage-backed	and	asset-backed	securities,	commercial	and	residential	property	value	declines	that	vary	by	property	type and	location	and	average	cumulative	collateral	loss	rates	that	vary	by	vintage	year;

•	 other	subjective	factors,	including	concentrations	and	information	obtained	from	regulators	and	rating	agencies;

•	 our	intent	to	sell	a	debt	or	an	equity	security	with	debt-like	characteristics	(collectively,	"debt	security")	or	whether	it	is	more likely	than	not	that	the	Company	will	be	required	to	sell	the	debt	security	before	its	anticipated	recovery;	and

•	 our	intent	and	ability	to	retain	an	equity	security	without	debt-like	characteristics	for	a	period	of	time	sufficient	to	allow	for	the recovery	of	its	value.

Impairment	losses	in	earnings	could	materially	adversely	affect	our	results	of	operation	and	financial	condition.

Losses	due	to	nonperformance	or	defaults	by	others,	including	issuers	of	investment	securities	(which	include	structured	securities such	as	commercial	mortgage	backed	securities	and	residential	mortgage	backed	securities,	European	private	and	sovereign	issuers, or	other	high	yielding	bonds)	mortgage	loans	or	reinsurance	and	derivative	instrument	counterparties,	could	have	a	material	adverse effect	on	the	value	of	our	investments,	business,	financial	condition,	results	of	operations	and	liquidity.

Issuers	or	borrowers	whose	securities	or	loans	we	hold,	customers,	trading	counterparties,	counterparties	under	swaps	and	other	derivative contracts,	reinsurers,	clearing	agents,	exchanges,	clearing	houses	and	other	financial	intermediaries	and	guarantors	may	default	on	their obligations	to	us	due	to	bankruptcy,	insolvency,	lack	of	liquidity,	adverse	economic	conditions,	operational	failure,	fraud,	government intervention	or	other	reasons.	Such	defaults	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations and	liquidity.	Additionally,	the	underlying	assets	supporting	our	structured	securities	or	loans	may	deteriorate	causing	these	securities	or loans	to	incur	losses.

Our	investment	portfolio	includes	securities	backed	by	real	estate	assets	the	value	of	which	have	been	adversely	impacted	by	the	recent recessionary	period,	high	unemployment	rates	and	the	associated	property	value	declines,	ultimately	resulting	in	a	reduction	in	expected future	 cash	 flows	 for	 certain	 securities.	The	 Company	 also	 has	 exposure	 to	 European	 based	 issuers	 of	 securities	 and	 providers	 of reinsurance,	as	well	as	indirect	European	exposure	resulting	from	the	variable	annuity	products	that	it	has	sold	in	Japan	and	the	United Kingdom.	Further	details	of	the	European	private	and	sovereign	issuers	held	within	the	investment	portfolio	and	indirect	variable	annuity exposures	can	be	found	in	Part	II,	Item	7,	MD&A	—	Enterprise	Risk	Management	—	Investment	Portfolio	Risks	and	Risk	Management. The	 Company's	 European	 based	 reinsurance	 arrangements	 are	 further	 described	 in	 Part	 II,	 Item	 7,	 MD&A	 —	 Enterprise	 Risk Management	—	Investment	Portfolio	Risks	and	Risk	Management	—	European	Exposure.

Further	property	value	declines	and	loss	rates	that	exceed	our	current	estimates,	as	outlined	in	Part	II,	Item	7,	MD&A	—	Enterprise	Risk Management	—	Other-Than-Temporary	Impairments,	a	worsening	of	general	economic	conditions,	including	the	European	financial crisis,	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

To	the	extent	the	investment	portfolio	is	not	adequately	diversified,	concentrations	of	credit	risk	may	exist	which	could	negatively	impact the	Company	if	significant	adverse	events	or	developments	occur	in	any	particular	industry,	group	of	related	industries	or	geographic regions.	The	Company	is	not	exposed	to	any	credit	concentration	risk	of	a	single	issuer	greater	than	10%	of	the	Company's	stockholders' equity	other	than	U.S.	government	and	U.S.	government	agencies	backed	by	the	full	faith	and	credit	of	the	U.S.	government.	However,	if issuers	of	securities	or	loans	we	hold	are	acquired,	merge	or	otherwise	consolidate	with	other	issuers	of	securities	or	loans	held	by	the Company,	the	Company's	credit	concentration	risk	could	increase	above	the	10%	threshold,	for	a	period	of	time,	until	the	Company	is able	to	sell	securities	to	get	back	in	compliance	with	the	established	investment	credit	policies.

# If	assumptions	used	in	estimating	future	gross	profits	differ	from	actual	experience,	we	may	be	required	to	accelerate	the	amortization of	DAC	and	increase	reserves	for	guaranteed	minimum	death	and	income	benefits,	which	could	have	a	material	adverse	effect	on	our results	of	operations	and	financial	condition.

The	Company	defers	acquisition	costs	associated	with	the	sales	of	its	universal	and	variable	life	and	variable	annuity	products.	These	costs are	amortized	over	the	expected	life	of	the	contracts.	The	remaining	deferred	but	not	yet	amortized	cost	is	referred	to	as	the	Deferred Acquisition	Cost	("DAC")	asset.	We	amortize	these	costs	in	proportion	to	the	present	value	of	estimated	gross	profits	("EGPs").	The Company	evaluates	the	EGPs	compared	to	the	DAC	asset	to	determine	if	an	impairment	exists.	The	Company	also	establishes	reserves	for GMDB	and	GMIB	using	components	of	EGPs.	The	projection	of	estimated	gross	profits	or	components	of	estimated	gross	profits	requires the	use	of	certain	assumptions,	principally	related	 to	separate	account	fund	returns	 in	excess	of	amounts	credited	 to	policyholders, surrender	and	lapse	rates,	interest	margin	(including	impairments),	mortality,	benefit	utilization,	annuitization	and	hedging	costs.	Of	these factors,	we	anticipate	that	changes	in	investment	returns	are	most	likely	to	impact	the	rate	of	amortization	of	such	costs.	However,	other factors	such	as	those	the	Company	might	employ	to	reduce	risk,	such	as	the	cost	of	hedging	or	other	risk	mitigating	techniques,	could	also significantly	reduce	estimates	of	future	gross	profits.	Estimating	future	gross	profits	is	a	complex	process	requiring	considerable	judgment and	the	forecasting	of	events	well	into	the	future.	If	our	assumptions	regarding	policyholder	behavior,	including	lapse	rates,	benefit utilization,	surrenders,	and	annuitization,	hedging	costs	or	costs	to	employ	other	risk	mitigating	techniques	prove	to	be	inaccurate	or	if significant	or	sustained	equity	market	declines	occur,	we	could	be	required	to	accelerate	the	amortization	of	DAC	related	to	variable annuity	and	variable	universal	life	contracts,	and	increase	reserves	for	GMDB	and	GMIB	which	would	result	in	a	charge	to	net	income. Such	adjustments	could	have	a	material	adverse	effect	on	our	results	of	operations	and	financial	condition.

If	our	businesses	do	not	perform	well,	we	may	be	required	to	recognize	an	impairment	of	our	goodwill	or	to	establish	a	valuation allowance	against	the	deferred	income	tax	asset,	which	could	have	a	material	adverse	effect	on	our	results	of	operations	and	financial condition.

Goodwill	represents	the	excess	of	the	amounts	we	paid	to	acquire	subsidiaries	and	other	businesses	over	the	fair	value	of	their	net	assets	at the	date	of	acquisition.	We	test	goodwill	at	least	annually	for	impairment.	Impairment	testing	is	performed	based	upon	estimates	of	the fair	value	of	the	"reporting	unit"	to	which	the	goodwill	relates.	The	reporting	unit	is	the	operating	segment	or	a	business	one	level	below that	operating	segment	if	discrete	financial	information	is	prepared	and	regularly	reviewed	by	management	at	that	level.	The	fair	value	of the	reporting	unit	is	impacted	by	the	performance	of	the	business	and	could	be	adversely	impacted	by	any	efforts	made	by	the	Company	to limit	risk.	If	it	is	determined	that	the	goodwill	has	been	impaired,	the	Company	must	write	down	the	goodwill	by	the	amount	of	the impairment,	with	a	corresponding	charge	 to	net	 income.	These	write	downs	could	have	a	material	adverse	effect	on	our	results	of operations	or	financial	condition.

Deferred	income	tax	represents	the	tax	effect	of	the	differences	between	the	book	and	tax	basis	of	assets	and	liabilities.	Deferred	tax	assets are	 assessed	 periodically	 by	 management	 to	 determine	 if	 they	 are	 realizable.	 Factors	 in	 management's	 determination	 include	 the performance	of	the	business	including	the	ability	to	generate	capital	gains,	to	offset	previously	recognized	capital	losses,	from	a	variety	of sources	and	tax	planning	strategies.	If	based	on	available	information,	it	is	more	likely	than	not	that	we	are	unable	to	recognize	a	full	tax benefit	on	realized	capital	losses,	then	a	valuation	allowance	will	be	established	with	a	corresponding	charge	to	net	income.	Charges	to increase	our	valuation	allowance	could	have	a	material	adverse	effect	on	our	results	of	operations	and	financial	condition.	As	previously announced,	we	are	evaluating	our	strategy	and	business	portfolios	with	the	goal	of	delivering	greater	shareholder	value.	Certain	strategic transactions	may	adversely	affect	our	ability	to	realize	our	deferred	tax	assets.

# The	occurrence	of	one	or	more	terrorist	attacks	in	the	geographic	areas	we	serve	or	the	threat	of	terrorism	in	general	may	have	a material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

The	occurrence	of	one	or	more	terrorist	attacks	in	the	geographic	areas	we	serve	could	result	in	substantially	higher	claims	under	our insurance	policies	than	we	have	anticipated.	Private	sector	catastrophe	reinsurance	is	extremely	limited	and	generally	unavailable	for terrorism	losses	caused	by	attacks	with	nuclear,	biological,	chemical	or	radiological	weapons.	Reinsurance	coverage	from	the	federal government	under	the	Terrorism	Risk	Insurance	Program	Reauthorization	Act	of	2007	is	also	limited.	Accordingly,	the	effects	of	a terrorist	attack	in	the	geographic	areas	we	serve	may	result	in	claims	and	related	losses	for	which	we	do	not	have	adequate	reinsurance. This	would	likely	cause	us	to	increase	our	reserves,	adversely	affect	our	results	during	the	period	or	periods	affected	and,	could	adversely affect	our	business,	financial	condition,	results	of	operations	and	liquidity.	Further,	the	continued	threat	of	terrorism	and	the	occurrence	of terrorist	attacks,	as	well	as	heightened	security	measures	and	military	action	in	response	to	these	threats	and	attacks	or	other	geopolitical or	military	crises,	may	cause	significant	volatility	in	global	financial	markets,	disruptions	to	commerce	and	reduced	economic	activity. These	consequences	could	have	an	adverse	effect	on	the	value	of	the	assets	in	our	investment	portfolio	as	well	as	those	in	our	separate accounts.	The	continued	threat	of	terrorism	also	could	result	in	increased	reinsurance	prices	and	potentially	cause	us	to	retain	more	risk than	we	otherwise	would	retain	if	we	were	able	to	obtain	reinsurance	at	lower	prices.	Terrorist	attacks	also	could	disrupt	our	operations centers	in	the	U.S.	or	abroad.	As	a	result,	it	is	possible	that	any,	or	a	combination	of	all,	of	these	factors	may	have	a	material	adverse effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

# Our	 business, financial	 condition,	 results	 of	 operations	 and liquidity	 may	 be	 materially	 adversely	 affected	 by	 unfavorable loss development.

Our	success,	in	part,	depends	upon	our	ability	to	accurately	assess	the	risks	associated	with	the	businesses	that	we	insure.	We	establish loss	reserves	to	cover	our	estimated	liability	for	the	payment	of	all	unpaid	losses	and	loss	expenses	incurred	with	respect	to	premiums earned	on	the	policies	that	we	write.	Loss	reserves	do	not	represent	an	exact	calculation	of	liability.	Rather,	loss	reserves	are	estimates	of what	we	expect	the	ultimate	settlement	and	administration	of	claims	will	cost,	less	what	has	been	paid	to	date.	These	estimates	are	based upon	actuarial	and	statistical	projections	and	on	our	assessment	of	currently	available	data,	as	well	as	estimates	of	claims	severity	and frequency,	legal	theories	of	liability	and	other	factors.	Loss	reserve	estimates	are	refined	periodically	as	experience	develops	and	claims are	reported	and	settled.	Establishing	an	appropriate	level	of	loss	reserves	is	an	inherently	uncertain	process.	Because	of	this	uncertainty, it	is	possible	that	our	reserves	at	any	given	time	will	prove	inadequate.	Furthermore,	since	estimates	of	aggregate	loss	costs	for	prior accident	years	are	used	in	pricing	our	insurance	products,	we	could	later	determine	that	our	products	were	not	priced	adequately	to	cover actual	losses	and	related	loss	expenses	in	order	to	generate	a	profit.	To	the	extent	we	determine	that	losses	and	related	loss	expenses	are emerging	unfavorably	to	our	initial	expectations,	we	will	be	required	to	increase	reserves.	Increases	in	reserves	would	be	recognized	as	an expense	during	the	period	or	periods	in	which	these	determinations	are	made,	thereby	adversely	affecting	our	results	of	operations	for	the related	period	or	periods.	Depending	on	the	severity	and	timing	of	any	changes	in	these	estimated	losses,	such	determinations	could	have	a material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

# It	is	difficult	for	us	to	predict	our	potential	exposure	for	asbestos	and	environmental	claims,	and	our	ultimate	liability	may	exceed	our

# currently	recorded	reserves,	which	may	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and liquidity.

We	continue	to	receive	asbestos	and	environmental	claims.	Significant	uncertainty	limits	the	ability	of	insurers	and	reinsurers	to	estimate the	ultimate	reserves	necessary	for	unpaid	losses	and	related	expenses	for	both	environmental	and	particularly	asbestos	claims.	For	some asbestos	and	environmental	claims,	we	believe	that	the	actuarial	tools	and	other	techniques	we	employ	to	estimate	the	ultimate	cost	of claims	 for	 more	 traditional	 kinds	 of	 insurance	 exposure	 are	 less	 precise	 in	 estimating	 reserves	 for	 our	 asbestos	 and	 environmental exposures.	Accordingly,	the	degree	of	variability	of	reserve	estimates	for	these	longer-tailed	exposures	is	significantly	greater	than	for other	more	traditional	exposures.	It	is	also	not	possible	to	predict	changes	in	the	legal	and	legislative	environment	and	their	effect	on	the future	development	of	asbestos	and	environmental	claims.	Because	of	the	significant	uncertainties	that	limit	the	ability	of	insurers	and reinsurers	to	estimate	the	ultimate	reserves	necessary	for	unpaid	losses	and	related	expenses	for	both	environmental	and	particularly asbestos	claims,	the	ultimate	liabilities	may	exceed	the	currently	recorded	reserves.	Increases	in	reserves	would	be	recognized	as	an expense	during	the	periods	in	which	these	determinations	are	made,	thereby	adversely	affecting	our	results	of	operations	for	the	related periods.	Any	such	additional	liability	cannot	be	reasonably	estimated	now,	but	could	have	a	material	adverse	effect	on	our	business, financial	condition,	results	of	operations	and	liquidity.

# We	are	particularly	vulnerable	to	losses	from	catastrophes,	both	natural	and	man-made,	which	could	materially	and	adversely	affect our	business,	financial	condition,	results	of	operations	and	liquidity.

Our	insurance	operations	expose	us	to	claims	arising	out	of	catastrophes.	Catastrophes	can	be	caused	by	various	unpredictable	events, including	earthquakes,	hurricanes,	hailstorms,	severe	winter	weather,	fires,	tornadoes,	explosions,	pandemics	and	other	natural	or	man- made	disasters.	The	geographic	distribution	of	our	business	subjects	us	to	catastrophe	exposure	for	natural	events	occurring	in	a	number	of areas,	including,	but	not	limited	to,	hurricanes	in	Florida,	the	Gulf	Coast,	the	Northeast	and	the	Atlantic	coast	regions	of	the	United	States, tornadoes	in	the	Midwest	and	Southeast,	and	earthquakes	in	California	and	the	New	Madrid	region	of	the	United	States.	We	expect	that increases	in	the	values	and	concentrations	of	insured	property	in	these	areas	will	continue	to	increase	the	severity	of	catastrophic	events	in the	future.	Starting	in	2004	and	2005,	third-party	catastrophe	loss	models	for	hurricane	loss	events	have	incorporated	medium-term forecasts	of	increased	hurricane	frequency	and	severity	—	reflecting	the	potential	influence	of	multi-decadal	climate	patterns	within	the Atlantic.	In	addition,	changing	climate	conditions	across	longer	time	scales,	including	the	potential	risk	of	broader	climate	change,	may	be increasing,	or	may	in	the	future	increase,	the	severity	of	certain	natural	catastrophe	losses	across	various	geographic	regions.	In	addition, changing	climate	conditions,	primarily	rising	global	temperatures,	may	be	increasing,	or	may	in	the	future	increase,	the	frequency	and severity	of	natural	catastrophes	such	as	hurricanes.	Potential	examples	of	the	impact	of	climate	change	on	catastrophe	exposure	include, but	are	not	limited	to	the	following:	an	increase	in	the	frequency	or	severity	of	wind	and	thunderstorm	and	tornado/hailstorm	events	due	to increased	convection	in	the	atmosphere,	more	frequent	brush	fires	in	certain	geographies	due	to	prolonged	periods	of	drought,	higher incidence	of	deluge	flooding,	and	the	potential	for	an	increase	in	severity	of	the	largest	hurricane	events	due	to	higher	sea	surface temperatures.	Our	operations	are	also	exposed	to	risk	of	loss	from	catastrophes	associated	with	pandemics	and	other	events	that	could significantly	increase	our	mortality	and	morbidity	exposures.	Policyholders	may	be	unable	to	meet	their	obligations	to	pay	premiums	on our	insurance	policies	or	make	deposits	on	our	investment	products.

Our	liquidity	could	be	constrained	by	a	catastrophe,	or	multiple	catastrophes,	which	could	result	in	extraordinary	losses.	In	addition,	in part	because	accounting	rules	do	not	permit	insurers	to	reserve	for	such	catastrophic	events	until	they	occur,	claims	from	catastrophic events	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.	To	the	extent	that	loss experience	unfolds	or	models	improve,	we	will	seek	to	reflect	any	increased	risk	in	the	design	and	pricing	of	our	products.	However,	the Company	may	be	exposed	to	regulatory	or	legislative	actions	that	prevent	a	full	accounting	of	loss	expectations	in	the	design	or	pricing	of our	products	or	result	in	additional	risk-shifting	to	the	insurance	industry.

# We	may	incur	losses	due	to	our	reinsurers'	unwillingness	or	inability	to	meet	their	obligations	under	reinsurance	contracts	and	the availability,	pricing	and	adequacy	of	reinsurance	may	not	be	sufficient	to	protect	us	against	losses.

As	an	insurer,	we	frequently	seek	to	reduce	the	losses	that	may	arise	from	catastrophes,	or	other	events	that	can	cause	unfavorable	results of	operations,	through	reinsurance.	Under	these	reinsurance	arrangements,	other	insurers	assume	a	portion	of	our	losses	and	related expenses;	however,	we	remain	liable	as	the	direct	insurer	on	all	risks	reinsured.	Consequently,	ceded	reinsurance	arrangements	do	not eliminate	our	obligation	to	pay	claims,	and	we	are	subject	to	our	reinsurers'	credit	risk	with	respect	to	our	ability	to	recover	amounts	due from	them.	Although	we	regularly	evaluate	the	financial	condition	of	our	reinsurers	to	minimize	our	exposure	to	significant	losses	from reinsurer	insolvencies,	our	reinsurers	may	become	financially	unsound	or	choose	to	dispute	their	contractual	obligations	by	the	time	their financial	obligations	become	due.	The	inability	or	unwillingness	of	any	reinsurer	to	meet	its	financial	obligations	to	us	could	have	a material	adverse	effect	on	our	results	of	operations.	In	addition,	market	conditions	beyond	our	control	determine	the	availability	and	cost of	the	reinsurance	we	are	able	to	purchase.	Historically,	reinsurance	pricing	has	changed	significantly	from	time	to	time.	No	assurances can	be	made	that	reinsurance	will	remain	continuously	available	to	us	to	the	same	extent	and	on	the	same	terms	as	are	currently	available. If	we	were	unable	to	maintain	our	current	level	of	reinsurance	or	purchase	new	reinsurance	protection	in	amounts	that	we	consider sufficient	and	at	prices	that	we	consider	acceptable,	we	would	have	to	either	accept	an	increase	in	our	net	liability	exposure,	reduce	the amount	of	business	we	write,	or	develop	other	alternatives	to	reinsurance.

# Competitive	activity	may	adversely	affect	our	market	share	and	financial	results,	which	could	have	a	material	adverse	effect	on	our business,	results	of	operations	and	financial	condition.

The	insurance	industry	is	highly	competitive.	Our	competitors	include	other	insurers	and,	because	many	of	our	products	include	an investment	component,	securities	firms,	investment	advisers,	mutual	funds,	banks	and	other	financial	institutions.	These	competitors compete	with	us	for	producers	such	as	brokers	and	independent	agents	and	for	our	employees.	Larger	competitors	may	have	lower operating	costs	and	an	ability	to	absorb	greater	risk	while	maintaining	their	financial	strength	ratings,	thereby	allowing	them	to	price	their products	more	competitively.	These	highly	competitive	pressures	could	result	in	increased	pricing	pressures	on	a	number	of	our	products and	services	and	may	harm	our	ability	to	maintain	or	increase	our	profitability.	Because	of	the	highly	competitive	nature	of	the	insurance industry,	there	can	be	no	assurance	that	we	will	continue	to	effectively	compete	with	our	industry	rivals,	or	that	competitive	pressure	will not	have	a	material	adverse	effect	on	our	business,	results	of	operations	and	financial	condition.

# We	may	experience	difficulty	in	marketing,	distributing	and	providing	investment	advisory	services	in	relation	to	our	products	through current	and	future	distribution	channels	and	advisory	firms.

We	distribute	our	annuity,	life,	property	and	casualty	insurance	products	and	mutual	funds	through	a	variety	of	distribution	channels, including	brokers,	independent	agents,	broker-dealers,	banks,	wholesalers,	affinity	partners,	our	own	internal	sales	force	and	other	third- party	organizations.	In	some	areas	of	our	business,	we	generate	a	significant	portion	of	our	business	through	or	in	connection	with individual	third-party	arrangements.	For	example,	we	market	our	Consumer	Markets	products	in	part	through	an	exclusive	licensing arrangement	 with	AARP	 that	 continues	 through	 January	 2020.	 Our	 ability	 to	 distribute	 products	 through	 affinity	 partners	 may	 be adversely	impacted	by	membership	levels	and	the	pace	of	membership	growth.	In	addition,	we	work	with	a	number	of	key	investment advisers	in	managing	our	products	and	mutual	funds.	In	December	2011,	for	example,	we	entered	into	a	5-year	agreement	with	Wellington Management	Company	as	the	preferred	sub-advisor	for	The	Hartford	Mutual	Funds.	We	periodically	negotiate	provisions	and	renewals	of these	relationships,	and	there	can	be	no	assurance	that	such	terms	will	remain	acceptable	to	us	or	such	third	parties.	An	interruption	in	our continuing	relationship	with	certain	of	these	third	parties,	including	potentially	as	a	result	of	a	strategic	transaction,	could	materially	affect our	ability	to	market	our	products	and	could	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and liquidity.

# The	impact	of	regulatory	initiatives,	including	the	enactment	of	The	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	of 2010	(the	"Dodd-Frank	Act"),	could	have	a	material	adverse	impact	on	our	business,	financial	condition,	results	of	operations	and liquidity.

Regulatory	developments	relating	to	the	recent	financial	crisis	may	significantly	affect	our	operations	and	prospects	in	ways	that	we cannot	predict.	U.S.	and	overseas	governmental	and	regulatory	authorities,	including	the	SEC,	The	Federal	Reserve,	the	Federal	Deposit Insurance	 Corporation	 ("FDIC"),	 the	 New	 York	 Stock	 Exchange	 and	 the	 Financial	 Industry	 Regulatory	Authority	 are	 considering enhanced	or	new	regulatory	requirements	intended	to	prevent	future	crises	or	otherwise	stabilize	the	institutions	under	their	supervision. Such	measures	are	likely	to	lead	to	stricter	regulation	of	financial	institutions	generally,	and	heightened	prudential	requirements	for systemically	 important	 companies	 in	 particular.	 Such	 measures	 could	 include	 taxation	 of	 financial	 transactions	 and	 restrictions	 on employee	compensation.

The	Dodd-Frank	Act	was	enacted	on	July	21,	2010,	mandating	changes	to	the	regulation	of	the	financial	services	industry.	The	Dodd- Frank	Act	may	affect	our	operations	and	governance	in	ways	that	could	adversely	affect	our	financial	condition	and	results	of	operations.

Certain	provisions	of	 the	Dodd-Frank	Act	will	require	central	clearing	of,	and/or	 impose	new	margin	and	capital	requirements	on, derivatives	transactions,	which	we	expect	will	increase	the	costs	of	our	hedging	program.	Other	provisions	in	the	Dodd-Frank	Act	that may	impact	us	include:	a	new	"Federal	Insurance	Office"	within	Treasury;	discretionary	authority	for	the	SEC	to	impose	a	harmonized standard	of	care	for	investment	advisers	and	broker-dealers	who	provide	personalized	advice	about	securities	to	retail	customers;	possible adverse	impact	on	the	pricing	and	liquidity	of	the	securities	in	which	we	invest	resulting	from	the	proprietary	trading	and	market	making limitation	of	the	Volcker	Rule;	possible	prohibition	of	certain	asset-backed	securities	transactions	that	could	adversely	impact	our	ability to	offer	insurance-linked	securities;	and	enhancements	to	corporate	governance,	especially	regarding	risk	management.

In	particular,	the	Dodd-Frank	Act	vests	a	newly	created	Financial	Services	Oversight	Council	("FSOC")	with	the	power	to	designate "systemically	important"	institutions,	which	will	be	subject	to	special	regulatory	supervision	and	other	provisions	intended	to	prevent,	or mitigate	 the	 impact	of,	future	disruptions	 in	 the	U.S.	financial	system.	Systemically	 important	 institutions	are	 limited	 to	 large	bank holding	companies	and	nonbank	financial	companies	that	are	so	important	that	their	potential	failure	could	"pose	a	threat	to	the	financial stability	of	the	United	States."	The	FSOC	released	a	second	notice	of	proposed	rulemaking	setting	forth	the	process	they	propose	to	follow when	designating	systemically	important	nonbank	financial	companies	in	October	2011,	but	has	not	yet	released	a	final	rule	or	indicated when	the	FSOC	will	begin	designating	systemically	important	nonbank	financial	companies.

If	we	are	designated	as	a	systemically	important	institution,	we	could	be	subject	to	higher	capital	requirements	and	additional	regulatory oversight	imposed	by	The	Federal	Reserve,	as	well	as	to	post-event	assessments	imposed	by	the	FDIC	to	recoup	the	costs	associated	with the	orderly	liquidation	of	other	systemically	important	institutions	in	the	event	one	or	more	such	institutions	fails.	Further,	the	FDIC	is authorized	to	petition	a	state	court	to	commence	an	insolvency	proceeding	to	liquidate	an	insurance	company	that	fails	in	the	event	the insurer's	state	regulator	fails	to	act.	We	may	also	be	restricted	from	sponsoring	and	investing	in	private	equity	and	hedge	funds,	which would	limit	our	discretion	in	managing	our	general	account.	The	Federal	Reserve	issued	a	proposed	rule	in	December	2011	that	would apply	 capital	 and	 liquidity	 requirements,	 single-counterparty	 credit	 limits,	 and	 stress	 testing	 and	 risk	 management	 requirements	 to systemically	important	institutions,	and	subject	such	institutions	to	an	early	remediation	regime	based	on	these	requirements.	The	Federal Reserve	has	noted	that	they	may	tailor	the	application	of	the	proposed	rule	to	the	particular	attributes	of	systemically	important	nonbank financial	companies.	If	The	Hartford	were	to	be	designated	as	systemically	important	by	the	FSOC,	these	requirements	could	apply	to	The Hartford.	However,	it	is	not	yet	clear	how	or	to	what	extent	these	requirements	would	be	applied	to	systemically	important	nonbank financial	companies.

# We	may	experience	unfavorable	judicial	or	legislative	developments	involving	claim	litigation	that	could	have	a	material	adverse effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

The	Hartford	is	involved	in	claims	litigation	arising	in	the	ordinary	course	of	business,	both	as	a	liability	insurer	defending	or	providing indemnity	for	third-party	claims	brought	against	insureds	and	as	an	insurer	defending	coverage	claims	brought	against	it.	The	Hartford accounts	for	such	activity	through	the	establishment	of	unpaid	loss	and	loss	adjustment	expense	reserves.	The	Company	is	also	involved	in legal	actions	that	do	not	arise	in	the	ordinary	course	of	business,	some	of	which	assert	claims	for	substantial	amounts.	Pervasive	or significant	changes	in	the	judicial	environment	relating	to	matters	such	as	trends	in	the	size	of	jury	awards,	developments	in	the	law relating	to	the	liability	of	insurers	or	tort	defendants,	and	rulings	concerning	the	availability	or	amount	of	certain	types	of	damages	could cause	our	ultimate	liabilities	to	change	from	our	current	expectations.	Changes	in	federal	or	state	tort	litigation	laws	or	other	applicable law	could	have	a	similar	effect.	It	is	not	possible	to	predict	changes	in	the	judicial	and	legislative	environment	and	their	impact	on	the future	development	of	the	adequacy	of	our	loss	reserves,	particularly	reserves	for	longer-tailed	lines	of	business,	including	asbestos	and environmental	reserves,	and	how	those	changes	might	adversely	affect	our	ability	to	price	our	products	appropriately.	Our	business, financial	condition,	results	of	operations	and	liquidity	could	also	be	adversely	affected	if	judicial	or	legislative	developments	cause	our ultimate	liabilities	to	increase	from	current	expectations.

# Our	business,	financial	condition,	results	of	operations	and	liquidity	may	be	adversely	affected	by	the	emergence	of	unexpected	and unintended	claim	and	coverage	issues.

As	industry	practices	and	legal,	judicial,	social	and	other	environmental	conditions	change,	unexpected	and	unintended	issues	related	to claims	and	coverage	may	emerge.	These	issues	may	either	extend	coverage	beyond	our	underwriting	intent	or	increase	the	frequency	or severity	of	claims.	In	some	instances,	these	changes	may	not	become	apparent	until	some	time	after	we	have	issued	insurance	contracts that	are	affected	by	the	changes.	As	a	result,	the	full	extent	of	liability	under	our	insurance	contracts	may	not	be	known	for	many	years after	a	contract	is	issued,	and	this	liability	may	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operations and	liquidity	at	the	time	it	becomes	known.

# Potential	changes	in	domestic	and	foreign	regulation	may	increase	our	business	costs	and	required	capital	levels,	which	could	have	a material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

We	are	subject	to	extensive	U.S.	and	non-U.S.	laws	and	regulations	that	are	complex,	subject	to	change	and	often	conflicting	in	their approach	or	intended	outcomes.	Compliance	with	these	laws	and	regulations	is	costly	and	can	affect	our	strategy,	as	well	as	the	demand for	and	profitability	of	the	products	we	offer.

State	insurance	laws	regulate	most	aspects	of	our	U.S.	insurance	businesses,	and	our	insurance	subsidiaries	are	regulated	by	the	insurance departments	 of	 the	 states	 in	 which	 they	 are	 domiciled,	 licensed	 or	 authorized	 to	 conduct	 business.	 U.S.	 state	 laws	 grant	 insurance regulatory	authorities	broad	administrative	powers	with	respect	to,	among	other	things:

•licensing	companies	and	agents	to	transact	business;

•calculating	the	value	of	assets	to	determine	compliance	with	statutory	requirements;

•	 mandating	certain	insurance	benefits;

•regulating	certain	premium	rates;

•reviewing	and	approving	policy	forms;

•regulating	unfair	trade	and	claims	practices,	including	through	the	imposition	of	restrictions	on	marketing	and	sales	practices, distribution	arrangements	and	payment	of	inducements;

•	 protecting	privacy;

•establishing	statutory	capital	and	reserve	requirements	and	solvency	standards;

•fixing	maximum	interest	rates	on	insurance	policy	loans	and	minimum	rates	for	guaranteed	crediting	rates	on	life	insurance policies	and	annuity	contracts;

•approving	changes	in	control	of	insurance	companies;

•approving	acquisitions,	divestitures	and	similar	transactions;

•restricting	the	payment	of	dividends	to	the	parent	company	and	other	transactions	between	affiliates;

•establishing	assessments	and	surcharges	for	guaranty	funds,	second-injury	funds	and	other	mandatory	pooling	arrangements;

•requiring	insurers	to	dividend	any	excess	profits	to	policy	holders;	and

•regulating	the	types,	amounts	and	valuation	of	investments.

Because	these	laws	and	regulations	are	complex	and	sometimes	inexact,	there	is	also	a	risk	that	any	particular	regulator's	or	enforcement authority's	interpretation	of	a	legal,	accounting,	or	reserving	issue	may	change	over	time	to	our	detriment,	or	expose	us	to	different	or additional	regulatory	risks.	For	example,	certain	of	our	domestic	life	insurance	subsidiaries	use	the	NAIC's	Model	Regulation	entitled "Valuation	of	Life	Insurance	Policies,"	commonly	known	as	Regulation	XXX,	in	setting	statutory	reserves	for	term	life	insurance	policies with	long-term	premium	guarantees	and	universal	life	policies	with	secondary	guarantees.	In	addition,	Actuarial	Guideline	38	("AG38"	or "AXXX")	clarifies	the	application	of	Regulation	XXX	with	respect	to	universal	life	insurance	policies	with	secondary	guarantees,	i.e.,	a guaranteed	death	benefit	for	a	specified	period	of	time,	often	for	life.	Virtually	all	of	our	in	force	universal	life	insurance	products	are	now affected	by	Regulation	XXX	and	AXXX.	The	application	of	these	regulations	and	guidelines	by	insurers	involves	interpretations	and judgments	that	may	not	be	consistent	with	the	opinion	of	state	insurance	departments.	We	cannot	provide	assurance	that	such	differences of	opinion	will	not	result	in	regulatory,	tax	or	other	challenges	to	the	actions	we	have	taken	to	date.	The	result	of	those	potential	challenges could	require	us	to	increase	statutory	reserves	or	incur	higher	operating	and/or	tax	costs.	Moreover,	it	is	possible	that	the	reinsurance	and capital	management	actions	we	have	taken	to	mitigate	the	impact	of	Regulation	XXX	and	AXXX	on	our	universal	life	insurance	business may	face	regulatory,	rating	agency	or	other	challenges.	Furthermore,	we	may	be	unable	to	continue	to	implement	actions	to	mitigate	the impact	of	these	regulations	on	future	sales	of	term	life	insurance	and	universal	life	policies,	resulting	in	lower	returns	on	such	products than	we	currently	anticipate	or	reduce	our	sales	of	these	products.

Furthermore,	our	international	operations	are	subject	to	regulation	in	the	relevant	jurisdictions	in	which	they	operate	(primarily	the	Japan Financial	Services	Agency	and	the	United	Kingdom	Financial	Services	Authority),	which	in	many	ways	is	similar	to	the	state	regulation outlined	above,	with	similar	related	restrictions	and	obligations.	Our	asset	management	businesses	are	also	subject	to	extensive	regulation in	the	various	jurisdictions	where	they	operate.

In	addition,	future	regulatory	initiatives	could	be	adopted	at	the	federal	or	state	level	that	could	impact	the	profitability	of	our	businesses.

These	 laws	 and	 regulations	 are	 primarily	 intended	 to	 protect	 investors	 in	 the	 securities	 markets	 or	 investment	 advisory	 clients	 and generally	 grant	 supervisory	 authorities	 broad	 administrative	 powers.	 Compliance	 with	 these	 laws	 and	 regulations	 is	 costly,	 time consuming	and	personnel	 intensive,	and	may	have	an	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and liquidity.	See	the	risk	factor,	"The	impact	of	regulatory	initiatives,	including	the	enactment	of	The	Dodd-Frank	Wall	Street	Reform	and Consumer	Protection	Act	of	2010	(the	"Dodd-Frank	Act"),	could	have	a	material	adverse	impact	on	our	business,	financial	condition, results	of	operations	and	liquidity."

# Our	ability	to	declare	and	pay	dividends	is	subject	to	limitations.

The	payment	of	future	dividends	on	our	capital	stock	is	subject	to	the	discretion	of	our	board	of	directors,	which	considers,	among	other factors,	our	operating	results,	overall	financial	condition,	credit-risk	considerations	and	capital	requirements,	as	well	as	general	business and	market	conditions.

Moreover,	as	a	holding	company	that	is	separate	and	distinct	from	our	insurance	subsidiaries,	we	have	no	significant	business	operations of	our	own.	Therefore,	we	rely	on	dividends	from	our	insurance	company	subsidiaries	and	other	subsidiaries	as	the	principal	source	of cash	flow	to	meet	our	obligations.	These	obligations	include	payments	on	our	debt	securities	and	the	payment	of	dividends	on	our	capital stock.	The	Connecticut	insurance	holding	company	laws	limit	the	payment	of	dividends	by	Connecticut-domiciled	insurers.	In	addition, these	laws	require	notice	to	and	approval	by	the	state	insurance	commissioner	for	the	declaration	or	payment	by	those	subsidiaries	of	any dividend	which,	together	with	other	dividends	or	distributions	made	within	the	preceding	12	months,	exceeds	the	greater	of:

•	 10%	of	the	insurer's	policyholder	surplus	as	of	December	31	of	the	preceding	year,	or

•	 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.

In	addition,	if	any	dividend	of	a	Connecticut-domiciled	insurer	exceeds	the	insurer's	earned	surplus,	it	requires	the	prior	approval	of	the Connecticut	Insurance	Commissioner.

The	 insurance	 holding	 company	 laws	 of	 the	 other	 jurisdictions	 in	 which	 our	 insurance	 subsidiaries	 are	 incorporated,	 or	 deemed commercially	domiciled,	generally	contain	similar,	and	in	some	instances	more	restrictive,	limitations	on	the	payment	of	dividends. Dividends	paid	to	us	by	our	insurance	subsidiaries	are	further	dependent	on	their	cash	requirements.	For	further	discussion	on	dividends from	insurance	subsidiaries,	see	Part	II,	Item	7,	MD&A	—	Capital	Resources	&	Liquidity.

Our	rights	to	participate	in	any	distribution	of	the	assets	of	any	of	our	subsidiaries,	for	example,	upon	their	liquidation	or	reorganization, and	the	ability	of	holders	of	our	common	stock	to	benefit	indirectly	from	a	distribution,	are	subject	to	the	prior	claims	of	creditors	of	the applicable	subsidiary,	except	to	the	extent	that	we	may	be	a	creditor	of	that	subsidiary.	Claims	on	these	subsidiaries	by	persons	other	than us	include,	as	of	December,	2011,	claims	by	policyholders	for	benefits	payable	amounting	to	$117.1	billion,	claims	by	separate	account holders	of	$143.9	billion,	and	other	liabilities	including	claims	of	trade	creditors,	claims	from	guaranty	associations	and	claims	from holders	of	debt	obligations,	amounting	to	$13.0	billion.

Holders	of	our	capital	stock	are	only	entitled	to	receive	such	dividends	as	our	board	of	directors	may	declare	out	of	funds	legally	available for	such	payments.	Moreover,	our	common	stockholders	are	subject	to	the	prior	dividend	rights	of	any	holders	of	our	preferred	stock	or depositary	shares	representing	such	preferred	stock	then	outstanding.	As	of	December	31,	2011,	there	were	575,000	shares	of	our	Series	F Preferred	Stock	issued	and	outstanding.	Under	the	terms	of	the	Series	F	Preferred	Stock,	our	ability	to	declare	and	pay	dividends	on	or repurchase	our	common	stock	will	be	subject	to	restrictions	in	the	event	we	fail	to	declare	and	pay	(or	set	aside	for	payment)	full dividends	on	the	Series	F	Preferred	Stock.

The	terms	of	our	outstanding	junior	subordinated	debt	securities	also	prohibit	us	from	declaring	or	paying	any	dividends	or	distributions on	our	capital	stock	or	purchasing,	acquiring,	or	making	a	liquidation	payment	on	such	stock,	if	we	have	given	notice	of	our	election	to defer	interest	payments	but	the	related	deferral	period	has	not	yet	commenced	or	a	deferral	period	is	continuing.

# As	a	property	and	casualty	insurer,	the	premium	rates	we	are	able	to	charge	and	the	profits	we	are	able	to	obtain	are	affected	by	the actions	of	state	insurance	departments	that	regulate	our	business,	the	cyclical	nature	of	the	business	in	which	we	compete	and	our ability	to	adequately	price	the	risks	we	underwrite,	which	may	have	a	material	adverse	effect	on	our	business,	financial	condition, results	of	operations	and	liquidity.

Pricing	adequacy	depends	on	a	number	of	factors,	including	the	ability	to	obtain	regulatory	approval	for	rate	changes,	proper	evaluation	of underwriting	risks,	the	ability	to	project	future	loss	cost	frequency	and	severity	based	on	historical	loss	experience	adjusted	for	known trends,	our	response	to	rate	actions	taken	by	competitors,	and	expectations	about	regulatory	and	legal	developments	and	expense	levels. We	seek	to	price	our	property	and	casualty	insurance	policies	such	that	insurance	premiums	and	future	net	investment	income	earned	on premiums	received	will	provide	for	an	acceptable	profit	in	excess	of	underwriting	expenses	and	the	cost	of	paying	claims.

State	insurance	departments	that	regulate	us	often	propose	premium	rate	changes	for	the	benefit	of	the	consumer	at	the	expense	of	the insurer	and	may	not	allow	us	to	reach	targeted	levels	of	profitability.	In	addition	to	regulating	rates,	certain	states	have	enacted	laws	that require	a	property	and	casualty	insurer	conducting	business	in	that	state	to	participate	in	assigned	risk	plans,	reinsurance	facilities,	joint underwriting	associations	and	other	residual	market	plans,	or	to	offer	coverage	to	all	consumers	and	often	restrict	an	insurer's	ability	to charge	the	price	it	might	otherwise	charge.	In	these	markets,	we	may	be	compelled	to	underwrite	significant	amounts	of	business	at	lower than	desired	rates,	participate	in	the	operating	losses	of	residual	market	plans	or	pay	assessments	to	fund	operating	deficits	of	state- sponsored	funds,	possibly	leading	to	unacceptable	returns	on	equity.	The	laws	and	regulations	of	many	states	also	limit	an	insurer's	ability to	 withdraw	 from	 one	 or	 more	 lines	 of	 insurance	 in	 the	 state,	 except	 pursuant	 to	 a	 plan	 that	 is	 approved	 by	 the	 state's	 insurance department.	Additionally,	certain	states	require	insurers	to	participate	in	guaranty	funds	for	impaired	or	insolvent	insurance	companies. These	funds	periodically	assess	losses	against	all	insurance	companies	doing	business	in	the	state.	Any	of	these	factors	could	have	a material	adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	liquidity.

Additionally,	the	property	and	casualty	insurance	market	is	historically	cyclical,	experiencing	periods	characterized	by	relatively	high levels	of	price	competition,	less	restrictive	underwriting	standards	and	relatively	low	premium	rates,	followed	by	periods	of	relatively	low levels	of	competition,	more	selective	underwriting	standards	and	relatively	high	premium	rates.	Prices	tend	to	increase	for	a	particular	line of	business	when	insurance	carriers	have	incurred	significant	losses	in	that	line	of	business	in	the	recent	past	or	when	the	industry	as	a whole	commits	less	of	its	capital	to	writing	exposures	in	that	line	of	business.	Prices	tend	to	decrease	when	recent	loss	experience	has been	favorable	or	when	competition	among	insurance	carriers	increases.	In	all	of	our	property	and	casualty	insurance	product	lines	and states,	there	is	a	risk	that	the	premium	we	charge	may	ultimately	prove	to	be	inadequate	as	reported	losses	emerge.	In	addition,	there	is	a risk	that	regulatory	constraints,	price	competition	or	incorrect	pricing	assumptions	could	prevent	us	from	achieving	targeted	returns. Inadequate	pricing	could	have	a	material	adverse	effect	on	our	results	of	operations.

If	we	are	unable	to	maintain	the	availability	of	our	systems	and	safeguard	the	security	of	our	data	due	to	the	occurrence	of	disasters	or a	cyber	or	other	information	security	incident,	our	ability	to	conduct	business	may	be	compromised,	we	may	incur	substantial	costs and	suffer	other	negative	consequences,	all	of	which	may	have	a	material	adverse	effect	on	our	business,	financial	condition,	results of	operations	and	liquidity.

We	use	computer	systems	to	process,	store,	retrieve,	evaluate	and	utilize	customer	and	company	data	and	information.	Our	computer, information	technology	and	telecommunications	systems,	in	turn,	interface	with	and	rely	upon	third-party	systems.	Our	business	is	highly dependent	 on	 our	 ability,	 and	 the	 ability	 of	 certain	 third	 parties,	 to	 access	 these	 systems	 to	 perform	 necessary	 business	 functions, including,	without	limitation,	conducting	our	financial	reporting	and	analysis,	providing	insurance	quotes,	processing	premium	payments, making	changes	 to	existing	policies,	filing	and	paying	claims,	administering	variable	annuity	products	and	mutual	funds,	providing customer	support	and	managing	our	investment	portfolios	and	hedging	programs.	Systems	failures	or	outages	could	compromise	our ability	to	perform	these	functions	in	a	timely	manner,	which	could	harm	our	ability	to	conduct	business	and	hurt	our	relationships	with	our business	partners	and	customers.	In	the	event	of	a	disaster	such	as	a	natural	catastrophe,	a	pandemic,	an	industrial	accident,	a	blackout,	a terrorist	attack	or	war,	systems	upon	which	we	rely	may	be	inaccessible	to	our	employees,	customers	or	business	partners	for	an	extended period	of	time.	Even	if	our	employees	and	business	partners	are	able	to	report	to	work,	they	may	be	unable	to	perform	their	duties	for	an extended	period	of	time	if	our	data	or	systems	used	to	conduct	our	business	are	disabled	or	destroyed.

Moreover,	our	systems	may	be	subject	to	a	computer	virus	or	other	malicious	code,	unauthorized	access,	a	cyber-attack	or	other	computer related	violation.	Such	an	event	could	compromise	our	confidential	information	as	well	as	that	of	our	clients	and	third	parties	with	whom we	interact,	impede	or	interrupt	our	business	operations	and	may	result	in	other	negative	consequences,	including	remediation	costs,	loss of	revenue,	additional	regulatory	scrutiny	and	litigation	and	reputational	damage.

In	addition,	we	routinely	transmit,	receive	and	store	personal,	confidential	and	proprietary	information	by	email	and	other	electronic means.	Although	we	attempt	to	keep	such	information	confidential,	we	may	be	unable	to	utilize	such	capabilities	in	all	events,	especially with	clients,	vendors,	service	providers,	counterparties	and	other	third	parties	who	may	not	have	or	use	appropriate	controls	to	protect confidential	information.	Furthermore,	certain	of	our	businesses	are	subject	to	compliance	with	regulations	enacted	by	U.S.	federal	and state	governments,	the	European	Union,	Japan	or	other	jurisdictions	or	enacted	by	various	regulatory	organizations	or	exchanges	relating to	the	privacy	of	the	information	of	clients,	employees	or	others.	A	misuse	or	mishandling	of	confidential	or	proprietary	information	being sent	to	or	received	from	an	employee	or	third	party	could	result	in	legal	liability,	regulatory	action	and	reputational	harm.

Third	parties	to	whom	we	outsource	certain	of	our	functions	are	also	subject	to	the	risks	outlined	above,	any	one	of	which	may	result	in our	incurring	substantial	costs	and	other	negative	consequences,	including	a	material	adverse	effect	on	our	business,	financial	condition,

results	of	operations	and	liquidity.

# Our	framework	for	managing	business	risks	may	not	be	effective	in	mitigating	risk	and	loss	to	us	that	could	adversely	affect	our businesses.

Our	business	performance	is	highly	dependent	on	our	ability	to	manage	risks	that	arise	from	a	large	number	of	day-to-day	business activities,	 including	 insurance	 underwriting,	 claims	 processing,	 servicing,	 investment,	 financial	 and	 tax	 reporting,	 compliance	 with regulatory	requirements	and	other	activities,	many	of	which	are	very	complex	and	for	some	of	which	we	rely	on	third	parties.	We	seek	to monitor	and	control	our	exposure	to	risks	arising	out	of	these	activities	through	a	risk	control	framework	encompassing	a	variety	of reporting	systems,	internal	controls,	management	review	processes	and	other	mechanisms.	We	cannot	be	completely	confident	that	these processes	and	procedures	will	effectively	control	all	known	risks	or	effectively	identify	unforeseen	risks,	or	that	our	employees	and	third- party	agents	will	effectively	implement	them.	Management	of	business	risks	can	fail	for	a	number	of	reasons,	including	design	failure, systems	failure,	failures	to	perform,	cyber	security	attacks	or	unlawful	activities	on	the	part	of	employees	or	third	parties.	In	the	event	that our	controls	are	not	effective	or	not	properly	implemented,	we	could	suffer	financial	or	other	loss,	disruption	of	our	businesses,	regulatory sanctions	or	damage	to	our	reputation.	Losses	resulting	from	these	failures	can	vary	significantly	in	size,	scope	and	scale	and	may	have material	adverse	effects	on	our	financial	condition	or	results	of	operations.

# If	we	experience	difficulties	arising	from	outsourcing	relationships,	our	ability	to	conduct	business	may	be	compromised.

We	outsource	certain	technology	and	business	functions	to	third	parties	and	expect	to	do	so	selectively	in	the	future.	If	we	do	not effectively	 develop	 and	 implement	 our	 outsourcing	 strategy,	 third-party	 providers	 do	 not	 perform	 as	 anticipated,	 or	 we	 experience problems	 with	 a	 transition,	 we	 may	 experience	 operational	 difficulties,	 inability	 to	 meet	 obligations,	 including,	 but	 not	 limited	 to, policyholder	obligations,	increased	costs	and	a	loss	of	business	that	may	have	a	material	adverse	effect	on	our	results	of	operations.	For other	risks	associated	with	our	outsourcing	of	certain	functions,	see	the	risk	factor,	"If	we	are	unable	to	maintain	the	availability	of	our systems	and	safeguard	the	security	of	our	data	due	to	the	occurrence	of	disasters	or	a	cyber	or	other	information	security	incident,	our ability	to	conduct	business	may	be	compromised,	we	may	incur	substantial	costs	and	suffer	other	negative	consequences,	all	of	which	may have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of	operation	and	liquidity."

# Potential	changes	in	federal	or	state	tax	laws,	including	changes	impacting	the	availability	of	the	separate	account	dividend	received deduction,	could	adversely	affect	our	business,	financial	condition,	results	of	operations	and	liquidity.

Many	of	the	products	that	the	Company	sells	benefit	from	one	or	more	forms	of	tax-favored	status	under	current	federal	and	state	income tax	regimes.	For	example,	the	Company	sells	life	insurance	policies	that	benefit	from	the	deferral	or	elimination	of	taxation	on	earnings accrued	under	the	policy,	as	well	as	permanent	exclusion	of	certain	death	benefits	that	may	be	paid	to	policyholders'	beneficiaries.	We also	sell	annuity	contracts	that	allow	the	policyholders	to	defer	the	recognition	of	taxable	income	earned	within	the	contract.	Other products	that	the	Company	sells	also	enjoy	similar,	as	well	as	other,	types	of	tax	advantages.	The	Company	also	benefits	from	certain	tax items,	including	but	not	limited	to,	tax-exempt	bond	interest,	dividends-received	deductions,	tax	credits	(such	as	foreign	tax	credits),	and insurance	reserve	deductions.

Due	in	large	part	to	the	recent	financial	crisis	that	has	affected	many	governments,	there	is	an	increasing	risk	that	federal	and/or	state	tax legislation	 could	 be	 enacted	 that	 would	 result	 in	 higher	 taxes	 on	 insurance	 companies	 and/or	 their	 policyholders.	 For	 example,	 on February	13,	2012,	the	Obama	Administration	released	its	"FY	2013,	Budget	of	the	United	States	Government"	that	includes	proposals which,	if	enacted,	would	adversely	affect	the	Company's	sale	of	variable	annuities	and	variable	life	products	and	its	profits	on	corporate owned	life	insurance	policies.	Although	the	specific	form	of	any	such	potential	legislation	is	uncertain,	it	could	include	lessening	or eliminating	some	or	all	of	the	tax	advantages	currently	benefiting	the	Company	or	its	policyholders	including,	but	not	limited	to,	those mentioned	above.	This	could	occur	in	the	context	of	deficit	reduction	or	other	tax	reforms.	The	effects	of	any	such	changes	could	have	a material	adverse	effect	on	our	profitability	and	financial	condition,	and	could	result	in	materially	lower	product	sales,	lapses	of	policies currently	held,	and/or	our	incurrence	of	materially	higher	corporate	taxes.

# Changes	in	accounting	principles	and	financial	reporting	requirements	could	result	in	material	changes	to	our	reported	results	and financial	condition.

U.S.	GAAP	and	related	financial	reporting	requirements	are	complex,	continually	evolving	and	may	be	subject	to	varied	interpretation	by the	relevant	authoritative	bodies.	Such	varied	interpretations	could	result	from	differing	views	related	to	specific	facts	and	circumstances. Changes	in	U.S.	GAAP	and	financial	reporting	requirements,	or	in	the	interpretation	of	U.S.	GAAP	or	those	requirements,	could	result	in material	 changes	 to	 our	 reported	 results	 and	 financial	 condition.	 Moreover,	 the	 SEC	 is	 currently	 evaluating	 International	 Financial Reporting	Standards	("IFRS")	to	determine	whether	IFRS	should	be	incorporated	into	the	financial	reporting	system	for	U.S.	issuers. Certain	of	these	standards	could	result	in	material	changes	to	our	reported	results	of	operation.

# We	may	not	be	able	to	protect	our	intellectual	property	and	may	be	subject	to	infringement	claims.

We	rely	on	a	combination	of	contractual	rights	and	copyright,	 trademark,	patent	and	 trade	secret	 laws	 to	establish	and	protect	our intellectual	property.	Although	we	use	a	broad	range	of	measures	to	protect	our	intellectual	property	rights,	third	parties	may	infringe	or misappropriate	our	intellectual	property.	We	may	have	to	litigate	to	enforce	and	protect	our	copyrights,	trademarks,	patents,	trade	secrets and	know-how	or	to	determine	their	scope,	validity	or	enforceability,	which	represents	a	diversion	of	resources	that	may	be	significant	in amount	and	may	not	prove	successful.	The	loss	of	intellectual	property	protection	or	the	inability	to	secure	or	enforce	the	protection	of	our intellectual	property	assets	could	have	a	material	adverse	effect	on	our	business	and	our	ability	to	compete.

We	also	may	be	subject	to	costly	litigation	in	the	event	that	another	party	alleges	our	operations	or	activities	infringe	upon	another	party's intellectual	 property	 rights.	Third	 parties	 may	 have,	 or	 may	 eventually	 be	 issued,	 patents	 that	 could	 be	 infringed	 by	 our	 products, methods,	processes	or	services.	Any	party	that	holds	such	a	patent	could	make	a	claim	of	infringement	against	us.	We	may	also	be	subject to	claims	by	third	parties	for	breach	of	copyright,	trademark,	trade	secret	or	license	usage	rights.	Any	such	claims	and	any	resulting litigation	could	result	in	significant	liability	for	damages.	If	we	were	found	to	have	infringed	a	third-party	patent	or	other	intellectual property	rights,	we	could	incur	substantial	liability,	and	in	some	circumstances	could	be	enjoined	from	providing	certain	products	or services	to	our	customers	or	utilizing	and	benefiting	from	certain	methods,	processes,	copyrights,	trademarks,	trade	secrets	or	licenses,	or alternatively	could	be	required	to	enter	into	costly	licensing	arrangements	with	third	parties,	all	of	which	could	have	a	material	adverse effect	on	our	business,	results	of	operations	and	financial	condition.

# Item	1B. 	 UNRESOLVED	STAFF	COMMENTS

# None.

# Item	2. 	 PROPERTIES

As	 of	 December	 31,	 2011,	 The	 Hartford	 owned	 building	 space	 of	 approximately	 2.9	 million	 square	 feet,	 of	 which	 approximately 2.6	million	square	feet	comprised	its	Hartford,	Connecticut	location	and	other	properties	within	the	greater	Hartford,	Connecticut	area.	In addition,	as	of	December	31,	2011,	The	Hartford	leased	approximately	3.2	million	square	feet,	throughout	the	United	States	of	America, and	approximately	68	thousand	square	feet,	in	other	countries.	All	of	the	properties	owned	or	leased	are	used	by	one	or	more	of	all	nine reporting	segments,	depending	on	the	location.	For	more	information	on	reporting	segments,	see	Part	I,	Item	1,	Business	of	The	Hartford —	Reporting	Segments.	The	Company	believes	its	properties	and	facilities	are	suitable	and	adequate	for	current	operations.

# Item	3. 	 LEGAL	PROCEEDINGS

# Litigation

The	Hartford	is	involved	in	claims	litigation	arising	in	the	ordinary	course	of	business,	both	as	a	liability	insurer	defending	or	providing indemnity	for	third-party	claims	brought	against	insureds	and	as	an	insurer	defending	coverage	claims	brought	against	it.	The	Hartford accounts	for	such	activity	through	the	establishment	of	unpaid	loss	and	loss	adjustment	expense	reserves.	Subject	to	the	uncertainties discussed	below	under	the	caption	"Asbestos	and	Environmental	Claims,"	management	expects	that	the	ultimate	liability,	if	any,	with respect	to	such	ordinary-course	claims	litigation,	after	consideration	of	provisions	made	for	potential	losses	and	costs	of	defense,	will	not be	material	to	the	consolidated	financial	condition,	results	of	operations	or	cash	flows	of	The	Hartford.

The	Hartford	is	also	involved	in	other	kinds	of	legal	actions,	some	of	which	assert	claims	for	substantial	amounts.	These	actions	include, among	others,	and	in	addition	to	the	matters	described	below,	putative	state	and	federal	class	actions	seeking	certification	of	a	state	or national	class.	Such	putative	class	actions	have	alleged,	for	example,	underpayment	of	claims	or	improper	underwriting	practices	in connection	with	various	kinds	of	insurance	policies,	such	as	personal	and	commercial	automobile,	property,	life	and	inland	marine; improper	sales	practices	in	connection	with	the	sale	of	life	insurance	and	other	investment	products;	and	improper	fee	arrangements	in connection	with	investment	products.	The	Hartford	also	is	involved	in	individual	actions	in	which	punitive	damages	are	sought,	such	as claims	alleging	bad	faith	in	the	handling	of	insurance	claims.	Like	many	other	insurers,	The	Hartford	also	has	been	joined	in	actions	by asbestos	plaintiffs	asserting,	among	other	things,	that	insurers	had	a	duty	to	protect	the	public	from	the	dangers	of	asbestos	and	that insurers	 committed	 unfair	 trade	 practices	 by	 asserting	 defenses	 on	 behalf	 of	 their	 policyholders	 in	 the	 underlying	 asbestos	 cases. Management	expects	that	the	ultimate	liability,	if	any,	with	respect	to	such	lawsuits,	after	consideration	of	provisions	made	for	estimated losses,	will	not	be	material	to	the	consolidated	financial	condition	of	The	Hartford.	Nonetheless,	given	the	large	or	indeterminate	amounts sought	in	certain	of	these	actions,	and	the	inherent	unpredictability	of	litigation,	the	outcome	in	certain	matters	could,	from	time	to	time, have	a	material	adverse	effect	on	the	Company's	results	of	operations	or	cash	flows	in	particular	quarterly	or	annual	periods.

Apart	 from	 the	 inherent	 difficulty	 of	 predicting	 litigation	 outcomes,	 particularly	 those	 that	 will	 be	 decided	 by	 a	 jury,	 the	 matters specifically	identified	below	purport	to	seek	substantial	damages	for	unsubstantiated	conduct	spanning	a	multi-year	period	based	on	novel and	complex	legal	theories	and	damages	models.	The	alleged	damages	are	not	quantified	or	factually	supported	in	the	complaint,	and,	in any	event,	the	Company's	experience	shows	that	demands	for	damages	often	bear	little	relation	to	a	reasonable	estimate	of	potential	loss. Most	are	in	the	earliest	stages	of	litigation,	with	few	or	no	substantive	legal	decisions	by	the	court	defining	the	scope	of	the	claims,	the class	(if	any),	or	the	potentially	available	damages.	In	many,	the	Company	has	not	yet	answered	the	complaint	or	asserted	its	defenses, and	fact	discovery	is	still	in	progress	or	has	not	yet	begun.	Accordingly,	unless	otherwise	specified	below,	management	cannot	reasonably estimate	the	possible	loss	or	range	of	loss,	if	any,	or	predict	the	timing	of	the	eventual	resolution	of	these	matters.

Broker	Compensation	Litigation	—	Following	the	New	York	Attorney	General's	filing	of	a	civil	complaint	against	Marsh	&	McLennan Companies,	Inc.,	and	Marsh,	Inc.	(collectively,	"Marsh")	 in	October	2004	alleging	 that	certain	 insurance	companies,	 including	The Hartford,	participated	with	Marsh	in	arrangements	to	submit	inflated	bids	for	business	insurance	and	paid	contingent	commissions	to ensure	that	Marsh	would	direct	business	to	them,	private	plaintiffs	brought	several	lawsuits	against	the	Company	predicated	on	the allegations	in	the	Marsh	complaint,	to	which	the	Company	was	not	party.	Among	these	is	a	multidistrict	litigation	in	the	United	States District	Court	for	the	District	of	New	Jersey.	Two	consolidated	amended	complaints	were	filed	in	the	multidistrict	litigation,	one	related	to conduct	in	connection	with	the	sale	of	property-casualty	insurance	and	the	other	related	to	alleged	conduct	in	connection	with	the	sale	of group	benefits	products.	The	Company	and	various	of	its	subsidiaries	are	named	in	both	complaints.	The	complaints	assert,	on	behalf	of	a putative	class	of	persons	who	purchased	insurance	through	broker	defendants,	claims	under	the	Sherman	Act,	the	Racketeer	Influenced and	 Corrupt	 Organizations	Act	 ("RICO"),	 state	 law,	 and	 in	 the	 case	 of	 the	 group	 benefits	 complaint,	 claims	 under	 the	 Employee Retirement	 Income	 Security	Act	 of	 1974	 ("ERISA").	The	 claims	 are	 predicated	 upon	 allegedly	 undisclosed	 or	 otherwise	 improper payments	of	contingent	commissions	to	the	broker	defendants	to	steer	business	to	the	insurance	company	defendants.	The	district	court dismissed	the	Sherman	Act	and	RICO	claims	in	both	complaints	for	failure	to	state	a	claim	and	has	granted	the	defendants'	motions	for summary	 judgment	 on	 the	 ERISA	 claims	 in	 the	 group-benefits	 products	 complaint.	 The	 district	 court	 further	 declined	 to	 exercise supplemental	jurisdiction	over	the	state	law	claims	and	dismissed	those	claims	without	prejudice.	The	plaintiffs	appealed	the	dismissal	of the	claims	in	both	consolidated	amended	complaints,	except	the	ERISA	claims.	In	August	2010,	the	United	States	Court	of	Appeals	for the	Third	Circuit	affirmed	the	dismissal	of	the	Sherman	Act	and	RICO	claims	against	the	Company.	The	Third	Circuit	vacated	the dismissal	of	the	Sherman	Act	and	RICO	claims	against	some	defendants	in	the	property	casualty	insurance	case	and	vacated	the	dismissal of	the	state-law	claims	as	to	all	defendants	in	light	of	the	reinstatement	of	the	federal	claims.	In	September	2010,	the	district	court	entered final	judgment	for	the	defendants	in	the	group	benefits	case.	In	March	2011,	the	Company	reached	an	agreement	in	principle	to	settle	on	a class	basis	the	property	casualty	insurance	case	for	an	immaterial	amount.	The	settlement	was	preliminarily	approved	by	the	court	in June	2011,	and	is	contingent	upon	final	court	approval.

Investment	and	Savings	Plan	ERISA	and	Shareholder	Securities	Class	Action	Litigation	—	In	November	and	December	2008,	following	a decline	in	the	share	price	of	the	Company's	common	stock,	seven	putative	class	action	lawsuits	were	filed	in	the	United	States	District Court	for	the	District	of	Connecticut	on	behalf	of	certain	participants	in	the	Company's	Investment	and	Savings	Plan	(the	"Plan"),	which offers	the	Company's	common	stock	as	one	of	many	investment	options.	These	lawsuits	have	been	consolidated,	and	a	consolidated amended	class-action	complaint	was	filed	on	March	23,	2009,	alleging	that	the	Company	and	certain	of	its	officers	and	employees violated	ERISA	by	allowing	the	Plan's	participants	to	invest	in	the	Company's	common	stock	and	by	failing	to	disclose	to	the	Plan's participants	information	about	the	Company's	financial	condition.	The	lawsuit	seeks	restitution	or	damages	for	losses	arising	from	the investment	 of	 the	 Plan's	 assets	 in	 the	 Company's	 common	 stock	 during	 the	 period	 from	 December	 10,	 2007	 to	 the	 present.	 In January	2010,	the	district	court	denied	the	Company's	motion	to	dismiss	the	consolidated	amended	complaint.	In	February	2011,	the parties	reached	an	agreement	in	principle	to	settle	on	a	class	basis	for	an	immaterial	amount.	The	settlement	was	preliminarily	approved by	the	court	in	January	2012,	and	is	contingent	upon	final	court	approval.

Mutual	Funds	Litigation	—	In	October	2010,	a	derivative	action	was	brought	on	behalf	of	six	Hartford	retail	mutual	funds	in	the	United States	District	Court	for	the	District	of	Delaware,	alleging	that	Hartford	Investment	Financial	Services,	LLC	("HIFSCO"),	an	indirect subsidiary	of	the	Company,	received	excessive	advisory	and	distribution	fees	in	violation	of	its	statutory	fiduciary	duty	under	Section 36(b)	of	the	Investment	Company	Act	of	1940.	In	February	2011,	a	nearly	identical	derivative	action	was	brought	against	HIFSCO	in	the United	States	District	Court	for	the	District	of	New	Jersey	on	behalf	of	six	additional	Hartford	retail	mutual	funds.	Both	actions	were assigned	to	the	Honorable	Renee	Marie	Bumb,	a	judge	in	the	District	of	New	Jersey	who	was	sitting	by	designation	with	respect	to	the Delaware	action.	Plaintiffs	in	each	action	seek	to	rescind	the	investment	management	agreements	and	distribution	plans	between	HIFSCO and	the	Hartford	mutual	funds	and	to	recover	the	total	fees	charged	thereunder	or,	in	the	alternative,	to	recover	any	improper	compensation HIFSCO	received.	In	addition,	plaintiffs	in	the	New	Jersey	action	seek	recovery	of	lost	earnings.	HIFSCO	moved	to	dismiss	both	actions and,	 in	 September	 2011,	 the	 motions	 to	 dismiss	 were	 granted	 in	 part	 and	 denied	 in	 part,	 with	 leave	 to	 amend	 the	 complaints.	 In November	2011,	a	stipulation	of	voluntary	dismissal	was	filed	in	the	Delaware	action	and	plaintiffs	in	the	New	Jersey	action	filed	an amended	complaint	on	behalf	of	six	Hartford	mutual	funds,	seeking	the	same	relief	as	in	their	original	complaint.	HIFSCO	disputes	the allegations	and	has	filed	a	partial	motion	to	dismiss.

Asbestos	 and	 Environmental	 Claims	—	As	discussed in	Part	II,	Item	7,	MD&A	—	Critical	Accounting	Estimates	—	Property	and Casualty	Insurance	Product	Reserves,	Net	of	Reinsurance	—	Reserving	for	Asbestos	and	Environmental	Claims	within	Property	& Casualty	Other	Operations,	The	Hartford	continues	to	receive	asbestos	and	environmental	claims	that	involve	significant	uncertainty regarding	policy	coverage	issues.	Regarding	these	claims,	The	Hartford	continually	reviews	its	overall	reserve	levels	and	reinsurance coverages,	as	well	as	the	methodologies	it	uses	to	estimate	its	exposures.	Because	of	the	significant	uncertainties	that	limit	the	ability	of insurers	and	reinsurers	to	estimate	the	ultimate	reserves	necessary	for	unpaid	losses	and	related	expenses,	particularly	those	related	to asbestos,	the	ultimate	liabilities	may	exceed	the	currently	recorded	reserves.	Any	such	additional	liability	cannot	be	reasonably	estimated now	but	could	be	material	to	The	Hartford's	consolidated	operating	results,	financial	condition	and	liquidity.

# Item	4. 	 MINE	SAFETY	DISCLOSURES

Not	applicable.

# PART	II

# Item	5. 	 MARKET	FOR	THE	HARTFORD'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS	AND	ISSUER PURCHASES	OF	EQUITY	SECURITIES

The	Hartford's	common	stock	is	traded	on	the	New	York	Stock	Exchange	("NYSE")	under	the	trading	symbol	"HIG".

The	following	 table	presents	 the	high	and	 low	closing	prices	for the	common	stock	of	The	Hartford	on the	NYSE	for the	periods indicated,	and	the	quarterly	dividends	declared	per	share.

|  | 1st	Qtr. | 2nd	Qtr. | 3rd	Qtr. | 4th	Qtr. |
| :--- | :--- | :--- | :--- | :--- |
| 2011 |  |  |  |  |
| Common\tStock\tPrice |  |  |  |  |
| High | $30.80 | $28.97 | $27.05 | $20.27 |
| Low | $24.75 | $23.81 | $15.82 | $14.92 |
| Dividends\tDeclared | $0.10 | $0.10 | $0.10 | $0.10 |
| 2010 |  |  |  |  |
| Common\tStock\tPrice |  |  |  |  |
| High | $28.58 | $29.64 | $24.12 | $27.43 |
| Low | $22.34 | $22.13 | $19.09 | $22.26 |
| Dividends\tDeclared | $0.05 | $0.05 | $0.05 | $0.05 |

As	of	February	17,	2012,	the	Company	had	approximately	269,700	shareholders.	The	closing	price	of	The	Hartford's	common	stock	on the	NYSE	on	February	17,	2012	was	$21.65.

The	Company's	Chief	Executive	Officer	has	certified	to	the	NYSE	that	he	is	not	aware	of	any	violation	by	the	Company	of	NYSE corporate	governance	listing	standards,	as	required	by	Section	303A.12(a)	of	the	NYSE's	Listed	Company	Manual.

There	are	also	various	legal	and	regulatory	limitations	governing	the	extent	to	which	The	Hartford's	insurance	subsidiaries	may	extend credit,	pay	dividends	or	otherwise	provide	funds	to	The	Hartford	Financial	Services	Group,	Inc.	as	discussed	in	Part	II,	Item	7,	MD&A	— Capital	Resources	and	Liquidity	—	Liquidity	Requirements	and	Sources	of	Capital.

See	 Part	 III,	 Item	 12,	 Security	 Ownership	 of	 Certain	 Beneficial	 Owners	 and	 Management	 and	 Related	 Stockholder	 Matters, for information	related	to	securities	authorized	for	issuance	under	equity	compensation	plans.

# Purchases	of	Equity	Securities	by	the	Issuer

The	following	table	summarizes	the	Company's	repurchases	of	its	common	stock	for	the	three	months	ended	December	31,	2011:

|  |  |  |  | Approximate	Dollar |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Total\tNumber\tof | Value\tof\tShares\tthat |
|  |  |  | Shares\tPurchased | May\tYet\tBe |
|  |  | Average | as\tPart\tof\tPublicly | Purchased\tUnder |
| Period | Total\tNumber\tof\nShares\tPurchased | Price\tPaid\nPer\tShare | Announced\tPlans\nor\tPrograms | the\tPlans\tor\nPrograms |
|  |  |  |  | (in\tmillions) |
| October\t1,\t2011\t–\tOctober\t31,\t2011 | 8,014[1] | $18.36 | — | $500 |
| November\t1,\t2011\t–\tNovember\t30,\t2011 | 12,649[1] | $19.25 | — | $500 |
| December\t1,\t2011\t–\tDecember\t31,\t2011 | 3,226,945 | $15.93 | 3,225,000 | $449 |
| Total | 3,247,608 | $15.95 | 3,225,000 | N/A |

[1] 	 Primarily represents shares	 acquired from	 employees	 of the	 Company for tax	 withholding	 purposes in	 connection	 with the Company's	stock	compensation	plans.

On	 July	 27,	 2011	 the	 Company's	 Board	 of	 Directors	 authorized	 a	 $500	 stock	 repurchase	 program.	 The	 Company's	 repurchase authorization,	which	expires	on	August	5,	2014,	permits	purchases	of	common	stock,	as	well	as	warrants	or	other	derivative	securities. Repurchases	 may	 be	 made	 in	 the	 open	 market,	 through	 derivative,	 accelerated	 share	 repurchase	 and	 other	 privately	 negotiated transactions,	and	through	plans	designed	to	comply	with	Rule	10b5-1(c)	under	the	Securities	Exchange	Act	of	1934,	as	amended.	The timing	of	any	future	repurchases	will	be	dependent	upon	several	factors,	including	the	market	price	of	the	Company's	securities,	the Company's	capital	position,	consideration	of	the	effect	of	any	repurchases	on	the	Company's	financial	strength	or	credit	ratings,	and	other corporate	considerations.	The	repurchase	program	may	be	modified,	extended	or	terminated	by	the	Board	of	Directors	at	any	time.	The Hartford	has	repurchased	$94	of	its	common	stock	under	this	program	through	February	17,	2012.

# Total	Return	to	Shareholders

The following tables	 present	 The	 Hartford's annual	 percentage return and five-year total return	 on its common stock including reinvestment	of	dividends	in	comparison	to	the	S&P	500	and	the	S&P	Insurance	Composite	Index.

# Annual	Return	Percentage

# Cumulative	Five-Year	Total	Return

|  | Cumulative	Five-Year	Total	Return | Cumulative	Five-Year	Total	Return | Cumulative	Five-Year	Total	Return |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Base |  |  |  |  |  |
|  | Period | For\tthe\tYears\tEnded | For\tthe\tYears\tEnded | For\tthe\tYears\tEnded | For\tthe\tYears\tEnded | For\tthe\tYears\tEnded |
| Company/Index | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| The\tHartford\tFinancial\tServices\tGroup,\tInc. | $100 | 95.45 | 19.10 | 27.48 | 31.57 | 19.72 |
| S&P\t500\tIndex | $100 | 105.49 | 66.46 | 84.05 | 96.71 | 98.76 |
| S&P\tInsurance\tComposite\tIndex | $100 | 93.69 | 39.22 | 44.67 | 51.72 | 47.44 |

# Item	6. 	 SELECTED	FINANCIAL	DATA

(In	millions,	except	for	per	share	data	and	combined	ratios)

|  | 2011 | 2010 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Income\tStatement\tData |  |  |  |  |  |
| Earned\tpremiums | $14,088 | $14,055 | $14,424 | $15,503 | $15,619 |
| Fee\tincome | 4,750 | 4,748 | 4,547 | 5,103 | 5,408 |
| Net\tinvestment\tincome\t(loss): |  |  |  |  |  |
| Securities\tavailable-for-sale\tand\tother | 4,272 | 4,364 | 4,017 | 4,327 | 5,203 |
| Equity\tsecurities,\ttrading | (1,359) | (774) | 3,188 | (10,340) | 145 |
| Total\tnet\tinvestment\tincome\t(loss) | 2,913 | 3,590 | 7,205 | (6,013) | 5,348 |
| Net\trealized\tcapital\tlosses: |  |  |  |  |  |
| Total\tother-than-temporary |  |  |  |  |  |
| impairment\t("OTTI")\tlosses | (263) | (852) | (2,191) | (3,964) | (483) |
| OTTI\tlosses\trecognized\tin\tother |  |  |  |  |  |
| comprehensive\tincome | 89 | 418 | 683 | — | — |
| Net\tOTTI\tlosses\trecognized\tin |  |  |  |  |  |
| earnings | (174) | (434) | (1,508) | (3,964) | (483) |
| Net\trealized\tcapital\tlosses,\texcluding |  |  |  |  |  |
| net\tOTTI\tlosses\trecognized\tin |  |  |  |  |  |
| earnings | 29 | (177) | (496) | (1,941) | (512) |
| Total\tnet\trealized\tcapital\ngains\t(losses) | (145) | (611) | (2,004) | (5,905) | (995) |
| Other\trevenues | 253 | 267 | 261 | 249 | 243 |
| Total\trevenues | 21,859 | 22,049 | 24,433 | 8,937 | 25,623 |
| Benefits,\tlosses\tand\tloss\tadjustment |  |  |  |  |  |
| expenses | 14,625 | 13,025 | 13,831 | 14,088 | 13,919 |
| Benefits,\tlosses\tand\tloss\tadjustment |  |  |  |  |  |
| expenses\t—\treturns\tcredited\ton |  |  |  |  |  |
| international\tvariable\tannuities | (1,359) | (774) | 3,188 | (10,340) | 145 |
| Amortization\tof\tdeferred\tpolicy |  |  |  |  |  |
| acquisition\tcosts\tand\tpresent\tvalue\tof |  |  |  |  |  |
| future\tprofits | 3,427 | 2,527 | 4,257 | 4,260 | 2,982 |
| Insurance\toperating\tcosts\tand\tother |  |  |  |  |  |
| expenses | 4,398 | 4,407 | 4,370 | 4,448 | 4,357 |
| Interest\texpense | 508 | 508 | 476 | 343 | 263 |
| Goodwill\timpairment | 30 | — | 32 | 745 | — |
| Total\tbenefits,\tlosses\tand |  |  |  |  |  |
| expenses | 21,629 | 19,693 | 26,154 | 13,544 | 21,666 |
| Income\t(loss)\tfrom\tcontinuing |  |  |  |  |  |
| operations\tbefore\tincome |  |  |  |  |  |
| taxes | 230 | 2,356 | (1,721) | (4,607) | 3,957 |
| Income\ttax\texpense\t(benefit) | (346) | 612 | (838) | (1,848) | 1,040 |
| Income\t(loss)\tfrom\tcontinuing |  |  |  |  |  |
| operations,\tnet\tof\ttax | 576 | 1,744 | (883) | (2,759) | 2,917 |
| Income\t(loss)\tfrom\tdiscontinued |  |  |  |  |  |
| operations,\tnet\tof\ttax | 86 | (64) | (4) | 10 | 32 |
| Net\tincome\t(loss) | 662 | 1,680 | (887) | (2,749) | 2,949 |
| Preferred\tstock\tdividends\tand\taccretion |  |  |  |  |  |
| of\tdiscount | 42 | 515 | 127 | 8 | — |
| Net\tincome\t(loss)\tavailable\tto\ncommon\tshareholders | $620 | $1,165 | $(1,014) | $(2,757) | $2,949 |
| Balance\tSheet\tData |  |  |  |  |  |
| Separate\taccount\tassets | $143,870 | $159,742 | $150,394 | $130,184 | $199,946 |
| Total\tassets | 304,064 | 318,346 | 307,717 | 287,583 | 360,361 |
| Total\tdebt\t(including\tcapital\tlease |  |  |  |  |  |
| obligations) | 6,216 | 6,607 | 5,839 | 6,221 | 4,507 |
| Separate\taccount\tliabilities | 143,870 | 159,742 | 150,394 | 130,184 | 199,946 |
| Common\tequity,\texcluding\tAOCI | 21,197 | 20,756 | 18,217 | 16,788 | 20,062 |
| Preferred\tStock | 556 | 556 | 2,960 | — | — |
| AOCI,\tnet\tof\ttax | 1,157 | (1,001) | (3,312) | (7,520) | (858) |
| Total\tstockholders'\tequity | 22,910 | 20,311 | 17,865 | 9,268 | 19,204 |
| Income\t(loss)\tfrom\tcontinuing |  |  |  |  |  |
| operations,\tnet\tof\ttax,\tavailable\tto |  |  |  |  |  |
| common\tshareholders\tper\tcommon |  |  |  |  |  |
| share |  |  |  |  |  |
| Basic | $1.20 | $2.85 | $(2.92) | $(9.02) | $9.22 |
| Diluted | 1.12 | 2.62 | (2.92) | (9.02) | 9.14 |
| Net\tincome\t(loss)\tavailable\tto\tcommon |  |  |  |  |  |
| shareholders\tper\tcommon\tshare |  |  |  |  |  |
| Basic | $1.39 | $2.70 | $(2.93) | $(8.99) | $9.32 |
| Diluted | 1.30 | 2.49 | (2.93) | (8.99) | 9.24 |
| Cash\tdividends\tdeclared\tper\tcommon |  |  |  |  |  |
| share | 0.40 | 0.20 | 0.20 | 1.91 | 2.03 |
| Other\tData |  |  |  |  |  |
| Total\trevenues,\texcluding\tnet\tinvestment |  |  |  |  |  |
| income\ton\tequity\tsecurities,\ttrading | $23,218 | $22,823 | $21,245 | $19,277 | $25,478 |
| Unlock\tbenefit\t(charge),\tafter-tax | $(530) | $111 | $(1,034) | $(932) | $213 |
| Total\tinvestments,\texcluding\tequity |  |  |  |  |  |
| securities,\ttrading | $104,449 | $98,175 | $93,235 | $89,287 | $94,904 |

# Item	7.	MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION

# AND	RESULTS	OF	OPERATIONS

Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	("MD&A")	addresses	the	financial	condition	of The	Hartford	Financial	Services	Group,	Inc.	and	its	subsidiaries	(collectively,	"The	Hartford"	or	the	"Company")	as	of	December	31, 2011,	compared	with	December	31,	2010,	and	its	results	of	operations	for	each	of	the	three	years	in	the	period	ended	December	31,	2011. This	discussion	should	be	read	in	conjunction	with	the	Consolidated	Financial	Statements	and	related	Notes	beginning	on	page	F-1.	The Hartford	made	changes	to	its	reporting	segments	in	2011	to	reflect	the	manner	in	which	the	Company	is	currently	organized	for	purposes of	making	operating	decisions	and	assessing	performance.	Accordingly,	segment	data	for	prior	reporting	periods	has	been	adjusted	to reflect	the	new	segment	reporting,	see	Note	3	of	the	Notes	to	Consolidated	Financial	Statement	for	further	discussion.	Additionally, certain	reclassifications	have	been	made	to	prior	year	financial	information	to	conform	to	the	current	year	presentation.

# INDEX

| INDEX |  |
| :--- | :--- |
| Description | Page |
| Consolidated\tResults\tof\tOperations | 34 |
| Outlooks | 37 |
| Critical\tAccounting\tEstimates | 39 |
| The\tHartford's\tOperations\tOverview | 64 |
| Key\tPerformance\tMeasures\tand\tRatios | 70 |
| Property\t&\tCasualty\tCommercial | 76 |
| Group\tBenefits | 79 |
| Consumer\tMarkets | 80 |
| Individual\tAnnuity | 83 |
| Individual\tLife | 85 |
| Retirement\tPlans | 87 |
| Mutual\tFunds | 89 |
| Life\tOther\tOperations | 90 |
| Property\t&\tCasualty\tOther\tOperations | 92 |
| Corporate | 93 |
| Enterprise\tRisk\tManagement | 94 |
| Capital\tResources\tand\tLiquidity | 121 |
| Impact\tof\tNew\tAccounting\tStandards | 131 |

# CONSOLIDATED	RESULTS	OF	OPERATIONS

|  |  |  |  | Increase | Increase |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | (Decrease)\tFrom | (Decrease)\tFrom |
| Net\tincome\t(loss)\tby\tsegment | 2011 | 2010 | 2009 | 2010\tto\t2011 | 2009\tto\t2010 |
| Property\t&\tCasualty\tCommercial | $528 | $995 | $899 | $(467) | $96 |
| Group\tBenefits | 90 | 185 | 193 | (95) | (8) |
| Commercial\tMarkets | 618 | 1,180 | 1,092 | (562) | 88 |
| Consumer\tMarkets | 5 | 143 | 140 | (138) | 3 |
| Individual\tAnnuity | (14) | 527 | (444) | (541) | 971 |
| Individual\tLife | 133 | 229 | 15 | (96) | 214 |
| Retirement\tPlans | 15 | 47 | (222) | (32) | 269 |
| Mutual\tFunds | 98 | 132 | 34 | (34) | 98 |
| Wealth\tManagement | 232 | 935 | (617) | (703) | 1,552 |
| Life\tOther\tOperations | 358 | (90) | (698) | 448 | 608 |
| Property\t&\tCasualty\tOther\nOperations | (117) | (53) | (78) | (64) | 25 |
| Corporate | (434) | (435) | (726) | 1 | 291 |
| Total\tnet\tincome\t(loss) | $662 | $1,680 | $(887) | $(1,018) | $2,567 |

The	decrease	in	net	income	from	2010	to	2011	was	primarily	due	to	the	following	items:

•	 An	Unlock	charge	of	$530,	after-tax,	in	2011	compared	to	an	Unlock	benefit	of	$111,	after-tax,	in	2010.	The	charge	in	2011	was primarily	driven	by	assumption	changes	which	reduced	expected	future	gross	profits	including	additional	costs	associated	with implementing	the	Japan	hedging	strategy	and	the	U.S.	variable	annuity	macro	hedge	program,	as	well	as	actual	separate	account returns	below	our	aggregated	estimated	return.	The	Unlock	benefit	for	2010	was	attributable	to	actual	separate	account	returns	being above	our	aggregated	estimated	return	and	the	impact	of	assumption	updates	primarily	related	to	decreasing	lapse	and	withdrawal rates	and	lower	hedge	costs.	For	further	discussion	of	Unlocks	see	the	Critical	Accounting	Estimates	within	the	MD&A.

•	 Current	accident	year	catastrophe	 losses	of	$484,	after-tax,	 in	2011	compared	 to	$294,	after-tax,	 in	2010.	The	 losses	 in	2011 primarily	relate	to	more	severe	tornadoes	and	wind	storms	in	the	Midwest	and	Southeast,	Hurricane	Irene,	and	winter	storms	in	the Northeast	and	Midwest.	The	losses	in	2010	include	severe	windstorm	events,	including	a	hail	storm	in	Arizona,	tornadoes	and	hail	in the	Midwest,	Plains	States	and	the	Southeast	and	winter	storms	in	the	Mid-Atlantic	and	Northeast.

•	 The	Company	recorded	reserve	strengthening	of	$31,	after-tax,	in	2011,	compared	to	reserve	releases	of	$294,	after-tax,	in	2010,	in its	property	and	casualty	insurance	prior	accident	years	development,	excluding	asbestos	and	environmental	reserves.	For	additional information	regarding	prior	accident	years	development,	see	Critical	Accounting	Estimates	within	the	MD&A.

•	 An	asbestos	reserve	strengthening	of	$189,	after-tax,	in	2011,	compared	to	$110,	after-tax,	in	2010	resulting	from	the	Company's annual	review	of	its	asbestos	liabilities	in	Property	&	Casualty	Other	Operations.	The	reserve	strengthening	in	2011	was	primarily driven	by	higher	frequency	and	severity	of	mesothelioma	claims,	particularly	against	certain	smaller,	more	peripheral	insureds,	while the	reserve	strengthening	in	2010	was	primarily	driven	by	increases	in	claim	severity	and	expenses.	For	further	information,	see Property	&	Casualty	Other	Operations	Claims	within	the	Property	and	Casualty	Insurance	Product	Reserves,	Net	of	Reinsurance section	in	Critical	Accounting	Estimates.

•	 A	 $73,	 after-tax,	 charge	 in	 the	 second	 quarter	 of	 2011 related to the	 write-off	 of	 capitalized	 costs	 associated	 with	 a	 policy administration	software	project	that	was	discontinued.

Partially	offsetting	these	decreases	in	net	income	were	following	items:

•Income	(loss)	from	discontinued	operations,	net	of	tax,	increased	due	to	a	realized	gain	on	the	sale	of	Specialty	Risk	Services	of $150,	after-tax,	in	the	first	quarter	of	2011,	which	was	partially	offset	by	a	loss	of	$74,	after-tax,	from	the	disposition	of	Federal Trust	Corporation	in	the	second	quarter	of	2011.	In	2010,	loss	from	discontinued	operations,	net	of	tax,	primarily	relates	to	goodwill impairment	on	Federal	Trust	Corporation	of	approximately	$100,	after-tax,	recorded	in	the	second	quarter	of	2010.

•	 The	first	quarter	of	2010	includes	an	accrual	for	a	litigation	settlement	of	$73,	before-tax,	for	a	class	action	lawsuit	related	to structured	settlements.

•Income	tax	expense	(benefit)	in	2010	includes	a	valuation	allowance	expense	of	$87	compared	to	a	benefit	of	$78	in	2011.	See	Note 13	of	the	Notes	to	Consolidated	Financial	Statements	for	a	reconciliation	of	the	tax	provision	at	the	U.S.	Federal	statutory	rate	to	the provision	for	income	taxes.

•In	the	second	quarter	of	2011,	the	Company	recorded	a	$52	income	tax	benefit	related	to	a	resolution	of	a	tax	matter	with	the	IRS	for the	computation	of	dividends	received	deduction	("DRD")	for	years	1998,	2000	and	2001.	For	additional	information	see	Note	13	of the	Notes	to	Consolidated	Financial	Statements.

•	 See	the	segment	sections	of	the	MD&A	for	a	discussion	on	their	respective	performances.

The	change	from	net	loss	in	2009	to	net	income	in	2010	was	primarily	due	to	the	following	items:

•	 An	Unlock	benefit	of	$111,	after-tax,	in	2010	compared	to	an	Unlock	charge	of	$1.0	billion,	after-tax,	in	2009.	The	Unlock	benefit for	 2010	 was	 attributable	 to	 actual	 separate	 account	 returns	 being	 above	 our	 aggregated	 estimated	 return	 and	 the	 impact	 of assumption	updates	primarily	related	to	decreasing	lapse	and	withdrawal	rates,	partially	offset	by	hedging,	annuitization	estimates on	Japan	products,	and	long-term	expected	rate	of	return	updates.	The	Unlock	charge	for	2009	was	primarily	driven	by	actual separate	account	returns	being	significantly	below	our	aggregated	estimated	return	for	the	first	quarter	of	2009,	partially	offset	by actual	returns	being	greater	than	our	aggregated	estimated	return	for	the	remainder	of	2009.	For	further	discussion	of	Unlocks	see	the Critical	Accounting	Estimates	within	the	MD&A.

•	 Net	realized	capital	losses	decreased	primarily	due	to	lower	impairment	losses,	lower	valuation	allowances	on	mortgage	loans,	and net	gains	on	sales	in	2010	compared	to	net	losses	on	sales	in	2009.	These	changes	were	partially	offset	by	losses	on	the	variable annuity	hedge	program	in	2010	compared	to	gains	in	2009.	For	further	discussion,	see	Net	Realized	Capital	Gains	(Losses)	within Investment	Results	of	Key	Performance	Measures	and	Ratios	of	this	MD&A.

Partially	offsetting	these	changes	in	net	income	(loss)	were	the	following	items:

•	 An	asbestos	reserve	strengthening	of	$110,	after-tax,	in	2010,	compared	to	$90,	after-tax,	in	2009	resulting	from	the	Company's annual	review	of	its	asbestos	liabilities	within	Property	&	Casualty	Other	Operations.	The	reserve	strengthening	in	2010	and	2009 was	primarily	driven	by	increases	in	claim	severity	and	expenses,	particularly	attributed	to	litigation	in	certain	jurisdictions,	and,	to	a lesser	extent,	development	on	primarily	peripheral	accounts.	For	further	information,	see	Property	&	Casualty	Other	Operations Claims	within	the	Property	and	Casualty	Insurance	Product	Reserves,	Net	of	Reinsurance	section	in	Critical	Accounting	Estimates.

•	 Current	accident	year	catastrophe	 losses	of	$294,	after-tax,	 in	2010	compared	 to	$199,	after-tax,	 in	2009.	The	 losses	 in	2010, primarily	relate	to	severe	windstorm	events,	particularly	from	hail	in	the	Midwest,	Plains	States	and	the	Southeast	and	from	winter storms	in	the	Mid-Atlantic	and	Northeast.	The	losses	in	2009,	primarily	relate	to	ice	storms,	windstorms,	and	tornadoes	across	many states.

•	 The	loss	from	discontinued	operations,	net	of	tax,	increased	in	2010	primarily	due	to	a	goodwill	impairment	on	Federal	Trust Corporation	of	approximately	$100,	after-tax,	partially	offset	by	a	net	realized	capital	gain	of	$41,	after-tax,	on	the	sale	of	the Hartford	Investments	Canada	Corporation	("HICC").

•Income	tax	expense	(benefit)	in	2010	includes	a	valuation	allowance	expense	of	$87	compared	to	an	expense	of	$30	in	2009.	In addition,	2009	included	nondeductible	costs	associated	with	warrants	of	$78.	See	Note	13	of	the	Notes	to	Consolidated	Financial Statements	for	a	reconciliation	of	the	tax	provision	at	the	U.S.	Federal	statutory	rate	to	the	provision	for	income	taxes.

# Income	Taxes

The	effective	tax	rates	for	2011,	2010	and	2009	were	(150%),	26%,	and	49%,	respectively.	The	differences	between	the	effective	rate	and the	U.S.	statutory	rate	of	35%	for	2011,	2010	and	2009	were	due	principally	to	tax-exempt	interest	earned	on	invested	assets	and	the DRD.	These	items	decreased	tax	expense	on	the	2011	and	2010	pre-tax	income	and	increased	the	tax	benefit	on	the	2009	pre-tax	loss.	The 2011	effective	tax	rate	also	includes	a	deferred	tax	asset	valuation	allowance	decrease,	and	the	2010	and	2009	effective	tax	rates	include	a deferred	tax	asset	valuation	allowance	increase.	The	2009	effective	tax	rate	also	includes	the	tax	effect	of	non-deductible	costs	associated with	warrants.

The	separate	account	DRD	is	estimated	for	the	current	year	using	information	from	the	most	recent	return,	adjusted	for	current	year equity	market	performance	and	other	appropriate	factors,	including	estimated	levels	of	corporate	dividend	payments	and	level	of	policy owner	equity	account	balances.	The	actual	current	year	DRD	can	vary	from	estimates	based	on,	but	not	limited	to,	changes	in	eligible dividends	received	in	the	mutual	funds,	amounts	of	distributions	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	$201,	$145	and	$181	related	to the	DRD	in	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.	These	amounts	included	benefits	(charges)	related	to	prior years'	tax	returns	of	$3,	$(3)	and	$29	in	2011,	2010	and	2009,	respectively.

In	Revenue	Ruling	2007-61,	issued	on	September	25,	2007,	the	IRS	announced	its	intention	to	issue	regulations	with	respect	to	certain computational	aspects	of	the	DRD	on	separate	account	assets	held	in	connection	with	variable	annuity	contracts.	Revenue	Ruling	2007-61 suspended	Revenue	Ruling	2007-54,	issued	in	August	2007	that	purported	to	change	accepted	industry	and	IRS	interpretations	of	the statutes	governing	these	computational	questions.	No	regulations	have	been	issued	to	date.	Any	regulations	that	the	IRS	may	ultimately propose	for	issuance	in	this	area	will	be	subject	to	public	notice	and	comment,	at	which	time	insurance	companies	and	other	members	of the	public	will	have	the	opportunity	to	raise	legal	and	practical	questions	about	the	content,	scope	and	application	of	such	regulations.	As a	result,	the	ultimate	timing	and	substance	of	any	such	regulations	are	unknown,	but	they	could	result	in	the	elimination	of	some	or	all	of the	separate	account	DRD	tax	benefit	that	the	Company	receives.	Management	believes	that	it	is	highly	likely	that	any	such	regulations would	apply	prospectively	only.

The	Company	receives	a	foreign	tax	credit	for	foreign	taxes	paid	including	payments	from	its	separate	account	assets.	This	credit	reduces the	Company's	U.S.	tax	liability.	The	separate	account	foreign	tax	credit	is	estimated	for	the	current	year	using	information	from	the	most recent	filed	return,	adjusted	for	the	change	in	the	allocation	of	separate	account	investments	to	the	international	equity	markets	during	the current	year.	The	actual	current	year	foreign	tax	credit	can	vary	from	the	estimates	due	to	actual	foreign	tax	credits	passed	through	from the	mutual	funds.	The	Company	recorded	benefits	of	$11,	$4	and	$16	related	to	the	separate	account	foreign	tax	credit	in	the	years	ended December	31,	2011,	2010	and	2009,	respectively.	These	amounts	included	benefits	(charges)	related	to	prior	years'	tax	returns	of	$2,	$(4) and	$3	in	2011,	2010	and	2009,	respectively.

The	Company's	unrecognized	tax	benefits	were	unchanged	during	2011	and	2010,	remaining	at	$48	as	of	December	31,	2011,	2010	and 2009.	This	entire	amount,	if	it	were	recognized,	would	affect	the	effective	tax	rate	in	the	period	it	is	released.

# OUTLOOKS

The	Hartford	provides	projections	and	other	forward-looking	information	in	the	following	discussions,	which	contain	many	forward- looking	statements,	particularly	relating	to	the	Company's	future	financial	performance.	These	forward-looking	statements	are	estimates based	on	information	currently	available	to	the	Company,	are	made	pursuant	to	the	safe	harbor	provisions	of	the	Private	Securities Litigation	Reform	Act	of	1995	and	are	subject	to	the	precautionary	statements	set	forth	on	page	3	of	this	Form	10-K	and	the	risk	factors set	forth	under	Item	1A	and	other	similar	information	contained	in	this	Form	10-K	and	in	other	filings	made	from	time	to	time	by	the Company	with	the	SEC.	Actual	results	are	likely	to	differ,	and	in	the	past	have	differed,	materially	from	those	forecast	by	the	Company, depending	on	the	outcome	of	various	factors,	including,	but	not	limited	to,	those	set	forth	in	each	discussion	below	and	in	Item	1A,	Risk Factors.

# Overview

As	previously	announced,	we	are	evaluating	our	strategy	and	business	portfolio	with	the	goal	of	delivering	shareholder	value.	As	this review	is	ongoing	and	no	decisions	have	yet	been	made,	the	following	discussion	of	our	outlooks	and	the	forward-looking	statements contained	therein	assume	a	continuation	of	our	current	business	focus	and,	as	such,	are	subject	to	change	based	on	any	actions	taken	as	a result	of	our	ongoing	review.

The	 Hartford	 focuses	 on	 growing	 its	 three	 customer-oriented	 divisions,	 Commercial	 Markets,	 Consumer	 Markets,	 and	 Wealth Management,	through	enhanced	product	development,	leveraging	synergies	of	the	divisions'	product	offerings	to	meet	customer	needs, and	increased	efficiencies	throughout	the	organization.	Slow	economic	and	employment	expansion	may	adversely	impact	the	performance of	The	Hartford's	insurance	protection	businesses	where	insureds	may	change	their	level	of	insurance,	and	asset	accumulation	businesses may	 see	 customers	 changing	 their	 level	 of	 savings	 based	 on	 anticipated	 economic	 conditions.	 In	 addition,	 the	 performance	 of	The Hartford's	 divisions	 is	 subject	 to	 uncertainty	 due	 to	 capital	 market	 conditions,	 which	 impact	 the	 earnings	 of	 its	 asset	 management businesses	and	valuations	and	earnings	 in	 its	 investment	portfolio.	The	current	and	future	 interest	rate	environment	also	affects	 the performance	of	the	Company's	divisions.	A	sustained	low	interest	rate	environment	would	result	in	lower	net	investment	income,	lower estimated	gross	profits	on	certain	Wealth	Management	products,	lower	margins	and	increased	pension	expense.

Commercial	Markets	focuses	on	growth	through	market-differentiated	products	and	services	while	maintaining	a	disciplined	underwriting approach.	In	Property	&	Casualty	Commercial,	improving	market	conditions	are	expected	to	continue,	which	should	enable	the	Company to	achieve	price	increases,	while	a	slowly	recovering	economy	is	anticipated	to	drive	an	increase	in	insurance	exposures.	As	such,	the Company	expects	low	to	mid	single-digit	written	premium	growth	in	2012.	This	growth	reflects	the	combination	of	our	current	market position,	 a	 broadening	 of	 underwriting	 expertise	 focused	 on	 selected	 industries,	 a	 leveraging	 of	 the	 payroll	 model,	 and	 numerous initiatives	launched	in	the	past	several	years.	More	specifically,	this	growth	is	anticipated	to	be	driven	by	continued	momentum	in	small commercial,	 including	programs	aimed	at	growing	 total	policy	counts,	 the	rollout	of	new	product	enhancements	and	 the	continued expansion	of	ease	of	doing	business	technology,	while	management	expects	middle	market	and	specialty	growth	to	be	tempered	as	a	result of	pricing	actions	taken	to	restore	returns	to	adequate	levels.	The	Property	&	Casualty	Commercial	combined	ratio	before	catastrophes	and prior	accident	year	development	is	expected	to	remain	in	the	mid	to	upper	90s	for	2012	as	compared	to	the	97.2%	achieved	in	2011. Earned	price	increases	are	expected	to	flow	through	the	book,	while	loss	costs	are	not	expected	to	change	dramatically.	In	Group	Benefits, premiums	are	expected	to	decline	in	2012,	as	compared	to	2011,	reflecting	the	competitive	environment	coupled	with	pricing	actions implemented	with	the	goal	of	improving	profitability.	Over	time,	as	employers	design	benefit	strategies	to	attract	and	retain	employees, while	attempting	to	control	their	benefit	costs,	management	believes	that	the	need	for	the	Company's	products	will	expand.	The	Company believes	that	this	combined	with	the	significant	number	of	employees	who	currently	do	not	have	coverage	or	adequate	levels	of	coverage, creates	continued	opportunities	for	our	products	and	services.	The	Company	expects	Group	Benefits'	loss	ratio	in	2012	to	improve	from the	2011	loss	ratio	of	79.5%	as	a	result	of	the	pricing	actions	taken,	given	the	expectation	of	persistent	elevated	disability	incidence.

The	Company	expects	written	premium	to	decline	in	2012,	compared	to	2011,	including	a	decrease	in	both	AARP	direct	and	Agency business.	Despite	an	improvement	in	policy	retention	in	2011	and	an	expected	further	increase	in	new	business	in	2012,	management expects	 that	non-renewed	premium	will	exceed	new	business	 in	2012	resulting	 in	an	overall	decline	 in	written	premium.	In	2012, management	expects	that	policy	retention	will	improve	but	continue	to	be	affected	by	the	impact	of	renewal	written	pricing	increases	in	a price	sensitive	market.	Within	the	Agency	channel,	policy	retention	will	also	be	affected	by	continued	pricing	and	underwriting	actions	to improve	profitability,	including	efforts	to	reposition	the	book	into	more	mature,	preferred	market	business.	The	Company	expects	new business	to	increase	in	2012,	primarily	driven	by	AARP	member	business,	both	direct	and	through	independent	agents,	as	well	as	new business	from	affinities	other	than	AARP	and	other	targeted	consumer	direct	marketing.	New	business	is	expected	to	benefit	from	the introduction	of	the	Open	Road	Advantage	auto	product	and	the	Hartford	Home	Advantage	product.	As	of	January	2012,	the	Open	Road Advantage	auto	product	was	available	in	44	states	and	the	Hartford	Home	Advantage	product	was	available	in	38	states.	Management expects	 that	 the	 combined	 ratio	 before	 catastrophes	 and	 prior	 accident	 year	 development	 will	 be	 flat	 to	 slightly	 lower	 in	 2012,	 as compared	to	2011,	as	an	improvement	in	the	current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes	will	be largely	offset	by	an	expected	increase	in	the	underwriting	expense	ratio.	For	both	auto	and	home,	the	current	accident	year	loss	and	loss adjustment	 expense	 ratio	 before	 catastrophes	 is	 expected	 to	 improve	 in	 2012,	 driven	 by	 earned	 pricing	 increases	 and	 lower	 claim frequency,	partially	offset	by	an	expected	modest	increase	in	average	claim	severity.	While	management	expects	that	industry	non- catastrophe	claim	frequency	will	be	relatively	flat	to	slightly	increasing	in	2012,	management	expects	The	Hartford	will	have	slightly lower	claim	frequency	given	its	continued	shift	to	a	more	preferred	book	of	business.

Wealth	 Management	 currently	 focuses	 on	 driving	 profitable	 growth	 through	 innovation,	 product	 diversification	 and	 multichannel distribution.	Additionally,	management	is	focused	on	improving	profit	margins	and	generating	statutory	surplus	in	each	of	its	operating segments.	Individual	Annuity	continues	to	build	out	a	portfolio	of	solutions	to	meet	the	needs	of	consumers	planning	for	and	living	in retirement.	 In	 2011,	 several	 of	 these	 solutions	 were	 incorporated	 in	 the	 Personal	 Retirement	 Manager	 II	 ("PRM	 II").	While	 initial indicators	of	sales	activity	have	improved,	the	product's	ultimate	success	in	contributing	to	Individual	Annuity	growth	will	depend	on, among	other	things,	our	ability	to	market	and	distribute	the	product	through	new	and	existing	distribution	channels	and	market	receptivity to	the	new	product	features.	Further,	Individual	Annuity	diversified	its	suite	of	product	solutions	through	the	introduction	of	a	new	fixed indexed	annuity	product.	In	addition,	the	Individual	Annuity	hedge	program	may	contribute	to	earnings	volatility	since	the	program generates	mark	to	market	gains	and	losses,	while	not	all	the	underlying	liabilities	being	hedged	are	marked	to	market.	Individual	Life continues	 to	 differentiate	 itself	 through	 the	 creative	 offering	 of	 riders.	The	 recently	 launched	 LongevityAccess	 rider,	 which	 allows policyholders	to	begin	taking	income	from	a	policy	at	age	90,	in	tandem	with	the	increasingly	popular	LifeAccess	rider,	which	allows policyholders	to	take	distributions	from	their	policies	in	cases	of	chronic	illness,	gives	The	Hartford	an	ability	to	help	people	protect against	 premature	 death,	 outliving	 one's	 assets,	 or	 deteriorating	 health.	 In	 addition	 to	 building	 out	 distribution	 through	 property	 & casualty	agents,	the	Company	continues	to	expand	its	distribution	into	career	life	insurance	professionals	through	the	Monarch	program. The	Retirement	Plans	business	continues	to	experience	strong	sales.	In	addition	to	our	core	401(k)	market,	we	have	seen	growth	in	larger ($5-$25)	 corporate	 plans.	 The	 property	 &	 casualty	 channel	 will	 become	 an	 increasingly	 important	 area	 of	 focus	 for	 us	 given	 our conviction	 that	 this	channel	 is	underpenetrated	and	well	suited	for	 this	business.	In	 the	fourth	quarter,	we	 introduced	The	Hartford Lifetime	Income	product,	a	patented	income	solution	delivered	through	401(k)	plans,	which	provides	a	guaranteed	paycheck	for	life	and has	been	a	major	catalyst	for	growth	in	this	business.	Our	Mutual	Fund	business	has	been	offering	new	funds	to	improve	our	participation in	asset	classes	where	we	see	potential	growth	opportunities.	In	addition,	the	Company	announced	in	the	fourth	quarter	of	2011	that Wellington	Management	Company,	LLP	("Wellington	Management")	will	serve	as	the	sole	sub-advisor	for	The	Hartford's	mutual	funds, including	equity	and	fixed	income	funds,	pending	a	fund-by-fund	review	by	The	Hartford's	mutual	funds	board	of	directors.

# Runoff	Operations

In	 the	fourth	quarter	of	2011,	The	Hartford	established	a	new	Runoff	Operations	division	consisting	of	Life	Other	Operations	and Property	&	Casualty	Other	Operations	in	order	to	better	differentiate	between	our	ongoing	and	runoff	businesses.	The	objective	of	the Runoff	 Operations	 division	 is	 to	 focus	 on	managing	 profitability,	 improving	 capital	 efficiency	 and	 effectiveness,	 and	 limiting	 and managing	risk	associated	with	the	businesses	residing	in	the	division.	Life	Other	Operations	consists	of	the	Hartford's	international variable	 annuity	 business,	 institutional	 annuities	 business	 and	 Private	 Placement	 Life	 Insurance	 business.	The	 international	 variable annuity	business	within	Life	Other	Operations	will	continue	to	be	a	significant	driver	of	earnings	and	earnings	variability	as	a	result	of	the hedge	program	associated	with	the	Company's	international	annuities.	This	hedge	program	generates	mark	to	market	gains	and	losses while	the	underlying	liabilities	being	hedged	are	primarily	not	marked	to	market	resulting	in	unpredictable	earnings	volatility	period	to period.	Property	&	Casualty	Other	Operations,	is	focused	on	managing	our	asbestos	environmental	and	other	legacy	liabilities.	The	results of	the	annual	ground	up	study	of	asbestos	reserves	and	the	annual	environmental	reserve	update	will	be	the	primary	driver	impacting	the results	for	this	business.

# CRITICAL	ACCOUNTING	ESTIMATES

The	preparation	of	financial	statements,	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America ("U.S.	GAAP"),	requires	management	to	make	estimates	and	assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	and disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	financial	statements	and	the	reported	amounts	of	revenues	and	expenses during	the	reporting	period.	Actual	results	could	differ,	and	in	the	past	have	differed,	from	those	estimates.

The	Company	has	identified	the	following	estimates	as	critical	in	that	they	involve	a	higher	degree	of	judgment	and	are	subject	to	a significant	degree	of	variability:

•	 property	and	casualty	insurance	product	reserves,	net	of	reinsurance;

•estimated	gross	profits	used	in	the	valuation	and	amortization	of	assets	and	liabilities	associated	with	variable	annuity	and	other universal	life-type	contracts;

•evaluation	of	other-than-temporary	impairments	on	available-for-sale	securities	and	valuation	allowances	on	mortgage	loans;

•living	benefits	required	to	be	fair	valued	(in	other	policyholder	funds	and	benefits	payable);

•	 goodwill	impairment;

•	 valuation	of	investments	and	derivative	instruments;

•	 pension	and	other	postretirement	benefit	obligations;

•	 valuation	allowance	on	deferred	tax	assets;	and

•contingencies	relating	to	corporate	litigation	and	regulatory	matters.

Certain	of	these	estimates	are	particularly	sensitive	to	market	conditions,	and	deterioration	and/or	volatility	in	the	worldwide	debt	or equity	markets	could	have	a	material	impact	on	the	Consolidated	Financial	Statements.	In	developing	these	estimates	management	makes subjective	and	complex	 judgments	 that	are	 inherently	uncertain	and	subject	 to	material	change	as	facts	and	circumstances	develop. Although	variability	is	inherent	in	these	estimates,	management	believes	the	amounts	provided	are	appropriate	based	upon	the	facts available	upon	compilation	of	the	financial	statements.

The	Hartford	establishes	reserves	on	its	property	and	casualty	insurance	products	to	provide	for	the	estimated	costs	of	paying	claims	under insurance	policies	written	by	the	Company.	These	reserves	include	estimates	for	both	claims	that	have	been	reported	and	those	that	have not	yet	been	reported,	and	include	estimates	of	all	expenses	associated	with	processing	and	settling	these	claims.	Incurred	but	not	reported ("IBNR")	 reserves	 represent	 the	 difference	 between	 the	 estimated	 ultimate	 cost	 of	 all	 claims	 and	 the	 actual	 reported	 loss	 and	 loss adjustment	expenses	("reported	losses").	Reported	losses	represent	cumulative	loss	and	loss	adjustment	expenses	paid	plus	case	reserves for	outstanding	reported	claims.	Company	actuaries	evaluate	the	total	reserves	(IBNR	and	case	reserves)	on	an	accident	year	basis.	An accident	year	is	the	calendar	year	in	which	a	loss	is	incurred,	or,	in	the	case	of	claims-made	policies,	the	calendar	year	in	which	a	loss	is reported.

Reserve	estimates	can	change	over	time	because	of	unexpected	changes	in	the	external	environment.	Potential	external	factors	include (1)	changes	in	the	inflation	rate	for	goods	and	services	related	to	covered	damages	such	as	medical	care,	hospital	care,	auto	parts,	wages and	home	repair;	(2)	changes	in	the	general	economic	environment	that	could	cause	unanticipated	changes	in	the	claim	frequency	per	unit insured;	(3)	changes	in	the	litigation	environment	as	evidenced	by	changes	in	claimant	attorney	representation	in	the	claims	negotiation and	 settlement	 process; (4) changes	 in	 the	 judicial	 environment	 regarding	 the	 interpretation	 of	 policy	 provisions	 relating	 to	 the determination	of	coverage	and/or	the	amount	of	damages	awarded	for	certain	types	of	damages;	(5)	changes	in	the	social	environment regarding	the	general	attitude	of	juries	in	the	determination	of	liability	and	damages;	(6)	changes	in	the	legislative	environment	regarding the	definition	of	damages;	and	(7)	new	types	of	injuries	caused	by	new	types	of	injurious	exposure:	past	examples	include	lead	paint, construction	defects	and	tainted	Chinese-made	drywall.

Reserve	estimates	can	also	change	over	 time	because	of	changes	 in	 internal	Company	operations.	Potential	 internal	factors	 include (1)	periodic	changes	in	claims	handling	procedures;	(2)	growth	in	new	lines	of	business	where	exposure	and	loss	development	patterns	are not	well	established;	or	(3)	changes	in	the	quality	of	risk	selection	in	the	underwriting	process.

In	the	case	of	assumed	reinsurance,	all	of	the	above	risks	apply.	In	addition,	changes	in	ceding	company	case	reserving	and	reporting patterns	 can	 create	 additional	 factors	 that	 need	 to	 be	 considered	 in	 estimating	 the	 reserves.	 Due	 to	 the	 inherent	 complexity	 of	 the assumptions	used,	final	claim	settlements	may	vary	significantly	from	the	present	estimates,	particularly	when	those	settlements	may	not occur	until	well	into	the	future.

Through	both	facultative	and	treaty	reinsurance	agreements,	the	Company	cedes	a	share	of	the	risks	it	has	underwritten	to	other	insurance companies.	The	Company's	net	reserves	for	loss	and	loss	adjustment	expenses	include	anticipated	recovery	from	reinsurers	on	unpaid claims.	The	estimated	amount	of	the	anticipated	recovery,	or	reinsurance	recoverable,	is	net	of	an	allowance	for	uncollectible	reinsurance.

Reinsurance	recoverables	include	an	estimate	of	the	amount	of	gross	loss	and	loss	adjustment	expense	reserves	that	may	be	ceded	under the	terms	of	the	reinsurance	agreements,	including	IBNR	unpaid	losses.	The	Company	calculates	its	ceded	reinsurance	projection	based on	the	terms	of	any	applicable	facultative	and	treaty	reinsurance,	often	including	an	estimate	by	reinsurance	agreement	of	how	IBNR losses	will	ultimately	be	ceded.

The	Company	provides	an	allowance	for	uncollectible	reinsurance,	reflecting	management's	best	estimate	of	reinsurance	cessions	that may	be	uncollectible	in	the	future	due	to	reinsurers'	unwillingness	or	inability	to	pay.	The	Company	analyzes	recent	developments	in commutation	activity	between	reinsurers	and	cedants,	recent	trends	in	arbitration	and	litigation	outcomes	in	disputes	between	reinsurers and	cedants	and	the	overall	credit	quality	of	the	Company's	reinsurers.	Where	its	contracts	permit,	the	Company	secures	future	claim obligations	with	various	forms	of	collateral,	including	irrevocable	letters	of	credit,	secured	trusts,	funds	held	accounts	and	group-wide offsets.	The	allowance	for	uncollectible	reinsurance	was	$290	as	of	December	31,	2011,	including	$83	related	to	Property	&	Casualty Commercial	and	$207	related	to	Property	&	Casualty	Other	Operations.

The	Company's	estimate	of	reinsurance	recoverables,	net	of	an	allowance	for	uncollectible	reinsurance,	is	subject	to	similar	risks	and uncertainties	as	the	estimate	of	the	gross	reserve	for	unpaid	losses	and	loss	adjustment	expenses.

The	 Hartford,	 like	 other	 insurance	 companies,	 categorizes	 and	 tracks	 its	 insurance	 reserves	 for	 its	 segments	 by	 "line	 of	 business". Furthermore,	The	Hartford	regularly	reviews	the	appropriateness	of	reserve	levels	at	the	line	of	business	level,	taking	into	consideration the	variety	of	trends	that	impact	the	ultimate	settlement	of	claims	for	the	subsets	of	claims	in	each	particular	line	of	business.	In	addition, Property	&	Casualty	Other	Operations	categorizes	reserves	as	asbestos	and	environmental	("A&E"),	whereby	the	Company	reviews	these reserve	levels	by	type	of	event,	rather	than	by	line	of	business.	Adjustments	to	previously	established	reserves,	which	may	be	material, are	reflected	in	the	operating	results	of	the	period	in	which	the	adjustment	is	determined	to	be	necessary.	In	the	judgment	of	management,

information	currently	available	has	been	properly	considered	in	the	reserves	established	for	losses	and	loss	adjustment	expenses.

The	following	table	shows	loss	and	loss	adjustment	expense	reserves	by	line	of	business	as	of	December	31,	2011,	net	of	reinsurance:

|  | Property	&amp;	Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;	Casualty<br>Other	Operations | Total	Property	and<br>Casualty	Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Reserve\tLine\tof\tBusiness |  |  |  |  |
| Commercial\tproperty | $187 | $—\t $— | $—\t $— | $187 |
| Homeowners' | — | 467 | — | 467 |
| Auto\tphysical\tdamage | 16 | 29 | — | 45 |
| Auto\tliability | 564 | 1,523 | — | 2,087 |
| Package\tbusiness | 1,282 | — | — | 1,282 |
| Workers'\tcompensation | 7,471 | — | — | 7,471 |
| General\tliability | 2,641 | 31 | — | 2,672 |
| Professional\tliability | 702 | — | — | 702 |
| Fidelity\tand\tsurety | 210 | — | — | 210 |
| Assumed\treinsurance | — | — | 349 | 349 |
| All\tother\tnon-A&amp;E | — | — | 810 | 810 |
| A&amp;E | 21 | 2 | 2,212 | 2,235 |
| Total\treserves-net | 13,094 | 2,052 | 3,371 | 18,517 |
| Reinsurance\tand\tother\trecoverables | 2,343 | 9 | 681 | 3,033 |
| Total\treserves-gross | $15,437 | $2,061 | $4,052 | $21,550 |

# Reserving	Methodology

# (See	Reserving	for	Asbestos	and	Environmental	Claims	within	Property	&	Casualty	Other	Operations	for	a	discussion	of	how A&E	reserves	are	set)

# How	reserves	are	set

Reserves	are	set	by	line	of	business	within	the	various	segments.	A	single	line	of	business	may	be	written	in	more	than	one	segment.	Case reserves	are	established	by	a	claims	handler	on	each	individual	claim	and	are	adjusted	as	new	information	becomes	known	during	the course	of	handling	the	claim.	Lines	of	business	for	which	loss	data	(e.g.,	paid	losses	and	case	reserves)	emerge	(i.e.,	is	reported)	over	a long	period	of	time	are	referred	to	as	long-tail	lines	of	business.	Lines	of	business	for	which	loss	data	emerge	more	quickly	are	referred	to as	short-tail	lines	of	business.	The	Company's	shortest-tail	lines	of	business	are	property	and	auto	physical	damage.	The	longest	tail	lines of	 business	 include	 workers'	 compensation,	 general	 liability,	 professional	 liability	 and	 assumed	 reinsurance.	 For	 short-tail	 lines	 of business,	emergence	of	paid	loss	and	case	reserves	is	credible	and	likely	indicative	of	ultimate	losses.	For	long-tail	lines	of	business, emergence	of	paid	losses	and	case	reserves	is	less	credible	in	the	early	periods	and,	accordingly,	may	not	be	indicative	of	ultimate	losses.

The	Company's	reserving	actuaries,	who	are	independent	of	the	business	units,	regularly	review	reserves	for	both	current	and	prior accident	years	using	the	most	current	claim	data.	For	most	lines	of	business,	these	reserve	reviews	incorporate	a	variety	of	actuarial methods	and	judgments	and	involve	rigorous	analysis.	These	selections	incorporate	input,	as	judged	by	the	reserving	actuaries	to	be appropriate,	from	claims	personnel,	pricing	actuaries	and	operating	management	on	reported	loss	cost	trends	and	other	factors	that	could affect	the	reserve	estimates.	Most	reserves	are	reviewed	fully	each	quarter,	including	loss	and	loss	adjustment	expense	reserves	for property,	auto	physical	damage,	auto	liability,	package	business,	workers'	compensation,	most	general	liability,	professional	liability	and fidelity	and	surety.	Other	reserves	are	reviewed	semi-annually	(twice	per	year)	or	annually.	These	include,	but	are	not	limited	to,	reserves for	losses	incurred	in	accident	years	older	than	twelve	and	twenty	years,	for	Consumer	Markets	and	Property	&	Casualty	Commercial, respectively,	assumed	reinsurance,	latent	exposures,	such	as	construction	defects	and	unallocated	loss	adjustment	expense.	For	reserves that	are	reviewed	semi-annually	or	annually,	management	monitors	the	emergence	of	paid	and	reported	losses	in	the	intervening	quarters to	either	confirm	that	the	estimate	of	ultimate	losses	should	not	change	or,	if	necessary,	perform	a	reserve	review	to	determine	whether	the reserve	estimate	should	change.

An	expected	loss	ratio	is	used	in	initially	recording	the	reserves	for	both	short-tail	and	long-tail	lines	of	business.	This	expected	loss	ratio is	determined	through	a	review	of	prior	accident	years'	loss	ratios	and	expected	changes	to	earned	pricing,	loss	costs,	mix	of	business, ceded	reinsurance	and	other	factors	that	are	expected	to	impact	the	loss	ratio	for	the	current	accident	year.	For	short-tail	lines,	IBNR	for the	current	accident	year	is	initially	recorded	as	the	product	of	the	expected	loss	ratio	for	the	period,	earned	premium	for	the	period	and the	proportion	of	losses	expected	to	be	reported	in	future	calendar	periods	for	the	current	accident	period.	For	long-tailed	lines,	IBNR reserves	for	the	current	accident	year	are	initially	recorded	as	the	product	of	the	expected	loss	ratio	for	the	period	and	the	earned	premium for	the	period,	less	reported	losses	for	the	period.

In	addition	to	the	expected	loss	ratio,	the	actuarial	techniques	or	methods	used	primarily	include	paid	and	reported	loss	development	and frequency	 /	 severity	 techniques	 as	 well	 as	 the	 Bornhuetter-Ferguson	 method	 (a	 combination	 of	 the	 expected	 loss	 ratio	 and	 paid development	or	reported	development	method).	Within	any	one	line	of	business,	the	methods	that	are	given	more	influence	vary	based primarily	on	the	maturity	of	the	accident	year,	the	mix	of	business	and	the	particular	internal	and	external	influences	impacting	the	claims experience	or	the	methods.	The	output	of	the	reserve	reviews	are	reserve	estimates	that	are	referred	to	herein	as	the	"actuarial	indication".

As	of	December	31,	2011	and	2010,	net	property	and	casualty	insurance	product	reserves	for	losses	and	loss	adjustment	expenses	reported under	accounting	principles	generally	accepted	in	the	United	States	of	America	("U.S.	GAAP")	were	approximately	equal	to	net	reserves reported	on	a	statutory	basis.	Under	U.S.	GAAP,	liabilities	for	unpaid	losses	for	permanently	disabled	workers'	compensation	claimants are	discounted	at	rates	that	are	no	higher	than	risk-free	interest	rates	and	which	generally	exceed	the	statutory	discount	rates	set	by regulators,	such	that	workers'	compensation	reserves	for	statutory	reporting	are	higher	than	the	reserves	for	U.S.	GAAP	reporting.	Largely offsetting	the	effect	of	the	difference	in	discounting	is	that	a	portion	of	the	U.S.	GAAP	provision	for	uncollectible	reinsurance	is	not recognized	under	statutory	accounting.	Most	of	the	Company's	property	and	casualty	insurance	product	reserves	are	not	discounted. However,	the	Company	has	discounted	liabilities	funded	through	structured	settlements	and	has	discounted	certain	reserves	for	indemnity payments	due	to	permanently	disabled	claimants	under	workers'	compensation	policies.

Provided	below	is	a	general	discussion	of	which	methods	are	preferred	by	line	of	business.	Because	the	actuarial	estimates	are	generated at	a	much	finer	level	of	detail	than	line	of	business	(e.g.,	by	distribution	channel,	coverage,	accident	period),	this	description	should	not	be assumed	to	apply	to	each	coverage	and	accident	year	within	a	line	of	business.	Also,	as	circumstances	change,	the	methods	that	are	given more	influence	will	change.

Property	and	Auto	Physical	Damage.	These	lines	are	fast-developing	and	paid	and	reported	development	techniques	are	used	as	these methods	use	historical	data	to	develop	paid	and	reported	loss	development	patterns,	which	are	then	applied	to	current	paid	and	reported losses	by	accident	period	to	estimate	ultimate	losses.	The	Company	relies	primarily	on	reported	development	techniques	although	a review	of	frequency	and	severity	and	the	initial	loss	expectation	based	on	the	expected	loss	ratio	is	used	for	the	most	immature	accident months.	 The	 advantage	 of	 frequency	 /	 severity	 techniques	 is	 that	 frequency	 estimates	 are	 generally	 easier	 to	 predict	 and	 external information	can	be	used	to	supplement	internal	data	in	making	severity	estimates.

Personal	Auto	Liability.	For	auto	liability,	and	bodily	injury	in	particular,	the	Company	performs	a	greater	number	of	techniques	than	it does	for	property	and	auto	physical	damage.	In	addition,	because	the	paid	development	technique	is	affected	by	changes	in	claim	closure patterns	and	the	reported	development	method	is	affected	by	changes	in	case	reserving	practices,	the	Company	uses	Berquist-Sherman techniques	which	adjust	these	patterns	to	reflect	current	settlement	rates	and	case	reserving	techniques.	The	Company	generally	uses	the reported	development	method	for	older	accident	years	as	a	higher	percentage	of	ultimate	losses	are	reflected	in	reported	losses	than	in cumulative	paid	losses	and	the	frequency/severity	and	Berquist-Sherman	methods	for	more	recent	accident	years.	Recent	periods	are influenced	by	changes	in	case	reserve	practices	and	changing	disposal	rates;	the	frequency/severity	techniques	are	not	affected	as	much	by these	changes	and	the	Berquist-Sherman	techniques	specifically	adjust	for	these	changes.

Auto	Liability	for	Commercial	Lines	and	Short-Tailed	General	Liability.	The	Company	performs	a	variety	of	techniques,	including	the paid	and	reported	development	methods	and	frequency	/	severity	techniques.	For	older,	more	mature	accident	years,	the	Company	finds that	 reported	 development	 techniques	 are	 best.	 For	 more	 recent	 accident	 years,	 the	 Company	 typically	 prefers	 frequency	 /	 severity techniques	that	make	separate	assumptions	about	loss	activity	above	and	below	a	selected	capping	level.

Long-Tailed	General	Liability,	Fidelity	and	Surety	and	Large	Deductible	Workers'	Compensation .	For	these	long-tailed	lines	of	business,

the	Company	generally	relies	on	the	expected	loss	ratio	and	reported	development	techniques.	The	Company	generally	weights	these techniques	together,	relying	more	heavily	on	the	expected	loss	ratio	method	at	early	ages	of	development	and	more	on	the	reported development	method	as	an	accident	year	matures.

Workers'	Compensation.	Workers'	compensation	is	the	Company's	single	largest	reserve	line	of	business	so	a	wide	range	of	methods	are reviewed	in	the	reserve	analysis.	Methods	performed	include	paid	and	reported	development,	variations	on	expected	loss	ratio	methods, and	an	in-depth	analysis	on	the	largest	states.	Historically,	paid	development	patterns	in	the	Company's	workers'	compensation	business have	been	stable,	so	paid	techniques	are	preferred.	Although	paid	techniques	may	be	less	predictive	of	the	ultimate	liability	when	a	low percentage	of	ultimate	losses	are	paid	as	in	early	periods	of	development,	recent	changes	in	the	frequency	of	workers'	compensation claims	have	caused	the	Company	to	place	greater	reliance	in	paid	methods	with	continued	consideration	of	the	state-by-state	analysis	and the	expected	loss	ratio	approach.

Professional	Liability.	Reported	and	paid	loss	developments	patterns	for	this	line	tend	to	be	volatile.	Therefore,	the	Company	typically relies	on	frequency	and	severity	techniques.

Assumed	Reinsurance	and	All	Other.	For	these	lines,	the	Company	tends	to	rely	on	the	reported	development	techniques.	In	assumed reinsurance,	assumptions	are	influenced	by	information	gained	from	claim	and	underwriting	audits.

Allocated	Loss	Adjustment	Expenses	(ALAE).	For	some	lines	of	business	(e.g.,	professional	liability	and	assumed	reinsurance),	ALAE	and losses	are	analyzed	together.	For	most	lines	of	business,	however,	ALAE	is	analyzed	separately,	using	paid	development	techniques	and an	analysis	of	the	relationship	between	ALAE	and	loss	payments.

Unallocated	Loss	Adjustment	Expense	(ULAE).	ULAE	is	analyzed	separately	from	loss	and	ALAE.	For	most	lines	of	business,	incurred ULAE	costs	to	be	paid	in	the	future	are	projected	based	on	an	expected	cost	per	claim	year	and	the	anticipated	claim	closure	pattern	and the	ratio	of	paid	ULAE	to	paid	loss.

The	final	step	in	the	reserve	review	process	involves	a	comprehensive	review	by	senior	reserving	actuaries	who	apply	their	judgment	and, in	concert	with	senior	management,	determine	the	appropriate	level	of	reserves	based	on	the	information	that	has	been	accumulated. Numerous	factors	are	considered	in	this	process	including,	but	not	limited	to,	the	assessed	reliability	of	key	loss	trends	and	assumptions that	may	be	significantly	influencing	the	current	actuarial	indications,	pertinent	trends	observed	over	the	recent	past,	the	level	of	volatility within	a	particular	line	of	business,	and	the	improvement	or	deterioration	of	actuarial	indications	in	the	current	period	as	compared	to	the prior	periods.	Total	recorded	net	reserves,	excluding	asbestos	and	environmental,	were	1.8%	higher	than	the	actuarial	indication	of	the reserves	as	of	December	31,	2011.

See	the	Reserve	Development	section	for	a	discussion	of	changes	to	reserve	estimates	recorded	in	2011.

# Current	trends	contributing	to	reserve	uncertainty

The	Hartford	 is	a	multi-line	company	 in	 the	property	and	casualty	 insurance	business.	The	Hartford	 is	 therefore	subject	 to	reserve uncertainty	stemming	from	a	number	of	conditions,	including	but	not	limited	to	those	noted	above,	any	of	which	could	be	material	at	any point	in	time.	Certain	issues	may	become	more	or	less	important	over	time	as	conditions	change.	As	various	market	conditions	develop, management	must	assess	whether	those	conditions	constitute	a	long-term	trend	that	should	result	in	a	reserving	action	(i.e.,	increasing	or decreasing	the	reserve).

Within	Property	&	Casualty	Commercial	and	Property	&	Casualty	Other	Operations,	the	Company	has	exposure	to	claims	asserted	for bodily	injury	as	a	result	of	long-term	or	continuous	exposure	to	harmful	products	or	substances.	Examples	include,	but	are	not	limited	to, pharmaceutical	products,	silica	and	lead	paint.	The	Company	also	has	exposure	to	claims	from	construction	defects,	where	property damage	or	bodily	injury	from	negligent	construction	is	alleged.	In	addition,	the	Company	has	exposure	to	claims	asserted	against	religious institutions	and	other	organizations	relating	to	molestation	or	abuse.	Such	exposures	may	involve	potentially	long	latency	periods	and may	implicate	coverage	in	multiple	policy	periods.	These	factors	make	reserves	for	such	claims	more	uncertain	than	other	bodily	injury	or property	damage	claims.	With	regard	to	these	exposures,	the	Company	is	monitoring	trends	in	litigation,	the	external	environment,	the similarities	to	other	mass	torts	and	the	potential	impact	on	the	Company's	reserves.

In	Consumer	Markets,	reserving	estimates	are	generally	less	variable	than	for	the	Company's	other	property	and	casualty	segments because	of	the	coverages	having	relatively	shorter	periods	of	loss	emergence.	Estimates,	however,	can	still	vary	due	to	a	number	of factors,	including	interpretations	of	frequency	and	severity	trends	and	their	impact	on	recorded	reserve	levels.	Severity	trends	can	be impacted	by	changes	in	internal	claim	handling	and	case	reserving	practices	in	addition	to	changes	in	the	external	environment.	These changes	in	claim	practices	increase	the	uncertainty	in	the	interpretation	of	case	reserve	data,	which	increases	the	uncertainty	in	recorded reserve	levels.	In	addition,	the	introduction	of	new	products	has	led	to	a	different	mix	of	business	by	type	of	insured	than	the	Company experienced	in	the	past.	Such	changes	in	mix	increase	the	uncertainty	of	the	reserve	projections,	since	historical	data	and	reporting patterns	may	not	be	applicable	to	the	new	business.

In	standard	commercial	lines,	workers'	compensation	is	the	Company's	single	biggest	line	of	business	and	the	line	of	business	with	the longest	pattern	of	loss	emergence.	Medical	costs	make	up	more	than	50%	of	workers'	compensation	payments.	As	such,	reserve	estimates for	workers'	compensation	are	particularly	sensitive	to	changes	in	medical	inflation,	the	changing	use	of	medical	care	procedures	and changes	in	state	legislative	and	regulatory	environments.	In	addition,	a	changing	economic	environment	can	affect	the	ability	of	an	injured worker	to	return	to	work	and	the	length	of	time	a	worker	receives	disability	benefits.	The	Company	has	recently	experienced	a	sharp increase	in	workers'	compensation	claim	frequency,	while	only	seeing	a	partial	offset	from	moderating	severity	trends.	These	factors increase	the	uncertainty	in	the	estimate	of	reserves.

In	specialty	lines,	many	lines	of	insurance	are	"long-tail",	including	large	deductible	workers'	compensation	insurance,	as	such,	reserve estimates	for	these	lines	are	more	difficult	to	determine	than	reserve	estimates	for	shorter-tail	lines	of	insurance.	Estimating	required reserve	levels	for	large	deductible	workers'	compensation	insurance	is	further	complicated	by	the	uncertainty	of	whether	losses	that	are attributable	to	the	deductible	amount	will	be	paid	by	the	insured;	if	such	losses	are	not	paid	by	the	insured	due	to	financial	difficulties,	the Company	would	be	contractually	liable.	Another	example	of	reserve	variability	relates	to	reserves	for	directors'	and	officers'	insurance. There	is	potential	volatility	in	the	required	level	of	reserves	due	to	the	continued	uncertainty	regarding	the	number	and	severity	of	class action	suits,	including	uncertainty	regarding	the	Company's	exposure	to	losses	arising	from	the	collapse	of	the	sub-prime	mortgage market.	Additionally,	the	Company's	exposure	to	losses	under	directors'	and	officers'	insurance	policies	is	primarily	in	excess	layers, making	estimates	of	loss	more	complex.	The	recent	financial	market	turmoil	has	increased	the	number	of	shareholder	class	action	lawsuits against	our	insureds	or	their	directors	and	officers	and	this	trend	could	continue	for	some	period	of	time.

# Impact	of	changes	in	key	assumptions	on	reserve	volatility

As	stated	above,	the	Company's	practice	is	to	estimate	reserves	using	a	variety	of	methods,	assumptions	and	data	elements.	Within	its reserve	estimation	process	for	reserves	other	than	asbestos	and	environmental,	the	Company	does	not	consistently	use	statistical	loss distributions	or	confidence	levels	around	its	reserve	estimate	and,	as	a	result,	does	not	disclose	reserve	ranges.

The	reserve	estimation	process	includes	assumptions	about	a	number	of	factors	in	the	internal	and	external	environment.	Across	most lines	of	business,	the	most	important	assumptions	are	future	loss	development	factors	applied	to	paid	or	reported	losses	to	date.	The	trend in	loss	costs	is	also	a	key	assumption,	particularly	in	the	most	recent	accident	years,	where	loss	development	factors	are	less	credible.

The	following	discussion	includes	disclosure	of	possible	variation	from	current	estimates	of	loss	reserves	due	to	a	change	in	certain	key indicators	of	potential	losses.	Each	of	the	impacts	described	below	is	estimated	individually,	without	consideration	for	any	correlation among	key	indicators	or	among	lines	of	business.	Therefore,	it	would	be	inappropriate	to	take	each	of	the	amounts	described	below	and add	them	together	in	an	attempt	to	estimate	volatility	for	the	Company's	reserves	in	total.	The	estimated	variation	in	reserves	due	to changes	in	key	indicators	is	a	reasonable	estimate	of	possible	variation	that	may	occur	in	the	future,	likely	over	a	period	of	several calendar	years.	It	is	important	to	note	that	the	variation	discussed	is	not	meant	to	be	a	worst-case	scenario,	and	therefore,	it	is	possible	that future	variation	may	be	more	than	the	amounts	discussed	below.

Recorded	reserves	for	auto	liability,	net	of	reinsurance,	are	$2.1	billion	across	all	lines,	$1.5	billion	of	which	is	in	Consumer	Markets. Personal	auto	liability	reserves	are	shorter-tailed	than	other	lines	of	business	(such	as	workers'	compensation)	and,	therefore,	less	volatile. However,	the	size	of	the	reserve	base	means	that	future	changes	in	estimates	could	be	material	to	the	Company's	results	of	operations	in any	given	period.	The	key	indicator	for	Consumer	Markets	auto	liability	is	the	annual	loss	cost	trend,	particularly	the	severity	trend component	of	loss	costs.	A	2.5	point	change	in	annual	severity	for	the	two	most	recent	accident	years	would	change	the	estimated	net reserve	need	by	$80,	in	either	direction.	A	2.5	point	change	in	annual	severity	is	within	the	Company's	historical	variation.

Recorded	reserves	for	workers'	compensation,	net	of	reinsurance,	are	$7.5	billion.	Loss	development	patterns	are	a	key	indicator	for	this line	of	business,	particularly	for	more	mature	accident	years.	Historically,	loss	development	patterns	have	been	impacted	by,	among	other things,	medical	cost	inflation.	The	Company	has	reviewed	the	historical	variation	in	reported	loss	development	patterns.	If	the	reported loss	development	patterns	change	by	3%,	the	estimated	net	reserve	need	would	change	by	$400,	in	either	direction.	A	3%	change	in reported	 loss	 development	 patterns	 is	 within	 the	 Company's	 historical	 variation,	 as	 measured	 by	 the	 variation	 around	 the	 average development	factors	as	reported	in	statutory	accident	year	reports.

Recorded	reserves	for	general	liability,	net	of	reinsurance,	are	$2.7	billion.	Loss	development	patterns	are	a	key	indicator	for	this	line	of business,	particularly	for	more	mature	accident	years.	Historically,	loss	development	patterns	have	been	impacted	by,	among	other	things, emergence	of	new	types	of	claims	(e.g.,	construction	defect	claims)	or	a	shift	in	the	mixture	between	smaller,	more	routine	claims	and larger,	more	complex	claims.	The	Company	has	reviewed	the	historical	variation	in	reported	loss	development	patterns.	If	the	reported loss	development	patterns	change	by	9%,	the	estimated	net	reserve	need	would	change	by	$200,	in	either	direction.	A	9%	change	in reported	 loss	 development	 patterns	 is	 within	 the	 Company's	 historical	 variation,	 as	 measured	 by	 the	 variation	 around	 the	 average development	factors	as	reported	in	statutory	accident	year	reports.

Similar	to	general	liability,	assumed	casualty	reinsurance	is	affected	by	reported	loss	development	patterns.	In	addition	to	the	items identified	above	that	would	affect	both	direct	and	reinsurance	liability	claim	development	patterns,	there	is	also	an	impact	to	reporting patterns	 for	 any	 changes	 in	 claim	 notification	 from	 ceding	 companies	 to	 the	 reinsurer.	 Recorded	 net	 reserves	 for	 HartRe	 assumed reinsurance	business,	excluding	asbestos	and	environmental	liabilities,	within	Property	&	Casualty	Other	Operations	were	$349	as	of December	31,	2011.	If	the	reported	loss	development	patterns	underlying	the	Company's	net	reserves	for	HartRe	assumed	casualty reinsurance	change	by	5%,	the	estimated	net	reserve	need	would	change	by	approximately	$95,	in	either	direction.	A	5%	change	in reported	 loss	 development	 patterns	 is	 within	 the	 Company's	 historical	 variation,	 as	 measured	 by	 the	 variation	 around	 the	 average development	factors	as	reported	in	statutory	accident	year	reports.

# Reserving	for	Asbestos	and	Environmental	Claims	within	Property	&	Casualty	Other	Operations

# How	A&E	reserves	are	set

In	establishing	reserves	for	asbestos	claims,	the	Company	evaluates	its	insureds'	estimated	liabilities	for	such	claims	using	a	ground-up approach.	The	Company	considers	a	variety	of	factors,	including	the	jurisdictions	where	underlying	claims	have	been	brought,	past, pending	 and	 anticipated	 future	 claim	 activity,	 disease	 mix,	 past	 settlement	 values	 of	 similar	 claims,	 dismissal	 rates,	 allocated	 loss adjustment	expense,	and	potential	bankruptcy	impact.

Similarly,	a	ground-up	exposure	review	approach	is	used	to	establish	environmental	reserves.	The	Company's	evaluation	of	its	insureds' estimated	liabilities	for	environmental	claims	involves	consideration	of	several	factors,	including	historical	values	of	similar	claims,	the number	of	sites	involved,	the	insureds'	alleged	activities	at	each	site,	the	alleged	environmental	damage	at	each	site,	the	respective	shares of	 liability	 of	 potentially	 responsible	 parties	 at	 each	 site,	 the	 appropriateness	 and	 cost	 of	 remediation	 at	 each	 site,	 the	 nature	 of governmental	enforcement	activities	at	each	site,	and	potential	bankruptcy	impact.

Having	evaluated	its	insureds'	probable	liabilities	for	asbestos	and/or	environmental	claims,	the	Company	then	evaluates	its	insureds' insurance	coverage	programs	for	such	claims.	The	Company	considers	its	insureds'	total	available	insurance	coverage,	including	the coverage	 issued	 by	 the	 Company.	 The	 Company	 also	 considers	 relevant	 judicial	 interpretations	 of	 policy	 language	 and	 applicable coverage	defenses	or	determinations,	if	any.

Evaluation	of	both	the	insureds'	estimated	liabilities	and	the	Company's	exposure	to	the	insureds	depends	heavily	on	an	analysis	of	the relevant	 legal	 issues	and	 litigation	environment.	This	analysis	 is	conducted	by	 the	Company's	 lawyers	and	 is	subject	 to	applicable privileges.

For	both	asbestos	and	environmental	reserves,	the	Company	also	compares	its	historical	direct	net	loss	and	expense	paid	and	reported experience,	 and	 net	 loss	 and	 expense	 paid	 and	 reported	 experience	 year	 by	 year,	 to	 assess	 any	 emerging	 trends,	 fluctuations	 or characteristics	suggested	by	the	aggregate	paid	and	reported	activity.

Once	the	gross	ultimate	exposure	for	indemnity	and	allocated	loss	adjustment	expense	is	determined	for	its	insureds	by	each	policy	year, the	Company	calculates	its	ceded	reinsurance	projection	based	on	any	applicable	facultative	and	treaty	reinsurance	and	the	Company's experience	with	reinsurance	collections.

# Uncertainties	Regarding	Adequacy	of	Asbestos	and	Environmental	Reserves

A	number	of	factors	affect	the	variability	of	estimates	for	asbestos	and	environmental	reserves	including	assumptions	with	respect	to	the frequency	of	claims,	the	average	severity	of	those	claims	settled	with	payment,	the	dismissal	rate	of	claims	with	no	payment	and	the expense	to	indemnity	ratio.	The	uncertainty	with	respect	to	the	underlying	reserve	assumptions	for	asbestos	and	environmental	adds	a greater	degree	of	variability	to	these	reserve	estimates	than	reserve	estimates	for	more	traditional	exposures.	While	this	variability	is reflected	in	part	in	the	size	of	the	range	of	reserves	developed	by	the	Company,	that	range	may	still	not	be	indicative	of	the	potential variance	between	the	ultimate	outcome	and	the	recorded	reserves.	The	recorded	net	reserves	as	of	December	31,	2011	of	$2.24	billion ($1.90	billion	and	$328	for	asbestos	and	environmental,	respectively)	is	within	an	estimated	range,	unadjusted	for	covariance,	of	$1.75 billion	to	$2.59	billion.	The	process	of	estimating	asbestos	and	environmental	reserves	remains	subject	to	a	wide	variety	of	uncertainties, which	 are	 detailed	 in	 Note	 12	 of	 Notes	 to	 Consolidated	 Financial	 Statements.	The	 Company	 believes	 that	 its	 current	 asbestos	 and environmental	reserves	are	appropriate.	However,	analyses	of	future	developments	could	cause	the	Company	to	change	its	estimates	and ranges	of	its	asbestos	and	environmental	reserves,	and	the	effect	of	these	changes	could	be	material	to	the	Company's	consolidated operating	results,	financial	condition	and	liquidity.	Consistent	with	the	Company's	long-standing	reserving	practices,	the	Company	will continue	 to	 review	 and	 monitor	 its	 reserves	 in	 the	 Property	 &	 Casualty	 Other	 Operations	 segment	 regularly	 and,	 where	 future developments	indicate,	make	appropriate	adjustments	to	the	reserves.

# Total	Property	and	Casualty	Insurance	Product	Reserves,	Net	of	Reinsurance,	Results

In	the	opinion	of	management,	based	upon	the	known	facts	and	current	law,	the	reserves	recorded	for	the	Company's	property	and casualty	businesses	at	December	31,	2011	represent	the	Company's	best	estimate	of	its	ultimate	liability	for	losses	and	loss	adjustment expenses	related	to	losses	covered	by	policies	written	by	the	Company.	However,	because	of	the	significant	uncertainties	surrounding reserves,	and	particularly	asbestos	exposures,	it	is	possible	that	management's	estimate	of	the	ultimate	liabilities	for	these	claims	may change	and	that	the	required	adjustment	to	recorded	reserves	could	exceed	the	currently	recorded	reserves	by	an	amount	that	could	be material	to	the	Company's	results	of	operations,	financial	condition	and	liquidity.

# Reserve	Roll-forwards	and	Development

Based	on	the	results	of	the	quarterly	reserve	review	process,	the	Company	determines	the	appropriate	reserve	adjustments,	if	any,	to record.	Recorded	reserve	estimates	are	changed	after	consideration	of	numerous	factors,	including	but	not	limited	to,	the	magnitude	of	the difference	between	the	actuarial	indication	and	the	recorded	reserves,	improvement	or	deterioration	of	actuarial	indications	in	the	period, the	maturity	of	the	accident	year,	trends	observed	over	the	recent	past	and	the	level	of	volatility	within	a	particular	line	of	business.	In general,	adjustments	are	made	more	quickly	to	more	mature	accident	years	and	less	volatile	lines	of	business.	Such	adjustments	of reserves	are	referred	 to	as	"reserve	development".	Reserve	development	 that	 increases	previous	estimates	of	ultimate	cost	 is	called "reserve	strengthening".	Reserve	development	that	decreases	previous	estimates	of	ultimate	cost	is	called	"reserve	releases".	Reserve development	can	influence	the	comparability	of	year	over	year	underwriting	results	and	is	set	forth	in	the	paragraphs	and	tables	that follow.

A	roll-forward	follows	of	property	and	casualty	insurance	product	liabilities	for	unpaid	losses	and	loss	adjustment	expenses	for	the	year ended	December	31,	2011:

|  | Property	&amp;<br>Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;<br>Casualty<br>Other<br>Operations | Total<br>Property	and<br>Casualty<br>Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand |  |  |  |  |
| loss\tadjustment\texpenses,\tgross | $14,727 | $2,177 | $4,121 | $21,025 |
| Reinsurance\tand\tother\trecoverables | 2,361 | 17 | 699 | 3,077 |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand |  |  |  |  |
| loss\tadjustment\texpenses,\tnet | 12,366 | 2,160 | 3,422 | 17,948 |
| Provision\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |
| adjustment\texpenses |  |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 4,139 | 2,536 | — | 6,675 |
| Current\taccident\tyear\tcatastrophes | 320 | 425 | — | 745 |
| Prior\taccident\tyears | 125 | (75) | 317 | 367 |
| Total\tprovision\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |
| adjustment\texpenses | 4,584 | 2,886 | 317 | 7,787 |
| Payments | (3,856) | (2,994) | (368) | (7,218) |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |
| adjustment\texpenses,\tnet | 13,094 | 2,052 | 3,371 | 18,517 |
| Reinsurance\tand\tother\trecoverables | 2,343 | 9 | 681 | 3,033 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\nadjustment\texpenses,\tgross | $15,437 | $2,061 | $4,052 | $21,550 |
| Earned\tpremiums | $6,127 | $3,747 |  |  |
| Loss\tand\tloss\texpense\tpaid\tratio\t[1] | 62.9 | 79.9 |  |  |
| Loss\tand\tloss\texpense\tincurred\tratio | 74.8 | 77.0 |  |  |
| Prior\taccident\tyears\tdevelopment\t(pts)\t[2] | 2.0 | (2.0) |  |  |

[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.

# Prior	accident	years	development	recorded	in	2011

Included	within	prior	accident	years	development	for	the	year	ended	December	31,	2011	were	the	following	loss	and	loss	adjustment

expense	reserve	strengthenings	(releases):

|  | Property	&amp;	Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;<br>Casualty<br>Other<br>Operations | Total	Property	and<br>Casualty	Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Auto\tliability | $(4) | $(93) | $— | $(97) |
| Homeowners | — | (1) | — | (1) |
| Professional\tliability | 29 | — | — | 29 |
| Package\tbusiness | (76) | — | — | (76) |
| Workers'\tcompensation | 171 | — | — | 171 |
| General\tliability | (40) | — | — | (40) |
| Fidelity\tand\tsurety | (7) | — | — | (7) |
| Commercial\tproperty | (4) | — | — | (4) |
| Net\tasbestos\treserves | — | — | 294 | 294 |
| Net\tenvironmental\treserves | — | — | 26 | 26 |
| Change\tin\tworkers'\tcompensation\tdiscount, |  |  |  |  |
| including\taccretion | 38 | — | — | 38 |
| Catastrophes | 12 | 25 | — | 37 |
| Other\treserve\tre-estimates,\tnet | 6 | (6) | (3) | (3) |
| Total\tprior\taccident\tyears\tdevelopment | $125 | $(75) | $317 | $367 |

During	2011,	the	Company's	re-estimates	of	prior	accident	years	reserves	included	the	following	significant	reserve	changes:

•	 Released	reserves	for	personal	auto	liability	claims,	primarily	for	accident	years	2006	through	2010.	Favorable	trends	in	reported severity	have	persisted	or	improved	over	this	time	period.	As	these	accident	years	develop,	the	uncertainty	around	the	ultimate	losses is	reduced	and	management	places	more	weight	on	the	emerged	experience.

•	 Strengthened	reserves	in	professional	liability	for	accident	years	2007	through	2008,	primarily	in	the	directors	and	officers	("D&O")

line	of	business.	Detailed	reviews	of	claims	involving	the	sub-prime	mortgage	market	collapse,	and	shareholder	class	action	lawsuits, resulted	in	a	higher	estimate	of	future	claim	costs	for	these	exposures.

•	 Released	reserves	 in	package	business	 liability	coverages	and	general liability, in	accident	years	2005 through	2009.	As these accident	years	developed,	claim	severity	has	emerged	lower	than	expected.

•	 Strengthened	reserves	in	workers'	compensation	in	accident	years	2008	through	2010.	Accident	year	2010	loss	costs	trends	were higher	than	expected	as	an	increase	in	frequency	outpaced	a	moderation	of	severity	trends.	Strengthening	in	accident	years	2009	and 2008	was	the	result	of	higher	than	expected	loss	emergence	for	these	years.	Strengthening	in	more	recent	years	is	partially	offset	by releases	in	accident	years	2007	and	prior.	Severity	emergence	in	these	older	accident	years	continues	to	be	favorable.

•	 Strengthened	prior	year	catastrophe	reserves,	primarily	related	to	a	severe	wind	and	hail	storm	in	Arizona	during	the	fourth	quarter of	2010.	Severity	of	property	damage	associated	with	this	event	increased	more	than	expected.

•	 Refer	to	the	Property	&	Casualty	Other	Operations	Claims	section	for	discussion	concerning	the	Company's	annual	evaluations	of net	environmental	and	net	asbestos	reserves,	and	related	reinsurance.

A	roll-forward	follows	of	property	and	casualty	insurance	product	liabilities	for	unpaid	losses	and	loss	adjustment	expenses	for	the	year ended	December	31,	2010:

|  | Property	&amp;<br>Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;<br>Casualty<br>Other<br>Operations | Total<br>Property	and<br>Casualty<br>Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |
| adjustment\texpenses,\tgross | $15,051 | $2,109 | $4,491 | $21,651 |
| Reinsurance\tand\tother\trecoverables | 2,570 | 11 | 860 | 3,441 |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\nadjustment\texpenses,\tnet | 12,481 | 2,098 | 3,631 | 18,210 |
| Provision\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses |  |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 3,579 | 2,737 | — | 6,316 |
| Current\taccident\tyear\tcatastrophes | 152 | 300 | — | 452 |
| Prior\taccident\tyears | (361) | (86) | 251 | (196) |
| Total\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses | 3,370 | 2,951 | 251 | 6,572 |
| Payments | (3,485) | (2,889) | (460) | (6,834) |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses,\tnet | 12,366 | 2,160 | 3,422 | 17,948 |
| Reinsurance\tand\tother\trecoverables | 2,361 | 17 | 699 | 3,077 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses,\tgross | $14,727 | $2,177 | $4,121 | $21,025 |
| Earned\tpremiums | $5,744 | $3,947 |  |  |
| Loss\tand\tloss\texpense\tpaid\tratio\t[1] | 60.7 | 73.2 |  |  |
| Loss\tand\tloss\texpense\tincurred\tratio | 58.7 | 74.8 |  |  |
| Prior\taccident\tyears\tdevelopment\t(pts)\t[2] | (6.3) | (2.2) |  |  |

# Prior	accident	years	development	recorded	in	2010

Included	within	prior	accident	years	development	for	the	year	ended	December	31,	2010	were	the	following	loss	and	loss	adjustment expense	reserve	strengthenings	(releases):

|  |  |  | Property	&amp; |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Casualty |  |
|  | Property\t&amp;\tCasualty | Consumer | Other | Total\tProperty\tand |
|  | Commercial | Markets | Operations | Casualty\tInsurance |
| Auto\tliability | $(54) | $(115) | $— | $(169) |
| Professional\tliability | (88) | — | — | (88) |
| Workers'\tcompensation | (70) | — | — | (70) |
| General\tliability | (108) | — | — | (108) |
| Package\tbusiness | (19) | — | — | (19) |
| Commercial\tproperty | (16) | — | — | (16) |
| Fidelity\tand\tsurety | (5) | — | — | (5) |
| Homeowners | — | 23 | — | 23 |
| Net\tenvironmental\treserves | — | — | 67 | 67 |
| Net\tasbestos\treserves | — | — | 189 | 189 |
| All\tother\tnon-A&amp;E | — | — | 11 | 11 |
| Uncollectible\treinsurance | (30) | — | — | (30) |
| Change\tin\tworkers'\tcompensation\tdiscount, |  |  |  |  |
| including\taccretion | 26 | — | — | 26 |
| Catastrophes | 1 | 10 | — | 11 |
| Other\treserve\tre-estimates,\tnet | 2 | (4) | (16) | (18) |
| Total\tprior\taccident\tyears\tdevelopment | $(361) | $(86) | $251 | $(196) |

During	2010,	the	Company's	re-estimates	of	prior	accident	years	reserves	included	the	following	significant	reserve	changes:

•	 Released	reserves	for	commercial	auto	liability	claims	as	the	Company	lowered	its	reserve	estimate	to	recognize	a	lower	severity trend	during	2009	that	continued	into	2010	on	larger	claims	in	accident	years	2002	to	2009.	In	addition,	reserves	were	released	for personal	auto	liability	claims	for	accident	years	2004	to	2009,	as	favorable	trends	in	reported	severity	have	persisted,	most	notably for	accident	years	2008	and	2009.	As	 these	accident	years	develop,	 the	uncertainty	around	 the	ultimate	 losses	 is	reduced	and management	places	more	weight	on	the	emerged	experience.

•	 Released	reserves	for	professional	liability	claims,	primarily	related	to	D&O	claims	in	accident	years	2004	to	2008.	For	these accident	years,	reported	losses	for	claims	under	D&O	policies	have	emerged	favorably	to	initial	expectations	due	to	lower	than expected	claim	severity.

•	 Released	reserves	for	workers'	compensation	business,	primarily	related	to	accident	years	2006	and	2007.	Management	updated reviews	of	state	reforms	affecting	these	accident	years	and	determined	impacts	to	be	more	favorable	than	previously	estimated.

•	 Released	reserves	for	general	liability	claims,	primarily	related	to	accident	years	2005	through	2008.	The	Company	observed	that claim	emergence	for	these	accident	years	continued	to	be	lower	than	anticipated	and	believed	this	would	continue,	and	therefore reduced	its	reserve	estimate	in	response.	Partially	offsetting	this	release	was	strengthening	on	loss	adjustment	expense	reserves during	the	second	quarter	of	2010	due	to	higher	than	expected	allocated	loss	expenses	for	claims	in	accident	years	2000	and	prior.

•	 Released	reserves	for	package	business	claims,	primarily	related	to	accident	years	2005	through	2009.	The	Company	observed	that claim	emergence	within	the	liability	portion	of	the	package	coverage	for	these	accident	years	continued	to	be	lower	than	anticipated and	believed	this	lower	level	of	claim	activity	would	continue,	and	therefore	reduced	its	reserve	estimate	in	response.

•	 Strengthened	 reserves	 for	 homeowners'	 claims,	 as	 the	 Company	 observed	 a	 lengthening	 of	 the	 claim	 reporting	 period	 for homeowners'	claims	which	resulted	in	increasing	management's	estimate	of	the	ultimate	cost	to	settle	these	claims.	The	Company also	began	spending	more	on	independent	adjuster	fees	to	better	assess	property	damages.

•	 The	Company	reviewed	its	allowance	for	uncollectible	reinsurance	in	the	second	quarter	of	2010	and	reduced	its	allowance,	in	part, by	a	reduction	in	gross	ceded	loss	recoverables.

|  | Property	&amp;<br>Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;<br>Casualty<br>Other<br>Operations | Total<br>Property	and<br>Casualty<br>Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |
| adjustment\texpenses,\tgross | $15,273 | $2,083 | $4,577 | $21,933 |
| Reinsurance\tand\tother\trecoverables | 2,742 | 46 | 798 | 3,586 |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\nadjustment\texpenses,\tnet | 12,531 | 2,037 | 3,779 | 18,347 |
| Provision\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses |  |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 3,582 | 2,707 | 1 | 6,290 |
| Current\taccident\tyear\tcatastrophes | 78 | 228 | — | 306 |
| Prior\taccident\tyears | (394) | (33) | 241 | (186) |
| Total\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses | 3,266 | 2,902 | 242 | 6,410 |
| Payments | (3,316) | (2,841) | (390) | (6,547) |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment |  |  |  |  |
| expenses,\tnet | 12,481 | 2,098 | 3,631 | 18,210 |
| Reinsurance\tand\tother\trecoverables | 2,570 | 11 | 860 | 3,441 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\nexpenses,\tgross | $15,051 | $2,109 | $4,491 | $21,651 |
| Earned\tpremiums | $5,903 | $3,959 |  |  |
| Loss\tand\tloss\texpense\tpaid\tratio\t[1] | 56.2 | 71.8 |  |  |
| Loss\tand\tloss\texpense\tincurred\tratio | 55.3 | 73.3 |  |  |
| Prior\taccident\tyears\tdevelopment\t(pts)\t[2] | (6.7) | (0.8) |  |  |

Included	within	prior	accident	years	development	for	the	year	ended	December	31,	2009	were	the	following	loss	and	loss	adjustment

|  |  |  | Property	&amp; |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Casualty |  |
|  | Property\t&amp;\tCasualty | Consumer | Other | Total\tProperty\tand |
|  | Commercial | Markets | Operations | Casualty\tInsurance |
| Auto\tliability | $(47) | $(77) | $— | $(124) |
| Professional\tliability | (127) | — | — | (127) |
| General\tliability,\tumbrella\tand\thigh\thazard |  |  |  |  |
| liability | (112) | — | — | (112) |
| Workers'\tcompensation | (92) | — | — | (92) |
| Package\tbusiness | 38 | — | — | 38 |
| Fidelity\tand\tsurety | 28 | — | — | 28 |
| Homeowners | — | 18 | — | 18 |
| Net\tenvironmental\treserves | — | — | 75 | 75 |
| Net\tasbestos\treserves | — | — | 138 | 138 |
| All\tother\tnon-A&amp;E | — | — | 35 | 35 |
| Uncollectible\treinsurance | (20) | — | (20) | (40) |
| Change\tin\tworkers'\tcompensation\tdiscount, |  |  |  |  |
| including\taccretion | 24 | — | — | 24 |
| Catastrophes | (23) | — | — | (23) |
| Other\treserve\tre-estimates,\tnet | (63) | 26 | 13 | (24) |
| Total\tprior\taccident\tyears\tdevelopment | $(394) | $(33) | $241 | $(186) |

•	 Released	reserves	for	personal	auto	liability	claims,	for	accident	years	2005	to	2007,	as	the	Company	recognized	that	favorable development	in	reported	severity,	first	observed	in	early	2008,	which	was	attributed,	in	part,	to	changes	made	in	claim	handling procedures	in	2007,	was	a	sustained	trend	for	those	accident	years.	In	the	third	and	fourth	quarters	of	2009,	management	also recognized	 sustained	 favorable	 development	 trends	 in	AARP	 for	 accident	 years	 2006	 to	 2008	 and	 released	 reserves	 for	 those accident	years.

•	 Released	reserves	for	commercial	auto	liability	claims,	primarily	related	to	accident	years	2003	to	2008.	In	the	fourth	quarter	of 2009,	the	Company	recognized	that	the	full	value	of	large	auto	liability	claims	was	being	recognized	as	case	reserves	at	an	earlier age.	The	increased	adequacy	of	case	reserves	caused	the	Company	to	decrease	its	estimate	of	reserves	for	IBNR	loss	and	loss adjustment	expenses.

•	 The	Company	released	reserves	for	D&O	and	errors	and	omissions	("E&O")	claims	in	2009	related	to	the	2003	to	2008	accident years.	For	these	accident	years,	reported	losses	for	claims	under	D&O	and	E&O	policies	had	been	emerging	favorably	to	initial expectations	due	to	lower	than	expected	claim	severity.

•	 Released	reserves	for	general	liability	claims,	primarily	related	to	accident	years	2003	to	2007.	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	reserve	releases	from	the	third	quarter	of	2007	through	2009.	During	2009,	management determined	that	the	lower	level	of	loss	emergence	was	also	evident	in	accident	year	2007	and	had	continued	for	accident	years	2003 to	2006	and,	as	a	result,	the	Company	reduced	the	reserves.	Largely	offsetting	the	releases,	the	Company	recognized	that	the	cost	of late	emerging	exposures	were	likely	to	be	higher	than	previously	expected,	and	also	recognized	additional	ceded	losses	on	accident years	1999	and	prior.

•	 Released	workers'	compensation	reserves,	primarily	related	to	additional	ceded	losses	on	accident	years	1999	and	prior	and	lower allocated	loss	adjustment	expense	reserves	in	accident	years	2003	to	2007.	During	the	first	quarter	of	2009,	the	Company	observed lower	than	expected	allocated	loss	adjustment	expense	payments	on	older	accident	years.	As	a	result,	the	Company	reduced	its estimate	for	future	expense	payments	on	more	recent	accident	years.

•	 Strengthened	 reserves	 for	 liability	 claims	 under	 package	 business,	 primarily	 related	 to	 allocated	 loss	 adjustment	 expenses	 for accident	years	2000	to	2005	and	2007	and	2008.	During	the	first	quarter	of	2009,	the	Company	identified	higher	than	expected expense	payments	on	older	accident	years	related	to	the	liability	coverage.	Additional	analysis	in	the	second	quarter	of	2009	showed that	this	higher	level	of	loss	adjustment	expense	was	likely	to	continue	into	more	recent	accident	years.	As	a	result,	in	the	second quarter	of	2009,	the	Company	increased	its	estimates	for	future	expense	payments	for	the	2007	and	2008	accident	years.	Largely offsetting	the	strengthenings,	the	Company	recognized	the	cost	of	late	emerging	exposures	were	likely	to	be	higher	than	previously expected,	and	also	recognized	a	lower	than	expected	frequency	of	high	severity	claims.

•	 Strengthened	reserves	for	surety	business,	primarily	related	to	accident	years	2004	to	2007.	The	net	strengthening	consisted	of	$55 strengthening	of	reserves	for	customs	bonds,	partially	offset	by	a	$27	release	of	reserves	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.	Continued	high volume	of	late	reported	claims	during	2009	caused	the	Company	to	strengthen	the	reserves.	Because	the	pattern	of	claim	reporting for	customs	bonds	has	not	been	similar	to	the	reporting	pattern	of	other	surety	bonds,	future	claim	activity	is	difficult	to	predict.	It	is possible	that	as	additional	claim	activity	emerges,	our	estimate	of	both	the	number	of	future	claims	and	the	cost	of	those	claims could	change	substantially.

•	 Strengthened	reserves	for	homeowners'	claims.	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 reserve	strengthening	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.

•	 The	Company	reviewed	its	allowance	for	uncollectible	reinsurance	in	the	second	quarter	of	2009	and	reduced	its	allowance	driven, in	part,	by	a	reduction	in	gross	ceded	loss	recoverables.

# Property	&	Casualty	Other	Operations	Claims

# Reserve	Activity

Reserves	and	reserve	activity	in	Property	&	Casualty	Other	Operations	are	categorized	and	reported	as	asbestos,	environmental,	or	"all other".	The	"all	other"	category	of	reserves	covers	a	wide	range	of	insurance	and	assumed	reinsurance	coverages,	including,	but	not limited	to,	potential	liability	for	construction	defects,	lead	paint,	silica,	pharmaceutical	products,	molestation	and	other	long-tail	liabilities.

The	 following	 table	 presents	 reserve	 activity,	 inclusive	 of	 estimates	 for	 both	 reported	 and	 incurred	 but	 not	 reported	 claims,	 net	 of reinsurance,	for	Property	&	Casualty	Other	Operations,	categorized	by	asbestos,	environmental	and	all	other	claims,	for	the	years	ended December	31,	2011,	2010	and	2009.

# Property	&	Casualty	Other	Operations	Losses	and	Loss	Adjustment	Expenses

|  | Asbestos | Environmental | All	Other	[1] | Total |
| :--- | :--- | :--- | :--- | :--- |
| 2011 |  |  |  |  |
| Beginning\tliability\t—\tnet\t[2]\t[3] | $1,787 | $334 | $1,302 | $3,423 |
| Losses\tand\tloss\tadjustment\texpenses\tincurred | 294 | 26 | (3) | 317 |
| Losses\tand\tloss\tadjustment\texpenses\tpaid | (189) | (40) | (140) | (369) |
| Ending\tliability\t—\tnet\t[2]\t[3] | $1,892[4] | $320 | $1,159 | $3,371 |
| 2010 |  |  |  |  |
| Beginning\tliability\t—\tnet\t[2]\t[3] | $1,892 | $307 | $1,432 | $3,631 |
| Losses\tand\tloss\tadjustment\texpenses\tincurred | 189 | 67 | (5) | 251 |
| Losses\tand\tloss\tadjustment\texpenses\tpaid | (294) | (40) | (125) | (459) |
| Ending\tliability\t—\tnet\t[2]\t[3] | $1,787 | $334 | $1,302 | $3,423 |
| 2009 |  |  |  |  |
| Beginning\tliability\t—\tnet\t[2]\t[3] | $1,884 | $269 | $1,628 | $3,781 |
| Losses\tand\tloss\tadjustment\texpenses\tincurred | 138 | 75 | 29 | 242 |
| Losses\tand\tloss\tadjustment\texpenses\tpaid | (181) | (40) | (171) | (392) |
| Reclassification\tof\tasbestos\tand\tenvironmental\tliabilities | 51 | 3 | (54) | — |
| Ending\tliability\t—\tnet\t[2]\t[3] | $1,892 | $307 | $1,432 | $3,631 |

[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	amounts	reported	in	Property	&	Casualty	Commercial	and	Consumer	Markets	reporting	segments	(collectively	"Ongoing Operations")	for	asbestos	and	environmental	net	liabilities	of	$15	and	$8,	respectively,	as	of	December	31,	2011,	$11	and	$5, respectively,	as	of	December	31,	2010,	and	$10	and	$5,	respectively,	as	of	December	31,	2009;	total	net	losses	and	loss	adjustment expenses	incurred	for	the	years	ended	December	31,	2011,	2010	and	2009	of	$27,	$15	and	$16,	respectively,	related	to	asbestos	and environmental	claims;	and	total	net	losses	and	loss	adjustment	expenses	paid	for	the	years	ended	December	31,	2011,	2010	and 2008	of	$20,	$14	and	$19,	respectively,	related	to	asbestos	and	environmental	claims.

[4] 	 The	one	year	and	average	three	year	net	paid	amounts	for	asbestos	claims,	including	Ongoing	Operations,	were	$198	and	$230, respectively,	resulting	in	a	one	year	net	survival	ratio	of	9.6	and	a	three	year	net	survival	ratio	of	8.3.	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.

For	paid	and	incurred	losses	and	loss	adjustment	expenses	reporting,	the	Company	classifies	its	asbestos	and	environmental	reserves	into three	categories:	Direct,	Assumed	Reinsurance	and	London	Market.	Direct	insurance	includes	primary	and	excess	coverage.	Assumed reinsurance	includes	both	"treaty"	reinsurance	(covering	broad	categories	of	claims	or	blocks	of	business)	and	"facultative"	reinsurance (covering	specific	risks	or	individual	policies	of	primary	or	excess	insurance	companies).	London	Market	business	includes	the	business written	by	one	or	more	of	the	Company's	subsidiaries	in	the	United	Kingdom,	which	are	no	longer	active	in	the	insurance	or	reinsurance business.	Such	business	includes	both	direct	insurance	and	assumed	reinsurance.

Of	the	three	categories	of	claims	(Direct,	Assumed	Reinsurance	and	London	Market),	direct	policies	tend	to	have	the	greatest	factual development	from	which	to	estimate	the	Company's	exposures.

Assumed	reinsurance	exposures	are	inherently	less	predictable	than	direct	insurance	exposures	because	the	Company	may	not	receive notice	of	a	reinsurance	claim	until	the	underlying	direct	insurance	claim	is	mature.	This	causes	a	delay	in	the	receipt	of	information	at	the reinsurer	level	and	adds	to	the	uncertainty	of	estimating	related	reserves.

London	Market	exposures	are	the	most	uncertain	of	the	three	categories	of	claims.	As	a	participant	in	the	London	Market	(comprised	of both	Lloyd's	of	London	and	London	Market	companies),	certain	subsidiaries	of	the	Company	wrote	business	on	a	subscription	basis,	with those	subsidiaries'	involvement	being	limited	to	a	relatively	small	percentage	of	a	total	contract	placement.	Claims	are	reported,	via	a broker,	to	the	"lead"	underwriter	and,	once	agreed	to,	are	presented	to	the	following	markets	for	concurrence.	This	reporting	and	claim agreement	process	makes	estimating	liabilities	for	this	business	the	most	uncertain	of	the	three	categories	of	claims.

The	following	table	sets	forth,	for	the	years	ended	December	31,	2011,	2010	and	2009,	paid	and	incurred	loss	activity	by	the	three categories	of	claims	for	asbestos	and	environmental.

# Paid	and	Incurred	Losses	and	Loss	Adjustment	Expenses	("LAE")	Development	—	Asbestos	and	Environmental

|  | Asbestos	[1] | Asbestos	[1] | Environmental	[1] | Environmental	[1] |
| :--- | :--- | :--- | :--- | :--- |
|  | Paid\nLosses\t&amp;\tLAE | Incurred\nLosses\t&amp;\tLAE | Paid\nLosses\t&amp;\tLAE | Incurred\nLosses\t&amp;\tLAE |
| 2011 |  |  |  |  |
| Gross |  |  |  |  |
| Direct | $170 | $350 | $32 | $25 |
| Assumed\tReinsurance | 55 | 12 | 8 | — |
| London\tMarket | 23 | 16 | 6 | 4 |
| Total | 248 | 378 | 46 | 29 |
| Ceded | (59) | (84) | (6) | (3) |
| Net | $189 | $294 | $40 | $26 |
| 2010 |  |  |  |  |
| Gross |  |  |  |  |
| Direct | $201 | $209 | $35 | $50 |
| Assumed\tReinsurance | 128 | — | 12 | 5 |
| London\tMarket | 42 | (15) | 7 | 10 |
| Total | 371 | 194 | 54 | 65 |
| Ceded | (77) | (5) | (14) | 2 |
| Net | $294 | $189 | $40 | $67 |
| 2009 |  |  |  |  |
| Gross |  |  |  |  |
| Direct | $160 | $117 | $29 | $92 |
| Assumed\t—\tDomestic | 56 | 52 | 7 | — |
| London\tMarket | 18 | — | 10 | 12 |
| Total | 234 | 169 | 46 | 104 |
| Ceded | (53) | (31) | (6) | (29) |
| Net\tprior\tto\treclassification | $181 | $138 | $40 | $75 |
| Reclassification\tof\tasbestos\tand\tenvironmental\tliabilities\t[2] | — | 51 | — | 3 |
| Net | $181 | $189 | $40 | $78 |

[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	years	ended	December	31,	2011,	2010	and	2009	includes	$30,	$15	and	$17,	respectively,

related	 to	 asbestos	 and	 environmental	 claims.	 Total	 gross	 losses	 and	 LAE	 paid	 in	 Ongoing	 Operations	 for	 the	 years	 ended December	31,	2011,	2010	and	2009	includes	$22,	$14	and	$20,	respectively,	related	to	asbestos	and	environmental	claims.

[2] 	 During	the	three	months	ended	June	30,	2009,	the	Company	reclassified	liabilities	of	$54	that	were	previously	classified	as	"All Other"	to	"Asbestos"	and	"Environmental".

In	the	fourth	quarters	of	2011,	2010	and	2009,	the	Company	completed	evaluations	of	certain	of	its	non-asbestos	and	environmental reserves,	 including	 its	 assumed	 reinsurance	 liabilities.	 In	 2011,	 the	 Company	 recognized	 no	 prior	 year	 development.	 In	 2010,	 the Company	recognized	unfavorable	prior	year	development	of	$11.	In	2009,	the	Company	recognized	unfavorable	prior	year	development of	$35,	principally	driven	by	higher	projected	unallocated	loss	adjustment	expenses.

During	the	third	quarters	of	2011,	2010	and	2009,	the	Company	completed	its	annual	ground	up	environmental	reserve	evaluations.	In each	of	these	evaluations,	the	Company	reviewed	all	of	its	open	direct	domestic	insurance	accounts	exposed	to	environmental	liability	as well	as	assumed	reinsurance	accounts	and	its	London	Market	exposures	for	both	direct	and	assumed	reinsurance.	During	the	third	quarters of	2011	and	2010,	the	Company	found	estimates	for	some	individual	account	exposures	increased	based	upon	unfavorable	litigation results	and	increased	clean-up	or	expense	costs,	with	the	vast	majority	of	this	deterioration	emanating	from	a	limited	number	of	insureds. In	 2009,	 the	 Company	 found	 estimates	 for	 some	 individual	 accounts	 increased	 based	 upon	 additional	 sites	 identified,	 litigation developments	and	new	damage	and	defense	cost	information	obtained	on	these	accounts	since	the	last	review.	The	net	effect	of	these account-specific	changes	as	well	as	actuarial	evaluations	of	new	account	emergence	and	historical	loss	and	expense	paid	experience resulted	in	$19,	$62	and	$75	increases	in	net	environmental	liabilities	in	2011,	2010	and	2009,	respectively.	The	Company	currently expects	to	continue	to	perform	an	evaluation	of	its	environmental	liabilities	annually.

In	reporting	environmental	results,	the	Company	classifies	its	gross	exposure	into	Direct,	Assumed	Reinsurance,	and	London	Market.	The following	table	displays	gross	environmental	reserves	and	other	statistics	by	category	as	of	December	31,	2011.

# Summary	of	Environmental	Reserves

|  | Total	Reserves |
| :--- | :--- |
| Gross\t[1]\t[2] |  |
| Direct\nAssumed\tReinsurance\nLondon\tMarket | $271\n39\n57 |
| Total | 367 |
| Ceded | (47) |
| Net | $320 |

[1] 	 The	one	year	gross	paid	amount	for	total	environmental	claims	is	$58,	resulting	in	a	one	year	gross	survival	ratio	of	6.4.

[2] 	 The	three	year	average	gross	paid	amount	for	total	environmental	claims	is	$58,	resulting	in	a	three	year	gross	survival	ratio	of	6.4.

During	the	second	quarters	of	2011,	2010	and	2009,	the	Company	completed	its	annual	ground-up	asbestos	reserve	evaluations.	As	part of	these	evaluations,	the	Company	reviewed	all	of	its	open	direct	domestic	insurance	accounts	exposed	to	asbestos	liability,	as	well	as assumed	 reinsurance	 accounts	 and	 its	 London	 Market	 exposures	 for	 both	 direct	 insurance	 and	 assumed	 reinsurance.	 Based	 on	 this evaluation,	 the	 Company	 strengthened	 its	 net	 asbestos	 reserves	 by	 $290	 in	 second	 quarter	 2011.	 During	 2011,	 for	 certain	 direct policyholders,	the	Company	experienced	increases	in	claim	frequency,	severity	and	expense	which	were	driven	by	mesothelioma	claims, particularly	against	certain	smaller,	more	peripheral	insureds.	The	Company	also	experienced	unfavorable	development	on	its	assumed reinsurance	accounts	driven	largely	by	the	same	factors	experienced	by	the	direct	policyholders.	During	2010	and	2009,	for	certain	direct policyholders,	the	Company	experienced	increases	in	claim	severity	and	expense.	Increases	in	severity	and	expense	were	driven	by litigation	in	certain	jurisdictions	and,	to	a	lesser	extent,	development	on	primarily	peripheral	accounts.	The	Company	also	experienced unfavorable	development	on	its	assumed	reinsurance	accounts	driven	largely	by	the	same	factors	experienced	by	the	direct	policyholders. The	net	effect	of	these	changes	in	2010	and	2009	resulted	in	$169	and	$138	increases	in	net	asbestos	reserves,	respectively.	The	Company currently	expects	to	continue	to	perform	an	evaluation	of	its	asbestos	liabilities	annually.

The	Company	divides	its	gross	asbestos	exposures	into	Direct,	Assumed	Reinsurance	and	London	Market.	The	Company	further	divides its	direct	asbestos	exposures	into	the	following	categories:	Major	Asbestos	Defendants	(the	"Top	70"	accounts	in	Tillinghast's	published Tiers	1	and	2	and	Wellington	accounts),	which	are	subdivided	further	as:	Structured	Settlements,	Wellington,	Other	Major	Asbestos Defendants,	Accounts	with	Future	Expected	Exposures	greater	than	$2.5,	Accounts	with	Future	Expected	Exposures	less	than	$2.5,	and Unallocated.

•	 Structured	Settlements	are	those	accounts	where	the	Company	has	reached	an	agreement	with	the	insured	as	to	the	amount	and timing	of	the	claim	payments	to	be	made	to	the	insured.

•	 The	Wellington	subcategory	includes	insureds	that	entered	into	the	"Wellington	Agreement"	dated	June	19,	1985.	The	Wellington Agreement	provided	terms	and	conditions	for	how	the	signatory	asbestos	producers	would	access	their	coverage	from	the	signatory insurers.

•	 The	Other	Major	Asbestos	Defendants	subcategory	represents	insureds	included	in	Tiers	1	and	2,	as	defined	by	Tillinghast	that	are not	Wellington	signatories	and	have	not	entered	into	structured	settlements	with	The	Hartford.	The	Tier	1	and	2	classifications	are meant	to	capture	the	insureds	for	which	there	is	expected	to	be	significant	exposure	to	asbestos	claims.

•	 Accounts	with	future	expected	exposures	greater	or	less	than	$2.5	include	accounts	that	are	not	major	asbestos	defendants.

•	 The	Unallocated	category	includes	an	estimate	of	the	reserves	necessary	for	asbestos	claims	related	to	direct	insureds	that	have	not previously	tendered	asbestos	claims	to	the	Company	and	exposures	related	to	liability	claims	that	may	not	be	subject	to	an	aggregate limit	under	the	applicable	policies.

An	account	may	move	between	categories	from	one	evaluation	to	the	next.	For	example,	an	account	with	future	expected	exposure	of greater	than	$2.5	in	one	evaluation	may	be	reevaluated	due	to	changing	conditions	and	recategorized	as	less	than	$2.5	in	a	subsequent evaluation	or	vice	versa.

The	following	table	displays	gross	asbestos	reserves	and	other	statistics	by	policyholder	category	as	of	December	31,	2011.

|  | Number	of<br>Accounts	[2] | All	Time<br>Paid	[3] | Total<br>Reserves | All	Time<br>Ultimate	[3] |
| :--- | :--- | :--- | :--- | :--- |
| Gross\tAsbestos\tReserves\tas\tof\tJune\t30,\t2011\t[1] |  |  |  |  |
| Major\tasbestos\tdefendants\t[5] |  |  |  |  |
| Structured\tsettlements\t(includes\t4\tWellington |  |  |  |  |
| accounts)\t[6] | 8 | $331 | $438 | $769 |
| Wellington\t(direct\tonly) | 29 | 908 | 43 | 951 |
| Other\tmajor\tasbestos\tdefendants | 28 | 527 | 28 | 555 |
| No\tknown\tpolicies\t(includes\t3\tWellington\taccounts) | 5 | — | — | — |
| Accounts\twith\tfuture\texposure\t&gt;\t$2.5 | 85 | 929 | 702 | 1,631 |
| Accounts\twith\tfuture\texposure\t&lt;\t$2.5 | 1,075 | 342 | 122 | 464 |
| Unallocated\t[7] |  | 1,895 | 563 | 2,458 |
| Total\tDirect |  | 4,932 | 1,896 | 6,828 |
| Assumed\tReinsurance |  | 1,302 | 379 | 1,681 |
| London\tMarket |  | 646 | 283 | 929 |
| Total\tas\tof\tJune\t30,\t2011\t[1] |  | 6,880 | 2,558 | 9,438 |
| Gross\tpaid\tloss\tactivity\tfor\tthe\tthird\tquarter\tand\tfourth |  |  |  |  |
| quarter\t2011 |  | 127 | (127) | — |
| Gross\tincurred\tloss\tactivity\tfor\tthe\tthird\tquarter\tand\tfourth |  |  |  |  |
| quarter\t2011 |  | — | 11 | 11 |
| Total\tas\tof\tDecember\t31,\t2011\t[4] |  | $7,007 | $2,442 | $9,449 |

[1] 	 Gross	Asbestos	Reserves	based	on	the	second	quarter	2011	asbestos	reserve	study.

[2] 	 An	account	may	move	between	categories	from	one	evaluation	to	the	next.	Reclassifications	were	made	as	a	result	of	the	reserve evaluation	completed	in	the	second	quarter	of	2011.

[3] 	 "All	Time	Paid"	represents	the	total	payments	with	respect	to	the	indicated	claim	type	that	have	already	been	made	by	the	Company as	of	the	indicated	balance	sheet	date.	"All	Time	Ultimate"	represents	the	Company's	estimate,	as	of	the	indicated	balance	sheet date,	of	the	total	payments	that	are	ultimately	expected	to	be	made	to	fully	settle	the	indicated	payment	type.	The	amount	is	the	sum of	the	amounts	already	paid	(e.g.	"All	Time	Paid")	and	the	estimated	future	payments	(e.g.	the	amount	shown	in	the	column	labeled "Total	Reserves").

[4] 	 Survival	ratio	is	a	commonly	used	industry	ratio	for	comparing	reserve	levels	between	companies.	While	the	method	is	commonly used,	it	is	not	a	predictive	technique.	Survival	ratios	may	vary	over	time	for	numerous	reasons	such	as	large	payments	due	to	the final	resolution	of	certain	asbestos	liabilities,	or	reserve	re-estimates.	The	survival	ratio	is	computed	by	dividing	the	recorded reserves	by	the	average	of	the	past	three	years	of	payments.	The	ratio	is	the	calculated	number	of	years	the	recorded	reserves	would survive	if	future	annual	payments	were	equal	to	the	average	annual	payments	for	the	past	three	years.	The	3-year	gross	survival ratio	of	8.3	as	of	December	31,	2011	is	computed	based	on	total	paid	losses	of	$881	for	the	period	from	January	1,	2009	to December	31,	2011.	As	of	December	31,	2011,	the	one	year	gross	paid	amount	for	total	asbestos	claims	is	$258	resulting	in	a	one year	gross	survival	ratio	of	9.5.

[6] 	 Structured	settlements	include	the	Company's	reserves	related	to	PPG	Industries,	Inc.	("PPG").	In	January	2009,	the	Company, along	with	approximately	three	dozen	other	insurers,	entered	into	a	modified	agreement	in	principle	with	PPG	to	resolve	the Company's	coverage	obligations	for	all	of	its	PPG	asbestos	liabilities,	including	principally	those	arising	out	of	its	50%	stock ownership	of	Pittsburgh	Corning	Corporation	("PCC"),	a	joint	venture	with	Corning,	Inc.	The	agreement	is	contingent	on	the fulfillment	of	certain	conditions,	including	the	confirmation	of	a	PCC	plan	of	reorganization	under	Section	524(g)	of	the	Bankruptcy Code,	which	have	not	yet	been	met.

[7] Includes	closed	accounts	(exclusive	of	Major	Asbestos	Defendants)	and	unallocated	IBNR.

The	Company	provides	an	allowance	for	uncollectible	reinsurance,	reflecting	management's	best	estimate	of	reinsurance	cessions	that may	be	uncollectible	in	the	future	due	to	reinsurers'	unwillingness	or	inability	to	pay.	During	the	second	quarters	of	2011,	2010	and	2009, the	Company	completed	its	annual	evaluations	of	the	collectability	of	the	reinsurance	recoverables	and	the	adequacy	of	the	allowance	for uncollectible	reinsurance	associated	with	older,	long-term	casualty	liabilities	reported	in	the	Property	&	Casualty	Other	Operations.	In conducting	 this	evaluation,	 the	Company	used	 its	most	recent	detailed	evaluations	of	ceded	 liabilities	reported	 in	 the	segment.	The Company	analyzed	the	overall	credit	quality	of	the	Company's	reinsurers,	recent	trends	in	arbitration	and	litigation	outcomes	in	disputes between	cedants	and	reinsurers,	and	recent	developments	in	commutation	activity	between	reinsurers	and	cedants.	The	evaluation	in	the second	quarters	of	2010	and	2011	resulted	in	no	adjustment	to	the	allowance	for	uncollectible	reinsurance.	As	of	December	31,	2011	and 2010,	the	allowance	for	uncollectible	reinsurance	for	Property	&	Casualty	Other	Operations	totals	$207.	As	a	result	of	the	second	quarter of	2009	evaluation,	the	Company	reduced	its	allowance	for	uncollectible	reinsurance	by	$20	principally	to	reflect	decreased	reinsurance recoverable	dispute	exposure	and	favorable	activity	since	the	last	evaluation.	The	Company	currently	expects	to	perform	its	regular comprehensive	review	of	Property	&	Casualty	Other	Operations	reinsurance	recoverables	annually.	Due	to	the	inherent	uncertainties	as	to collection	and	the	length	of	time	before	reinsurance	recoverables	become	due,	particularly	for	older,	long-term	casualty	liabilities,	it	is possible	that	future	adjustments	to	the	Company's	reinsurance	recoverables,	net	of	the	allowance,	could	be	required.

Consistent	with	the	Company's	long-standing	reserving	practices,	the	Company	will	continue	to	review	and	monitor	its	reserves	in	the Property	&	Casualty	Other	Operations	segment	regularly	and,	where	future	developments	indicate,	make	appropriate	adjustments	to	the reserves.	The	company	will	complete	both	its	annual	ground-up	asbestos	and	environmental	reserve	studies	during	the	second	quarter	of 2012.

# Impact	of	Re-estimates

The	establishment	of	property	and	casualty	insurance	product	reserves	is	an	estimation	process,	using	a	variety	of	methods,	assumptions and	data	elements.	Ultimate	losses	may	vary	significantly	from	the	current	estimates.	Many	factors	can	contribute	to	these	variations	and the	need	to	change	the	previous	estimate	of	required	reserve	levels.	Subsequent	changes	can	generally	be	thought	of	as	being	the	result	of the	 emergence	 of	 additional	 facts	 that	 were	 not	 known	 or	 anticipated	 at	 the	 time	 of	 the	 prior	 reserve	 estimate	 and/or	 changes	 in interpretations	of	information	and	trends.

The	table	below	shows	the	range	of	annual	reserve	re-estimates	experienced	by	The	Hartford	over	the	past	ten	years.	The	amount	of	prior accident	year	development	(as	shown	in	the	reserve	rollforward)	for	a	given	calendar	year	is	expressed	as	a	percent	of	the	beginning calendar	 year	 reserves,	 net	 of	 reinsurance.	 The	 percentage	 relationships	 presented	 are	 significantly	 influenced	 by	 the	 facts	 and circumstances	of	each	particular	year	and	by	the	fact	that	only	the	last	ten	years	are	included	in	the	range.	Accordingly,	these	percentages are	not	intended	to	be	a	prediction	of	the	range	of	possible	future	variability.	See	"Impact	of	key	assumptions	on	reserve	volatility"	within this	section	for	further	discussion	of	the	potential	for	variability	in	recorded	loss	reserves.

|  | Property	&amp;	Casualty<br>Commercial | Consumer<br>Markets | Property	&amp;<br>Casualty	Other<br>Operations | Total	Property	and<br>Casualty	Insurance |
| :--- | :--- | :--- | :--- | :--- |
| Range\tof\tprior\taccident\tyear\tunfavorable |  |  |  |  |
| (favorable)\tdevelopment\tfor\tthe\tten\tyears |  |  |  |  |
| ended\tDecember\t31,\t2011\t[1]\t[2] | (3.1)\t–\t1.5 | (5.2)\t–\t5.1 | 3.0\t–\t67.5 | (1.2)\t–\t21.5 |

[1] 	 Excluding	the	reserve	strengthening	for	asbestos	and	environmental	reserves,	over	the	past	ten	years	reserve	re-estimates	for	total property	and	casualty	insurance	ranged	from	(3.0)%	to	1.6%.

[2] 	 Development	for	Corporate	is	included	in	Property	&	Casualty	Commercial	and	Consumer	Markets	in	2007	and	prior.

The	potential	variability	of	the	Company's	property	and	casualty	insurance	product	reserves	would	normally	be	expected	to	vary	by segment	and	the	types	of	loss	exposures	insured	by	those	segments.	Illustrative	factors	influencing	the	potential	reserve	variability	for each	of	the	segments	are	discussed	above.

A	table	depicting	the	historical	development	of	the	liabilities	for	unpaid	losses	and	loss	adjustment	expenses,	net	of	reinsurance,	follows.

# Loss	Development	Table

# Loss	And	Loss	Adjustment	Expense	Liability	Development	—	Net	of	Reinsurance

# For	the	Years	Ended	December	31,	[1]

|  | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Liabilities\tfor\tunpaid\tlosses\tand\tloss |  |  |  |  |  |  |  |  |  |  |  |
| adjustment\texpenses,\tnet\tof\treinsurance | \t $12,860 | \t $13,141 | \t $16,218 | \t $16,191 | \t $16,863 | \t $17,604 | \t $18,231 | \t $18,347 | \t $18,210 | \t $17,948 | \t $18,517 |
| Cumulative\tpaid\tlosses\tand\tloss\texpenses |  |  |  |  |  |  |  |  |  |  |  |
| One\tyear\tlater | 3,339 | 3,480 | 4,415 | 3,594 | 3,702 | 3,727 | 3,703 | 3,771 | 3,882 | 4,037 |  |
| Two\tyears\tlater | 5,621 | 6,781 | 6,779 | 6,035 | 6,122 | 5,980 | 5,980 | 6,273 | 6,401 |  |  |
| Three\tyears\tlater | 8,324 | 8,591 | 8,686 | 7,825 | 7,755 | 7,544 | 7,752 | 8,074 | — |  |  |
| Four\tyears\tlater | 9,710 | 10,061 | 10,075 | 9,045 | 8,889 | 8,833 | 9,048 | — | — |  |  |
| Five\tyears\tlater | 10,871 | 11,181 | 11,063 | 9,928 | 9,903 | 9,778 | — | — | — |  |  |
| Six\tyears\tlater | 11,832 | 12,015 | 11,821 | 10,798 | 10,674 | — | — | — | — |  |  |
| Seven\tyears\tlater | 12,563 | 12,672 | 12,601 | 11,448 | — | — | — | — | — |  |  |
| Eight\tyears\tlater | 13,166 | 13,385 | 13,193 | — | — | — | — | — | — |  |  |
| Nine\tyears\tlater | 13,829 | 13,935 | — | — | — | — | — | — | — |  |  |
| Ten\tyears\tlater | 14,345 | — | — | — | — | — | — | — | — |  |  |
| Liabilities\tre-estimated |  |  |  |  |  |  |  |  |  |  |  |
| One\tyear\tlater | 13,153 | 15,965 | 16,632 | 16,439 | 17,159 | 17,652 | 18,005 | 18,161 | 18,014 | 18,315 |  |
| Two\tyears\tlater | 16,176 | 16,501 | 17,232 | 16,838 | 17,347 | 17,475 | 17,858 | 18,004 | 18,136 |  |  |
| Three\tyears\tlater | 16,768 | 17,338 | 17,739 | 17,240 | 17,318 | 17,441 | 17,700 | 18,139 | — |  |  |
| Four\tyears\tlater | 17,425 | 17,876 | 18,367 | 17,344 | 17,497 | 17,439 | 17,866 | — | — |  |  |
| Five\tyears\tlater | 17,927 | 18,630 | 18,554 | 17,570 | 17,613 | 17,676 | — | — | — |  |  |
| Six\tyears\tlater | 18,686 | 18,838 | 18,836 | 17,777 | 17,895 | — | — | — | — |  |  |
| Seven\tyears\tlater | 18,892 | 19,126 | 19,063 | 18,064 | — | — | — | — | — |  |  |
| Eight\tyears\tlater | 19,192 | 19,373 | 19,351 | — | — | — | — | — | — |  |  |
| Nine\tyears\tlater | 19,452 | 19,671 | — | — | — | — | — | — | — |  |  |
| Ten\tyears\tlater | 19,751 | — | — | — | — | — | — | — | — |  |  |
| Deficiency\t(redundancy),\tnet\tof\nreinsurance | \t $6,891 | \t $6,530 | \t $3,133 | \t $1,873 | \t $1,032 | \t $72 | \t $(365) | \t $(208) | \t $(74) | \t $367 |  |

The	table	above	shows	the	cumulative	deficiency	(redundancy)	of	the	Company's	reserves,	net	of	reinsurance,	as	now	estimated	with	the benefit	of	additional	information.	Those	amounts	are	comprised	of	changes	in	estimates	of	gross	losses	and	changes	in	estimates	of	related reinsurance	recoveries.

The	table	below,	for	the	periods	presented,	reconciles	the	net	reserves	to	the	gross	reserves,	as	initially	estimated	and	recorded,	and	as currently	estimated	and	recorded,	and	computes	the	cumulative	deficiency	(redundancy)	of	the	Company's	reserves	before	reinsurance.

# Loss	And	Loss	Adjustment	Expense	Liability	Development	—	Gross

|  | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Net\treserve,\tas\tinitially\nestimated | $13,141 | $16,218 | $16,191 | $16,863 | $17,604 | $18,231 | $18,347 | $18,210 | $17,948 | $18,517 |
| Reinsurance\tand\tother |  |  |  |  |  |  |  |  |  |  |
| recoverables,\tas\tinitially |  |  |  |  |  |  |  |  |  |  |
| estimated | 3,950 | 5,497 | 5,138 | 5,403 | 4,387 | 3,922 | 3,586 | 3,441 | 3,077 | 3,033 |
| Gross\treserve,\tas\tinitially\nestimated | $17,091 | $21,715 | $21,329 | $22,266 | $21,991 | $22,153 | $21,933 | $21,651 | $21,025 | $21,550 |
| Net\tre-estimated\treserve | $19,671 | $19,351 | $18,064 | $17,895 | $17,676 | $17,866 | $18,139 | $18,136 | $18,315 |  |
| Re-estimated\tand\tother |  |  |  |  |  |  |  |  |  |  |
| reinsurance |  |  |  |  |  |  |  |  |  |  |
| recoverables | 5,693 | 5,592 | 5,469 | 5,792 | 4,193 | 3,910 | 3,585 | 3,064 | 2,799 |  |
| Gross\tre-estimated\nreserve | $25,364 | $24,943 | $23,533 | $23,687 | $21,869 | $21,776 | $21,724 | $21,200 | $21,114 |  |
| Gross\tdeficiency\n(redundancy) | $8,273 | $3,228 | $2,204 | $1,421 | $(122) | $(377) | $(209) | $(451) | $89 |  |

The	following	table	is	derived	from	the	Loss	Development	table	and	summarizes	the	effect	of	reserve	re-estimates,	net	of	reinsurance,	on calendar	year	operations	for	the	ten-year	period	ended	December	31,	2011.	The	total	of	each	column	details	the	amount	of	reserve	re- estimates	made	in	the	indicated	calendar	year	and	shows	the	accident	years	to	which	the	re-estimates	are	applicable.	The	amounts	in	the total	accident	year	column	on	the	far	right	represent	the	cumulative	reserve	re-estimates	during	the	ten	year	period	ended	December	31, 2011	for	the	indicated	accident	year(s).

# Effect	of	Net	Reserve	Re-estimates	on	Calendar	Year	Operations

|  | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| By\tAccident\tyear |  |  |  |  |  |  |  |  |  |  |  |
| 2001\t&amp;\tPrior | $293 | $3,023 | $592 | $657 | $502 | $759 | $206 | $300 | $260 | $299 | $6,891 |
| 2002 | — | (199) | (56) | 180 | 36 | (5) | 2 | (12) | (13) | (1) | (68) |
| 2003 | — | — | (122) | (237) | (31) | (126) | (21) | (6) | (20) | (10) | (573) |
| 2004 | — | — | — | (352) | (108) | (226) | (83) | (56) | (20) | (1) | (846) |
| 2005 | — | — | — | — | (103) | (214) | (133) | (47) | (91) | (5) | (593) |
| 2006 | — | — | — | — | — | (140) | (148) | (213) | (118) | (45) | (664) |
| 2007 | — | — | — | — | — | — | (49) | (113) | (156) | (71) | (389) |
| 2008 | — | — | — | — | — | — | — | (39) | 1 | (31) | (69) |
| 2009 | — | — | — | — | — | — | — | — | (39) | (13) | (52) |
| 2010 | — | — | — | — | — | — | — | — | — | 245 | 245 |
| Total | $293 | $2,824 | $414 | $248 | $296 | $48 | $(226) | $(186) | $(196) | $367 | $3,882 |

During	the	2007	calendar	year,	the	Company	refined	its	processes	for	allocating	incurred	but	not	reported	("IBNR")	reserves	by	accident year,	resulting	in	a	reclassification	of	$347	of	IBNR	reserves	from	the	2003	to	2006	accident	years	to	the	2002	and	prior	accident	years. This	reclassification	of	reserves	by	accident	year	had	no	effect	on	total	recorded	reserves	within	any	segment	or	on	total	recorded	reserves for	any	line	of	business	within	a	segment.

# Reserve	changes	for	accident	years	2001	&	Prior

The	largest	impacts	of	net	reserve	re-estimates	are	shown	in	the	"2001	&	Prior"	accident	years.	The	reserve	deterioration	is	driven,	in	part, by	deterioration	of	reserves	for	asbestos,	environmental,	assumed	casualty	reinsurance,	workers'	compensation,	and	general	liability claims.	Numerous	actuarial	assumptions	on	assumed	casualty	reinsurance	turned	out	to	be	low,	including	loss	cost	trends,	particularly	on excess	of	loss	business,	and	the	impact	of	deteriorating	terms	and	conditions.

The	reserve	re-estimates	in	calendar	year	2003	include	an	increase	in	reserves	of	$2.6	billion	related	to	reserve	strengthening	based	on	the Company's	evaluation	of	its	asbestos	reserves.	The	reserve	evaluation	that	led	to	the	strengthening	in	calendar	year	2003	confirmed	the Company's	view	of	the	existence	of	a	substantial	long-term	deterioration	in	the	asbestos	litigation	environment.	The	reserve	re-estimates in	calendar	years	2004	through	2006	were	largely	attributable	to	reductions	in	the	reinsurance	recoverable	asset	associated	with	older, long-term	casualty	liabilities,	and	unexpected	development	on	mature	claims	in	both	general	liability	and	workers'	compensation.

The	reserve	re-estimates	during	calendar	year	2008	are	 largely	driven	by	 increases	 in	asbestos,	environmental	and	general	 liability reserves.	The	reserve	re-estimates	in	calendar	years	2009,	2010	and	2011	are	largely	due	to	increases	in	asbestos	and	environmental reserves,	resulting	from	 the	Company's	annual	evaluations	of	 these	 liabilities.	These	reserve	evaluations	reflect	deterioration	 in	 the litigation	environment	surrounding	asbestos	and	environmental	liabilities	during	this	period.

# Reserve	changes	for	accident	year	2002

Accident	 year	 2002	 is	 reasonably	 close	 to	 original	 estimates.	 However,	 it	 shows	 swings	 by	 calendar	 period,	 with	 some	 favorable development	prior	 to	calendar	year	2005,	 largely	offset	by	unfavorable	development	 in	calendar	years	2005	 through	2008.	Reserve releases	during	calendar	years	2003	and	2004	come	largely	from	short-tail	lines	of	business,	where	results	emerge	quickly	and	actual reported	losses	are	predictive	of	ultimate	losses.	Reserve	increases	during	calendar	year	2005	were	a	result	of	unfavorable	development	on accident	years	prior	to	2002	leading	the	Company	to	increase	its	estimate	of	unpaid	losses	for	the	2002	accident	year.

# Reserve	changes	for	accident	years	2003	through	2007

Even	after	considering	the	2007	calendar	year	reclassification	of	$347	IBNR	reserves	from	accident	years	2003	to	2006	to	accident	years 2002	and	prior,	accident	years	2003	through	2007	show	favorable	development	in	calendar	years	2004	through	2011.	A	portion	of	the release	comes	from	short-tail	lines	of	business,	where	results	emerge	quickly.	During	calendar	year	2005	and	2006,	favorable	re-estimates occurred	for	both	loss	and	allocated	loss	adjustment	expenses.	In	addition,	catastrophe	reserves	related	to	the	2004	and	2005	hurricanes developed	favorably	in	2006.	During	calendar	years	2005	through	2008,	the	Company	recognized	favorable	re-estimates	of	both	loss	and allocated	loss	adjustment	expenses	on	workers'	compensation	claims,	driven,	in	part,	by	state	regulatory	reforms	in	California	and	Florida, underwriting	actions,	and	expense	reduction	initiatives	that	had	a	greater	impact	in	controlling	costs	than	originally	estimated.	In	2007,	the Company	released	reserves	for	package	business	claims	as	reported	losses	emerged	favorably	to	previous	expectations.	In	2007	through 2009,	the	Company	released	reserves	for	general	liability	claims	due	to	the	favorable	emergence	of	losses	for	high	hazard	and	umbrella general	liability	claims.	Reserves	for	professional	liability	claims	were	released	in	2008	and	2009	related	to	the	2003	through	2007 accident	years	due	to	a	lower	estimate	of	claim	severity	on	both	directors'	and	officers'	insurance	claims	and	errors	and	omissions insurance	claims.	Reserves	of	auto	liability	claims,	within	Consumer	Markets,	were	released	in	2008	due	largely	to	an	improvement	in emerged	claim	severity	for	the	2005	to	2007	accident	years.

Accident	years	2008	through	2009	remain	reasonably	close	to	original	estimates.	Modest	favorable	reserve	re-estimates	during	calendar periods	2009	through	2011	are	primarily	related	to	liability	lines	of	business.

Unfavorable	reserve	re-estimates	in	calendar	year	2011	are	largely	driven	by	workers'	compensation.	Loss	cost	trends	were	higher	than initially	expected	as	an	increase	in	frequency	outpaced	a	moderation	of	severity	trends.

# Estimated	Gross	Profits	Used	in	the	Valuation	and	Amortization	of	Assets	and	Liabilities	Associated	with	Variable	Annuity	and	Other

# Universal	Life-Type	Contracts

Estimated	gross	profits	("EGPs")	are	used	in	the	amortization	of:	the	DAC	asset,	which	includes	the	present	value	of	future	profits;	sales inducement	assets	("SIA");	and	unearned	revenue	reserves	("URR").	See	Note	7	of	the	Notes	to	Consolidated	Financial	Statements	for additional	information	on	DAC.	See	Note	10	of	the	Notes	to	Consolidated	Financial	Statements	for	additional	information	on	SIA. Portions	of	EGPs	are	also	used	in	the	valuation	of	reserves	for	death	and	other	insurance	benefit	features	on	variable	annuity	and	universal life-type	contracts.	See	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	for	additional	information	on	death	and	other	insurance benefit	reserves.

The	most	significant	EGP	based	balances	as	of	December	31,	2011	and	2010	are	as	follows:

|  | Individual	Annuity | Individual	Annuity | Individual	Life | Individual	Life | Retirement	Plans | Retirement	Plans | Life	Other	Operations | Life	Other	Operations |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| DAC | $2,815 | $3,251 | $2,755 | $2,633 | $813 | $820 | $1,256 | $1,652 |
| SIA | $291 | $329 | $47 | $45 | $22 | $23 | $54 | $41 |
| URR | $90 | $99 | $1,570 | $1,367 | $—\t $— | $—\t $— | $39 | $59 |
| Death\tand\tOther |  |  |  |  |  |  |  |  |
| Insurance\tBenefit |  |  |  |  |  |  |  |  |
| Reserves | $1,103 | $1,052 | $228 | $113 | $1 | $1 | $975 | $696 |

For	most	contracts,	the	Company	estimates	gross	profits	over	20	years	as	EGPs	emerging	subsequent	to	that	timeframe	are	immaterial. Products	sold	in	a	particular	year	are	aggregated	into	cohorts.	Future	gross	profits	for	each	cohort	are	projected	over	the	estimated	lives	of the	 underlying	 contracts,	 based	 on	 future	 account	 value	 projections	 for	 variable	 annuity	 and	 variable	 universal	 life	 products.	 The projection	of	future	account	values	requires	the	use	of	certain	assumptions	including:	separate	account	returns;	separate	account	fund	mix; fees	assessed	against	the	contract	holder's	account	balance;	surrender	and	lapse	rates;	interest	margin;	mortality;	and	the	extent	and duration	of	hedging	activities	and	hedging	costs.	Changes	in	these	assumptions	and,	in	addition,	changes	to	other	policyholder	behavior assumptions	such	as	resets,	partial	surrenders,	reaction	to	price	increases,	and	asset	allocations	causes	EGPs	to	fluctuate	which	impacts earnings.

The	Company	determines	EGPs	from	a	single	deterministic	reversion	to	mean	("RTM")	separate	account	return	projection	which	is	an estimation	technique	commonly	used	by	insurance	entities	to	project	future	separate	account	returns.	Through	this	estimation	technique, the	Company's	DAC	model	is	adjusted	to	reflect	actual	account	values	at	the	end	of	each	quarter.	Through	consideration	of	recent	market returns,	the	Company	will	unlock,	or	adjust,	projected	returns	over	a	future	period	so	that	the	account	value	returns	to	the	long-term expected	rate	of	return,	providing	that	those	projected	returns	do	not	exceed	certain	caps	or	floors.	This	Unlock	for	future	separate account	returns	is	determined	each	quarter.	Under	RTM,	the	expected	long	term	weighted	average	rate	of	return	is	8.3%	and	5.9%	for	U.S. and	Japan,	respectively.

In	the	third	quarter	of	each	year,	the	Company	completes	a	comprehensive	non-market	related	policyholder	behavior	assumption	study and	incorporates	the	results	of	those	studies	into	its	projection	of	future	gross	profits.	Additionally,	throughout	the	year,	the	Company evaluates	 various	 aspects	 of	 policyholder	 behavior	 and	 periodically	 revises	 its	 policyholder	 assumptions	 as	 credible	 emerging	 data indicates	that	changes	are	warranted.	Upon	completion	of	the	assumption	study	or	evaluation	of	credible	new	information,	the	Company will	revise	its	assumptions	to	reflect	its	current	best	estimate.	These	assumption	revisions	will	change	the	projected	account	values	and	the related	EGPs	in	the	DAC,	SIA	and	URR	amortization	models,	as	well	as	the	death	and	other	insurance	benefit	reserving	model.

All	assumption	changes	that	affect	the	estimate	of	future	EGPs	including	the	update	of	current	account	values,	the	use	of	the	RTM estimation	technique	and	policyholder	behavior	assumptions	are	considered	an	Unlock	in	the	period	of	revision.	An	Unlock	adjusts	DAC, SIA,	URR	and	death	and	other	insurance	benefit	reserve	balances	in	the	Consolidated	Balance	Sheets	with	an	offsetting	benefit	or	charge in	the	Consolidated	Statements	of	Operations	in	the	period	of	the	revision.	An	Unlock	that	results	in	an	after-tax	benefit	generally	occurs as	a	result	of	actual	experience	or	future	expectations	of	product	profitability	being	favorable	compared	to	previous	estimates.	An	Unlock that	results	in	an	after-tax	charge	generally	occurs	as	a	result	of	actual	experience	or	future	expectations	of	product	profitability	being unfavorable	compared	to	previous	estimates.

EGPs	are	also	used	to	determine	the	expected	excess	benefits	and	assessments	included	in	the	measurement	of	death	and	other	insurance benefit	reserves.	These	excess	benefits	and	assessments	are	derived	from	a	range	of	stochastic	scenarios	that	have	been	calibrated	to	the Company's	RTM	separate	account	returns.	The	determination	of	death	and	other	insurance	benefit	reserves	is	also	impacted	by	discount rates,	lapses,	volatilities,	mortality	assumptions	and	benefit	utilization,	including	assumptions	around	annuitization	rates.

An	Unlock	revises	EGPs,	on	a	quarterly	basis,	to	reflect	market	updates	of	policyholder	account	value	and	the	Company's	current	best estimate	 assumptions.	 Modifications	 to	 the	 Company's	 hedging	 programs	 may	 impact	 EGPs,	 and	 correspondingly	 impact	 DAC recoverability.	After	each	quarterly	Unlock,	the	Company	also	tests	the	aggregate	recoverability	of	DAC	by	comparing	the	DAC	balance to	the	present	value	of	future	EGPs.	The	margin	between	the	DAC	balance	and	the	present	value	of	future	EGPs	for	U.S.	and	Japan individual	variable	annuities	was	23%	and	40%	as	of	December	31,	2011,	respectively.	If	the	margin	between	the	DAC	asset	and	the present	value	of	future	EGPs	is	exhausted,	then	further	reductions	in	EGPs	would	cause	portions	of	DAC	to	be	unrecoverable	and	the DAC	asset	would	be	written	down	to	equal	future	EGPs.

# Unlocks

The	after-tax	(charge)	benefit	to	net	income	(loss)	by	asset	and	liability	as	a	result	of	the	Unlocks	for	2011,	2010	and	2009,	were:

| Segment |  |  | Insurance |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| After-tax\t(Charge)\tBenefit | DAC | URR | Benefit\tReserves | SIA | Total |
| Individual\tAnnuity | $(162) | $6 | $— | $(16) | $(172) |
| Individual\tLife | (50) | 21 | (40) | — | (69) |
| Retirement\tPlans | (44) | — | — | (1) | (45) |
| Life\tOther\tOperations | (74) | — | (173) | 3 | (244) |
| Total | $(330) | $27 | $(213) | $(14) | $(530) |

The	Unlock	charge	for	the	year	ended	December	31,	2011	was	driven	primarily	by	assumption	changes	which	reduced	expected	future gross	profits	including	additional	costs	associated	with	implementing	the	Japan	hedging	strategy	and	the	U.S.	variable	annuity	macro hedge	program,	as	well	as	actual	separate	account	returns	below	our	aggregated	estimated	return.

|  |  |  | Death	and	Other |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment |  |  | Insurance\tBenefit |  |  |
| After-tax\t(charge)\tbenefit | DAC | URR | Reserves | SIA | Total |
| Individual\tAnnuity | $104 | $1 | $39 | $(1) | $143 |
| Individual\tLife | 23 | 5 | 1 | (1) | 28 |
| Retirement\tPlans | 18 | — | — | — | 18 |
| Life\tOther\tOperations | (62) | 6 | (23) | 1 | (78) |
| Total | $83 | $12 | $17 | $(1) | $111 |

The	Unlock	benefit	for	the	year	ended	December	31,	2010	was	driven	primarily	by	actual	separate	account	returns	above	our	aggregated estimated	return.	Also	included	in	the	benefit	are	assumption	changes	related	to	benefits	from	withdrawals	and	lapses,	offset	by	hedging, annuitization	estimates	on	Japan	products,	and	long-term	expected	rate	of	return	updates.

|  |  |  | Death	and |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Segment |  |  | Other\tInsurance |  |  |
| After-tax\t(charge)\tbenefit | DAC | URR | Benefit\tReserves | SIA | Total\t[1] |
| Individual\tAnnuity | $(429) | $17 | $(158) | $(36) | $(606) |
| Individual\tLife | (101) | 54 | (4) | — | (51) |
| Retirement\tPlans | (55) | — | — | (1) | (56) |
| Life\tOther\tOperations | (104) | 6 | (210) | (10) | (318) |
| Corporate | (3) | — | — | — | (3) |
| Total | $(692) | $77 | $(372) | $(47) | $(1,034) |

[1] Includes	$(49)	related	to	DAC	recoverability	impairment	associated	with	the	decision	to	suspend	sales	in	the	U.K	variable	annuity business.

The	Unlock	charge	for	the	year	ended	December	31,	2009	was	driven	primarily	by	actual	separate	account	returns	significantly	below	our aggregated	estimated	return	for	the	first	quarter	of	2009,	partially	offset	by	actual	returns	being	greater	than	our	aggregated	estimated return	for	the	period	from	April	1,	2009	to	December	31,	2009.

The	Company	has	a	monitoring	process	overseen	by	a	committee	of	investment	and	accounting	professionals	that	identifies	investments that	are	subject	to	an	enhanced	evaluation	on	a	quarterly	basis	to	determine	if	an	other-than-temporary	impairment	("impairment")	is present	for	AFS	securities	or	a	valuation	allowance	is	required	for	mortgage	loans.	This	evaluation	is	a	quantitative	and	qualitative process,	which	is	subject	to	risks	and	uncertainties.	For	further	discussion	of	the	accounting	policies,	see	the	Significant	Investment Accounting	Policies	Section	in	Note	5	of	the	Notes	to	Consolidated	Financial	Statements.	For	a	discussion	of	impairments	recorded,	see the	Other-Than-Temporary	Impairments	within	the	Investment	Portfolio	Risks	and	Risk	Management	section	of	the	MD&A.

Fair	values	for	GMWB	and	GMAB	contracts	are	calculated	using	the	income	approach	based	upon	internally	developed	models	because active,	observable	markets	do	not	exist	for	those	items.	The	fair	value	of	the	Company's	guaranteed	benefit	liabilities,	classified	as embedded	 derivatives,	 and	 the	 related	 reinsurance	 and	 customized	 freestanding	 derivatives	 is	 calculated	 as	 an	 aggregation	 of	 the following	 components:	 Best	 Estimate	 Claims	 Payments;	 Credit	 Standing	 Adjustment;	 and	 Margins.	 The	 resulting	 aggregation	 is reconciled	or	calibrated,	if	necessary,	to	market	information	that	is,	or	may	be,	available	to	the	Company,	but	may	not	be	observable	by other	 market	 participants,	 including	 reinsurance	 discussions	 and	 transactions.	 The	 Company	 believes	 the	 aggregation	 of	 these components,	as	necessary	and	as	reconciled	or	calibrated	to	the	market	information	available	to	the	Company,	results	in	an	amount	that	the Company	would	be	required	to	transfer,	or	receive,	for	an	asset,	to	or	from	market	participants	in	an	active	liquid	market,	if	one	existed, for	 those	market	participants	 to	assume	 the	risks	associated	with	 the	guaranteed	minimum	benefits	and	 the	related	reinsurance	and customized	derivatives.	The	fair	value	is	likely	to	materially	diverge	from	the	ultimate	settlement	of	the	liability	as	the	Company	believes settlement	will	be	based	on	our	best	estimate	assumptions	rather	than	those	best	estimate	assumptions	plus	risk	margins.	In	the	absence	of any	transfer	of	the	guaranteed	benefit	liability	to	a	third	party,	the	release	of	risk	margins	is	likely	to	be	reflected	as	realized	gains	in	future periods'	 net	 income.	 For	 further	 discussion	 on	 the	 impact	 of	 fair	 value	 changes	 from	 living	 benefits	 see	 Note	 4	 of	 the	 Notes	 to Consolidated	Financial	Statements	and	for	a	discussion	on	the	sensitivities	of	certain	living	benefits	due	to	capital	market	factors	see Variable	Product	Guarantee	Risks	and	Risk	Management.

Goodwill	balances	are	reviewed	for	impairment	at	least	annually	or	more	frequently	if	events	occur	or	circumstances	change	that	would indicate	that	a	triggering	event	for	a	potential	impairment	has	occurred.	During	the	fourth	quarter	of	2011,	the	Company	changed	the	date of	its	annual	impairment	test	for	all	reporting	units	to	October	31st	from	January	1st	for	Wealth	Management	reporting	units,	June	30th	for Federal	Trust	Corporation	within	Corporate,	and	October	1st	for	Property	&	Casualty	Commercial	and	Consumer	Markets.	As	a	result,	all reporting	units	performed	an	impairment	test	on	October	31,	2011	in	addition	to	the	annual	impairment	tests	performed	on	January	1st	or October	1st	as	applicable.	The	change	was	made	to	be	consistent	across	all	reporting	units	and	to	more	closely	align	the	impairment	testing date	with	the	long-range	planning	and	forecasting	process.	The	Company	has	determined	that	this	change	in	accounting	principle	is preferable	under	the	circumstances	and	does	not	result	in	any	delay,	acceleration	or	avoidance	of	impairment.	As	it	was	impracticable	to objectively	determine	projected	cash	flows	and	related	valuation	estimates	as	of	each	October	31	for	periods	prior	to	October	31,	2011, without	applying	information	that	has	been	learned	since	those	periods,	the	Company	has	prospectively	applied	the	change	in	the	annual goodwill	impairment	testing	date	from	October	31,	2011.

The	goodwill	impairment	test	follows	a	two-step	process.	In	the	first	step,	the	fair	value	of	a	reporting	unit	is	compared	to	its	carrying value.	If	the	carrying	value	of	a	reporting	unit	exceeds	its	fair	value,	the	second	step	of	the	impairment	test	is	performed	for	purposes	of measuring	the	impairment.	In	the	second	step,	the	fair	value	of	the	reporting	unit	is	allocated	to	all	of	the	assets	and	liabilities	of	the reporting	unit	 to	determine	an	 implied	goodwill	value.	If	 the	carrying	amount	of	 the	reporting	unit's	goodwill	exceeds	 the	 implied goodwill	value,	an	impairment	loss	is	recognized	in	an	amount	equal	to	that	excess.

Management's	determination	of	the	fair	value	of	each	reporting	unit	incorporates	multiple	inputs	into	discounted	cash	flow	calculations including	assumptions	that	market	participants	would	make	in	valuing	the	reporting	unit.	Assumptions	include	levels	of	economic	capital, future	business	growth,	earnings	projections,	and	assets	under	management	for	certain	Wealth	Management	reporting	units	and	 the weighted	average	cost	of	capital	used	for	purposes	of	discounting.	In	the	case	of	one	business	unit,	a	market	comparison	approach	is	used to	determine	fair	value.	Decreases	in	the	amount	of	economic	capital	allocated	to	a	reporting	unit,	decreases	in	business	growth,	decreases in	earnings	projections	and	increases	in	the	weighted	average	cost	of	capital	will	all	cause	a	reporting	unit's	fair	value	to	decrease.

A	reporting	unit	is	defined	as	an	operating	segment	or	one	level	below	an	operating	segment.	Most	of	the	Company's	reporting	units,	for which	goodwill	has	been	allocated,	are	equivalent	to	the	Company's	operating	segments	as	there	is	no	discrete	financial	information available	for	the	separate	components	of	the	segment	or	all	of	the	components	of	the	segment	have	similar	economic	characteristics.	In 2011	and	2010,	The	Hartford	changed	its	reporting	segments	with	no	change	to	reporting	units.	The	group	disability	and	group	life components	of	Group	Benefits	have	been	aggregated	into	one	reporting	unit;	the	homeowners	and	automobile	components	of	Consumer Markets	have	been	aggregated	into	one	reporting	unit;	the	variable	life,	universal	life	and	term	life	components	of	Individual	Life	have been	aggregated	into	one	reporting	unit;	the	401(k),	457	and	403(b)	components	of	Retirement	Plans	have	been	aggregated	into	one reporting	unit;	the	retail	mutual	funds	component	of	Mutual	Funds	has	been	aggregated	into	one	reporting	unit.	In	circumstances	where the	 components	 of	 an	 operating	 segment	 constitute	 a	 business	 for	 which	 discrete	 financial	 information	 is	 available	 and	 segment management	regularly	reviews	the	operating	results	of	that	component	such	as	Hartford	Financial	Products,	the	Company	has	classified those	components	as	reporting	units.	Goodwill	associated	with	the	June	30,	2000	buyback	of	Hartford	Life,	Inc.	was	allocated	to	each	of Hartford	Life's	reporting	units	based	on	the	reporting	units'	fair	value	of	in-force	business	at	the	time	of	the	buyback.	Although	this goodwill	was	allocated	to	each	reporting	unit,	it	is	held	in	Corporate	for	segment	reporting.

As	of	December	31,	2011,	goodwill	has	been	allocated	to	the	following	reporting	units:

|  | Segment | Goodwill	in |  |
| :--- | :--- | :--- | :--- |
|  | Goodwill | Corporate | Total |
| Group\tBenefits | $— | $138 | $138 |
| Consumer\tMarkets | 119 | — | 119 |
| Individual\tLife | 224 | 118 | 342 |
| Retirement\tPlans | 87 | 69 | 156 |
| Mutual\tFunds | 159 | 92 | 251 |
| Total | $589 | $417 | $1,006 |

As	of	December	31,	2010,	goodwill	has	been	allocated	to	the	following	reporting	units:

|  | Segment | Goodwill	in |  |
| :--- | :--- | :--- | :--- |
|  | Goodwill | Corporate | Total |
| Hartford\tFinancial\tProducts\twithin\tProperty\t&amp;\tCasualty\tCommercial | $30 | $— | $30 |
| Group\tBenefits | — | 138 | 138 |
| Consumer\tMarkets | 119 | — | 119 |
| Individual\tLife | 224 | 118 | 342 |
| Retirement\tPlans | 87 | 69 | 156 |
| Mutual\tFunds | 159 | 92 | 251 |
| Federal\tTrust\tCorporation\twithin\tCorporate | — | 15 | 15 |
| Total | $619 | $432 | $1,051 |

During	the	second	quarter	of	2011,	the	Company	wrote	off	the	remaining	$15	of	goodwill	associated	with	the	Federal	Trust	Corporation ("FTC")	reporting	unit	within	Corporate	due	to	the	announced	divestiture	of	FTC.	The	write-off	of	the	FTC	reporting	unit	goodwill	was recorded	as	a	loss	on	disposal	within	discontinued	operations.

The	 Company	 completed	 its	 annual	 goodwill	 assessment	 for	 the	 reporting	 units	 within	 the	 Property	 &	 Casualty	 Commercial	 and Consumer	 Markets	 operating	 segments	 on	 October	 1,	 2011.	 The	 Consumer	 Markets	 reporting	 unit	 completed	 its	 annual	 goodwill assessment	on	October	1,	2011	and	again	on	October	31,	2011	which	resulted	in	no	impairment	of	goodwill.	In	both	tests,	the	reporting unit	passed	the	first	step	of	their	annual	impairment	tests	with	a	significant	margin.	The	annual	goodwill	assessment	for	the	Property	& Casualty	Commercial	reporting	unit	that	was	performed	on	October	1,	2011	resulted	in	a	write-down	of	goodwill	of	$30,	pre-tax	leaving no	remaining	goodwill.	The	results	of	the	discounted	cash	flow	calculations	indicated	that	the	fair	value	of	the	reporting	unit	was	less	than the	carrying	value;	this	was	due	primarily	to	a	decrease	in	future	expected	underwriting	cash	flows.	The	decrease	in	future	expected underwriting	cash	flows	is	driven	by	an	expected	reduction	in	written	premium	in	the	short	term	as	the	Company	maintains	pricing discipline	in	a	downward	market	cycle,	while	retaining	long	term	capabilities	for	future	opportunities.

The	Company	completed	its	annual	goodwill	assessment	for	the	individual	reporting	units	within	the	Wealth	Management	operating segment	and	Corporate,	except	for	the	FTC	reporting	unit,	as	noted	above,	on	January	1,	2011	and	October	31,	2011,	which	resulted	in	no impairment	of	goodwill.	In	both	tests,	the	reporting	units	passed	the	first	step	of	their	annual	impairment	tests	with	a	significant	margin with	the	exception	of	the	Individual	Life	reporting	unit	at	the	January	1,	2011	test.	The	Individual	Life	reporting	unit	had	a	margin	of	less than	10%	between	fair	value	and	book	value	on	January	1,	2011.	As	of	the	October	31,	2011	impairment	test,	the	Individual	Life reporting	unit	had	a	fair	value	in	excess	of	book	value	of	approximately	15%,	a	modest	improvement	from	the	January	1,	2011	results	due to	improving	cost	of	capital.

The	fair	value	of	the	Individual	Life	reporting	unit	is	based	on	discounted	cash	flows	using	earnings	projections	on	in	force	business	and future	business	growth.	There	could	be	a	positive	or	negative	impact	on	the	result	of	step	one	in	future	periods	if	assumptions	change about	the	level	of	economic	capital,	future	business	growth,	earnings	projections	or	the	weighted	average	cost	of	capital.

See	Note	8	of	the	Notes	to	Consolidated	Financial	Statements	for	information	on	the	results	of	goodwill	impairment	tests	performed	in 2010	and	2009.

The	fair	value	of	AFS	securities,	fixed	maturities,	at	fair	value	using	the	fair	value	option	("FVO"),	equity	securities,	trading,	and	short- term	investments	in	an	active	and	orderly	market	(i.e.,	not	distressed	or	forced	liquidation)	is	determined	by	management	after	considering one	of	three	primary	sources	of	information:	third-party	pricing	services,	independent	broker	quotations	or	pricing	matrices.	Security pricing	is	applied	using	a	"waterfall"	approach	whereby	prices	are	first	sought	from	third-party	pricing	services,	the	remaining	unpriced securities	are	submitted	to	independent	brokers	for	prices,	or	lastly,	securities	are	priced	using	a	pricing	matrix.	Typical	inputs	used	by these	pricing	methods	include,	but	are	not	limited	to,	reported	trades,	benchmark	yields,	issuer	spreads,	bids,	offers,	and/or	estimated	cash flows,	prepayments	speeds	and	default	rates.	Based	on	 the	 typical	 trading	volumes	and	 the	 lack	of	quoted	market	prices	for	fixed maturities,	third-party	pricing	services	will	normally	derive	the	security	prices	through	recent	reported	trades	for	identical	or	similar securities	making	adjustments	through	the	reporting	date	based	upon	available	market	observable	information	as	outlined	above.	If	there are	no	recent	reported	trades,	the	third	party	pricing	services	and	brokers	may	use	matrix	or	model	processes	to	develop	a	security	price where	future	cash	flow	expectations	are	developed	based	upon	collateral	performance	and	discounted	at	an	estimated	market	rate.	For further	discussion,	see	the	Available-for-Sale,	Fixed	Maturities,	FVO,	Equity	Securities,	Trading,	and	Short-Term	Investments	Section	in Note	4	of	the	Notes	to	Consolidated	Financial	Statements.

The	Company	has	analyzed	the	third-party	pricing	services	valuation	methodologies	and	related	inputs,	and	has	also	evaluated	the	various types	of	securities	in	its	investment	portfolio	to	determine	an	appropriate	fair	value	hierarchy	level	based	upon	trading	activity	and	the observability	of	market	inputs.	For	further	discussion	of	fair	value	measurement,	see	Note	4	of	the	Notes	to	Consolidated	Financial Statements.

# Valuation	of	Derivative	Instruments,	excluding	embedded	derivatives	within	liability	contracts	and	reinsurance	related	derivatives

Derivative	instruments	are	reported	on	the	Consolidated	Balance	Sheets	at	fair	value	and	are	reported	in	Other	Investments	and	Other Liabilities.	The	fair	value	of	derivative	instruments	is	determined	using	pricing	valuation	models,	which	utilize	market	data	inputs	or independent	broker	quotations.	Excluding	embedded	and	reinsurance	related	derivatives,	as	of	December	31,	2011	and	2010,	98%	and 97%,	respectively,	of	derivatives	based	upon	notional	values,	were	priced	by	valuation	models,	which	utilize	independent	market	data. The	 remaining	 derivatives	 were	 priced	 by	 broker	 quotations.	 The	 derivatives	 are	 valued	 using	 mid-market	 level	 inputs	 that	 are predominantly	observable	in	the	market	with	the	exception	of	the	customized	swap	contracts	that	hedge	guaranteed	minimum	withdrawal benefits	("GMWB")	liabilities.	Inputs	used	to	value	derivatives	include,	but	are	not	limited	to,	swap	interest	rates,	foreign	currency forward	and	spot	rates,	credit	spreads	and	correlations,	interest	and	equity	volatility	and	equity	index	levels.	For	further	discussion,	see	the Derivative	Instruments,	including	embedded	derivatives	within	the	investments	section	in	Note	4	of	the	Notes	to	Consolidated	Financial Statements.

The	Company	maintains	a	U.S.	qualified	defined	benefit	pension	plan	(the	"Plan")	that	covers	substantially	all	employees,	as	well	as unfunded	excess	plans	to	provide	benefits	in	excess	of	amounts	permitted	to	be	paid	to	participants	of	the	Plan	under	the	provisions	of	the Internal	Revenue	Code.	The	Company	has	also	entered	into	individual	retirement	agreements	with	certain	retired	directors	providing	for unfunded	supplemental	pension	benefits.	In	addition,	the	Company	provides	certain	health	care	and	life	insurance	benefits	for	eligible retired	 employees.	 The	 Company	 maintains	 international	 plans	 which	 represent	 an	 immaterial	 percentage	 of	 total	 pension	 assets, liabilities	and	expense	and,	for	reporting	purposes,	are	combined	with	domestic	plans.

Pursuant	to	accounting	principles	related	to	the	Company's	pension	and	other	postretirement	obligations	to	employees	under	its	various benefit	plans,	the	Company	is	required	to	make	a	significant	number	of	assumptions	in	order	to	calculate	the	related	liabilities	and expenses	each	period.	The	two	economic	assumptions	that	have	the	most	impact	on	pension	and	other	postretirement	expense	are	the discount	rate	and	the	expected	long-term	rate	of	return	on	plan	assets.	In	determining	the	discount	rate	assumption,	the	Company	utilizes	a discounted	cash	flow	analysis	of	the	Company's	pension	and	other	postretirement	obligations	and	currently	available	market	and	industry data.	The	yield	curve	utilized	in	the	cash	flow	analysis	is	comprised	of	bonds	rated	Aa	or	higher	with	maturities	primarily	between	zero and	thirty	years.	Based	on	all	available	information,	it	was	determined	that	4.75%	and	4.50%	were	the	appropriate	discount	rates	as	of December	31,	2011	to	calculate	the	Company's	pension	and	other	postretirement	obligations,	respectively.	Accordingly,	the	4.75%	and 4.50%	discount	rates	will	also	be	used	to	determine	the	Company's	2012	pension	and	other	postretirement	expense,	respectively.	At December	31,	2010,	the	discount	rate	was	5.50%	and	5.25%	for	pension	and	other	postretirement	expense,	respectively.

As	 of	 December	 31,	 2011,	 a	 25	 basis	 point	 increase/decrease in the	 discount rate	 would	 decrease/increase the	 pension	 and	 other postretirement	obligations	by	$157	and	$10,	respectively.

The	 Company	 determines	 the	 expected	 long-term	 rate	 of	 return	 assumption	 based	 on	 an	 analysis	 of	 the	 Plan	 portfolio's	 historical compound	rates	of	return	since	1979	(the	earliest	date	for	which	comparable	portfolio	data	is	available)	and	over	5	year	and	10	year periods.	The	Company	selected	these	periods,	as	well	as	shorter	durations,	to	assess	the	portfolio's	volatility,	duration	and	total	returns	as they	 relate	 to	 pension	 obligation	 characteristics,	 which	 are	 influenced	 by	 the	 Company's	 workforce	 demographics.	 In	 addition,	 the Company	also	applies	long-term	market	return	assumptions	to	an	investment	mix	that	generally	anticipates	60%	fixed	income	securities, 20%	equity	securities	and	20%	alternative	assets	to	derive	an	expected	long-term	rate	of	return.	Based	upon	these	analyses,	management maintained	the	long-term	rate	of	return	assumption	at	7.30%	as	of	December	31,	2011.	This	assumption	will	be	used	to	determine	the Company's	2012	expense.	The	long-term	rate	of	return	assumption	at	December	31,	2010,	that	was	used	to	determine	the	Company's 2010	expense,	was	7.30%.

Pension	expense	reflected	in	the	Company's	results	was	$213,	$186	and	$137	in	2011,	2010	and	2009,	respectively.	The	Company estimates	 its	 2012	 pension	 expense	 will	 be	 approximately	 $246,	 based	 on	 current	 assumptions.	 To	 illustrate	 the	 impact	 of	 these assumptions	on	annual	pension	expense	for	2012	and	going	forward,	a	25	basis	point	decrease	in	the	discount	rate	will	increase	pension expense	by	approximately	$18	and	a	25	basis	point	change	in	the	long-term	asset	return	assumption	will	increase/decrease	pension expense	by	approximately	$11.

The	Company	uses	a	five-year	averaging	method	to	determine	the	market-related	value	of	Plan	assets,	which	is	used	to	determine	the expected	return	component	of	pension	expense.	Under	this	methodology,	asset	gains/losses	that	result	from	returns	that	differ	from	the Company's	long-term	rate	of	return	assumption	are	recognized	in	the	market-related	value	of	assets	on	a	level	basis	over	a	five	year period.	The	difference	between	actual	asset	returns	for	the	plans	of	$613	and	$434	for	the	years	ended	December	31,	2011	and	2010, respectively,	as	compared	to	expected	returns	of	$298	and	$286	for	the	years	ended	December	31,	2011	and	2010,	respectively,	will	be fully	reflected	in	the	market-related	value	of	plan	assets	over	the	next	five	years	using	the	methodology	described	above.	The	level	of actuarial	net	loss	continues	to	exceed	the	allowable	amortization	corridor.	Based	on	the	4.75%	discount	rate	selected	as	of	December	31, 2011	and	taking	into	account	estimated	future	minimum	funding,	the	difference	between	actual	and	expected	performance	in	2011	will decrease	annual	pension	expense	in	future	years.	The	decrease	in	pension	expense	will	be	approximately	$13	in	2012	and	will	increase ratably	to	a	decrease	of	approximately	$95	in	2017.

# Valuation	Allowance	on	Deferred	Tax	Assets

Deferred	tax	assets	represent	the	tax	benefit	of	future	deductible	temporary	differences	and	operating	loss	and	tax	credit	carryforwards. Deferred	tax	assets	are	measured	using	the	enacted	tax	rates	expected	to	be	in	effect	when	such	benefits	are	realized	if	there	is	no	change in	tax	law.	Under	U.S.	GAAP,	we	test	the	value	of	deferred	tax	assets	for	impairment	on	a	quarterly	basis	at	the	entity	level	within	each tax	jurisdiction,	consistent	with	our	filed	tax	returns.	Deferred	tax	assets	are	reduced	by	a	valuation	allowance	if,	based	on	the	weight	of available	evidence,	it	is	more	likely	than	not	that	some	portion,	or	all,	of	the	deferred	tax	assets	will	not	be	realized.	The	determination	of the	valuation	allowance	for	our	deferred	tax	assets	requires	management	to	make	certain	judgments	and	assumptions.	In	evaluating	the ability	to	recover	deferred	tax	assets,	we	have	considered	all	available	evidence	as	of	December	31,	2011,	including	past	operating	results, the	existence	of	cumulative	losses	in	the	most	recent	years,	forecasted	earnings,	future	taxable	income,	and	prudent	and	feasible	tax planning	strategies.	In	the	event	we	determine	it	is	not	more	likely	than	not	that	we	will	be	able	to	realize	all	or	part	of	our	deferred	tax assets	in	the	future,	an	increase	to	the	valuation	allowance	would	be	charged	to	earnings	in	the	period	such	determination	is	made. Likewise,	if	it	is	later	determined	that	it	is	more	likely	than	not	that	those	deferred	tax	assets	would	be	realized,	the	previously	provided valuation	allowance	would	be	reversed.	Our	judgments	and	assumptions	are	subject	to	change	given	the	inherent	uncertainty	in	predicting future	performance	and	specific	industry	and	investment	market	conditions.

The	Company	has	recorded	a	deferred	tax	asset	valuation	allowance	that	is	adequate	to	reduce	the	total	deferred	tax	asset	to	an	amount that	will	be	more	likely	than	not	realized.	The	deferred	tax	asset	valuation	allowance	was	$95,	relating	mostly	to	foreign	net	operating losses,	as	of	December	31,	2011	and	was	$173	as	of	December	31,	2010.	In	assessing	the	need	for	a	valuation	allowance,	management considered	 future	 taxable	 temporary	 difference	 reversals,	 future	 taxable	 income	 exclusive	 of	 reversing	 temporary	 differences	 and carryforwards,	taxable	income	in	open	carry	back	years,	as	well	as	other	tax	planning	strategies.	These	tax	planning	strategies	include holding	a	portion	of	debt	securities	with	market	value	losses	until	recovery,	altering	the	level	of	tax	exempt	securities	held,	selling appreciated	securities	to	offset	capital	losses,	business	considerations	such	as	asset-liability	matching,	and	the	sales	of	certain	corporate assets.	Management	views	such	tax	planning	strategies	as	prudent	and	feasible,	and	would	implement	them,	if	necessary,	to	realize	the deferred	tax	asset.	Based	on	the	availability	of	additional	tax	planning	strategies	identified	in	the	second	quarter	of	2011,	the	Company released	$86,	or	100%	of	the	valuation	allowance	associated	with	investment	realized	capital	losses.	Future	economic	conditions	and	debt market	volatility,	including	increases	in	interest	rates,	can	adversely	impact	the	Company's	tax	planning	strategies	and	in	particular	the Company's	ability	to	utilize	tax	benefits	on	previously	recognized	realized	capital	losses.

Management	 evaluates	 each	 contingent	 matter	 separately.	 A	 loss	 is	 recorded	 if	 probable	 and	 reasonably	 estimable.	 Management establishes	reserves	for	these	contingencies	at	its	"best	estimate,"	or,	if	no	one	number	within	the	range	of	possible	losses	is	more probable	than	any	other,	the	Company	records	an	estimated	reserve	at	the	low	end	of	the	range	of	losses.

The	Company	has	a	quarterly	monitoring	process	involving	legal	and	accounting	professionals.	Legal	personnel	first	identify	outstanding corporate	litigation	and	regulatory	matters	posing	a	reasonable	possibility	of	loss.	These	matters	are	then	jointly	reviewed	by	accounting and	legal	personnel	to	evaluate	the	facts	and	changes	since	the	last	review	in	order	to	determine	if	a	provision	for	loss	should	be	recorded or	adjusted,	the	amount	that	should	be	recorded,	and	the	appropriate	disclosure.	The	outcomes	of	certain	contingencies	currently	being evaluated	by	the	Company,	which	relate	to	corporate	litigation	and	regulatory	matters,	are	inherently	difficult	to	predict,	and	the	reserves that	have	been	established	for	the	estimated	settlement	amounts	are	subject	to	significant	changes.	Management	expects	that	the	ultimate liability,	if	any,	with	respect	to	such	lawsuits,	after	consideration	of	provisions	made	for	estimated	losses,	will	not	be	material	to	the consolidated	financial	condition	of	the	Company.	In	view	of	the	uncertainties	regarding	the	outcome	of	these	matters,	as	well	as	the	tax- deductibility	of	payments,	it	is	possible	that	the	ultimate	cost	to	the	Company	of	these	matters	could	exceed	the	reserve	by	an	amount	that would	have	a	material	adverse	effect	on	the	Company's	results	of	operations	or	liquidity	in	a	particular	quarterly	or	annual	period.

# THE	HARTFORD'S	OPERATIONS	OVERVIEW

The	Hartford	 is	a	financial	holding	company	for	a	group	of	subsidiaries	 that	provide	property	and	casualty	and	 life	 insurance	and investment	products	to	both	individual	and	business	customers	in	the	United	States	and	continues	to	administer	business	previously	sold	in Japan	and	the	U.K.

The	 Company	 conducts	 business	 in	 four	 divisions,	 Commercial	 Markets,	 Consumer	 Markets,	 Wealth	 Management	 and	 Runoff Operations,	each	containing	reporting	segments.	The	Commercial	Markets	division	consists	of	the	reporting	segments	of	Property	& Casualty	Commercial	and	Group	Benefits.	The	Consumer	Markets	division	 is	also	 the	reporting	segment.	The	Wealth	Management division	consists	of	the	following	reporting	segments:	Individual	Annuity,	Individual	Life,	Retirement	Plans	and	Mutual	Funds.	The Runoff	division	consists	of	Life	Other	Operations	and	Property	&	Casualty	Other	Operations.	For	additional	discussion	regarding	The Hartford's	reporting	segments,	see	Note	3	of	the	Notes	to	Consolidated	Financial	Statements.

The	Company	derives	its	revenues	principally	from:	(a)	premiums	earned	for	insurance	coverages	provided	to	insureds;	(b)	fee	income, including	asset	management	fees,	on	separate	account	and	mutual	fund	assets	and	mortality	and	expense	fees,	as	well	as	cost	of	insurance charges;	(c)	net	investment	income;	(d)	fees	earned	for	services	provided	to	third	parties;	and	(e)	net	realized	capital	gains	and	losses. Premiums	charged	for	insurance	coverages	are	earned	principally	on	a	pro	rata	basis	over	the	terms	of	the	related	policies	in-force.	Asset management	fees	and	mortality	and	expense	fees	are	primarily	generated	from	separate	account	assets,	which	are	deposited	through	the sale	of	variable	annuity	and	variable	universal	life	products	and	from	mutual	funds.	Cost	of	insurance	charges	are	assessed	on	the	net amount	at	risk	for	investment-oriented	life	insurance	products.	Service	fees	principally	include	revenues	from	member	contact	center services	provided	through	the	AARP	Health	program.

Profitability	over	time	is	greatly	influenced	by	the	Company's	underwriting	discipline,	which	seeks	to	manage	exposure	to	loss	through favorable	risk	selection	and	diversification,	its	management	of	claims,	its	use	of	reinsurance,	the	size	of	its	in	force	block,	actual	mortality and	 morbidity	 experience,	 and	 its	 ability	 to	 manage	 its	 expense	 ratio	 which	 it	 accomplishes	 through	 economies	 of	 scale	 and	 its management	of	acquisition	costs	and	other	underwriting	expenses.

Pricing	adequacy	depends	on	a	number	of	factors,	including	the	ability	to	obtain	regulatory	approval	for	rate	changes,	proper	evaluation	of underwriting	risks,	the	ability	to	project	future	loss	cost	frequency	and	severity	based	on	historical	loss	experience	adjusted	for	known trends,	the	Company's	response	to	rate	actions	taken	by	competitors,	and	expectations	about	regulatory	and	legal	developments	and expense	levels.	The	Company	seeks	to	price	its	insurance	policies	such	that	insurance	premiums	and	future	net	investment	income	earned on	premiums	received	will	cover	underwriting	expenses	and	the	ultimate	cost	of	paying	claims	reported	on	the	policies	and	provide	for	a profit	margin.	For	many	of	its	insurance	products,	the	Company	is	required	to	obtain	approval	for	its	premium	rates	from	state	insurance departments.

The	financial	results	in	the	Company's	variable	annuity,	mutual	fund	and,	to	a	lesser	extent,	variable	universal	life	businesses,	depend largely	on	the	amount	of	the	contract	holder	account	value	or	assets	under	management	on	which	it	earns	fees	and	the	level	of	fees charged.	Changes	in	account	value	or	assets	under	management	are	driven	by	two	main	factors:	net	flows,	which	measure	the	success	of the	Company's	asset	gathering	and	retention	efforts,	and	the	market	return	of	the	funds,	which	is	heavily	influenced	by	the	return	realized in	 the	equity	markets.	Net	flows	are	comprised	of	new	sales	and	other	deposits	 less	surrenders,	death	benefits,	policy	charges	and annuitizations	of	investment	type	contracts,	such	as	variable	annuity	contracts.	In	the	mutual	fund	business,	net	flows	are	known	as	net sales.	Net	sales	are	comprised	of	new	sales	less	redemptions	by	mutual	fund	customers.	The	Company	uses	the	average	daily	value	of	the S&P	500	Index	as	an	indicator	for	evaluating	market	returns	of	the	underlying	account	portfolios	in	the	United	States.	Relative	financial results	of	variable	products	are	highly	correlated	 to	 the	growth	 in	account	values	or	assets	under	management	since	 these	products generally	earn	fee	 income	on	a	daily	basis.	Equity	market	movements	could	also	result	 in	benefits	for	or	charges	against	deferred acquisition	costs.

The	profitability	of	fixed	annuities	and	other	"spread-based"	products	depends	largely	on	the	Company's	ability	to	earn	target	spreads between	earned	investment	rates	on	its	general	account	assets	and	interest	credited	to	policyholders.	In	addition,	the	size	and	persistency of	gross	profits	from	these	businesses	is	an	important	driver	of	earnings	as	it	affects	the	rate	of	amortization	of	deferred	policy	acquisition costs.

The	investment	return,	or	yield,	on	invested	assets	is	an	important	element	of	the	Company's	earnings	since	insurance	products	are	priced with	the	assumption	that	premiums	received	can	be	invested	for	a	period	of	time	before	benefits,	loss	and	loss	adjustment	expenses	are paid.	Due	to	the	need	to	maintain	sufficient	liquidity	to	satisfy	claim	obligations,	the	majority	of	the	Company's	invested	assets	have	been held	in	available-for-sale	securities,	including,	among	other	asset	classes,	corporate	bonds,	municipal	bonds,	government	debt,	short-term debt,	mortgage-backed	securities	and	asset-backed	securities.

The	primary	investment	objective	for	the	Company	is	to	maximize	economic	value,	consistent	with	acceptable	risk	parameters,	including the	 management	 of	 credit	 risk	 and	 interest	 rate	 sensitivity	 of	 invested	 assets,	 while	 generating	 sufficient	 after-tax	 income	 to	 meet policyholder	and	corporate	obligations.	Investment	strategies	are	developed	based	on	a	variety	of	factors	 including	business	needs, regulatory	requirements	and	tax	considerations.

For	a	discussion	on	how	The	Hartford	establishes	property	and	casualty	insurance	product	reserves,	see	"Property	and	Casualty	Insurance Product	Reserves,	Net	of	Reinsurance"	in	the	Critical	Accounting	Estimates	section	of	MD&A	and	for	further	information	on	Unlocks, see	"Estimated	Gross	Profits	Used	in	the	Valuation	and	Amortization	of	Assets	and	Liabilities	Associated	with	Variable	Annuity	and Other	Universal	Life-Type	Contracts"	also	in	the	Critical	Accounting	Estimates	section	of	MD&A.

# Definitions	of	Non-GAAP	and	other	measures	and	ratios

# Account	Value

Account	value	includes	policyholders'	balances	for	investment	contracts	and	reserves	for	future	policy	benefits	for	insurance	contracts. Account	value	is	a	measure	used	by	the	Company	because	a	significant	portion	of	the	Company's	fee	income	is	based	upon	the	level	of account	value.	These	revenues	increase	or	decrease	with	a	rise	or	fall	in	the	amount	of	account	value	whether	caused	by	changes	in	the market	or	through	net	flows.

# After-tax	Margin,	Core	Earnings	excluding	Unlock

After-tax	margin,	core	earnings	excluding	Unlock,	is	a	non-GAAP	financial	measure	that	the	Company	uses	to	evaluate,	and	believes	is an	important	measure	of,	certain	of	the	segment's	operating	performance.	After-tax	margin	is	the	most	directly	comparable	U.S.	GAAP measure.	The	Hartford	believes	that	the	measure	after-tax	margin,	core	earnings	excluding	Unlock,	provides	investors	with	a	valuable measure	of	the	performance	of	certain	of	the	Company's	on-going	businesses	because	it	reveals	trends	in	those	businesses	that	may	be obscured	by	the	effect	of	realized	gains	(losses)	and	quarterly	Unlocks.	Unlocks	occur	when	the	Company	determines	based	on	actual experience	or	other	evidence,	that	estimates	of	future	gross	profits	should	be	revised.	As	the	Unlock	is	a	reflection	of	the	Company's	new best	estimates	of	future	gross	profits,	the	result	of	the	Unlock	and	its	impact	distort	the	trend	of	after-tax	margin.	After-tax	margin, excluding	realized	gains	(losses)	and	Unlock,	should	not	be	considered	as	a	substitute	for	After-tax	margin	and	does	not	reflect	the	overall profitability	of	our	businesses.	Therefore,	the	Company	believes	it	is	important	for	investors	to	evaluate	both	after-tax	margin,	core earnings	excluding	Unlock,	and	after-tax	margin	when	reviewing	the	Company's	performance.	After-tax	margin,	core	earnings	excluding Unlock	is	calculated	by	dividing	core	earnings	excluding	Unlocks	by	total	core	revenues	excluding	Unlocks.	A	reconciliation	of	After-tax margin	to	After-tax	margin,	core	earnings	excluding	Unlock	for	the	year	ended	December	31,	2011,	2010	and	2009	is	set	forth	in	the After-tax	Margin	section	within	Key	Performance	Measures	and	Ratios.	For	additional	information	regarding	the	Unlock,	see	Critical Accounting	Estimates	within	the	MD&A.

# Assets	Under	Management

Assets	under	management	("AUM")	include	account	values	and	mutual	fund	assets.	AUM	is	a	measure	used	by	the	Company	because	a significant	portion	of	the	Company's	revenues	are	based	upon	asset	values.	These	revenues	increase	or	decrease	with	a	rise	or	fall	in	the amount	of	account	value	whether	caused	by	changes	in	the	market	or	through	net	flows.

# Catastrophe	ratio

The	catastrophe	ratio	(a	component	of	the	loss	and	loss	adjustment	expense	ratio)	represents	the	ratio	of	catastrophe	losses	incurred	in	the current	calendar	year	(net	of	reinsurance)	to	earned	premiums	and	includes	catastrophe	losses	incurred	for	both	the	current	and	prior accident	years.	A	catastrophe	is	an	event	that	causes	$25	or	more	in	industry	insured	property	losses	and	affects	a	significant	number	of property	and	casualty	policyholders	and	insurers.	The	catastrophe	ratio	includes	the	effect	of	catastrophe	losses,	but	does	not	include	the effect	of	reinstatement	premiums.

# Combined	ratio

The	combined	ratio	is	the	sum	of	the	loss	and	loss	adjustment	expense	ratio,	the	expense	ratio	and	the	policyholder	dividend	ratio.	This ratio	is	a	relative	measurement	that	describes	the	related	cost	of	losses	and	expenses	for	every	$100	of	earned	premiums.	A	combined ratio	below	100.0	demonstrates	underwriting	profit;	a	combined	ratio	above	100.0	demonstrates	underwriting	losses.

# Combined	ratio	before	catastrophes	and	prior	accident	year	development

The	combined	ratio	before	catastrophes	and	prior	accident	year	development,	a	non-GAAP	measure,	represents	the	combined	ratio	for	the current	accident	year,	excluding	the	impact	of	catastrophes.	Combined	ratio	is	the	most	directly	comparable	U.S.	GAAP	measure.	The Company	believes	this	ratio	is	an	important	measure	of	the	trend	in	profitability	since	it	removes	the	impact	of	volatile	and	unpredictable catastrophe	 losses	 and	 prior	 accident	 year	 reserve	 development.	A	 reconciliation	 of	 combined	 ratio	 to	 combined	 ratio	 before	 prior accident	year	reserve	development	for	the	years	ended	December	31,	2011,	2010	and	2009	is	set	forth	in	the	Combined	ratio	before catastrophes	and	prior	year	development	section	within	Key	Performance	Measures	and	Ratios.

# Core	Earnings

Core	earnings,	a	non-GAAP	measure	is	an	important	measure	of	the	Company's	operating	performance.	The	Hartford	believes	that	the measure	core	earnings	provides	investors	with	a	valuable	measure	of	the	performance	of	the	Company's	ongoing	businesses	because	it reveals	trends	in	our	insurance	and	financial	services	businesses	that	may	be	obscured	by	including	the	net	effect	of	certain	realized capital	gains	and	losses	and	discontinued	operations.	Some	realized	capital	gains	and	losses	are	primarily	driven	by	investment	decisions and	external	economic	developments,	the	nature	and	timing	of	which	are	unrelated	to	the	insurance	and	underwriting	aspects	of	our business.	Accordingly,	core	earnings	excludes	the	effect	of	all	realized	gains	and	losses	(net	of	tax	and	the	effects	of	deferred	policy acquisition	costs	("DAC")	that	tend	to	be	highly	variable	from	period	to	period	based	on	capital	market	conditions.	The	Hartford	believes, however,	that	some	realized	capital	gains	and	losses	are	integrally	related	to	our	insurance	operations,	so	core	earnings	includes	net realized	gains	and	losses	such	as	net	periodic	settlements	on	credit	derivatives	and	net	periodic	settlements	on	the	Japan	fixed	annuity cross-currency	swap.	These	net	realized	gains	and	losses	are	directly	related	to	an	offsetting	item	included	in	the	income	statement	such	as net	investment	income.	Core	earnings	is	also	used	by	management	to	assess	our	operating	performance	and	is	one	of	the	measures considered	in	determining	incentive	compensation	for	the	Company's	managers.	Net	income	is	the	most	directly	comparable	U.S.	GAAP measure.	Core	earnings	should	not	be	considered	as	a	substitute	for	net	income	and	does	not	reflect	the	overall	profitability	of	the Company's	business.	Therefore,	The	Hartford	believes	that	it	is	useful	for	investors	to	evaluate	both	net	income	and	core	earnings	when reviewing	the	Company's	performance.	A	reconciliation	of	net	income	to	core	earnings	for	the	years	ended	December	31,	2011,	2010	and 2009	is	set	forth	below

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Core\tearnings | $970 | $1,972 | $797 |
| Less:\tRealized\tgains\t(losses)\texcluded\tfrom\tcore\tearnings | (394) | (228) | (1,680) |
| Less:\tDiscontinued\toperations | 86 | (64) | (4) |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |

# Current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes

The	current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes	is	a	measure	of	the	cost	of	non-catastrophe	claims incurred	in	the	current	accident	year	divided	by	earned	premiums.	Management	believes	that	the	current	accident	year	loss	and	loss adjustment	expense	ratio	before	catastrophes	is	a	performance	measure	that	is	useful	to	investors	as	it	removes	the	impact	of	volatile	and unpredictable	catastrophe	losses	and	prior	accident	year	reserve	development.

# DAC	amortization	ratio,	Core	Earnings	excluding	Unlock

DAC	amortization	ratio,	core	earnings	excluding	Unlock,	is	a	non-GAAP	financial	measure	that	the	Company	uses	to	evaluate,	and believes	 is	 an	 important	 measure	 of,	 certain	 of	 the	 segment's	 operating	 performance.	 DAC	 amortization	 ratio	 is	 the	 most	 directly comparable	U.S.	GAAP	measure.	The	Hartford	believes	 that	 the	measure	DAC	amortization	ratio,	core	earnings	excluding	Unlock, provides	investors	with	a	valuable	measure	of	the	performance	of	certain	of	the	Company's	on-going	businesses	because	it	reveals	trends in	our	businesses	that	may	be	obscured	by	the	effect	of	realized	gains	(losses)	or	quarterly	Unlocks.	Unlocks	occur	when	the	Company determines,	based	on	actual	experience	or	other	evidence,	that	estimates	of	future	gross	profits	should	be	revised.	The	Unlock	 is	a reflection	of	the	Company's	new	best	estimates	of	future	gross	profits.	The	result	of	the	Unlock	and	is	impact	distort	the	trend	of	DAC amortization	 ratio.	 DAC	 amortization	 ratio,	 core	 earnings	 excluding	 Unlock,	 should	 not	 be	 considered	 as	 a	 substitute	 for	 DAC amortization	ratio	and	does	not	reflect	the	overall	profitability	of	our	businesses.	Therefore,	the	Company	believes	it	is	important	for investors	to	evaluate	both	DAC	amortization	ratio,	core	earnings	excluding	Unlock,	and	DAC	amortization	ratio	when	reviewing	the Company's	performance.	DAC	amortization	ratio,	core	earnings	excluding	Unlock	is	calculated	by	dividing	Core	DAC	amortization costs	by	pre-tax	core	earnings	before	DAC	amortization	costs.	A	reconciliation	of	DAC	amortization	ratio	to	DAC	amortization	ratio, core	earnings	excluding	Unlock	for	the	years	ended	December	31,	2011,	2010	and	2009	is	set	forth	in	the	Individual	Annuity	Operating Summary	with	MD&A.	For	additional	information	regarding	the	Unlock,	see	Critical	Accounting	Estimates	within	the	MD&A.

# Expense	ratio

The	expense	ratio	for	the	underwriting	segments	of	Property	&	Casualty	Commercial	and	Consumer	Markets	is	the	ratio	of	underwriting expenses,	excluding	bad	debt	expense,	to	earned	premiums.	Underwriting	expenses	include	the	amortization	of	deferred	policy	acquisition costs	and	insurance	operating	costs	and	expenses.	Deferred	policy	acquisition	costs	include	commissions,	taxes,	licenses	and	fees	and other	underwriting	expenses	and	are	amortized	over	the	policy	term.

The	expense	ratio	for	the	remaining	segments	is	expressed	as	a	ratio	of	insurance	operating	costs	and	expenses	to	a	revenue	measure, depending	on	the	type	of	business.	This	calculation	excludes	the	amortization	of	deferred	policy	acquisition	costs,	which	is	calculated	as	a separate	ratio,	and	is	discussed	below.

# Fee	Income

Fee	income	is	largely	driven	from	amounts	collected	as	a	result	of	contractually	defined	percentages	of	assets	under	management.	These fees	are	generally	collected	on	a	daily	basis.	For	individual	life	insurance	products,	fees	are	contractually	defined	as	percentages	based	on levels	of	insurance,	age,	premiums	and	deposits	collected	and	contract	holder	value.	Life	insurance	fees	are	generally	collected	on	a monthly	basis.	Therefore,	the	growth	in	assets	under	management	either	through	positive	net	flows	or	net	sales,	or	favorable	equity	market performance	will	have	a	favorable	impact	on	fee	income.	Conversely,	either	negative	net	flows	or	net	sales,	or	unfavorable	equity	market performance	will	reduce	fee	income.

# Loss	and	loss	adjustment	expense	ratio

The	loss	and	loss	adjustment	expense	ratio	is	a	measure	of	the	cost	of	claims	incurred	in	the	calendar	year	divided	by	earned	premium	and includes	 losses	 incurred	 for	 both	 the	 current	 and	 prior	 accident	 years,	 as	 well	 as	 the	 costs	 of	 mortality	 and	 morbidity	 and	 other contractholder	benefits	to	policyholders.	Since	Group	Benefits	occasionally	buys	a	block	of	claims	for	a	stated	premium	amount,	the Company	excludes	this	buyout	from	the	loss	ratio	used	for	evaluating	the	underwriting	results	of	the	business	as	buyouts	may	distort	the loss	ratio.	Among	other	factors,	the	loss	and	loss	adjustment	expense	ratio	needed	for	the	Company	to	achieve	its	targeted	return	on	equity fluctuates	from	year	to	year	based	on	changes	in	the	expected	investment	yield	over	the	claim	settlement	period,	the	timing	of	expected claim	settlements	and	the	targeted	returns	set	by	management	based	on	the	competitive	environment.

The	loss	and	loss	adjustment	expense	ratio	is	affected	by	claim	frequency	and	claim	severity,	particularly	for	shorter-tail	property	lines	of business,	where	the	emergence	of	claim	frequency	and	severity	is	credible	and	likely	indicative	of	ultimate	losses.	Claim	frequency represents	the	percentage	change	in	the	average	number	of	reported	claims	per	unit	of	exposure	in	the	current	accident	year	compared	to that	of	the	previous	accident	year.	Claim	severity	represents	the	percentage	change	in	the	estimated	average	cost	per	claim	in	the	current accident	year	compared	to	that	of	the	previous	accident	year.	As	one	of	the	factors	used	to	determine	pricing,	the	Company's	practice	is	to first	make	an	overall	assumption	about	claim	frequency	and	severity	for	a	given	line	of	business	and	then,	as	part	of	the	ratemaking process,	adjust	the	assumption	as	appropriate	for	the	particular	state,	product	or	coverage.

# Loss	ratio,	excluding	buyouts

The	loss	ratio	is	utilized	for	the	Group	Benefits	segment	and	is	expressed	as	a	ratio	of	benefits,	losses	and	loss	adjustment	expenses	to premiums	and	other	considerations,	excluding	buyout	premiums.	Buyout	premiums	represent	takeover	of	open	claim	liabilities	and	other non-recurring	premium	amounts.

# Mutual	Fund	Assets

Mutual	fund	assets	include	retail,	investment-only	and	college	savings	plan	assets	under	Section	529	of	the	Code,	collectively	referred	to as	non-proprietary,	and	proprietary	mutual	funds.	Non-proprietary	mutual	fund	assets	are	owned	by	the	shareholders	of	those	funds	and not	by	 the	Company.	Proprietary	mutual	funds	 include	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.	The	non-proprietary	mutual	fund	assets	are not	reflected	in	the	Company's	consolidated	financial	statements.	Mutual	fund	assets	are	a	measure	used	by	the	Company	because	a significant	portion	of	the	Company's	revenues	are	based	upon	asset	values.	These	revenues	increase	or	decrease	with	a	rise	or	fall	in	the amount	of	account	value	whether	caused	by	changes	in	the	market	or	through	net	flows.

# 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	(excluding	the	effects	of	realized	capital	gains	and losses,	including	those	related	to	the	Company's	GMWB	product	and	related	reinsurance	and	hedging	programs)	and	the	related	crediting rates	on	average	general	account	assets	under	management.	The	net	investment	spreads	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.	The	determination	of	credited	rates	is	based	upon	consideration	of	current	market	rates	for	similar	products, portfolio	yields	and	contractually	guaranteed	minimum	credited	rates.	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.	The	volatile	nature	of	net	investment	spread	is driven	primarily	by	earnings	on	limited	partnership	and	other	alternative	investments	and	prepayment	premiums	on	securities.	Investment earnings	can	also	be	influenced	by	factors	such	as	changes	in	interest	rates,	credit	spreads	and	decisions	to	hold	higher	levels	of	short-term investments.	Net	investment	spread	is	calculated	by	dividing	net	investment	earnings	by	average	reserves	using	a	13-point	average,	less interest	credited	divided	by	average	account	value	using	a	13-point	average.

# New	business	written	premium

New	business	written	premium	represents	the	amount	of	premiums	charged	for	policies	issues	to	customers	who	were	not	insured	with	the Company	in	the	previous	policy	term.	New	business	written	premium	plus	renewal	policy	written	premium	equals	total	written	premium.

# Policies	in	force

Policies	in	force	represent	the	number	of	policies	with	coverage	in	effect	as	of	the	end	of	the	period.	The	number	of	policies	in	force	is	a growth	measure	used	for	Consumer	Markets	and	standard	commercial	lines	within	Property	&	Casualty	Commercial	and	is	affected	by both	new	business	growth	and	premium	renewal	retention.

# Policy	count	retention

Policy	count	retention	represents	the	ratio	of	the	number	of	policies	renewed	during	the	period	divided	by	the	number	of	policies	from	the previous	policy	term	period.	The	number	of	policies	available	to	renew	from	the	previous	policy	term	represents	the	number	of	policies written	in	the	previous	policy	term	net	of	any	cancellations	of	those	policies.	Policy	count	retention	is	affected	by	a	number	of	factors, including	the	percentage	of	renewal	policy	quotes	accepted	and	decisions	by	the	Company	to	non-renew	policies	because	of	specific policy	underwriting	concerns	or	because	of	a	decision	to	reduce	premium	writings	in	certain	classes	of	business	or	states.	Policy	count retention	is	also	affected	by	advertising	and	rate	actions	taken	by	competitors.

# Policyholder	dividend	ratio

The	policyholder	dividend	ratio	is	the	ratio	of	policyholder	dividends	to	earned	premium.

# Prior	accident	year	loss	and	loss	adjustment	expense	ratio

The	prior	year	loss	and	loss	adjustment	expense	ratio	represents	the	increase	(decrease)	in	the	estimated	cost	of	settling	catastrophe	and non-catastrophe	claims	incurred	in	prior	accident	years	as	recorded	in	the	current	calendar	year	divided	by	earned	premiums.

# Reinstatement	premiums

Reinstatement	premium	represents	additional	ceded	premium	paid	for	the	reinstatement	of	the	amount	of	reinsurance	coverage	that	was reduced	as	a	result	of	a	reinsurance	loss	payment.

# Renewal	earned	pricing	increase	(decrease)

Written	premiums	are	earned	over	the	policy	term,	which	is	six	months	for	certain	personal	lines	auto	business	and	12	months	for substantially	all	of	the	remainder	of	the	Company's	property	and	casualty	business.	Because	the	Company	earns	premiums	over	the	6	to 12	month	term	of	the	policies,	renewal	earned	pricing	increases	(decreases)	lag	renewal	written	pricing	increases	(decreases)	by	6	to 12	months.

# Renewal	written	pricing	increase	(decrease)

Renewal	written	pricing	increase	(decrease)	represents	the	combined	effect	of	rate	changes,	amount	of	insurance	and	individual	risk pricing	decisions	per	unit	of	exposure	since	the	prior	year.	The	rate	component	represents	the	average	change	in	rate	filings	during	the period	 and	 the	 amount	 of	 insurance	 represents	 the	 value	 of	 the	 rating	 base,	 such	 as	 model	 year/vehicle	 symbol	 for	 auto,	 building replacement	costs	for	property	and	wage	inflation	for	workers'	compensation.	The	renewal	written	price	increase	(decrease)	does	not include	other	factors	that	affect	average	premium	per	unit	of	exposure	such	as	changes	in	the	mix	of	business	by	state,	territory,	class	plan and	tier	of	risk.	A	number	of	factors	affect	renewal	written	pricing	increases	(decreases)	including	expected	loss	costs	as	projected	by	the Company's	pricing	actuaries,	rate	filings	approved	by	state	regulators,	risk	selection	decisions	made	by	the	Company's	underwriters	and marketplace	 competition.	 Renewal	 written	 pricing	 changes	 reflect	 the	 property	 and	 casualty	 insurance	 market	 cycle.	 Prices	 tend	 to increase	for	a	particular	line	of	business	when	insurance	carriers	have	incurred	significant	losses	in	that	line	of	business	in	the	recent	past or	the	industry	as	a	whole	commits	less	of	its	capital	to	writing	exposures	in	that	line	of	business.	Prices	tend	to	decrease	when	recent	loss experience	has	been	favorable	or	when	competition	among	insurance	carriers	increases.

# Return	on	Assets	("ROA"),	Core	Earnings	excluding	Unlock

ROA,	core	earnings	excluding	Unlock,	is	a	non-GAAP	financial	measure	that	the	Company	uses	to	evaluate,	and	believes	is	an	important measure	of,	certain	of	the	segment's	operating	performance.	ROA	is	the	most	directly	comparable	U.S.	GAAP	measure.	The	Hartford believes	that	the	measure	ROA,	core	earnings	excluding	Unlock,	provides	investors	with	a	valuable	measure	of	the	performance	of certain	of	the	Company's	on-going	businesses	because	it	reveals	trends	in	our	businesses	that	may	be	obscured	by	the	effect	of	realized gains	(losses)	or	quarterly	Unlocks.	Unlocks	occur	when	the	Company	determines,	based	on	actual	experience	or	other	evidence,	that estimates	of	future	gross	profits	should	be	revised.	As	the	Unlock	is	a	reflection	of	the	Company's	new	best	estimates	of	future	gross profits.	The	result	and	its	impact	distort	the	trend	of	ROA.	ROA,	core	earnings	excluding	Unlock,	should	not	be	considered	as	a	substitute for	ROA	and	does	not	reflect	the	overall	profitability	of	our	businesses.	Therefore,	the	Company	believes	it	is	important	for	investors	to evaluate	both	ROA,	core	earnings	excluding	Unlock,	and	ROA	when	reviewing	the	Company's	performance.	ROA	is	calculated	by dividing	core	earnings	excluding	Unlocks	by	a	two-point	average	AUM.	A	reconciliation	of	ROA	to	ROA,	core	earnings	excluding Unlock	for	the	years	ended	December	31,	2011,	2010	and	2009	is	set	forth	in	the	ROA	section	within	Key	Performance	Measures	and Ratios.

# Underwriting	results

Underwriting	results	is	a	before-tax	measure	that	represents	earned	premiums	less	incurred	losses,	loss	adjustment	expenses,	underwriting expenses	and	policyholder	dividends.	The	Hartford	believes	that	underwriting	results	provides	investors	with	a	valuable	measure	of before-tax	profitability	derived	from	underwriting	activities,	which	are	managed	separately	from	the	Company's	investing	activities.	The underwriting	segments	of	Property	&	Casualty	Commercial	and	Consumer	Markets	are	evaluated	by	management	primarily	based	upon underwriting	results.	A	reconciliation	of	underwriting	results	to	net	income	for	Property	&	Casualty	Commercial	and	Consumer	Markets is	set	forth	in	their	respective	discussions	herein.

# Written	and	earned	premiums

Written	premium	is	a	statutory	accounting	financial	measure	which	represents	the	amount	of	premiums	charged	for	policies	issued,	net	of reinsurance,	during	a	fiscal	period.	Earned	premium	is	a	U.S.	GAAP	and	statutory	measure.	Premiums	are	considered	earned	and	are included	in	the	financial	results	on	a	pro	rata	basis	over	the	policy	period.	Management	believes	that	written	premium	is	a	performance measure	that	is	useful	to	investors	as	it	reflects	current	trends	in	the	Company's	sale	of	property	and	casualty	insurance	products.	Written and	earned	premium	are	recorded	net	of	ceded	reinsurance	premium.

Traditional	life	insurance	type	products,	such	as	those	sold	by	Group	Benefits,	collect	premiums	from	policyholders	in	exchange	for financial	protection	for	the	policyholder	from	a	specified	insurable	loss,	such	as	death	or	disability.	These	premiums	together	with	net investment	income	earned	from	the	overall	investment	strategy	are	used	to	pay	the	contractual	obligations	under	these	insurance	contracts. Two	major	factors,	new	sales	and	persistency,	impact	premium	growth.	Sales	can	increase	or	decrease	in	a	given	year	based	on	a	number of	factors,	including	but	not	limited	to,	customer	demand	for	the	Company's	product	offerings,	pricing	competition,	distribution	channels and	the	Company's	reputation	and	ratings.	Persistency	refers	to	the	percentage	of	policies	remaining	in-force	from	year-to-year.

# KEY	PERFORMANCE	MEASURES	AND	RATIOS

The	Hartford	considers	several	measures	and	ratios	to	be	the	key	performance	indicators	for	its	businesses.	The	following	discussions include	the	more	significant	ratios	and	measures	of	profitability	for	the	years	ended	December	31,	2011,	2010	and	2009.	Management believes	that	these	ratios	and	measures	are	useful	in	understanding	the	underlying	trends	in	The	Hartford's	businesses.	However,	these	key performance	indicators	should	only	be	used	in	conjunction	with,	and	not	in	lieu	of,	the	results	presented	in	the	segment	discussions	that follow	 in	 this	 MD&A.	These	 ratios	 and	 measures	 may	 not	 be	 comparable	 to	 other	 performance	 measures	 used	 by	 the	 Company's competitors.

# Combined	ratio	before	catastrophes	and	prior	year	development

Combined	ratio	before	catastrophes	and	prior	accident	year	development	is	a	key	indicator	of	overall	profitability	for	the	property	and casualty	underwriting	segments	of	Property	&	Casualty	Commercial	and	Consumer	Markets	since	it	removes	the	impact	of	volatile	and unpredictable	catastrophe	losses	and	prior	accident	year	reserve	development.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Property\t&amp;\tCasualty\tCommercial |  |  |  |
| Combined\tratio | 104.5 | 89.7 | 85.9 |
| Catastrophe\tratio | 5.4 | 2.7 | 0.9 |
| Non-catastrophe\tprior\tyear\tdevelopment | 1.8 | (6.3) | (6.3) |
| Combined\tratio\tbefore\tcatastrophes\tand\tprior\tyear\tdevelopment | 97.2 | 93.4 | 91.2 |
| Consumer\tMarkets |  |  |  |
| Combined\tratio | 101.5 | 99.0 | 97.2 |
| Catastrophe\tratio | 12.0 | 7.8 | 5.9 |
| Non-catastrophe\tprior\tyear\tdevelopment | (2.7) | (2.4) | (1.0) |
| Combined\tratio\tbefore\tcatastrophes\tand\tprior\tyear\tdevelopment | 92.2 | 93.6 | 92.3 |

•	 Property	&	Casualty	Commercial's	combined	ratio	before	catastrophes	and	prior	year	development	deteriorated	primarily	due	to	an increase	in	current	accident	year	losses	and	loss	adjustment	expenses	ratio	before	catastrophes,	largely	due	to	loss	costs	outpacing earned	pricing	increases	predominantly	related	to	workers	compensation	business.

•	 Consumer	Markets	combined	ratio	before	catastrophes	and	prior	year	development	decreased	primarily	due	to	changes	in	the	current accident	year	loss	and	loss	adjustment	expenses	ratio	before	catastrophes,	as	a	decrease	for	auto	was	partially	offset	by	an	increase for	home.	The	decrease	for	auto	was	driven	by	the	effect	of	earned	pricing	increases	and	lower	estimated	frequency	on	auto	liability claims,	which	was	partially	offset	by	higher	auto	physical	damage	loss	costs.	The	increase	for	home	was	primarily	due	to	an	increase in	the	frequency	of	non-catastrophe	weather	claims,	partially	offset	by	the	effect	of	earned	pricing	increases.

•	 Property	&	Casualty	Commercial's	combined	ratio	before	catastrophes	and	prior	year	development	increased	primarily	due	to	higher severity	on	package	business	and	workers'	compensation,	as	well	as	an	increased	ratio	for	specialty	casualty,	and	to	a	lesser	extent an	increase	in	the	expense	ratio	due	to	increased	expenses	for	taxes,	licenses	and	fees.

•	 Consumer	Markets	combined	ratio	before	catastrophes	and	prior	year	development	increased	primarily	due	to	an	increase	in	the current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes	for	auto	of	1.3	points	due	to	higher	auto	physical damage	emerged	frequency	and	higher	expected	auto	liability	loss	costs	relative	to	average	premium.	The	current	accident	year	loss and	loss	adjustment	expense	ratio	before	catastrophes	for	home	increased	0.7	points	primarily	due	to	an	increase	in	loss	adjustment expenses,	partially	offset	by	the	effect	of	earned	pricing	increases.

# Return	on	Assets

Return	on	assets	is	a	key	indicator	of	overall	profitability	for	the	Individual	Annuity,	Retirement	Plans,	Mutual	Funds	and	Life	Other

Operations	reporting	segments	as	a	significant	portion	of	their	earnings	is	based	on	average	assets	under	management.

| Ratios | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Individual\tAnnuity\t[1] |  |  |  |
| ROA | (1.6)\tbps | 54.7\tbps | (48.6)\t\tbps |
| Effect\tof\tnet\trealized\tlosses,\tnet\tof\ttax\tand\tDAC\ton\tROA | (41.3)\t\tbps | 0.2\tbps | (38.5)\t\tbps |
| Effect\tof\tUnlock\ton\tROA | (7.2)\t\tbps | 15.8\tbps | (47.0)\t\tbps |
| ROA,\tcore\tearnings\texcluding\tUnlock | 46.9\tbps | 38.7\tbps | 36.9\tbps |
| Retirement\tPlans\t[1] |  |  |  |
| ROA | 2.9\t\tbps | 9.7\tbps | (54.8)\t\tbps |
| Effect\tof\tnet\trealized\tlosses,\tnet\tof\ttax\tand\tDAC\ton\tROA | (0.7)\tbps | (4.8)\tbps | (46.4)\tbps |
| Effect\tof\tUnlock\ton\tROA | (7.5)\tbps | 5.4\tbps | (11.4)\tbps |
| ROA,\tcore\tearnings\texcluding\tUnlock | 11.1\tbps | 9.1\tbps | 3.0\tbps |
| Mutual\tFunds\t[1] |  |  |  |
| ROA | 10.5\tbps | 13.7\tbps | 8.8\tbps |
| Effect\tof\tnet\trealized\tgains/(losses),\tnet\tof\ttax\tand\tDAC\ton\tROA | —\tbps | 3.9\tbps | —\tbps |
| ROA,\tcore\tearnings\texcluding\tUnlock | 10.5\tbps | 9.8\tbps | 8.8\tbps |
| Life\tOther\tOperations\t[1] |  |  |  |
| ROA | 39.2\tbps | (9.6)\t\tbps | (74.5)\t\tbps |
| Effect\tof\tnet\trealized\tgains/(losses),\tnet\tof\ttax\tand\tDAC\ton\tROA | 1.7\tbps | (32.0)\t\tbps | (51.7)\t\tbps |
| Effect\tof\tUnlock\ton\tROA | 3.5\tbps | (7.7)\t\tbps | (32.4)\t\tbps |
| ROA,\tcore\tearnings\texcluding\tUnlock | 34.0\tbps | 30.1\tbps | 9.6\tbps |

[1] 	 Proprietary	mutual	funds,	Investment-Only	mutual	funds,	Canadian	mutual	funds,	and	529	college	savings	plans	are	reported	in Mutual	Funds	in	2011	and	2010.	Prior	to	2010,	proprietary	mutual	fund	assets	were	included	in	Individual	Annuity,	Retirement

Plans,	and	Mutual	Funds,	as	those	same	assets	generate	earnings	for	each	of	these	segments.

•Individual	Annuity's	ROA,	core	earnings	excluding	Unlock,	increased	in	2011	primarily	due	to	the	favorable	impact	of	a	flat	DAC amortization	rate	on	2011	earnings	and	a	DRD	tax	settlement	benefit	in	2011.

•	 Retirement	Plans'	ROA,	core	earnings	excluding	Unlock,	increased	in	2011	primarily	due	to	increased	fee	and	investment	income resulting	from	higher	average	general	account	invested	assets	and	favorable	partnership	income	as	well	as	a	DRD	tax	settlement benefit.

•	 Mutual	 Funds'	 ROA,	 core	 earnings	 excluding	 Unlock,	 increased	 in	 2011	 primarily	 due	 to	 higher	 earnings	 from	 continuing operations	resulting	primarily	from	lower	operating	expenses	in	2011.	Assets	under	management	and	asset-based	fee	income	were unfavorably	impacted	by	declining	equity	market	performance	and	increasing	outflows	over	the	course	of	2011.

•	 Life	Other	Operations'	ROA,	core	earnings	excluding	Unlock,	increased	in	2011	primarily	due	to	a	lower	DAC	amortization	rate,	as earnings	increased	in	2011	compared	to	2010,	and	a	DRD	tax	settlement	benefit,	offset	in	part	by	decreased	investment	income	due to	lower	average	account	values	in	2011	as	compared	to	2010.

•Individual	Annuity's	ROA,	core	earnings	excluding	Unlock,	increased	in	2010	primarily	due	to	improved	net	investment	income	on limited	partnerships	and	other	alternative	investments,	a	lower	DAC	amortization	rate,	lower	operating	expenses	associated	with	the restructuring	of	operations.

•	 Retirement	Plans'	ROA,	core	earnings	excluding	Unlock,	increased	in	2010	primarily	due	to	improved	performance	on	limited partnerships	and	other	alternative	investments	in	2010,	and	was	driven	by	improvement	in	the	equity	markets,	which	led	to	increased account	values	and	increased	deposit	activity.

•	 Mutual	Funds'	ROA,	core	earnings	excluding	Unlock,	increased	in	2010	primarily	due	to	improvement	in	the	equity	markets,	which enabled	this	line	of	business	to	partially	return	to	scale,	and	the	impact	of	lower	operating	expenses,	partially	offset	by	the	addition	of proprietary	mutual	fund	assets	to	this	line	of	business,	which	has	a	lower	ROA	level	than	the	non-proprietary	mutual	fund	business.

•	 Life	Other	Operations'	ROA,	core	earnings	excluding	Unlock,	increased	in	2010	primarily	due	to	lower	operating	expenses	in	2010 and	the	absence	of	3	Win	charges	recognized	in	the	first	quarter	of	2009.

# After-tax	margin

After-tax	margin	is	a	key	indicator	of	overall	profitability	for	the	Individual	Life	and	Group	Benefits	reporting	segments	as	a	significant portion	of	their	earnings	are	a	result	of	the	net	margin	from	losses	incurred	on	earned	premiums,	fees	and	other	considerations.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Individual\tLife |  |  |  |
| After-tax\tmargin | 9.6% | 17.9% | 1.3% |
| Effect\tof\tnet\trealized\tgains\t(losses),\tnet\tof\ttax\tand\tDAC\ton\tafter-tax |  |  |  |
| margin | 1.3% | 1.3% | (6.6%) |
| Effect\tof\tUnlock\ton\tafter-tax\tmargin | (5.5%) | 1.7% | (4.7%) |
| After-tax\tmargin,\tcore\tearnings\texcluding\tUnlock | 13.8% | 14.9% | 12.6% |
| Group\tBenefits |  |  |  |
| After-tax\tmargin\t(excluding\tbuyouts) | 2.0% | 3.9% | 4.2% |
| Effect\tof\tnet\trealized\tgains\t(losses),\tnet\tof\ttax\ton\tafter-tax\tmargin | 0.1% | 0.5% | (1.5%) |
| After-tax\tmargin\t(excluding\tbuyouts),\texcluding\trealized\tgains\n(losses) | 1.9% | 3.4% | 5.7% |

•Individual	Life's	after-tax	margin,	core	earnings	excluding	Unlock,	decrease	was	primarily	due	to	increased	benefits,	losses	and expenses	and	increased	mortality	costs,	partially	offset	by	increased	net	investment	income.

•	 The	decrease	in	Group	Benefits'	after-tax	margin	(excluding	buyouts),	excluding	realized	gains	(losses),	was	primarily	due	to	higher mortality	and	morbidity	driven	by	elevated	incidence	and	lower	claim	terminations,	and	to	a	lesser	extent,	a	decrease	in	fully	insured ongoing	premiums,	driven	by	lower	sales	over	the	past	year,	as	well	as	from	a	challenging	economic	environment.

•Individual	Life's	after-tax	margin,	core	earnings	excluding	Unlock,	increase	was	primarily	due	to	lower	DAC	amortization	and	net realized	capital	gains	in	2010	compared	to	net	realized	capital	losses	in	2009.

•	 Group	Benefits'	after-tax	margin	(excluding	buyouts),	excluding	realized	gains	(losses),	decrease	was	primarily	due	to	a	higher	loss ratio	from	unfavorable	morbidity	driven	by	lower	claim	terminations	on	disability	business.

# Investment	Results

# Composition	of	Invested	Assets

|  | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- |
|  | Amount | Percent | Amount | Percent |
| Fixed\tmaturities,\tAFS,\tat\tfair\tvalue | $81,809 | 78.3% | $77,820 | 79.2% |
| Fixed\tmaturities,\tat\tfair\tvalue\tusing\tthe\tfair\tvalue\toption | 1,328 | 1.3% | 649 | 0.7% |
| Equity\tsecurities,\tAFS,\tat\tfair\tvalue | 921 | 0.9% | 973 | 1.0% |
| Mortgage\tloans | 5,728 | 5.5% | 4,489 | 4.6% |
| Policy\tloans,\tat\toutstanding\tbalance | 2,001 | 1.9% | 2,181 | 2.2% |
| Limited\tpartnerships\tand\tother\talternative\tinvestments | 2,532 | 2.4% | 1,918 | 2.0% |
| Other\tinvestments\t[1] | 2,394 | 2.3% | 1,617 | 1.6% |
| Short-term\tinvestments | 7,736 | 7.4% | 8,528 | 8.7% |
| Total\tinvestments\texcluding\tequity\tsecurities,\ttrading | 104,449 | 100.0% | 98,175 | 100.0% |

# [1] 	 Primarily	relates	to	derivative	instruments.

support	Japan	variable	annuities.	Those	equity	securities,	trading,	were	invested	in	mutual	funds,	which,	in	turn,	invested	in	the

following	asset	classes,	Japan	equity	21%,	Japan	fixed	income	(primarily	government	securities)	15%,	global	equity	21%,	global government	bonds	42%,	and	cash	and	other	1%	for	both	periods	presented.

Total	investments	increased	since	December	31,	2010	primarily	due	to	increases	in	fixed	maturities,	AFS,	mortgage	loans	and	other investments,	partially	offset	by	a	decline	in	equity	securities,	trading	and	short-term	investments.	The	increase	in	fixed	maturities,	AFS, was	largely	the	result	of	improved	valuations	as	a	result	of	declining	interest	rates,	partially	offset	by	credit	spread	widening.	The	increase in	mortgage	loans	related	to	the	funding	of	commercial	whole	loans,	and	the	increase	in	other	investments	primarily	related	to	increases	in value	of	derivatives	largely	due	to	a	decline	in	the	equity	market,	strengthening	of	the	Japanese	yen	in	comparison	to	the	U.S.	dollar	and	a decline	in	interest	rates.	These	increases	were	partially	offset	by	a	decline	in	equity	securities,	trading,	primarily	due	to	deteriorations	in market	performance	of	the	underlying	investments	and	net	outflows,	partially	offset	by	the	Japanese	yen	strengthening	in	comparison	to the	euro.	The	decline	in	short-term	investments	primarily	relates	to	increased	allocations	to	mortgage	loans	and	limited	partnerships	and other	alternative	investments.

# Net	Investment	Income	(Loss)

|  | 2011 | 2011 | 2010 | 2010 | 2009 | 2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amount | Yield\t[1] | Amount | Yield\t[1] | Amount | Yield\t[1] |
| Fixed\tmaturities\t[2] | $3,396 | 4.2% | $3,489 | 4.3% | $3,617 | 4.5% |
| Equity\tsecurities,\tAFS | 36 | 3.8% | 53 | 4.8% | 93 | 6.5% |
| Mortgage\tloans | 281 | 5.4% | 260 | 5.2% | 307 | 4.8% |
| Policy\tloans | 131 | 6.1% | 132 | 6.1% | 139 | 6.3% |
| Limited\tpartnerships\tand\tother |  |  |  |  |  |  |
| alternative\tinvestments | 243 | 12.0% | 216 | 12.6% | (341) | (15.6%) |
| Other\t[3] | 301 |  | 329 |  | 314 |  |
| Investment\texpense | (116) |  | (115) |  | (112) |  |
| Total\tsecurities\tAFS\tand\tother | $4,272 | 4.4% | $4,364 | 4.5% | $4,017 | 4.1% |
| Equity\tsecurities,\ttrading | (1,359) |  | (774) |  | 3,188 |  |
| Total\tnet\tinvestment\tincome |  |  |  |  |  |  |
| (loss),\tbefore-tax | $2,913 |  | $3,590 |  | $7,205 |  |
| Total\tsecurities,\tAFS\tand\tother |  |  |  |  |  |  |
| excluding\tlimited\tpartnerships |  |  |  |  |  |  |
| and\tother\talternative |  |  |  |  |  |  |
| investments | 4,029 | 4.2% | 4,148 | 4.3% | 4,358 | 4.5% |

[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	 consolidated	 variable	 interest	 entity	 noncontrolling interests.	Included	in	the	fixed	maturity	yield	is	Other,	which	primarily	relates	to	derivatives	(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.

Total	 net	 investment	 income	 declined	 largely	 due	 to	 equity	 securities,	 trading,	 resulting	 from	 a	 market	 decline	 of	 the	 underlying investment	funds	supporting	the	Japanese	variable	annuity	product	and	net	outflows,	partially	offset	by	the	Japanese	yen	strengthening	in comparison	to	the	euro.	Also	contributing	to	the	decline	was	lower	income	on	fixed	maturities	resulting	from	the	proceeds	from	sales being	reinvested	at	lower	rates.	These	declines	were	partially	offset	by	an	increase	in	limited	partnership	and	other	alternative	investment income	due	to	additional	allocations	to	this	asset	class	and	strong	private	equity	and	real	estate	returns,	as	well	as	an	increase	in	mortgage loan	income	due	to	additional	investments	in	commercial	whole	loans.	The	Company's	expectation	for	2012,	based	on	the	current	interest rate	 and	 credit	 environment,	 is	 that	 reinvestment	 rates	 will	 be	 slightly	 lower	 than	 maturing	 securities;	 however,	 the	 Company	 has increased	its	investment	in	certain	higher	yielding	asset	classes,	such	as	commercial	mortgage	loans	and	a	modest	amount	of	high-yield securities.	Therefore,	the	Company	expects	the	2012	portfolio	yield,	excluding	limited	partnerships,	to	be	relatively	consistent	with	2011.

Total	net	investment	income	decreased	largely	due	to	equity	securities,	trading,	resulting	primarily	from	declines	in	market	performance of	the	underlying	investment	funds	supporting	the	Japanese	variable	annuity	product.	Total	net	investment	income,	excluding	equity securities,	trading,	increased	primarily	due	to	improved	performance	of	limited	partnerships	and	other	alternative	investments	primarily within	real	estate	and	private	equity	funds,	partially	offset	by	lower	income	on	fixed	maturities	resulting	from	a	decline	in	average	short- term	interest	rates	and	lower	reinvestment	rates.

# Net	Realized	Capital	Gains	(Losses)

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Gross\tgains\ton\tsales | $693 | $836 | $1,056 |
| Gross\tlosses\ton\tsales | (384) | (522) | (1,397) |
| Net\tOTTI\tlosses\trecognized\tin\tearnings | (174) | (434) | (1,508) |
| Valuation\tallowances\ton\tmortgage\tloans | 24 | (154) | (403) |
| Japanese\tfixed\tannuity\tcontract\thedges,\tnet\t[1] | 3 | 27 | 47 |
| Periodic\tnet\tcoupon\tsettlements\ton\tcredit\tderivatives/Japan | (10) | (17) | (49) |
| Results\tof\tvariable\tannuity\thedge\tprogram |  |  |  |
| U.S.\tGMWB\tderivatives,\tnet | (397) | 89 | 1,464 |
| U.S.\tmacro\thedge\tprogram | (216) | (445) | (733) |
| Total\tU.S.\tprogram | (613) | (356) | 731 |
| International\tprogram | 775 | 11 | (112) |
| Total\tresults\tof\tvariable\tannuity\thedge\tprogram | 162 | (345) | 619 |
| Other,\tnet\t[2] | (459) | (2) | (369) |
| Net\trealized\tcapital\tgains\t(losses),\tbefore-tax | $(145) | $(611) | $(2,004) |

[1] 	 Relates	to	the	Japanese	fixed	annuity	product	(adjustment	of	product	liability	for	changes	in	spot	currency	exchange	rates,	related derivative	hedging	instruments,	excluding	net	period	coupon	settlements,	and	Japan	FVO	securities).

[2] 	 Primarily	consists	of	gains	and	losses	on	non-qualifying	derivatives	and	fixed	maturities,	FVO,	Japan	3Win	related	foreign	currency swaps,	and	other	investment	gains	and	losses.

Details	on	the	Company's	net	realized	capital	gains	and	losses	are	as	follows:

Variable	annuity	hedge	program •					For	the	year	ended	December	31,	2011,	the	loss	on	U.S.	GMWB	related	derivatives, net,	was	primarily	due	to	a	decrease	in	long-term	interest	rates	that	resulted	in	a charge	of	($283)	and	a	higher	interest	rate	volatility	that	resulted	in	a	charge	of	($84). The	loss	on	U.S.	macro	hedge	program	for	the	year	ended	December	31,	2011	was primarily	driven	by	time	decay	and	a	decrease	in	equity	market	volatility	since	the purchase	date	of	certain	options	during	the	fourth	quarter.	The	gain	associated	with the	international	program	for	the	year	ended	December	31,	2011	was	primarily	driven by	the	Japanese	yen	strengthening,	lower	global	equity	markets,	and	a	decrease	in interest	rates.

•					For	the	year	ended	December	31,	2010,	the	gain	on	U.S.	GMWB	derivatives,	net,	was primarily	due	to	liability	model	assumption	updates	of	$159	and	lower	implied market	volatility	of	$118,	and	outperformance	of	the	underlying	actively	managed funds	as	compared	to	their	respective	indices	of	$104,	partially	offset	by	losses	due	to a	general	decrease	in	long-term	rates	of	($158)	and	rising	equity	markets	of	($90). The	net	loss	on	the	U.S.	macro	hedge	program	was	primarily	the	result	of	a	higher equity	market	valuation	and	the	impact	of	trading	activity.

•					For	the	year	ended	December	31,	2009,	the	gain	on	GMWB	derivatives,	net,	was primarily	due	to	liability	model	assumption	updates	related	to	favorable	policyholder experience	of	$566,	the	relative	outperformance	of	the	underlying	actively	managed funds	as	compared	to	their	respective	indices	of	$550,	and	the	impact	of	the Company's	own	credit	standing	of	$154.	Additional	net	gains	of	$56	resulted	from lower	implied	market	volatility	and	a	general	increase	in	long-term	interest	rates, partially	offset	by	rising	equity	markets.	The	net	loss	on	the	U.S.	macro	hedge program	was	primarily	the	result	of	a	higher	equity	market	valuation. Other,	net •					Other,	net	loss	for	the	year	ended	December	31,	2011,	was	primarily	due	to	losses	of ($148)	on	credit	derivatives	and	fair	value	option	securities	driven	by	credit	spread widening	and	losses	of	($141)	on	transactional	foreign	currency	re-valuation associated	with	the	internal	reinsurance	of	the	Japan	variable	annuity	business,	which is	offset	in	AOCI,	due	to	appreciation	of	the	Japanese	yen	versus	the	U.S.	dollar. Additionally,	losses	of	($94)	for	the	year	ended	December	31,	2011	resulted	from equity	futures	and	options	used	to	hedge	equity	market	risk	in	the	investment portfolio	due	to	an	increase	in	the	equity	market	during	the	hedged	period.	Also included	were	losses	of	($69)	on	Japan	3Win	foreign	currency	swaps	primarily	driven by	a	decrease	in	long-term	U.S.	interest	rates.

•					Other,	net	loss	for	the	year	ended	December	31,	2010	was	primarily	due	to	a	loss	of ($326)	on	transactional	foreign	currency	re-valuation	due	to	an	increase	in	value	of the	Japanese	yen	versus	the	U.S.	dollar	associated	with	the	internal	reinsurance	of	the Japan	variable	annuity	business,	which	is	offset	in	AOCI.	This	loss	was	partially offset	by	gains	of	$217	on	credit	derivatives	driven	by	credit	spread	tightening,	and gains	of	$59	on	interest	rate	derivatives	used	to	manage	portfolio	duration	driven	by	a decline	in	long-term	interest	rates.

# PROPERTY	&	CASUALTY	COMMERCIAL

| Underwriting	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Written\tpremiums | $6,176 | $5,796 | $5,715 |
| Change\tin\tunearned\tpremium\treserve | 49 | 52 | (188) |
| Earned\tpremiums | 6,127 | 5,744 | 5,903 |
| Losses\tand\tloss\tadjustment\texpenses |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 4,139 | 3,579 | 3,582 |
| Current\taccident\tyear\tcatastrophes | 320 | 152 | 78 |
| Prior\taccident\tyears | 125 | (361) | (394) |
| Total\tlosses\tand\tloss\tadjustment\texpenses | 4,584 | 3,370 | 3,266 |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts | 1,356 | 1,353 | 1,393 |
| Underwriting\texpenses | 443 | 426 | 399 |
| Dividends\tto\tpolicyholders | 18 | 5 | 10 |
| Underwriting\tresults | (274) | 590 | 835 |
| Net\tservicing\tincome | 13 | 9 | 6 |
| Net\tinvestment\tincome | 910 | 935 | 755 |
| Net\trealized\tcapital\tgains\t(losses) | (50) | 3 | (209) |
| Goodwill\timpairment | (30) | — | — |
| Other\texpenses | (151) | (147) | (139) |
| Income\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | 418 | 1,390 | 1,248 |
| Income\ttax\texpense | 40 | 407 | 356 |
| Income\tfrom\tcontinuing\toperations,\tnet\tof\ttax | 378 | 983 | 892 |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax\t[1] | 150 | 12 | 7 |
| Net\tincome | $528 | $995 | $899 |

[1] 	 Represents	the	income	from	operations	and	sale	of	Specialty	Risk	Services	("SRS").	For	additional	information,	see	Note	20	of	the Notes	to	Consolidated	Financial	Statements.

| Premium	Measures	[1] | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| New\tbusiness\tpremium | $1,097 | $1,122 | $1,101 |
| Standard\tcommercial\tlines\tpolicy\tcount\tretention | 82% | 84% | 81% |
| Standard\tcommercial\tlines\trenewal\twritten\tpricing\tincrease\t(decrease) | 4% | 1% | (1%) |
| Standard\tcommercial\tlines\trenewal\tearned\tpricing\tincrease\t(decrease) | 2% | — | (2%) |
| Standard\tcommercial\tlines\tpolicies\tin-force\tas\tof\tend\tof\tperiod | 1,252,820 | 1,211,047 | 1,159,759 |

| Ratios | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Loss\tand\tloss\tadjustment\texpense\tratio |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 67.6 | 62.3 | 60.7 |
| Current\taccident\tyear\tcatastrophes | 5.2 | 2.7 | 1.3 |
| Prior\taccident\tyears | 2.0 | (6.3) | (6.7) |
| Total\tloss\tand\tloss\tadjustment\texpense\tratio | 74.8 | 58.7 | 55.3 |
| Expense\tratio | 29.4 | 31.0 | 30.4 |
| Policyholder\tdividend\tratio | 0.3 | 0.1 | 0.2 |
| Combined\tratio | 104.5 | 89.7 | 85.9 |
| Catastrophe\tratio |  |  |  |
| Current\taccident\tyear | 5.2 | 2.7 | 1.3 |
| Prior\taccident\tyears | 0.2 | — | (0.4) |
| Total\tcatastrophe\tratio | 5.4 | 2.7 | 0.9 |
| Combined\tratio\tbefore\tcatastrophes | 99.1 | 87.1 | 84.9 |
| Combined\tratio\tbefore\tcatastrophes\tand\tprior\taccident\tyear\tdevelopment | 97.2 | 93.4 | 91.2 |
| Other\trevenues\t[1] | $97 | $96 | $103 |

[1] 	 Represents	servicing	revenues.

Net	income	decreased	in	2011,	as	compared	to	the	prior	year,	primarily	due	to	a	decrease	in	underwriting	results	due	to	higher	current accident	year	losses,	including	catastrophes,	and	unfavorable	prior	accident	years	development	in	2011	compared	to	favorable	prior accident	years	development	in	2010.	The	decrease	in	underwriting	results	was	partially	offset	by	the	net	realized	capital	gain	on	the	sale	of SRS.	The	annual	goodwill	assessment	for	the	Property	&	Casualty	Commercial	reporting	unit	resulted	in	a	write-down	of	goodwill	of	$30, pre-tax	for	the	year	ended	December	31,	2011.	For	further	discussion,	see	Goodwill	and	Other	Intangible	Assets	within	Note	8	of	the Notes	to	Consolidated	Financial	Statements.

Current	accident	year	catastrophe	losses	increased	$168,	pre-tax,	from	2010	to	2011.	In	2011,	catastrophes	primarily	included	severe thunderstorms	and	tornadoes	in	the	Midwest	and	Southeast,	Hurricane	Irene	in	the	Northeast,	Tropical	Storm	Lee,	and	winter	storms, earlier	in	the	year,	in	the	Northeast	and	Midwest.	In	2010,	catastrophes	primarily	included	tornadoes,	thunderstorms	and	hail	events	in	the Midwest,	Plains	States	and	the	Southeast	and	winter	storms	in	the	Mid-Atlantic	and	Northeast.

For	information	regarding	prior	accident	years	reserve	development,	including	reserve	(releases)	strengthenings	by	reserve	line,	see	the Property	and	Casualty	Insurance	Product	Reserves,	Net	of	Reinsurance	section	within	Critical	Accounting	Estimates.

The	increase	in	earned	premiums	in	2011,	is	primarily	due	to	improvements	in	workers'	compensation,	driven	by	higher	new	business premium,	renewal	earned	pricing	increases	and	an	increase	in	policies-in-force.	The	earned	pricing	changes	were	primarily	a	reflection	of written	pricing	changes	over	the	last	year.	Renewal	written	pricing	increased	for	all	standard	commercial	lines	driven	by	improving	market conditions.

Current	accident	year	losses	and	loss	adjustment	expenses	before	catastrophes	increased,	due	primarily	to	the	increase	in	earned	premiums for	workers'	compensation,	as	well	as	an	increase	in	the	current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes. The	ratio	increased	primarily	due	to	loss	costs	outpacing	earned	pricing	increases	driven	by	an	increase	in	workers'	compensation	claim frequency,	partially	offset	by	moderating	severity,	resulting	in	an	increase	in	current	accident	year	reserve	strengthening.

Underwriting	expenses	increased	in	2011,	driven	by	an	increase	in	technology	costs,	partially	offset	by	a	decrease	in	compensation	related costs.	The	year	ended	December	31,	2011	included	a	$12	release	of	reserves	for	other	state	funds	and	taxes,	while	the	year	ended December	31,	2010	included	strengthening	of	$20,	which	was	due	to	an	increase	in	the	assessment	for	New	York	state	funds	and	taxes. The	 change	 in	 dividends	 to	 policyholders	 is	 due	 to	 a	 decrease	 in	 2010	 of	 dividends	 payable	 primarily	 for	 workers'	 compensation policyholders.

Net	 realized	 capital	 losses	 increased	 primarily	 due	 to	 losses	 on	 derivatives,	 partially	 offset	 by lower impairments.	 For	 additional information,	see	the	Investment	Results	section	within	Key	Performance	Measures	and	Ratios.

The	effective	tax	rate,	in	both	periods,	differs	from	the	U.S.	Federal	statutory	rate	primarily	due	to	permanent	differences	related	to investments	in	tax	exempt	securities.	In	addition,	due	to	the	availability	of	additional	tax	planning	strategies,	the	Company	released	$22, or	100%,	of	the	valuation	allowance	associated	with	investment	realized	capital	losses	in	2011.	For	further	discussion,	see	Income	Taxes within	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

Net	income	increased	in	2010,	as	compared	to	the	prior	year,	driven	by	improvements	in	net	realized	capital	gains	(losses)	and	higher	net investment	income,	despite	a	decrease	in	underwriting	results.	The	primary	causes	of	the	decrease	in	underwriting	results	were	lower earned	premiums	and	higher	current	accident	year	catastrophe	losses.

Earned	premiums	decreased	across	most	product	lines,	with	the	exception	of	workers	compensation	and	specialty	casualty.	The	effects	of the	economic	downturn	contributed	to	the	decrease	in	earned	premiums	during	2010.	Although	earned	premiums	declined,	several	key measures	showed	improvement.	New	business	written	premium	increased,	driven	by	increases	in	specialty	casualty	and	package	business, partially	offset	by	decreases	in	general	liability,	professional	liability	and	marine.	In	addition,	for	standard	commercial	lines,	policy	count retention	increased	in	all	lines	of	business,	due	in	part	by	an	improvement	in	mid-term	cancellations	in	2010.	Renewal	earned	pricing	was flat	for	standard	commercial	lines,	as	an	increase	in	package	business	and	property	was	offset	by	a	decrease	in	all	other	lines.	The	earned pricing	changes	were	primarily	a	reflection	of	written	pricing	changes	over	the	last	year.	Renewal	written	pricing	increased	for	standard commercial	lines	driven	by	increases	in	property	and	workers	compensation,	partially	offset	by	decreases	in	all	other	lines.	Lastly,	the number	of	policies-in-force	increased,	primarily	due	to	the	increase	in	policy	count	retention.	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.

Current	accident	year	losses	and	loss	adjustment	expenses	before	catastrophes	decreased	slightly,	due	to	the	decrease	in	earned	premiums, which	was	mostly	offset	by	an	increase	in	the	current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes.	The	ratio increased,	primarily	due	to	higher	severity	on	package	business	and	workers'	compensation,	as	well	as	an	increased	ratio	for	specialty casualty.

Current	accident	year	catastrophe	losses	in	2010	were	higher	than	in	2009	primarily	due	to	more	severe	windstorm	events,	particularly from	hail	in	the	West,	Midwest,	plains	states	and	the	Southeast,	and	from	winter	storms	in	the	Mid-Atlantic	and	Northeast.	Losses	in	2009 were	primarily	incurred	from	ice	storms,	windstorms	and	tornadoes	across	many	states.

Underwriting	expenses	increased	in	2010,	driven	by	an	increase	in	taxes,	licenses	and	fees	of	$19,	which	included	a	$5	increase	in	reserve strengthening	for	other	state	funds	and	taxes	and	a	$7	reduction	in	TWIA	assessments	recognized	in	2009	related	to	hurricane	Ike.	Also contributing	to	the	increase	were	higher	technology	costs,	partially	offset	by	lower	compensation-related	costs.	Amortization	of	deferred policy	acquisition	costs	decreased,	largely	due	to	the	decrease	in	earned	premiums.	The	change	in	dividends	to	policyholders	is	due	to	a decrease	in	2010	of	dividends	payable	primarily	for	workers'	compensation	policyholders.

Net	realized	capital	gains	(losses)	improved	as	compared	to	the	prior	year,	as	did	net	investment	income.	The	improvements	in	net realized	capital	gains	(loss)	were	primarily	driven	by	lower	impairments	in	2010	compared	to	2009	and	realized	gains	on	derivatives	in 2010	compared	to	losses	in	2009.	Net	investment	income	increased	in	2010,	primarily	as	a	result	of	improvements	in	limited	partnerships and	 other	 alternative	 investments,	 partially	 offset	 by	 lower	 returns	 on	 taxable	 fixed	 maturities	 due	 to	 declining	 interest	 rates.	 For additional	information,	see	the	Investment	Results	section	within	Key	Performance	Measures	and	Ratios.

The	effective	tax	rate,	in	both	periods,	differs	from	the	U.S.	Federal	statutory	rate	primarily	due	to	permanent	differences	related	to investments	in	tax	exempt	securities.	For	further	discussion,	see	Income	Taxes	within	Note	13	of	the	Notes	to	Consolidated	Financial Statements.

# GROUP	BENEFITS

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Premiums\tand\tother\tconsiderations | $4,147 | $4,278 | $4,350 |
| Net\tinvestment\tincome | 411 | 429 | 403 |
| Net\trealized\tcapital\tgains\t(losses) | (3) | 46 | (124) |
| Total\trevenues | 4,555 | 4,753 | 4,629 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 3,306 | 3,331 | 3,196 |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts | 55 | 61 | 61 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 1,104 | 1,111 | 1,120 |
| Total\tbenefits,\tlosses\tand\texpenses | 4,465 | 4,503 | 4,377 |
| Income\tbefore\tincome\ttaxes | 90 | 250 | 252 |
| Income\ttax\texpense | — | 65 | 59 |
| Net\tincome | $90 | $185 | $193 |

Group	Benefits	has	a	block	of	financial	institution	business	that	is	experience	rated.	This	business	comprised	approximately	9%	to	10%	of the	segment's	2011,	2010	and	2009	premiums	and	other	considerations	(excluding	buyouts).	With	respect	to	the	segment's	core	earnings, the	financial	institution	business	comprised	2%	for	2011,	6%	for	2010,	2%	for	2009,	excluding	a	one-time	payment	to	a	third	party administrator	in	2011	and	a	commission	accrual	adjustment	in	2009.

Net	income	decreased,	relative	to	prior	year,	primarily	due	to	higher	mortality	and	morbidity	driven	by	elevated	incidence	and	lower claim	terminations,	and	to	a	lesser	extent,	a	decrease	in	fully	insured	ongoing	premiums,	driven	by	lower	sales	over	the	past	year,	as	well as,	from	a	challenging	economic	environment.

Net	income	decreased	as	compared	to	prior	year,	as	a	decrease	in	premiums	and	other	considerations	and	higher	claim	costs	offset	the improvements	in	net	realized	capital	gains	(losses)	and	net	investment	income.	Premiums	and	other	considerations	decreased	due	to	a	3% decline	in	fully	insured	ongoing	premiums	which	was	driven	by	lower	sales	due	to	the	competitive	marketplace,	and	the	pace	of	the economic	recovery.	The	loss	ratio,	excluding	buyouts,	increased	compared	to	the	prior	year,	particularly	in	group	disability,	primarily	due to	unfavorable	morbidity	experience	from	higher	incidence	and	lower	claim	terminations.

The	favorable	change	to	net	realized	capital	gains	in	2010,	from	net	realized	capital	losses	in	2009,	was	due	to	impairments	on	investment securities	recorded	in	2009.	For	further	discussion	on	impairments,	see	Other-Than-Temporary	Impairments	within	the	Investment	Credit Risk	section	of	the	MD&A.	Net	investment	income	increased	as	a	result	of	higher	weighted	average	portfolio	yields	primarily	due	to improved	performance	on	limited	partnerships	and	other	alternative	investments.

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Written\tpremiums | $3,675 | $3,886 | $3,995 |
| Change\tin\tunearned\tpremium\treserve | (72) | (61) | 36 |
| Earned\tpremiums | 3,747 | 3,947 | 3,959 |
| Losses\tand\tloss\tadjustment\texpenses |  |  |  |
| Current\taccident\tyear\tbefore\tcatastrophes | 2,536 | 2,737 | 2,707 |
| Current\taccident\tyear\tcatastrophes | 425 | 300 | 228 |
| Prior\taccident\tyears | (75) | (86) | (33) |
| Total\tlosses\tand\tloss\tadjustment\texpenses | 2,886 | 2,951 | 2,902 |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts | 639 | 667 | 674 |
| Underwriting\texpenses | 279 | 290 | 273 |
| Underwriting\tresults | (57) | 39 | 110 |
| Net\tservicing\tincome | 19 | 35 | 29 |
| Net\tinvestment\tincome | 187 | 187 | 178 |
| Net\trealized\tcapital\tgains\t(losses) | (11) | — | (52) |
| Other\texpenses | (162) | (66) | (77) |
| Income\t(loss)\tbefore\tincome\ttaxes | (24) | 195 | 188 |
| Income\ttax\texpense\t(benefit) | (29) | 52 | 48 |
| Net\tincome | $5 | $143 | $140 |

Net	income	decreased	in	2011,	as	compared	to	the	prior	year,	due	to	higher	current	accident	year	catastrophes	and	a	$113,	pre-tax,	charge, recorded	in	other	expenses,	related	to	the	write	off	of	capitalized	costs	associated	with	a	discontinued	policy	administration	software project.

Current	accident	year	catastrophe	losses	increased	from	2010	to	2011,	driven	by	an	increase	in	tornado	and	thunderstorm	losses	in	the Midwest	and	Southeast	of	approximately	$140,	pre-tax.	In	2011,	catastrophes	primarily	included	severe	tornadoes,	hail	and	thunderstorm events	in	the	Midwest	and	Southeast	and	Hurricane	Irene.	In	2010,	catastrophes	primarily	included	tornadoes,	hail	and	thunderstorm events	in	the	Midwest,	Plains	States	and	the	Southeast,	as	well	as,	a	severe	wind	and	hail	storm	event	in	Arizona.

Earned	premiums	decreased	in	auto	and	were	down	modestly	for	homeowners.	For	both	auto	and	homeowners,	non-renewal	of	existing policies	more	than	offset	the	impacts	of	new	business	written	premium	and	renewal	earned	pricing	increases.	Compared	to	2010,	the number	of	policies	in-force	as	of	December	31,	2011	decreased	for	both	auto	and	home,	driven	by	non-renewals.

Auto	new	business	written	premium	decreased,	primarily	due	to	the	effect	of	written	pricing	increases	and	underwriting	actions	that lowered	the	policy	issue	rate	in	Agency.	Home	new	business	written	premium	decreased	in	both	AARP	and	Agency	driven	largely	by	the effect	of	written	pricing	increases.	While	auto	and	home	new	business	written	premium	declined	for	the	full	year,	new	business	increased in	the	latter	part	of	the	year	with	new	business	growth	in	both	channels	in	the	fourth	quarter	of	2011.

The	higher	auto	renewal	earned	pricing	in	2011	was	due	to	rate	increases	and	the	effect	of	policyholders	purchasing	newer	vehicle	models in	place	of	older	models.	Average	renewal	earned	premium	per	policy	for	auto	increased	modestly	as	renewal	earned	pricing	increases were	partially	offset	by	the	effect	of	a	continued	shift	to	more	preferred	market	business	which	has	lower	average	earned	premium. Homeowners'	renewal	earned	pricing	increases	were	due	to	rate	increases	and	increased	coverage	amounts.	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.

Current	accident	year	losses	and	loss	adjustment	expenses	before	catastrophes	decreased	primarily	due	to	lower	earned	premiums.	The overall	current	accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes	decreased	during	2011	as	a	2.6	point	decrease	for auto	was	partially	offset	by	a	1.2	point	increase	for	home.	For	auto,	the	effect	of	earned	pricing	increases	and	lower	estimated	frequency on	auto	liability	claims	was	partially	offset	by	higher	auto	physical	damage	loss	costs.	For	home,	an	increase	in	the	frequency	of	non- catastrophe	weather	claims	was	partially	offset	by	the	effect	of	earned	pricing	increases.

Amortization	of	deferred	acquisition	costs	decreased	largely	due	to	a	decline	in	commissions	paid	to	agents	due	to	lower	Agency	earned premium.	The	decrease	in	underwriting	expenses	was	primarily	driven	by	a	decrease	in	reserves	for	other	state	funds	and	taxes.	The decline	in	net	servicing	income	in	2011	was	largely	due	to	lower	contact	center	transaction	volumes	handled	as	a	third	party	administrator under	the	AARP	Health	program.

Net	income	increased	slightly	in	2010,	as	compared	to	the	prior	year,	despite	a	decrease	in	underwriting	results.	The	primary	causes	of	the decrease	in	underwriting	results	were	higher	current	accident	year	losses	and	loss	adjustment	expenses,	including	catastrophes,	partially offset	by	more	favorable	prior	accident	year	reserve	development.	The	lower	underwriting	results	were	offset	by	improvements	in	net realized	capital	gains	(losses)	and	higher	net	investment	income.

Current	accident	year	losses	and	loss	adjustment	expenses	before	catastrophes	increased	primarily	due	to	an	increase	in	the	current accident	year	loss	and	loss	adjustment	expense	ratio	before	catastrophes	for	auto	due	to	higher	auto	physical	damage	emerged	frequency and	higher	expected	auto	liability	loss	costs	relative	to	average	premium.	The	current	accident	year	loss	and	loss	adjustment	expense	ratio before	catastrophes	for	home	increased	primarily	due	to	an	increase	in	loss	adjustment	expenses,	partially	offset	by	the	effect	of	earned pricing	increases.

Current	accident	year	catastrophes	were	higher	in	2010	than	in	2009	primarily	due	to	a	severe	wind	and	hail	storm	event	in	Arizona	during the	fourth	quarter	of	2010.	Losses	in	2010	were	also	incurred	from	tornadoes,	thunderstorms	and	hail	events	in	the	Midwest,	plains	states and	the	Southeast,	as	well	as	from	winter	storms	in	the	Mid-Atlantic	and	Northeast.	Catastrophe	losses	in	2009	were	primarily	incurred from	windstorms	in	Texas	and	the	Midwest	as	well	as	the	two	large	Colorado	hail	and	windstorm	events.

Earned	premiums	decreased	in	2010,	as	lower	earned	premiums	in	auto	were	partially	offset	by	an	increase	in	homeowners.	Auto	earned premiums	were	down	reflecting	a	decrease	in	new	business	written	premium	and	policy	count	retention	since	the	fourth	quarter	of	2009 and	a	decrease	 in	average	renewal	earned	premium	per	policy.	Homeowners'	earned	premiums	grew	primarily	due	 to	 the	effect	of increases	in	earned	pricing,	partially	offset	by	a	decrease	in	new	business	written	premium	and	policy	count	retention.

Auto	and	home	new	business	written	premium	decreased	primarily	due	to	the	effect	of	written	pricing	increases	and	underwriting	actions that	lowered	the	policy	issue	rate.	Also	contributing	to	the	decrease	in	new	business	were	fewer	responses	from	direct	marketing	on AARP	business	and	fewer	quotes	from	independent	agents	driven	by	increased	competition.	Partially	offsetting	the	decrease	in	auto	new business	was	the	effect	of	an	increase	in	policies	sold	to	AARP	members	through	agents.	Partially	offsetting	the	decrease	in	home	new business	was	an	increase	in	the	cross-sale	of	homeowners'	insurance	to	insureds	that	have	auto	policies.

The	change	in	auto	renewal	earned	pricing	was	flat	due	to	rate	increases	and	the	effect	of	policyholders	purchasing	newer	vehicle	models in	place	of	older	models.	Despite	auto	renewal	earned	pricing	increasing,	average	renewal	earned	premium	per	policy	for	auto	declined due	to	a	shift	to	more	preferred	market	segments	and	a	greater	concentration	of	business	in	states	and	territories	with	lower	average premium.	 Homeowners'	 renewal	 earned	 pricing	 increased	 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.

Policy	count	retention	for	auto	and	home	decreased	primarily	driven	by	the	effect	of	renewal	written	pricing	increases	and	underwriting actions	to	improve	profitability.	The	decrease	in	the	policy	count	retention	for	homeowners	was	partially	offset	by	the	effect	of	the Company's	non-renewal	of	Florida	homeowners'	agency	business	in	2009.	Compared	to	2009,	the	number	of	policies	in-force	as	of	2010 decreased	for	both	auto	and	home,	driven	by	the	decreases	in	policy	retention	and	new	business.

The	expense	ratio	increased	due	largely	to	an	increase	in	legal	settlement	costs	in	2010	and	higher	amortization	of	acquisition	costs	on AARP	business,	partially	offset	by	lower	direct	marketing	spend	for	consumer	direct	business.	Also	contributing	to	the	increase	in	the expense	ratio	was	a	reduction	of	TWIA	hurricane	assessments	in	2009	largely	offset	by	an	increase	in	reserves	for	other	state	funds	and taxes	in	2009.

Net	realized	capital	gains	(losses)	improved,	as	compared	to	prior	year.	The	improvements	were	primarily	driven	by	lower	impairments	in 2010	compared	to	2009	and	realized	gains	on	derivatives	in	2010	compared	to	losses	in	2009.	Net	investment	income	increased,	primarily as	a	result	of	increased	income	from	limited	partnerships	and	other	alternative	investments,	partially	offset	by	lower	returns	on	taxable fixed	maturities	due	to	declining	interest	rates.	For	additional	information,	see	the	Investment	Results	section	within	Key	Performance Measures	and	Ratios.

# INDIVIDUAL	ANNUITY

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fee\tincome\tand\tother | $1,411 | $1,493 | $1,472 |
| Earned\tpremiums | 249 | 223 | (7) |
| Net\tinvestment\tincome | 768 | 814 | 771 |
| Net\trealized\tcapital\tlosses | (591) | (339) | (7) |
| Total\trevenues | 1,837 | 2,191 | 2,229 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 1,106 | 1,054 | 1,310 |
| Amortization\tof\tDAC | 483 | (56) | 1,339 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 536 | 542 | 505 |
| Total\tbenefits,\tlosses\tand\texpenses | 2,125 | 1,540 | 3,154 |
| Income\t(loss)\tbefore\tincome\ttaxes | (288) | 651 | (925) |
| Income\ttax\texpense\t(benefit) | (274) | 124 | (481) |
| Net\tincome\t(loss) | $(14) | $527 | $(444) |

[1] International	and	institutional	annuities	were	transferred	retrospectively	to	Life	Other	Operations.

Net	income	decreased	in	2011	compared	to	2010	primarily	due	to	an	Unlock	charge	taken	in	2011	compared	to	an	Unlock	benefit	in	2010 and	increased	net	realized	capital	losses	in	2011.	Additionally,	lower	account	values	driven	by	equity	performance	and	net	outflows resulted	in	lower	fee	income.

The	Unlock	charge	was	$172,	after-tax,	in	2011	as	compared	to	an	Unlock	benefit	of	$143,	after-tax,	in	2010.	The	Unlock	charge	in	2011 was	due	to	the	annual	assumption	update	which	reflected	additional	hedging	costs	incurred	in	2011	resulting	in	increased	benefits	losses and	loss	adjustment	expenses	and	DAC	amortization.	For	further	discussion	of	the	Unlock	see	the	Critical	Accounting	Estimates	within the	MD&A.

The	higher	net	realized	capital	losses	in	2011	were	primarily	due	to	increased	losses	on	the	variable	annuity	hedging	program.	The	variable annuity	hedging	program	losses	were	$613	in	2011	compared	with	losses	of	$356	in	2010.	For	further	discussion	on	the	results	of	the variable	annuity	hedging	program	see	Investment	Results,	Net	Realized	Capital	Gains	(Losses)	within	Key	Performance	Measures	and Ratios	of	the	MD&A.

Net	investment	spread	decreased	by	10	bps	in	2011	compared	to	2010	primarily	due	to	lower	returns	on	partnership,	derivative	and	other alternative	investments.	Yields	decreased	by	28	bps	due	to	a	lower	interest	rate	environment,	however,	this	decrease	was	offset	by	a benefit	of	18	bps	from	lower	crediting	rates	related	to	maturities	of	older	contracts	with	higher	crediting	rates	or	contract	renewals	with current	lower	crediting	rates.

Individual	Annuity's	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate account	DRD	on	annuity	products.	Income	taxes	include	separate	account	DRD	benefits	of	$155	in	2011	compared	to	$108	in	2010. Included	in	the	2011	separate	account	benefit	is	a	tax	benefit	of	$51	including	$6	interest	related	to	a	DRD	settlement.	For	further discussion,	see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

Net	income	increased	in	2010	compared	to	2009	primarily	due	to	significant	improvements	in	the	equity	markets,	which	resulted	in	an Unlock	benefit	in	2010	as	compared	to	an	Unlock	charge	in	2009,	as	well	as	continued	market	value	appreciation	in	account	value resulting	in	increased	fee	income,	and	due	to	continued	expense	reduction	efforts	in	2010.

The	Unlock	benefit	was	$143,	after-tax,	in	2010	as	compared	to	an	Unlock	charge	of	$606,	after-tax,	in	2009.	The	benefit	in	2010	was primarily	due	to	equity	market	improvements	that	were	greater	than	expectations	for	the	year	ended	December	31,	2010,	while	2009's charge	was	primarily	the	result	of	equity	market	performance	significantly	below	expectations	for	the	first	quarter	of	2009.	The	Unlock resulted	in	decreases	to	both	benefits,	losses	and	loss	adjustment	expenses	and	amortization	of	DAC.	For	further	discussion	of	the	Unlock see	the	Critical	Accounting	Estimates	within	the	MD&A.

The	higher	net	realized	capital	losses	in	2010	were	primarily	due	to	losses	on	the	variable	annuity	hedging	program	compared	to	gains	in 2009,	partially	offset	by	lower	impairment	losses	in	2010	and	net	realized	gains	on	sales	of	securities	in	2010	compared	to	net	realized losses	in	2009.	The	variable	annuity	hedging	program	losses	were	$356	in	2010	compared	with	gains	of	$731	in	2009.	For	further discussion	on	the	results	of	the	variable	annuity	hedging	program	see	Investment	Results,	Net	Realized	Capital	Gains	(Losses)	within	Key Performance	Measures	and	Ratios	of	the	MD&A.

Net	 investment	 income	on	securities	available-for-sale	and	other increased	slightly	due to improving investments	results	on limited partnership	and	other	alternative	investments.

Net	investment	spread	increased	by	26	bps	in	2010	compared	to	2009	primarily	due	to	an	increase	in	partnership	returns,	partially	offset by	declines	in	fixed	maturities.	Yields	decreased	by	7	bps	due	to	a	lower	interest	rate	environment,	however,	this	decrease	was	offset	by	a benefit	of	33	bps	from	lower	crediting	rates	related	to	maturities	of	older	contracts	with	higher	crediting	rates	or	contract	renewals	with current	lower	crediting	rates.

Individual	Annuity's	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate account	DRD	on	U.S.	annuity	products.	For	further	discussion,	see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

# INDIVIDUAL	LIFE

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fee\tincome\tand\tother | $1,001 | $952 | $1,027 |
| Earned\tpremiums | (102) | (96) | (87) |
| Net\tinvestment\tincome | 456 | 400 | 335 |
| Net\trealized\tcapital\tgains\t(losses) | 30 | 24 | (145) |
| Total\trevenues | 1,385 | 1,280 | 1,130 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 816 | 644 | 640 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 182 | 181 | 188 |
| Amortization\tof\tDAC | 221 | 119 | 314 |
| Total\tbenefits,\tlosses\tand\texpenses | 1,219 | 944 | 1,142 |
| Income\t(loss)\tbefore\tincome\ttaxes | 166 | 336 | (12) |
| Income\ttax\texpense\t(benefit) | 33 | 107 | (27) |
| Net\tincome | $133 | $229 | $15 |
| Account\tValues |  |  |  |
| Individual\tvariable\tuniversal\tlife\tinsurance | $5,535 | $6,115 | $5,766 |
| Universal\tlife,\tinterest\tsensitive\twhole\tlife,\tmodified\tguaranteed\tlife |  |  |  |
| insurance\tand\tother | 6,765 | 6,128 | 5,693 |
| Total\taccount\tvalues | $12,300 | $12,243 | $11,459 |
| Individual\tLife\tInsurance\tIn-force |  |  |  |
| Variable\tuniversal\tlife\tinsurance | $69,716 | $74,044 | $78,671 |
| Universal\tlife,\tinterest\tsensitive\twhole\tlife,\tmodified\tguaranteed\tlife |  |  |  |
| insurance | 64,006 | 58,789 | 56,030 |
| Term\tlife | 81,494 | 75,797 | 69,968 |
| Total\tlife\tinsurance\tin-force | $215,216 | $208,630 | $204,669 |
| Net\tInvestment\tSpread | 153\tbps | 145\tbps | 81\tbps |
| Death\tBenefits | $423 | $362 | $346 |

Net	income	decreased	in	2011	compared	to	2010	largely	due	to	an	Unlock	charge	taken	in	2011	compared	to	an	Unlock	benefit	in	2010 and	unfavorable	mortality	in	2011,	partially	offset	by	an	increase	in	net	investment	income	driven	by	higher	invested	assets	and	favorable partnership	income.

The	Unlock	charge	was	$69,	after-tax,	for	2011	compared	to	an	Unlock	benefit	of	$28,	after-tax,	for	2010.	The	Unlock	charge	in	2011	was due	to	the	annual	assumption	update	completed	in	the	third	quarter	and	resulted	in	an	increase	in	fee	income,	benefit	and	claim	expense and	DAC	amortization.	For	further	discussion	of	Unlocks	see	the	Critical	Accounting	Estimates	within	the	MD&A.

Net	investment	spread	increased	by	8	bps	in	2011	compared	to	2010.	While	yields	were	down	slightly	compared	to	2010,	the	increase	in spread	was	driven	by	lower	crediting	rates	on	new	business	written	relative	to	in-force	business	with	higher	crediting	rates.

The	increase	in	death	benefits	for	2011	compared	to	2010	was	due	to	unfavorable	mortality	experience	due	to	higher	reinsurance	retention relative	to	2010	but	within	expected	levels	of	volatility	for	2011.

Individual	Life's	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate	account DRD.	 Income	 taxes	 include	 separate	 account	 DRD	 benefits	 of	 $17	 and	 $13	 for	 the	 years	 ended	 December	 31,	 2011	 and	 2010, respectively.	The	separate	account	DRD	benefit	for	the	year	ended	December	31,	2011	includes	$5	related	to	a	DRD	settlement.

Net	income	increased	in	2010	compared	to	2009	primarily	due	to	net	realized	capital	gains	and	Unlock	benefit	in	2010.	In	addition, Individual	Life's	net	income	increased,	excluding	the	improvements	to	net	realized	gains	and	an	Unlock	benefit,	due	to	improvements	in the	segment's	individual	life	business.

Individual	Life's	net	realized	gains	in	2010	compared	to	net	realized	capital	losses	in	2009	were	primarily	due	to	lower	losses	from impairments.	For	further	discussion	on	impairments,	see	Other-Than-Temporary	Impairments	within	the	Investment	Credit	Risk	section	of the	MD&A.

The	Unlock	benefit	was	$28,	after-tax,	in	2010	as	compared	to	an	Unlock	charge	of	$51,	after-tax,	in	2009.	The	benefit	in	2010	was primarily	due	to	assumption	updates	related	to	lapse	rates,	investment	margin	and	mortality,	partially	offset	by	persistency,	while	2009's charge	was	primarily	the	result	of	assumption	updates	related	to	investment	margin	and	expenses,	as	well	as	equity	market	performance significantly	below	expectations	in	2009,	partially	offset	by	assumption	updates	on	lapse	rates.	The	Unlock	primarily	resulted	in	decreases to	amortization	of	DAC	and	fee	income	and	other.	For	further	discussion	of	the	Unlock	see	the	Critical	Accounting	Estimates	within	the MD&A.

Net	investment	income	increased	primarily	due	to	improved	performance	of	limited	partnerships	and	other	alternative	investments	and earnings	on	a	higher	average	invested	asset	base	in	2010	compared	to	2009,	partially	offset	by	lower	yields	on	fixed	maturity	investments. Net	investment	spread	increased	by	64	bps	in	2010	compared	to	2009	driven	by	improved	investment	yields	of	33	bps	and	decreased crediting	rates	of	31	bps.	The	lower	crediting	rates	related	to	maturities	of	older	contracts	with	higher	crediting	rates	or	contract	renewals with	current	lower	crediting	rates.

Individual	Life's	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate	account DRD,	partially	offset	by	a	valuation	allowance	on	deferred	tax	benefits	related	to	certain	realized	losses	in	2010.	For	further	discussion, see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

# RETIREMENT	PLANS

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fee\tincome\tand\tother | $373 | $352 | $321 |
| Earned\tpremiums | 7 | 7 | 3 |
| Net\tinvestment\tincome | 396 | 364 | 315 |
| Net\trealized\tcapital\tlosses | (10) | (18) | (333) |
| Total\trevenues | 766 | 705 | 306 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 308 | 278 | 269 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 354 | 340 | 346 |
| Amortization\tof\tDAC | 134 | 27 | 56 |
| Total\tbenefits,\tlosses\tand\texpenses | 796 | 645 | 671 |
| Income\t(loss)\tbefore\tincome\ttaxes | (30) | 60 | (365) |
| Income\ttax\texpense\t(benefit) | (45) | 13 | (143) |
| Net\tincome\t(loss) | $15 | $47 | $(222) |

| Assets	Under	Management | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| 401(k)\taccount\tvalues | $21,124 | $20,291 | $16,142 |
| 403(b)/457\taccount\tvalues | 12,775 | 12,649 | 11,116 |
| 401(k)/403(b)\tmutual\tfunds | 18,403 | 19,578 | 16,704 |
| Total\tassets\tunder\tmanagement | $52,302 | $52,518 | $43,962 |

| Assets	Under	Management	Roll	Forward | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Assets\tunder\tmanagement,\tbeginning\tof\tperiod | $52,518 | $43,962 | $37,036 |
| Net\tflows | 761 | 1,545 | (1,142) |
| Transfers\tin\tand\treclassifications\t[1] | 267 | 1,488 | — |
| Change\tin\tmarket\tvalue\tand\tother | (1,244) | 5,523 | 8,068 |
| Assets\tunder\tmanagement,\tend\tof\tperiod | $52,302 | $52,518 | $43,962 |
| Net\tInvestment\tSpread | 98\tbps | 99\tbps | 66\tbps |

[1] 	 Lifetime	Income	and	Maturity	Funding	business	of	$194	was	transferred	from	Individual	Annuity	to	Retirement	Plans	effective

January	1,	2010.	Also	in	2010,	the	Company	identified	specific	plans	that	required	reclassification	of	$1.3	billion	from	AUA	to AUM.

Net	income	decreased	in	2011	compared	to	2010	due	largely	to	the	Unlock	charge	taken	in	the	third	quarter	compared	to	an	Unlock benefit	in	2010,	partially	offset	by	a	favorable	one-time	true	up	in	tax	expense.

The	Unlock	charge	was	$45,	after-tax,	in	2011	as	compared	to	an	Unlock	benefit	of	$18,	after-tax,	in	2010.	The	Unlock	charge	in	2011 was	primarily	due	to	the	annual	assumption	update	completed	in	the	third	quarter.	The	most	significant	assumption	changes	related	to reduced	investment	spread	in	the	general	account	delayed	projected	expense	benefits	and	increased	trail	commissions	due	to	the	mix	of business.	Each	of	these	items	reduces	expected	future	gross	profits.	The	benefit	in	2010	was	primarily	due	to	assumption	changes	based	on actual	experience	and	to	a	lesser	extent	from	the	market	performance	variance	to	expectations.	For	further	discussion	of	Unlocks	see	the Critical	Accounting	Estimates	within	the	MD&A.

Net	 investment	 income	 increased	 in	 2011	 compared	 to	 2010	 although	 portfolio	 yields	 were	 lower	 in	 2011.	 Net	 investment	 spread decreased	by	1	bps	driven	by	lower	yields	of	12	bps	on	higher	average	general	account	invested	assets	and	favorable	partnership	income, offset	by	lower	crediting	rates	of	11	bps.

Retirement	Plans'	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate	account DRD.	For	2011	and	2010	income	taxes	include	separate	account	DRD	benefits	of	$25	and	$18,	respectively.	Included	in	the	separate account	benefit	for	2011	is	a	$4	benefit	related	to	a	DRD	settlement	and	a	$2	benefit	related	to	a	true	up	the	2010	tax	year	provision.	In addition,	due	to	the	availability	of	additional	tax	planning	strategies,	the	Company	released	$10	or	100%	of	the	valuation	allowance associated	with	realized	capital	losses	during	2011.	For	further	discussion,	see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

Retirement	Plans'	net	income	in	2010	compared	to	a	net	loss	in	2009	was	primarily	due	to	significant	improvements	in	net	realized	capital losses,	as	well	as	higher	net	investment	income	and	improvements	in	the	equity	markets	which	resulted	in	an	Unlock	benefit	in	2010	as compared	to	an	Unlock	charge	in	2009	and	continued	market	value	appreciation	in	AUM	which	resulted	in	increased	fee	income	and other.

Net	realized	capital	losses	were	lower	in	2010	compared	to	2009	due	to	lower	losses	from	impairments,	derivatives,	and	trading	losses compared	to	2009.

Net	investment	income	increased	in	2010	compared	to	2009	primarily	due	to	the	improved	performance	from	limited	partnerships	and other	alternative	investments	and	higher	average	general	account	invested	assets	compared	to	2009.	Correspondingly,	the	improvements in	performance	on	 limited	partnerships	and	other	alternative	 investments	drove	an	 increase	 in	 the	net	 investment	spread	of	33	bps, partially	offset	by	lower	returns	on	fixed	maturity	securities.	Net	investment	spread	also	improved	due	to	lower	crediting	rates	of	8	bps.

The	Unlock	benefit	was	$18,	after-tax,	in	2010	as	compared	to	an	Unlock	charge	of	$56,	after-tax,	in	2009.	The	benefit	in	2010	was primarily	 due	 to	 assumption	 changes	 based	 on	 actual	 experience	 and	 to	 a	 lesser	 extent	 from	 the	 market	 performance	 variance	 to expectations	for	the	year	ended	December	31,	2010,	while	2009's	charge	was	primarily	the	result	assumption	changes	based	on	actual experience	and	equity	market	performance	significantly	below	expectations.	The	Unlock	primarily	resulted	in	a	decrease	to	amortization of	DAC.	For	further	discussion	of	the	Unlock	see	the	Critical	Accounting	Estimates	within	the	MD&A.

Fee	 income	 and	 other	 increased	 primarily	 due	 to	 increases in	 asset	 based fees	 on	 higher	 average	 account	 values resulting from improvements	in	equity	markets	and	increased	net	flows.

Retirement	Plans'	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	permanent	differences	for	the	separate	account DRD.	For	further	discussion,	see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

# MUTUAL	FUNDS

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fee\tincome\tand\tother | $649 | $664 | $518 |
| Net\tinvestment\tloss | (3) | (8) | (21) |
| Net\trealized\tcapital\tgains\t(loss) | 1 | — | — |
| Total\trevenues | 647 | 656 | 497 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 448 | 458 | 395 |
| Amortization\tof\tDAC | 47 | 51 | 50 |
| Total\tbenefits,\tlosses\tand\texpenses | 495 | 509 | 445 |
| Income\tfrom\tcontinuing\toperations,\tbefore\tincome\ttaxes | 152 | 147 | 52 |
| Income\ttax\texpense | 54 | 52 | 18 |
| Income\tfrom\tcontinuing\toperations | 98 | 95 | 34 |
| Income\tfrom\tdiscontinued\toperations,\tnet\tof\ttax\t[1] | — | 37 | — |
| Net\tincome | $98 | $132 | $34 |

| Assets	Under	Management | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Retail\tmutual\tfund\tassets | $40,228 | $48,753 | $42,829 |
| Investment\tOnly\tmutual\tfund\tassets | 6,983 | 6,659 | — |
| 529\tCollege\tSavings\tPlan\tand\tCanadian\tmutual\tfund\tassets | 1,557 | 1,472 | 1,202 |
| Total\tnon-proprietary\tand\tCanadian\tmutual\tfund\tassets | 48,768 | 56,884 | 44,031 |
| Proprietary\tmutual\tfund\tassets | 36,770 | 43,602 | — |
| Total\tmutual\tfund\tassets\tunder\tmanagement | $85,538 | $100,486 | $44,031 |

| Non-Proprietary	and	Canadian	Mutual	Fund	AUM	Roll	Forward | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Non-Proprietary\tand\tCanadian\tMutual\tFund\tAUM,\tbeginning\tof\tperiod | $56,884 | $44,031 | $32,710 |
| Transfers\tin\t(out)\t[2] | — | 5,617 | (826) |
| Net\tflows | (4,378) | 2,750 | 2,115 |
| Change\tin\tmarket\tvalue\tand\tother | (3,738) | 4,486 | 10,032 |
| Non-Proprietary\tand\tCanadian\tMutual\tFund\tAUM,\tend\tof\tperiod | $48,768 | $56,884 | $44,031 |

| Proprietary	Mutual	Fund	AUM	Roll	Forward | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Proprietary\tMutual\tFund\tAUM,\tbeginning\tof\tperiod | $43,602 | $—\t $— | $—\t $— |
| Transfers\tin\t[3] | — | 43,890 | — |
| Net\tflows | (5,797) | (5,334) | — |
| Change\tin\tmarket\tvalue | (1,035) | 5,046 | — |
| Proprietary\tMutual\tFund\tAUM,\tend\tof\tperiod | $36,770 | $43,602 | $— |

[1] 	 Represents	income	from	discontinued	operations,	net	of	tax	of	Hartford	Investments	Canada	Corporation	("HICC").	For	additional information,	see	Note	20	of	the	Notes	to	Consolidated	Financial	Statements.

[2] 	 Canadian	and	Offshore	businesses	were	transferred	to	International	Annuity	within	Life	Other	Operations	effective	January	1,

2009.	Investment-only	and	Canadian	mutual	fund	assets	were	transferred	from	Life	Other	Operations	effective	January	1,	2010.

[3] 	 Proprietary	mutual	fund	assets	under	management	are	included	in	the	Mutual	Fund	reporting	segment	effective	January	1,	2010.

Net	income	decreased	in	2011	primarily	due	to	discontinued	operations.	The	decline	in	income	from	discontinued	operations	in	2011 compared	to	2010	is	due	to	the	sale	of	the	Canadian	mutual	fund	operations,	which	closed	in	December	2010.	Net	income	from	continuing operations	increased	compared	to	2010	due	to	a	decline	in	expenses	largely	due	to	a	capital	infusion	to	the	Money	Market	Funds	in	the third	quarter	of	2010.

Net	income	increased	in	2010	compared	to	2009	due	to	the	inclusion	of	a	net	realized	gain	on	the	sale	of	Canadian	mutual	fund	operations of	$41	after-tax,	within	income	from	discontinued	operations.	In	addition	higher	overall	account	balances	attributed	to	the	improved equity	markets,	and	positive	net	flows	on	non-proprietary	and	Canadian	mutual	fund	assets,	resulted	in	higher	fee	income,	partially	offset by	higher	trail	commissions,	as	well	as	capital	infusions	to	the	money	market	funds.	Also	contributing	to	the	net	income	in	2010	is	the increase	in	scale	of	the	reporting	segment's	businesses.

# LIFE	OTHER	OPERATIONS

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fee\tincome\tand\tother | $1,045 | $1,046 | $948 |
| Earned\tpremiums | (25) | 3 | 345 |
| Net\tinvestment\tincome\t(loss) |  |  |  |
| Securities\tavailable-for-sale\tand\tother | 973 | 999 | 947 |
| Equity\tsecurities\ttrading\t[1] | (1,359) | (774) | 3,188 |
| Total\tnet\tinvestment\tincome\t(loss) | (386) | 225 | 4,135 |
| Net\trealized\tcapital\tgains\t(losses) | 586 | (417) | (702) |
| Total\trevenues | 1,220 | 857 | 4,726 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 1,305 | 1,148 | 1,854 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses\t—\treturns\tcredited\ton |  |  |  |
| international\tvariable\tannuities\t[1] | (1,359) | (774) | 3,188 |
| Amortization\tof\tDAC | 492 | 305 | 370 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 274 | 262 | 350 |
| Total\tbenefits,\tlosses\tand\texpenses | 712 | 941 | 5,762 |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tbefore\tincome\ttaxes | 508 | (84) | (1,036) |
| Income\ttax\texpense\t(benefit) | 150 | — | (343) |
| Income\t(loss)\tfrom\tcontinuing\toperations | 358 | (84) | (693) |
| Loss\tfrom\tdiscontinued\toperations,\tnet\tof\ttax\t[2] | — | (6) | (5) |
| Net\tincome\t(loss) | $358 | $(90) | $(698) |
| Assets\tUnder\tManagement\t[3] |  |  |  |
| Variable\tannuity\taccount\tvalues\t[4] | $31,162 | $33,507 | $32,948 |
| Fixed\tMVA\tannuity\tand\tother\taccount\tvalues\t[5] | 4,786 | 4,596 | 4,365 |
| Institutional\tannuity\taccount\tvalues\t[6] | 19,330 | 19,674 | 22,373 |
| Private\tPlacement\tLife\tInsurance\t("PPLI") | 36,335 | 36,042 | 35,146 |
| Account\tValue\tRoll\tForward |  |  |  |
| Variable\tAnnuities |  |  |  |
| Account\tvalue,\tbeginning\tof\tperiod | $33,507 | $32,948 | $31,335 |
| Net\tflows | (1,848) | (1,946) | (606) |
| Change\tin\tmarket\tvalue\tand\tother | (2,130) | (1,531) | 2,545 |
| Effect\tof\tcurrency\ttranslation | 1,633 | 4,036 | (326) |
| Account\tvalue,\tend\tof\tperiod | $31,162 | $33,507 | $32,948 |

[1] Includes	investment	income	and	mark-to-market	effects	of	equity	securities,	trading,	supporting	the	international	variable	annuity business,	which	are	classified	in	net	investment	income	with	corresponding	amounts	credited	to	policyholders	within	benefits,	losses and	loss	adjustment	expenses.

[2] 	 Represents	 loss	 from	 discontinued	 operations,	 net	 of	 tax	 of	 Hartford	 Advantage investment,	 Ltd. ("HAIL").	 For	 additional information,	see	Note	20	of	the	Notes	to	Consolidated	Financial	Statements.

[3] International	 and	 institutional annuities	 were transferred retrospectively from Individual Annuity; PPLI	 was transferred retrospectively	from	Individual	Life.

[4] 	 Canadian	and	Offshore	businesses	were	transferred	from	Mutual	Funds	effective	January	1,	2009.	Investment-only	and	Canadian mutual	fund	assets	were	transferred	to	Mutual	Funds	effective	January	1,	2010.

[5] Includes	approximately	$1.9	billion,	$1.9	billion	and	$1.8	billion	related	to	the	triggering	of	the	guaranteed	minimum	income	benefit for	the	3	Win	product	as	of	December	31,	2011,	2010	and	2009,	respectively.	This	account	value	is	not	expected	to	generate material	future	profit	or	loss	to	the	Company.

[6] Included	in	the	balance	is	approximately	$1.3	billion	for	the	year	ended	December	31,	2011	and	approximately	$1.4	billion	for	the year	ended	December	31,	2010	related	to	an	intrasegment	funding	agreement	which	is	eliminated	in	consolidation.

Net	income	increased	in	2011	compared	to	2010	primarily	due	to	the	change	in	net	realized	capital	gains	(losses),	offset	in	part	by increases	in	2011	in	the	Unlock	charge	and	DAC	amortization	resulting	from	assumption	changes	reflecting	the	declining	performance	of the	equity	markets	in	2011.	Benefits,	losses	and	loss	adjustment	expenses	increased	in	2011	reflecting	the	decline	in	equity	market performance	however,	these	expenses	were	partially	offset	by	the	release	of	a	reserve	related	to	a	Japan	product.	In	addition,	insurance operating	costs	and	other	expenses	increased	in	2011	due	to	costs	associated	with	expected	assessments	related	to	the	Executive	Life Insurance	Company	of	New	York	("ELNY")	insolvency.

The	net	realized	capital	gains	in	2011	compared	to	net	realized	capital	losses	in	2010	were	primarily	due	to	gains	in	the	variable	annuity hedging	program	and	lower	net	impairment	losses.	Variable	annuity	hedging	program	gains	were	$775	in	2011	compared	to	$11	in	2010; net	impairment	losses	were	$54	and	$172,	respectively,	in	2011	and	2010.	For	further	discussion	on	the	results	of	the	variable	annuity hedging	program	see	Investment	Results,	Net	Realized	Capital	Gains	(Losses)	within	Key	Performance	Measures	and	Ratios	of	the MD&A.

The	Unlock	charge	was	$244,	after-tax,	in	2011	compared	to	an	Unlock	charge	of	$78,	after-tax,	in	2010.	The	Unlock	charge	in	2011	was primarily	a	result	of	the	impact	of	the	annual	assumption	update.	Including	expected	Japan	hedging	costs,	and	actual	separate	account returns	below	our	aggregated	estimated	returns.	Benefits,	losses	and	loss	adjustment	expenses	as	well	as	DAC	amortization	increased accordingly.	For	further	discussion	of	the	Unlock	see	the	Critical	Accounting	Estimates	within	the	MD&A.

Life	Other	Operations	effective	tax	rate	differs	from	the	statutory	rate	of	35%	primarily	due	to	varying	tax	rates	by	country	and	the valuation	allowance	on	deferred	tax	benefits	related	to	certain	realized	losses	on	securities	that	back	certain	institutional	annuities.	For further	discussion,	see	Note	13	of	the	Notes	to	Consolidated	Financial	Statements.

Net	income	increased	in	2010	compared	to	2009	primarily	due	to	the	change	in	net	realized	capital	gains	(losses),	a	lower	Unlock	charge and	lower	DAC	amortization,	as	well	as	continued	expense	reduction	efforts.

The	Unlock	charge	was	$78,	after-tax,	in	2010	compared	to	an	Unlock	charge	of	$318,	after-tax,	in	2009.	The	Unlock	charge	in	2010	was primarily	due	to	equity	market	improvements	that	were	less	than	expected	for	2010,	while	the	Unlock	charge	in	2009	was	primarily	due	to equity	market	performance	significantly	below	expectations	for	the	first	quarter	of	2009.	Benefits,	losses	and	loss	adjustment	expenses,	as well	as	DAC	amortization	decreased	in	2010	due	to	the	lower	Unlock	charge.	For	further	discussion	of	the	Unlock	see	the	Critical Accounting	Estimates	within	the	MD&A.

The	lower	net	realized	capital	losses	in	2010	compared	to	2009	were	primarily	due	to	lower	impairment	losses	and	net	realized	gains	on sales	of	securities	as	compared	with	net	realized	losses	in	2009.	Variable	annuity	hedging	program	gains	were	were	$11	in	2010	compared to	losses	of	$112	in	2009;	net	impairment	losses	were	$172	and	$619,	respectively,	in	2010	and	2009.	For	further	discussion	on	the	results of	the	variable	annuity	hedging	program	see	Investment	Results,	Net	Realized	Capital	Gains	(Losses)	within	Key	Performance	Measures and	Ratios	of	the	MD&A.

Management's	decision	to	suspend	sales	of	structured	settlements	and	terminal	funding	products	resulted	in	decreased	earned	premiums	in 2010	as	compared	to	2009	with	a	corresponding	decrease	in	benefits,	losses	and	loss	adjustment	expenses.	In	addition,	benefits,	losses	and loss	adjustment	expenses	were	lower	for	institutional	annuities	driven	by	the	Company's	execution	on	its	call	and	buyback	strategy associated	with	stable	value	products,	which	reduced	the	related	liabilities.

# PROPERTY	&	CASUALTY	OTHER	OPERATIONS

| Operating	Summary | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Earned\tpremiums | $— | $1 | $— |
| Net\tinvestment\tincome | 151 | 163 | 161 |
| Net\trealized\tcapital\tgains\t(losses) | (1) | 24 | (26) |
| Total\trevenues | 150 | 188 | 135 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 317 | 251 | 241 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 24 | 30 | 23 |
| Total\tbenefits,\tlosses\tand\texpenses | 341 | 281 | 264 |
| Loss\tbefore\tincome\ttaxes | (191) | (93) | (129) |
| Income\ttax\tbenefit | (74) | (40) | (51) |
| Net\tloss | $(117) | $(53) | $(78) |

The	net	loss	in	Property	&	Casualty	Other	Operations	increased	in	2011,	as	compared	to	2010,	primarily	due	to	reserve	strengthening	of $290,	pre-tax,	in	2011,	resulting	from	the	company's	annual	review	of	its	asbestos	liabilities.	In	the	comparable	prior	year	period,	the reserve	strengthening	was	$169,	pre-tax.

Partially	offsetting	the	increase	in	asbestos	reserve	strengthening	was	lower	reserve	strengthening	of	net	environmental	reserves	of	$19,

pre-tax,	in	2011	compared	to	$62,	pre-tax,	in	2010,	resulting	from	the	company's	annual	review	of	its	environmental	liabilities.

For	further	information,	see	Property	&	Casualty	Other	Operations	Claims	within	the	Property	and	Casualty	Insurance	Product	Reserves,

Net	of	Reinsurance	section	in	Critical	Accounting	Estimates.

The	net	loss	in	Property	&	Casualty	Other	Operations	improved	in	2010,	as	compared	to	2009,	primarily	due	to	a	change	from	net	realized capital	losses	in	2009	to	net	realized	capital	gains	in	2010.	The	change	in	net	realized	capital	gains	(losses)	is	a	result	of	impairments	in 2009.	In	addition,	the	net	loss	improved	due	to	lower	reserve	strengthening	of	$62,	pre-tax,	in	2010,	compared	to	$75,	pre-tax,	in	2009, resulting	from	the	company's	annual	review	of	its	environmental	liabilities.

Partially	offsetting	 the	 improvements	 in	net	realized	capital	gains	(losses)	and	environmental	reserve	actions	was	 increased	reserve strengthening	of	$169,	pre-tax,	in	2010,	compared	to	$138,	pre-tax,	in	2009,	resulting	from	the	company's	annual	review	of	its	asbestos liabilities.

# CORPORATE

| Operating	Summary	[1] | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Earned\tpremiums | $— | $2 | $(1) |
| Fee\tincome\t[2] | 209 | 187 | 220 |
| Net\tinvestment\tincome | 23 | 81 | 173 |
| Net\trealized\tcapital\tgains\t(losses) | (96) | 66 | (406) |
| Other\trevenue | — | (1) | 4 |
| Total\trevenues | 136 | 335 | (10) |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | (3) | (2) | 153 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 202 | 325 | 323 |
| Interest\texpense | 508 | 508 | 476 |
| Goodwill\timpairment | — | — | 32 |
| Total\tbenefits,\tlosses\tand\texpenses | 707 | 831 | 984 |
| Loss\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | (571) | (496) | (994) |
| Income\ttax\tbenefit | (201) | (168) | (274) |
| Loss\tfrom\tcontinuing\toperations,\tnet\tof\ttax | (370) | (328) | (720) |
| Loss\tfrom\tdiscontinued\toperations,\tnet\tof\ttax\t[3] | (64) | (107) | (6) |
| Net\tloss | $(434) | $(435) | $(726) |

[1] 	 Leveraged	corporate	owned	life	insurance	was	transferred	from	Corporate	to	Life	Other	Operations,	effective	January	1,	2010.

[2] 	 Fee	income	includes	the	income	associated	with	the	sales	of	non-proprietary	insurance	products	in	the	Company's	broker-dealer subsidiaries	that	has	an	offsetting	commission	expense	in	insurance	operating	costs	and	other	expenses.

[3] 	 Represents	the	loss	from	operations	and	sale	of	Federal	Trust	Corporation.	For	additional	information,	see	Note	20	of	the	Notes	to Consolidated	Financial	Statements.

The	net	loss	in	Corporate	remained	flat	due	to	net	realized	capital	losses	in	2011,	compared	to	gains	in	2010,	partially	offset	by	a	decrease in	insurance	operating	costs	and	other	expenses.	The	net	realized	capital	losses	in	2011	primarily	relate	to	losses	on	derivatives.

Insurance	operating	costs	and	other	expenses	decreased	primarily	as	a	result	of	an	accrual	for	a	litigation	settlement	of	$73,	before-tax,	in 2010,	for	a	class	action	lawsuit	related	to	structured	settlements.

The	loss	from	discontinued	operations,	net	of	tax,	in	2011,	is	due	to	a	net	realized	capital	loss	of	$74,	after-tax,	from	the	disposition	of Federal	Trust	Corporation.	Loss	from	discontinued	operations,	net	of	tax,	in	2010,	primarily	relates	to	goodwill	impairment	on	Federal Trust	Corporation	of	approximately	$100,	after-tax.

See	Note	13	of	the	Notes	to	Consolidated	Financial	Statements	for	a	reconciliation	of	the	tax	provision	at	the	U.S.	Federal	statutory	rate	to the	provision	(benefit)	for	income	taxes.

The	net	loss	in	Corporate	decreased	primarily	due	to	improvements	in	net	realized	capital	gains	(losses),	partially	offset	by	an	increase	in interest	expense.

The	change	to	net	realized	capital	gains,	from	net	realized	capital	losses	was	due	to	impairments	on	investment	securities	recorded	in 2009.	In	addition,	2009	included	a	net	realized	capital	loss	of	approximately	$300	as	a	result	of	a	contingency	payment	made	to	Allianz due	to	the	Company's	participation	in	the	Capital	Purchase	Program.	See	Note	15	of	the	Notes	to	Consolidated	Financial	Statements	for	a further	discussion	on	Allianz.

Interest	expense	increased	primarily	due	to	the	issuance	of	$1.1	billion	of	senior	notes	in	the	first	quarter	of	2010.	For	further	information, see	Senior	Notes	within	Note	14	of	the	Notes	to	Consolidated	Financial	Statements.

The	effective	tax	rate	in	2009	differed	from	the	U.S.	Federal	statutory	rate	due	to	nondeductible	costs	associated	with	the	contingency payment	to	Allianz.

The	Company	has	an	enterprise	risk	management	function	("ERM")	that	is	charged	with	providing	analysis	of	the	Company's	risks	on	an individual	and	aggregated	basis	and	with	ensuring	that	the	Company's	risks	remain	within	its	risk	appetite	and	tolerances.	The	Company has	 established	 the	 Enterprise	 Risk	 and	 Capital	 Committee	 ("ERCC")	 that	 includes	 the	 Company's	 CEO,	 Chief	 Financial	 Officer ("CFO"),	 Chief	 Investment	 Officer	 ("CIO"),	 Chief	 Risk	 Officer,	 the	 divisional	 Presidents	 and	 the	 General	 Counsel.	 The	 ERCC	 is responsible	for	managing	the	Company's	risks	and	overseeing	the	enterprise	risk	management	program.	The	Company	categorizes	its main	risks	as	follows:

# Insurance	Risk	Management

The	Company	categorizes	its	insurance	risks	across	both	property-casualty	and	life	products.	The	Company's	insurance	operations	are vested	in	the	ability	to	add	value	through	the	effective	underwriting,	pooling,	and	pricing	of	insurance	risks.	As	such,	working	under	the direction	of	the	Company's	Chief	Insurance	Risk	Officer	("CIRO"),	the	Company	has	developed	a	disciplined	approach	to	insurance	risk management	that	is	well	integrated	into	the	organization's	underwriting,	pricing,	reinsurance,	claims,	and	capital	management	processes.

At	the	same	time,	the	Company	has	policies	and	procedures	to	manage	concentrations	or	correlations	of	insurance	risk,	including	ERM policies	governing	the	risks	related	to	natural	and	man-made	property	catastrophes	such	as	hurricanes,	earthquakes,	tornado/hailstorms, winter	storms,	pandemics,	terrorism,	and	casualty	catastrophes.	The	Company	establishes	risk	limits	to	control	potential	loss	and	actively monitors	the	risk	exposures	as	a	percent	of	statutory	surplus.	The	Company	also	uses	reinsurance	to	transfer	insurance	risk	to	well- established	 and	 financially	 secure	 reinsurers	 (see	 Reinsurance	 Section).	 The	 Company's	 CIRO	 has	 enterprise	 responsibility	 for establishing	and	maintaining	the	framework,	principles	and	guidelines	of	The	Hartford's	insurance	risk	management	program.

# Non-Catastrophic	Insurance	Risks

Non-catastrophic	insurance	risks	exist	within	each	of	the	Company's	divisions	and	include,	but	are	not	limited	to,	the	following:

•	 Property:	Risk	of	loss	to	personal	or	commercial	property	from	automobile	related	accidents,	weather,	explosions,	smoke,

shaking,	 fire,	 theft,	 vandalism,	 inadequate	 installation,	 faulty	 equipment,	 collisions	 and	 falling	 objects,	 and/or	 machinery mechanical	breakdown	resulting	in	physical	damage	and	other	covered	perils.

•	 Liability:	Risk	 of loss	 from	 automobile	 related	 accidents,	 uninsured	 and	 underinsured	 drivers,	 lawsuits	 from	 accidents, defective	products,	breach	of	warranty,	negligent	acts	by	professional	practitioners,	environmental	claims,	latent	exposures,

fraud,	 coercion,	 forgery,	 failure	 to	 fulfill	 obligations	 per	 contract	 surety,	 liability	 from	 errors	 and	 omissions,	 derivative lawsuits,	and	other	securities	actions	and	covered	perils.

•	 Mortality:	Risk	of	loss	from	unexpected	trends	in	insured	deaths	impacting	timing	of	payouts	from	life	insurance	or	annuity products,	personal	or	commercial	automobile	related	accidents,	and	death	of	employees	or	executives	during	the	course	of employment,	while	on	disability,	or	while	collecting	worker's	compensation	benefits.

•	 Morbidity:	Risk	of	loss	to	an	insured	from	illness	incurred	during	the	course	of	employment	or	illness	from	other	covered perils.

•	 Disability:	Risk	of loss	 incurred	from	personal	or	commercial	automobile	related	 losses,	accidents	arising	outside	of	 the workplace,	injuries	or	accidents	incurred	during	the	course	of	employment,	or	from	equipment	each	loss	resulting	short	term	or long	term	disability	payments.

•	 Longevity:	Risk	of	loss	from	increase	life	expectancy	trends	among	policyholders	receiving	long	term	benefit	payments	or annuity	payouts.

The	Company's	processes	for	managing	these	risks	include	disciplined	underwriting	protocols,	exposure	controls,	sophisticated	risk	based pricing,	risk	modeling,	risk	transfer,	and	capital	management	strategies.	The	Company	has	established	underwriting	guidelines	for	both individual	risks,	including	individual	policy	limits,	and	risks	in	the	aggregate,	including	aggregate	exposure	limits	by	geographic	zone	and peril.	Pricing	indications	for	each	line	of	business	are	set	independent	of	the	business	by	corporate	actuarial	and	are	integrated	into	the reserve	review	process	to	ensure	consistency	between	pricing	and	reserving.	Monthly	reports	track	loss	cost	trends	relative	to	pricing objectives	within	each	state	and	product,	and	corporate	actuarial	provides	an	independent	report	to	the	Board	on	the	Company's	reserve position	and	loss	cost	trends.

# Natural	Catastrophe	Risk

Natural	catastrophe	risk	is	defined	as	the	exposure	arising	from	natural	phenomena	(e.g.,	weather,	earthquakes,	wildfires,	etc.)	that	create a	concentration	or	aggregation	of	loss	across	the	Company's	insurance	or	asset	portfolios.	The	Company	uses	both	internal	and	third-party models	to	estimate	the	potential	loss	resulting	from	various	catastrophe	events	and	the	potential	financial	impact	those	events	would	have on	the	Company's	financial	position	and	results	of	operations	across	the	property-casualty,	life,	and	asset	management	businesses.	For natural	catastrophe	perils,	the	Company	generally	limits	its	estimated	pre-tax	loss	as	a	result	of	natural	catastrophes	for	property	& casualty	exposures	from	a	single	250-year	event	to	less	than	30%	of	statutory	surplus	prior	to	reinsurance	and	to	less	than	15%	of statutory	surplus	after	reinsurance.	The	Company's	modeled	loss	estimates	are	derived	by	averaging	21	modeled	loss	events	representing	a 250-year	return	period	loss.	For	the	peril	of	earthquake,	the	21	events	averaged	to	determine	the	modeled	loss	estimate	include	events occurring	in	California	as	well	as	the	Northeastern,	Southeastern	and	Midwestern	regions	of	the	United	States	with	associated	magnitudes ranging	from	5.9	to	7.7	on	the	Moment	Magnitude	scale.	For	the	peril	of	hurricane,	the	21	events	averaged	to	determine	the	modeled	loss estimate	include	category	3,	4	and	5	events	in	Florida,	as	well	as	other	Gulf	and	Northeastern	region	landfalls.

While	Enterprise	Risk	Management	has	a	process	to	track	and	manage	these	limits,	from	time	to	time,	the	estimated	loss	to	natural catastrophes	from	a	single	250-year	event	prior	to	reinsurance	may	fluctuate	above	or	below	these	limits	due	to	changes	in	modeled	loss estimates,	exposures,	or	statutory	surplus.	Currently,	the	Company's	estimated	pre-tax	loss	to	a	single	250-year	natural	catastrophe	event prior	to	reinsurance	is	less	than	30%	of	the	statutory	surplus	of	the	property	and	casualty	insurance	subsidiaries	and	the	Company's estimated	pre-tax	loss	net	of	reinsurance	is	less	than	15%	of	statutory	surplus	of	the	property	and	casualty	operations.	The	estimated 250	year	pre-tax	probable	maximum	losses	from	hurricane	events	are	estimated	to	be	$1.7	billion	and	$632,	before	and	after	reinsurance, respectively.	The	estimated	250	year	pre-tax	probable	maximum	loss	from	earthquake	events	is	estimated	to	be	$793	before	reinsurance and	 $482	 net	 of	 reinsurance.	 The	 loss	 estimates	 represent	 total	 property	 losses	 for	 hurricane	 events	 and	 property	 and	 workers' compensation	losses	for	earthquake	events	resulting	from	a	single	event.	The	estimates	provided	are	based	on	250-year	return	period	loss estimates	that	have	a	0.4%	likelihood	of	being	exceeded	in	any	single	year.

The	net	loss	estimates	provided	above	assume	that	the	Company	is	able	to	recover	all	losses	ceded	to	reinsurers	under	its	reinsurance programs.	There	are	various	methodologies	used	in	the	industry	to	estimate	the	potential	property	and	workers'	compensation	losses	that would	arise	from	various	catastrophe	events	and	companies	may	use	different	models	and	assumptions	in	their	estimates.	Therefore,	the Company's	estimates	of	gross	and	net	losses	arising	from	a	250-year	hurricane	or	earthquake	event	may	not	be	comparable	to	estimates provided	by	other	companies.	Furthermore,	the	Company's	estimates	are	subject	to	significant	uncertainty	and	could	vary	materially	from the	actual	losses	that	would	arise	from	these	events	and	the	loss	estimates	provided	by	other	companies.	The	Company	also	manages natural	catastrophe	risk	for	group	life,	group	disability,	and	individual	life	insurance,	which	in	combination	with	property	and	workers compensation	loss	estimates,	are	subject	to	separate	enterprise	risk	management	net	aggregate	loss	limits	as	a	percent	of	enterprise	surplus.

# Terrorism	Risk

The	Company	defines	terrorism	risk	as	the	risk	of	losses	from	terrorist	attacks,	including	losses	caused	by	single-site	and	multi-site conventional	attacks,	as	well	as	the	potential	for	attacks	using	nuclear,	biological,	chemical	or	radiological	weapons	("NBCR").	The Company	monitors	aggregations	of	terrorism	risk	exposure	around	key	landmarks	primarily	in	major	metropolitan	areas	that	span	the Company's	insurance	portfolio.	Enterprise	limits	for	terrorism	apply	to	aggregations	of	risk	across	property-casualty,	group	benefits,	life insurance	and	specific	asset	portfolios	and	are	defined	based	on	a	deterministic,	single-site	conventional	terrorism	attack	scenario.	The Company	manages	its	potential	estimated	loss	from	a	terrorism	loss	scenario	to	less	than	$1.3	billion.	In	addition,	the	Company	monitors exposures	 monthly	 and	 employs	 both	 internally	 developed	 and	 vendor-licensed	 loss	 modeling	 tools	 as	 part	 of	 its	 risk	 management discipline.

# Pandemic	Risk

Pandemic	 risk	 is	 the	 exposure	 to	 loss	 arising	 from	 widespread	 influenza	 or	 other	 pathogens	 or	 bacterial	 infections	 that	 create	 an aggregation	of	loss	across	the	Company's	insurance	or	asset	portfolios.	Consistent	with	industry	practice,	the	Company	assesses	exposure to	pandemics	by	analyzing	the	potential	impact	from	a	variety	of	pandemic	scenarios	based	on	conditions	consistent	with	historical outbreaks	of	flu-like	viruses	such	as	the	"Severe"	1918	Spanish	Flu,	the	Asian	flu	of	1957,	the	Hong	Kong	flu	of	1968,	and	the	2009 outbreak	of	the	swine	flu.	For	pandemic	risk,	the	Company	generally	limits	its	estimated	pre-tax	loss	from	a	single	250	year	event	to	less than	12.5%	of	the	statutory	surplus	for	the	enterprise.	In	evaluating	these	scenarios,	the	Company	assesses	the	impact	on	group	and individual	life	policies,	short-term	and	long	term	disability,	annuities,	COLI,	property	&	casualty	claims,	and	losses	in	the	investment portfolio	associated	with	market	declines	in	the	event	of	a	widespread	pandemic.

# Reinsurance	as	a	Risk	Management	Strategy

The	Hartford	utilizes	reinsurance	to	transfer	risk	to	affiliated	and	unaffiliated	insurers.	Reinsurance	is	used	to	manage	aggregation	of	risk as	well	as	to	transfer	certain	risk	to	reinsurance	companies	based	on	specific	geographic	or	risk	concentrations.	All	reinsurance	processes are	 aligned	 under	 a	 single	 enterprise	 reinsurance	 risk	 management	 policy.	 Reinsurance	 purchasing	 is	 a	 centralized	 function	 within Commercial,	Consumer	Markets	and	Wealth	Management	to	support	a	consistent	strategy	and	to	ensure	that	the	reinsurance	activities	are fully	integrated	into	the	organization's	risk	management	processes.

A	variety	of	traditional	reinsurance	products	are	used	as	part	of	the	Company's	risk	management	strategy,	including	excess	of	loss occurrence-based	products	that	protect	property	and	worker's	compensation	exposures,	and	individual	risk	or	quota	share	arrangements, that	protect	specific	classes	or	lines	of	business.	The	Company	has	no	significant	finite	risk	contracts	in	place	and	the	statutory	surplus benefit	from	all	such	prior	year	contracts	is	immaterial.	Facultative	reinsurance	is	used	by	the	Company	to	manage	policy-specific	risk exposures	 based	 on	 established	 underwriting	 guidelines.	 The	 Hartford	 also	 participates	 in	 governmentally	 administered	 reinsurance facilities	 such	 as	 the	 Florida	 Hurricane	 Catastrophe	 Fund	 ("FHCF"),	 the	Terrorism	 Risk	 Insurance	 Program	 established	 under	The Terrorism	Risk	Insurance	Program	Reauthorization	Act	of	2007	("TRIPRA")	and	other	reinsurance	programs	relating	to	particular	risks	or specific	lines	of	business.

# Reinsurance	for	Catastrophes

The	Company	has	several	catastrophe	reinsurance	programs,	including	reinsurance	treaties	that	cover	property	and	workers'	compensation losses	aggregating	from	single	catastrophe	events.	The	following	table	summarizes	the	primary	catastrophe	treaty	reinsurance	coverage's that	the	Company	has	in	place	as	of	February	1,	2012:

| Coverage | Treaty	term | reinsured | Per	occurrence	limit | Retention |
| :--- | :--- | :--- | :--- | :--- |
| Principal\tproperty\tcatastrophe\tprogram\tcovering | 1/1/2012\tto | 90% | $750 | $350 |
| property\tcatastrophe\tlosses\tfrom\ta\tsingle\tevent | 1/1/2013 |  |  |  |
| Reinsurance\twith\tthe\tFHCF\tcovering\tFlorida | 6/1/2011\tto | 90% | 145[1] | 55 |
| Personal\tLines\tproperty\tcatastrophe\tlosses\tfrom\ta | 6/1/2012 |  |  |  |
| single\tevent |  |  |  |  |
| Workers\tcompensation\tlosses\tarising\tfrom\ta\tsingle | 7/1/2011\tto | 95% | 350 | 100 |
| catastrophe\tevent\t[2] | 7/1/2012 |  |  |  |

[1] 	 The	per	occurrence	limit	on	the	FHCF	treaty	is	$145	for	the	6/1/2011	to	6/1/2012	treaty	year	based	on	the	Company's	election	to purchase	the	required	coverage	from	FHCF.	For	6/1/2010	to	6/1/2011,	the	Company	elected	not	to	purchase	additional	limits	under the	Temporary	Increase	in	Coverage	Limit	(TICL)	statutory	provision.

[2] In	addition,	to	the	limit	shown	above,	the	workers	compensation	reinsurance	includes	a	non-catastrophe,	industrial	accident	layer, 80%	of	$30	excess	a	$20	retention.

In	addition	to	the	property	catastrophe	reinsurance	coverage	described	in	the	above	table,	the	Company	has	other	catastrophe	and	working layer	treaties	and	facultative	reinsurance	agreements	that	cover	property	catastrophe	losses	on	an	aggregate	excess	of	loss	and	on	a	per	risk basis.	The	principal	property	catastrophe	reinsurance	program	and	other	reinsurance	programs	include	a	provision	to	reinstate	limits	in	the event	that	a	catastrophe	loss	exhausts	limits	on	one	or	more	layers	under	the	treaties.

In	addition	to	the	reinsurance	protection	provided	by	The	Hartford's	traditional	property	catastrophe	reinsurance	program	described	above, the	Hartford	has	fully	collateralized	reinsurance	coverage's	from	Foundation	Re	III	for	losses	sustained	from	qualifying	hurricane	loss events.	Under	the	terms	of	the	treaties,	the	Company	is	reimbursed	for	losses	from	hurricanes	using	customized	industry	index	contracts designed	to	replicate	The	Hartford's	own	catastrophe	losses,	with	a	provision	that	the	actual	losses	incurred	by	the	Company	for	covered events,	net	of	reinsurance	recoveries,	cannot	be	less	than	zero.

The	following	table	summarizes	the	terms	of	the	reinsurance	treaties	with	Foundation	Re	III	that	were	in	place	as	of	December	31,	2011:

|  |  |  | Bond	amount	issued |
| :--- | :--- | :--- | :--- |
| Covered\tperils | Treaty\tterm | Covered\tlosses | by\tFoundation\tRe\tIII |
| Hurricane\tloss\tevents\taffecting\tthe\tGulf\tand | 1/27/2010\tto | 90%\tof\t$200\tin\tlosses\tin\texcess\tof\tan | $180 |
| Eastern\tCoast\tof\tthe\tUnited\tStates | 1/27/2014 | index\tloss\ttrigger\tequating\tto |  |
|  |  | approximately\t$1.2\tbillion\tin\tlosses\tto |  |
|  |  | The\tHartford |  |
| Hurricane\tloss\tevents\taffecting\tthe\tGulf\tand | 2/18/2011\tto | 67.5%\tof\t$200\tin\tlosses\tin\texcess\tof | 135 |
| Eastern\tCoast\tof\tthe\tUnited\tStates | 2/18/2015 | an\tindex\tloss\ttrigger\tequating\tto |  |

As	of	December	31,	2011,	there	have	been	no	events	that	are	expected	to	trigger	a	recovery	under	the	Foundation	Re	III	reinsurance program	and,	accordingly,	the	Company	has	not	recorded	any	recoveries	from	the	associated	reinsurance	treaties.

# Reinsurance	for	Terrorism

For	the	risk	of	terrorism,	private	sector	catastrophe	reinsurance	capacity	is	generally	limited	and	largely	unavailable	for	terrorism	losses caused	by	nuclear,	biological,	chemical	or	radiological	weapons	attacks.	As	such,	the	Company's	principal	reinsurance	protection	against large-scale	terrorist	attacks	is	the	coverage	currently	provided	through	the	TRIPRA.	On	December	26,	2007,	the	President	signed	TRIPRA extending	the	Terrorism	Risk	Insurance	Act	of	2002	("TRIA")	through	the	end	of	2014.	TRIPRA	provides	a	backstop	for	insurance- related	losses	resulting	from	any	"act	of	terrorism"	certified	by	the	Secretary	of	the	Treasury,	in	concurrence	with	the	Secretary	of	State and	Attorney	General,	that	result	in	industry	losses	in	excess	of	$100.	In	addition,	TRIPRA	revised	the	TRIA	definition	of	a	certified	"act of	terrorism"	by	removing	the	requirement	that	an	act	be	committed	"on	behalf	of	any	foreign	person	or	foreign	interest".	As	a	result, domestic	acts	of	terrorism	can	now	be	certified	as	"acts	of	terrorism"	under	the	program,	subject	to	the	other	requirements	of	TRIPRA. Under	the	program,	in	any	one	calendar	year,	the	federal	government	would	pay	85%	of	covered	losses	from	a	certified	act	of	terrorism after	an	insurer's	losses	exceed	20%	of	the	Company's	eligible	direct	commercial	earned	premiums	of	the	prior	calendar	year,	up	to	a combined	annual	aggregate	limit	for	the	federal	government	and	all	insurers	of	$100	billion.	If	an	act	of	terrorism	or	acts	of	terrorism result	 in	 covered	 losses	 exceeding	 the	 $100	 billion	 annual	 industry	 aggregate	 limit,	 a	 future	 Congress	 would	 be	 responsible	 for determining	how	additional	losses	in	excess	of	$100	billion	will	be	paid.

Among	 other	 items,	TRIPRA	 required	 that	 the	 President's	Working	 Group	 on	 Financial	 Markets	 ("PWG")	 continue	 to	 perform	 an analysis	regarding	the	long-term	availability	and	affordability	of	insurance	for	terrorism	risk.	Among	the	findings	detailed	in	the	PWG's initial	report,	released	October	2,	2006,	were	that	the	high	level	of	uncertainty	associated	with	predicting	the	frequency	of	terrorist	attacks, coupled	with	the	unwillingness	of	some	insurance	policyholders	to	purchase	insurance	coverage,	makes	predicting	long-term	development of	the	terrorism	risk	market	difficult,	and	that	there	is	likely	little	potential	for	future	market	development	for	NBCR	coverage.	The January	2011	PWG	report	notes	some	improvements	in	capacity	and	modeling,	but	also	noted	that	take-up	rates	for	terrorism	coverage remained	relatively	flat	over	the	past	three	years	and	that	insurers	remain	uncertain	about	the	ability	of	models	to	predict	the	frequency	and severity	of	terrorist	attacks.	With	respect	to	NBCR	coverage,	a	December	2008	study	by	the	U.S.	Government	Accountability	Office ("GAO")	found	that	property	and	casualty	insurers	still	generally	seek	to	exclude	NBCR	coverage	from	their	commercial	policies	when permitted.	 However,	 while	 nuclear,	 pollution	 and	 contamination	 exclusions	 are	 contained	 in	 many	 property	 and	 liability	 insurance policies,	the	GAO	report	concluded	that	such	exclusions	may	be	subject	to	challenges	in	court	because	they	were	not	specifically	drafted to	address	terrorist	attacks.	Furthermore,	workers'	compensation	policies	generally	have	no	exclusion	or	limitations.	The	GAO	found	that commercial	property	and	casualty	policyholders,	including	companies	that	own	high-value	properties	in	large	cities,	generally	reported that	 they	 could	 not	 obtain	 NBCR	 coverage.	 Commercial	 property	 and	 casualty	 insurers	 generally	 remain	 unwilling	 to	 offer	 NBCR coverage	because	of	uncertainties	about	the	risk	and	the	potential	for	catastrophic	losses.

# Reinsurance	Recoverables

# Reinsurance	Security

To	manage	reinsurer	credit	risk,	a	security	review	committee	evaluates	 the	credit	standing,	financial	performance,	management	and operational	quality	of	each	potential	reinsurer.	Through	this	process,	the	Company	maintains	a	centralized	list	of	reinsurers	approved	for participation	in	reinsurance	transactions.	Only	reinsurers	approved	through	this	process	are	eligible	to	participate	in	new	reinsurance transactions.	The	Company's	approval	designations	reflect	 the	differing	credit	exposure	associated	with	various	classes	of	business. Participation	eligibility	is	categorized	based	upon	the	nature	of	the	risk	reinsured,	including	the	expected	liability	payout	duration.	In addition	to	defining	participation	eligibility,	the	Company	regularly	monitors	credit	risk	exposure	to	each	reinsurance	counterparty	and has	established	limits	tiered	by	counterparty	credit	rating.	For	further	discussions	on	how	the	Company	manages	and	mitigates	third	party credit	risk,	refer	to	the	Credit	Risk	section.

# Property	and	Casualty	Insurance	Product	Reinsurance	Recoverable

Property	and	casualty	insurance	product	reinsurance	recoverables	represent	loss	and	loss	adjustment	expense	recoverable	from	a	number of	entities,	including	reinsurers	and	pools.	The	following	table	shows	the	components	of	the	gross	and	net	reinsurance	recoverable	as	of December	31,	2011	and	2010:

| Reinsurance	Recoverable | December	31,	2011 | December	31,	2010 |
| :--- | :--- | :--- |
| Paid\tloss\tand\tloss\tadjustment\texpenses | $153 | $198 |
| Unpaid\tloss\tand\tloss\tadjustment\texpenses | 2,884 | 2,963 |
| Gross\treinsurance\trecoverable | 3,037 | 3,161 |
| Less:\tallowance\tfor\tuncollectible\treinsurance | (290) | (290) |
| Net\treinsurance\trecoverable | $2,747 | $2,871 |

As	shown	in	the	following	table,	a	portion	of	the	total	gross	reinsurance	recoverable	relates	to	the	Company's	mandatory	participation	in various	involuntary	assigned	risk	pools	and	the	value	of	annuity	contracts	held	under	structured	settlement	agreements.	Reinsurance recoverables	due	from	mandatory	pools	are	backed	by	the	financial	strength	of	the	property	and	casualty	insurance	industry.	Annuities purchased	 from	 third-party	 life	 insurers	 under	 structured	 settlements	 are	 recognized	 as	 reinsurance	 recoverables	 in	 cases	 where	 the Company	has	not	obtained	a	release	from	the	claimant.	Of	the	remaining	gross	reinsurance	recoverable	as	of	December	31,	2011	and 2010,	the	following	table	shows	the	portion	of	recoverables	due	from	companies	rated	by	A.M.	Best.

| Distribution	of	gross	reinsurance	recoverable | December	31,	2011 |  | December	31,	2010 |  |
| :--- | :--- | :--- | :--- | :--- |
| Gross\treinsurance\trecoverable | $3,037 |  | $3,161 |  |
| Less:\tmandatory\t(assigned\trisk)\tpools\tand\tstructured |  |  |  |  |
| settlements | (617) |  | (614) |  |
| Gross\treinsurance\trecoverable\texcluding\tmandatory\npools\tand\tstructured\tsettlements | $2,420 |  | $2,547 |  |
|  |  | %\tof\tTotal |  | %\tof\tTotal |
| Rated\tA-\t(Excellent)\tor\tbetter\tby\tA.M.\tBest\t[1] | $1,774 | 73.3% | $1,869 | 73.3% |
| Other\trated\tby\tA.M.\tBest | 52 | 2.2% | 43 | 1.7% |
| Total\trated\tcompanies | 1,826 | 75.5% | 1,912 | 75.0% |
| Voluntary\tpools | 100 | 4.1% | 107 | 4.2% |
| Captives | 242 | 10.0% | 226 | 8.9% |
| Other\tnot\trated\tcompanies | 252 | 10.4% | 302 | 11.9% |
| Total | $2,420 | 100.0% | $2,547 | 100.0% |

Where	its	contracts	permit,	the	Company	secures	future	claim	obligations	with	various	forms	of	collateral,	including	irrevocable	letters	of credit,	secured	trusts,	funds	held	accounts	and	group	wide	offsets.	As	part	of	its	reinsurance	recoverable	review,	the	Company	analyzes recent	developments	 in	commutation	activity	between	reinsurers	and	cedants,	recent	 trends	 in	arbitration	and	 litigation	outcomes	 in disputes	between	cedants	and	reinsurers	and	the	overall	credit	quality	of	the	Company's	reinsurers.	Due	largely	to	investment	losses sustained	by	reinsurers	in	2008	along	with	significant	catastrophe	losses	and	European	sovereign	debt	concerns	in	2011,	the	financial strength	ratings	of	some	reinsurers	have	been	downgraded	and	the	financial	strength	ratings	of	other	reinsurers	have	been	put	on	negative watch.	Nevertheless,	as	indicated	in	the	above	table,	approximately	73%	of	the	gross	reinsurance	recoverables	due	from	reinsurers	rated by	A.M.	Best	were	rated	A-	(excellent)	or	better	as	of	December	31,	2011.	Due	to	the	inherent	uncertainties	as	to	collection	and	the	length of	time	before	such	amounts	will	be	due,	it	is	possible	that	future	adjustments	to	the	Company's	reinsurance	recoverables,	net	of	the allowance,	could	be	required,	which	could	have	a	material	adverse	effect	on	the	Company's	consolidated	results	of	operations	or	cash flows	in	a	particular	quarterly	or	annual	period.

Annually,	the	Company	completes	evaluations	of	the	reinsurance	recoverable	asset	associated	with	older,	long-term	casualty	liabilities reported	in	the	Property	&	Casualty	Other	Operations	reporting	segment,	and	the	allowance	for	uncollectible	reinsurance	reported	in	the Property	&	Casualty	Commercial	reporting	segment.	For	a	discussion	regarding	the	results	of	these	evaluations,	see	Property	and	Casualty Insurance	Product	Reserves,	Net	of	Reinsurance	within	the	Critical	Accounting	Estimates	section	of	the	MD&A.

# Guaranty	Funds	and	Other	Insurance	Assessments

As	part	of	its	risk	management	strategy,	the	Company	regularly	monitors	the	financial	wherewithal	of	other	insurers	and,	in	particular, activity	by	insurance	regulators	and	various	state	guaranty	associations	relations	to	troubled	insurers.	In	all	states,	insurers	licensed	to transact	certain	classes	of	insurance	are	required	to	become	members	of	a	guaranty	fund.	In	most	states,	in	the	event	of	the	insolvency	of an	insurer	writing	any	such	class	of	insurance	in	the	state,	members	of	the	funds	are	assessed	to	pay	certain	claims	of	the	insolvent	insurer. A	particular	state's	fund	assesses	its	members	based	on	their	respective	written	premiums	in	the	state	for	the	classes	of	insurance	in	which the	insolvent	insurer	was	engaged.	Assessments	are	generally	limited	for	any	year	to	one	or	two	percent	of	the	premiums	written	per	year depending	on	the	state.	The	amount	and	timing	of	assessments	related	to	past	insolvencies	is	unpredictable.

Citizens	 Property	 Insurance	 Corporation	 in	 Florida	 ("Citizens"),	 a	 non-affiliate	 insurer,	 provides	 property	 insurance	 to	 Florida homeowners	and	businesses	that	are	unable	to	obtain	insurance	from	other	carriers,	including	for	properties	deemed	to	be	"high	risk". Citizens	maintains	a	Personal	Lines	account,	a	Commercial	Lines	account	and	a	High	Risk	account.	If	Citizens	incurs	a	deficit	in	any	of these	accounts,	Citizens	may	impose	a	"regular	assessment"	on	other	insurance	carriers	in	the	state,	such	as	the	Company,	to	fund	the deficits,	subject	to	certain	restrictions	and	subject	to	approval	by	the	Florida	Office	of	Insurance	Regulation.	Carriers	are	then	permitted	to surcharge	policyholders	to	recover	the	assessments	over	the	next	few	years.	Citizens	may	also	opt	to	finance	a	portion	of	the	deficits through	issuing	bonds	and	may	impose	"emergency	assessments"	on	other	insurance	carriers	to	fund	the	bond	repayments.	Unlike	with regular	assessments,	however,	insurance	carriers	only	serve	as	a	collection	agent	for	emergency	assessments	and	are	not	required	to	remit surcharges	for	emergency	assessments	to	Citizens	until	they	collect	surcharges	from	policyholders.	Under	U.S.	GAAP,	the	Company	is required	to	accrue	for	regular	assessments	in	the	period	the	assessments	become	probable	and	estimable	and	the	obligating	event	has occurred.	Surcharges	to	recover	the	amount	of	regular	assessments	may	not	be	recorded	as	an	asset	until	the	related	premium	is	written. Emergency	assessments	that	may	be	levied	by	Citizens	are	not	recorded	in	the	income	statement.

# Operational	Risk	Management

The	Hartford	has	an	Operational	Risk	Management	("ORM")	function	whose	responsibility	is	to	provide	a	comprehensive	and	enterprise- wide	view	of	the	Company's	operational	risk	on	an	aggregate	basis.	The	Company	defines	operational	risk	as	the	risk	of	loss	resulting from	inadequate	or	failed	internal	processes,	people	and	systems,	or	from	external	events.	This	inadequacy	or	failure	may	come	from internal	or	external	events.	It	includes	legal	risk	and	considers	reputational	risk	as	an	impact.	The	Company	has	developed	a	library	of operational	risks	which	have	been	classified	into	the	following	seven	risk	categories:

# •Internal	Fraud

•	 External	Fraud

•	 Employment	Practices	&	Workplace	Safety

•	 Business	Disruption	&	Systems	Failures

•	 Clients,	Products	&	Business	Practice

•	 Damage	to	Physical	Assets

•	 Execution,	Delivery	&	Process	Management

ORM	is	led	by	the	Chief	Operational	Risk	Officer	("CORO")	who	is	responsible	for	establishing,	maintaining	and	communicating	the framework,	principles	and	guidelines	of	The	Hartford's	operational	risk	management	program.	Responsibility	for	day-to-day	management of	operational	risk	lies	within	each	business	unit	and	functional	area..

ORM	works	closely	with	the	Operational	Risk	Committee	("ORC"),	an	enterprise	wide	governance	body	comprised	of	senior	leaders from	 functional	 areas	 such	 as	 ORM,	 Enterprise	 Services,	 Enterprise	 Operations,	 Claims,	 Information	Technology,	 Compliance	 and Internal	Audit.	The	ORC	meets	regularly	and	provides	a	forum	for	ensuring	the	effective	management	of	operational	risks	across	the enterprise.	The	ORC's	responsibilities	include	reviewing	and	approving:	policies	governing	operational	risk,	functional	risk	tolerances, and	 risk	 mitigation	 strategies.	 This	 group	 also	 identifies	 emerging	 operational	 risks,	 prioritizes	 them,	 and	 determines	 action	 plans.

Individual	committees,	such	as	the	Enterprise	Sourcing	Board,	Enterprise	Privacy	and	Security	Committee	and	the	Enterprise	Health,

Environment	and	Safety	Committee,	focus	on	specific	operational	risk	issues	and	report	to	the	ORC.

ORM	 is	 responsible	 for	 ensuring	 controls	 and	 providing	 a	 framework	 for	 managing	 operational	 risks.	 ORM	 has	 various	 tools	 and processes	for	identifying,	monitoring,	measuring,	prioritizing,	and	reporting	operational	risks.	ORM	uses	a	centralized	Governance,	Risk, and	Compliance	(GRC)	system	to	help	manage	operational	risk	across	the	Company's	finance,	legal,	data	security,	and	information technology	functions.	The	Company's	business	risk	assessment	process	is	used	to	identify	operational	risks	and	evaluate	controls	to mitigate	those	risks.

# Financial	Risk	Management

The	Company	identifies	the	following	categories	of	financial	risk:

•	 Liquidity	Risk

•Interest	Rate	Risk

•	 Equity	Risk

•	 Foreign	Currency	Exchange	Risk

# •	 Credit	Risk

Financial	risks	include	direct,	and	indirect	risks	to	the	Company's	financial	objectives	coming	from	events	that	impact	market	conditions or	prices.	Financial	risk	also	includes	exposure	to	events	that	may	cause	correlated	movement	in	multiple	risk	factors.	The	primary	source of	financial	risks	are	the	Company's	general	account	assets	and	the	liabilities	which	those	assets	back,	together	with	the	guarantees	which the	company	has	written	over	various	liability	products,	particularly	its	portfolio	of	variable	annuities.	The	Company	assesses	its	financial risk	on	a	U.S.	GAAP,	statutory	and	economic	basis.	The	Hartford	has	developed	a	disciplined	approach	to	financial	risk	management	that is	well	integrated	into	the	Company's	underwriting,	pricing,	hedging,	claims,	asset	and	liability	management,	new	product,	and	capital management	processes.	Consistent	with	its	risk	appetite,	the	Company	establishes	financial	risk	limits	to	control	potential	loss.	Exposures are	actively	monitored,	and	mitigated	where	appropriate.	The	Company	uses	various	risk	management	strategies,	including	reinsurance and	 over-the-counter	 and	 exchange	 traded	 derivatives	 to	 transfer	 risk	 to	 well-established	 and	 financially	 secure	 counterparties.	The Company's	Chief	Market	Risk	Officer	has	enterprise	responsibility	for	establishing	and	maintaining	 the	framework,	principles,	and guidelines	of	The	Hartford's	financial	risk	management	program.

Liquidity	risk	is	the	risk	to	current	or	prospective	earnings	or	capital	arising	from	the	company's	inability	or	perceived	inability	to	meet its	contractual	cash	obligations	at	the	legal	entity	level	when	they	come	due	over	given	horizons	without	incurring	unacceptable	costs	and without	relying	on	uncommitted	funding	sources.	Liquidity	risk	includes	the	inability	to	manage	unplanned	increases	or	accelerations	in cash	outflows,	decreases	or	changes	in	funding	sources,	and	changes	in	market	conditions	that	affect	the	ability	to	liquidate	assets	quickly to	meet	obligations	with	minimal	loss	in	value.	Components	of	liquidity	risk	include	funding	risk,	transaction	risk	and	market	liquidity risk.	Funding	risk	is	the	gap	between	sources	and	uses	of	cash	under	normal	and	stressed	conditions	taking	into	consideration	structural, regulatory	 and	 legal	 entity	 constraints.	 Changes	 in	 institution-specific	 conditions	 that	 affect	 the	 Company's	 ability	 to	 sell	 assets	 or otherwise	transact	business	without	incurring	a	significant	loss	in	value	is	transaction	risk.	Changes	in	general	market	conditions	that affect	the	institution's	ability	to	sell	assets	or	otherwise	transact	business	without	incurring	a	significant	loss	in	value	is	market	liquidity risk.

The	 Company	 has	 defined	 ongoing	 monitoring	 and	 reporting	 requirements	 to	 assess	 liquidity	 across	 the	 enterprise.	 The	 Company measures	and	manages	liquidity	risk	exposures	and	funding	needs	within	prescribed	limits	and	across	legal	entities,	business	lines	and currencies,	taking	into	account	legal,	regulatory	and	operational	limitations	to	the	transferability	of	liquidity.	The	Company	also	monitors internal	and	external	conditions,	identifies	material	risk	changes	and	emerging	risks	that	may	impact	liquidity.	The	Company's	CFO	has primary	responsibility	for	liquidity	risk.

For	further	discussion	on	liquidity	see	the	section	on	Capital	Resources	and	Liquidity.

Interest	rate	risk	is	the	risk	of	financial	loss	due	to	adverse	changes	in	the	value	of	assets	and	liabilities	arising	from	movements	in	interest rates.	Interest	rate	risk	encompasses	exposures	with	respect	to	changes	in	the	level	of	interest	rates,	the	shape	of	the	term	structure	of	rates and	the	volatility	of	interest	rates.	Interest	rate	risk	does	not	include	exposure	to	changes	in	credit	spreads.	The	Company	has	exposure	to interest	rates	arising	from	its	fixed	securities,	interest	sensitive	liabilities	and	discount	rate	assumptions	associated	with	the	Company's pension	and	other	post	retirement	benefit	obligations.

An	increase	in	interest	rates	from	current	levels	is	generally	a	favorable	development	for	the	Company.	Rate	increases	are	expected	to provide	 additional	 net	 investment	 income,	 increase	 sales	 of	 fixed	 rate	 Wealth	 Management	 and	 Life	 Other	 Operations	 investment products,	reduce	the	cost	of	the	variable	annuity	hedging	program,	limit	the	potential	risk	of	margin	erosion	due	to	minimum	guaranteed crediting	 rates	 in	 certain	 Wealth	 Management	 and	 Life	 Other	 Operations	 products	 and,	 if	 sustained,	 could	 reduce	 the	 Company's prospective	pension	expense.	Conversely,	a	rise	in	interest	rates	will	reduce	the	fair	value	of	the	investment	portfolio,	increase	interest expense	on	the	Company's	variable	rate	debt	obligations	and,	if	long-term	interest	rates	rise	dramatically	within	a	six	to	twelve	month time	 period,	 certain	 Wealth	 Management	 and	 Life	 Other	 Operations	 businesses	 may	 be	 exposed	 to	 disintermediation	 risk. Disintermediation	risk	refers	to	the	risk	that	policyholders	will	surrender	their	contracts	in	a	rising	interest	rate	environment	requiring	the Company	to	liquidate	assets	in	an	unrealized	loss	position.	In	conjunction	with	the	interest	rate	risk	measurement	and	management techniques,	certain	of	Wealth	Management	and	Life	Other	Operation's	fixed	income	product	offerings	have	market	value	adjustment provisions	at	contract	surrender.	An	increase	in	interest	rates	may	also	impact	the	Company's	tax	planning	strategies	and	in	particular	its ability	to	utilize	tax	benefits	to	offset	certain	previously	recognized	realized	capital	losses.

A	decline	in	interest	rates	results	in	certain	mortgage-backed	securities	being	more	susceptible	to	paydowns	and	prepayments.	During such	periods,	the	Company	generally	will	not	be	able	to	reinvest	the	proceeds	at	comparable	yields.	Lower	interest	rates	will	also	likely result	in	lower	net	investment	income,	increased	hedging	cost	associated	with	variable	annuities	and,	if	declines	are	sustained	for	a	long period	of	time,	it	may	subject	the	Company	to	reinvestment	risks,	higher	pension	costs	expense	and	possibly	reduced	profit	margins associated	with	guaranteed	crediting	rates	on	certain	Wealth	Management	and	Life	Other	Operations	products.	Conversely,	the	fair	value of	the	investment	portfolio	will	increase	when	interest	rates	decline	and	the	Company's	interest	expense	will	be	lower	on	its	variable	rate debt	obligations.

The	Company	manages	its	exposure	to	interest	rate	risk	by	constructing	investment	portfolios	that	maintain	asset	allocation	limits	and asset/liability	duration	matching	targets	which	may	include	the	use	of	derivatives.	The	Company	analyzes	interest	rate	risk	using	various models	including	parametric	models	and	cash	flow	simulation	under	various	market	scenarios	of	the	liabilities	and	their	supporting investment	portfolios,	which	may	include	derivative	instruments.	Measures	the	Company	uses	to	quantify	its	exposure	to	interest	rate	risk inherent	in	its	invested	assets	and	interest	rate	sensitive	liabilities	include	duration,	convexity	and	key	rate	duration.	Duration	is	the	price sensitivity	of	a	financial	instrument	or	series	of	cash	flows	to	a	parallel	change	in	the	underlying	yield	curve	used	to	value	the	financial instrument	or	series	of	cash	flows.	For	example,	a	duration	of	5	means	the	price	of	the	security	will	change	by	approximately	5%	for	a	100 basis	point	change	in	interest	rates.	Convexity	is	used	to	approximate	how	the	duration	of	a	security	changes	as	interest	rates	change	in	a parallel	manner.	Key	rate	duration	analysis	measures	the	price	sensitivity	of	a	security	or	series	of	cash	flows	to	each	point	along	the	yield curve	and	enables	the	Company	to	estimate	the	price	change	of	a	security	assuming	non-parallel	interest	rate	movements.

To	calculate	duration,	convexity,	and	key	rate	durations,	projections	of	asset	and	liability	cash	flows	are	discounted	to	a	present	value using	interest	rate	assumptions.	These	cash	flows	are	then	revalued	at	alternative	interest	rate	levels	to	determine	the	percentage	change	in fair	value	due	to	an	incremental	change	in	the	entire	yield	curve	for	duration	and	convexity,	or	a	particular	point	on	the	yield	curve	for	key rate	duration.	Cash	flows	from	corporate	obligations	are	assumed	to	be	consistent	with	the	contractual	payment	streams	on	a	yield	to	worst basis.	Yield	to	worst	is	a	basis	that	represents	the	lowest	potential	yield	that	can	be	received	without	the	issuer	actually	defaulting.	The primary	assumptions	used	in	calculating	cash	flow	projections	include	expected	asset	payment	streams	taking	into	account	prepayment speeds,	issuer	call	options	and	contract	holder	behavior.	Mortgage-backed	and	asset-backed	securities	are	modeled	based	on	estimates	of the	rate	of	future	prepayments	of	principal	over	the	remaining	life	of	the	securities.	These	estimates	are	developed	by	incorporating collateral	surveillance	and	anticipated	future	market	dynamics.	Actual	prepayment	experience	may	vary	from	these	estimates.

The	Company	is	also	exposed	to	interest	rate	risk	based	upon	the	discount	rate	assumption	associated	with	the	Company's	pension	and other	postretirement	benefit	obligations.	The	discount	rate	assumption	is	based	upon	an	interest	rate	yield	curve	comprised	of	bonds	rated Aa	 with	 maturities	 primarily	 between	 zero	 and	 thirty	 years.	 For	 further	 discussion	 of	 interest	 rate	 risk	 associated	 with	 the	 benefit obligations,	see	the	Critical	Accounting	Estimates	Section	of	the	MD&A	under	Pension	and	Other	Postretirement	Benefit	Obligations	and Note	 17	 of	 the	 Notes	 to	 Consolidated	 Financial	 Statements.	 In	 addition,	 management	 evaluates	 performance	 of	 certain	 Wealth Management	and	Life	Other	Operations	products	based	on	net	investment	spread	which	is,	in	part,	influenced	by	changes	in	interest	rates. For	further	discussion,	see	the	Individual	Annuity,	Individual	Life,	and	Retirement	Plans	sections	of	the	MD&A.

The	 investments	and	 liabilities	primarily	associated	with	 interest	rate	risk	are	 included	 in	 the	following	discussion.	Certain	product liabilities,	 including	 those	 containing	 GMWB,	 GMIB,	 GMAB,	 or	 GMDB,	 expose	 the	 Company	 to	 interest	 rate	 risk	 but	 also	 have significant	equity	risk.	These	liabilities	are	discussed	as	part	of	the	Equity	Risk	section	below.

# Fixed	Maturity	Investments

The	Company's	investment	portfolios	primarily	consist	of	investment	grade	fixed	maturity	securities.	The	fair	value	of	these	investments was	$83.1	billion	and	$78.4	billion	at	December	31,	2011	and	2010,	respectively.	The	fair	value	of	these	and	other	invested	assets fluctuates	depending	on	the	interest	rate	environment	and	other	general	economic	conditions.	The	weighted	average	duration	of	the	fixed maturity	portfolio	was	approximately	5.3	years	and	5.1	years	as	of	December	31,	2011	and	2010,	respectively.

# Liabilities

The	Company's	investment	contracts	and	certain	insurance	product	liabilities,	other	than	non-guaranteed	separate	accounts,	include	asset accumulation	vehicles	such	as	fixed	annuities,	guaranteed	investment	contracts,	other	investment	and	universal	life-type	contracts	and certain	insurance	products	such	as	long-term	disability.

Asset	accumulation	vehicles	primarily	require	a	fixed	rate	payment,	often	for	a	specified	period	of	time,	such	as	fixed	rate	annuities	with	a market	value	adjustment	feature.	Product	examples	include	fixed	rate	annuities	with	a	market	value	adjustment	feature	and	fixed	rate guaranteed	investment	contracts.	The	term	to	maturity	of	these	contracts	generally	range	from	less	than	one	year	to	ten	years.	In	addition, certain	products	such	as	universal	life	contracts	and	the	general	account	portion	of	Wealth	Management's	and	Life	Other	Operation's variable	annuity	products,	credit	interest	to	policyholders	subject	to	market	conditions	and	minimum	interest	rate	guarantees.	The	term	to maturity	of	the	asset	portfolio	supporting	these	products	may	range	from	short	to	intermediate.

While	interest	rate	risk	associated	with	many	of	these	products	has	been	reduced	through	the	use	of	market	value	adjustment	features	and surrender	charges,	the	primary	risk	associated	with	these	products	is	that	the	spread	between	investment	return	and	credited	rate	may	not be	sufficient	to	earn	targeted	returns.

The	Company	also	manages	the	risk	of	certain	insurance	liabilities	similarly	to	investment	type	products	due	to	the	relative	predictability of	the	aggregate	cash	flow	payment	streams.	Products	in	this	category	may	contain	significant	reliance	upon	actuarial	(including	mortality and	morbidity)	pricing	assumptions	and	do	have	some	element	of	cash	flow	uncertainty.	Product	examples	include	structured	settlement contracts,	 on-benefit	 annuities	 (i.e.,	 the	 annuitant	 is	 currently	 receiving	 benefits	 thereon)	 and	 short-term	 and	 long-term	 disability contracts.	The	cash	outflows	associated	with	these	policy	liabilities	are	not	interest	rate	sensitive	but	do	vary	based	on	the	timing	and amount	of	benefit	payments.	The	primary	risks	associated	with	these	products	are	that	the	benefits	will	exceed	expected	actuarial	pricing and/or	that	the	actual	timing	of	the	cash	flows	will	differ	from	those	anticipated,	or	interest	rate	levels	may	deviate	from	those	assumed	in product	pricing,	ultimately	resulting	in	an	investment	return	lower	than	that	assumed	in	pricing.	The	average	duration	of	the	liability	cash flow	payments	can	range	from	less	than	one	year	to	in	excess	of	fifteen	years.

# Derivatives

The	Company	utilizes	a	variety	of	derivative	instruments	to	mitigate	interest	rate	risk	associated	with	its	investment	portfolio.	Interest	rate swaps	are	primarily	used	to	convert	interest	receipts	or	payments	to	a	fixed	or	variable	rate.	The	use	of	such	swaps	enables	the	Company to	customize	contract	terms	and	conditions	to	customer	objectives	and	manage	the	interest	rate	risk	profile	within	established	tolerances. Interest	rate	swaps	are	also	used	to	hedge	the	variability	in	the	cash	flow	of	a	forecasted	purchase	or	sale	of	fixed	rate	securities	due	to changes	in	interest	rates.	Forward	rate	agreements	are	used	to	convert	interest	receipts	on	floating-rate	securities	to	fixed	rates.	These derivatives	are	used	to	lock	in	the	forward	interest	rate	curve	and	reduce	income	volatility	that	results	from	changes	in	interest	rates. Interest	rate	caps,	floors,	swaptions,	and	futures	may	be	used	to	manage	portfolio	duration.

At	December	31,	2011	and	2010,	notional	amounts	pertaining	to	derivatives	utilized	to	manage	interest	rate	risk	totaled	$19.8	billion	and $19.3	 billion,	 respectively	 ($19.5	 billion	 and	 $18.9	 billion,	 respectively,	 related	 to	 investments	 and	 $0.3	 billion	 and	 $0.4	 billion,

respectively,	related	to	Wealth	Management	and	Life	Other	Operations	liabilities).	The	fair	value	of	these	derivatives	was	($332)	and

# Interest	Rate	Sensitivity

The	before-tax	change	in	the	net	economic	value	of	investment	contracts	(e.g.,	fixed	annuity	contracts)	issued	by	the	Company's	Wealth Management	 and	 Life	 Other	 Operations,	 as	 well	 as	 certain	 insurance	 product	 liabilities	 (e.g.,	 short-term	 and	 long-term	 disability contracts)	issued	by	the	Company's	Commercial	Markets	operations,	for	which	the	payment	rates	are	fixed	at	contract	issuance	and	the investment	experience	is	substantially	absorbed	by	the	Company's	operations,	along	with	the	corresponding	invested	assets	are	included in	the	following	table.	Also	included	in	this	analysis	are	the	interest	rate	sensitive	derivatives	used	by	the	Company	to	hedge	its	exposure to	interest	rate	risk	in	the	investment	portfolios	supporting	these	contracts.	This	analysis	does	not	include	the	assets	and	corresponding liabilities	of	certain	insurance	products	such	as	auto,	property,	whole	and	term	life	insurance,	and	certain	life	contingent	annuities.	Certain financial	instruments,	such	as	limited	partnerships	and	other	alternative	investments,	have	been	omitted	from	the	analysis	due	to	the	fact that	the	investments	are	accounted	for	under	the	equity	method	and	generally	lack	sensitivity	to	interest	rate	changes.	Separate	account assets	and	liabilities,	equity	securities,	trading	and	the	corresponding	liabilities	associated	with	the	variable	annuity	products	sold	in	Japan are	excluded	from	the	analysis	because	gains	and	losses	in	separate	accounts	accrue	to	policyholders.	The	calculation	of	the	estimated hypothetical	change	in	net	economic	value	below	assumes	a	100	basis	point	upward	and	downward	parallel	shift	in	the	yield	curve.

|  | 2011 | 2011 | 2010 | 2010 |
| :--- | :--- | :--- | :--- | :--- |
| Basis\tpoint\tshift | -\t100 | +\t100 | -\t100 | +\t100 |
| Amount | $(494) | $287 | $(190) | $96 |

The	 fixed	 liabilities	 included	 above	 represented	 approximately	 43%	 and	 47%	 of	 the	 Company's	 general	 account	 liabilities	 as	 of December	31,	2011	and	2010,	respectively.	The	assets	supporting	the	fixed	liabilities	are	monitored	and	managed	within	set	duration guidelines,	and	are	evaluated	on	a	daily	basis,	as	well	as	annually	using	scenario	simulation	techniques	in	compliance	with	regulatory requirements.

The	following	table	provides	an	analysis	showing	the	estimated	before-tax	change	in	the	fair	value	of	the	Company's	fixed	maturity investments	and	related	derivatives,	not	included	in	the	table	above,	assuming	100	basis	point	upward	and	downward	parallel	shifts	in	the yield	 curve	 as	 of	 December	 31,	 2011	 and	 2010.	 Certain	 financial	 instruments,	 such	 as	 limited	 partnerships	 and	 other	 alternative investments,	have	been	omitted	from	the	analysis	due	to	the	fact	that	the	investments	are	accounted	for	under	the	equity	method	and generally	lack	sensitivity	to	interest	rate	changes.

|  |  | Change	in	Fair	Value	as	of	December	31, | Change	in	Fair	Value	as	of	December	31, |  |
| :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2011 | 2010 | 2010 |
| Basis\tpoint\tshift | -\t100 | +\t100 | -\t100 | +\t100 |
| Amount | $3,248 | $(2,985) | $2,988 | $(2,774) |

The	selection	of	the	100	basis	point	parallel	shift	in	the	yield	curve	was	made	only	as	an	illustration	of	the	potential	hypothetical	impact	of such	an	event	and	should	not	be	construed	as	a	prediction	of	future	market	events.	Actual	results	could	differ	materially	from	those illustrated	above	due	to	the	nature	of	the	estimates	and	assumptions	used	in	the	above	analysis.	The	Company's	sensitivity	analysis calculation	assumes	that	the	composition	of	invested	assets	and	liabilities	remain	materially	consistent	throughout	the	year	and	that	the current	relationship	between	short-term	and	long-term	interest	rates	will	remain	constant	over	time.	As	a	result,	these	calculations	may not	fully	capture	the	impact	of	portfolio	re-allocations,	significant	product	sales	or	non-parallel	changes	in	interest	rates.

Equity	risk	is	defined	as	the	risk	of	financial	loss	due	to	changes	in	the	value	of	global	equities	or	equity	indices.	The	Company	has exposure	to	equity	risk	from	assets	under	management,	embedded	derivatives	within	the	Company's	variable	annuities	and	assets	that support	the	Company's	pension	plans.	Equity	Risk	on	the	Company's	Variable	Annuity	products	is	mitigated	through	various	hedging programs.	(See	the	Variable	Annuity	Hedge	Program	Section)

The	Company's	exposure	to	equity	risk	includes	the	potential	for	lower	earnings	associated	with	certain	of	the	Wealth	Management's businesses	such	as	variable	annuities	where	fee	income	is	earned	based	upon	the	fair	value	of	the	assets	under	management.	For	further discussion	 of	 equity	 risk,	 see	 the	 Variable	 Product	 Guarantee	 Risks	 and	 Risk	 Management	 section	 below.	 In	 addition,	 Wealth Management	offers	certain	guaranteed	benefits,	primarily	associated	with	variable	annuity	products,	which	increases	the	Company's potential	benefit	exposure	as	the	equity	markets	decline.

The	Company	is	also	subject	to	equity	risk	based	upon	the	assets	that	support	its	pension	plans.	The	asset	allocation	mix	is	reviewed	on	a periodic	basis.	In	order	to	minimize	risk,	the	pension	plans	maintain	a	listing	of	permissible	and	prohibited	investments.	In	addition,	the pension	plans	have	certain	concentration	limits	and	investment	quality	requirements	imposed	on	permissible	investment	options.	For further	discussion	of	equity	risk	associated	with	the	pension	plans,	see	the	Critical	Accounting	Estimates	section	of	the	MD&A	under "Pension	and	Other	Postretirement	Benefit	Obligations"	and	Note	17	of	the	Notes	to	Consolidated	Financial	Statements.

# Variable	Product	Guarantee	Risks	and	Risk	Management

The	Company's	variable	products	are	significantly	influenced	by	the	U.S.,	Japanese,	and	other	equity	markets.	Increases	or	declines	in equity	markets	impact	certain	assets	and	liabilities	related	to	the	Company's	variable	products	and	the	Company's	earnings	derived	from those	products.	The	Company's	variable	products	include	variable	annuity	contracts,	mutual	funds,	and	variable	life	insurance.

# Generally,	declines	in	equity	markets	will:

•reduce	the	value	of	assets	under	management	and	the	amount	of	fee	income	generated	from	those	assets;

•reduce	the	value	of	equity	securities	trading	supporting	the	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	hedge	product	guarantees	resulting	in	realized	capital	gains;

•increase	the	costs	of	the	hedging	instruments	we	use	in	our	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	assets	to	be	held	backing	variable	annuity	guarantees	to	maintain	required	regulatory	reserve levels	and	targeted	risk	based	capital	ratios;

•adversely	affect	customer	sentiment	toward	equity-linked	products,	causing	a	decline	in	sales;	and

•	 decrease	the	Company's	estimated	future	gross	profits.	See	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.

Generally,	increases	in	equity	markets	will	reduce	the	value	of	the	dynamic	hedge	program	and	macro	hedge	derivative	assets,	resulting	in realized	capital	 losses,	and	will	generally	have	 the	 inverse	 impact	of	 those	 listed	above.	See	section	on	Variable	Annuity	Hedging Program	for	more	information.

# Variable	Annuity	Guaranteed	Benefits

The	majority	of	the	Company's	U.S.,	Japan,	and	U.K.	variable	annuities	include	optional	living	benefit	and	guaranteed	minimum	death benefit	features.	The	net	amount	at	risk	("NAR")	 is	generally	defined	as	 the	guaranteed	minimum	benefit	amount	 in	excess	of	 the contractholder's	 current	 account	 value.	 Global	 variable	 annuity	 account	 values	 with	 guarantee	 features	 were $99.8 billion	 and $116.7	billion	as	of	December	31,	2011	and	December	31,	2010,	respectively.

The	following	table	summarizes	the	account	values	of	the	Company's	U.S.	and	Japan	variable	annuities	with	guarantee	features	and	the NAR	split	between	various	guarantee	features:

# Total	Variable	Annuity	Guarantees

|  |  |  |  | %	of |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Account | Gross\tNet | Retained\tNet | Contracts\tIn | %\tIn\tthe |
| ($\tin\tbillions) | Value | Amount\tat\tRisk | Amount\tat\tRisk | the\tMoney | Money[4] |
| U.\tS\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB\t[2] | $68.7 | $12.0 | $5.1 | 77% | 15% |
| GMWB | 36.6 | 1.9 | 1.6 | 45% | 12% |
| Japan\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB | 29.2 | 10.9 | 9.4 | 99% | 27% |
| GMIB\t[3] | 27.3 | 7.5 | 7.5 | 99% | 22% |
| UK\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB | 1.9 | 0.08 | 0.08 | 100% | 4% |
| GMWB | 1.8 | 0.07 | 0.07 | 57% | 3% |

|  |  |  |  | %	of |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Account | Gross\tNet | Retained\tNet | Contracts\tIn | %\tIn\tthe |
| ($\tin\tbillions) | Value | Amount\tat\tRisk | Amount\tat\tRisk | the\tMoney | Money[4] |
| U.\tS\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB\t[2] | $83.0 | $10.7 | $4.3 | 70% | 12% |
| GMWB | 44.8 | 1.3 | 1.1 | 35% | 9% |
| Japan\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB | 31.2 | 8.8 | 7.6 | 98% | 22% |
| GMIB\t[3] | 29.7 | 6.1 | 6.1 | 99% | 17% |
| UK\tVariable\tAnnuity\t[1] |  |  |  |  |  |
| GMDB | 2.2 | 0.04 | 0.04 | 100% | 1% |
| GMWB | 2.5 | 0.03 | 0.03 | 25% | 1% |

[1] 	 Policies	with	a	guaranteed	living	benefits	(a	GMWB	in	the	US	or	UK,	or	a	GMIB	in	Japan)	also	have	a	guaranteed	death	benefit.

The	net	amount	at	risk	("NAR")	for	each	benefit	is	shown;	however	these	benefits	are	not	additive.	When	a	policy	terminates	due	to death,	any	NAR	related	to	GMWB	or	GMIB	is	released.	Similarly,	when	a	policy	goes	into	benefit	status	on	a	GMWB	or,	by contract,	the	GMDB	NAR	is	reduced	to	$0.	When	a	policy	goes	into	benefit	status	on	a	GMIB,	its	GMDB	NAR	is	released

[2] 	 Excludes	group	annuity	contracts	with	GMDB	benefits.

[3] Includes	small	amount	of	GMWB

[4 	 For	all	contracts	that	are	"in	the	money",	this	represents	the	percentage	by	which	the	average	contract	was	in	the	money.

The	Company	expects	to	incur	these	payments	in	the	future	only	if	the	policyholder	has	an	"in	the	money"	GMWB	at	their	death	or	their account	value	is	reduced	to	a	specified	level,	through	contractually	permitted	withdrawals	and/or	market	declines.	If	the	account	value	is reduced	to	the	specified	level,	the	contract	holder	will	receive	an	annuity	equal	to	the	guaranteed	remaining	benefit	("GRB")	.	For	the Company's	"life-time"	GMWB	products,	this	annuity	can	continue	beyond	the	GRB.	As	the	account	value	fluctuates	with	equity	market returns	on	a	daily	basis	and	the	"life-time"	GMWB	payments	can	exceed	the	GRB,	the	ultimate	amount	to	be	paid	by	the	Company,	if	any, is	uncertain	and	could	be	significantly	more	or	 less	 than	 the	Company's	current	carried	 liability.	For	additional	 information	on	 the Company's	GMWB	liability,	see	Note	4	of	the	Notes	to	Consolidated	Financial	Statements.

Many	policyholders	with	a	GMDB	also	have	a	GMWB	in	the	U.S.	or	GMIB	in	Japan.	Policyholders	that	have	a	product	that	offer	both guarantees	can	only	receive	the	GMDB	or	the	GMIB	benefit	in	Japan	or	the	GMDB	or	GMWB	in	the	U.S.	For	additional	information	on the	Company's	GMDB	liability,	see	Note	9	of	the	Notes	to	Consolidated	Financial	Statements.

For	GMIB	contracts,	in	general,	the	policyholder	has	the	right	to	elect	to	annuitize	benefits,	beginning	(for	certain	products)	on	the	tenth or	fifteenth	anniversary	year	of	contract	commencement,	receive	lump	sum	payment	of	the	then	current	account	value,	or	remain	in	the variable	sub-account.	For	GMIB	contracts,	if	the	policyholder	makes	the	election,	the	policyholder	is	entitled	to	receive	the	original investment	value	over	a	10-	to	15-	year	annuitization	period.	A	small	percentage	of	the	contracts	will	first	become	eligible	to	elect annuitization	beginning	in	2013.	The	remainder	of	the	contracts	will	first	become	eligible	to	elect	annuitization	from	2014	to	2022. Because	policyholders	have	various	contractual	rights	to	defer	their	annuitization	election,	the	period	over	which	annuitization	election can	 take	 place	 is	 subject	 to	 policyholder	 behavior	 and	 therefore	 indeterminate.	 In	 addition,	 upon	 annuitization	 the	 contractholder surrenders	access	to	the	account	value	and	the	account	value	is	transferred	to	the	Company's	general	account	where	it	is	invested	and	the additional	investment	proceeds	are	used	towards	payment	of	the	original	investment	value.	If	the	original	investment	value	exceeds	the account	value	upon	annuitization	then	the	contract	is	"in	the	money".	As	of	December	31,	2011,	65%	of	retained	NAR	is	reinsured	to	an affiliate	of	The	Hartford.	For	additional	information	on	the	Company's	GMIB	liability,	see	Note	9	of	the	Notes	to	Consolidated	Financial Statements.

The	following	table	represents	the	timing	of	account	values	eligible	for	annuitization	under	the	Japan	GMIB	as	of	December	31,	2011,	as well	as	the	NAR.	The	account	values	reflect	100%	annuitization	at	the	earliest	point	allowed	by	the	contract	and	no	adjustments	for	future market	returns	and	policyholder	behaviors.	Future	market	returns,	changes	in	the	value	of	the	Japanese	yen	and	policyholder	behaviors will	impact	account	values	eligible	for	annuitization	in	the	years	presented.

| ($	in	billions) | Account	Value | Net	Amount	at	Risk |
| :--- | :--- | :--- |
| 2013 | $0.3 | $— |
| 2014 | 4.5 | 0.9 |
| 2015 | 7.3 | 2.0 |
| 2016 | 2.5 | 0.8 |
| 2017 | 2.8 | 0.9 |
| 2018\t&amp;\tbeyond\t[2] | 6.9 | 2.0 |
| Total | $24.3 | $6.6 |

[1] 	 Excludes	certain	non-GMIB	living	benefits	of	$2.9	billion	of	account	value	and	$0.9	billion	of	NAR.

[2] In	2018	&	beyond,	$2.6	billion	of	the	$6.9	billion	is	primarily	associated	with	account	value	that	is	eligible	in	2021.

# Variable	Annuity	Market	Risk	Exposures

The	following	table	summarizes	the	broad	Variable	Annuity	Guarantees	offered	by	the	Company	and	the	market	risks	to	which	the guarantee	is	most	exposed	from	a	U.S.	GAAP	accounting	perspective.

# Risk	Hedging

# Variable	Annuity	Hedging	Program

The	 Company's	 variable	 annuity	 hedging	 is	 primarily	 focused	 on	 reducing	 the	 economic	 exposure	 to	 market	 risks	 associated	 with guaranteed	 benefits	 that	 are	 embedded	 in	 our	 global	 VA	 contracts	 through	 the	 use	 of	 reinsurance	 and	 capital	 market	 derivative instruments.	The	variable	annuity	hedging	also	considers	the	potential	impacts	on	Statutory	accounting	results.

The	Company	uses	reinsurance	for	a	portion	of	contracts	with	GMWB	riders	issued	prior	to	the	third	quarter	of	2003	and	GMWB	risks associated	with	a	block	of	business	sold	between	the	third	quarter	of	2003	and	the	second	quarter	of	2006.	The	Company	also	uses reinsurance	for	a	majority	of	the	GMDB	issued	in	the	U.S.	and	a	portion	of	the	GMDB	issued	in	Japan.

# Capital	Market	Derivatives

# GMWB	Hedge	Program

The	Company	enters	into	derivative	contracts	to	hedge	market	risk	exposures	associated	with	the	GMWB	liabilities	that	are	not	reinsured. These	derivative	contracts	include	customized	swaps,	interest	rate	swaps	and	futures,	and	equity	swaps,	options,	and	futures,	on	certain indices	including	the	S&P	500	index,	EAFE	index,	and	NASDAQ	index.

Additionally,	the	Company	holds	customized	derivative	contracts	to	provide	protection	from	certain	capital	market	risks	for	the	remaining term	of	specified	blocks	of	non-reinsured	GMWB	riders.	These	customized	derivative	contracts	are	based	on	policyholder	behavior assumptions	specified	at	the	inception	of	the	derivative	contracts.	The	Company	retains	the	risk	for	differences	between	assumed	and actual	policyholder	behavior	and	between	the	performance	of	the	actively	managed	funds	underlying	the	separate	accounts	and	their respective	indices.

While	the	Company	actively	manages	this	dynamic	hedging	program,	increased	U.S.	GAAP	earnings	volatility	may	result	from	factors including,	but	not	limited	to:	policyholder	behavior,	capital	markets,	divergence	between	the	performance	of	the	underlying	funds	and	the hedging	indices,	changes	in	hedging	positions	and	the	relative	emphasis	placed	on	various	risk	management	objectives.

# Macro	Hedge	Program

The	Company's	macro	hedging	program	uses	derivative	instruments	such	as	options,	futures,	swaps,	and	forwards	on	equities	and	interest rates	to	provide	protection	against	the	statutory	tail	scenario	risk	arising	from	U.S.,	GMWB	and	GMDB	liabilities,	on	the	Company's statutory	surplus.	These	macro	hedges	cover	some	of	the	residual	risks	not	otherwise	covered	by	specific	dynamic	hedging	programs. Management	assesses	this	residual	risk	under	various	scenarios	in	designing	and	executing	the	macro	hedge	program.	The	macro	hedge program	will	result	in	additional	U.S.	GAAP	earnings	volatility	as	changes	in	the	value	of	the	macro	hedge	derivatives,	which	are designed	to	reduce	statutory	reserve	and	capital	volatility,	may	not	be	closely	aligned	to	changes	in	U.S.	GAAP	liabilities.

# International	Hedge	Programs

The	Company	enters	into	derivative	contracts	to	hedge	market	risk	exposures	associated	with	the	guaranteed	benefits	which	are	embedded in	the	international	variable	annuity	contracts.	These	derivative	contracts	include	foreign	currency	forwards	and	options,	interest	rate swaps	and	futures,	and	equity	swaps,	options,	and	futures	on	certain	broadly	traded	global	equity	indices	including	the	S&P500	index, Nikkei	225	index,	FTSE	100	index,	and	Euro	Stoxx	50.	During	2011,	the	Company	increased	its	equity,	currency,	and	interest	rate	hedge cover.

While	the	Company	actively	manages	these	dynamic	hedging	programs,	increased	U.S.	GAAP	earnings	volatility	may	result	from	factors including,	but	not	 limited	 to:	focus	on	reducing	 the	economic	exposure	 to	market	risks	associated	with	guaranteed	benefits,	capital markets,	changes	in	hedging	positions	and	the	relative	emphasis	placed	on	various	risk	management	objectives.

# Variable	Annuity	Hedging	Program	Sensitivities

The	following	table	presents	the	accounting	treatment	of	the	underlying	guaranteed	living	benefits	and	the	related	hedge	assets	by	hedge program.

[1] 	 The	liabilities	for	international	variable	annuity	are	primarily	not	measured	on	a	fair	value	basis.	However	there	is	an	immaterial portion	of	the	international	variable	annuity	with	a	GMWB	or	GMAB	which	is	measured	on	a	fair	value	basis.

The	following	table	presents	our	estimates	of	the	potential	instantaneous	impacts	from	sudden	market	stresses	related	to	equity	market prices,	 interest	rates,	 implied	market	volatilities,	and	foreign	currency	exchange	rates.	The	sensitivities	below	represent:	(1)	 the	net estimated	difference	between	the	change	in	the	fair	value	of	GMWB	liabilities	and	the	underlying	hedge	instruments	and	(2)	the	estimated change	in	fair	value	of	the	hedge	instruments	for	the	macro	and	international	hedge	programs,	before	the	impacts	of	amortization	of	DAC, and	taxes.	As	noted	in	the	table	above,	certain	hedge	assets	are	used	to	hedge	liabilities	that	are	not	carried	at	fair	value	and	will	not	have a	liability	offset	in	the	U.S.	GAAP	sensitivity	analysis.	All	sensitivities	are	measured	as	of	December	30,	2011,	and	are	related	to	the	fair value	of	liabilities	and	hedge	instruments	in	place	as	of	that	date	for	the	Company's	variable	annuity	hedge	programs.	The	impacts presented	in	the	table	below	are	estimated	individually	as	of	December	30,	2011,	and	performed	without	consideration	of	any	correlation among	market	risk	factors.

| U.S.	GAAP	Sensitivity	Analysis |  |  | U.S.	Programs |  |  |  | International	Programs | International	Programs | International	Programs |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (pre\tTax/DAC)\t[1] | GMWB | GMWB | GMWB | Macro | Macro | Macro | Japan/UK | Japan/UK | Japan/UK |
| Equity\tMarket\tReturn | -20% | -10% | +10% | -20% | -10% | +10% | -20% | -10% | +10% |
| Potential\tNet\tFair\tValue\tImpact | $(35) | $(4) | $(20) | $380 | $141 | $(89) | $908 | $456 | $(451) |
| Interest\tRates | -50bps | -25bps | +25bps | -50bps | -25bps | +25bps | -50bps | -25bps | +25\tbps |
| Potential\tNet\tFair\tValue\tImpact | $(221) | $(106) | $99 | $12 | $6 | $(6) | $477 | $235 | $(240) |
| Implied\tVolatilities | +10% | +2% | -10% | +10% | +2% | -10% | +10% | +2% | -10% |
| Potential\tNet\tFair\tValue\tImpact | $(565) | $(110) | $509 | $90 | $19 | $(111) | $30 | $6 | $(26) |
| Yen\tStrengthens\t+/\tWeakens\t- | +20% | +10% | -10% | +20% | +10% | -10% | +20% | +10% | -10% |
| Potential\tNet\tFair\tValue\tImpact | N/A | N/A | N/A | N/A | N/A | N/A | $ 2,875 | $ 1,197 | $(749) |

The	above	sensitivity	analysis	is	an	estimate	and	should	not	be	used	to	predict	the	Company's	future	financial	performance	of	its	variable annuity	hedge	programs.	The	actual	net	changes	in	the	fair	value	liability	and	the	hedging	assets	illustrated	in	the	above	table	may	vary materially	depending	on	a	variety	of	factors	which	include	but	are	not	limited	to:

•	 The	sensitivity	analysis	is	only	valid	as	of	the	measurement	date	and	assumes	instantaneous	changes	in	the	capital	market	factors	and no	ability	to	rebalance	hedge	positions	prior	to	the	market	changes;

•	 Changes	to	the	underlying	hedging	program,	policyholder	behavior,	and	variation	in	underlying	fund	performance	relative	to	the hedged	index,	which	could	materially	impact	the	liability;	and

•	 The	impact	of	elapsed	time	on	liabilities	or	hedge	assets,	any	non-parallel	shifts	in	capital	market	factors,	or	correlated	moves	across the	sensitivities.

Foreign	currency	exchange	risk	is	defined	as	the	risk	of	financial	loss	due	to	changes	in	the	relative	value	between	currencies.	The Company's	foreign	currency	exchange	risk	is	related	to	non-U.S.	dollar	denominated	liability	contracts,	including	its	GMDB,	GMAB, GMWB	and	GMIB	benefits	associated	with	its	Japanese	and	U.K.	variable	annuities,	the	investment	in	and	net	income	of	the	Japanese and	 U.K.	 operations,	 non-U.S.	 dollar	 denominated	 investments,	 which	 primarily	 consist	 of	 fixed	 maturity	 investments,	 and	 a	 yen denominated	individual	fixed	annuity	product.	In	addition,	the	Company's	Life	Other	Operations	issued	non-U.S.	dollar	denominated funding	agreement	liability	contracts.	A	portion	of	the	Company's	foreign	currency	exposure	is	mitigated	through	the	use	of	derivatives.

The	company	manages	the	market	risk,	including	foreign	currency	exchange	risk,	associated	with	the	guaranteed	benefits	related	to	the Japanese	and	U.K.	variable	annuities	through	its	comprehensive	International	Hedge	Program.	For	more	information	on	the	International Hedge	Program,	including	the	foreign	currency	exchange	risk	sensitivity	analysis,	see	the	Variable	Product	Guarantee	Risks	and	Risk Management	section.

In	order	to	manage	the	currency	exposure	related	to	non-U.S.	dollar	denominated	investments	and	the	non-U.S.	dollar	denominated funding	agreement	liability	contracts,	the	Company	enters	into	foreign	currency	swaps	and	forwards	to	hedge	the	variability	in	cash	flows or	fair	value.	These	foreign	currency	swap	and	forward	agreements	are	structured	to	match	the	foreign	currency	cash	flows	of	the	hedged foreign	denominated	securities	and	liabilities.

The	 yen	 denominated	 individual	 fixed	 annuity	 product	 was	 written	 by	 Hartford	 Life	 Insurance	 K.K.	 ("HLIKK"),	 a	 wholly-owned Japanese	subsidiary	of	Hartford	Life,	Inc.	("HLI"),	and	subsequently	reinsured	to	Hartford	Life	Insurance	Company,	a	U.S.	dollar	based wholly-owned	 indirect	 subsidiary	 of	 HLI.	 During	 2009,	 the	 Company	 suspended	 new	 sales	 of	 the	 Japan	 business.	The	 underlying investment	involves	investing	in	U.S.	securities	markets,	which	offer	favorable	credit	spreads.	The	yen	denominated	fixed	annuity	product ("yen	fixed	annuities")	is	recorded	in	the	consolidated	balance	sheets	with	invested	assets	denominated	in	dollars	while	policyholder liabilities	are	denominated	in	yen	and	converted	to	U.S.	dollars	based	upon	the	December	31	yen	to	U.S.	dollar	spot	rate.	The	difference between	U.S.	dollar	denominated	investments	and	yen	denominated	liabilities	exposes	the	Company	to	currency	risk.	The	Company manages	this	currency	risk	associated	with	the	yen	fixed	annuities	primarily	with	pay	variable	U.S.	dollar	and	receive	fixed	yen	currency swaps.

Although	economically	an	effective	hedge,	a	divergence	between	the	yen	denominated	fixed	annuity	product	liability	and	the	currency swaps	exists	primarily	due	to	the	difference	in	the	basis	of	accounting	between	the	liability	and	the	derivative	instruments	(i.e.	historical cost	versus	fair	value).	The	yen	denominated	fixed	annuity	product	liabilities	are	recorded	on	a	historical	cost	basis	and	are	only	adjusted for	changes	in	foreign	spot	rates	and	accrued	income.	The	currency	swaps	are	recorded	at	fair	value,	incorporating	changes	in	value	due	to changes	in	forward	foreign	exchange	rates,	interest	rates	and	accrued	income.	A	portion	of	the	Company's	foreign	currency	exposure	is mitigated	through	the	use	of	derivatives.

The	risk	associated	with	the	non-U.S.	dollar	denominated	fixed	maturities	relates	to	potential	decreases	in	value	and	income	resulting from	unfavorable	changes	in	foreign	exchange	rates.	The	fair	value	of	the	non-U.S.	dollar	denominated	fixed	maturities,	which	are primarily	denominated	in	euro,	sterling,	yen	and	Canadian	dollars,	at	December	31,	2011	and	2010,	were	approximately	$2.3	billion	and $1.4	billion,	respectively.	Included	in	these	amounts	are	$1.9	billion	and	$1.0	billion	at	December	31,	2011	and	2010,	respectively,	related to	 non-U.S.	 dollar	 denominated	 fixed	 maturity	 securities	 that	 directly	 support	 liabilities	 denominated	 in	 the	 same	 currencies.	 At December	31,	2011	and	2010,	the	derivatives	used	to	hedge	currency	exchange	risk	related	to	the	remaining	non-U.S.	dollar	denominated fixed	maturities	had	a	total	notional	amount	of	$399	and	$431,	respectively,	and	total	fair	value	of	$12	and	($6),	respectively.

Based	on	the	fair	values	of	the	Company's	non-U.S.	dollar	denominated	securities,	including	the	associated	yen	denominated	fixed annuity	product	liabilities,	and	derivative	instruments	as	of	December	31,	2011	and	2010,	management	estimates	that	a	10%	unfavorable change	in	exchange	rates	would	decrease	the	fair	values	by	a	before-tax	total	of	approximately	$113	and	$87,	respectively.	The	estimated impact	was	based	upon	a	10%	change	in	December	31	spot	rates.	The	selection	of	the	10%	unfavorable	change	was	made	only	for illustration	of	the	potential	hypothetical	impact	of	such	an	event	and	should	not	be	construed	as	a	prediction	of	future	market	events. Actual	results	could	differ	materially	from	those	illustrated	above	due	to	the	nature	of	the	estimates	and	assumptions	used	in	the	above analysis.

The	Company's	Wealth	Management	operations	issued	non-U.S.	dollar	denominated	funding	agreement	liability	contracts.	The	Company hedges	the	foreign	currency	risk	associated	with	these	liability	contracts	with	currency	rate	swaps.	At	December	31,	2011	and	2010,	the derivatives	used	to	hedge	foreign	currency	exchange	risk	related	to	foreign	denominated	liability	contracts	had	a	total	notional	amount	of $771	and	a	total	fair	value	of	($57)	and	($17),	respectively.

The	Company	uses	currency	swaps	to	manage	the	foreign	currency	risk	associated	with	the	yen	denominated	individual	fixed	annuity product.	As	of	December	31,	2011	and	2010,	the	notional	value	of	the	currency	swaps	was	$1.9	billion	and	$2.1	billion	and	the	fair	value was	$514	and	$608,	respectively.	The	currency	swaps	are	recorded	at	fair	value,	incorporating	changes	in	value	due	to	changes	in	forward foreign	exchange	rates,	interest	rates	and	accrued	income.	A	before-tax	net	gain	of	$3	and	$27	for	the	years	ended	December	31,	2011	and 2010,	respectively,	which	includes	the	changes	in	value	of	the	currency	swaps,	excluding	net	periodic	coupon	settlements,	and	the	yen fixed	annuity	contract	remeasurement,	was	recorded	in	net	realized	capital	gains	and	losses.

# Financial	Risk	on	Statutory	Capital

Statutory	surplus	amounts	and	risk-based	capital	("RBC")	ratios	may	increase	or	decrease	in	any	period	depending	upon	a	variety	of factors	and	may	be	compounded	in	extreme	scenarios	or	if	multiple	factors	occur	at	the	same	time.	At	times	the	impact	of	changes	in certain	market	factors	or	a	combination	of	multiple	factors	on	RBC	ratios	can	be	counterintuitive.	Factors	include:

•In	general,	as	equity	market	levels	and	interest	rates	decline,	the	amount	and	volatility	of	both	our	actual	potential	obligation,	as	well as	the	related	statutory	surplus	and	capital	margin	for	death	and	living	benefit	guarantees	associated	with	U.S.	variable	annuity contracts	 can	 be	 materially	 negatively	 affected,	 sometimes	 at	 a	 greater	 than	 linear	 rate.	 Other	 market	 factors	 that	 can	 impact statutory	surplus,	reserve	levels	and	capital	margin	include	differences	in	performance	of	variable	subaccounts	relative	to	indices and/or	 realized	 equity	 and	 interest	 rate	 volatilities.	 In	 addition,	 as	 equity	 market	 levels	 increase,	 generally	 surplus	 levels	 will increase.	RBC	ratios	will	also	tend	to	increase	when	equity	markets	increase.	However,	as	a	result	of	a	number	of	factors	and	market conditions,	including	the	level	of	hedging	costs	and	other	risk	transfer	activities,	reserve	requirements	for	death	and	living	benefit guarantees	and	RBC	requirements	could	increase	with	rising	equity	markets,	resulting	in	lower	RBC	ratios.	Non-market	factors, which	can	also	impact	the	amount	and	volatility	of	both	our	actual	potential	obligation,	as	well	as	the	related	statutory	surplus	and capital	margin,	include	actual	and	estimated	policyholder	behavior	experience	as	it	pertains	to	lapsation,	partial	withdrawals,	and mortality.

•	 Similarly,	for	guaranteed	benefits	(GMDB,	GMIB,	and	GMWB)	reinsured	from	our	international	operations	to	our	U.S.	insurance subsidiaries,	the	amount	and	volatility	of	both	our	actual	potential	obligation,	as	well	as	the	related	statutory	surplus	and	capital margin	can	be	materially	affected	by	a	variety	of	factors,	both	market	and	non-market.	Market	factors	include	declines	in	various equity	market	indices	and	interest	rates,	changes	in	value	of	the	yen	versus	other	global	currencies,	difference	in	the	performance	of variable	subaccounts	relative	to	indices,	and	increases	in	realized	equity,	interest	rate,	and	currency	volatilities.	Non-market	factors include	actual	and	estimated	policyholder	behavior	experience	as	it	pertains	to	lapsation,	withdrawals,	mortality,	and	annuitization. Risk	mitigation	activities,	such	as	hedging,	may	also	result	in	material	and	sometimes	counterintuitive	impacts	on	statutory	surplus and	capital	margin.	Notably,	as	changes	in	these	market	and	non-market	factors	occur,	both	our	potential	obligation	and	the	related statutory	reserves	and/or	required	capital	can	increase	or	decrease	at	a	greater	than	linear	rate.

•	 As	 the	 value	 of	 certain	 fixed-income	 and	 equity	 securities in	 our investment	 portfolio	 decreases,	 due in	 part to	 credit	 spread widening,	statutory	surplus	and	RBC	ratios	may	decrease.

•	 As	the	value	of	certain	derivative	instruments	that	do	not	get	hedge	accounting	decreases,	statutory	surplus	and	RBC	ratios	may decrease.

•	 The	life	insurance	subsidiaries'	exposure	to	foreign	currency	exchange	risk	exists	with	respect	to	non-U.S.	dollar	denominated	assets and	liabilities.	Assets	and	liabilities	denominated	in	foreign	currencies	are	accounted	for	at	their	U.S.	dollar	equivalent	values	using exchange	rates	at	the	balance	sheet	date.	As	foreign	currency	exchange	rates	vary	in	comparison	to	the	U.S.	dollar,	the	remeasured value	of	those	non-dollar	denominated	assets	or	liabilities	will	also	vary,	causing	an	increase	or	decrease	to	statutory	surplus.

•	 Our	statutory	surplus	is	also	impacted	by	widening	credit	spreads	as	a	result	of	the	accounting	for	the	assets	and	liabilities	in	our fixed	market	value	adjusted	("MVA")	annuities.	Statutory	separate	account	assets	supporting	the	fixed	MVA	annuities	are	recorded at	fair	value.	In	determining	the	statutory	reserve	for	the	fixed	MVA	annuities,	we	are	required	to	use	current	crediting	rates	in	the U.S.	and	Japanese	LIBOR	in	Japan.	In	many	capital	market	scenarios,	current	crediting	rates	in	the	U.S.	are	highly	correlated	with market	rates	implicit	in	the	fair	value	of	statutory	separate	account	assets.	As	a	result,	the	change	in	statutory	reserve	from	period	to period	will	likely	substantially	offset	the	change	in	the	fair	value	of	the	statutory	separate	account	assets.	However,	in	periods	of volatile	credit	markets,	such	as	we	have	experienced,	actual	credit	spreads	on	investment	assets	may	increase	sharply	for	certain	sub- sectors	of	the	overall	credit	market,	resulting	in	statutory	separate	account	asset	market	value	losses.	As	actual	credit	spreads	are	not fully	reflected	in	the	current	crediting	rates	in	the	U.S.	or	Japanese	LIBOR	in	Japan,	the	calculation	of	statutory	reserves	will	not substantially	offset	the	change	in	fair	value	of	the	statutory	separate	account	assets	resulting	in	reductions	in	statutory	surplus.	This has	resulted	and	may	continue	to	result	in	the	need	to	devote	significant	additional	capital	to	support	the	product.

•	 With	respect	to	our	fixed	annuity	business,	sustained	low	interest	rates	may	result	in	a	reduction	in	statutory	surplus	and	an	increase in	National	Association	of	Insurance	Commissioners	("NAIC")	required	capital.

Most	 of	 these	 factors	 are	 outside	 of	 the	 Company's	 control.	The	 Company's	 financial	 strength	 and	 credit	 ratings	 are	 significantly influenced	by	the	statutory	surplus	amounts	and	RBC	ratios	of	our	insurance	company	subsidiaries.	In	addition,	rating	agencies	may implement	changes	to	their	internal	models	that	have	the	effect	of	increasing	or	decreasing	the	amount	of	statutory	capital	we	must	hold	in order	to	maintain	our	current	ratings.

The	Company	has	reinsured	approximately	18%	of	its	risk	associated	with	U.S.	GMWB	and	58%	of	its	risk	associated	with	the	aggregate U.S.	GMDB	exposure.	These	reinsurance	agreements	serve	to	reduce	the	Company's	exposure	to	changes	in	the	statutory	reserves	and	the related	capital	and	RBC	ratios	associated	with	changes	in	the	capital	markets.	The	Company	also	continues	to	explore	other	solutions	for mitigating	the	capital	market	risk	effect	on	surplus,	such	as	internal	and	external	reinsurance	solutions,	modifications	to	our	hedging program,	changes	in	product	design,	increasing	pricing	and	expense	management

Credit	risk	is	defined	as	the	risk	of	financial	loss	due	to	uncertainty	of	obligor's	or	counterparty's	ability	or	willingness	to	meet	its obligations	in	accordance	with	agreed	upon	terms.	The	majority	of	the	Company's	credit	risk	is	concentrated	in	its	investment	holdings but	is	also	present	in	reinsurance	and	insurance	portfolios.	Credit	risk	is	comprised	of	three	major	factors:	the	risk	of	change	in	credit quality,	or	credit	migration	risk;	the	risk	of	default;	and	the	risk	of	a	change	in	value	of	a	financial	instrument	due	to	changes	in	credit spread	that	are	unrelated	to	changes	in	obligor	credit	quality.	A	decline	in	creditworthiness	is	typically	associated	with	an	increase	in	an investment's	credit	spread,	potentially	resulting	in	an	increase	in	other-than-temporary	impairments	and	an	increased	probability	of	a realized	loss	upon	sale.

The	 objective	 of	 the	 Company's	 enterprise	 credit	 risk	 management	 strategy	 is	 to	 identify,	 quantify,	 and	 manage	 credit	 risk	 on	 an aggregate	portfolio	basis	and	to	limit	potential	losses	in	accordance	with	an	established	credit	risk	appetite.	The	Company	manages	to	its risk	appetite	by	primarily	holding	a	diversified	mix	of	investment	grade	issuers	and	counterparties	across	its	investment,	reinsurance,	and insurance	portfolios.	Potential	losses	are	also	limited	within	portfolios	by	diversifying	across	geographic	regions,	asset	types,	and	sectors.

The	Company	manages	a	credit	exposure	from	its	inception	to	its	maturity	or	sale.	Both	the	investment	and	reinsurance	areas	have formulated	procedures	for	counterparty	approvals	and	authorizations.	Although	approval	processes	may	vary	by	area	and	type	of	credit risk,	approval	processes	establish	minimum	levels	of	creditworthiness	and	financial	stability.	Eligible	credits	are	subjected	to	prudent	and conservative	 underwriting	 reviews.	 Within	 the	 investment	 portfolio,	 private	 securities,	 such	 as	 commercial	 mortgages,	 and	 private placements,	must	be	presented	to	their	respective	review	committees	for	approval.

Credit	risks	are	managed	on	an	on-going	basis	through	the	use	of	various	processes	and	analyses.	At	the	investment,	reinsurance,	and insurance	product	levels,	fundamental	credit	analyses	are	performed	at	the	issuer/counterparty	level	on	a	regular	basis.	To	provide	a holistic	review	within	the	investment	portfolio,	fundamental	analyses	are	supported	by	credit	ratings,	assigned	by	nationally	recognized rating	agencies	or	internally	assigned,	and	by	quantitative	credit	analyses.	The	Company	utilizes	a	credit	VaR	to	measure	default	and migration	risk	on	a	monthly	basis.	Issuer	and	security	level	risk	measures	are	also	utilized.	In	the	event	of	deterioration	in	credit	quality, the	Company	maintains	watch	 lists	of	problem	counterparties	within	 the	 investment	and	reinsurance	portfolios.	The	watch	 lists	are updated	based	on	regular	credit	examinations	and	management	reviews.	The	Company	also	performs	quarterly	assessments	of	probable expected	losses	in	the	investment	portfolio.	The	process	is	conducted	on	a	sector	basis	and	is	intended	to	promptly	assess	and	identify potential	problems	in	the	portfolio	and	to	recognize	necessary	impairments.

Credit	risk	policies	at	the	enterprise	and	operation	level	ensure	comprehensive	and	consistent	approaches	to	quantifying,	evaluating,	and managing	credit	risk	under	expected	and	stressed	conditions.	These	policies	define	the	scope	of	the	risk,	authorities,	accountabilities, terms,	and	limits,	and	are	regularly	reviewed	and	approved	by	senior	management	and	ERM.	Aggregate	counterparty	credit	quality	and exposure	is	monitored	on	a	daily	basis	utilizing	an	enterprise-wide	credit	exposure	information	system	that	contains	data	on	issuers, ratings,	exposures,	and	credit	limits.	Exposures	are	tracked	on	a	current	and	potential	basis.	Credit	exposures	are	reported	regularly	to	the ERCC	and	to	the	Finance,	Investment	and	Risk	Management	Committee	("FIRMCo").	Exposures	are	aggregated	by	ultimate	parent across	investments,	reinsurance	receivables,	insurance	products	with	credit	risk,	and	derivative	counterparties.	The	credit	database	and reporting	system	are	available	to	all	key	credit	practitioners	in	the	enterprise.

The	Company	exercises	various	and	differing	methods	to	mitigate	its	credit	risk	exposure	within	its	investment	and	reinsurance	portfolios. Some	of	the	reasons	for	mitigating	credit	risk	include	financial	instability	or	poor	credit,	avoidance	of	arbitration	or	litigation,	future uncertainty,	and	exposure	in	excess	of	risk	tolerances.	Credit	risk	within	the	investment	portfolio	is	most	commonly	mitigated	through	the use	of	derivative	instruments	or	asset	sales.	Counterparty	credit	risk	is	mitigated	through	the	practice	of	entering	into	contracts	only	with highly	creditworthy	institutions	and	through	the	practice	of	holding	and	posting	of	collateral.	Systemic	credit	risk	is	mitigated	through	the construction	of	high-quality,	diverse	portfolios	 that	are	subject	 to	regular	underwriting	of	credit	risks.	For	further	discussion	of	 the Company's	investment	and	derivative	instruments,	see	the	Investment	Management	section	and	Note	5	of	the	Notes	to	Consolidated Financial	Statements.	Further	discussion	on	managing	and	mitigating	credit	risk	from	the	use	of	reinsurance	via	an	enterprise	security review	process,	see	the	Reinsurance	section.

The	Company	is	not	exposed	to	any	credit	concentration	risk	of	a	single	issuer	greater	than	10%	of	the	Company's	stockholders'	equity other	than	U.S.	government	and	government	agencies	backed	by	the	full	faith	and	credit	of	the	U.S.	government.	For	further	discussion	of concentration	of	credit	risk,	see	the	Concentration	of	Credit	Risk	section	in	Note	5	of	the	Notes	to	Consolidated	Financial	Statements.

# Derivative	Instruments

The	Company	utilizes	a	variety	of	over-the-counter	and	exchange	traded	derivative	instruments	as	a	part	of	its	overall	risk	management strategy,	as	well	as	to	enter	into	replication	transactions.	Derivative	instruments	are	used	to	manage	risk	associated	with	interest	rate, equity	market,	credit	spread,	issuer	default,	price,	and	currency	exchange	rate	risk	or	volatility.	Replication	transactions	are	used	as	an economical	means	to	synthetically	replicate	the	characteristics	and	performance	of	assets	that	would	otherwise	be	permissible	investments under	the	Company's	investment	policies.	For	further	information	on	the	Company's	use	of	derivatives,	see	Note	5	of	the	Notes	to Consolidated	Financial	Statements.

Derivative	activities	are	monitored	and	evaluated	by	the	Company's	compliance	and	risk	management	teams	and	reviewed	by	senior management.	In	addition,	the	Company	monitors	counterparty	credit	exposure	on	a	monthly	basis	to	ensure	compliance	with	Company policies	and	statutory	limitations.	The	notional	amounts	of	derivative	contracts	represent	the	basis	upon	which	pay	or	receive	amounts	are calculated	and	are	not	reflective	of	credit	risk.	Downgrades	to	the	credit	ratings	of	The	Hartford's	insurance	operating	companies	may have	adverse	implications	for	its	use	of	derivatives	including	those	used	to	hedge	benefit	guarantees	of	variable	annuities.	In	some	cases, downgrades	may	give	derivative	counterparties	the	unilateral	contractual	right	to	cancel	and	settle	outstanding	derivative	trades	or	require additional	collateral	to	be	posted.	In	addition,	downgrades	may	result	in	counterparties	becoming	unwilling	to	engage	in	additional	over- the-counter	("OTC")	derivatives	or	may	require	collateralization	before	entering	into	any	new	trades.	This	will	restrict	the	supply	of derivative	instruments	commonly	used	to	hedge	variable	annuity	guarantees,	particularly	long-dated	equity	derivatives	and	interest	rate swaps.	Under	these	circumstances,	the	Company's	operating	subsidiaries	could	conduct	hedging	activity	using	a	combination	of	cash	and exchange-traded	instruments,	in	addition	to	using	the	available	OTC	derivatives.

The	Company	uses	various	derivative	counterparties	in	executing	its	derivative	transactions.	The	use	of	counterparties	creates	credit	risk that	 the	 counterparty	 may	 not	 perform	 in	 accordance	 with	 the	 terms	 of	 the	 derivative	 transaction.	 The	 Company	 has	 developed	 a derivative	counterparty	exposure	policy	which	limits	the	Company's	exposure	to	credit	risk.	The	derivative	counterparty	exposure	policy establishes	market-based	credit	limits,	favors	long-term	financial	stability	and	creditworthiness	of	the	counterparty	and	typically	requires credit	enhancement/credit	risk	reducing	agreements.	The	Company	minimizes	the	credit	risk	of	derivative	instruments	by	entering	into transactions	with	high	quality	counterparties	primarily	rated	A	or	better,	which	are	monitored	and	evaluated	by	the	Company's	risk management	team	and	reviewed	by	senior	management.	In	addition,	the	Company	monitors	counterparty	credit	exposure	on	a	monthly basis	 to	 ensure	 compliance	 with	 Company	 policies	 and	 statutory	 limitations.	 The	 Company	 also	 generally	 requires	 that	 derivative contracts,	other	than	exchange	traded	contracts,	certain	forward	contracts,	and	certain	embedded	and	reinsurance	derivatives,	be	governed by	an	International	Swaps	and	Derivatives	Association	Master	Agreement,	which	is	structured	by	legal	entity	and	by	counterparty	and permits	right	of	offset.

The	Company	has	developed	credit	exposure	thresholds	which	are	based	upon	counterparty	ratings.	Credit	exposures	are	measured	using the	market	value	of	the	derivatives,	resulting	in	amounts	owed	to	the	Company	by	its	counterparties	or	potential	payment	obligations	from the	Company	to	its	counterparties.	Credit	exposures	are	generally	quantified	daily	based	on	the	prior	business	day's	market	value	and collateral	is	pledged	to	and	held	by,	or	on	behalf	of,	the	Company	to	the	extent	the	current	value	of	the	derivatives	exceed	the	contractual thresholds.	In	accordance	with	industry	standard	and	the	contractual	agreements,	collateral	is	typically	settled	on	the	next	business	day. The	Company	has	exposure	to	credit	risk	for	amounts	below	the	exposure	thresholds	which	are	uncollateralized,	as	well	as	for	market fluctuations	that	may	occur	between	contractual	settlement	periods	of	collateral	movements.

For	the	company's	domestic	derivative	programs,	the	maximum	uncollateralized	threshold	for	a	derivative	counterparty	for	a	single	legal entity	is	$10.	The	Company	currently	transacts	OTC	derivatives	in	five	legal	entities	that	have	a	threshold	greater	than	zero	and	therefore the	maximum	combined	threshold	for	a	single	counterparty	across	all	legal	entities	that	use	derivatives	is	$50.	In	addition,	the	Company may	have	exposure	to	multiple	counterparties	in	a	single	corporate	family	due	to	a	common	credit	support	provider.	As	of	December	31, 2011,	for	the	company's	domestic	derivative	programs,	the	maximum	combined	threshold	for	all	counterparties	under	a	single	credit support	provider	across	all	legal	entities	that	use	derivatives	is	$100.	Based	on	the	contractual	terms	of	the	collateral	agreements,	these thresholds	may	be	immediately	reduced	due	to	a	downgrade	in	either	party's	credit	rating.	Beginning	in	the	fourth	quarter	of	2011,	the Company	began	hedging	its	Japan	exposures	within	the	legal	entity	HLIKK.	The	counterparty	credit	exposures	at	HLIKK	generally follow	the	maximum	uncollateralized	threshold	of	the	domestic	program	however,	for	two	counterparties,	collateralization	requirements are	currently	not	in	place.	These	two	counterparties	maintain	credit	ratings	of	A	or	better	and	the	Company	actively	monitors	their	credit standing.	For	further	discussion,	see	the	Derivative	Commitments	section	of	Note	12	of	the	Notes	to	Consolidated	Financial	Statements.

For	the	year	ended	December	31,	2011,	the	Company	has	incurred	no	losses	on	derivative	instruments	due	to	counterparty	default.

In	addition	to	counterparty	credit	risk,	the	Company	may	also	introduce	credit	risk	through	the	use	of	credit	default	swaps	that	are	entered into	to	manage	credit	exposure.	Credit	default	swaps	involve	a	transfer	of	credit	risk	of	one	or	many	referenced	entities	from	one	party	to another	in	exchange	for	periodic	payments.	The	party	that	purchases	credit	protection	will	make	periodic	payments	based	on	an	agreed upon	rate	and	notional	amount,	and	for	certain	transactions	there	will	also	be	an	upfront	premium	payment.	The	second	party,	who assumes	credit	risk,	will	typically	only	make	a	payment	if	there	is	a	credit	event	as	defined	in	the	contract	and	such	payment	will	be typically	equal	to	the	notional	value	of	the	swap	contract	less	the	value	of	the	referenced	security	issuer's	debt	obligation.	A	credit	event	is generally	defined	as	default	on	contractually	obligated	interest	or	principal	payments	or	bankruptcy	of	the	referenced	entity.

The	Company	uses	credit	derivatives	to	purchase	credit	protection	and	to	assume	credit	risk	with	respect	to	a	single	entity,	referenced index,	or	asset	pool.	The	Company	purchases	credit	protection	through	credit	default	swaps	to	economically	hedge	and	manage	credit	risk of	certain	fixed	maturity	investments	across	multiple	sectors	of	the	investment	portfolio.	The	Company	also	enters	into	credit	default swaps	that	assume	credit	risk	as	part	of	replication	transactions.	Replication	transactions	are	used	as	an	economical	means	to	synthetically replicate	the	characteristics	and	performance	of	assets	that	would	otherwise	be	permissible	investments	under	the	Company's	investment policies.	These	swaps	reference	investment	grade	single	corporate	issuers	and	baskets,	which	include	customized	diversified	portfolios	of corporate	issuers,	which	are	established	within	sector	concentration	limits	and	may	be	divided	into	tranches	which	possess	different	credit ratings.

As	of	December	31,	2011	and	2010,	the	notional	amount	related	to	credit	derivatives	that	purchase	credit	protection	was	$1.7	billion	and $2.6	billion,	respectively,	while	the	fair	value	was	$36	and	($9),	respectively.	As	of	December	31,	2011	and	2010,	the	notional	amount related	to	credit	derivatives	that	assume	credit	risk	was	$3.0	billion	and	$2.6	billion,	respectively,	while	the	fair	value	was	($648)	and ($434),	respectively.	For	further	information	on	credit	derivatives,	see	the	Capital	Markets	Risk	Management	section	of	the	MD&A	and Note	5	of	the	Notes	to	Consolidated	Financial	Statements.

# Investment	Portfolio	Risks	and	Risk	Management

# Investment	Portfolio	Composition

The	following	table	presents	the	Company's	fixed	maturities,	AFS,	by	credit	quality.	The	ratings	referenced	below	are	based	on	the ratings	of	a	nationally	recognized	rating	organization	or,	if	not	rated,	assigned	based	on	the	Company's	internal	analysis	of	such	securities

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Percent\tof |  |  | Percent\tof |
|  | Amortized |  | Total\tFair | Amortized |  | Total\tFair |
|  | Cost | Fair\tValue | Value | Cost | Fair\tValue | Value |
| United\tStates\tGovernment/Government\tagencies | $8,901 | $9,364 | 11.4% | $9,961 | $9,918 | 12.7% |
| AAA | 9,631 | 10,113 | 12.4% | 10,080 | 10,174 | 13.1% |
| AA | 15,471 | 15,844 | 19.4% | 15,933 | 15,554 | 20.0% |
| A | 19,501 | 21,053 | 25.7% | 19,265 | 19,460 | 25.0% |
| BBB | 20,972 | 21,760 | 26.6% | 18,849 | 19,153 | 24.6% |
| BB\t&amp;\tbelow | 4,502 | 3,675 | 4.5% | 4,331 | 3,561 | 4.6% |
| Total\tfixed\tmaturities | $78,978 | 81,809 | 100.0% | $78,419 | 77,820 | 100.0% |

The	movement	in	the	overall	credit	quality	of	the	Company's	portfolio	was	primarily	attributable	to	sales	of	U.S.	Treasuries	as	the Company	continues	to	reinvest	in	spread	product	and	purchase	investment	grade	corporate	securities	concentrated	in	industrial	and	utility issuers.	Fixed	maturities,	FVO,	are	not	included	in	the	above	table.	For	further	discussion	on	fair	value	option	securities,	see	Note	4	of	the Notes	to	Consolidated	Financial	Statements.

The	following	table	presents	the	Company's	AFS	securities	by	type,	as	well	as	fixed	maturities,	FVO.

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | \t\t Percent | \t\t Percent |  |  |  | \t\t Percent | \t\t Percent |
|  | Cost\tor | Gross | Gross | \t\tof\tTotal | \t\tof\tTotal | Cost\tor | Gross | Gross | \t\tof\tTotal | \t\tof\tTotal |
|  | \tAmortized\t\tUnrealized\t\tUnrealized | \tAmortized\t\tUnrealized\t\tUnrealized | \tAmortized\t\tUnrealized\t\tUnrealized | Fair | Fair | \tAmortized\t\tUnrealized\t\tUnrealized | \tAmortized\t\tUnrealized\t\tUnrealized | \tAmortized\t\tUnrealized\t\tUnrealized | Fair | Fair |
|  | Cost | Gains | Losses | Value | Value | Cost | Gains | Losses | Value | Value |
| Asset-backed\tsecurities\t("ABS") |  |  |  |  |  |  |  |  |  |  |
| Consumer\tloans | \t$2,688 | 34\t\t$ | (208)\t$ | 2,514 | 3.1%\t$ | 2,496\t\t$ | 23\t\t$ | (221)\t$ | 2,298 | 2.9% |
| Small\tbusiness | 418 | 1 | (123) | 296 | 0.4% | 453 | — | (141) | 312 | 0.4% |
| Other | 324 | 20 | (1) | 343 | 0.4% | 298 | 15 | (34) | 279 | 0.4% |
| CDOs |  |  |  |  |  |  |  |  |  |  |
| Collateralized\tloan\tobligations |  |  |  |  |  |  |  |  |  |  |
| ("CLOs") | 2,334 | — | (181) | 2,153 | 2.6% | 2,429 | 1 | (212) | 2,218 | 2.9% |
| CREs | 485 | 16 | (167) | 334 | 0.4% | 653 | — | (266) | 387 | 0.5% |
| Other | — | — | — | — | — | 6 | — | — | 6 | — |
| CMBS |  |  |  |  |  |  |  |  |  |  |
| Agency\tbacked\t[1] | 637 | 40 | — | 677 | 0.8% | 519 | 9 | (4) | 524 | 0.7% |
| Bonds | 5,992 | 182 | (487) | 5,687 | 7.0% | 6,985 | 147 | (583) | 6,549 | 8.4% |
| Interest\tonly\t("IOs") | 563 | 49 | (25) | 587 | 0.7% | 793 | 79 | (28) | 844 | 1.1% |
| Corporate |  |  |  |  |  |  |  |  |  |  |
| Basic\tindustry\t[2] | 3,690 | 309 | (19) | 3,979 | 4.9% | 2,993 | 190 | (24) | 3,159 | 4.1% |
| Capital\tgoods | 3,327 | 331 | (33) | 3,625 | 4.4% | 3,179 | 223 | (23) | 3,379 | 4.3% |
| Consumer\tcyclical | 2,277 | 206 | (8) | 2,475 | 3.0% | 1,883 | 115 | (12) | 1,986 | 2.6% |
| Consumer\tnon-cyclical | 5,985 | 644 | (13) | 6,616 | 8.1% | 6,126 | 444 | (29) | 6,541 | 8.4% |
| Energy | 3,338 | 381 | (15) | 3,704 | 4.5% | 3,377 | 212 | (23) | 3,566 | 4.6% |
| Financial\tservices | 7,763 | 334 | (526) | 7,571 | 9.3% | 7,545 | 253 | (470) | 7,328 | 9.4% |
| Tech./comm. | 4,357 | 443 | (61) | 4,739 | 5.8% | 4,268 | 269 | (68) | 4,469 | 5.7% |
| Transportation | 1,285 | 123 | (6) | 1,402 | 1.7% | 1,141 | 69 | (13) | 1,197 | 1.5% |
| Utilities | 8,236 | 857 | (38) | 9,055 | 11.2% | 7,099 | 386 | (58) | 7,427 | 9.5% |
| Other\t[2] | 903 | 33 | (20) | 845 | 1.0% | 885 | 13 | (27) | 832 | 1.1% |
| Foreign\tgovt./govt.\tagencies | 2,030 | 141 | (10) | 2,161 | 2.6% | 1,627 | 73 | (17) | 1,683 | 2.2% |
| Municipal |  |  |  |  |  |  |  |  |  |  |
| Taxable | 1,688 | 120 | (51) | 1,757 | 2.1% | 1,319 | 9 | (129) | 1,199 | 1.5% |
| Tax-exempt | 10,869 | 655 | (21) | 11,503 | 14.1% | 11,150 | 141 | (366) | 10,925 | 14.0% |
| Residential\tmortgage-backed |  |  |  |  |  |  |  |  |  |  |
| securities\t("RMBS") |  |  |  |  |  |  |  |  |  |  |
| Agency | 4,436 | 222 | — | 4,658 | 5.7% | 4,283 | 109 | (27) | 4,365 | 5.6% |
| Non-agency | 62 | — | (2) | 60 | 0.1% | 78 | — | (3) | 75 | 0.1% |
| Alt-A | 115 | 5 | (21) | 99 | 0.1% | 168 | — | (19) | 149 | 0.2% |
| Sub-prime | 1,348 | 25 | (433) | 940 | 1.1% | 1,507 | — | (413) | 1,094 | 1.4% |
| U.S.\tTreasuries | 3,828 | 203 | (2) | 4,029 | 4.9% | 5,159 | 24 | (154) | 5,029 | 6.5% |
| Fixed\tmaturities,\tAFS | 78,978 | 5,374 | (2,471) | 81,809 | 100% | 78,419 | 2,804 | (3,364) | 77,820 | 100.0% |
| Equity\tsecurities |  |  |  |  |  |  |  |  |  |  |
| Financial\tservices | 479 | 10 | (187) | 302 |  | 569 | 4 | (127) | 446 |  |
| Other | 577 | 58 | (16) | 619 |  | 444 | 88 | (5) | 527 |  |
| Equity\tsecurities,\tAFS | 1,056 | 68 | (203) | 921 |  | 1,013 | 92 | (132) | 973 |  |
| Total\tAFS\tsecurities | \t$80,034 | 5,442\t\t$ | (2,674)\t$82,730 | (2,674)\t$82,730 |  | \t$79,432\t\t$ | 2,896\t\t$ | (3,496)\t$78,793 | (3,496)\t$78,793 |  |
| Fixed\tmaturities,\tFVO |  |  |  | \t$1,328 |  |  |  |  | \t$649 |  |

[1] 	 Represents	securities	with	pools	of	loans	issued	by	the	Small	Business	Administration	which	are	backed	by	the	full	faith	and	credit of	the	U.S.	government.	[2]	Gross	unrealized	gains	(losses)	exclude	the	fair	value	of	bifurcated	embedded	derivative	features	of certain	securities.	Subsequent	changes	in	value	will	be	recorded	in	net	realized	capital	gains	(losses).

The	Company	continues	to	invest	in	a	diversified	portfolio	with	a	focus	on	investment	grade	basic	industry	and	utility	issuers,	while reducing	its	exposure	to	U.S.	Treasuries,	commercial	real	estate	securities	and	subordinated	financial	services	securities.	The	Company's AFS	net	unrealized	position	improved	primarily	as	a	result	of	improved	security	valuations	largely	due	to	declining	interest	rates,	partially offset	by	credit	spread	widening.	Fixed	maturities,	FVO,	represents	Japan	government	securities	supporting	the	Japan	fixed	annuity product,	 as	 well	 as	 securities	 containing	 an	 embedded	 credit	 derivative	 for	 which	 the	 Company	 elected	 the	 fair	 value	 option.	The underlying	credit	risk	of	 the	securities	containing	credit	derivatives	are	primarily	 investment	grade	CRE	CDOs	and	a	subordinated position	on	a	basket	of	corporate	bonds.	For	further	discussion	on	fair	value	option	securities,	see	Note	4	of	the	Notes	to	Consolidated Financial	Statements.

# European	Exposure

Many	economies	within	Europe	continue	to	experience	significant	adverse	economic	conditions	which	have	been	precipitated	in	part	by high	 unemployment	 rates	 and	 government	 debt	 levels.	As	 a	 result,	 issuers	 in	 several	 European	 countries	 have	 experienced	 credit deterioration	and	rating	downgrades	and	a	reduced	ability	to	access	capital	markets	and/or	higher	borrowing	costs.	The	concerns	regarding the	European	countries	have	impacted	the	capital	markets	which,	in	turn,	has	made	it	more	difficult	to	contain	the	European	financial crisis.	Austerity	measures	aimed	at	reducing	sovereign	debt	levels,	along	with	steps	taken	by	the	European	Central	Bank	to	provide liquidity	and	credit	support	to	certain	countries	issuing	debt,	have	helped	to	stabilize	markets	recently.	However,	risks	remain	elevated.

The	Company	manages	the	credit	risk	associated	with	the	European	securities	within	the	investment	portfolio	on	an	on-going	basis	using several	 processes	 which	 are	 supported	 by	 macroeconomic	 analysis	 and	 issuer	 credit	 analysis.	 For	 additional	 details	 regarding	 the Company's	management	of	credit	risk,	see	the	Credit	Risk	section	of	this	MD&A.	The	Company	considers	alternate	scenarios,	including a	base-case	and	both	a	positive	and	negative	"tail"	scenario	that	includes	a	partial	or	full	break-up	of	the	Eurozone.	The	outlook	for	key factors	is	evaluated,	including	the	economic	prospects	for	key	countries,	the	potential	for	the	spread	of	sovereign	debt	contagion,	and	the likelihood	that	policymakers	and	politicians	pursue	sufficient	fiscal	discipline	and	introduce	appropriate	backstops.	Given	the	inherent uncertainty	in	the	outcome	of	developments	in	the	Eurozone,	however,	the	Company	has	been	focused	on	controlling	both	absolute	levels of	exposure	and	the	composition	of	that	exposure	through	both	bond	and	derivative	transactions.

The	Company	has	limited	direct	European	exposure,	totaling	only	5%	of	total	invested	assets	as	of	December	31,	2011.	The	following tables	present	the	Company's	European	securities	included	in	the	Securities	by	Type	table	above.	The	Company	identifies	exposures	with the	issuers'	ultimate	parent	country	of	domicile,	which	may	not	be	the	country	of	the	security	issuer.	Certain	European	countries	were separately	listed	below,	Greece,	Italy,	Ireland,	Portugal	and	Spain	("GIIPS"),	because	of	the	current	significant	economic	strains	persisting in	these	countries.	The	criteria	used	for	indentifying	the	countries	separately	listed	includes	credit	default	spreads	that	exceed	the	iTraxx SovX	index	level	and	an	S&P	credit	quality	rating	of	A	or	lower.

The	following	tables	present	the	Company's	European	securities	included	in	the	Securities	by	Type	table	above.

|  | Corporate	&amp;	Equity, | Corporate	&amp;	Equity, | Corporate	&amp;	Equity, |  | Foreign	Govt./ |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | AFS\tNon-Finan.\t[1] | AFS\tNon-Finan.\t[1] | AFS\tFinancials | AFS\tFinancials | Govt.\tAgencies | Govt.\tAgencies | Total | Total |
|  | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair |
|  | Cost | Value | Cost | Value | Cost | Value | Cost | Value |
| Italy | $314 | $255 | $— | $— | $— | $— | $314 | $255 |
| Spain | 191 | 189 | 20 | 19 | — | — | 211 | 208 |
| Ireland | 163 | 162 | — | — | — | — | 163 | 162 |
| Portugal | 15 | 15 | — | — | — | — | 15 | 15 |
| Greece | — | — | — | — | — | — | — | — |
| Higher\trisk | 683 | 621 | 20 | 19 | — | — | 703 | 640 |
| Europe\texcluding\thigher |  |  |  |  |  |  |  |  |
| risk | 4,277 | 4,698 | 1,255 | 1,135 | 901 | 970 | 6,433 | 6,800 |
| Total\tEurope | $4,960 | $5,316 | $1,275 | $1,154 | $901 | $970 | $7,136 | $7,440 |
| Europe\texposure\tnet\tof |  |  |  |  |  |  |  |  |
| credit\tdefault\tswap |  |  |  |  |  |  |  |  |
| protection\t[2] |  |  |  |  |  |  | $6,439 | $7,467 |

|  | Corporate	&amp;	Equity,	AFS | Corporate	&amp;	Equity,	AFS | Corporate	&amp;	Equity,	AFS | Corporate	&amp;	Equity,	AFS | Foreign	Govt./ |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Non-Finan.\t[1] | Non-Finan.\t[1] | Financials | Financials | Govt.\tAgencies | Govt.\tAgencies | Total | Total |
|  | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair |
|  | Cost | Value | Cost | Value | Cost | Value | Cost | Value |
| Italy | $374 | $359 | $17 | $17 | $—\t\t $— | $—\t\t $— | $391 | $376 |
| Spain | 263 | 279 | 54 | 46 | — | — | 317 | 325 |
| Ireland | 178 | 173 | 4 | 3 | — | — | 182 | 176 |
| Portugal | 31 | 28 | — | — | — | — | 31 | 28 |
| Greece | — | — | — | — | — | — | — | — |
| Higher\trisk | 846 | 839 | 75 | 66 | — | — | 921 | 905 |
| Europe\texcluding |  |  |  |  |  |  |  |  |
| higher\trisk | 4,837 | 5,229 | 1,682 | 1,623 | 592 | 606 | 7,111 | 7,458 |
| Total\tEurope | $5,683 | $6,068 | $1,757 | $1,689 | $592 | $606 | $8,032 | $8,363 |
| Europe\texposure |  |  |  |  |  |  |  |  |
| net\tof\tcredit |  |  |  |  |  |  |  |  |
| default\tswap |  |  |  |  |  |  |  |  |
| protection\t[2] |  |  |  |  |  |  | $6,695 | $8,358 |

2010	related	to	limited	partnerships	and	other	alternative	investments,	the	majority	of	which	is	domiciled	in	the	United	Kingdom.

respectively,	as	of	December	31,	2010	related	to	credit	default	swap	protection.	This	includes	a	notional	amount	of	$89	and	$42	as

of	December	31,	2011	and	2010,	respectively,	related	to	single	name	corporate	issuers	in	the	financial	services	sector.

The	Company's	European	investment	exposure	largely	relates	to	corporate	entities	which	are	domiciled	in	or	generated	a	significant portion	of	its	revenue	within	the	United	Kingdom,	Germany,	the	Netherlands	and	Switzerland.	As	of	December	31,	2011	and	2010, exposure	to	the	United	Kingdom	totals	less	than	2%	of	total	invested	assets.	The	majority	of	investments	are	U.S.	dollar-denominated,	and those	 securities	 that	 are	 pound	 and	 euro-denominated	 are	 hedged	 to	 U.S.	 dollars	 or	 support	 foreign-denominated	 liabilities.	 For	 a discussion	of	foreign	currency	risks,	see	the	Foreign	Currency	Exchange	Risk	section	of	this	MD&A.	The	Company	does	not	hold	any sovereign	exposure	to	the	higher	risk	countries	and	does	not	hold	any	exposure	to	issuers	in	Greece.	As	of	December	31,	2011	and	2010, the	Company's	unfunded	commitments	associated	with	its	investment	portfolio	was	immaterial,	and	the	weighted	average	credit	quality of	European	investments	was	A	and	A-,	respectively.

As	of	December	31,	2011	and	2010,	the	Company's	total	credit	default	swaps	that	provide	credit	protection	had	a	notional	amount	of	$697 and	$1.3	billion,	respectively,	and	a	fair	value	of	$27	and	($5),	respectively.	Included	in	those	notional	amounts	as	of	December	31,	2011 and	2010	were	$407	and	$532,	respectively,	on	credit	default	swaps	that	reference	single	name	corporate	and	financial	European	issuers, of	which	$125	and	$57,	respectively,	related	to	the	higher	risk	countries.	The	maturity	dates	of	credit	defaults	swaps	are	primarily consistent	with	the	hedged	bonds.	Also	included	are	credit	default	swaps	with	a	notional	amount	of	$290	and	$805,	respectively,	as	of December	31,	2011	and	2010	which	reference	a	standard	basket	of	European	corporate	and	financial	issuers.	For	further	information	on the	use	of	the	Company's	credit	derivatives	and	counterparty	credit	quality,	see	Derivative	Instruments	within	the	Credit	Risk	section	of this	MD&A.

In	addition	to	the	credit	risk	associated	with	the	investment	portfolio,	the	Company	has	$247	of	reinsurance	recoverables	due	from	legal entity	counterparties	domiciled	within	Europe.	For	a	more	detail	discussion	of	the	Company's	reinsurance	arrangements,	see	Note	6	of	the Notes	to	the	Consolidated	Financial	Statements.

Included	in	the	Company's	equity	securities,	trading,	portfolio	are	investments	in	World	Government	Bond	Index	Funds	("WGBI	funds"). The	fair	value	of	the	WGBI	funds	at	December	31,	2011	and	2010	was	$12.5	billion	and	$12.9	billion,	respectively.	Because	several	of these	funds	are	managed	by	third	party	asset	managers,	the	Company	does	not	have	access	to	detailed	holdings;	however,	the	WGBI	funds investment	mandate	follows	the	Citigroup	non-Japan	World	Government	Fund	Index	("the	index")	and	includes	allocations	to	certain European	sovereign	debt.	The	estimated	fair	value	of	the	European	allocation	based	upon	the	index	benchmark	allocation	was	$5.4	billion and	$5.8	billion	as	of	December	31,	2011	and	2010,	respectively.	Included	in	this	estimated	European	exposure	were	investments	in Ireland,	Italy,	Portugal	and	Spain	with	an	estimated	fair	value	of	$1.7	billion	and	$2.0	billion	as	of	December	31,	2011	and	2010, respectively.	The	index	guidelines	allow	investment	in	issuers	rated	BBB-	or	higher	by	Standard	and	Poors	or	Baa3	or	higher	by	Moodys. Should	an	issuer's	credit	rating	fall	below	both	of	these	rating	levels	they	will	be	removed	from	the	Index	and	the	holdings	will	be liquidated.	Because	these	assets	support	the	international	variable	annuity	business,	changes	in	the	value	of	these	investments	are	reflected in	the	corresponding	policyholder	liabilities.	The	Company's	indirect	exposure	to	these	holdings	is	through	any	guarantees	issued	on	the underlying	variable	annuity	policies.

# Financial	Services

The	Company's	exposure	to	the	financial	services	sector	is	predominantly	through	banking	and	insurance	institutions.	The	following	table presents	the	Company's	exposure	to	the	financial	services	sector	included	in	the	Securities	by	Type	table	above.

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amortized |  | Net | Amortized |  | Net |
|  | Cost | Fair\tValue | Unrealized | Cost | Fair\tValue | Unrealized |
| AAA | $240 | $245 | $5 | $302 | $309 | $7 |
| AA | 1,698 | 1,675 | (23) | 2,085 | 2,095 | 10 |
| A | 3,664 | 3,685 | 21 | 3,760 | 3,599 | (161) |
| BBB | 2,335 | 1,998 | (337) | 1,677 | 1,518 | (159) |
| BB\t&amp;\tbelow | 305 | 270 | (35) | 290 | 253 | (37) |
| Total | $8,242 | $7,873 | $(369) | $8,114 | $7,774 | $(340) |

Domestic	financial	companies	continued	to	stabilize	throughout	2011	due	to	improved	earnings	performance,	strengthening	of	asset quality	and	capital	retention.	However,	spread	volatility	remains	high	due	to	concerns	around	European	sovereign	risks	and	potential contagion,	 regulatory	 pressures	 and	 a	 weaker	 U.S.	 macroeconomic	 environment.	 Financial	 institutions	 remain	 vulnerable	 to	 these concerns,	as	well	as	ongoing	stress	in	the	real	estate	markets	which	could	adversely	impact	the	Company's	net	unrealized	position. Included	in	the	table	above	as	of	December	31,	2011,	is	an	amortized	cost	and	fair	value	of	$1.3	billion	and	$1.2	billion,	respectively, related	to	European	investment	exposure,	of	which	only	$20	and	$19,	respectively,	relates	to	GIIPS.	As	of	December	31,	2010,	amortized cost	and	fair	value	includes	$1.8	billion	and	$1.7	billion,	respectively,	of	European	exposure,	of	which	only	$75	and	$66,	respectively, relates	to	GIIPS.

# Commercial	Real	Estate

The	commercial	real	estate	market	continued	to	show	signs	of	improving	fundamentals,	such	as	increases	in	transaction	activities,	more readily	available	financing	and	new	issuances.	While	delinquencies	still	remain	at	historically	high	levels,	they	are	expected	to	move lower	in	2012.

The	following	table	presents	the	Company's	exposure	to	commercial	mortgage	backed-securities	("CMBS")	bonds	by	current	credit quality	and	vintage	year,	 included	 in	 the	Securities	by	Type	 table	above.	Credit	protection	represents	 the	current	weighted	average percentage	of	the	outstanding	capital	structure	subordinated	to	the	Company's	investment	holding	that	is	available	to	absorb	losses	before the	security	incurs	the	first	dollar	loss	of	principal	and	excludes	any	equity	interest	or	property	value	in	excess	of	outstanding	debt.

|  |  |  |  |  | December	31,	2011 | December	31,	2011 |  |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | AAA | AAA | AA | AA | A | A | BBB | BBB | BB\tand\tBelow | BB\tand\tBelow | Total | Total |
|  | \t Amortized | Fair | \t Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair |
|  | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value |
| 2003\t&amp;\tPrior | $408 | $415 | $148 | $144 | $83 | $81 | $16 | $13 | $33 | $30 | $688 | $683 |
| 2004 | 333 | 349 | 68 | 75 | 45 | 41 | 30 | 28 | 26 | 21 | 502 | 514 |
| 2005 | 520 | 556 | 101 | 96 | 178 | 151 | 177 | 138 | 71 | 57 | 1,047 | 998 |
| 2006 | 713 | 762 | 516 | 493 | 180 | 159 | 362 | 298 | 430 | 302 | 2,201 | 2,014 |
| 2007 | 245 | 267 | 296 | 275 | 123 | 97 | 166 | 130 | 195 | 149 | 1,025 | 918 |
| 2008 | 55 | 60 | — | — | — | — | — | — | — | — | 55 | 60 |
| 2009 | 28 | 29 | — | — | — | — | — | — | — | — | 28 | 29 |
| 2010 | 29 | 31 | — | — | — | — | — | — | — | — | 29 | 31 |
| 2011 | 417 | 440 | — | — | — | — | — | — | — | — | 417 | 440 |
| Total | $2,748 | $2,909 | $1,129 | $1,083 | $609 | $529 | $751 | $607 | $755 | $559 | $5,992 | $5,687 |
| Credit |  |  |  |  |  |  |  |  |  |  |  |  |
| protection |  | 27.3% |  | 22.7% |  | 19.7% |  | 13.8% |  | 8.2% |  | 21.6% |

|  | AAA | AAA | AA | AA | A | A | BBB | BBB | BB	and	Below | BB	and	Below | Total | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | \t Amortized | Fair | \t Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair |
|  | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value |
| 2003\t&amp;\tPrior | $782 | $803 | $146 | $142 | $107 | $103 | $24 | $21 | $26 | $22 | $1,085 | $1,091 |
| 2004 | 489 | 511 | 35 | 35 | 68 | 61 | 33 | 27 | 6 | 5 | 631 | 639 |
| 2005 | 610 | 632 | 131 | 121 | 213 | 177 | 182 | 147 | 123 | 96 | 1,259 | 1,173 |
| 2006 | 1,016 | 1,050 | 566 | 536 | 256 | 224 | 496 | 416 | 436 | 339 | 2,770 | 2,565 |
| 2007 | 305 | 320 | 278 | 250 | 71 | 55 | 253 | 200 | 278 | 198 | 1,185 | 1,023 |
| 2008 | 55 | 58 | — | — | — | — | — | — | — | — | 55 | 58 |
| Total | $3,257 | $3,374 | $1,156 | $1,084 | $715 | $620 | $988 | $811 | $869 | $660 | $6,985 | $6,549 |
| Credit |  |  |  |  |  |  |  |  |  |  |  |  |
| protection |  | 28.8% |  | 22.5% |  | 13.3% |  | 13.8% |  | 8.0% |  | 21.5% |

[1] 	 The	vintage	year	represents	the	year	the	pool	of	loans	was	originated.

The	Company	also	has	AFS	exposure	to	commercial	real	estate	("CRE")	collateralized	debt	obligations	("CDOs")	with	an	amortized	cost and	fair	value	of	$485	and	$334,	respectively,	as	of	December	31,	2011	and	$653	and	$387,	respectively,	as	of	December	31,	2010.	These securities	are	comprised	of	diversified	pools	of	commercial	mortgage	loans	or	equity	positions	of	other	CMBS	securitizations.	Although the	Company	does	not	plan	to	invest	in	this	asset	class	going	forward,	we	continue	to	monitor	these	investments	as	economic	and	market uncertainties	regarding	future	performance	impacts	market	liquidity	and	results	in	higher	risk	premiums.

In	addition	to	CMBS	bonds	and	CRE	CDOs,	the	Company	has	exposure	to	commercial	mortgage	loans	as	presented	in	the	following table.	These	loans	are	collateralized	by	a	variety	of	commercial	properties	and	are	diversified	both	geographically	throughout	the	United States	and	by	property	type.	These	loans	may	be	either	in	the	form	of	a	whole	loan,	where	the	Company	is	the	sole	lender,	or	a	loan participation.	Loan	participations	are	loans	where	the	Company	has	purchased	or	retained	a	portion	of	an	outstanding	loan	or	package	of loans	and	participates	on	a	pro-rata	basis	in	collecting	interest	and	principal	pursuant	to	the	terms	of	the	participation	agreement.	In general,	A-Note	participations	have	senior	payment	priority,	followed	by	B-Note	participations	and	then	mezzanine	loan	participations. As	of	December	31,	2011,	loans	within	the	Company's	mortgage	loan	portfolio	that	have	had	extensions	or	restructurings	other	than	what is	allowable	under	the	original	terms	of	the	contract	are	immaterial.

|  |  | Commercial	Mortgage	Loans | Commercial	Mortgage	Loans |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | December\t31,\t2011 | December\t31,\t2011 | December\t31,\t2011 | December\t31,\t2010 | December\t31,\t2010 | December\t31,\t2010 |
|  | Amortized | Valuation | Carrying | Amortized | Valuation | Carrying |
|  | Cost\t[1] | Allowance | Value | Cost\t[1] | Allowance | Value |
| Agricultural | $268 | $(19) | $249 | $339 | $(23) | $316 |
| Whole\tloans | 4,892 | (17) | 4,875 | 3,326 | (23) | 3,303 |
| A-Note\tparticipations | 265 | — | 265 | 319 | — | 319 |
| B-Note\tparticipations | 296 | (66) | 230 | 327 | (70) | 257 |
| Mezzanine\tloans | 109 | — | 109 | 181 | (36) | 145 |
| Total | $5,830 | $(102) | $5,728 | $4,492 | $(152) | $4,340 |

[1] 	 Amortized	cost	represents	carrying	value	prior	to	valuation	allowances,	if	any.

Since	December	31,	2010,	the	Company	funded	$1.8	billion	of	commercial	whole	loans	with	a	weighted	average	loan-to-value	("LTV") ratio	of	62%	and	a	weighted	average	yield	of	4.5%.	The	Company	continues	to	originate	commercial	whole	loans	in	primary	markets, such	as	multi-family	and	retail,	focusing	on	loans	with	strong	LTV	ratios	and	high	quality	property	collateral.	As	of	December	31,	2011, the	Company	had	mortgage	loans	held-for-sale	with	a	carrying	value	and	valuation	allowance	of	$74	and	$4,	respectively,	and	$87	and $7,	respectively,	as	of	December	31,	2010.

# Municipal	Bonds

The	Company	holds	investments	in	securities	backed	by	states,	municipalities	and	political	subdivisions	("municipal")	with	an	amortized cost	 and	 fair	 value	 of	 $12.6	 billion	 and	 $13.3	 billion,	 respectively,	 as	 of	 December	 31,	 2011	 and	 $12.5	 billion	 and	 $12.1	 billion, respectively,	as	of	December	31,	2010.	The	Company's	municipal	bond	portfolio	primarily	consists	of	high	quality	essential	service revenue	 and	 general	 obligation	 bonds.	As	 of	 December	 31,	 2011,	 the	 largest	 issuer	 concentrations	 were	 the	 states	 of	 California, Massachusetts	and	Illinois,	which	each	comprised	less	than	3%	of	the	municipal	bond	portfolio	and	were	primarily	comprised	of	general obligation	bonds.	As	of	December	31,	2010,	the	largest	issuer	concentrations	were	the	states	of	California,	Massachusetts	and	Georgia, which	each	comprised	less	than	3%	of	the	municipal	bond	portfolio	and	were	primarily	comprised	of	general	obligation	bonds.

# Limited	Partnerships	and	Other	Alternative	Investments

The	following	table	presents	the	Company's	investments	in	limited	partnerships	and	other	alternative	investments	which	include	hedge funds,	mortgage	and	real	estate	funds,	mezzanine	debt	funds,	and	private	equity	and	other	funds.	Hedge	funds	include	investments	in funds	of	funds	and	direct	funds.	These	hedge	funds	invest	in	a	variety	of	strategies	including	global	macro	and	long/short	credit	and equity.	 Mortgage	 and	 real	 estate	 funds	 consist	 of	 investments	 in	 funds	 whose	 assets	 consist	 of	 mortgage	 loans,	 mortgage	 loan participations,	mezzanine	loans	or	other	notes	which	may	be	below	investment	grade,	as	well	as	equity	real	estate	and	real	estate	joint ventures.	Mezzanine	debt	funds	include	investments	in	funds	whose	assets	consist	of	subordinated	debt	that	often	incorporates	equity- based	options	such	as	warrants	and	a	limited	amount	of	direct	equity	investments.	Private	equity	and	other	funds	primarily	consist	of investments	in	funds	whose	assets	typically	consist	of	a	diversified	pool	of	investments	in	small	to	mid-sized	non-public	businesses	with high	growth	potential.

|  | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- |
|  | Amount | Percent | Amount | Percent |
| Hedge\tfunds | $896 | 35.4% | $439 | 22.8% |
| Mortgage\tand\treal\testate\tfunds | 479 | 18.9% | 406 | 21.2% |
| Mezzanine\tdebt\tfunds | 118 | 4.7% | 132 | 6.9% |
| Private\tequity\tand\tother\tfunds | 1,039 | 41.0% | 941 | 49.1% |
| Total | $2,532 | 100.0% | $1,918 | 100.0% |

Since	December	31,	2010,	the	increase	in	hedge	funds	relates	to	additional	investments	in	the	type	of	fund	strategies	that	the	Company expects	to	generate	superior	risk-adjusted	returns	over	time.

# Available-for-Sale	Securities	—	Unrealized	Loss	Aging

The	total	gross	unrealized	losses	were	$2.7	billion	as	of	December	31,	2011,	which	have	improved	$822,	or	24%,	from	December	31, 2010	as	interest	rates	declined,	partially	offset	by	credit	spread	widening.	As	of	December	31,	2011,	$743	of	the	gross	unrealized	losses were	associated	with	securities	depressed	less	than	20%	of	cost	or	amortized	cost.

The	remaining	$1.9	billion	of	gross	unrealized	losses	were	associated	with	securities	depressed	greater	than	20%,	which	includes	$156 associated	with	securities	depressed	over	50%	for	twelve	months	or	more.	These	securities	are	backed	primarily	by	commercial	and residential	real	estate	that	have	market	spreads	that	continue	to	be	wider	than	the	spreads	at	the	security's	respective	purchase	date.	The unrealized	losses	remain	largely	due	to	the	continued	market	and	economic	uncertainties	surrounding	residential	and	certain	commercial real	 estate	 and	 lack	 of	 liquidity.	 Based	 upon	 the	 Company's	 cash	 flow	 modeling	 and	 current	 market	 and	 collateral	 performance assumptions,	these	securities	have	sufficient	credit	protection	levels	to	receive	contractually	obligated	principal	and	interest	payments. Also	included	in	the	gross	unrealized	losses	depressed	greater	than	20%	are	financial	services	securities	that	have	a	floating-rate	coupon and/or	long-dated	maturities.

As	part	of	the	Company's	ongoing	security	monitoring	process,	the	Company	has	reviewed	its	AFS	securities	in	an	unrealized	loss position	and	concluded	that	there	were	no	additional	impairments	as	of	December	31,	2011	and	that	these	securities	are	temporarily depressed	and	are	expected	to	recover	in	value	as	the	securities	approach	maturity	or	as	real	estate	related	market	spreads	continue	to improve.	For	these	securities	in	an	unrealized	loss	position	where	a	credit	impairment	has	not	been	recorded,	the	Company's	best	estimate of	expected	future	cash	flows	are	sufficient	to	recover	the	amortized	cost	basis	of	the	security.	Furthermore,	the	Company	neither	has	an intention	to	sell	nor	does	it	expect	to	be	required	to	sell	these	securities.	For	further	information	regarding	the	Company's	impairment analysis,	see	Other-Than-Temporary	Impairments	in	the	Investment	Portfolio	Risks	and	Risk	Management	section	of	this	MD&A.

The	following	table	presents	the	Company's	unrealized	loss	aging	for	AFS	securities	by	length	of	time	the	security	was	in	a	continuous unrealized	loss	position.

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Cost\tor |  |  |  | Cost\tor |  |  |
|  |  | Amortized | Fair | Unrealized |  | Amortized | Fair | Unrealized |
|  | Items | Cost | Value | Loss\t[1] | Items | Cost | Value | Loss\t[1] |
| Three\tmonths\tor\tless | 855 | $3,933 | $3,672 | $(261) | 1,503 | $17,431 | $16,783 | $(643) |
| Greater\tthan\tthree\tto |  |  |  |  |  |  |  |  |
| six\tmonths | 485 | 2,617 | 2,517 | (100) | 115 | 732 | 690 | (42) |
| Greater\tthan\tsix\tto |  |  |  |  |  |  |  |  |
| nine\tmonths | 224 | 1,181 | 1,097 | (84) | 91 | 438 | 397 | (41) |
| Greater\tthan\tnine\tto |  |  |  |  |  |  |  |  |
| eleven\tmonths | 42 | 106 | 95 | (11) | 42 | 185 | 169 | (16) |
| Greater\tthan\ttwelve |  |  |  |  |  |  |  |  |
| months | 943 | 11,613 | 9,324 | (2,218) | 1,231 | 15,599 | \t 12,811 | (2,754) |
| Total | 2,549 | $19,450 | $16,705 | $(2,674) | 2,982 | $34,385 | $30,850 | $(3,496) |

[1] 	 Unrealized	losses	exclude	the	fair	value	of	bifurcated	embedded	derivative	features	of	certain	securities	as	changes	in	value	are recorded	in	net	realized	capital	gains	(losses).

The	following	tables	present	the	Company's	unrealized	loss	aging	for	AFS	securities	continuously	depressed	over	20%	by	length	of	time (included	in	the	table	above).

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Cost\tor |  |  |  | Cost\tor |  |  |
|  |  | Amortized | Fair | Unrealized |  | Amortized | Fair | Unrealized |
| Consecutive\tMonths | Items | Cost | Value | Loss\t[1] | Items | Cost | Value | Loss |
| Three\tmonths\tor\tless | 206 | $1,823 | $1,289 | $(500) | 99 | $771 | $582 | $(189) |
| Greater\tthan\tthree\tto\tsix |  |  |  |  |  |  |  |  |
| months | 134 | 1,749 | 1,205 | (544) | 22 | 136 | 104 | (32) |
| Greater\tthan\tsix\tto\tnine |  |  |  |  |  |  |  |  |
| months | 42 | 406 | 269 | (137) | 28 | 234 | 169 | (65) |
| Greater\tthan\tnine\tto |  |  |  |  |  |  |  |  |
| eleven\tmonths | 9 | 1 | — | (1) | 13 | 43 | 32 | (11) |
| Greater\tthan\ttwelve |  |  |  |  |  |  |  |  |
| months | 239 | 1,806 | 1,057 | (749) | 390 | 4,361 | 2,766 | (1,595) |
| Total | 630 | $5,785 | $3,820 | $(1,931) | 552 | $5,545 | $3,653 | $(1,892) |

The	following	tables	present	the	Company's	unrealized	loss	aging	for	AFS	securities	continuously	depressed	over	50%	by	length	of	time (included	in	the	tables	above).

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Cost\tor |  |  |  | Cost\tor |  |  |
|  |  | Amortized | Fair | Unrealized |  | Amortized | Fair | Unrealized |
| Consecutive\tMonths | Items | Cost | Value | Loss | Items | Cost | Value | Loss |
| Three\tmonths\tor\tless | 50 | $152 | $55 | $(97) | 20 | $27 | $12 | $(15) |
| Greater\tthan\tthree\tto\tsix |  |  |  |  |  |  |  |  |
| months | 26 | 110 | 46 | (64) | 1 | 2 | 1 | (1) |
| Greater\tthan\tsix\tto\tnine |  |  |  |  |  |  |  |  |
| months | 7 | 33 | 11 | (22) | 12 | 65 | 29 | (36) |
| Greater\tthan\tnine\tto |  |  |  |  |  |  |  |  |
| eleven\tmonths | 5 | 5 | 1 | (4) | — | — | — | — |
| Greater\tthan\ttwelve |  |  |  |  |  |  |  |  |
| months | 54 | 227 | 71 | (156) | 94 | 722 | 260 | (462) |
| Total | 142 | $527 | $184 | $(343) | 127 | $816 | $302 | $(514) |

# Other-Than-Temporary	Impairments

The	following	table	presents	the	Company's	impairments	recognized	in	earnings	by	security	type.

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| ABS | $27 | $13 | $54 |
| CDOs | 41 | 164 | 511 |
| CMBS |  |  |  |
| Bonds | 16 | 157 | 257 |
| IOs | 5 | 3 | 25 |
| Corporate | 50 | 33 | 198 |
| Equity | 17 | 14 | 145 |
| RMBS |  |  |  |
| Non-agency | — | 2 | 4 |
| Alt-A | 1 | 10 | 62 |
| Sub-prime | 15 | 37 | 232 |
| Other | 2 | 1 | 20 |
| Total | $174 | $434 | $1,508 |

For	the	year	ended	December	31,	2011,	impairments	recognized	in	earnings	were	comprised	of	credit	impairments	of	$125,	securities	that the	Company	intends	to	sell	of	$32	and	impairments	on	equity	securities	of	$17.

Credit	impairments	were	primarily	concentrated	in	structured	securities	associated	with	commercial	real	estate,	as	well	as	direct	private investments.	The	structured	securities	were	impaired	primarily	due	to	property-specific	deterioration	of	the	underlying	collateral.	The Company	calculated	these	impairments	utilizing	both	a	top	down	modeling	approach	and	a	security-specific	collateral	review.	The	top down	 modeling	 approach	 used	 discounted	 cash	 flow	 models	 that	 considered	 losses	 under	 current	 and	 expected	 future	 economic conditions.	Assumptions	used	over	the	current	period	included	macroeconomic	factors,	such	as	a	high	unemployment	rate,	as	well	as sector	specific	factors	such	as	property	value	declines,	commercial	real	estate	delinquency	levels	and	changes	in	net	operating	income. The	macroeconomic	assumptions	considered	by	the	Company	did	not	materially	change	during	2011	and,	as	such,	the	credit	impairments recognized	for	the	year	ended	December	31,	2011	were	primarily	driven	by	actual	or	expected	collateral	deterioration,	largely	as	a	result of	the	Company's	security-specific	collateral	review.

The	 security-specific	 collateral	 review	 is	 performed	 to	 estimate	 potential	 future	 losses.	This	 review	 incorporates	 assumptions	 about expected	future	collateral	cash	flows,	including	projected	rental	rates	and	occupancy	levels	that	varied	based	on	property	type	and	sub- market.	The	results	of	the	security-specific	collateral	review	allowed	the	Company	to	estimate	the	expected	timing	of	a	security's	first loss,	if	any,	and	the	probability	and	severity	of	potential	ultimate	losses.	The	Company	then	discounted	these	anticipated	future	cash	flows at	the	security's	book	yield	prior	to	impairment.

Included	in	corporate	and	equity	security	types	were	direct	private	investments	that	were	impaired	primarily	due	to	the	likelihood	of	a disruption	 in	 contractual	 principal	 and	 interest	 payments	 due	 to	 the	 restructuring	 of	 the	 debtor's	 obligation.	 Impairments	 on	 equity securities	were	primarily	related	to	preferred	stock	associated	with	these	direct	private	investments.

Impairments	on	securities	for	which	the	Company	has	the	intent	to	sell	were	primarily	on	corporate	bonds,	certain	ABS	aircraft	bonds	and CMBS	as	market	pricing	continues	to	improve	and	the	Company	would	like	the	ability	to	reduce	certain	exposures.

In	addition	to	the	credit	impairments	recognized	in	earnings,	the	Company	recognized	non-credit	impairments	in	other	comprehensive income	 of	 $89	 for	 the	 year	 ended	 December	 31,	 2011,	 predominantly	 concentrated	 in	 CRE	 CDOs	 and	 RMBS.	 These	 non-credit impairments	represent	the	difference	between	fair	value	and	the	Company's	best	estimate	of	expected	future	cash	flows	discounted	at	the security's	 effective	 yield	 prior	 to	 impairment,	 rather	 than	 at	 current	 market	 implied	 credit	 spreads.	 These	 non-credit	 impairments primarily	represent	increases	in	market	liquidity	premiums	and	credit	spread	widening	that	occurred	after	the	securities	were	purchased,	as well	as	a	discount	for	variable-rate	coupons	which	are	paying	less	than	at	purchase	date.	In	general,	larger	liquidity	premiums	and	wider credit	spreads	are	the	result	of	deterioration	of	the	underlying	collateral	performance	of	the	securities,	as	well	as	 the	risk	premium required	to	reflect	future	uncertainty	in	the	real	estate	market.

Future	impairments	may	develop	as	the	result	of	changes	in	intent	to	sell	of	specific	securities	or	if	actual	results	underperform	current modeling	assumptions,	which	may	be	the	result	of,	but	are	not	limited	to,	macroeconomic	factors	and	security-specific	performance below	current	expectations.	Ultimate	 loss	formation	will	be	a	function	of	macroeconomic	factors	and	 idiosyncratic	security-specific performance.

For	the	year	ended	December	31,	2010,	impairments	recognized	in	earnings	were	comprised	of	credit	impairments	of	$372	primarily concentrated	on	structured	securities	associated	with	commercial	and	residential	real	estate.	Also	included	were	impairments	on	debt securities	for	which	 the	Company	 intended	 to	sel1	of	$54,	mainly	comprised	of	CMBS	bonds	 in	order	 to	 take	advantage	of	price appreciation,	as	well	as	impairments	on	equity	securities	of	$8	primarily	on	below	investment	grade	securities	depressed	20%	for	more than	six	months.

Impairments	recognized	in	earnings	were	comprised	of	credit	impairments	of	$1.2	billion	primarily	concentrated	on	CRE	CDOs,	below- prime	RMBS	and	CMBS.	Also	included	were	impairments	on	debt	securities	for	which	the	Company	intended	to	sell	of	$156,	mainly comprised	of	corporate	financial	services	securities,	as	well	as	impairments	on	equity	securities	of	$136	related	to	below	investment	grade hybrid	securities.

# Valuation	Allowances	on	Mortgage	Loans

The	following	table	presents	(additions)/reversals	to	valuation	allowances	on	mortgage	loans.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Credit-related\tconcerns | $27 | $(70) | $(310) |
| Held\tfor\tsale |  |  |  |
| Agricultural\tloans | (3) | (10) | (4) |
| B-note\tparticipations | — | (22) | (51) |
| Mezzanine\tloans | — | (52) | (43) |
| Total | $24 | $(154) | $(408) |

For	the	year	ended	December	31,	2011,	valuation	allowances	on	mortgage	loan	reversals	of	$24	were	largely	driven	by	the	release	of	a reserve	associated	with	the	sale	of	a	previously	reserved	for	mezzanine	loan.	Continued	improvement	in	commercial	real	estate	property valuations	will	positively	impact	future	loss	development,	with	future	impairments	driven	by	idiosyncratic	loan-specific	performance. Excluded	 from	 the	 table	 above	 are	 valuation	 allowances	 associated	 with	 mortgage	 loans	 related	 to	 the	 divestiture	 of	 Federal	Trust Corporation.	For	further	information	regarding	the	divestiture	of	Federal	Trust	Corporation,	see	Note	20	of	the	Notes	to	the	Consolidated Financial	Statements.

For	the	years	ended	December	31,	2010	and	2009,	valuation	allowances	on	mortgage	loan	additions	of	($154)	and	($408),	respectively, primarily	related	to	B-Note	participant	and	mezzanine	loan	sales.	Also	included	were	additions	for	expected	credit	losses	due	to	borrower financial	difficulty	and/or	collateral	deterioration.

# CAPITAL	RESOURCES	AND	LIQUIDITY

Capital	resources	and	liquidity	represent	the	overall	financial	strength	of	The	Hartford	and	its	insurance	operations	and	their	ability	to generate	cash	flows	from	each	of	their	business	segments,	borrow	funds	at	competitive	rates	and	raise	new	capital	to	meet	operating	and growth	needs	over	the	next	twelve	months.

# Liquidity	Requirements	and	Sources	of	Capital

The	liquidity	requirements	of	the	holding	company	of	The	Hartford	Financial	Services	Group,	Inc.	("HFSG	Holding	Company")	have been	and	will	continue	to	be	met	by	HFSG	Holding	Company's	fixed	maturities,	short-term	investments	and	cash	of	$1.6	billion	at December	31,	2011,	dividends	from	its	insurance	operations,	as	well	as	the	issuance	of	common	stock,	debt	or	other	capital	securities	and borrowings	from	its	credit	facilities.	Expected	liquidity	requirements	of	the	HFSG	Holding	Company	for	the	next	twelve	months	include interest	 on	 debt	 of	 approximately	 $480,	 common	 stockholder	 dividends,	 subject	 to	 the	 discretion	 of	 the	 Board	 of	 Directors,	 of approximately	$170,	and	preferred	stock	dividends	of	approximately	$42.

Furthermore,	the	Company's	Board	of	Directors	has	authorized	a	$500	stock	repurchase	program	that	permits	purchases	of	common stock,	as	well	as	warrants	and	other	derivative	securities.	The	Hartford	has	repurchased	$94	of	its	common	stock	under	this	program through	February	17,	2012.

In	addition,	in	2010	The	Hartford	entered	into	an	intercompany	liquidity	agreement	that	allows	for	short-term	advances	of	funds	among the	HFSG	Holding	Company	and	certain	affiliates	of	up	to	$2.0	billion	for	liquidity	and	other	general	corporate	purposes.	The	Connecticut Insurance	Department	granted	approval	for	certain	affiliated	insurance	companies	that	are	parties	to	the	agreement	to	treat	receivables from	a	parent,	including	the	HFSG	Holding	Company,	as	admitted	assets	for	statutory	accounting	purposes.

On	October	17,	2011,	The	Hartford	repaid	its	$400,	5.25%	senior	notes	at	maturity.	For	additional	information	regarding	debt,	see	Note 14	of	the	Notes	to	Consolidated	Financial	Statements.

# Dividends

On	 February 23, 2012,	 The	 Hartford's	 Board	 of	 Directors	 declared	 a	 quarterly	 dividend	 of $0.10 per	 common	 share	 payable on	April	2,	2012	to	common	shareholders	of	record	as	of	March	5,	2012	and	a	dividend	of	$18.125	on	each	share	of	Series	F	preferred stock	payable	on	April	2,	2012	to	shareholders	of	record	as	of	March	15,	2012.

# Pension	Plans	and	Other	Postretirement	Benefits

While	the	Company	has	significant	discretion	in	making	voluntary	contributions	to	the	U.	S.	qualified	defined	benefit	pension	plan,	the Employee	Retirement	Income	Security	Act	of	1974,	as	amended	by	the	Pension	Protection	Act	of	2006	and	further	amended	by	the Worker,	Retiree,	and	Employer	Recovery	Act	of	2008,	and	Internal	Revenue	Code	regulations	mandate	minimum	contributions	in	certain circumstances.	The	Company	made	contributions	to	the	U.	S.	qualified	defined	benefit	pension	plan	of	$200,	$200,	and	$200	in	2011, 2010	and	2009.	No	contributions	were	made	to	the	other	postretirement	plans	in	2011,	2010	and	2009.	The	Company's	2011	required minimum	funding	contribution	was	immaterial.	The	Company	presently	anticipates	contributing	approximately	$200	to	its	U.	S.	qualified defined	benefit	pension	plan	in	2012,	based	upon	certain	economic	and	business	assumptions.	These	assumptions	include,	but	are	not limited	to,	equity	market	performance,	changes	in	interest	rates	and	the	Company's	other	capital	requirements.	The	Company	does	not have	a	required	minimum	funding	contribution	for	the	U.S.	qualified	defined	benefit	pension	plan	for	2012	and	the	funding	requirements for	all	of	the	pension	plans	is	expected	to	be	immaterial.

# Dividends	from	Insurance	Subsidiaries

Dividends	to	the	HFSG	Holding	Company	from	its	insurance	subsidiaries	are	restricted.	The	payment	of	dividends	by	Connecticut- domiciled	insurers	is	limited	under	the	insurance	holding	company	laws	of	Connecticut.	These	laws	require	notice	to	and	approval	by	the state	insurance	commissioner	for	the	declaration	or	payment	of	any	dividend,	which,	together	with	other	dividends	or	distributions	made within	the	preceding	twelve	months,	exceeds	the	greater	of	(i)	10%	of	the	insurer's	policyholder	surplus	as	of	December	31	of	the preceding	year	or	(ii)	net	income	(or	net	gain	from	operations,	if	such	company	is	a	life	insurance	company)	for	the	twelve-month	period ending	on	the	thirty-first	day	of	December	last	preceding,	in	each	case	determined	under	statutory	insurance	accounting	principles.	In addition,	if	any	dividend	of	a	Connecticut-domiciled	insurer	exceeds	the	insurer's	earned	surplus,	it	requires	the	prior	approval	of	the Connecticut	Insurance	Commissioner.	The	insurance	holding	company	laws	of	the	other	jurisdictions	in	which	The	Hartford's	insurance subsidiaries	are	incorporated	(or	deemed	commercially	domiciled)	generally	contain	similar	(although	in	certain	instances	somewhat more	restrictive)	limitations	on	the	payment	of	dividends.	Dividends	paid	to	HFSG	Holding	Company	by	its	life	insurance	subsidiaries are	 further	 dependent	 on	 cash	 requirements	 of	 HLI	 and	 other	 factors.	The	 Company's	 property-casualty	 insurance	 subsidiaries	 are permitted	to	pay	up	to	a	maximum	of	approximately	$1.4	billion	in	dividends	to	HFSG	Holding	Company	in	2012	without	prior	approval from	 the	applicable	 insurance	commissioner.	The	Company's	 life	 insurance	subsidiaries	are	permitted	 to	pay	up	 to	a	maximum	of approximately	$625	in	dividends	to	HLI	in	2012	without	prior	approval	from	the	applicable	insurance	commissioner.	The	aggregate	of these	amounts	is	the	maximum	the	insurance	subsidiaries	could	pay	to	HFSG	Holding	Company	in	2012	without	prior	approval	from	the applicable	insurance	commissioner.	In	addition	to	statutory	limitations	on	paying	dividends,	the	Company	also	takes	other	items	into consideration	when	determining	dividends	from	subsidiaries.	These	considerations	include,	but	are	not	limited	to	expected	earnings	and capitalization	of	the	subsidiary,	regulatory	capital	requirements	and	liquidity	requirements	of	the	individual	operating	company.	In	2012, HFSG	Holding	Company	anticipates	receiving	$800	in	dividends	from	its	property-casualty	insurance	subsidiaries,	net	of	dividends	to fund	interest	payments	on	an	intercompany	note	between	Hartford	Holdings,	Inc.	and	Hartford	Fire	Insurance	Company,	and	no	dividends from	 the	 life	 insurance	subsidiaries.	In	2011,	HFSG	Holding	Company	and	HLI	received	$80	 in	dividends	from	 the	 life	 insurance subsidiaries,	and	HFSG	Holding	Company	received	$1.1	billion	in	dividends	from	its	property-casualty	insurance	subsidiaries,	including $150	reflecting	the	net	realized	capital	gain	on	the	sale	of	SRS,	$160	related	to	funding	interest	payments	on	an	intercompany	note between	Hartford	Holdings	Inc.	and	Hartford	Fire	Insurance	Company	and	$800	used	in	conjunction	with	other	resources	at	the	HFSG Holding	Company	principally	to	fund	dividends,	interest,	capital	contributions	to	subsidiaries	and	debt	maturities.

# Other	Sources	of	Capital	for	the	HFSG	Holding	Company

The	Hartford	endeavors	to	maintain	a	capital	structure	that	provides	financial	and	operational	flexibility	to	its	insurance	subsidiaries, ratings	that	support	its	competitive	position	in	the	financial	services	marketplace	(see	the	"Ratings"	section	below	for	further	discussion), and	shareholder	returns.	As	a	result,	the	Company	may	from	time	to	time	raise	capital	from	the	issuance	of	equity,	equity-related	debt	or other	capital	securities	and	is	continuously	evaluating	strategic	opportunities.	The	issuance	of	common	equity,	equity-related	debt	or	other capital	securities	could	result	in	the	dilution	of	shareholder	interests	or	reduced	net	income	due	to	additional	interest	expense.

# Shelf	Registrations

On	August	 4,	 2010,	The	 Hartford	 filed	 with	 the	 Securities	 and	 Exchange	 Commission	 (the	 "SEC")	 an	 automatic	 shelf	 registration statement	(Registration	No.	333-168532)	for	the	potential	offering	and	sale	of	debt	and	equity	securities.	The	registration	statement	allows for	the	following	types	of	securities	to	be	offered:	debt	securities,	junior	subordinated	debt	securities,	preferred	stock,	common	stock, depositary	shares,	warrants,	stock	purchase	contracts,	and	stock	purchase	units.	In	that	The	Hartford	is	a	well-known	seasoned	issuer,	as defined	in	Rule	405	under	the	Securities	Act	of	1933,	the	registration	statement	went	effective	immediately	upon	filing	and	The	Hartford may	 offer	 and	 sell	 an	 unlimited	 amount	 of	 securities	 under	 the	 registration	 statement	 during	 the	 three-year	 life	 of	 the	 registration statement.

# Contingent	Capital	Facility

The	Hartford	is	party	to	a	put	option	agreement	that	provides	The	Hartford	with	the	right	to	require	the	Glen	Meadow	ABC	Trust,	a Delaware	statutory	trust,	at	any	time	and	from	time	to	time,	to	purchase	The	Hartford's	junior	subordinated	notes	in	a	maximum	aggregate principal	amount	not	to	exceed	$500.	Under	the	Put	Option	Agreement,	The	Hartford	will	pay	the	Glen	Meadow	ABC	Trust	premiums	on a	periodic	basis,	calculated	with	respect	to	the	aggregate	principal	amount	of	Notes	that	The	Hartford	had	the	right	to	put	to	the	Glen Meadow	ABC	Trust	for	such	period.	The	Hartford	has	agreed	to	reimburse	the	Glen	Meadow	ABC	Trust	for	certain	fees	and	ordinary expenses.	The	Company	holds	a	variable	interest	in	the	Glen	Meadow	ABC	Trust	where	the	Company	is	not	the	primary	beneficiary.	As	a result,	the	Company	did	not	consolidate	the	Glen	Meadow	ABC	Trust.	As	of	December	31,	2011,	The	Hartford	has	not	exercised	its	right to	require	Glen	Meadow	ABC	Trust	to	purchase	the	Notes.	As	a	result,	the	Notes	remain	a	source	of	capital	for	the	HFSG	Holding Company.

# Commercial	Paper	and	Revolving	Credit	Facility

The	table	below	details	the	Company's	short-term	debt	programs	and	the	applicable	balances	outstanding.

|  |  |  | Maximum	Available	As	of | Maximum	Available	As	of | Outstanding	As	of | Outstanding	As	of |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Effective | Expiration | December\t31, | December\t31, | December\t31, | December\t31, |
| Description | Date | Date | 2011 | 2010 | 2011 | 2010 |
| Commercial\tPaper |  |  |  |  |  |  |
| The\tHartford | 11/10/86 | N/A | $2,000 | $2,000 | $— | $— |
| Revolving\tCredit\tFacility |  |  |  |  |  |  |
| 5-year\trevolving\tcredit\tfacility |  |  |  |  |  |  |
| [1] | 8/9/07 | 8/9/12 | 1,900 | 1,900 | — | — |
| Total\tCommercial\tPaper\tand\nRevolving\tCredit\tFacility |  |  | $3,900 | $3,900 | $— | $— |

# [1] 	 Terminated	in	January	2012,	see	discussion	that	follows.

While	The	Hartford's	maximum	borrowings	available	under	its	commercial	paper	program	are	$2.0	billion,	the	Company	is	dependent upon	market	conditions	to	access	short-term	financing	through	the	issuance	of	commercial	paper	to	investors.	As	of	December	31,	2011, the	Company	has	no	commercial	paper	outstanding.

In	January	2012,	the	Company	entered	into	a	senior	unsecured	revolving	credit	facility	(the	"Credit	Facility")	that	provides	for	borrowing capacity	up	to	$1.75	billion	(which	is	available	in	U.S.	dollars,	and	in	Euro,	Sterling,	Canadian	dollars	and	Japanese	Yen)	through January	6,	2016	and	terminated	its	$1.9	billion	unsecured	revolving	credit	facility	due	August	9,	2012.	As	of	December	31,	2011,	the Company	was	in	compliance	with	all	financial	covenants	under	the	terminated	credit	facility.

Of	the	total	availability	under	the	Credit	Facility,	up	to	$250	is	available	to	support	letters	of	credit	issued	on	behalf	of	the	Company	or subsidiaries	of	the	Company.	Under	the	Credit	Facility,	the	Company	must	maintain	a	minimum	level	of	consolidated	net	worth	of $16	billion.	The	minimum	level	of	consolidated	net	worth,	as	defined,	will	be	adjusted	in	the	first	quarter	of	2012	upon	the	adoption	of	a new	DAC	accounting	standard,	see	Note	1	of	the	Notes	to	Consolidated	Financial	Statements,	by	the	lesser	of	approximately	$1.0	billion, after-tax	representing	70%	of	the	adoption-related	estimated	DAC	charge,	or	$1.7	billion.	The	definition	of	consolidated	net	worth	under the	terms	of	the	credit	facility	excludes	AOCI	and	includes	the	Company's	outstanding	junior	subordinated	debentures	and	perpetual preferred	 securities,	 net	 of	 discount.	 In	 addition,	 the	 Company's	 maximum	 ratio	 of	 consolidated	 total	 debt	 to	 consolidated	 total capitalization	is	35%,	and	the	ratio	of	consolidated	total	debt	of	subsidiaries	to	consolidated	total	capitalization	is	limited	to	10%.	The Company	will	certify	compliance	with	the	financial	covenants	for	the	syndicate	of	participating	financial	institutions	on	a	quarterly	basis.

The	Hartford's	Japan	operations	also	maintain	two	lines	of	credit	in	support	of	operations.	Both	lines	of	credit	are	in	the	amount	of	$65,	or ¥5	billion,	and	individually	have	expiration	dates	of	September	30,	2012	and	January	3,	2013.

# Derivative	Commitments

Certain	of	the	Company's	derivative	agreements	contain	provisions	that	are	tied	to	the	financial	strength	ratings	of	the	individual	legal entity	that	entered	into	the	derivative	agreement	as	set	by	nationally	recognized	statistical	rating	agencies.	If	the	legal	entity's	financial strength	were	to	fall	below	certain	ratings,	the	counterparties	to	the	derivative	agreements	could	demand	immediate	and	ongoing	full collateralization	and	in	certain	instances	demand	immediate	settlement	of	all	outstanding	derivative	positions	traded	under	each	impacted bilateral	agreement.	The	settlement	amount	is	determined	by	netting	the	derivative	positions	transacted	under	each	agreement.	If	the termination	rights	were	to	be	exercised	by	the	counterparties,	it	could	impact	the	legal	entity's	ability	to	conduct	hedging	activities	by increasing	the	associated	costs	and	decreasing	the	willingness	of	counterparties	to	transact	with	the	legal	entity.	The	aggregate	fair	value of	all	derivative	instruments	with	credit-risk-related	contingent	features	that	are	in	a	net	liability	position	as	of	December	31,	2011,	is $725.	Of	this	$725	the	legal	entities	have	posted	collateral	of	$716	in	the	normal	course	of	business.	Based	on	derivative	market	values	as of	December	31,	2011,	a	downgrade	of	one	level	below	the	current	financial	strength	ratings	by	either	Moody's	or	S&P	could	require approximately	an	additional	$37	to	be	posted	as	collateral.	Based	on	derivative	market	values	as	of	December	31,	2011,	a	downgrade	by either	Moody's	or	S&P	of	two	levels	below	the	legal	entities'	current	financial	strength	ratings	could	require	approximately	an	additional $48	of	assets	to	be	posted	as	collateral.	These	collateral	amounts	could	change	as	derivative	market	values	change,	as	a	result	of	changes in	our	hedging	activities	or	to	the	extent	changes	in	contractual	terms	are	negotiated.	The	nature	of	the	collateral	that	we	would	post,	if required,	would	be	primarily	in	the	form	of	U.S.	Treasury	bills	and	U.S.	Treasury	notes.

The	aggregate	notional	amount	of	derivative	relationships	that	could	be	subject	to	immediate	termination	in	the	event	of	rating	agency downgrades	to	either	BBB+	or	Baa1	as	of	December	31,	2011	was	$14.5	billion	with	a	corresponding	fair	value	of	$418.	The	notional	and fair	value	amounts	include	a	customized	GMWB	derivative	with	a	notional	amount	of	$4.2	billion	and	a	fair	value	of	$207,	for	which	the Company	has	a	contractual	right	to	make	a	collateral	payment	in	the	amount	of	approximately	$45	to	prevent	its	termination.	This customized	GMWB	derivative	contains	an	early	termination	trigger	such	that	if	the	unsecured,	unsubordinated	debt	of	the	counterparty's related	party	guarantor	is	downgraded	two	levels	or	more	below	the	current	ratings	by	Moody's	and	one	or	more	levels	by	S&P,	the counterparty	could	terminate	all	transactions	under	the	applicable	International	Swaps	and	Derivatives	Association	Master	Agreement.	As of	December	31,	2011,	the	gross	fair	value	of	the	affected	derivative	contracts	is	$223,	which	would	approximate	the	settlement	value.

# Insurance	Operations

Current	and	expected	patterns	of	claim	frequency	and	severity	or	surrenders	may	change	from	period	to	period	but	continue	to	be	within historical	norms	and,	therefore,	the	Company's	insurance	operations'	current	liquidity	position	is	considered	to	be	sufficient	to	meet anticipated	demands	over	the	next	twelve	months,	including	any	obligations	related	to	the	Company's	restructuring	activities.	For	a discussion	and	tabular	presentation	of	the	Company's	current	contractual	obligations	by	period,	refer	to	Off-Balance	Sheet	Arrangements and	Aggregate	Contractual	Obligations	within	the	Capital	Resources	and	Liquidity	section	of	the	MD&A.

The	 principal	 sources	 of	 operating	 funds	 are	 premiums,	 fees	 earned	 from	 assets	 under	 management	 and	 investment	 income,	 while investing	cash	flows	originate	from	maturities	and	sales	of	invested	assets.	The	primary	uses	of	funds	are	to	pay	claims,	claim	adjustment expenses,	commissions	and	other	underwriting	expenses,	to	purchase	new	investments	and	to	make	dividend	payments	to	the	HFSG Holding	Company.

The	Company's	insurance	operations	consist	of	property	and	casualty	insurance	products	(collectively	referred	to	as	"Property	&	Casualty Operations")	and	life	insurance	products	(collectively	referred	to	as	"Life	Operations").

# Property	&	Casualty	Operations

Property	&	Casualty	Operations	holds	fixed	maturity	securities	including	a	significant	short-term	investment	position	(securities	with maturities	of	one	year	or	less	at	the	time	of	purchase)	to	meet	liquidity	needs.

The	following	table	summarizes	Property	&	Casualty	Operations'	fixed	maturities,	short-term	investments,	and	cash,	as	of	December	31, 2011:

Liquidity	requirements	that	are	unable	to	be	funded	by	Property	&	Casualty	Operation's	short-term	investments	would	be	satisfied	with current	operating	funds,	including	premiums	received	or	through	the	sale	of	invested	assets.	A	sale	of	invested	assets	could	result	in significant	realized	losses.

# Life	Operations

Life	Operations'	total	general	account	contractholder	obligations	are	supported	by	$76	billion	of	cash	and	total	general	account	invested assets,	excluding	equity	securities,	trading,	which	includes	a	significant	short-term	investment	position	to	meet	liquidity	needs.

The	following	table	summarizes	Life	Operations'	fixed	maturities,	short-term	investments,	and	cash,	as	of	December	31,	2011:

Capital	resources	available	to	fund	liquidity,	upon	contract	holder	surrender,	are	a	function	of	the	legal	entity	in	which	the	liquidity requirement	 resides.	 Generally,	 obligations	 of	 Group	 Benefits	 will	 be	 funded	 by	 Hartford	 Life	 and	Accident	 Insurance	 Company; obligations	of	Individual	Annuity,	Individual	Life	and	private	placement	life	insurance	products	will	be	generally	funded	by	both	Hartford Life	Insurance	Company	and	Hartford	Life	and	Annuity	Insurance	Company;	obligations	of	Retirement	Plans	and	institutional	investment products	 will	 be	 generally	 funded	 by	 Hartford	 Life	 Insurance	 Company;	 and	 obligations	 of	 the	 Company's	 international	 annuity subsidiaries	will	be	generally	funded	by	the	legal	entity	in	the	country	in	which	the	obligation	was	generated.

Hartford	Life	Insurance	Company	("HLIC"),	an	indirect	wholly	owned	subsidiary,	became	a	member	of	the	Federal	Home	Loan	Bank	of Boston	("FHLBB")	in	May	2011.	Membership	allows	HLIC	access	to	collateralized	advances,	which	may	be	used	to	support	various spread-based	business	and	enhance	liquidity	management.	The	Connecticut	Department	of	Insurance	("CTDOI")	will	permit	HLIC	to pledge	up	to	$1.48	billion	in	qualifying	assets	to	secure	FHLBB	advances	for	2012.	The	amount	of	advances	that	can	be	taken	are dependent	on	the	asset	types	pledged	to	secure	the	advances.	The	pledge	limit	is	recalculated	annually	based	on	statutory	admitted	assets and	capital	and	surplus.	HLIC	would	need	to	seek	the	prior	approval	of	the	CTDOI	if	there	were	a	desire	to	exceed	these	limits.	As	of December	31,	2011,	HLIC	had	no	advances	outstanding	under	the	FHLBB	facility.

# As	of

|  | As	of |
| :--- | :--- |
|  | December\t31, |
| Contractholder\tObligations | 2011 |
| Total\tLife\tcontractholder\tobligations | $239,723 |
| Less:\tSeparate\taccount\tassets\t[1] | (143,870) |
| International\tstatutory\tseparate\taccounts\t[1] | (30,461) |
| General\taccount\tcontractholder\tobligations | $65,392 |
| Composition\tof\tGeneral\tAccount\tContractholder\tObligations |  |
| Contracts\twithout\ta\tsurrender\tprovision\tand/or\tfixed\tpayout\tdates\t[2] | $30,339 |
| Fixed\tMVA\tannuities\t[3] | 9,727 |
| International\tfixed\tMVA\tannuities | 2,642 |
| Guaranteed\tinvestment\tcontracts\t("GIC")\t[4] | 567 |
| Other\t[5] | 22,117 |
| General\taccount\tcontractholder\tobligations | $65,392 |

[1] In	the	event	customers	elect	to	surrender	separate	account	assets	or	international	statutory	separate	accounts,	Life	Operations	will use	the	proceeds	from	the	sale	of	the	assets	to	fund	the	surrender,	and	Life	Operations'	liquidity	position	will	not	be	impacted.	In many	instances	Life	Operations	will	receive	a	percentage	of	the	surrender	amount	as	compensation	for	early	surrender	(surrender charge),	increasing	Life	Operations'	liquidity	position.	In	addition,	a	surrender	of	variable	annuity	separate	account	or	general account	assets	(see	below)	will	decrease	Life	Operations'	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	Operations'	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	Operations	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	Operations	is	required	to contribute	additional	capital	to	the	statutory	separate	account.	Life	Operations	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 Operations.

[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	Operations'	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	Individual	Annuity's	individual	variable	annuities	and	Individual	Life	variable	life	contracts,	the	general	account	option	for Retirement	Plans'	annuities	and	universal	life	contracts	sold	by	Individual	Life	may	be	funded	through	operating	cash	flows	of	Life Operations,	available	short-term	investments,	or	Life	Operations	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	Operations	may	need	 to	 take	other	actions,	 including enforcing	certain	contract	provisions	which	could	restrict	surrenders	and/or	slow	or	defer	payouts.

# Off-Balance	Sheet	Arrangements	and	Aggregate	Contractual	Obligations

The	Company	does	not	have	any	off-balance	sheet	arrangements	that	are	reasonably	likely	to	have	a	material	effect	on	the	financial condition,	results	of	operations,	liquidity,	or	capital	resources	of	the	Company,	except	for	the	contingent	capital	facility	described	above and	the	following:

•	 The	Company	has	unfunded	commitments	to	purchase	investments	in	limited	partnerships,	private	placements	and	mortgage	loans	of approximately	$1.4	billion	as	disclosed	in	Note	12	of	Notes	to	Consolidated	Financial	Statements.

The	following	table	identifies	the	Company's	aggregate	contractual	obligations	as	of	December	31,	2011:

|  |  |  | Payments	due	by	period |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Less\tthan | 1-3 | 3-5 | More\tthan |
|  | Total | 1\tyear | years | years | 5\tyears |
| Property\tand\tcasualty\tobligations\t[1] | $22,093 | $5,721 | $4,384 | $2,818 | $9,170 |
| Life,\tannuity\tand\tdisability\tobligations\t[2] | 341,984 | 22,894 | 34,895 | 30,701 | 253,494 |
| Operating\tlease\tobligations\t[3] | 242 | 58 | 81 | 47 | 56 |
| Long-term\tdebt\tobligations\t[4] | 19,202 | 480 | 1,460 | 1,678 | 15,584 |
| Consumer\tnotes\t[5] | 348 | 168 | 104 | 55 | 21 |
| Purchase\tobligations\t[6] | 3,484 | 2,693 | 544 | 214 | 33 |
| Other\tlong-term\tliabilities\treflected\ton |  |  |  |  |  |
| the\tbalance\tsheet\t[7] | 2,505 | 1,986 | 379 | 140 | — |
| Total\t[8] | $389,858 | $34,000 | $41,847 | $35,653 | $278,358 |

[1] 	 The	 following	 points	 are significant to	 understanding the	 cash flows	 estimated for	 obligations	 under	 property	 and	 casualty contracts:

•	 Reserves	for	Property	&	Casualty	unpaid	losses	and	loss	adjustment	expenses	include	IBNR	and	case	reserves.	While	payments due	on	claim	reserves	are	considered	contractual	obligations	because	they	relate	to	insurance	policies	issued	by	the	Company,

the	ultimate	amount	to	be	paid	to	settle	both	case	reserves	and	IBNR	is	an	estimate,	subject	to	significant	uncertainty.	The actual	amount	to	be	paid	is	not	finally	determined	until	the	Company	reaches	a	settlement	with	the	claimant.	Final	claim settlements	may	vary	significantly	from	the	present	estimates,	particularly	since	many	claims	will	not	be	settled	until	well	into the	future.

•In	estimating	 the	 timing	of	 future	payments	by	year,	 the	Company	has	assumed	 that	 its	historical	payment	patterns	will continue.	However,	the	actual	timing	of	future	payments	could	vary	materially	from	these	estimates	due	to,	among	other	things,

changes	 in	 claim	 reporting	 and	 payment	 patterns	 and	 large	 unanticipated	 settlements.	 In	 particular,	 there	 is	 significant uncertainty	over	the	claim	payment	patterns	of	asbestos	and	environmental	claims.	In	addition,	the	table	does	not	include future	cash	flows	related	to	the	receipt	of	premiums	that	may	be	used,	in	part,	to	fund	loss	payments.

•	 Under	U.S.	GAAP,	the	Company	is	only	permitted	to	discount	reserves	for	losses	and	loss	adjustment	expenses	in	cases	where the	payment	pattern	and	ultimate	loss	costs	are	fixed	and	determinable	on	an	individual	claim	basis.	For	the	Company,	these include	claim	settlements	with	permanently	disabled	claimants.	As	of	December	31,	2011,	the	total	property	and	casualty reserves	in	the	above	table	are	gross	of	a	reserve	discount	of	$542.

[2] 	 Estimated	life,	annuity	and	disability	obligations	include	death	and	disability	claims,	policy	surrenders,	policyholder	dividends	and trail	commissions	offset	by	expected	future	deposits	and	premiums	on	in-force	contracts.	Estimated	life,	annuity	and	disability obligations	 are	 based	 on	 mortality,	 morbidity	 and	 lapse	 assumptions	 comparable	 with	 the	 Company's	 historical	 experience, modified	for	recent	observed	trends.	The	Company	has	also	assumed	market	growth	and	interest	crediting	consistent	with	other assumptions.	In	contrast	to	this	table,	the	majority	of	the	Company's	obligations	are	recorded	on	the	balance	sheet	at	the	current account	values	and	do	not	incorporate	an	expectation	of	future	market	growth,	interest	crediting,	or	future	deposits.	Therefore,	the estimated	obligations	presented	in	this	table	significantly	exceed	the	liabilities	recorded	in	reserve	for	future	policy	benefits	and unpaid	losses	and	loss	adjustment	expenses,	other	policyholder	funds	and	benefits	payable	and	separate	account	liabilities.	Due	to the	significance	of	the	assumptions	used,	the	amounts	presented	could	materially	differ	from	actual	results.

[3] Includes	future	minimum	lease	payments	on	operating	lease	agreements.	See	Note	12	of	Notes	to	Consolidated	Financial	Statements for	additional	discussion	on	lease	commitments.

[4] Includes	contractual	principal	and	interest	payments.	See	Note	14	of	Notes	to	Consolidated	Financial	Statements	for	additional discussion	of	long-term	debt	obligations.

[5] 	 Consumer	notes	include	principal	payments	and	contractual	interest	for	fixed	rate	notes	and	interest	based	on	current	rates	for floating	rate	notes.	See	Note	14	of	Notes	to	Consolidated	Financial	Statements	for	additional	discussion	of	consumer	notes.

[6] Includes	$1.4	billion	in	commitments	to	purchase	investments	including	approximately	$700	of	limited	partnership,	$108	of	private placements	 and	 $553	 of	 mortgage	 loans.	 Outstanding	 commitments	 under	 these	 limited	 partnerships	 and	 mortgage	 loans	 are included	in	payments	due	in	less	than	1	year	since	the	timing	of	funding	these	commitments	cannot	be	reliably	estimated.	The remaining	commitments	to	purchase	investments	primarily	represent	payables	for	securities	purchased	which	are	reflected	on	the Company's	consolidated	balance	sheet.

	 Also	included	in	purchase	obligations	is	$1.1	billion	relating	to	contractual	commitments	to	purchase	various	goods	and	services such	as	maintenance,	human	resources,	information	technology,	and	transportation	in	the	normal	course	of	business.	Purchase obligations	exclude	contracts	that	are	cancelable	without	penalty	or	contracts	that	do	not	specify	minimum	levels	of	goods	or services	to	be	purchased.

[7] Includes	cash	collateral	of	$2	billion	which	the	Company	has	accepted	in	connection	with	the	Company's	derivative	instruments. Since	the	timing	of	the	return	of	the	collateral	is	uncertain,	the	return	of	the	collateral	has	been	included	in	the	payments	due	in	less than	1	year.

	 Also	included	in	other	long	term	liabilities	is	$48	of	net	unrecognized	tax	benefits.

[8] 	 Does	not	include	estimated	voluntary	contribution	of	$200	to	the	Company's	pension	plan	in	2012.

# Capitalization

The	capital	structure	of	The	Hartford	as	of	December	31,	2011	and	December	31,	2010	consisted	of	debt	and	stockholders'	equity, summarized	as	follows:

|  | December	31, | December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | Change |
| Short-term\tdebt\t(includes\tcurrent\tmaturities\tof\tlong-term\tdebt) | $— | $400 | (100%) |
| Long-term\tdebt | 6,216 | 6,207 | — |
| Total\tdebt\t[1] | 6,216 | 6,607 | (6%) |
| Stockholders'\tequity\texcluding\taccumulated\tother\tcomprehensive\tloss,\tnet |  |  |  |
| of\ttax\t("AOCI") | 21,753 | 21,312 | 2% |
| AOCI,\tnet\tof\ttax | 1,157 | (1,001) | NM |
| Total\tstockholders'\tequity | $22,910 | $20,311 | 13% |
| Total\tcapitalization\tincluding\tAOCI | $29,126 | $26,918 | 8% |
| Debt\tto\tstockholders'\tequity | 27% | 33% |  |
| Debt\tto\tcapitalization | 21% | 25% |  |

The	Hartford's	total	capitalization	increased	$2.2	billion,	or	8%,	from	December	31,	2010	to	December	31,	2011	due	to	improvements	in AOCI,	net	of	tax,	and	increases	in	stockholders'	equity,	excluding	AOCI.	AOCI,	net	of	tax,	improved	primarily	due	to	improvements	in the	Company's	net	unrealized	position	on	available-for-sale	securities	of	$2.0	billion	primarily	as	a	result	of	improved	security	valuations largely	due	to	declining	interest	rates,	partially	offset	by	credit	spread	widening.	The	increase	in	stockholders'	equity,	excluding	AOCI, was	primarily	due	to	net	income	of	$662.

For	additional	information	on	equity	and	AOCI,	net	of	tax,	see	Notes	15	and	16,	respectively,	of	the	Notes	to	Consolidated	Financial Statements.

# Cash	Flow

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Net\tcash\tprovided\tby\toperating\tactivities | $2,274 | $3,309 | $2,974 |
| Net\tcash\tused\tfor\tinvesting\tactivities | $(1,182) | $(434) | $(3,123) |
| Net\tcash\tprovided\tby\t(used\tfor)\tfinancing\tactivities | $(609) | $(2,955) | $523 |
| Cash\t—\tend\tof\tyear | $2,581 | $2,062 | $2,142 |

The	decrease	in	cash	provided	by	operating	activities	compared	to	the	prior	year	period	reflected	an	increase	in	losses	paid	on	property	and casualty	 insurance	 products,	 and	 to	 a	 lesser	 extent,	 lower	 net	 investment	 income	 on	 available-for-sale	 securities,	 excluding	 limited partnerships	and	other	alternative	investments.

Cash	used	for	investing	activities	in	2011	primarily	relates	to	net	purchases	of	mortgage	loans	of	$1.3	billion	and	net	purchases	of	fixed maturities,	fair	value	option	of	$627,	partially	offset	by	net	receipts	on	derivatives	of	$720	and	net	proceeds	of	available-for-sale	securities of	$256.	Cash	used	for	investing	activities	in	2010	primarily	relates	to	net	purchases	of	available-for-sale	securities	of	$1.5	billion	and	net payments	on	derivatives	of	$338,	partially	offset	by	net	proceeds	from	sales	of	mortgage	loans	of	$1.4	billion.

Cash	used	for	financing	activities	in	2011	primarily	consists	of	repayment	of	long-term	debt	and	dividends	paid	on	common	and	preferred stock,	partially	offset	by	net	inflows	on	investment	and	universal	life-type	contracts.	In	the	comparable	prior	period	of	2010,	cash	used	for financing	activities	increased	primarily	due	to	repayments	of	consumer	notes	of	$754,	repayment	of	$275	in	senior	notes	and	net	outflows on	investment	and	universal	life-type	contracts.

The	increase	in	cash	provided	by	operating	activities,	compared	to	the	prior	year	period,	was	primarily	the	result	of	increases	in	fee income.

Cash	used	for	investing	activities	in	2010	primarily	relates	to	net	purchases	of	available-for-sale	securities	of	$1.5	billion	and	net	payments on	derivatives	of	$338,	partially	offset	by	net	proceeds	from	sales	of	mortgage	loans	of	$1.4	billion.	Cash	used	for	investing	activities	in 2009	consisted	of	net	outflows	of	$2.9	billion	from	changes	in	payables	on	securities	lending,	net	purchases	of	available-for-sale	securities and	$561of	net	payments	on	derivatives,	partially	offset	by	net	proceeds	from	sales	of	mortgage	loans	of	$396.

Cash	used	for	financing	activities	in	2010	primarily	consists	of	repayments	of	consumer	notes	of	$754,	repayment	of	$275	in	senior	notes and	net	outflows	on	investment	and	universal	life-type	contracts.	Cash	provided	by	financing	activities	in	2009	primarily	consists	of proceeds	from	the	issuance	of	preferred	stock	and	warrants	to	U.S.	Treasury	of	$3.4	billion,	partially	offset	by	net	outflows	on	investment and	universal	life-type	contracts.

Operating	cash	flows	in	each	of	the	last	three	years	have	been	adequate	to	meet	liquidity	requirements.

# Equity	Markets

For	a	discussion	of	the	potential	impact	of	the	equity	markets	on	capital	and	liquidity,	see	the	Financial	Risk	on	Statutory	Capital	and Liquidity	Risk	section	in	this	MD&A.

# Ratings

Ratings	impact	the	Company's	cost	of	borrowing	and	its	ability	to	access	financing	and	are	an	important	factor	in	establishing	competitive position	in	the	insurance	and	financial	services	marketplace.	There	can	be	no	assurance	that	the	Company's	ratings	will	continue	for	any given	period	of	time	or	that	they	will	not	be	changed.	In	the	event	the	Company's	ratings	are	downgraded,	the	Company's	cost	of borrowing	and	ability	to	access	financing,	as	well	as	the	level	of	revenues	or	the	persistency	of	its	business	may	be	adversely	impacted.

The	following	 table	summarizes	The	Hartford's	significant	member	companies'	financial	ratings	from the	major independent	rating organizations	as	of	February	17,	2012.

These	ratings	are	not	a	recommendation	to	buy	or	hold	any	of	The	Hartford's	securities	and	they	may	be	revised	or	revoked	at	any	time	at the	sole	discretion	of	the	rating	organization.

The	agencies	consider	many	factors	in	determining	the	final	rating	of	an	insurance	company.	One	consideration	is	the	relative	level	of statutory	surplus	necessary	to	support	the	business	written.	Statutory	surplus	represents	the	capital	of	the	insurance	company	reported	in accordance	with	accounting	practices	prescribed	by	the	applicable	state	insurance	department.	See	Part	I,	Item	1A.	Risk	Factors	— "Downgrades	in	our	financial	strength	or	credit	ratings,	which	may	make	our	products	less	attractive,	could	increase	our	cost	of	capital and	inhibit	our	ability	to	refinance	our	debt,	which	would	have	a	material	adverse	effect	on	our	business,	financial	condition,	results	of operations	and	liquidity."

# Statutory	Surplus

The	table	below	sets	forth	statutory	surplus	for	the	Company's	insurance	companies.	The	statutory	surplus	amounts	as	of	December	31, 2011	and	2010	in	the	table	below	are	based	on	actual	statutory	filings	with	the	applicable	regulatory	authorities.

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| U.S.\tlife\tinsurance\tsubsidiaries,\tincludes\tdomestic\tcaptive\tinsurance\tsubsidiaries | $7,388 | $7,731 |
| Property\tand\tcasualty\tinsurance\tsubsidiaries | 7,412 | 7,721 |
| Total | $14,800 | $15,452 |

Total	statutory	capital	and	surplus	for	the	U.S.	life	insurance	subsidiaries,	including	domestic	captive	insurance	subsidiaries,	decreased	by $343,	primarily	due	to	variable	annuity	surplus	impacts	of	$470	and	an	increase	in	the	asset	valuation	reserve	of	$323,	partially	offset	by an	increase	in	capital	contributions	of	$287	and	an	increase	in	statutory	admitted	deferred	tax	assets	of	$268.	Total	statutory	capital	and surplus	for	the	property	and	casualty	insurance	subsidiaries	decreased	by	$309,	primarily	due	to	dividends	to	the	HFSG	Holding	Company of	$1.1	billion,	partially	offset	by	statutory	net	income,	after	tax,	of	$514,	an	increase	in	statutory	admitted	assets	of	$145,	unrealized gains	of	$90,	and	an	increase	in	statutory	admitted	deferred	tax	assets	of	$26.

The	Company	also	holds	regulatory	capital	and	surplus	for	 its	operations	 in	Japan.	Under	 the	accounting	practices	and	procedures governed	by	Japanese	regulatory	authorities,	the	Company's	statutory	capital	and	surplus	was	$1.3	billion	as	of	December	31,	2011	and 2010.

# Statutory	Capital

The	Company's	stockholders'	equity,	as	prepared	using	U.S.	generally	accepted	accounting	principles	("U.S.	GAAP")	was	$22.9	billion as	of	December	31,	2011.	The	Company's	estimated	aggregate	statutory	capital	and	surplus,	as	prepared	in	accordance	with	the	National Association	 of	 Insurance	 Commissioners'	 Accounting	 Practices	 and	 Procedures	 Manual	 ("U.S.STAT")	 was $14.8 billion	 as	 of December	31,	2011.	Significant	differences	between	U.S.GAAP	stockholders'	equity	and	aggregate	statutory	capital	and	surplus	prepared in	accordance	with	U.S.STAT	include	the	following:

•	 Costs	 incurred	 by	 the	 Company to	 acquire insurance	 policies	 are	 deferred	 under	 U.S.GAAP	 while those	 costs	 are	 expensed immediately	under	U.S.STAT.

•	 Temporary	differences	between	the	book	and	tax	basis	of	an	asset	or	liability	which	are	recorded	as	deferred	tax	assets	are	evaluated for	recoverability	under	U.S.GAAP	while	those	amounts	deferred	are	subject	to	limitations	under	U.S.STAT.

•	 The	assumptions	used	in	the	determination	of	Life	benefit	reserves	is	prescribed	under	U.S.STAT,	while	the	assumptions	used	under U.S.GAAP	are	generally	the	Company's	best	estimates.	The	methodologies	for	determining	life	insurance	reserve	amounts	may	also be	different.	For	example,	reserving	for	living	benefit	reserves	under	U.S.STAT	is	generally	addressed	by	the	Commissioners' Annuity	Reserving	Valuation	Methodology	and	the	related	Actuarial	Guidelines,	while	under	U.S.GAAP,	those	same	living	benefits may	be	considered	embedded	derivatives	and	recorded	at	fair	value	or	they	may	be	considered	SOP	03-1	reserves.	The	sensitivity	of these	life	insurance	reserves	to	changes	in	equity	markets,	as	applicable,	will	be	different	between	U.S.GAAP	and	U.S.STAT.

•	 The	difference	between	the	amortized	cost	and	fair	value	of	fixed	maturity	and	other	investments,	net	of	tax,	is	recorded	as	an increase	or	decrease	to	the	carrying	value	of	the	related	asset	and	to	equity	under	U.S.GAAP,	while	U.S.STAT	only	records	certain securities	at	fair	value,	such	as	equity	securities	and	certain	lower	rated	bonds	required	by	the	NAIC	to	be	recorded	at	the	lower	of amortized	cost	or	fair	value.

•	 U.S.STAT	for	life	insurance	companies	establishes	a	formula	reserve	for	realized	and	unrealized	losses	due	to	default	and	equity risks	associated	with	certain	invested	assets	(the	Asset	Valuation	Reserve),	while	U.S.GAAP	does	not.	Also,	for	those	realized	gains and	losses	caused	by	changes	in	interest	rates,	U.S.STAT	for	life	insurance	companies	defers	and	amortizes	the	gains	and	losses,

caused	by	changes	in	interest	rates,	into	income	over	the	original	life	to	maturity	of	the	asset	sold	(the	Interest	Maintenance	Reserve)

while	U.S.GAAP	does	not.

•	 Goodwill	arising	from	the	acquisition	of	a	business	is	tested	for	recoverability	on	an	annual	basis	(or	more	frequently,	as	necessary)

for	U.S.GAAP,	while	under	U.S.STAT	goodwill	is	amortized	over	a	period	not	to	exceed	10	years	and	the	amount	of	goodwill	is limited.

In	addition,	certain	assets,	including	a	portion	of	premiums	receivable	and	fixed	assets,	are	non-admitted	(recorded	at	zero	value	and charged	against	surplus)	under	U.S.STAT.	U.S.GAAP	generally	evaluates	assets	based	on	their	recoverability.

# Risk-Based	Capital

State	 insurance	regulators	and	 the	NAIC	have	adopted	risk-based	capital	requirements	for	 life	 insurance	companies	 to	evaluate	 the adequacy	of	statutory	capital	and	surplus	in	relation	to	investment	and	insurance	risks.	The	requirements	provide	a	means	of	measuring	the minimum	amount	of	statutory	surplus	appropriate	for	an	insurance	company	to	support	its	overall	business	operations	based	on	its	size and	risk	profile.	Under	risk-based	capital	("RBC")	requirements,	a	company's	RBC	is	calculated	by	applying	factors	and	performing calculations	 relating	 to	 various	 asset,	 premium,	 claim,	 expense	 and	 reserve	 items.	 The	 adequacy	 of	 a	 company's	 actual	 capital	 is determined	by	the	ratio	of	a	company's	total	adjusted	capital,	as	defined	by	the	insurance	regulators,	to	its	company	action	level	of	RBC (known	as	the	RBC	ratio),	also	as	defined	by	insurance	regulators.	RBC	standards	are	used	by	regulators	to	set	in	motion	appropriate regulatory	actions	related	to	insurers	that	show	indications	of	inadequate	conditions.	In	addition,	rating	agencies	consider	RBC	ratios, along	with	their	proprietary	models,	in	making	ratings	determinations.

# Sensitivity

In	any	particular	year,	statutory	surplus	amounts	and	RBC	ratios	may	increase	or	decrease	depending	upon	a	variety	of	factors.	The amount	of	change	in	the	statutory	surplus	or	RBC	ratios	can	vary	based	on	individual	factors	and	may	be	compounded	in	extreme scenarios	or	if	multiple	factors	occur	at	the	same	time.	At	times	the	impact	of	changes	in	certain	market	factors	or	a	combination	of multiple	factors	on	RBC	ratios	can	be	counterintuitive.	For	further	discussion	on	 these	factors	and	 the	potential	 impacts	 to	 the	 life insurance	subsidiaries,	see	the	Financial	Risk	on	Statutory	Capital	section	within	Enterprise	Risk	Management.

Statutory	capital	at	the	property	and	casualty	subsidiaries	has	historically	been	maintained	at	or	above	the	capital	level	required	to	meet "AA	level"	ratings	from	rating	agencies.	Statutory	capital	generated	by	the	property	and	casualty	subsidiaries	in	excess	of	the	capital	level required	to	meet	"AA	level"	ratings	is	available	for	use	by	the	enterprise	or	for	corporate	purposes.	The	amount	of	statutory	capital	can increase	or	decrease	depending	on	a	number	of	factors	affecting	property	and	casualty	results	including,	among	other	factors,	the	level	of catastrophe	claims	incurred,	the	amount	of	reserve	development,	the	effect	of	changes	in	interest	rates	on	investment	income	and	the discounting	of	loss	reserves,	and	the	effect	of	realized	gains	and	losses	on	investments.

In	 addition,	 the	 Company	 can	 access	 the	 $500	 Glen	 Meadow trust	 contingent	 capital facility	 and	 maintains the	 ability to	 access $1.9	billion	of	capacity	under	its	revolving	credit	facility.

# Contingencies

Legal	Proceedings	—	For	a	discussion	regarding	contingencies	related	to	The	Hartford's	legal	proceedings,	please	see	the	information contained	under	"Litigation"	and	"Asbestos	and	Environmental	Claims,"	in	Note	12	of	the	Notes	to	Consolidated	Financial	Statements, which	is	incorporated	herein	by	reference.

For	 a	 discussion	 of	 terrorism	 reinsurance legislation	 and	 how it	 affects	 The	 Hartford, see	 "Terrorism"	 under the Insurance	 Risk Management	section	of	the	MD&A.

Tax	 proposals	 and	 regulatory	 initiatives	 which	 have	 been	 or	 are	 being	 considered	 by	 Congress	 and/or	 the	 United	 States	 Treasury Department	could	have	a	material	effect	on	the	insurance	business.	These	proposals	and	initiatives	include,	or	could	include,	new	taxes	or assessments	on	large	financial	institutions,	changes	pertaining	to	the	income	tax	treatment	of	insurance	companies	and	life	insurance products	and	annuities,	repeal	or	reform	of	the	estate	tax	and	comprehensive	federal	tax	reform,	and	changes	to	the	regulatory	structure	for financial	institutions.	The	nature	and	timing	of	any	Congressional	or	regulatory	action	with	respect	to	any	such	efforts	is	unclear.

# Legislative	Developments

The	Dodd-Frank	Wall	Street	Reform	and	Consumer	Protection	Act	of	2010	(the	"Dodd-Frank	Act")	was	enacted	on	July	21,	2010, mandating	changes	to	the	regulation	of	the	financial	services	industry.	The	Dodd-Frank	Act	may	affect	our	operations	and	governance	in ways	that	could	adversely	affect	our	financial	condition	and	results	of	operations.

In	particular,	the	Dodd-Frank	Act	vests	a	newly	created	Financial	Services	Oversight	Council	with	the	power	to	designate	"systemically important"	institutions,	which	will	be	subject	to	special	regulatory	supervision	and	other	provisions	intended	to	prevent,	or	mitigate	the impact	of,	future	disruptions	in	the	U.S.	financial	system.	Systemically	important	institutions	are	limited	to	large	bank	holding	companies and	nonbank	financial	companies	that	are	so	important	that	their	potential	failure	could	"pose	a	threat	to	the	financial	stability	of	the United	States."	If	we	are	designated	as	a	systemically	important	institution,	we	could	be	subject	to	higher	capital	requirements	and additional	regulatory	oversight	imposed	by	The	Federal	Reserve,	as	well	as	to	post-event	assessments	imposed	by	the	Federal	Deposit Insurance	Corporation	("FDIC")	to	recoup	the	costs	associated	with	the	orderly	liquidation	of	other	systemically	important	institutions	in the	event	one	or	more	such	 institutions	fails.	Further,	 the	FDIC	 is	authorized	 to	petition	a	state	court	 to	commence	an	 insolvency proceeding	to	liquidate	an	insurance	company	that	fails	in	the	event	the	insurer's	state	regulator	fails	to	act.	Other	provisions	will	require central	clearing	of,	and/or	impose	new	margin	and	capital	requirements	on,	derivatives	transactions,	which	we	expect	will	increase	the costs	of	our	hedging	program.

The	Hartford	is	subject	to	a	number	of	applicable	Dodd-Frank	Act	provisions.	For	example,	if	we	are	designated	a	systemically	important financial	institution,	the	Dodd-Frank	Act	may	restrict	us	from	sponsoring	and	investing	in	private	equity	and	hedge	funds,	which	would limit	our	discretion	in	managing	our	general	account.	Other	provisions	in	the	Dodd-Frank	Act	that	may	impact	us	include:	a	new	"Federal Insurance	Office"	within	Treasury;	discretionary	authority	for	the	SEC	to	impose	a	harmonized	standard	of	care	for	investment	advisers and	broker-dealers	who	provide	personalized	advice	about	securities	to	retail	customers;	possible	adverse	impact	on	the	pricing	and liquidity	of	the	securities	in	which	we	invest	resulting	from	the	proprietary	trading	and	market	making	limitation	of	the	Volcker	Rule; possible	 prohibition	 of	 certain	 asset-backed	 securities	 transactions	 that	 could	 adversely	 impact	 our	 ability	 to	 offer	 insurance-linked securities;	and	enhancements	to	corporate	governance,	especially	regarding	risk	management.

# FY	2013,	Budget	of	the	United	States	Government

On	February	13,	2012,	the	Obama	Administration	released	its	"FY	2013,	Budget	of	the	United	States	Government"	(the	"Budget"). Although	the	Administration	has	not	released	proposed	statutory	language,	the	Budget	includes	proposals	which	if	enacted,	would	affect the	taxation	of	life	insurance	companies	and	certain	life	insurance	products.	In	particular,	the	proposals	would	affect	the	treatment	of corporate	owned	life	insurance	("COLI")	policies	by	limiting	the	availability	of	certain	interest	deductions	for	companies	that	purchase those	policies.	The	proposals	would	also	change	the	method	used	to	determine	the	amount	of	dividend	income	received	by	a	life	insurance company	on	assets	held	in	separate	accounts	used	to	support	products,	including	variable	life	insurance	and	variable	annuity	contracts, that	are	eligible	for	the	dividends	received	deduction	("DRD").	The	DRD	reduces	the	amount	of	dividend	income	subject	to	tax	and	is	a significant	component	of	the	difference	between	the	Company's	actual	tax	expense	and	expected	amount	determined	using	the	federal statutory	tax	rate	of	35%.	If	proposals	of	this	type	were	enacted,	the	Company's	sale	of	variable	annuities	and	variable	life	products	and	its profits	on	COLI	policies	could	be	adversely	affected	and	the	Company's	actual	tax	expense	could	increase,	reducing	earnings.

# Guaranty	Fund	and	Other	Insurance-related	Assessments

For	a	discussion	regarding	Guaranty	Fund	and	Other	Insurance-related	Assessments,	see	Note	12	of	the	Notes	to	Consolidated	Financial Statements.

# IMPACT	OF	NEW	ACCOUNTING	STANDARDS

For	a	discussion	of	accounting	standards,	see	Note	1	of	the	Notes	to	Consolidated	Financial	Statements.

# Item	7A.	 QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

The	information	required	by	this	item	is	set	forth	in	the	Capital	Markets	Risk	Management	section	of	Item	7,	Management's	Discussion and	Analysis	of	Financial	Condition	and	Results	of	Operations	and	is	incorporated	herein	by	reference.

# Item	8. 	 FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

See	Index	to	Consolidated	Financial	Statements	and	Schedules	elsewhere	herein.

# Item	9. 	 CHANGES IN AND DISAGREEMENTS	 WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

# Item	9A.	 CONTROLS	AND	PROCEDURES

# Evaluation	of	disclosure	controls	and	procedures

The	Company's	principal	executive	officer	and	its	principal	financial	officer,	based	on	their	evaluation	of	the	Company's	disclosure controls	 and	 procedures	 (as	 defined	 in	 Exchange	Act	 Rule	 13a-15(e)),	 have	 concluded	 that	 the	 Company's	 disclosure	 controls	 and procedures	are	effective	for	the	purposes	set	forth	in	the	definition	thereof	in	Exchange	Act	Rule	13a-15(e)	as	of	December	31,	2011.

# Management's	annual	report	on	internal	control	over	financial	reporting

The	management	of	The	Hartford	Financial	Services	Group,	Inc.	and	its	subsidiaries	("The	Hartford")	is	responsible	for	establishing	and maintaining	adequate	internal	control	over	financial	reporting	for	The	Hartford	as	defined	in	Rule	13a-15(f)	under	the	Securities	Exchange Act	of	1934.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	accounting	principles	generally accepted	in	the	United	States.	A	company's	internal	control	over	financial	reporting	includes	policies	and	procedures	that	(1)	pertain	to the	maintenance	of	records	that	in	reasonable	detail	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	accounting	principles	generally	accepted	in	the	United	States,	and	that	receipts	and	expenditures	of	the	company	are being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	the	company's	assets	that	could	have	a	material effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of any	evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in conditions,	or	that	the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

The	Hartford's	management	assessed	its	internal	controls	over	financial	reporting	as	of	December	31,	2011	in	relation	to	criteria	for effective	internal	control	over	financial	reporting	described	in	"Internal	Control	—	Integrated	Framework"	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission.	Based	on	this	assessment	under	those	criteria,	The	Hartford's	management concluded	that	its	internal	control	over	financial	reporting	was	effective	as	of	December	31,	2011.

# Attestation	report	of	the	Company's	registered	public	accounting	firm

The	 Hartford's	 independent	 registered	 public	 accounting	 firm,	 Deloitte	 &	 Touche	 LLP,	 has issued their	 attestation report	 on the Company's	internal	control	over	financial	reporting	which	is	set	forth	below.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# To	the	Board	of	Directors	and	Stockholders	of

# Hartford,	Connecticut

We	 have	 audited	 the	 internal	 control	 over	 financial	 reporting	 of	 The	 Hartford	 Financial	 Services	 Group,	 Inc.	 and	 its	 subsidiaries (collectively,	the	"Company")	as	of	December	31,	2011,	based	on	the	criteria	established	in	Internal	Control—Integrated	Framework issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	The	Company's	management	is	responsible	for maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial reporting	 was	 maintained	 in	 all	 material	 respects.	 Our	 audit	 included	 obtaining	 an	 understanding	 of	 internal	 control	 over	 financial reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the	design	and	operating	effectiveness	of	internal control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	by,	or	under	the	supervision	of,	the	company's	principal executive	and	principal	financial	officers,	or	persons	performing	similar	functions,	and	effected	by	the	company's	board	of	directors, management,	and	other	personnel	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of consolidated	 financial	 statements	 for	 external	 purposes	 in	 accordance	 with	 generally	 accepted	 accounting	 principles.	A	 company's internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable assurance	 that	 transactions	 are	 recorded	 as	 necessary	 to	 permit	 preparation	 of	 consolidated	 financial	 statements	 in	 accordance	 with generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with authorizations	 of	 management	 and	 directors	 of	 the	 company;	 and	 (3)	 provide	 reasonable	 assurance	 regarding	 prevention	 or	 timely detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	consolidated financial	statements.

Because	 of	 the	 inherent	 limitations	 of	 internal	 control	 over	 financial	 reporting,	 including	 the	 possibility	 of	 collusion	 or	 improper management	override	of	controls,	material	misstatements	due	to	error	or	fraud	may	not	be	prevented	or	detected	on	a	timely	basis.	Also, projections	of	any	evaluation	of	the	effectiveness	of	the	internal	control	over	financial	reporting	to	future	periods	are	subject	to	the	risk that	 the	 controls	 may	 become	 inadequate	 because	 of	 changes	 in	 conditions,	 or	 that	 the	 degree	 of	 compliance	 with	 the	 policies	 or procedures	may	deteriorate.

In	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31, 2011,	based	on	the	criteria	established	in	Internal	Control—Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations of	the	Treadway	Commission.

We	 have	 also	 audited,	 in	 accordance	 with	 the	 standards	 of	 the	 Public	 Company	Accounting	 Oversight	 Board	 (United	 States),	 the consolidated	financial	statements	and	financial	statement	schedules	as	of	and	for	the	year	ended	December	31,	2011	of	the	Company	and our	report,	dated	February	24,	2012,	expressed	an	unqualified	opinion	on	those	consolidated	financial	statements	and	financial	statement schedules	and	included	an	explanatory	paragraph	regarding	the	Company's	change	in	its	method	of	accounting	and	reporting	for	variable interest	entities	and	embedded	credit	derivatives	as	required	by	accounting	guidance	adopted	in	2010,	and	for	other-than	temporary impairments	as	required	by	accounting	guidance	adopted	in	2009.

DELOITTE	&	TOUCHE	LLP

# Changes	in	internal	control	over	financial	reporting

There	were	no	changes	in	the	Company's	internal	control	over	financial	reporting	that	occurred	during	the	Company's	fourth	fiscal	quarter of	2011	that	have	materially	affected,	or	are	reasonably	likely	to	materially	affect,	the	Company's	internal	control	over	financial	reporting.

# Item	9B. 	 OTHER	INFORMATION

# PART	III

# Item	10. 	 DIRECTORS,	AND	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE	OF	THE	HARTFORD

Certain	of	the	information	called	for	by	Item	10	will	be	set	forth	in	the	definitive	proxy	statement	for	the	2012	annual	meeting	of shareholders	(the	"Proxy	Statement")	to	be	filed	by	The	Hartford	with	the	Securities	and	Exchange	Commission	within	120	days	after	the end	of	the	fiscal	year	covered	by	this	Form	10-K	under	the	captions	"Nominee	for	Directorships",	"Section	16(a)	Beneficial	Ownership Reporting	Compliance",	"Corporate	Governance"	and	"Board	of	Directors"	and	is	incorporated	herein	by	reference.

The	Company	has	adopted	a	Code	of	Ethics	and	Business	Conduct,	which	is	applicable	to	all	employees	of	the	Company,	including	the principal	executive	officer,	the	principal	financial	officer	and	the	principal	accounting	officer.	The	Code	of	Ethics	and	Business	Conduct	is available	on	the	Company's	website	at:	www.thehartford.com.	Any	waiver	of,	or	material	amendment	to,	the	Code	of	Ethics	and	Business Conduct	applicable	to	the	Company's	principal	executive	officer,	principal	financial	officer,	principal	accounting	officer	or	controller	or persons	performing	similar	functions	will	be	posted	promptly	to	our	web	site	in	accordance	with	applicable	NYSE	and	SEC	rules.

# Executive	Officers	of	The	Hartford

Information	about	the	executive	officers	of	The	Hartford	who	are	also	nominees	for	election	as	directors	will	be	set	forth	in	The	Hartford's Proxy	Statement.	Set	forth	below	is	information	about	the	other	executive	officers	of	the	Company:

# Position	with	The	Hartford	and	Business	Experience

# 1 	 Denotes	a	subsidiary	of	The	Hartford

# Item	11. 	 EXECUTIVE	COMPENSATION

The	 information	called	for	by	Item	11	will	be	set	forth	 in	 the	Proxy	Statement	under	 the	captions	"Compensation	Discussion	and Analysis",	 "Executive	 Compensation",	 "Director	 Compensation",	 "Report	 of	 the	 Compensation	 and	 Management	 Development Committee",	and	"Compensation	and	Management	Development	Committee	Interlocks	and	Insider	Participation"	and	is	incorporated herein	by	reference.

# Item	12. 	 SECURITY	 OWNERSHIP	 OF	 CERTAIN BENEFICIAL	 OWNERS	 AND	 MANAGEMENT	 AND	 RELATED STOCKHOLDER	MATTERS

Certain	of	 the	 information	called	for	by	Item	12	will	be	set	forth in the	Proxy	Statement	under the	caption	"Information	on	Stock Ownership"	and	is	incorporated	herein	by	reference.

# Equity	Compensation	Plan	Information

The	following	table	provides	information	as	of	December	31,	2011	about	the	securities	authorized	for	issuance	under	the	Company's equity	compensation	plans.	The	Company	maintains	The	Hartford	Incentive	Stock	Plan	(the	"2000	Stock	Plan"),	The	Hartford	2005 Incentive	Stock	Plan	(the	"2005	Stock	Plan"),	The	Hartford	2010	Incentive	Stock	Plan	(the	"2010	Stock	Plan"),	and	The	Hartford Employee	Stock	Purchase	Plan	(the	"ESPP").	On	May	19,	2010,	the	shareholders	of	the	Company	approved	the	2010	Stock	Plan,	which superseded	the	2005	Stock	Plan.	Pursuant	to	the	provisions	of	the	2010	Stock	Plan,	no	additional	shares	may	be	issued	from	the	2005 Stock	Plan.	To	the	extent	that	any	awards	under	the	2005	Stock	Plan	are	forfeited,	terminated,	expire	unexercised	or	are	settled	in	cash	in lieu	of	stock,	the	shares	subject	to	such	awards	(or	the	relevant	portion	thereof)	shall	be	available	for	award	under	the	2010	Stock	Plan	and such	shares	shall	be	added	to	the	total	number	of	shares	available	under	the	2010	Stock	Plan.

In	addition,	the	Company	maintains	the	2000	PLANCO	Non-employee	Option	Plan	(the	"PLANCO	Plan")	pursuant	to	which	it	may	grant awards	 to	non-employee	wholesalers	of	products	of	Hartford	Life	Distributors,	LLC,	and	 its	affiliate,	PLANCO,	LLC	(collectively "HLD").

|  | (a)<br>Number	of	Securities<br>to	be	Issued	Upon<br>Exercise	of<br>Outstanding	Options,<br>Warrants	and	Rights | (b)<br>Weighted-average<br>Exercise	Price	of<br>Outstanding<br>Options,	Warrants<br>and	Rights | (c)<br>Number	of	Securities	Remaining<br>Available	for	Future	Issuance<br>Under	Equity	Compensation	Plans<br>(Excluding	Securities	Reflected	in<br>Column	(a)) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby |  |  |  |
| stockholders | 4,833,390 | $47.89 | 21,124,460[1] |
| Equity\tcompensation\tplans\tnot\tapproved\tby |  |  |  |
| stockholders | 5,956 | 47.12 | 264,388 |
| Total | 4,839,346 | $47.89 | 21,388,848 |

[1] 	 Of	these	shares,	6,472,280	shares	remain	available	for	purchase	under	the	ESPP.

# Summary	Description	of	the	2000	PLANCO	Non-Employee	Option	Plan

The	Company's	Board	of	Directors	adopted	the	PLANCO	Plan	on	July	20,	2000,	and	amended	it	on	February	20,	2003	to	increase	the number	of	shares	of	the	Company's	common	stock	subject	to	the	plan	to	450,000	shares.	The	stockholders	of	the	Company	have	not approved	the	PLANCO	Plan.	No	awards	have	been	issued	under	the	PLANCO	Plan	since	2003.

Eligibility	—	Any	non-employee	independent	contractor	serving	on	the	wholesale	sales	force	as	an	insurance	agent	who	is	an	exclusive agent	of	the	Company	or	who	derives	more	than	50%	of	his	or	her	annual	income	from	the	Company	is	eligible.

Terms	of	options	—	Nonqualified	stock	options	("NQSOs")	 to	purchase	shares	of	common	stock	are	available	for	grant	under	 the PLANCO	Plan.	The	administrator	of	the	PLANCO	Plan,	the	Compensation	and	Management	Development	Committee,	(i)	determines	the recipients	 of	 options	 under	 the	 PLANCO	 Plan,	 (ii)	 determines	 the	 number	 of	 shares	 of	 common	 stock	 covered	 by	 such	 options, (iii)	determines	the	dates	and	the	manner	in	which	options	become	exercisable	(which	is	typically	in	three	equal	annual	installments beginning	on	the	first	anniversary	of	the	date	of	grant),	(iv)	sets	the	exercise	price	of	options	(which	may	be	less	than,	equal	to	or	greater than	the	fair	market	value	of	common	stock	on	the	date	of	grant)	and	(v)	determines	the	other	terms	and	conditions	of	each	option. Payment	of	the	exercise	price	may	be	made	in	cash,	other	shares	of	the	Company's	common	stock	or	through	a	same	day	sale	program. The	term	of	an	NQSO	may	not	exceed	ten	years	and	two	days	from	the	date	of	grant.

If	an	optionee's	required	relationship	with	the	Company	terminates	for	any	reason,	other	than	for	cause,	any	exercisable	options	remain exercisable	for	a	fixed	period	of	four	months,	not	to	exceed	the	remainder	of	the	option's	term.	Any	options	that	are	not	exercisable	at	the time	of	such	termination	are	cancelled	on	the	date	of	such	termination.	If	the	optionee's	required	relationship	is	terminated	for	cause,	the options	are	canceled	immediately.

Acceleration	in	Connection	with	a	Change	in	Control	—	Upon	the	occurrence	of	a	change	in	control,	each	option	outstanding	on	the	date of	such	change	in	control,	and	which	is	not	then	fully	vested	and	exercisable,	shall	immediately	vest	and	become	exercisable.	In	general,	a "Change	in	Control"	will	be	deemed	to	have	occurred	upon	the	acquisition	of	40%	or	more	of	the	outstanding	voting	stock	of	the Company,	a	tender	or	exchange	offer	to	acquire	15%	or	more	of	the	outstanding	voting	stock	of	the	Company,	certain	mergers	or corporate	transactions	resulting	in	the	shareholders	of	the	Company	before	the	transactions	owning	less	than	55%	of	the	entity	surviving the	transactions,	certain	transactions	involving	a	transfer	of	substantially	all	of	the	Company's	assets	or	a	change	in	greater	than	50%	of the	Board	members	over	a	two	year	period.	See	Note	18	of	the	Notes	to	Consolidated	Financial	Statements	for	a	description	of	the	2010 Stock	Plan	and	the	ESPP.

# Item	13. 	 CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

Any	information	called	for	by	Item	13	will	be	set	forth	in	the	Proxy	Statement	under	the	caption	"Corporate	Governance"	and	"Board	of Directors"	and	is	incorporated	herein	by	reference.

# Item	14. 	 PRINCIPAL	ACCOUNTING	FEES	AND	SERVICES

The	information	called	for	by	Item	14	will	be	set	forth	in	the	Proxy	Statement	under	the	caption	"Report	of	the	Audit	Committee"	and	is incorporated	herein	by	reference.

# Item	15. 	 EXHIBITS,	FINANCIAL	STATEMENT	SCHEDULES

(a)	Documents	filed	as	a	part	of	this	report:

(1) 	 Consolidated	Financial	Statements.	See	Index	to	Consolidated	Financial	Statements	and	Schedules	elsewhere	herein.

(2) 	 Consolidated	Financial	Statement	Schedules.	See	Index	to	Consolidated	Financial	Statement	and	Schedules	elsewhere	herein.

(3) 	 Exhibits.	See	Exhibit	Index	elsewhere	herein.

# INDEX	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	AND	SCHEDULES

We	have	audited	the	accompanying	consolidated	balance	sheets	of	The	Hartford	Financial	Services	Group,	Inc.	and	its	subsidiaries (collectively,	the	"Company")	as	of	December	31,	2011	and	2010,	and	the	related	consolidated	statements	of	operations,	changes	in stockholders'	equity,	comprehensive	income	(loss),	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2011.	Our audits	also	included	the	consolidated	financial	statement	schedules	listed	in	the	Index	at	Item	15.	These	consolidated	financial	statements and	financial	statement	schedules	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on these	consolidated	financial	statements	and	financial	statement	schedules	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	consolidated	financial	statements are	free	of	material	misstatement.	An	audit	includes	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the consolidated	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant	estimates	made	by management,	 as	 well	 as	 evaluating	 the	 overall	 consolidated	 financial	 statement	 presentation.	 We	 believe	 that	 our	 audits	 provide	 a reasonable	basis	for	our	opinion.

In	our	opinion,	such	consolidated	financial	statements	present	fairly,	 in	all	material	respects,	 the	financial	position	of	The	Hartford Financial	Services	Group,	Inc.	and	its	subsidiaries	as	of	December	31,	2011	and	2010,	and	the	results	of	their	operations	and	their	cash flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2011,	in	conformity	with	accounting	principles	generally	accepted	in the	United	States	of	America.	Also,	in	our	opinion,	such	consolidated	financial	statement	schedules,	when	considered	in	relation	to	the basic	consolidated	financial	statements	taken	as	a	whole,	present	fairly,	in	all	material	respects,	the	information	set	forth	therein.

As	discussed	in	Note	1	of	the	consolidated	financial	statements,	the	Company	changed	its	method	of	accounting	and	reporting	for	variable interest	entities	and	embedded	credit	derivatives	as	required	by	accounting	guidance	adopted	 in	2010,	and	for	other-than-temporary impairments	as	required	by	accounting	guidance	adopted	in	2009.

We	 have	 also	 audited,	 in	 accordance	 with	 the	 standards	 of	 the	 Public	 Company	Accounting	 Oversight	 Board	 (United	 States),	 the Company's	internal	control	over	financial	reporting	as	of	December	31,	2011,	based	on	the	criteria	established	in	Internal	Control—

Integrated Framework	issued	 by	 the	 Committee	 of	 Sponsoring	 Organizations	 of	 the	 Treadway	 Commission	 and	 our	 report	 dated February	24,	2012	expressed	an	unqualified	opinion	on	the	Company's	internal	control	over	financial	reporting.

# Consolidated	Statements	of	Operations

| (In	millions,	except	for	per	share	data) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Revenues |  |  |  |
| Earned\tpremiums | $14,088 | $14,055 | $14,424 |
| Fee\tincome | 4,750 | 4,748 | 4,547 |
| Net\tinvestment\tincome: |  |  |  |
| Securities\tavailable-for-sale\tand\tother | 4,272 | 4,364 | 4,017 |
| Equity\tsecurities,\ttrading | (1,359) | (774) | 3,188 |
| Total\tnet\tinvestment\tincome | 2,913 | 3,590 | 7,205 |
| Net\trealized\tcapital\tgains\t(losses): |  |  |  |
| Total\tother-than-temporary\timpairment\t("OTTI")\tlosses | (263) | (852) | (2,191) |
| OTTI\tlosses\trecognized\tin\tother\tcomprehensive\tincome\t("OCI") | 89 | 418 | 683 |
| Net\tOTTI\tlosses\trecognized\tin\tearnings | (174) | (434) | (1,508) |
| Net\trealized\tcapital\tgains\t(losses),\texcluding\tnet\tOTTI\tlosses\trecognized\tin |  |  |  |
| earnings | 29 | (177) | (496) |
| Total\tnet\trealized\tcapital\tlosses | (145) | (611) | (2,004) |
| Other\trevenues | 253 | 267 | 261 |
| Total\trevenues | 21,859 | 22,049 | 24,433 |
| Benefits,\tlosses\tand\texpenses |  |  |  |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses | 14,625 | 13,025 | 13,831 |
| Benefits,\tlosses\tand\tloss\tadjustment\texpenses\t—\treturns\tcredited\ton |  |  |  |
| international\tvariable\tannuities | (1,359) | (774) | 3,188 |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts\tand\tpresent\tvalue\tof\tfuture |  |  |  |
| profits | 3,427 | 2,527 | 4,257 |
| Insurance\toperating\tcosts\tand\tother\texpenses | 4,398 | 4,407 | 4,370 |
| Interest\texpense | 508 | 508 | 476 |
| Goodwill\timpairment | 30 | — | 32 |
| Total\tbenefits,\tlosses\tand\texpenses | 21,629 | 19,693 | 26,154 |
| Income\t(loss)\tfrom\tcontinuing\toperations\tbefore\tincome\ttaxes | 230 | 2,356 | (1,721) |
| Income\ttax\texpense\t(benefit) | (346) | 612 | (838) |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax | 576 | 1,744 | (883) |
| Income\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 86 | (64) | (4) |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |
| Preferred\tstock\tdividends\tand\taccretion\tof\tdiscount | 42 | 515 | 127 |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders | $620 | $1,165 | $(1,014) |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax,\tavailable\tto\tcommon |  |  |  |
| shareholders\tper\tcommon\tshare |  |  |  |
| Basic | $1.20 | $2.85 | $(2.92) |
| Diluted | $1.12 | $2.62 | $(2.92) |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders\tper\tcommon\tshare |  |  |  |
| Basic | $1.39 | $2.70 | $(2.93) |
| Diluted | $1.30 | $2.49 | $(2.93) |
| Cash\tdividends\tdeclared\tper\tcommon\tshare | $0.40 | $0.20 | $0.20 |

# See	Notes	to	Consolidated	Financial	Statements.

# Consolidated	Statements	of	Comprehensive	Income

| (In	millions) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Comprehensive\tIncome |  |  |  |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |
| Other\tcomprehensive\tincome |  |  |  |
| Change\tin\tnet\tunrealized\tgain/loss\ton\tsecurities | 1,979 | 1,707 | 5,909 |
| Change\tin\tOTTI\tlosses\trecognized\tin\tother\tcomprehensive\tincome | 9 | 116 | (224) |
| Change\tin\tnet\tgain/loss\ton\tcash-flow\thedging\tinstruments | 131 | 128 | (387) |
| Change\tin\tforeign\tcurrency\ttranslation\tadjustments | 112 | 289 | (23) |
| Change\tin\tpension\tand\tother\tpostretirement\tplan\tadjustments | (73) | (123) | (155) |
| Total\tother\tcomprehensive\tincome | 2,158 | 2,117 | 5,120 |
| Total\tcomprehensive\tincome | $2,820 | $3,797 | $4,233 |

# Consolidated	Balance	Sheets

| (In	millions,	except	for	share	and	per	share	data) | 2011 | 2010 |
| :--- | :--- | :--- |
| Assets |  |  |
| Investments: |  |  |
| Fixed\tmaturities,\tavailable-for-sale,\tat\tfair\tvalue\t(amortized\tcost\tof\t$78,978\tand\t$78,419) |  |  |
| (includes\tvariable\tinterest\tentity\tassets,\tat\tfair\tvalue,\tof\t$153\tand\t$406) | $81,809 | $77,820 |
| Fixed\tmaturities,\tat\tfair\tvalue\tusing\tthe\tfair\tvalue\toption\t(includes\tvariable\tinterest\tentity\tassets, |  |  |
| at\tfair\tvalue,\tof\t$338\tand\t$323) | 1,328 | 649 |
| Equity\tsecurities,\ttrading,\tat\tfair\tvalue\t(cost\tof\t$32,928\tand\t$33,899) | 30,499 | 32,820 |
| Equity\tsecurities,\tavailable-for-sale,\tat\tfair\tvalue\t(cost\tof\t$1,056\tand\t$1,013) | 921 | 973 |
| Mortgage\tloans\t(net\tof\tallowances\tfor\tloan\tlosses\tof\t$102\tand\t$155) | 5,728 | 4,489 |
| Policy\tloans,\tat\toutstanding\tbalance | 2,001 | 2,181 |
| Limited\tpartnerships\tand\tother\talternative\tinvestments\t(includes\tvariable\tinterest\tentity\tassets\tof |  |  |
| $7\tand\t$14) | 2,532 | 1,918 |
| Other\tinvestments | 2,394 | 1,617 |
| Short-term\tinvestments | 7,736 | 8,528 |
| Total\tinvestments | 134,948 | 130,995 |
| Cash | 2,581 | 2,062 |
| Premiums\treceivable\tand\tagents'\tbalances,\tnet | 3,446 | 3,273 |
| Reinsurance\trecoverables,\tnet | 4,768 | 4,862 |
| Deferred\tpolicy\tacquisition\tcosts\tand\tpresent\tvalue\tof\tfuture\tprofits | 8,744 | 9,857 |
| Deferred\tincome\ttaxes,\tnet | 1,398 | 3,725 |
| Goodwill | 1,006 | 1,051 |
| Property\tand\tequipment,\tnet | 1,029 | 1,150 |
| Other\tassets | 2,274 | 1,629 |
| Separate\taccount\tassets | 143,870 | 159,742 |
| Total\tassets | $304,064 | $318,346 |
| Liabilities |  |  |
| Reserve\tfor\tfuture\tpolicy\tbenefits\tand\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | $41,016 | $39,598 |
| Other\tpolicyholder\tfunds\tand\tbenefits\tpayable | 45,612 | 44,550 |
| Other\tpolicyholder\tfunds\tand\tbenefits\tpayable\t—\tinternational\tvariable\tannuities | 30,461 | 32,793 |
| Unearned\tpremiums | 5,222 | 5,176 |
| Short-term\tdebt | — | 400 |
| Long-term\tdebt | 6,216 | 6,207 |
| Consumer\tnotes | 314 | 382 |
| Other\tliabilities\t(includes\tvariable\tinterest\tentity\tliabilities\tof\t$471\tand\t$394) | 8,443 | 9,187 |
| Separate\taccount\tliabilities | 143,870 | 159,742 |
| Total\tliabilities | 281,154 | 298,035 |
| Commitments\tand\tContingencies\t(Note\t12) |  |  |
| Stockholders'\tEquity |  |  |
| liquidation\tpreference\t$1,000\tper\tshare | 556 | 556 |
| 469,754,771\tshares\tissued | 5 | 5 |
| Additional\tpaid-in\tcapital | 10,391 | 10,448 |
| Retained\tearnings | 12,519 | 12,077 |
| Treasury\tstock,\tat\tcost\t—\t27,211,115\tand\t25,205,283\tshares | (1,718) | (1,774) |
| Accumulated\tother\tcomprehensive\tincome\t(loss),\tnet\tof\ttax | 1,157 | (1,001) |
| Total\tstockholders'\tequity | 22,910 | 20,311 |
| Total\tliabilities\tand\tstockholders'\tequity | $304,064 | $318,346 |

# Consolidated	Statements	of	Changes	in	Stockholders'	Equity

| (In	millions,	except	for	share	data) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Preferred\tStock,\tat\tbeginning\tof\tperiod | $556 | $2,960 | $— |
| Issuance\tof\tmandatory\tconvertible\tpreferred\tstock | — | 556 | — |
| Accelerated\taccretion\tof\tdiscount\tfrom\tredemption\tof\tpreferred\tstock\tissued |  |  |  |
| to\tU.S.\tTreasury | — | 440 | — |
| Issuance\t(redemption)\tof\tpreferred\tstock\tto\tthe\tU.S.\tTreasury | — | (3,400) | 2,920 |
| Accretion\tof\tpreferred\tstock\tdiscount\ton\tissuance\tto\tU.S.\tTreasury | — | — | 40 |
| Preferred\tStock,\tat\tend\tof\tperiod | 556 | 556 | 2,960 |
| Common\tStock | 5 | 5 | 4 |
| Additional\tPaid-in\tCapital,\tat\tbeginning\tof\tperiod | 10,448 | 8,985 | 7,569 |
| Issuance\tof\tcommon\tshares\tunder\tpublic\toffering | — | 1,599 | — |
| Issuance\tof\tshares\tunder\tincentive\tand\tstock\tcompensation\tplans | (50) | (130) | (126) |
| Tax\texpense\ton\temployee\tstock\toptions\tand\tawards | (7) | (6) | (11) |
| Issuance\tof\tshares\tunder\tdiscretionary\tequity\tissuance\tplan | — | — | 887 |
| Issuance\tof\twarrants\tto\tU.S.\tTreasury | — | — | 480 |
| Reclassification\tof\twarrants\tfrom\tother\tliabilities\tto\tequity\tand\textension\tof |  |  |  |
| warrants'\tterm | — | — | 186 |
| Additional\tPaid-in\tCapital,\tat\tend\tof\tperiod | 10,391 | 10,448 | 8,985 |
| Retained\tEarnings,\tat\tbeginning\tof\tperiod,\tbefore\tcumulative\teffect\tof |  |  |  |
| accounting\tchange,\tnet\tof\ttax | 12,077 | 11,164 | 11,336 |
| Cumulative\teffect\tof\taccounting\tchange,\tnet\tof\ttax | — | 26 | — |
| Retained\tEarnings,\tat\tbeginning\tof\tperiod,\tas\tadjusted | 12,077 | 11,190 | 11,336 |
| Net\tincome\t(loss) | 662 | 1,680 | (887) |
| Cumulative\teffect\tof\taccounting\tchanges,\tnet\tof\ttax | — | (194) | 912 |
| Accelerated\taccretion\tof\tdiscount\tfrom\tredemption\tof\tpreferred\tstock\tissued |  |  |  |
| to\tU.S.\tTreasury | — | (440) | — |
| Dividends\ton\tpreferred\tstock | (42) | (75) | (87) |
| Dividends\tdeclared\ton\tcommon\tstock | (178) | (84) | (70) |
| Accretion\tof\tpreferred\tstock\tdiscount\ton\tissuance\tto\tU.S.\tTreasury | — | — | (40) |
| Retained\tEarnings,\tat\tend\tof\tperiod | 12,519 | 12,077 | 11,164 |
| Treasury\tStock,\tat\tCost,\tat\tbeginning\tof\tperiod | (1,774) | (1,936) | (2,120) |
| Issuance\tof\tshares\tunder\tincentive\tand\tstock\tcompensation\tplans\tfrom |  |  |  |
| treasury\tstock | 115 | 165 | 187 |
| Treasury\tstock\tacquired | (51) | — | — |
| Return\tof\tshares\tunder\tincentive\tand\tstock\tcompensation\tplans\tto\ttreasury |  |  |  |
| stock | (8) | (3) | (3) |
| Treasury\tStock,\tat\tCost,\tat\tend\tof\tperiod | (1,718) | (1,774) | (1,936) |
| Accumulated\tOther\tComprehensive\tLoss,\tNet\tof\tTax,\tat\tbeginning\tof\tperiod | (1,001) | (3,312) | (7,520) |
| Cumulative\teffect\tof\taccounting\tchanges,\tnet\tof\ttax | — | 194 | (912) |
| Total\tother\tcomprehensive\tincome | 2,158 | 2,117 | 5,120 |
| Accumulated\tOther\tComprehensive\tIncome\t(Loss),\tNet\tof\tTax,\tat\tend\tof\nperiod | 1,157 | (1,001) | (3,312) |
| Noncontrolling\tInterest,\tat\tbeginning\tof\tperiod | — | 29 | 92 |
| Recognition\tof\tnoncontrolling\tinterest\tin\tother\tliabilities | — | (29) | — |
| Change\tin\tnoncontrolling\tinterest\townership | — | — | (56) |
| Noncontrolling\tloss | — | — | (7) |
| Noncontrolling\tInterest,\tat\tend\tof\tperiod | — | — | 29 |
| Total\tStockholders'\tEquity | $22,910 | $20,311 | $17,894 |
| Preferred\tShares\tOutstanding,\tat\tbeginning\tof\tperiod\t(in\tthousands) | 575 | 3,400 | 6,048 |
| Redemption\tof\tpreferred\tshares\tissued\tto\tthe\tU.S.\tTreasury | — | (3,400) | — |
| Issuance\tof\tmandatory\tconvertible\tpreferred\tshares | — | 575 | — |
| Conversion\tof\tpreferred\tto\tcommon\tshares | — | — | (6,048) |
| Issuance\tof\tshares\tto\tU.S.\tTreasury | — | — | 3,400 |
| Preferred\tShares\tOutstanding,\tat\tend\tof\tperiod | 575 | 575 | 3,400 |
| Common\tShares\tOutstanding,\tat\tbeginning\tof\tperiod\t(in\tthousands) | 444,549 | 383,007 | 300,579 |
| Issuance\tof\tshares\tunder\tpublic\toffering | — | 59,590 | — |
| Issuance\tof\tshares\tunder\tincentive\tand\tstock\tcompensation\tplans | 1,476 | 2,095 | 2,356 |
| Return\tof\tshares\tunder\tincentive\tand\tstock\tcompensation\tplans\tand\tother\tto |  |  |  |
| treasury\tstock | (261) | (143) | (204) |
| Treasury\tstock\tacquired | (3,225) | — | (27) |
| Conversion\tof\tpreferred\tto\tcommon\tshares | — | — | 24,194 |
| Issuance\tof\tshares\tunder\tdiscretionary\tequity\tissuance\tplan | — | — | 56,109 |
| Common\tShares\tOutstanding,\tat\tend\tof\tperiod | 442,539 | 444,549 | 383,007 |

# Consolidated	Statements	of	Cash	Flows

| (In	millions) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities |  |  |  |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |
| Adjustments\tto\treconcile\tnet\tincome\t(loss)\tto\tnet\tcash\tprovided\tby\toperating |  |  |  |
| activities |  |  |  |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts\tand\tpresent\tvalue\tof\tfuture |  |  |  |
| profits | 3,427 | 2,544 | 4,267 |
| Additions\tto\tdeferred\tpolicy\tacquisition\tcosts\tand\tpresent\tvalue\tof\tfuture |  |  |  |
| profits | (2,608) | (2,648) | (2,853) |
| Change\tin\treserve\tfor\tfuture\tpolicy\tbenefits\tand\tunpaid\tlosses\tand\tloss |  |  |  |
| adjustment\texpenses\tand\tunearned\tpremiums | 1,451 | (93) | 558 |
| Change\tin\treinsurance\trecoverables | (31) | 353 | 236 |
| Change\tin\treceivables\tand\tother\tassets | (211) | 437 | 380 |
| Change\tin\tpayables\tand\taccruals | (491) | (612) | (1,271) |
| Change\tin\taccrued\tand\tdeferred\tincome\ttaxes | (103) | 561 | (246) |
| Net\trealized\tcapital\tlosses | 24 | 554 | 2,010 |
| Net\treceipts\t(disbursements)\tfrom\tinvestment\tcontracts\trelated\tto |  |  |  |
| policyholder\tfunds\t—\tinternational\tvariable\tannuities | (2,332) | 497 | 1,498 |
| Net\t(increase)\tdecrease\tin\tequity\tsecurities,\ttrading | 2,321 | (499) | (1,501) |
| Depreciation\tand\tamortization | 668 | 596 | 470 |
| Goodwill\timpairment | 30 | 153 | 32 |
| Other\toperating\tactivities,\tnet | (533) | (214) | 281 |
| Net\tcash\tprovided\tby\toperating\tactivities | 2,274 | 3,309 | 2,974 |
| Investing\tActivities |  |  |  |
| Proceeds\tfrom\tthe\tsale/maturity/prepayment\tof: |  |  |  |
| Fixed\tmaturities,\tavailable-for-sale | 37,914 | 49,155 | 53,538 |
| Fixed\tmaturities,\tfair\tvalue\toption | 37 | 20 | — |
| Equity\tsecurities,\tavailable-for-sale | 239 | 325 | 949 |
| Mortgage\tloans | 515 | 1,723 | 629 |
| Partnerships | 237 | 367 | 391 |
| Payments\tfor\tthe\tpurchase\tof: |  |  |  |
| Fixed\tmaturities,\tavailable-for-sale | (37,627) | (50,807) | (54,346) |
| Fixed\tmaturities,\tfair\tvalue\toption | (664) | (75) | — |
| Equity\tsecurities,\tavailable-for-sale | (270) | (163) | (307) |
| Mortgage\tloans | (1,800) | (291) | (233) |
| Partnerships | (784) | (348) | (274) |
| Proceeds\tfrom\tbusiness\tsold | 278 | 241 | (7) |
| Derivatives,\tnet | 720 | (338) | (561) |
| Change\tin\tpolicy\tloans,\tnet | 180 | (7) | 34 |
| Change\tin\tpayables\tfor\tcollateral\tunder\tsecurities\tlending,\tnet | — | (46) | (2,925) |
| Other\tinvesting\tactivities,\tnet | (157) | (190) | (11) |
| Net\tcash\tused\tfor\tinvesting\tactivities | (1,182) | (434) | (3,123) |
| Financing\tActivities |  |  |  |
| Deposits\tand\tother\tadditions\tto\tinvestment\tand\tuniversal\tlife-type\tcontracts | 11,531 | 12,602 | 14,239 |
| Withdrawals\tand\tother\tdeductions\tfrom\tinvestment\tand\tuniversal\tlife-type |  |  |  |
| contracts | (21,022) | (22,476) | (24,341) |
| Net\ttransfers\tfrom\tseparate\taccounts\trelated\tto\tinvestment\tand\tuniversal\tlife- |  |  |  |
| type\tcontracts | 9,843 | 8,409 | 7,203 |
| Proceeds\tfrom\tissuance\tof\tlong-term\tdebt | — | 1,090 | — |
| Repayments\tat\tmaturity\tfor\tlong-term\tdebt\tand\tpayments\ton\tcapital\tlease |  |  |  |
| obligations | (405) | (343) | (24) |
| Change\tin\tcommercial\tpaper | — | — | (375) |
| Repayments\tat\tmaturity\tor\tsettlement\tof\tconsumer\tnotes | (68) | (754) | (74) |
| Net\tproceeds\tfrom\tissuance\tof\tmandatory\tconvertible\tpreferred\tstock | — | 556 | — |
| Net\tproceeds\tfrom\tissuance\tof\tcommon\tshares\tunder\tpublic\toffering | — | 1,600 | — |
| Redemption\tof\tpreferred\tstock\tissued\tto\tthe\tU.S.\tTreasury | — | (3,400) | — |
|  | — | — | 3,400 |
| Net\tproceeds\tfrom\tissuance\tof\tcommon\tshares\tunder\tdiscretionary\tequity |  |  |  |
| issuance\tplan | — | — | 887 |
| Proceeds\tfrom\tnet\tissuance\tof\tshares\tunder\tincentive\tand\tstock |  |  |  |
| compensation\tplans\tand\texcess\ttax\tbenefit | 10 | 25 | 17 |
| Treasury\tstock\tacquired | (46) | — | — |
| Dividends\tpaid\ton\tpreferred\tstock | (42) | (85) | (73) |
| Dividends\tpaid\ton\tcommon\tstock | (153) | (85) | (149) |
| Changes\tin\tbank\tdeposits\tand\tpayments\ton\tbank\tadvances | (257) | (94) | (187) |
| Net\tcash\tprovided\tby\t(used\tfor)\tfinancing\tactivities | (609) | (2,955) | 523 |
| Foreign\texchange\trate\teffect\ton\tcash | 36 | — | (43) |
| Net\tincrease\t(decrease)\tin\tcash | 519 | (80) | 331 |
| Cash\t—\tbeginning\tof\tperiod | 2,062 | 2,142 | 1,811 |
| Cash\t—\tend\tof\tperiod | $2,581 | $2,062 | $2,142 |
| Supplemental\tDisclosure\tof\tCash\tFlow\tInformation |  |  |  |
| Income\ttaxes\tpaid\t(received) | $179 | $308 | $(243) |
| Interest\tpaid | $501 | $485 | $475 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1.	Basis	of	Presentation	and	Accounting	Policies

# Basis	of	Presentation

The	 Hartford	 Financial	 Services	 Group,	 Inc.	 is	 a	 holding	 company	 for	 insurance	 and	 financial	 services	 subsidiaries	 that	 provide investment	 products	 and	 life	 and	 property	 and	 casualty	 insurance	 to	 both	 individual	 and	 business	 customers	 in	 the	 United	 States (collectively,	"The	Hartford",	the	"Company",	"we"	or	"our").	Also,	The	Hartford	continues	to	administer	business	previously	sold	in Japan	and	the	U.K.

The	Consolidated	Financial	Statements	have	been	prepared	on	the	basis	of	accounting	principles	generally	accepted	in	the	United	States of	America	("U.S.	GAAP"),	which	differ	materially	from	the	accounting	practices	prescribed	by	various	insurance	regulatory	authorities.

# Consolidation

The	Consolidated	Financial	Statements	include	the	accounts	of	The	Hartford	Financial	Services	Group,	Inc.,	companies	in	which	the Company	directly	or	indirectly	has	a	controlling	financial	interest	and	those	variable	interest	entities	("VIEs")	in	which	the	Company	is required	to	consolidate.	Entities	in	which	the	Company	has	significant	influence	over	the	operating	and	financing	decisions	but	are	not required	to	consolidate	are	reported	using	the	equity	method.	For	further	discussions	on	VIEs	see	Note	5	of	the	Notes	to	Consolidated Financial	Statements.	Material	intercompany	transactions	and	balances	between	The	Hartford	and	its	subsidiaries	and	affiliates	have	been eliminated.

# Discontinued	Operations

The	results	of	operations	of	a	component	of	the	Company	that	either	has	been	disposed	of	or	is	classified	as	held-for-sale	are	reported	in discontinued	operations	if	the	operations	and	cash	flows	of	the	component	have	been	or	will	be	eliminated	from	the	ongoing	operations	of the	Company	as	a	result	of	 the	disposal	 transaction	and	 the	Company	will	not	have	any	significant	continuing	 involvement	 in	 the operations	of	the	component	after	the	disposal	transaction.

The	Company	is	presenting	the	operations	of	certain	businesses	that	meet	the	criteria	for	reporting	as	discontinued	operations.	Amounts for	prior	periods	have	been	retrospectively	reclassified.	See	Note	20	of	the	Notes	to	Consolidated	Financial	Statements	for	information	on the	specific	subsidiaries	and	related	impacts.

# Use	of	Estimates

The	preparation	of	financial	statements,	in	conformity	with	U.S.	GAAP,	requires	management	to	make	estimates	and	assumptions	that affect	the	reported	amounts	of	assets	and	liabilities	and	the	disclosure	of	contingent	assets	and	liabilities	at	the	date	of	the	financial statements	 and	 the	 reported	 amounts	 of	 revenues	 and	 expenses	 during	 the	 reporting	 period.	Actual	 results	 could	 differ	 from	 those estimates.

The	most	significant	estimates	include	those	used	in	determining	property	and	casualty	insurance	product	reserves,	net	of	reinsurance; estimated	gross	profits	used	in	the	valuation	and	amortization	of	assets	and	liabilities	associated	with	variable	annuity	and	other	universal life-type	 contracts;	 evaluation	 of	 other-than-temporary	 impairments	 on	 available-for-sale	 securities	 and	 valuation	 allowances	 on investments;	living	benefits	required	to	be	fair	valued;	goodwill	impairment;	valuation	of	investments	and	derivative	instruments;	pension and	other	postretirement	benefit	obligations;	valuation	allowance	on	deferred	tax	assets;	and	contingencies	relating	to	corporate	litigation and	regulatory	matters.	Certain	of	these	estimates	are	particularly	sensitive	to	market	conditions,	and	deterioration	and/or	volatility	in	the worldwide	debt	or	equity	markets	could	have	a	material	impact	on	the	Consolidated	Financial	Statements.

The	Company	maintains	a	retail	mutual	fund	operation	whereby	the	Company,	through	wholly-owned	subsidiaries,	provides	investment management	and	administrative	services	to	The	Hartford	Mutual	Funds,	Inc.	and	The	Hartford	Mutual	Funds	II,	Inc.	(collectively,	"mutual funds"),	consisting	of	57	non-proprietary	mutual	funds,	as	of	December	31,	2011.	The	Company	charges	fees	to	these	mutual	funds,	which are	recorded	as	revenue	by	the	Company.	These	mutual	funds	are	registered	with	the	Securities	and	Exchange	Commission	("SEC")	under the	Investment	Company	Act	of	1940.	The	mutual	funds	are	owned	by	the	shareholders	of	those	funds	and	not	by	the	Company.	In	the fourth	 quarter	 of	 2011,	 the	 Company	 entered	 into	 a	 preferred	 partnership	 agreement	 with	Wellington	 Management	 Company,	 LLP ("Wellington	Management")	and	announced	that	Wellington	Management	will	serve	as	the	sole	sub-advisor	for	The	Hartford's	non- proprietary	mutual	funds,	including	equity	and	fixed	income	funds,	pending	a	fund-by-fund	review	by	The	Hartford's	mutual	funds	board of	directors.	As	of	December	31,	2011,	Wellington	Management	served	as	the	sub-advisor	for	29	of	The	Hartford's	non-proprietary mutual	funds	and	has	been	the	primary	manager	for	the	Company's	equity	funds.

The	mutual	funds	are	owned	by	the	shareholders	of	those	funds	and	not	by	the	Company.	As	such,	the	mutual	fund	assets	and	liabilities and	related	investment	returns	are	not	reflected	in	the	Company's	Consolidated	Financial	Statements	since	they	are	not	assets,	liabilities and	operations	of	the	Company

# Reclassifications

Certain	reclassifications	have	been	made	to	prior	year	financial	information	to	conform	to	the	current	year	presentation.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	(continued)

# 1.	Basis	of	Presentation	and	Accounting	Policies	(continued)

# Future	Adoption	of	New	Accounting	Standards

# Accounting	for	Costs	Associated	with	Acquiring	or	Renewing	Insurance	Contracts

In	October	2010,	the	FASB	issued	a	standard	clarifying	the	definition	of	acquisition	costs	that	are	eligible	for	deferral.	Acquisition	costs are	to	include	only	those	costs	that	are	directly	related	to	the	successful	acquisition	or	renewal	of	insurance	contracts;	incremental	direct costs	of	contract	acquisition	that	are	incurred	in	transactions	with	either	independent	third	parties	or	employees;	and	advertising	costs meeting	the	capitalization	criteria	for	direct-response	advertising.

This	standard	is	effective	for	fiscal	years	beginning	after	December	15,	2011,	and	interim	periods	within	those	years.	This	standard	may be	applied	prospectively	upon	the	date	of	adoption,	with	retrospective	application	permitted,	but	not	required.	Early	adoption	as	of	the beginning	of	a	fiscal	year	is	permitted.

The	Company	elected	to	adopt	this	standard	retrospectively	on	January	1,	2012,	resulting	in	a	write	down	of	the	Company's	deferred acquisition	costs	relating	to	those	costs	which	no	longer	meet	the	revised	standard	as	summarized	above.	The	Company	estimates	the cumulative	effect	of	the	retrospective	adoption	of	this	standard,	when	reflected	in	future	financial	statements,	will	reduce	stockholders' equity	as	of	December	31,	2011	by	approximately	$1.5	billion,	after-tax	and	increase	2011	net	income	by	approximately	$45.	Excluding the	effects	of	the	DAC	Unlock	and	amortization	related	to	realized	gains	and	losses,	the	estimated	effect	would	be	a	decrease	to	2011	net income	of	approximately	$10.	Future	income	statement	impacts	will	reflect	higher	non-deferrable	expenses	and	lower	amortization	due	to the	lower	DAC	balance,	before	the	effect	of	any	DAC	Unlock	and	amortization	related	to	realized	gains	and	losses.

# Significant	Accounting	Policies

The	Company's	significant	accounting	policies	are	described	below	or	are	referenced	below	to	the	applicable	Note	where	the	description is	included.

# Revenue	Recognition

Property	and	casualty	insurance	premiums	are	earned	on	a	pro	rata	basis	over	the	lives	of	the	policies	and	include	accruals	for	ultimate premium	revenue	anticipated	under	auditable	and	retrospectively	rated	policies.	Unearned	premiums	represent	the	premiums	applicable	to the	unexpired	terms	of	policies	in	force.	An	estimated	allowance	for	doubtful	accounts	is	recorded	on	the	basis	of	periodic	evaluations	of balances	due	from	insureds,	management's	experience	and	current	economic	conditions.	The	Company	charges	off	any	balances	that	are determined	 to	 be	 uncollectible.	 The	 allowance	 for	 doubtful	 accounts	 included	 in	 premiums	 receivable	 and	 agents'	 balances	 in	 the Consolidated	Balance	Sheets	was	$119	as	of	December	31,	2011	and	2010.

Traditional	life	and	group	disability	products	premiums	are	generally	recognized	as	revenue	when	due	from	policyholders.

Fee	income	for	universal	life-type	contracts	consists	of	policy	charges	for	policy	administration,	cost	of	insurance	charges	and	surrender charges	assessed	against	policyholders'	account	balances	and	are	recognized	in	the	period	in	which	services	are	provided.	The	amounts collected	from	policyholders	for	investment	and	universal	life-type	contracts	are	considered	deposits	and	are	not	included	in	revenue. Unearned	revenue	reserves,	representing	amounts	assessed	as	consideration	for	origination	of	a	universal	life-type	contract,	are	deferred and	recognized	in	income	over	the	period	benefited,	generally	in	proportion	to	estimated	gross	profits.

Other	revenue	consists	primarily	of	revenues	associated	with	the	Company's	servicing	businesses.

# Dividends	to	Policyholders

Policyholder	dividends	are	paid	to	certain	property	and	casualty	and	life	insurance	policyholders.	Policies	that	receive	dividends	are referred	 to	 as	 participating	 policies.	 Such	 dividends	 are	 accrued	 using	 an	 estimate	 of	 the	 amount	 to	 be	 paid	 based	 on	 underlying contractual	obligations	under	policies	and	applicable	state	laws.

Net	written	premiums	for	participating	property	and	casualty	insurance	policies	represented	9%,	8%	and	8%	of	total	net	written	premiums for	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.	Participating	dividends	to	policyholders	were	$18,	$5	and	$10	for the	years	ended	December	31,	2011,	2010	and	2009,	respectively.

Total	participating	policies	in-force	represented	1%	of	the	total	life	insurance	policies	in-force	as	of	December	31,	2011,	2010,	and	2009. Dividends	to	policyholders	were	$17,	$21	and	$13	for	the	years	ended	December	31,	2011,	2010,	and	2009,	respectively.	There	were	no additional	amounts	of	income	allocated	to	participating	policyholders.	If	limitations	exist	on	the	amount	of	net	income	from	participating life	insurance	contracts	that	may	be	distributed	to	stockholder's,	the	policyholder's	share	of	net	income	on	those	contracts	that	cannot	be distributed	is	excluded	from	stockholder's	equity	by	a	charge	to	operations	and	a	credit	to	a	liability.

Cash	represents	cash	on	hand	and	demand	deposits	with	banks	or	other	financial	institutions.

# Property	and	Equipment

Property	and	equipment	is	carried	at	cost	net	of	accumulated	depreciation.	Depreciation	is	based	on	the	estimated	useful	lives	of	the various	classes	of	property	and	equipment	and	is	determined	principally	on	the	straight-line	method.	Accumulated	depreciation	was $2.1	billion	and	$1.9	billion	as	of	December	31,	2011	and	2010,	respectively.	Depreciation	expense	was	$216,	$276,	and	$253	for	the years	ended	December	31,	2011,	2010,	and	2009,	respectively.

# Other	Policyholder	Funds	and	Benefits	Payable

Other	policyholder	funds	and	benefits	payable	consist	of	universal	life-type	contracts	and	investment	contracts.

Universal	 life-type	 contracts	 consist	 of	 fixed	 and	 variable	 annuities,	 401(k),	 certain	 governmental	 annuities,	 private	 placement	 life insurance	("PPLI"),	variable	universal	life	insurance,	universal	life	insurance	and	interest	sensitive	whole	life	insurance.	The	liability	for universal	life-type	contracts	is	equal	to	the	balance	that	accrues	to	the	benefit	of	the	policyholders	as	of	the	financial	statement	date (commonly	referred	to	as	the	account	value),	including	credited	interest,	amounts	that	have	been	assessed	to	compensate	the	Company	for services	 to	 be	 performed	 over	 future	 periods,	 and	 any	 amounts	 previously	 assessed	 against	 policyholders	 that	 are	 refundable	 on termination	of	the	contract.

Investment	contracts	consist	of	institutional	and	governmental	products,	without	life	contingencies,	including	funding	agreements,	certain structured	settlements	and	guaranteed	investment	contracts.	The	liability	for	investment	contracts	is	equal	to	the	balance	that	accrues	to	the benefit	of	the	contract	holder	as	of	the	financial	statement	date,	which	includes	the	accumulation	of	deposits	plus	credited	interest,	less withdrawals	and	amounts	assessed	 through	 the	financial	statement	date.	Contract	holder	funds	 include	funding	agreements	held	by Variable	Interest	Entities	issuing	medium-term	notes.

# Foreign	Currency	Translation

Foreign	currency	translation	gains	and	losses	are	reflected	in	stockholders'	equity	as	a	component	of	accumulated	other	comprehensive income	(loss).	The	Company's	foreign	subsidiaries'	balance	sheet	accounts	are	translated	at	the	exchange	rates	in	effect	at	each	year	end and	income	statement	accounts	are	translated	at	the	average	rates	of	exchange	prevailing	during	the	year.	The	national	currencies	of	the international	operations	are	generally	their	functional	currencies.

# 2.	Earnings	(Loss)	per	Share

The	following	tables	present	a	reconciliation	of	net	income	(loss)	and	shares	used	in	calculating	basic	earnings	(loss)	per	common	share	to those	used	in	calculating	diluted	earnings	(loss)	per	common	share.

| (In	millions,	except	for	per	share	data) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Earnings |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax | $576 | $1,744 | $(883) |
| Less:\tPreferred\tstock\tdividends\tand\taccretion\tof\tdiscount | 42 | 515 | 127 |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax,\tavailable\tto |  |  |  |
| common\tshareholders | 534 | 1,229 | (1,010) |
| Add:\tDilutive\teffect\tof\tpreferred\tstock\tdividends | — | 33 | — |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax,\tavailable\tto\ncommon\tshareholders\tand\tassumed\tconversion\tof\tpreferred\tshares | $534 | $1,262 | $(1,010) |
| Income\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | $86 | $(64) | $(4) |
| Net\tincome |  |  |  |
| Net\tincome | $662 | $1,680 | $(887) |
| Less:\tPreferred\tstock\tdividends\tand\taccretion\tof\tdiscount | 42 | 515 | 127 |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders | 620 | 1,165 | (1,014) |
| Add:\tDilutive\teffect\tof\tpreferred\tstock\tdividends | — | 33 | — |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders\tand\tassumed |  |  |  |
| conversion\tof\tpreferred\tshares | $620 | $1,198 | $(1,014) |
| Shares |  |  |  |
| Weighted\taverage\tcommon\tshares\toutstanding,\tbasic | 445.0 | 431.5 | 346.3 |
| Dilutive\teffect\tof\twarrants | 31.9 | 32.3 | — |
| Dilutive\teffect\tof\tstock\tcompensation\tplans | 1.1 | 1.3 | — |
| Dilutive\teffect\tof\tmandatory\tconvertible\tpreferred\tshares | — | 16.4 | — |
| Weighted\taverage\tshares\toutstanding\tand\tdilutive\tpotential\tcommon |  |  |  |
| shares | 478.0 | 481.5 | 346.3 |
| Earnings\t(loss)\tper\tcommon\tshare |  |  |  |
| Basic |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax,\tavailable\tto\tcommon |  |  |  |
| shareholders | $1.20 | $2.85 | $(2.92) |
| Income\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 0.19 | (0.15) | (0.01) |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders | $1.39 | $2.70 | $(2.93) |
| Diluted |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations,\tnet\tof\ttax,\tavailable\tto\tcommon |  |  |  |
| shareholders | $1.12 | $2.62 | $(2.92) |
| Income\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | 0.18 | (0.13) | (0.01) |
| Net\tincome\t(loss)\tavailable\tto\tcommon\tshareholders | $1.30 | $2.49 | $(2.93) |

# 2.	Earnings	(Loss)	per	Share	(continued)

Basic	earnings	per	share	is	computed	based	on	the	weighted	average	number	of	common	shares	outstanding	during	the	year.	Diluted earnings	per	share	includes	the	dilutive	effect	of	warrants,	stock	compensation	plans,	and	assumed	conversion	of	preferred	shares	to common	using	the	treasury	stock	method.	Contingently	issuable	shares	are	included	for	the	number	of	shares	issuable	assuming	the	end	of the	reporting	period	was	the	end	of	the	contingency	period,	if	dilutive.

Under	the	treasury	stock	method	for	the	warrants	issued	as	a	result	of	the	Company's	participation	in	the	Capital	Purchase	Program,	see Note	15,	exercise	shall	be	assumed	at	the	beginning	of	the	period.	The	proceeds	from	exercise	of	$9.699	per	share	in	2011	and	9.790	per share	in	2010	and	2009	shall	be	assumed	to	be	used	to	purchase	common	shares	at	the	average	market	price	during	the	period.

Under	the	treasury	stock	method	for	the	warrants	issued	to	Allianz,	see	Note	15,	exercise	shall	be	assumed	at	the	beginning	of	the	period. The	proceeds	from	exercise	of	$25.23	in	2011,	$25.23	in	2010	and	$25.25	in	2009	per	share	shall	be	assumed	to	be	used	to	purchase common	shares	at	the	average	market	price	during	the	period.

Under	the	treasury	stock	method	for	stock	compensation	plans,	shares	are	assumed	to	be	issued	and	then	reduced	for	the	number	of	shares repurchaseable	with	theoretical	proceeds	at	the	average	market	price	for	the	period.	Theoretical	proceeds	for	the	stock	compensation	plans include	option	exercise	price	payments,	unamortized	stock	compensation	expense	and	tax	benefits	realized	in	excess	of	the	tax	benefit recognized	in	net	income.	The	difference	between	the	number	of	shares	assumed	issued	and	number	of	shares	purchased	represents	the dilutive	shares.	Upon	exercise	of	outstanding	options	or	vesting	of	other	stock	compensation	plan	awards,	the	additional	shares	issued	and outstanding	are	included	in	the	calculation	of	the	Company's	weighted	average	shares	from	the	date	of	exercise	or	vesting.

Under	the	if-converted	method	for	mandatory	convertible	preferred	stock,	see	Note	15,	the	conversion	to	common	shares	is	assumed	if	the inclusion	of	 these	shares	and	 the	related	dividend	adjustment	are	dilutive	 to	 the	earnings	per	share	calculation.	For	 the	year	ended December	31,	2011,	20.7	million	shares	and	the	related	dividend	adjustment	would	have	been	antidilutive	to	the	earnings	per	share calculations	and	 therefore	are	excluded.	Assuming	 the	 impact	of	 the	mandatory	convertible	preferred	shares	was	dilutive,	weighted average	common	shares	outstanding	and	dilutive	potential	common	shares	would	have	totaled	498.7	million	shares.	For	the	year	ended December	31,	2010,	these	shares	and	the	related	dividend	adjustment	are	included	in	the	diluted	earnings	per	share	calculation.

As	a	result	of	the	net	loss	in	the	year	ended	December	31,	2009,	the	Company	used	basic	weighted	average	common	shares	outstanding	in the	 calculation	 of	 diluted	 loss	 per	 share,	 since	 the	 inclusion	 of	 shares	 for	 warrants	 of	 14.6	 million,	 stock	 compensation	 plans	 of 0.9	million,	would	have	been	antidilutive	to	the	earnings	per	share	calculation.	In	the	absence	of	the	net	loss,	weighted	average	common shares	outstanding	and	dilutive	potential	common	shares	would	have	totaled	361.8	million	for	the	year	ended	December	31,	2009.

# 3.	Segment	Information

The	Company	is	organized	into	four	divisions:	Commercial	Markets,	Consumer	Markets,	Wealth	Management	and	Runoff	Operations.	In 2011,	the	Runoff	Operations	division	was	formed	to	reflect	the	manner	in	which	the	Company	is	currently	organized	for	purposes	of making	 operating	 decisions	 and	 assessing	 performance.	As	 a	 result,	 the	 Company	 conducts	 business	 principally	 in	 nine	 reporting segments,	and	segment	data	for	prior	reporting	periods	has	been	adjusted	accordingly.

The	Company's	reporting	segments,	as	well	as	the	Corporate	category,	are	as	follows:

Property	 &	 Casualty	 Commercial	 provides	 workers'	 compensation,	 property,	 automobile,	 marine,	 livestock,	 liability	 and	 umbrella coverages	primarily	throughout	the	United	States	("U.S."),	along	with	a	variety	of	customized	insurance	products	and	risk	management services	including	professional	liability,	fidelity,	surety,	and	specialty	casualty	coverages.

Group	 Benefits	 provides	 employers,	 associations,	 affinity	 groups	 and	 financial	 institutions	 with	 group life,	 accident	 and	 disability coverage,	along	with	other	products	and	services,	including	voluntary	benefits,	and	group	retiree	health.

Consumer	 Markets	 provides	 standard	 automobile,	 homeowners	 and	 home-based	 business	 coverages	 to	 individuals	 across	 the	 U.S., including	a	special	program	designed	exclusively	for	members	of	AARP.	Consumer	Markets	also	operates	a	member	contact	center	for health	insurance	products	offered	through	the	AARP	Health	program.

Retirement	Plans	provides	products	and	services	to	corporations	pursuant	to	Section	401(k)	of	the	Internal	Revenue	Code	of	1986,	as amended	(the	"Code"),	and	products	and	services	to	municipalities	and	not-for-profit	organizations	under	Sections	457	and	403(b)	of	the Code,	collectively	referred	to	as	government	plans.

Mutual	 Funds	 offers	 retail	 mutual	 funds,	 investment-only	 mutual	 funds	 and	 college	 savings	 plans	 under	 Section	 529	 of the	 Code (collectively	referred	to	as	non-proprietary)	and	proprietary	mutual	fund	supporting	insurance	products	issued	by	The	Hartford.

# 3.	Segment	Information	(continued)

Life	Other	Operations	consists	of	the	international	annuity	business	of	the	former	Global	Annuity	reporting	segment	as	well	as	certain product	 offerings	 previously	 included	 in	 the	 former	 Global	Annuity	 and	 Life	 Insurance	 reporting	 segments.	 Life	 Other	 Operations encompasses	the	administration	of	investment	retirement	savings	and	other	insurance	and	savings	products	to	individuals	and	groups outside	of	the	U.S.,	primarily	in	Japan	and	Europe,	as	well	as	institutional	annuity	products	and	private	placement	life	insurance.

Property	 &	 Casualty	 Other	 Operations,	 previously	 included	 in	 the	 former	 Corporate	 and	 Other	 category,	 includes	 the	 Company's management	 of	 certain	 property	 and	 casualty	 operations	 that	 have	 discontinued	 writing	 new	 business	 and	 substantially	 all	 of	 the Company's	asbestos	and	environmental	exposures.

The	Company	includes	in	the	Corporate	category	the	Company's	debt	financing	and	related	interest	expense,	as	well	as	other	capital raising	activities;	banking	operations;	certain	fee	income	and	commission	expenses	associated	with	sales	of	non-proprietary	products	by broker-dealer	subsidiaries;	and	certain	purchase	accounting	adjustments	and	other	charges	not	allocated	to	the	segments.	The	former Corporate	and	Other	category	was	renamed	for	2011	segment	reporting	due	to	the	inclusion	of	the	Property	&	Casualty	Other	Operations as	a	separate	reporting	segment	in	the	new	Runoff	Operations	division.

# Financial	Measures	and	Other	Segment	Information

Certain	 transactions	 between	 segments	 occur	 during	 the	 year	 that	 primarily	 relate	 to	 tax	 settlements,	 insurance	 coverage,	 expense reimbursements,	services	provided,	security	transfers	and	capital	contributions.	Also,	one	segment	may	purchase	group	annuity	contracts from	another	to	fund	pension	costs	and	annuities	to	settle	casualty	claims.	In	addition,	certain	inter-segment	transactions	occur	that	relate to	interest	income	on	allocated	surplus.	Consolidated	net	investment	income	is	unaffected	by	such	transactions.

The	following	table	presents	net	income	(loss)	for	each	reporting	segment,	as	well	as	the	Corporate	category.

| Net	income	(loss) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Property\t&amp;\tCasualty\tCommercial | $528 | $995 | $899 |
| Group\tBenefits | 90 | 185 | 193 |
| Consumer\tMarkets | 5 | 143 | 140 |
| Individual\tAnnuity | (14) | 527 | (444) |
| Individual\tLife | 133 | 229 | 15 |
| Retirement\tPlans | 15 | 47 | (222) |
| Mutual\tFunds | 98 | 132 | 34 |
| Life\tOther\tOperations | 358 | (90) | (698) |
| Property\t&amp;\tCasualty\tOther\tOperations | (117) | (53) | (78) |
| Corporate | (434) | (435) | (726) |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |

The	following	table	presents	revenues	by	product	line	for	each	reporting	segment,	as	well	as	the	Corporate	category.

| Revenues | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Earned\tpremiums,\tfees,\tand\tother\tconsiderations |  |  |  |
| Property\t&amp;\tCasualty\tCommercial |  |  |  |
| Workers'\tcompensation | $2,809 | $2,387 | $2,275 |
| Property | 528 | 547 | 597 |
| Automobile | 583 | 598 | 646 |
| Package\tbusiness | 1,145 | 1,124 | 1,123 |
| Liability | 540 | 540 | 619 |
| Fidelity\tand\tsurety | 215 | 224 | 250 |
| Professional\tliability | 307 | 324 | 393 |
| Total\tProperty\t&amp;\tCasualty\tCommercial | 6,127 | 5,744 | 5,903 |
| Group\tBenefits |  |  |  |
| Group\tdisability | 1,929 | 2,004 | 1,975 |
| Group\tlife\tand\taccident | 2,024 | 2,052 | 2,126 |
| Other | 194 | 222 | 249 |
| Total\tGroup\tBenefits | 4,147 | 4,278 | 4,350 |
| Consumer\tMarkets |  |  |  |
| Automobile | 2,619 | 2,806 | 2,857 |
| Homeowners | 1,128 | 1,141 | 1,102 |
| Total\tConsumer\tMarkets\t[1] | 3,747 | 3,947 | 3,959 |
| Individual\tAnnuity |  |  |  |
| Variable\tannuity | 1,604 | 1,702 | 1,468 |
| Fixed\t/\tMVA\tand\tother\tannuity | 56 | 14 | (3) |
| Total\tIndividual\tAnnuity | 1,660 | 1,716 | 1,465 |
| Individual\tLife |  |  |  |
| Variable\tlife | 396 | 416 | 503 |
| Universal\tlife | 455 | 391 | 390 |
| Term\t/\tOther\tlife | 48 | 49 | 47 |
| Total\tIndividual\tLife | 899 | 856 | 940 |
| Retirement\tPlans |  |  |  |
| 401(k) | 332 | 318 | 286 |
| Government\tplans | 48 | 41 | 38 |
| Total\tRetirement\tPlans | 380 | 359 | 324 |
| Mutual\tFunds |  |  |  |
| Non-Proprietary | 590 | 603 | 518 |
| Proprietary | 59 | 61 | — |
| Total\tMutual\tFunds | 649 | 664 | 518 |
| Life\tOther\tOperations | 1,020 | 1,049 | 1,293 |
| Property\t&amp;\tCasualty\tOther\tOperations | — | 1 | — |
| Corporate | 209 | 189 | 219 |
| Total\tearned\tpremiums,\tfees,\tand\tother\tconsiderations | 18,838 | 18,803 | 18,971 |
| Net\tinvestment\tincome\t(loss): |  |  |  |
| Securities\tavailable-for-sale\tand\tother | 4,272 | 4,364 | 4,017 |
| Equity\tsecurities,\ttrading | (1,359) | (774) | 3,188 |
| Total\tnet\tinvestment\tincome\t(loss) | 2,913 | 3,590 | 7,205 |
| Net\trealized\tcapital\tgains\t(losses) | (145) | (611) | (2,004) |
| Other\trevenues | 253 | 267 | 261 |
| Total\trevenues | $21,859 | $22,049 | $24,433 |

| Geographical	Revenue	Information | For	the	years	ended	December	31, | For	the	years	ended	December	31, | For	the	years	ended	December	31, |
| :--- | :--- | :--- | :--- |
| Revenues | 2011 | 2010 | 2009 |
| United\tStates\tof\tAmerica | $21,561 | $22,140 | $20,189 |
| Japan | 135 | (329) | 3,816 |
| Other | 163 | 238 | 428 |
| Total\trevenues | $21,859 | $22,049 | $24,433 |

| Amortization	of	deferred	policy	acquisition	costs	and | For	the	years	ended	December	31, | For	the	years	ended	December	31, | For	the	years	ended	December	31, |
| :--- | :--- | :--- | :--- |
| present\tvalue\tof\tfuture\tprofits | 2011 | 2010 | 2009 |
| Property\t&amp;\tCasualty\tCommercial | $1,356 | $1,353 | $1,393 |
| Group\tBenefits | 55 | 61 | 61 |
| Consumer\tMarkets | 639 | 667 | 674 |
| Individual\tAnnuity | 483 | (56) | 1,339 |
| Individual\tLife | 221 | 119 | 314 |
| Retirement\tPlans | 134 | 27 | 56 |
| Mutual\tFunds | 47 | 51 | 50 |
| Life\tOther\tOperations | 492 | 305 | 370 |
| Total\tamortization\tof\tdeferred\tpolicy\tacquisition\tcosts\tand\tpresent |  |  |  |
| value\tof\tfuture\tprofits | $3,427 | $2,527 | $4,257 |

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\t(benefit) | 2011 | 2010 | 2009 |
| Property\t&amp;\tCasualty\tCommercial | $40 | $407 | $356 |
| Group\tBenefits | — | 65 | 59 |
| Consumer\tMarkets | (29) | 52 | 48 |
| Individual\tAnnuity | (274) | 124 | (481) |
| Individual\tLife | 33 | 107 | (27) |
| Retirement\tPlans | (45) | 13 | (143) |
| Mutual\tFunds | 54 | 52 | 18 |
| Life\tOther\tOperations | 150 | — | (343) |
| Property\t&amp;\tCasualty\tOther\tOperations | (74) | (40) | (51) |
| Corporate | (201) | (168) | (274) |
| Total\tincome\ttax\texpense\t(benefit) | $(346) | $612 | $(838) |

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
| Assets | 2011 | 2010 |
| Property\t&amp;\tCasualty\tCommercial | $24,692 | $23,736 |
| Group\tBenefits | 9,485 | 9,028 |
| Consumer\tMarkets | 6,513 | 6,778 |
| Individual\tAnnuity | 87,055 | 101,144 |
| Individual\tLife | 17,930 | 16,538 |
| Retirement\tPlans | 35,410 | 34,152 |
| Mutual\tFunds | 307 | 301 |
| Life\tOther\tOperations | 111,407 | 113,065 |
| Property\t&amp;\tCasualty\tOther\tOperations | 4,639 | 4,733 |
| Corporate | 6,626 | 8,871 |
| Total\tassets | $304,064 | $318,346 |

# 4.	Fair	Value	Measurements

The	following	financial	instruments	are	carried	at	fair	value	in	the	Company's	Consolidated	Financial	Statements:	fixed	maturity	and equity	securities,	available-for-sale	("AFS"),	fixed	maturities	at	fair	value	using	fair	value	option	("FVO"),	equity	securities,	trading, short-term	investments,	freestanding	and	embedded	derivatives,	separate	account	assets	and	certain	other	liabilities.

The	following	section	applies	the	fair	value	hierarchy	and	disclosure	requirements	for	the	Company's	financial	instruments	that	are	carried at	fair	value.	The	fair	value	hierarchy	prioritizes	the	inputs	in	the	valuation	techniques	used	to	measure	fair	value	into	three	broad	Levels (Level	1,	2	or	3).

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,	guaranteed	product	embedded	and	reinsurance derivatives	and	other	complex	derivative	securities.	Because	Level	3	fair	values,	by	 their	nature,	contain	one	or	more significant	 unobservable	 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.

In	many	situations,	inputs	used	to	measure	the	fair	value	of	an	asset	or	liability	position	may	fall	into	different	levels	of	the	fair	value hierarchy.	In	these	situations,	the	Company	will	determine	the	level	in	which	the	fair	value	falls	based	upon	the	lowest	level	input	that	is significant	to	the	determination	of	the	fair	value.	Transfers	of	securities	among	the	levels	occur	at	the	beginning	of	the	reporting	period. Transfers	between	Level	1	and	Level	2	were	not	material	for	the	year	ended	December	31,	2011.	In	most	cases,	both	observable	(e.g., changes	in	interest	rates)	and	unobservable	(e.g.,	changes	in	risk	assumptions)	inputs	are	used	in	the	determination	of	fair	values	that	the Company	has	classified	within	Level	3.	Consequently,	these	values	and	the	related	gains	and	losses	are	based	upon	both	observable	and unobservable	inputs.	The	Company's	fixed	maturities	included	in	Level	3	are	classified	as	such	because	these	securities	are	primarily priced	by	independent	brokers	and/or	within	illiquid	markets.

# 4.	Fair	Value	Measurements	(continued)

These	disclosures	provide	 information	as	 to	 the	extent	 to	which	 the	Company	uses	fair	value	 to	measure	financial	 instruments	and information	about	the	inputs	used	to	value	those	financial	instruments	to	allow	users	to	assess	the	relative	reliability	of	the	measurements.

The	following	tables	present	assets	and	(liabilities)	carried	at	fair	value	by	hierarchy	level.

|  | Total | Quoted	Prices	in<br>Active	Markets<br>for	Identical<br>Assets<br>(Level	1) | Significant<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) |
| :--- | :--- | :--- | :--- | :--- |
| Assets\taccounted\tfor\tat\tfair\tvalue\ton\ta\trecurring |  |  |  |  |
| basis |  |  |  |  |
| Fixed\tmaturities,\tAFS |  |  |  |  |
| ABS | $3,153 | $— | $2,792 | $361 |
| CDOs | 2,487 | — | 2,119 | 368 |
| CMBS | 6,951 | — | 6,363 | 588 |
| Corporate | 44,011 | — | 41,756 | 2,255 |
| Foreign\tgovernment/government\tagencies | 2,161 | — | 2,112 | 49 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions |  |  |  |  |
| ("Municipal") | 13,260 | — | 12,823 | 437 |
| RMBS | 5,757 | — | 4,694 | 1,063 |
| U.S.\tTreasuries | 4,029 | 750 | 3,279 | — |
| Total\tfixed\tmaturities | 81,809 | 750 | 75,938 | 5,121 |
| Fixed\tmaturities,\tFVO | 1,328 | — | 833 | 495 |
| Equity\tsecurities,\ttrading | 30,499 | 1,967 | 28,532 | — |
| Equity\tsecurities,\tAFS | 921 | 352 | 476 | 93 |
| Derivative\tassets |  |  |  |  |
| Credit\tderivatives | (24) | — | (11) | (13) |
| Equity\tderivatives | 31 | — | — | 31 |
| Foreign\texchange\tderivatives | 519 | — | 519 | — |
| Interest\trate\tderivatives | 195 | — | 147 | 48 |
| U.S.\tGMWB\thedging\tinstruments | 494 | — | 11 | 483 |
| U.S.\tmacro\thedge\tprogram | 357 | — | — | 357 |
| International\tprogram\thedging\tinstruments | 731 | — | 692 | 39 |
| Other\tderivative\tcontracts | 28 | — | — | 28 |
| Total\tderivative\tassets\t[1] | 2,331 | — | 1,358 | 973 |
| Short-term\tinvestments | 7,736 | 750 | 6,986 | — |
| Reinsurance\trecoverable\tfor\tU.S.\tGMWB | 443 | — | — | 443 |
| Separate\taccount\tassets\t[2] | 139,432 | 101,644 | 36,757 | 1,031 |
| Total\tassets\taccounted\tfor\tat\tfair\tvalue\ton\ta\nrecurring\tbasis | $264,499 | $105,463 | $150,880 | $8,156 |
| Percentage\tof\tlevel\tto\ttotal | 100% | 40% | 57% | 3% |
| Liabilities\taccounted\tfor\tat\tfair\tvalue\ton\ta |  |  |  |  |
| recurring\tbasis |  |  |  |  |
| Other\tpolicyholder\tfunds\tand\tbenefits\tpayable |  |  |  |  |
| U.S\tguaranteed\twithdrawal\tbenefits | $(2,538) | $—\t $— | $—\t $— | $(2,538) |
| International\tguaranteed\twithdrawal\tbenefits | (66) | — | — | (66) |
| International\tother\tguaranteed\tliving\tbenefits | (5) | — | — | (5) |
| Equity\tlinked\tnotes | (9) | — | — | (9) |
| Total\tother\tpolicyholder\tfunds\tand\tbenefits\tpayable | (2,618) | — | — | (2,618) |
| Derivative\tliabilities |  |  |  |  |
| Credit\tderivatives | (573) | — | (25) | (548) |
| Equity\tderivatives | 9 | — | — | 9 |
| Foreign\texchange\tderivatives | 134 | — | 134 | — |
| Interest\trate\tderivatives | (527) | — | (421) | (106) |
| U.S.\tGMWB\thedging\tinstruments | 400 | — | — | 400 |
| International\tprogram\thedging\tinstruments | 19 | — | 23 | (4) |
| Total\tderivative\tliabilities\t[3] | (538) | — | (289) | (249) |
| Other\tLiabilities | (9) | — | — | (9) |
| Consumer\tnotes\t[4] | (4) | — | — | (4) |
| Total\tliabilities\taccounted\tfor\tat\tfair\tvalue\ton\ta |  |  |  |  |
| recurring\tbasis | $(3,169) | $— | $(289) | $(2,880) |

|  | Total | Quoted	Prices	in<br>Active	Markets<br>for	Identical<br>Assets<br>(Level	1) | Significant<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) |
| :--- | :--- | :--- | :--- | :--- |
| Assets\taccounted\tfor\tat\tfair\tvalue\ton\ta\trecurring |  |  |  |  |
| basis |  |  |  |  |
| Fixed\tmaturities,\tAFS |  |  |  |  |
| ABS | $2,889 | $— | $2,412 | $477 |
| CDOs | 2,611 | — | 30 | 2,581 |
| CMBS | 7,917 | — | 7,228 | 689 |
| Corporate | 39,884 | — | 37,755 | 2,129 |
| Foreign\tgovernment/government\tagencies | 1,683 | — | 1,627 | 56 |
| Municipal | 12,124 | — | 11,852 | 272 |
| RMBS | 5,683 | — | 4,398 | 1,285 |
| U.S.\tTreasuries | 5,029 | 434 | 4,595 | — |
| Total\tfixed\tmaturities | 77,820 | 434 | 69,897 | 7,489 |
| Fixed\tmaturities,\tFVO | 649 | — | 127 | 522 |
| Equity\tsecurities,\ttrading | 32,820 | 2,279 | 30,541 | — |
| Equity\tsecurities,\tAFS | 973 | 298 | 521 | 154 |
| Derivative\tassets |  |  |  |  |
| Credit\tderivatives | 3 | — | (18) | 21 |
| Equity\tderivatives | 2 | — | — | 2 |
| Foreign\texchange\tderivatives | 795 | — | 795 | — |
| Interest\trate\tderivatives | (106) | — | (70) | (36) |
| U.S.\tGMWB\thedging\tinstruments | 339 | — | (122) | 461 |
| U.S.\tmacro\thedge\tprogram | 203 | — | — | 203 |
| International\tprogram\thedging\tinstruments | 256 | 2 | 249 | 5 |
| Other\tderivative\tcontracts | 32 | — | — | 32 |
| Total\tderivative\tassets\t[1] | 1,524 | 2 | 834 | 688 |
| Short-term\tinvestments | 8,528 | 541 | 7,987 | — |
| Reinsurance\trecoverable\tfor\tU.S.\tGMWB | 280 | — | — | 280 |
| Separate\taccount\tassets\t[2] | 153,727 | 116,717 | 35,763 | 1,247 |
| Total\tassets\taccounted\tfor\tat\tfair\tvalue\ton\ta\nrecurring\tbasis | $276,321 | $120,271 | $145,670 | $10,380 |
| Percentage\tof\tlevel\tto\ttotal | 100% | 43% | 53% | 4% |

|  | Total | Quoted	Prices<br>in	Active<br>Markets	for<br>Identical	Assets<br>(Level	1) | Significant<br>Observable<br>Inputs<br>(Level	2) | Significant<br>Unobservable<br>Inputs<br>(Level	3) |
| :--- | :--- | :--- | :--- | :--- |
| Liabilities\taccounted\tfor\tat\tfair\tvalue\ton\ta\trecurring |  |  |  |  |
| basis |  |  |  |  |
| Other\tpolicyholder\tfunds\tand\tbenefits\tpayable |  |  |  |  |
| U.S\tguaranteed\twithdrawal\tbenefits | $(1,611) | $—\t $— | $—\t $— | $(1,611) |
| International\tguaranteed\twithdrawal\tbenefits | (36) | — | — | (36) |
| International\tother\tguaranteed\tliving\tbenefits | 3 | — | — | 3 |
| Equity\tlinked\tnotes | (9) | — | — | (9) |
| Total\tother\tpolicyholder\tfunds\tand\tbenefits\tpayable | (1,653) | — | — | (1,653) |
| Derivative\tliabilities |  |  |  |  |
| Credit\tderivatives | (482) | — | (71) | (411) |
| Equity\tderivatives | 2 | — | — | 2 |
| Foreign\texchange\tderivatives | (34) | — | (34) | — |
| Interest\trate\tderivatives | (266) | — | (249) | (17) |
| U.S.\tGMWB\thedging\tinstruments | 128 | — | (11) | 139 |
| International\tprogram\thedging\tinstruments | (2) | (2) | — | — |
| Total\tderivative\tliabilities\t[3] | (654) | (2) | (365) | (287) |
| Other\tliabilities | (37) | — | — | (37) |
| Consumer\tnotes\t[4] | (5) | — | — | (5) |
| Total\tliabilities\taccounted\tfor\tat\tfair\tvalue\ton\ta\nrecurring\tbasis | $(2,349) | $(2) | $(365) | $(1,982) |

[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,	2011	and	2010,	$1.4	billion	and	$968,	respectively,	of	cash	collateral	liability	was netted	against	the	derivative	asset	value	in	the	Consolidated	Balance	Sheet	and	is	excluded	from	the	table	above.	See	footnote	3 below	for	derivative	liabilities.

[2] 	 Approximately	$4.0	and	$6.0	billion	of	investment	sales	receivable	that	are	not	subject	to	fair	value	accounting	are	excluded	as	of December	31,	2011	and	2010,	respectively.

[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.

# Determination	of	Fair	Values

The	valuation	methodologies	used	to	determine	the	fair	values	of	assets	and	liabilities	under	the	"exit	price"	notion,	reflect	market- participant	objectives	and	are	based	on	the	application	of	the	fair	value	hierarchy	that	prioritizes	relevant	observable	market	inputs	over unobservable	inputs.	The	Company	determines	the	fair	values	of	certain	financial	assets	and	financial	liabilities	based	on	quoted	market prices	where	available	and	where	prices	represent	a	reasonable	estimate	of	fair	value.	The	Company	also	determines	fair	value	based	on future	cash	flows	discounted	at	the	appropriate	current	market	rate.	Fair	values	reflect	adjustments	for	counterparty	credit	quality,	the Company's	default	spreads,	liquidity	and,	where	appropriate,	risk	margins	on	unobservable	parameters.	The	following	is	a	discussion	of the	methodologies	used	to	determine	fair	values	for	the	financial	instruments	listed	in	the	above	tables.

The	fair	valuation	process	is	monitored	by	the	Valuation	Committee,	which	is	a	cross-functional	group	of	senior	management	within HIMCO	that	meets	at	least	quarterly.	The	Valuation	Committee	is	co-chaired	by	the	Heads	of	Investment	Operations	and	Accounting,	and has	representation	from	various	investment	sector	professionals,	accounting,	operations,	legal,	compliance	and	risk	management.	The purpose	of	the	committee	is	to	oversee	the	pricing	policy	and	procedures	by	ensuring	objective	and	reliable	valuation	practices	and	pricing of	 financial	 instruments,	 as	 well	 as	 addressing	 fair	 valuation	 issues	 and	 approving	 changes	 to	 valuation	 methodologies	 and	 pricing sources.	 There	 is	 also	 a	 Fair	 Value	 Working	 Group	 ("Working	 Group")	 which	 includes	 the	 Heads	 of	 Investment	 Operations	 and Accounting,	as	well	as	other	investment,	operations,	accounting	and	risk	management	professionals	that	meet	monthly	to	review	market data	trends,	pricing	and	trading	statistics	and	results,	and	any	proposed	pricing	methodology	changes	described	in	more	detail	in	the following	paragraphs.

# Available-for-Sale	Securities,	Fixed	Maturities,	FVO,	Equity	Securities,	Trading,	and	Short-term	Investments

The	fair	value	of	AFS	securities,	fixed	maturities,	FVO,	equity	securities,	trading,	and	short-term	investments	in	an	active	and	orderly market	(e.g.	not	distressed	or	forced	 liquidation)	are	determined	by	management	after	considering	one	of	 three	primary	sources	of information:	third-party	pricing	services,	independent	broker	quotations	or	pricing	matrices.	Security	pricing	is	applied	using	a	"waterfall" approach	 whereby	 publicly	 available	 prices	 are	 first	 sought	 from	 third-party	 pricing	 services,	 the	 remaining	 unpriced	 securities	 are submitted	to	independent	brokers	for	prices,	or	lastly,	securities	are	priced	using	a	pricing	matrix.	Based	on	the	typical	trading	volumes and	the	lack	of	quoted	market	prices	for	fixed	maturities,	third-party	pricing	services	will	normally	derive	the	security	prices	from	recent reported	trades	for	identical	or	similar	securities	making	adjustments	through	the	reporting	date	based	upon	available	market	observable information	as	outlined	above.	If	there	are	no	recently	reported	trades,	the	third-party	pricing	services	and	independent	brokers	may	use matrix	 or	 model	 processes	 to	 develop	 a	 security	 price	 where	 future	 cash	 flow	 expectations	 are	 developed	 based	 upon	 collateral performance	and	discounted	at	an	estimated	market	rate.	Included	in	the	pricing	of	ABS	and	RMBS	are	estimates	of	the	rate	of	future prepayments	 of	 principal	 over	 the	 remaining	 life	 of	 the	 securities.	 Such	 estimates	 are	 derived	 based	 on	 the	 characteristics	 of	 the underlying	structure	and	prepayment	speeds	previously	experienced	at	the	interest	rate	levels	projected	for	the	underlying	collateral. Actual	prepayment	experience	may	vary	from	these	estimates.

Prices	from	third-party	pricing	services	are	often	unavailable	for	securities	that	are	rarely	traded	or	are	traded	only	in	privately	negotiated transactions.	As	a	result,	certain	securities	are	priced	via	independent	broker	quotations	which	utilize	inputs	that	may	be	difficult	to corroborate	with	observable	market	based	data.	Additionally,	the	majority	of	these	independent	broker	quotations	are	non-binding.

A	pricing	matrix	is	used	to	price	private	placement	securities	for	which	the	Company	is	unable	to	obtain	a	price	from	a	third-party	pricing service	by	discounting	the	expected	future	cash	flows	from	the	security	by	a	developed	market	discount	rate	utilizing	current	credit spreads.	Credit	spreads	are	developed	each	month	using	market	based	data	for	public	securities	adjusted	for	credit	spread	differentials between	public	and	private	securities	which	are	obtained	from	a	survey	of	multiple	private	placement	brokers.	The	appropriate	credit spreads	 determined	 through	 this	 survey	 approach	 are	 based	 upon	 the	 issuer's	 financial	 strength	 and	 term	 to	 maturity,	 utilizing	 an independent	public	security	index	and	trade	information	and	adjusting	for	the	non-public	nature	of	the	securities.

The	Working	Group	performs	ongoing	analysis	of	the	prices	and	credit	spreads	received	from	third	parties	to	ensure	that	the	prices represent	a	reasonable	estimate	of	the	fair	value.	This	process	involves	quantitative	and	qualitative	analysis	and	is	overseen	by	investment and	accounting	professionals.	As	a	part	of	this	analysis,	the	Company	considers	trading	volume,	new	issuance	activity	and	other	factors	to determine	whether	the	market	activity	is	significantly	different	than	normal	activity	in	an	active	market,	and	if	so,	whether	transactions may	not	be	orderly	considering	the	weight	of	available	evidence.	If	the	available	evidence	indicates	that	pricing	is	based	upon	transactions that	are	stale	or	not	orderly,	the	Company	places	little,	if	any,	weight	on	the	transaction	price	and	will	estimate	fair	value	utilizing	an internal	pricing	model.	In	addition,	the	Company	ensures	that	prices	received	from	independent	brokers	represent	a	reasonable	estimate	of fair	value	through	the	use	of	internal	and	external	cash	flow	models	developed	based	on	spreads,	and	when	available,	market	indices.	As	a result	of	this	analysis,	if	the	Company	determines	that	there	is	a	more	appropriate	fair	value	based	upon	the	available	market	data,	the	price received	from	the	third	party	is	adjusted	accordingly	and	approved	by	the	Valuation	Committee.	The	Company's	internal	pricing	model utilizes	the	Company's	best	estimate	of	expected	future	cash	flows	discounted	at	a	rate	of	return	that	a	market	participant	would	require. The	significant	inputs	to	the	model	include,	but	are	not	limited	to,	current	market	inputs,	such	as	credit	loss	assumptions,	estimated prepayment	speeds	and	market	risk	premiums.

The	Company	conducts	other	specific	activities	to	monitor	controls	around	pricing.	Daily	analyses	identify	price	changes	over	3-5%,	sale trade	prices	that	differ	over	3%	from	the	prior	day's	price	and	purchase	trade	prices	that	differ	more	than	3%	from	the	current	day's	price. Weekly	analyses	identify	prices	that	differ	more	than	5%	from	published	bond	prices	of	a	corporate	bond	index.	Monthly	analyses identify	price	changes	over	3%,	prices	that	haven't	changed,	missing	prices	and	second	source	validation	on	most	sectors.	Analyses	are conducted	by	a	dedicated	pricing	unit	who	follows	up	with	trading	and	investment	sector	professionals	and	challenges	prices	with	vendors when	 the	 estimated	 assumptions	 used	 differ	 from	 what	 the	 Company	 feels	 a	 market	 participant	 would	 use.	Any	 changes	 from	 the identified	pricing	source	are	verified	by	further	confirmation	of	assumptions	used.	Examples	of	other	procedures	performed	include,	but are	not	limited	to,	initial	and	on-going	review	of	third-party	pricing	services'	methodologies,	review	of	pricing	statistics	and	trends	and back	testing	recent	trades.	For	a	sample	of	structured	securities,	a	comparison	of	the	vendor's	assumptions	to	our	internal	econometric models	is	also	performed;	any	differences	are	challenged	in	accordance	with	the	process	described	above.

The	Company	has	analyzed	the	third-party	pricing	services'	valuation	methodologies	and	related	inputs,	and	has	also	evaluated	the various	types	of	securities	in	its	investment	portfolio	to	determine	an	appropriate	fair	value	hierarchy	level	based	upon	trading	activity	and the	observability	of	market	inputs.	Most	prices	provided	by	third-party	pricing	services	are	classified	into	Level	2	because	the	inputs	used in	pricing	the	securities	are	market	observable.	Due	to	a	general	lack	of	transparency	in	the	process	that	brokers	use	to	develop	prices, most	valuations	that	are	based	on	brokers'	prices	are	classified	as	Level	3.	Some	valuations	may	be	classified	as	Level	2	if	the	price	can be	corroborated	with	observable	market	data.

# Derivative	Instruments,	including	embedded	derivatives	within	investments

Derivative	instruments	are	fair	valued	using	pricing	valuation	models	that	utilize	independent	market	data	inputs,	quoted	market	prices	for exchange-traded	 derivatives,	 or	 independent	 broker	 quotations.	 Excluding	 embedded	 and	 reinsurance	 related	 derivatives,	 as	 of December	31,	2011	and	2010,	98%	and	97%,	respectively,	of	derivatives,	based	upon	notional	values,	were	priced	by	valuation	models	or quoted	market	prices.	The	remaining	derivatives	were	priced	by	broker	quotations.

The	Company	performs	various	controls	on	derivative	valuations	which	include	both	quantitative	and	qualitative	analysis.	Analyses	are conducted	by	a	dedicated	derivative	pricing	team	that	works	directly	with	investment	sector	professionals	to	analyze	impacts	of	changes	in the	market	environment	and	investigate	variances.	There	is	a	monthly	analysis	to	identify	market	value	changes	greater	than	pre-defined thresholds,	 stale	 prices,	 missing	 prices	 and	 zero	 prices.	Also	 on	 a	 monthly	 basis,	 a	 second	 source	 validation,	 typically	 to	 broker quotations,	is	performed	for	certain	of	the	more	complex	derivatives,	as	well	as	for	all	new	deals	during	the	month.	A	model	validation review	is	performed	on	any	new	models,	which	typically	includes	detailed	documentation	and	validation	to	a	second	source.	The	model validation	documentation	and	results	of	validation	are	presented	to	the	Valuation	Committee	for	approval.	There	is	a	monthly	control	to review	changes	in	pricing	sources	to	ensure	that	new	models	are	not	moved	to	production	until	formally	approved.

The	Company	utilizes	derivative	instruments	to	manage	the	risk	associated	with	certain	assets	and	liabilities.	However,	the	derivative instrument	may	not	be	classified	with	the	same	fair	value	hierarchy	level	as	the	associated	assets	and	liabilities.	Therefore	the	realized	and unrealized	gains	and	losses	on	derivatives	reported	in	Level	3	may	not	reflect	the	offsetting	impact	of	the	realized	and	unrealized	gains and	losses	of	the	associated	assets	and	liabilities.

# Valuation	Techniques	and	Inputs	for	Investments

Generally,	the	Company	determines	the	estimated	fair	value	of	its	AFS	securities,	fixed	maturities,	FVO,	equity	securities,	trading,	and short-term	investments	using	the	market	approach.	The	income	approach	is	used	for	securities	priced	using	a	pricing	matrix,	as	well	as	for derivative	instruments.	For	Level	1	investments,	which	are	comprised	of	on-the-run	U.S.	Treasuries,	exchange-traded	equity	securities, short-term	investments,	and	exchange	traded	futures	and	option	contracts,	valuations	are	based	on	observable	inputs	that	reflect	quoted prices	for	identical	assets	in	active	markets	that	the	Company	has	the	ability	to	access	at	the	measurement	date.

For	most	of	the	Company's	debt	securities,	the	following	inputs	are	typically	used	in	the	Company's	pricing	methods:	reported	trades, benchmark	yields,	bids	and/or	estimated	cash	flows.	For	securities	except	U.S.	Treasuries,	inputs	also	include	issuer	spreads,	which	may consider	credit	default	swaps.	Derivative	instruments	are	valued	using	mid-market	inputs	that	are	predominantly	observable	in	the	market.

A	description	of	additional	inputs	used	in	the	Company's	Level	2	and	Level	3	measurements	is	listed	below:

Level	2 The	fair	values	of	most	of	the	Company's	Level	2	investments	are	determined	by	management	after	considering	prices received	from	third	party	pricing	services.	These	investments	include	most	fixed	maturities	and	preferred	stocks,	including those	reported	in	separate	account	assets.

•	 ABS,	CDOs,	CMBS	and	RMBS	—	Primary	inputs	also	include	monthly	payment	information,	collateral	performance, which	 varies	 by	 vintage	 year	 and	 includes	 delinquency	 rates,	 collateral	 valuation	 loss	 severity	 rates,	 collateral refinancing	assumptions,	credit	default	swap	indices	and,	for	ABS	and	RMBS,	estimated	prepayment	rates.

•	 Corporates, including investment	 grade	 private	 placements	—	 Primary inputs	 also include	 observations	 of	 credit default	swap	curves	related	to	the	issuer.

•	 Foreign	 government/government	 agencies	-	Primary	inputs	also	include	observations	of	credit	default	swap	curves related	to	the	issuer	and	political	events	in	emerging	markets.

•	 Municipals	—	Primary	inputs	also	include	Municipal	Securities	Rulemaking	Board	reported	trades	and	material	event notices,	and	issuer	financial	statements.

•	 Short-term	investments	—	Primary	inputs	also	include	material	event	notices	and	new	issue	money	market	rates.

•	 Equity	securities,	trading	—	Consist	of	investments	in	mutual	funds.	Primary	inputs	include	net	asset	values	obtained from	third	party	pricing	services.

•	 Credit	derivatives	—	Significant	inputs	primarily	include	the	swap	yield	curve	and	credit	curves.

•	 Foreign	exchange	derivatives	—	Significant	inputs	primarily	include	the	swap	yield	curve,	currency	spot	and	forward rates,	and	cross	currency	basis	curves.

•Interest	rate	derivatives	—	Significant	input	is	primarily	the	swap	yield	curve.

Level	3 Most	of	 the	Company's	securities	classified	as	Level	3	are	valued	based	on	brokers'	prices.	This	 includes	 less	 liquid securities	 such	 as	 lower	 quality	 asset-backed	 securities	 ("ABS"),	 commercial	 mortgage-backed	 securities	 ("CMBS"),

commercial	real	estate	("CRE")	CDOs	and	residential	mortgage-backed	securities	("RMBS")	primarily	backed	by	below-

prime	 loans.	 Primary	 inputs	 for	 these	 structured	 securities	 are	 consistent	 with	 the	 typical	 inputs	 used	 in	 Level 2 measurements	noted	above,	but	are	Level	3	due	to	their	illiquid	markets.	Additionally,	certain	long-dated	securities	are priced	based	on	third	party	pricing	services,	including	municipal	securities,	foreign	government/government	agencies,	bank loans	and	below	investment	grade	private	placement	securities.	Primary	inputs	for	these	long-dated	securities	are	consistent with	the	typical	inputs	used	in	Level	1	and	Level	2	measurements	noted	above,	but	include	benchmark	interest	rate	or	credit spread	assumptions	that	are	not	observable	in	the	marketplace.	Also	included	in	Level	3	are	certain	derivative	instruments that	either	have	significant	unobservable	 inputs	or	are	valued	based	on	broker	quotations.	Significant	 inputs	for	 these derivative	contracts	primarily	include	the	typical	inputs	used	in	the	Level	1	and	Level	2	measurements	noted	above,	but	also may	include	the	following:

•	 Credit	derivatives	—	Significant	unobservable	inputs	may	include	credit	correlation	and	swap	yield	curve	and	credit curve	extrapolation	beyond	observable	limits.

•	 Equity	derivatives	—	Significant	unobservable	inputs	may	include	equity	volatility.

•Interest rate contracts	 —	Significant	 unobservable inputs	 may include swap	 yield curve extrapolation	 beyond observable	limits	and	interest	rate	volatility.

# Product	Derivatives

The	Company	currently	offers	certain	variable	annuity	products	with	GMWB	riders	in	the	U.S.,	and	formerly	offered	such	products	in	the U.K.	and	Japan.	The	GMWB	represents	an	embedded	derivative	in	the	variable	annuity	contract.	When	it	is	determined	that	(1)	the embedded	derivative	possesses	economic	characteristics	that	are	not	clearly	and	closely	related	to	the	economic	characteristics	of	the	host contract,	 and	 (2)	 a	 separate	 instrument	 with	 the	 same	 terms	 would	 qualify	 as	 a	 derivative	 instrument,	 the	 embedded	 derivative	 is bifurcated	from	the	host	for	measurement	purposes.	The	embedded	derivative	is	carried	at	fair	value,	with	changes	in	fair	value	reported in	net	realized	capital	gains	and	losses.	The	Company's	GMWB	liability	is	reported	in	other	policyholder	funds	and	benefits	payable	in the	Consolidated	Balance	Sheets.

In	valuing	the	embedded	derivative,	the	Company	attributes	to	the	derivative	a	portion	of	the	expected	fees	to	be	collected	over	the expected	life	of	the	contract	from	the	contract	holder	equal	to	the	present	value	of	future	GMWB	claims	(the	"Attributed	Fees").	The excess	of	fees	collected	from	the	contract	holder	in	the	current	period	over	the	current	period's	Attributed	Fees	are	associated	with	the	host variable	annuity	contract	and	reported	in	fee	income.

# U.S.	GMWB	Reinsurance	Derivative

The	Company	has	reinsurance	arrangements	in	place	to	transfer	a	portion	of	its	risk	of	loss	due	to	GMWB.	These	arrangements	are recognized	as	derivatives	and	carried	at	fair	value	in	reinsurance	recoverables.	Changes	in	the	fair	value	of	the	reinsurance	agreements	are reported	in	net	realized	capital	gains	and	losses.

The	fair	value	of	the	U.S.	GMWB	reinsurance	derivative	is	calculated	as	an	aggregation	of	the	components	described	in	the	Living Benefits	Required	 to	be	Fair	Valued	discussion	below	and	 is	modeled	using	significant	unobservable	policyholder	behavior	 inputs, identical	to	those	used	in	calculating	the	underlying	liability,	such	as	lapses,	fund	selection,	resets	and	withdrawal	utilization	and	risk margins.

# Separate	Account	Assets

Separate	account	assets	are	primarily	invested	in	mutual	funds	but	also	have	investments	in	fixed	maturity	and	equity	securities.	The separate	account	investments	are	valued	in	the	same	manner,	and	using	the	same	pricing	sources	and	inputs,	as	the	fixed	maturity,	equity security,	and	short-term	investments	of	the	Company.

Fair	values	for	GMWB	and	guaranteed	minimum	accumulation	benefit	("GMAB")	contracts	are	calculated	using	the	income	approach based	upon	internally	developed	models	because	active,	observable	markets	do	not	exist	for	those	items.	The	fair	value	of	the	Company's guaranteed	benefit	liabilities,	classified	as	embedded	derivatives,	and	the	related	reinsurance	and	customized	freestanding	derivatives	is calculated	as	an	aggregation	of	the	following	components:	Best	Estimate	Claim	Payments;	Credit	Standing	Adjustment;	and	Margins.	The resulting	aggregation	is	reconciled	or	calibrated,	if	necessary,	to	market	information	that	is,	or	may	be,	available	to	the	Company,	but	may not	be	observable	by	other	market	participants,	including	reinsurance	discussions	and	transactions.	The	Company	believes	the	aggregation of	these	components,	as	necessary	and	as	reconciled	or	calibrated	to	the	market	information	available	to	the	Company,	results	in	an amount	that	the	Company	would	be	required	to	transfer	or	receive,	for	an	asset,	to	or	from	market	participants	in	an	active	liquid	market, if	 one	 existed,	 for	 those	 market	 participants	 to	 assume	 the	 risks	 associated	 with	 the	 guaranteed	 minimum	 benefits	 and	 the	 related reinsurance	and	customized	derivatives.	The	fair	value	is	likely	to	materially	diverge	from	the	ultimate	settlement	of	the	liability	as	the Company	believes	settlement	will	be	based	on	our	best	estimate	assumptions	rather	 than	 those	best	estimate	assumptions	plus	risk margins.	In	the	absence	of	any	transfer	of	the	guaranteed	benefit	liability	to	a	third	party,	the	release	of	risk	margins	is	likely	to	be reflected	as	realized	gains	in	future	periods'	net	income.	Each	component	described	below	is	unobservable	in	the	marketplace	and	require subjectivity	by	the	Company	in	determining	their	value.

# Best	Estimate

# Claim	Payments

The	Best	Estimate	Claim	Payments	is	calculated	based	on	actuarial	and	capital	market	assumptions	related	to	projected	cash	flows, including	the	present	value	of	benefits	and	related	contract	charges,	over	the	lives	of	the	contracts,	incorporating	expectations	concerning policyholder	behavior	such	as	 lapses,	fund	selection,	resets	and	withdrawal	utilization.	For	 the	customized	derivatives,	policyholder behavior	 is	 prescribed	 in	 the	 derivative	 contract.	 Because	 of	 the	 dynamic	 and	 complex	 nature	 of	 these	 cash	 flows,	 best	 estimate assumptions	and	a	Monte	Carlo	stochastic	process	is	used	in	valuation.	The	Monte	Carlo	stochastic	process	involves	the	generation	of thousands	of	scenarios	that	assume	risk	neutral	returns	consistent	with	swap	rates	and	a	blend	of	observable	implied	index	volatility levels.	Estimating	these	cash	flows	involves	numerous	estimates	and	subjective	judgments	regarding	a	number	of	variables	—including expected	market	rates	of	return,	market	volatility,	correlations	of	market	index	returns	to	funds,	fund	performance,	discount	rates	and assumptions	about	policyholder	behavior	which	emerge	over	time.

At	each	valuation	date,	the	Company	assumes	expected	returns	based	on:

•risk-free	rates	as	represented	by	the	eurodollar	futures,	LIBOR	deposits	and	swap	rates	to	derive	forward	curve	rates;

•	 market	implied	volatility	assumptions	for	each	underlying	index	based	primarily	on	a	blend	of	observed	market	"implied	volatility"

data;

•correlations	of	historical	returns	across	underlying	well	known	market	indices	based	on	actual	observed	returns	over	the	ten	years preceding	the	valuation	date;	and

•three	years	of	history	for	fund	indexes	compared	to	separate	account	fund	regression.

As	many	guaranteed	benefit	obligations	are	relatively	new	in	the	marketplace,	actual	policyholder	behavior	experience	is	limited.	As	a result,	estimates	of	future	policyholder	behavior	are	subjective	and	based	on	analogous	internal	and	external	data.	As	markets	change, mature	and	evolve	and	actual	policyholder	behavior	emerges,	management	continually	evaluates	the	appropriateness	of	its	assumptions for	this	component	of	the	fair	value	model.

On	a	daily	basis,	the	Company	updates	capital	market	assumptions	used	in	the	GMWB	liability	model	such	as	interest	rates,	equity	indices and	the	blend	of	implied	equity	index	volatilities.	The	Company	monitors	various	aspects	of	policyholder	behavior	and	may	modify certain	of	its	assumptions,	including	living	benefit	lapses	and	withdrawal	rates,	if	credible	emerging	data	indicates	that	changes	are warranted.	At	a	minimum,	all	policyholder	behavior	assumptions	are	reviewed	and	updated,	as	appropriate,	in	conjunction	with	the completion	of	the	Company's	comprehensive	study	to	refine	its	estimate	of	future	gross	profits	during	the	third	quarter	of	each	year.

# Credit	Standing	Adjustment

This	assumption	makes	an	adjustment	that	market	participants	would	make,	in	determining	fair	value,	to	reflect	the	risk	that	guaranteed benefit	 obligations	 or	 the	 GMWB	 reinsurance	 recoverables	 will	 not	 be	 fulfilled	 ("nonperformance	 risk").	As	 a	 result	 of	 sustained volatility	in	the	Company's	credit	default	spreads,	during	2009	the	Company	changed	its	estimate	of	the	Credit	Standing	Adjustment	to incorporate	a	blend	of	observable	Company	and	reinsurer	credit	default	spreads	from	capital	markets,	adjusted	for	market	recoverability. Prior	to	the	first	quarter	of	2009,	the	Company	calculated	the	Credit	Standing	Adjustment	by	using	default	rates	published	by	rating agencies,	adjusted	for	market	recoverability.	The	credit	standing	adjustment	assumption,	net	of	reinsurance,	resulted	in	pre-tax	realized gains	(losses)	of	$55,	($10)	and	$26,	for	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.	As	of	December	31,	2011	the credit	standing	adjustment	was	$80.

# Margins

The	behavior	risk	margin	adds	a	margin	that	market	participants	would	require,	in	determining	fair	value,	for	the	risk	that	the	Company's assumptions	about	policyholder	behavior	could	differ	from	actual	experience.	The	behavior	risk	margin	 is	calculated	by	 taking	 the difference	between	adverse	policyholder	behavior	assumptions	and	best	estimate	assumptions.

Assumption	updates,	including	policyholder	behavior	assumptions,	affected	best	estimates	and	margins	for	total	pre-tax	realized	gains	of $52,	$159	and	$566	for	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.	As	of	December	31,	2011	the	behavior	risk margin	was	$419.

In	addition	to	the	non-market-based	updates	described	above,	the	Company	recognized	non-market-based	updates	driven	by	the	relative outperformance	(underperformance)	of	the	underlying	actively	managed	funds	as	compared	to	their	respective	indices	resulting	in	pre-tax realized	gains	(losses)	of	approximately	$(72),	$104	and	$550	for	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.

# Assets	and	Liabilities	Measured	at	Fair	Value	on	a	Recurring	Basis	Using	Significant	Unobservable	Inputs	(Level	3)

The	tables	below	provide	fair	value	roll-forwards	for	the	year	ended	December	31,	2011	and	2010,	for	the	financial	instruments	classified as	Level	3.

# Roll-forward	of	Financial	Instruments	Measured	at	Fair	Value	on	a	Recurring	Basis	Using	Significant	Unobservable	Inputs

|  |  |  |  |  | Foreign |  |  | Total	Fixed | Fixed |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | govt./govt |  |  | Maturities, | Maturities, |
| Assets | ABS | CDOs | CMBS | Corporate | agencies | Municipal | RMBS | AFS | FVO |
| Fair\tvalue\tas\tof |  |  |  |  |  |  |  |  |  |
| January\t1,\t2011 | $477 | $2,581 | $689 | $2,129 | $56 | $272 | $ 1,285 | $7,489 | $522 |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| Included\tin\tnet |  |  |  |  |  |  |  |  |  |
| income\t[1],\t[2],\t[6] | (27) | (41) | 11 | (40) | — | — | (21) | (118) | 22 |
| Included\tin\tOCI\t[3] | 22 | 126 | 52 | (31) | 1 | 48 | 3 | 221 | — |
| Purchases | 58 | — | 29 | 108 | 3 | 131 | 25 | 354 | — |
| Settlements | (37) | (151) | (86) | (121) | (4) | — | (135) | (534) | (3) |
| Sales | (10) | (66) | (317) | (162) | (7) | (2) | (16) | (580) | (42) |
| Transfers\tinto\tLevel\t3 |  |  |  |  |  |  |  |  |  |
| [4] | 82 | 30 | 268 | 774 | 39 | 4 | 82 | 1,279 | — |
| Transfers\tout\tof\tLevel\t3 |  |  |  |  |  |  |  |  |  |
| [4] | (204) | (2,111) | (58) | (402) | (39) | (16) | (160) | (2,990) | (4) |
| Fair\tvalue\tas\tof\nDecember\t31,\t2011 | $361 | $368 | $588 | $2,255 | $49 | $437 | $ 1,063 | $5,121 | $495 |
| Changes\tin\tunrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| included\tin\tnet |  |  |  |  |  |  |  |  |  |
| income\trelated\tto |  |  |  |  |  |  |  |  |  |
| financial\tinstruments |  |  |  |  |  |  |  |  |  |
| still\theld\tat |  |  |  |  |  |  |  |  |  |
| December\t31,\t2011 |  |  |  |  |  |  |  |  |  |
| [2]\t[7] | $(16) | $(41) | $(17) | $(17) | $— | $— | $(15) | $(106) | $19 |

|  |  |  |  |  | Freestanding	Derivatives	[5] | Freestanding	Derivatives	[5] |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  |  | U.S. | Intl. |  |  |
|  | Equity |  |  |  | U.S. | Macro | Program |  | Total\tFree- |
|  | Securities, |  |  | Interest | GMWB | Hedge | Hedging | Other | Standing |
| Assets\t(Liabilities) | AFS | Credit | Equity | Rate | Hedging | Program | Instr. | Contracts | Derivatives\t[5] |
| Fair\tvalue\tas\tof |  |  |  |  |  |  |  |  |  |
| January\t1,\t2011 | $154 | $(390) | $4 | $(53) | $600 | $203 | $5 | $32 | $401 |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| Included\tin\tnet |  |  |  |  |  |  |  |  |  |
| income\t[1],\t[2], |  |  |  |  |  |  |  |  |  |
| [6] | (12) | (170) | (9) | (21) | 279 | (128) | (3) | (4) | (56) |
| Included\tin\tOCI\t[3] | (4) | — | — | — | — | — | — | — | — |
| Purchases | 39 | 1 | 45 | 64 | 23 | 347 | 33 | — | 513 |
| Settlements | — | (2) | — | (48) | (19) | (65) | — | — | (134) |
| Sales | (10) | — | — | — | — | — | — | — | — |
| Transfers\tinto\tLevel\t3 |  |  |  |  |  |  |  |  |  |
| [4] | 7 | — | — | — | — | — | — | — | — |
| Transfers\tout\tof\tLevel\t3 |  |  |  |  |  |  |  |  |  |
| [4] | (81) | — | — | — | — | — | — | — | — |
| Fair\tvalue\tas\tof\nDecember\t31,\t2011 | $93 | $(561) | $40 | $(58) | $883 | $357 | $35 | $28 | $724 |
| Changes\tin\tunrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| included\tin\tnet |  |  |  |  |  |  |  |  |  |
| income\trelated\tto |  |  |  |  |  |  |  |  |  |
| financial\tinstruments |  |  |  |  |  |  |  |  |  |
| still\theld\tat |  |  |  |  |  |  |  |  |  |
| December\t31,\t2011 |  |  |  |  |  |  |  |  |  |
| [2]\t[7] | $(10) | $(163) | $(8) | $(19) | $278 | $(107) | $(5) | $(4) | $(28) |

|  | Reinsurance	Recoverable |  |
| :--- | :--- | :--- |
| Assets | for\tU.S.\tGMWB | Separate\tAccounts |
| Fair\tvalue\tas\tof\tJanuary\t1,\t2011 | $280 | $1,247 |
| Total\trealized/unrealized\tgains\t(losses) |  |  |
| Included\tin\tnet\tincome\t[1],\t[2],\t[6] | 131 | 25 |
| Included\tin\tOCI\t[3] | — | — |
| Purchases | — | 292 |
| Settlements | 32 | — |
| Sales | — | (171) |
| Transfers\tinto\tLevel\t3\t[4] | — | 14 |
| Transfers\tout\tof\tLevel\t3\t[4] | — | (376) |
| Fair\tvalue\tas\tof\tDecember\t31,\t2011 | $443 | $1,031 |
| Changes\tin\tunrealized\tgains\t(losses)\tincluded\tin\tnet\tincome\trelated\tto\tfinancial\ninstruments\tstill\theld\tat\tDecember\t31,\t2011\t[2]\t[7] | $131 | $(1) |

|  |  |  |  |  | Total	Other |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | U.S. | International |  |  | Policyholder |  |  |
|  | Guaranteed | Guaranteed | International | Equity | Funds\tand |  |  |
|  | Withdrawal | Living | Other\tLiving | Linked | Benefits | Other | Consumer |
| Liabilities | Benefits | Benefits | Benefits | Notes | Payable | Liabilities | Notes |
| Fair\tvalue\tas\tof\tJanuary\t1,\t2011 | $(1,611) | $(36) | $3 | $(9) | $(1,653) | $(37) | $(5) |
| Total\trealized/unrealized\tgains |  |  |  |  |  |  |  |
| (losses) |  |  |  |  |  |  |  |
| Included\tin\tnet\tincome\t[1], |  |  |  |  |  |  |  |
| [2],\t[6] | (780) | (21) | (4) | — | (805) | 28 | 1 |
| Included\tin\tOCI\t[3] | — | — | — | — | 0 | — | — |
| Settlements | (147) | (9) | (4) | — | (160) | — | — |
| Fair\tvalue\tas\tof\tDecember\t31, |  |  |  |  |  |  |  |
| 2011 | $(2,538) | $(66) | $(5) | $(9) | $(2,618) | $(9) | $(4) |
| Changes\tin\tunrealized\tgains |  |  |  |  |  |  |  |
| (losses)\tincluded\tin\tnet |  |  |  |  |  |  |  |
| income\trelated\tto\tfinancial |  |  |  |  |  |  |  |
| instruments\tstill\theld\tat |  |  |  |  |  |  |  |
| December\t31,\t2011\t[2]\t[7] | $(780) | $(21) | $(4) | $— | $(805) | $28 | $1 |

|  |  |  |  |  | Foreign |  |  | Total	Fixed | Fixed |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  | govt./govt. |  |  | Maturities, | Maturities, |
| Assets | ABS | CDOs | CMBS | Corporate | agencies | Municipal | RMBS | AFS | FVO |
| Fair\tvalue\tas\tof\tJanuary\t1, |  |  |  |  |  |  |  |  |  |
| 2010 | $580 | $2,835 | $307 | $8,027 | $93 | $262 | $1,153 | $13,257 | $— |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| Included\tin\tnet\tincome |  |  |  |  |  |  |  |  |  |
| [1],\t[2],\t[6] | (17) | (151) | (132) | (14) | — | 1 | (43) | (356) | 80 |
| Included\tin\tOCI\t[3] | 92 | 533 | 409 | 320 | 5 | 24 | 254 | 1,637 | — |
| Purchases,\tissuances,\tand |  |  |  |  |  |  |  |  |  |
| settlements | (74) | (234) | (186) | 78 | (8) | 14 | (161) | (571) | (11) |
| Transfers\tinto\tLevel\t3\t[4] | 40 | 42 | 443 | 967 | 8 | 11 | 146 | 1,657 | 453 |
| Transfers\tout\tof\tLevel\t3\t[4] | (144) | (444) | (152) | (7,249) | (42) | (40) | (64) | (8,135) | — |
| Fair\tvalue\tas\tof |  |  |  |  |  |  |  |  |  |
| December\t31,\t2010 | $477 | $2,581 | $689 | $2,129 | $56 | $272 | $1,285 | $7,489 | $522 |
| Changes\tin\tunrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses)\tincluded |  |  |  |  |  |  |  |  |  |
| in\tnet\tincome\trelated\tto |  |  |  |  |  |  |  |  |  |
| financial\tinstruments |  |  |  |  |  |  |  |  |  |
| still\theld\tat |  |  |  |  |  |  |  |  |  |
| December\t31,\t2010\t[2] |  |  |  |  |  |  |  |  |  |
| [7] | $(8) | $(158) | $(73) | $(24) | $— | $— | $(38) | $(301) | $76 |

|  |  |  |  |  | Freestanding	Derivatives	[5] | Freestanding	Derivatives	[5] |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  |  |  | U.S. | Intl. |  |  |
|  | Equity |  |  |  | U.S. | Macro | Program |  | Total\tFree- |
|  | Securities, |  |  | Interest | GMWB | Hedge | Hedging | Other | Standing |
| Assets\t(Liabilities) | AFS | Credit | Equity | Rate | Hedging | Program | Instr. | Contracts | Derivatives\t[5] |
| Fair\tvalue\tas\tof\tJanuary\t1, |  |  |  |  |  |  |  |  |  |
| 2010 | $58 | $(228) | $(2) | $5 | $236 | $278 | $12 | $36 | $337 |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |  |
| Included\tin\tnet\tincome |  |  |  |  |  |  |  |  |  |
| [1],\t[2],\t[6] | (6) | 124 | 6 | (4) | (74) | (312) | (29) | (4) | (293) |
| Included\tin\tOCI\t[3] | 9 | — | — | 1 | — | — | — | — | 1 |
| Purchases,\tissuances,\tand |  |  |  |  |  |  |  |  |  |
| settlements | 16 | 4 | — | (44) | 442 | 237 | 22 | — | 661 |
| Transfers\tinto\tLevel\t3\t[4] | 98 | (290) | — | — | — | — | — | — | (290) |
| Transfers\tout\tof\tLevel\t3\t[4] | (21) | — | — | (11) | (4) | — | — | — | (15) |
| Fair\tvalue\tas\tof |  |  |  |  |  |  |  |  |  |
| December\t31,\t2010 | $154 | $(390) | $4 | $(53) | $600 | $203 | $5 | $32 | $401 |
| Changes\tin\tunrealized |  |  |  |  |  |  |  |  |  |
| gains\t(losses)\tincluded |  |  |  |  |  |  |  |  |  |
| in\tnet\tincome\trelated\tto |  |  |  |  |  |  |  |  |  |
| financial\tinstruments |  |  |  |  |  |  |  |  |  |
| still\theld\tat |  |  |  |  |  |  |  |  |  |
| December\t31,\t2010\t[2] |  |  |  |  |  |  |  |  |  |
| [7] | $(8) | $116 | $6 | $(24) | $(61) | $(292) | $(29) | $(4) | $(288) |

|  | Reinsurance	Recoverable |  |
| :--- | :--- | :--- |
| Assets | for\tU.S.\tGMWB | Separate\tAccounts |
| Fair\tvalue\tas\tof\tJanuary\t1,\t2010 | $347 | $962 |
| Total\trealized/unrealized\tgains\t(losses) |  |  |
| Included\tin\tnet\tincome\t[1],\t[2],\t[6] | (102) | 142 |
| Purchases,\tissuances,\tand\tsettlements | 35 | 314 |
| Transfers\tinto\tLevel\t3\t[4] | — | 14 |
| Transfers\tout\tof\tLevel\t3\t[4] | — | (185) |
| Fair\tvalue\tas\tof\tDecember\t31,\t2010 | $280 | $1,247 |
| Changes\tin\tunrealized\tgains\t(losses)\tincluded\tin\tnet\tincome\trelated\tto\tfinancial\ninstruments\tstill\theld\tat\tDecember\t31,\t2010\t[2]\t[7] | $(102) | $20 |

|  |  |  |  |  |  | Total	Other |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | U.S. | International |  |  |  | Policyholder |  |  |
|  | Guaranteed | Guaranteed | International | Equity |  | Funds\tand |  |  |
|  | Withdrawal | Living | Other\tLiving | Linked | Institutional | Benefits | Other | Consumer |
| Liabilities | Benefits | Benefits | Benefits | Notes | Notes | Payable | Liabilities | Notes |
| Fair\tvalue\tas\tof\tJanuary\t1, |  |  |  |  |  |  |  |  |
| 2010 | $(1,957) | $(45) | $2 | $(10) | $(2) | $(2,012) | $— | $(5) |
| Total\trealized/unrealized |  |  |  |  |  |  |  |  |
| gains\t(losses) |  |  |  |  |  |  |  |  |
| Included\tin\tnet\tincome |  |  |  |  |  |  |  |  |
| [1],\t[2],\t[6] | 486 | 22 | 4 | — | 2 | 514 | (26) | — |
| Included\tin\tOCI\t[3] | — | (4) | — | — | — | (4) | — | — |
| Purchases,\tissuances,\tand |  |  |  |  |  |  |  |  |
| settlements | (140) | (9) | (3) | 1 | — | (151) | — | — |
| Transfers\tinto\tLevel\t3\t[4] | — | — | — | — | — | — | (11) | — |
| Fair\tvalue\tas\tof |  |  |  |  |  |  |  |  |
| December\t31,\t2010 | $(1,611) | $(36) | $3 | $(9) | $— | $(1,653) | $(37) | $(5) |
| Changes\tin\tunrealized |  |  |  |  |  |  |  |  |
| gains\t(losses)\tincluded |  |  |  |  |  |  |  |  |
| in\tnet\tincome\trelated\tto |  |  |  |  |  |  |  |  |
| financial\tinstruments |  |  |  |  |  |  |  |  |
| still\theld\tat |  |  |  |  |  |  |  |  |
| December\t31,\t2010\t[2] |  |  |  |  |  |  |  |  |
| [7] | $486 | $22 | $4 | $— | $2 | $514 | $— | $— |

[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	in	these	rows	are	reported	in	net	realized	capital	gains/losses.	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.	All	amounts	are	before	income	taxes	and	amortization	DAC.

[3] 	 All	amounts	are	before	income	taxes	and	amortization	of	DAC.

[4] 	 Transfers	in	and/or	(out)	of	Level	3	are	primarily	attributable	to	the	availability	of	market	observable	information	and	the	re- evaluation	of	the	observability	of	pricing	inputs.

[5] 	 Derivative	instruments	are	reported	in	this	table	on	a	net	basis	for	asset/(liability)	positions	and	reported	in	the	Consolidated Balance	Sheet	in	other	investments	and	other	liabilities.

[6] Includes	both	market	and	non-market	impacts	in	deriving	realized	and	unrealized	gains	(losses).

[7] 	 Amounts	presented	are	for	Level	3	only	and	therefore	may	not	agree	to	other	disclosures	included	herein.

# Fair	Value	Option

The	Company	elected	the	fair	value	option	for	its	investments	containing	an	embedded	credit	derivative	which	were	not	bifurcated	as	a result	of	new	accounting	guidance	effective	July	1,	2010.	The	underlying	credit	risk	of	these	securities	is	primarily	corporate	bonds	and commercial	 real	 estate.	The	 Company	 elected	 the	 fair	 value	 option	 given	 the	 complexity	 of	 bifurcating	 the	 economic	 components associated	 with	 the	 embedded	 credit	 derivative.	Additionally,	 the	 Company	 elected	 the	 fair	 value	 option	 for	 purchases	 of	 foreign government	securities	to	align	with	the	accounting	for	yen-based	fixed	annuity	liabilities,	which	are	adjusted	for	changes	in	spot	rates through	realized	gains	and	losses.	Similar	to	other	fixed	maturities,	income	earned	from	these	securities	is	recorded	in	net	investment income.	Changes	in	the	fair	value	of	these	securities	are	recorded	in	net	realized	capital	gains	and	losses.

The	Company	previously	elected	the	fair	value	option	for	one	of	its	consolidated	VIEs	in	order	to	apply	a	consistent	accounting	model	for the	VIE's	assets	and	liabilities.	The	VIE	is	an	investment	vehicle	that	holds	high	quality	investments,	derivative	instruments	that	reference third-party	corporate	credit	and	issues	notes	to	investors	that	reflect	the	credit	characteristics	of	the	high	quality	investments	and	derivative instruments.	The	risks	and	rewards	associated	with	the	assets	of	the	VIE	inure	to	the	investors.	The	investors	have	no	recourse	against	the Company.	As	a	result,	there	has	been	no	adjustment	to	the	market	value	of	the	notes	for	the	Company's	own	credit	risk.

The	following	table	presents	the	changes	in	fair	value	of	those	assets	and	liabilities	accounted	for	using	the	fair	value	option	reported	in net	realized	capital	gains	and	losses	in	the	Company's	Consolidated	Statements	of	Operations.

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| Assets |  |  |
| Fixed\tmaturities,\tFVO |  |  |
| ABS | $— | $(5) |
| Corporate | 10 | (7) |
| CRE\tCDOs | (33) | 83 |
| Foreign\tgovernment | 45 | — |
| RMBS | — | (1) |
| Other\tliabilities |  |  |
| Credit-linked\tnotes | 28 | (26) |
| Total\trealized\tcapital\tgains | $50 | $44 |

The	following	table	presents	the	fair	value	of	assets	and	liabilities	accounted	for	using	the	fair	value	option	included	in	the	Company's Consolidated	Balance	Sheets.

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| Assets |  |  |
| Fixed\tmaturities,\tFVO |  |  |
| ABS | $65 | $65 |
| CRE\tCDOs | 225 | 270 |
| Corporate | 272 | 250 |
| Foreign\tgovernment | 766 | 64 |
| Total\tfixed\tmaturities,\tFVO | $1,328 | $649 |
| Other\tliabilities |  |  |
| Credit-linked\tnotes\t[1] | $9 | $37 |

# Financial	Instruments	Not	Carried	at	Fair	Value

The	following	table	presents	carrying	amounts	and	fair	values	of	The	Hartford's	financial	instruments	not	carried	at	fair	value	and	not included	in	the	above	fair	value	discussion	as	of	December	31,	2011	and	December	31,	2010.

|  | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- |
|  | Carrying\nAmount | Fair\nValue | Carrying\nAmount | Fair\nValue |
| Assets |  |  |  |  |
| Policy\tloans | $2,001 | $2,153 | $2,181 | $2,294 |
| Mortgage\tloans | 5,728 | 5,977 | 4,489 | 4,524 |
| Liabilities |  |  |  |  |
| Other\tpolicyholder\tfunds\tand\tbenefits\tpayable\t[1] | $10,343 | $11,238 | $11,155 | $11,383 |
| Senior\tnotes\t[2] | 4,481 | 4,623 | 4,880 | 5,072 |
| Junior\tsubordinated\tdebentures\t[2] | 1,735 | 2,430 | 1,727 | 2,596 |
| Consumer\tnotes\t[3] | 310 | 305 | 377 | 392 |

[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	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.

The	Company	has	not	made	any	changes	in	its	valuation	methodologies	for	the	following	assets	and	liabilities	since	December	31,	2010.

•	 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.

•	 Fair	values	for	other	policyholder	funds	and	benefits	payable,	not	carried	at	fair	value,	are	determined	by	estimating	future	cash flows,	discounted	at	the	current	market	rate.

•	 Fair	values	for	senior	notes	and	junior	subordinated	debentures	are	based	primarily	on	market	quotations	from	independent	third party	pricing	services.

# 5.	Investments	and	Derivative	Instruments

# Significant	Investment	Accounting	Policies

The	Company's	investments	in	fixed	maturities	include	bonds,	redeemable	preferred	stock	and	commercial	paper.	These	investments, along	with	certain	equity	securities,	which	include	common	and	non-redeemable	preferred	stocks,	are	classified	as	AFS	and	are	carried	at fair	 value.	 The	 after-tax	 difference	 from	 cost	 or	 amortized	 cost	 is	 reflected	 in	 stockholders'	 equity	 as	 a	 component	 of	 Other Comprehensive	Income	(Loss)	("OCI"),	after	adjustments	for	the	effect	of	deducting	the	life	and	pension	policyholders'	share	of	the immediate	participation	guaranteed	contracts	and	certain	life	and	annuity	deferred	policy	acquisition	costs	and	reserve	adjustments.	Fixed maturities	for	which	the	Company	elected	the	fair	value	option	are	classified	as	FVO	and	are	carried	at	fair	value.	The	equity	investments associated	with	the	variable	annuity	products	offered	in	Japan	are	recorded	at	fair	value	and	are	classified	as	trading	with	changes	in	fair value	recorded	in	net	investment	income.	Policy	loans	are	carried	at	outstanding	balance.	Mortgage	loans	are	recorded	at	the	outstanding principal	balance	adjusted	for	amortization	of	premiums	or	discounts	and	net	of	valuation	allowances.	Short-term	investments	are	carried at	amortized	cost,	which	approximates	fair	value.	Limited	partnerships	and	other	alternative	investments	are	reported	at	their	carrying value	with	the	change	in	carrying	value	accounted	for	under	the	equity	method	and	accordingly	the	Company's	share	of	earnings	are included	in	net	investment	income.	Recognition	of	limited	partnerships	and	other	alternative	investment	income	is	delayed	due	to	the availability	of	the	related	financial	information,	as	private	equity	and	other	funds	are	generally	on	a	three-month	delay	and	hedge	funds are	on	a	one-month	delay.	Accordingly,	income	for	the	years	ended	December	31,	2011,	2010	and	2009	may	not	include	the	full	impact	of current	year	changes	in	valuation	of	the	underlying	assets	and	liabilities,	which	are	generally	obtained	from	the	limited	partnerships	and other	alternative	investments'	general	partners.	Other	investments	primarily	consist	of	derivatives	instruments	which	are	carried	at	fair value.

# Recognition	and	Presentation	of	Other-Than-Temporary	Impairments

The	Company	deems	debt	securities	and	certain	equity	securities	with	debt-like	characteristics	(collectively	"debt	securities")	to	be	other- than-temporarily	impaired	("impaired")	if	a	security	meets	the	following	conditions:	a)	the	Company	intends	to	sell	or	it	is	more	likely than	not	the	Company	will	be	required	to	sell	the	security	before	a	recovery	in	value,	or	b)	the	Company	does	not	expect	to	recover	the entire	amortized	cost	basis	of	the	security.	If	the	Company	intends	to	sell	or	it	is	more	likely	than	not	the	Company	will	be	required	to	sell the	security	before	a	recovery	in	value,	a	charge	is	recorded	in	net	realized	capital	losses	equal	to	the	difference	between	the	fair	value	and amortized	cost	basis	of	the	security.	For	those	impaired	debt	securities	which	do	not	meet	the	first	condition	and	for	which	the	Company does	not	expect	to	recover	the	entire	amortized	cost	basis,	the	difference	between	the	security's	amortized	cost	basis	and	the	fair	value	is separated	into	the	portion	representing	a	credit	other-than-temporary	impairment	("impairment"),	which	is	recorded	in	net	realized	capital losses,	and	the	remaining	impairment,	which	is	recorded	in	OCI.	Generally,	the	Company	determines	a	security's	credit	impairment	as	the difference	between	its	amortized	cost	basis	and	its	best	estimate	of	expected	future	cash	flows	discounted	at	the	security's	effective	yield prior	to	impairment.	The	remaining	non-credit	impairment,	which	is	recorded	in	OCI,	is	the	difference	between	the	security's	fair	value and	the	Company's	best	estimate	of	expected	future	cash	flows	discounted	at	the	security's	effective	yield	prior	to	the	impairment,	which typically	represents	current	market	liquidity	and	risk	premiums.	The	previous	amortized	cost	basis	less	the	impairment	recognized	in	net realized	capital	losses	becomes	the	security's	new	cost	basis.	The	Company	accretes	the	new	cost	basis	to	the	estimated	future	cash	flows over	the	expected	remaining	life	of	the	security	by	prospectively	adjusting	the	security's	yield,	if	necessary.	The	following	table	presents the	change	in	non-credit	impairments	recognized	in	OCI	as	disclosed	in	the	Company's	Consolidated	Statements	of	Comprehensive Income	(Loss)	for	the	years	ended	December	31,	2011	and	2010,	respectively.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| OTTI\tlosses\trecognized\tin\tOCI | $(89) | $(418) | $(683) |
| Changes\tin\tfair\tvalue\tand/or\tsales | 112 | 647 | 244 |
| Tax\tand\tdeferred\tacquisition\tcosts | (14) | (113) | 215 |
| Change\tin\tnon-credit\timpairments\trecognized\tin\tOCI | $9 | $116 | $(224) |

# 5.	Investments	and	Derivative	Instruments	(continued)

The	Company's	evaluation	of	whether	a	credit	impairment	exists	for	debt	securities	includes	but	is	not	limited	to,	the	following	factors: (a)	changes	in	the	financial	condition	of	the	security's	underlying	collateral,	(b)	whether	the	issuer	is	current	on	contractually	obligated interest	and	principal	payments,	(c)	changes	in	the	financial	condition,	credit	rating	and	near-term	prospects	of	the	issuer,	(d)	the	extent	to which	the	fair	value	has	been	less	than	the	amortized	cost	of	the	security	and	(e)	the	payment	structure	of	the	security.	The	Company's best	 estimate	 of	 expected	 future	 cash	 flows	 used	 to	 determine	 the	 credit	 loss	 amount	 is	 a	 quantitative	 and	 qualitative	 process	 that incorporates	information	received	from	third-party	sources	along	with	certain	internal	assumptions	and	judgments	regarding	the	future performance	of	the	security.	The	Company's	best	estimate	of	future	cash	flows	involves	assumptions	including,	but	not	limited	to,	various performance	indicators,	such	as	historical	and	projected	default	and	recovery	rates,	credit	ratings,	current	and	projected	delinquency	rates, and	loan-to-value	("LTV")	ratios.	In	addition,	for	structured	securities,	the	Company	considers	factors	including,	but	not	limited	to, average	cumulative	collateral	loss	rates	that	vary	by	vintage	year,	commercial	and	residential	property	value	declines	that	vary	by	property type	and	location	and	commercial	real	estate	delinquency	levels.	These	assumptions	require	the	use	of	significant	management	judgment and	 include	 the	probability	of	 issuer	default	and	estimates	regarding	 timing	and	amount	of	expected	recoveries	which	may	 include estimating	the	underlying	collateral	value.	In	addition,	projections	of	expected	future	debt	security	cash	flows	may	change	based	upon new	information	regarding	the	performance	of	the	issuer	and/or	underlying	collateral	such	as	changes	in	the	projections	of	the	underlying property	value	estimates.

For	equity	securities	where	the	decline	in	the	fair	value	is	deemed	to	be	other-than-temporary,	a	charge	is	recorded	in	net	realized	capital losses	equal	to	the	difference	between	the	fair	value	and	cost	basis	of	the	security.	The	previous	cost	basis	less	the	impairment	becomes the	security's	new	cost	basis.	The	Company	asserts	its	intent	and	ability	to	retain	those	equity	securities	deemed	 to	be	 temporarily impaired	 until	 the	 price	 recovers.	 Once	 identified,	 these	 securities	 are	 systematically	 restricted	 from	 trading	 unless	 approved	 by	 a committee	of	investment	and	accounting	professionals	("Committee").	The	Committee	will	only	authorize	the	sale	of	these	securities based	on	predefined	criteria	that	relate	to	events	that	could	not	have	been	reasonably	foreseen.	Examples	of	the	criteria	include,	but	are not	limited	to,	the	deterioration	in	the	issuer's	financial	condition,	security	price	declines,	a	change	in	regulatory	requirements	or	a	major business	combination	or	major	disposition.

The	primary	factors	considered	in	evaluating	whether	an	impairment	exists	for	an	equity	security	include,	but	are	not	limited	to:	(a)	the length	of	time	and	extent	to	which	the	fair	value	has	been	less	than	the	cost	of	the	security,	(b)	changes	in	the	financial	condition,	credit rating	and	near-term	prospects	of	the	issuer,	(c)	whether	the	issuer	is	current	on	preferred	stock	dividends	and	(d)	the	intent	and	ability	of the	Company	to	retain	the	investment	for	a	period	of	time	sufficient	to	allow	for	recovery.

# Mortgage	Loan	Valuation	Allowances

The	Company's	security	monitoring	process	reviews	mortgage	loans	on	a	quarterly	basis	to	identify	potential	credit	losses.	Commercial mortgage	loans	are	considered	to	be	impaired	when	management	estimates	that,	based	upon	current	information	and	events,	it	is	probable that	the	Company	will	be	unable	to	collect	amounts	due	according	to	the	contractual	terms	of	the	loan	agreement.	Criteria	used	to determine	if	an	impairment	exists	include,	but	are	not	limited	to:	current	and	projected	macroeconomic	factors,	such	as	unemployment rates,	and	property-specific	factors	such	as	rental	rates,	occupancy	levels,	LTV	ratios	and	debt	service	coverage	ratios	("DSCR").	In addition,	the	Company	considers	historic,	current	and	projected	delinquency	rates	and	property	values.	These	assumptions	require	the	use of	significant	management	judgment	and	include	the	probability	and	timing	of	borrower	default	and	loss	severity	estimates.	In	addition, projections	of	expected	future	cash	flows	may	change	based	upon	new	information	regarding	the	performance	of	the	borrower	and/or underlying	collateral	such	as	changes	in	the	projections	of	the	underlying	property	value	estimates.

For	mortgage	loans	that	are	deemed	impaired,	a	valuation	allowance	is	established	for	the	difference	between	the	carrying	amount	and	the Company's	share	of	either	(a)	the	present	value	of	the	expected	future	cash	flows	discounted	at	the	loan's	effective	interest	rate,	(b)	the loan's	observable	market	price	or,	most	frequently,	(c)	the	fair	value	of	the	collateral.	A	valuation	allowance	has	been	established	for either	individual	loans	or	as	a	projected	loss	contingency	for	loans	with	an	LTV	ratio	of	90%	or	greater	and	consideration	of	other	credit quality	factors,	including	DSCR.	Changes	in	valuation	allowances	are	recorded	in	net	realized	capital	gains	and	losses.	Interest	income	on impaired	loans	is	accrued	to	the	extent	it	is	deemed	collectible	and	the	loans	continue	to	perform	under	the	original	or	restructured	terms. Interest	income	ceases	to	accrue	for	loans	when	it	is	probable	that	the	Company	will	not	receive	interest	and	principal	payments	according to	the	contractual	terms	of	the	loan	agreement,	or	if	a	loan	is	more	than	60	days	past	due.	Loans	may	resume	accrual	status	when	it	is determined	that	sufficient	collateral	exists	to	satisfy	the	full	amount	of	the	loan	and	interest	payments,	as	well	as	when	it	is	probable	cash will	be	received	in	the	foreseeable	future.	Interest	income	on	defaulted	loans	is	recognized	when	received.

# Net	Realized	Capital	Gains	and	Losses

Net	realized	capital	gains	and	losses	from	investment	sales,	after	deducting	the	life	and	pension	policyholders'	share	for	certain	products, are	reported	as	a	component	of	revenues	and	are	determined	on	a	specific	identification	basis,	as	well	as	changes	in	value	associated	with fixed	maturities	for	which	the	fair	value	option	was	elected.	Net	realized	capital	gains	and	losses	also	result	from	fair	value	changes	in derivatives	contracts	(both	free-standing	and	embedded)	that	do	not	qualify,	or	are	not	designated,	as	a	hedge	for	accounting	purposes,	and the	change	in	value	of	derivatives	in	certain	fair-value	hedge	relationships.	Impairments	and	mortgage	loan	valuation	allowances	are recognized	as	net	realized	capital	losses	in	accordance	with	the	Company's	impairment	and	mortgage	loan	valuation	allowance	policies previously	discussed	above.	Foreign	currency	transaction	remeasurements	are	also	included	in	net	realized	capital	gains	and	losses.

# Net	Investment	Income

Interest	income	from	fixed	maturities	and	mortgage	loans	is	recognized	when	earned	on	the	constant	effective	yield	method	based	on estimated	timing	of	cash	flows.	The	amortization	of	premium	and	accretion	of	discount	for	fixed	maturities	also	takes	into	consideration call	and	maturity	dates	that	produce	the	lowest	yield.	For	securitized	financial	assets	subject	to	prepayment	risk,	yields	are	recalculated and	 adjusted	 periodically	 to	 reflect	 historical	 and/or	 estimated	 future	 repayments	 using	 the	 retrospective	 method;	 however,	 if	 these investments	 are	 impaired,	 any	 yield	 adjustments	 are	 made	 using	 the	 prospective	 method.	 Prepayment	 fees	 on	 fixed	 maturities	 and mortgage	loans	are	recorded	in	net	investment	income	when	earned.	For	limited	partnerships	and	other	alternative	investments,	the	equity method	of	accounting	is	used	to	recognize	the	Company's	share	of	earnings.	For	impaired	debt	securities,	the	Company	accretes	the	new cost	basis	to	the	estimated	future	cash	flows	over	the	expected	remaining	life	of	the	security	by	prospectively	adjusting	the	security's	yield, if	necessary.	The	Company's	non-income	producing	investments	were	not	material	for	the	years	ended	December	31,	2011,	2010	and 2009.

Net	 investment	 income	 on	 equity	 securities,	 trading,	 includes	 dividend	 income	 and	 the	 changes	 in	 market	 value	 of	 the	 securities associated	 with	 the	 variable	 annuity	 products	 sold	 in	 Japan	 and	 the	 United	 Kingdom.	 The	 returns	 on	 these	 policyholder-directed investments	inure	to	the	benefit	of	the	variable	annuity	policyholders	but	the	underlying	funds	do	not	meet	the	criteria	for	separate	account reporting.	Accordingly,	these	assets	are	reflected	in	the	Company's	general	account	and	the	returns	credited	to	the	policyholders	are reflected	in	interest	credited,	a	component	of	benefits,	losses	and	loss	adjustment	expenses.

# Significant	Derivative	Instruments	Accounting	Policies

The	Company	utilizes	a	variety	of	derivative	instruments,	including	swaps,	caps,	floors,	forwards,	futures	and	options	through	one	of	four Company-approved	objectives:	to	hedge	risk	arising	from	interest	rate,	equity	market,	credit	spread	and	issuer	default,	price	or	currency exchange	rate	risk	or	volatility;	to	manage	liquidity;	to	control	transaction	costs;	or	to	enter	into	replication	transactions.

Interest	rate,	volatility,	dividend,	credit	default	and	 index	swaps	 involve	 the	periodic	exchange	of	cash	flows	with	other	parties,	at specified	intervals,	calculated	using	agreed	upon	rates	or	other	financial	variables	and	notional	principal	amounts.	Generally,	no	cash	or principal	payments	are	exchanged	at	the	inception	of	the	contract.	Typically,	at	the	time	a	swap	is	entered	into,	the	cash	flow	streams exchanged	by	the	counterparties	are	equal	in	value.

Interest	rate	cap	and	floor	contracts	entitle	the	purchaser	to	receive	from	the	issuer	at	specified	dates,	the	amount,	if	any,	by	which	a specified	market	rate	exceeds	the	cap	strike	interest	rate	or	falls	below	the	floor	strike	interest	rate,	applied	to	a	notional	principal	amount. A	premium	payment	is	made	by	the	purchaser	of	the	contract	at	its	inception	and	no	principal	payments	are	exchanged.

Forward	contracts	are	customized	commitments	that	specify	a	rate	of	interest	or	currency	exchange	rate	to	be	paid	or	received	on	an obligation	beginning	on	a	future	start	date	and	are	typically	settled	in	cash.

Financial	futures	are	standardized	commitments	to	either	purchase	or	sell	designated	financial	instruments,	at	a	future	date,	for	a	specified price	and	may	be	settled	in	cash	or	through	delivery	of	the	underlying	instrument.	Futures	contracts	trade	on	organized	exchanges.	Margin requirements	for	futures	are	met	by	pledging	securities	or	cash,	and	changes	in	the	futures'	contract	values	are	settled	daily	in	cash.

Option	contracts	grant	the	purchaser,	for	a	premium	payment,	the	right	to	either	purchase	from	or	sell	to	the	issuer	a	financial	instrument at	a	specified	price,	within	a	specified	period	or	on	a	stated	date.

Foreign	currency	swaps	exchange	an	initial	principal	amount	in	two	currencies,	agreeing	to	re-exchange	the	currencies	at	a	future	date,	at an	agreed	upon	exchange	rate.	There	may	also	be	a	periodic	exchange	of	payments	at	specified	intervals	calculated	using	the	agreed	upon rates	and	exchanged	principal	amounts.

The	Company's	derivative	transactions	are	used	in	strategies	permitted	under	the	derivative	use	plans	required	by	the	State	of	Connecticut, the	State	of	Illinois	and	the	State	of	New	York	insurance	departments.

# Accounting	and	Financial	Statement	Presentation	of	Derivative	Instruments	and	Hedging	Activities

Derivative	instruments	are	recognized	on	the	Consolidated	Balance	Sheets	at	fair	value.	For	balance	sheet	presentation	purposes,	the Company	offsets	the	fair	value	amounts,	income	accruals,	and	cash	collateral	held,	related	to	derivative	instruments	executed	in	a	legal entity	and	with	the	same	counterparty	under	a	master	netting	agreement,	which	provides	the	Company	with	the	legal	right	of	offset.

On	the	date	the	derivative	contract	is	entered	into,	the	Company	designates	the	derivative	as	(1)	a	hedge	of	the	fair	value	of	a	recognized asset	or	liability	("fair	value"	hedge),	(2)	a	hedge	of	the	variability	in	cash	flows	of	a	forecasted	transaction	or	of	amounts	to	be	received	or paid	related	to	a	recognized	asset	or	liability	("cash	flow"	hedge),	(3)	a	hedge	of	a	net	investment	in	a	foreign	operation	("net	investment" hedge)	or	(4)	held	for	other	investment	and/or	risk	management	purposes,	which	primarily	involve	managing	asset	or	liability	related	risks which	do	not	qualify	for	hedge	accounting.

# Fair	Value	Hedges

Changes	in	the	fair	value	of	a	derivative	that	is	designated	and	qualifies	as	a	fair	value	hedge,	including	foreign-currency	fair	value hedges,	along	with	the	changes	in	the	fair	value	of	the	hedged	asset	or	liability	that	is	attributable	to	the	hedged	risk,	are	recorded	in current	period	earnings	with	any	differences	between	the	net	change	in	fair	value	of	the	derivative	and	the	hedged	item	representing	the hedge	ineffectiveness.	Periodic	cash	flows	and	accruals	of	income/expense	("periodic	derivative	net	coupon	settlements")	are	recorded	in the	line	item	of	the	consolidated	statements	of	operations	in	which	the	cash	flows	of	the	hedged	item	are	recorded.

# Cash	Flow	Hedges

Changes	in	the	fair	value	of	a	derivative	that	is	designated	and	qualifies	as	a	cash	flow	hedge,	including	foreign-currency	cash	flow hedges,	are	recorded	in	AOCI	and	are	reclassified	into	earnings	when	the	variability	of	the	cash	flow	of	the	hedged	item	impacts	earnings. Gains	and	losses	on	derivative	contracts	that	are	reclassified	from	AOCI	to	current	period	earnings	are	included	in	the	line	item	in	the consolidated	statements	of	operations	in	which	the	cash	flows	of	the	hedged	item	are	recorded.	Any	hedge	ineffectiveness	is	recorded immediately	in	current	period	earnings	as	net	realized	capital	gains	and	losses.	Periodic	derivative	net	coupon	settlements	are	recorded	in the	line	item	of	the	consolidated	statements	of	operations	in	which	the	cash	flows	of	the	hedged	item	are	recorded.

# Net	Investment	in	a	Foreign	Operation	Hedges

Changes	in	fair	value	of	a	derivative	used	as	a	hedge	of	a	net	investment	in	a	foreign	operation,	to	the	extent	effective	as	a	hedge,	are recorded	in	the	foreign	currency	translation	adjustments	account	within	AOCI.	Cumulative	changes	in	fair	value	recorded	in	AOCI	are reclassified	into	earnings	upon	the	sale	or	complete,	or	substantially	complete,	liquidation	of	the	foreign	entity.	Any	hedge	ineffectiveness is	recorded	immediately	in	current	period	earnings	as	net	realized	capital	gains	and	losses.	Periodic	derivative	net	coupon	settlements	are recorded	in	the	line	item	of	the	consolidated	statements	of	operations	in	which	the	cash	flows	of	the	hedged	item	are	recorded.

# Other	Investment	and/or	Risk	Management	Activities

The	Company's	other	investment	and/or	risk	management	activities	primarily	relate	to	strategies	used	to	reduce	economic	risk	or	replicate permitted	investments	and	do	not	receive	hedge	accounting	treatment.	Changes	in	the	fair	value,	including	periodic	derivative	net	coupon settlements,	of	derivative	instruments	held	for	other	investment	and/or	risk	management	purposes	are	reported	in	current	period	earnings as	net	realized	capital	gains	and	losses.

# Hedge	Documentation	and	Effectiveness	Testing

To	qualify	for	hedge	accounting	treatment,	a	derivative	must	be	highly	effective	in	mitigating	the	designated	changes	in	fair	value	or	cash flow	of	the	hedged	item.	At	hedge	inception,	the	Company	formally	documents	all	relationships	between	hedging	instruments	and	hedged items,	as	well	as	its	risk-management	objective	and	strategy	for	undertaking	each	hedge	transaction.	The	documentation	process	includes linking	derivatives	that	are	designated	as	fair	value,	cash	flow,	or	net	investment	hedges	to	specific	assets	or	liabilities	on	the	balance sheet	or	to	specific	forecasted	transactions	and	defining	the	effectiveness	and	ineffectiveness	testing	methods	to	be	used.	The	Company also	formally	assesses	both	at	the	hedge's	inception	and	ongoing	on	a	quarterly	basis,	whether	the	derivatives	that	are	used	in	hedging transactions	have	been	and	are	expected	to	continue	to	be	highly	effective	in	offsetting	changes	in	fair	values	or	cash	flows	of	hedged items.	Hedge	effectiveness	is	assessed	using	qualitative	and	quantitative	methods.	Qualitative	methods	may	include	comparison	of	critical terms	of	the	derivative	to	the	hedged	item.	Quantitative	methods	include	regression	or	other	statistical	analysis	of	changes	in	fair	value	or cash	flows	associated	with	the	hedge	relationship.	Hedge	ineffectiveness	of	the	hedge	relationships	are	measured	each	reporting	period using	the	"Change	in	Variable	Cash	Flows	Method",	the	"Change	in	Fair	Value	Method",	the	"Hypothetical	Derivative	Method",	or	the "Dollar	Offset	Method".

# Discontinuance	of	Hedge	Accounting

The	Company	discontinues	hedge	accounting	prospectively	when	(1)	it	is	determined	that	the	derivative	is	no	longer	highly	effective	in offsetting	changes	in	the	fair	value	or	cash	flows	of	a	hedged	item;	(2)	the	derivative	is	de-designated	as	a	hedging	instrument;	or	(3)	the derivative	expires	or	is	sold,	terminated	or	exercised.

When	hedge	accounting	is	discontinued	because	it	is	determined	that	the	derivative	no	longer	qualifies	as	an	effective	fair-value	hedge, the	derivative	continues	to	be	carried	at	fair	value	on	the	balance	sheet	with	changes	in	its	fair	value	recognized	in	current	period	earnings.

When	hedge	accounting	is	discontinued	because	the	Company	becomes	aware	that	it	is	not	probable	that	the	forecasted	transaction	will occur,	the	derivative	continues	to	be	carried	on	the	balance	sheet	at	its	fair	value,	and	gains	and	losses	that	were	accumulated	in	AOCI	are recognized	immediately	in	earnings.

In	 other	 situations	 in	 which	 hedge	 accounting	 is	 discontinued	 on	 a	 cash-flow	 hedge,	 including	 those	 where	 the	 derivative	 is	 sold, terminated	or	exercised,	amounts	previously	deferred	in	AOCI	are	reclassified	into	earnings	when	earnings	are	impacted	by	the	variability of	the	cash	flow	of	the	hedged	item.

# Embedded	Derivatives

The	 Company	 purchases	 and	 issues	 financial	 instruments	 and	 products	 that	 contain	 embedded	 derivative	 instruments.	 When	 it	 is determined	that	(1)	the	embedded	derivative	possesses	economic	characteristics	that	are	not	clearly	and	closely	related	to	the	economic characteristics	of	the	host	contract,	and	(2)	a	separate	instrument	with	the	same	terms	would	qualify	as	a	derivative	instrument,	the embedded	derivative	is	bifurcated	from	the	host	for	measurement	purposes.	The	embedded	derivative,	which	is	reported	with	the	host instrument	in	the	consolidated	balance	sheets,	is	carried	at	fair	value	with	changes	in	fair	value	reported	in	net	realized	capital	gains	and losses.

Credit	risk	is	measured	as	the	amount	owed	to	the	Company	based	on	current	market	conditions	and	potential	payment	obligations between	the	Company	and	its	counterparties.	For	each	legal	entity	of	the	Company,	credit	exposures	are	generally	quantified	daily	based on	the	prior	business	day's	market	value	and	collateral	is	pledged	to	and	held	by,	or	on	behalf	of,	the	Company	to	the	extent	the	current value	of	derivatives	exceeds	the	contractual	thresholds	for	every	counterparty.	For	the	company's	domestic	derivative	programs,	the maximum	uncollateralized	threshold	for	a	derivative	counterparty	for	a	single	level	entity	is	generally	$10.	The	Company	also	minimizes the	 credit	 risk	 of	 derivative	 instruments	 by	 entering	 into	 transactions	 with	 high	 quality	 counterparties	 rated	A	 or	 better,	 which	 are monitored	and	evaluated	by	the	Company's	risk	management	team	and	reviewed	by	senior	management.	In	addition,	the	Company monitors	counterparty	credit	exposure	on	a	monthly	basis	to	ensure	compliance	with	Company	policies	and	statutory	limitations.	The Company	 generally	 requires	 that	 derivative	 contracts,	 other	 than	 exchange	 traded	 contracts,	 certain	 forward	 contracts,	 and	 certain embedded	and	reinsurance	derivatives,	be	governed	by	an	International	Swaps	and	Derivatives	Association	Master	Agreement	which	is structured	by	legal	entity	and	by	counterparty	and	permits	right	of	offset.

| (Before-tax) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Fixed\tmaturities | $3,396 | $3,489 | $3,617 |
| Equity\tsecurities,\tAFS | 36 | 53 | 93 |
| Mortgage\tloans | 281 | 260 | 307 |
| Policy\tloans | 131 | 132 | 139 |
| Limited\tpartnerships\tand\tother\talternative\tinvestments | 243 | 216 | (341) |
| Other\tinvestments | 301 | 329 | 314 |
| Investment\texpenses | (116) | (115) | (112) |
| Total\tsecurities\tAFS\tand\tother | 4,272 | 4,364 | 4,017 |
| Equity\tsecurities,\ttrading | (1,359) | (774) | 3,188 |
| Total\tnet\tinvestment\tincome\t(loss) | $2,913 | $3,590 | $7,205 |

The	net	unrealized	gain	(loss)	on	equity	securities,	trading,	included	in	net	investment	income	during	the	years	ended	December	31,	2011, 2010	and	2009,	was	($1.3)	billion,	($68)	and	$3.4	billion,	respectively,	substantially	all	of	which	have	corresponding	amounts	credited	to policyholders.	These	amounts	were	not	included	in	gross	unrealized	gains	(losses).

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Gross\tgains\ton\tsales | $693 | $836 | $1,056 |
| Gross\tlosses\ton\tsales | (384) | (522) | (1,397) |
| Net\tOTTI\tlosses\trecognized\tin\tearnings | (174) | (434) | (1,508) |
| Valuation\tallowances\ton\tmortgage\tloans | 24 | (154) | (403) |
| Japanese\tfixed\tannuity\tcontract\thedges,\tnet\t[1] | 3 | 27 | 47 |
| Periodic\tnet\tcoupon\tsettlements\ton\tcredit\tderivatives/Japan | (10) | (17) | (49) |
| Results\tof\tvariable\tannuity\thedge\tprogram |  |  |  |
| U.S.\tGMWB\tderivatives,\tnet | (397) | 89 | 1,464 |
| U.S.\tmacro\thedge\tprogram | (216) | (445) | (733) |
| Total\tU.S.\tprogram | (613) | (356) | 731 |
| International\tprogram | 775 | 11 | (112) |
| Total\tresults\tof\tvariable\tannuity\thedge\tprogram | 162 | (345) | 619 |
| Other,\tnet\t[2] | (459) | (2) | (369) |
| Net\trealized\tcapital\tlosses,\tbefore-tax | $(145) | $(611) | $(2,004) |

# Sales	of	Available-for-Sale	Securities

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, | For	the	years	ended	December	31, |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Fixed\tmaturities,\tAFS |  |  |  |
| Sale\tproceeds | $36,956 | $46,482 | $41,973 |
| Gross\tgains | 617 | 706 | 755 |
| Gross\tlosses | (381) | (452) | (1,272) |
| Equity\tsecurities,\tAFS |  |  |  |
| Sale\tproceeds | $239 | $325 | $941 |
| Gross\tgains | 59 | 24 | 429 |
| Gross\tlosses | — | (16) | (151) |

Sales	of	AFS	securities	in	2011	were	the	result	of	the	reinvestment	into	spread	product	well-positioned	for	modest	economic	growth,	as well	as	the	purposeful	reduction	of	certain	exposures.

# Other-Than-Temporary	Impairment	Losses

The	following	table	presents	a	roll-forward	of	the	Company's	cumulative	credit	impairments	on	debt	securities	held	as	of	December	31, 2011,	2010	and	2009.

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Balance\tas\tof\tbeginning\tof\tperiod | $(2,072) | $(2,200) | $— |
| Credit\timpairments\tremaining\tin\tretained\tearnings\trelated\tto\tadoption\tof\tnew |  |  |  |
| accounting\tguidance\tin\tApril\t2009 | — | — | (1,320) |
| Additions\tfor\tcredit\timpairments\trecognized\ton\t[1]: |  |  |  |
| Securities\tnot\tpreviously\timpaired | (56) | (211) | (840) |
| Securities\tpreviously\timpaired | (69) | (161) | (292) |
| Reductions\tfor\tcredit\timpairments\tpreviously\trecognized\ton: |  |  |  |
| Securities\tthat\tmatured\tor\twere\tsold\tduring\tthe\tperiod | 505 | 468 | 245 |
| Securities\tthat\tthe\tCompany\tintends\tto\tsell\tor\tmore\tlikely\tthan\tnot\twill\tbe |  |  |  |
| required\tto\tsell\tbefore\trecovery | — | — | 3 |
| Securities\tdue\tto\tan\tincrease\tin\texpected\tcash\tflows | 16 | 32 | 4 |
| Balance\tas\tof\tend\tof\tperiod | $(1,676) | $(2,072) | $(2,200) |

[1] 	 These	additions	are	included	in	the	net	OTTI	losses	recognized	in	earnings	in	the	Consolidated	Statements	of	Operations.

# Available-for-Sale	Securities

The	following	table	presents	the	Company's	AFS	securities	by	type.

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Cost\tor | Gross | Gross |  | Non- | Cost\tor | Gross | Gross |  | Non- |
|  | Amortized | Unrealized | Unrealized | Fair | Credit | Amortized | Unrealized | Unrealized | Fair | Credit |
|  | Cost | Gains | Losses | Value | OTTI\t[1] | Cost | Gains | Losses | Value | OTTI\t[1] |
| ABS | $3,430 | $55 | $(332) | $3,153 | $(7) | $3,247 | $38 | $(396) | $2,889 | $(2) |
| CDOs | 2,819 | 16 | (348) | 2,487 | (44) | 3,088 | 1 | (478) | 2,611 | (82) |
| CMBS | 7,192 | 271 | (512) | 6,951 | (31) | 8,297 | 235 | (615) | 7,917 | (9) |
| Corporate\t[2] | 41,161 | 3,661 | (739) | \t 44,011 | — | 38,496 | 2,174 | (747) | \t 39,884 | 7 |
| Foreign |  |  |  |  |  |  |  |  |  |  |
| govt./govt. |  |  |  |  |  |  |  |  |  |  |
| agencies | 2,030 | 141 | (10) | 2,161 | — | 1,627 | 73 | (17) | 1,683 | — |
| Municipal | 12,557 | 775 | (72) | \t 13,260 | — | 12,469 | 150 | (495) | \t 12,124 | — |
| RMBS | 5,961 | 252 | (456) | 5,757 | (105) | 6,036 | 109 | (462) | 5,683 | (124) |
| U.S.\tTreasuries | 3,828 | 203 | (2) | 4,029 | — | 5,159 | 24 | (154) | 5,029 | — |
| Total\tfixed |  |  |  |  |  |  |  |  |  |  |
| maturities, |  |  |  |  |  |  |  |  |  |  |
| AFS | 78,978 | 5,374 | (2,471) | \t 81,809 | (187) | 78,419 | 2,804 | (3,364) | \t 77,820 | (210) |
| Equity\tsecurities, |  |  |  |  |  |  |  |  |  |  |
| AFS | 1,056 | 68 | (203) | 921 | — | 1,013 | 92 | (132) | 973 | — |
| Total\tAFS |  |  |  |  |  |  |  |  |  |  |
| securities | $80,034 | $5,442 | $(2,674) | $82,730 | $(187) | $79,432 | $2,896 | $(3,496) | $78,793 | $(210) |

[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	December	31,	2011	and	2010.

[2] 	 Gross	unrealized	gains	(losses)	exclude	the	fair	value	of	bifurcated	embedded	derivative	features	of	certain	securities.	Subsequent changes	in	value	will	be	recorded	in	net	realized	capital	gains	(losses).

The	following	table	presents	the	Company's	fixed	maturities,	AFS,	by	contractual	maturity	year.

|  | December	31,	2011 | December	31,	2011 |
| :--- | :--- | :--- |
| Maturity | Amortized\tCost | Fair\tValue |
| One\tyear\tor\tless | $3,206 | $3,240 |
| Over\tone\tyear\tthrough\tfive\tyears | 16,140 | 16,790 |
| Over\tfive\tyears\tthrough\tten\tyears | 15,041 | 16,111 |
| Over\tten\tyears | 25,189 | 27,320 |
| Subtotal | 59,576 | 63,461 |
| Mortgage-backed\tand\tasset-backed\tsecurities | 19,402 | 18,348 |
| Total | $78,978 | $81,809 |

Estimated	maturities	may	differ	from	contractual	maturities	due	 to	security	call	or	prepayment	provisions.	Due	 to	 the	potential	for variability	in	payment	spreads	(i.e.	prepayments	or	extensions),	mortgage-backed	and	asset-backed	securities	are	not	categorized	by contractual	maturity.

# Concentration	of	Credit	Risk

The	Company	aims	to	maintain	a	diversified	investment	portfolio	including	issuer,	sector	and	geographic	stratification,	where	applicable, and	has	established	certain	exposure	limits,	diversification	standards	and	review	procedures	to	mitigate	credit	risk.

As	of	December	31,	2011	and	2010,	the	Company	was	not	exposed	to	any	concentration	of	credit	risk	of	a	single	issuer	greater	than	10% of	the	Company's	stockholders'	equity	other	than	U.S.	government	and	certain	U.S.	government	agencies.	As	of	December	31,	2011, other	than	U.S.	government	and	certain	U.S.	government	agencies,	the	Company's	three	largest	exposures	by	issuer	were	the	Government of	Japan,	Government	of	the	United	Kingdom	and	AT&T	Inc.	which	each	comprised	less	than	0.8%	of	total	invested	assets.	As	of December	31,	2010,	other	than	U.S.	government	and	certain	U.S.	government	agencies,	the	Company's	three	largest	exposures	by	issuer were	JP	Morgan	Chase	&	Co.,	Wells	Fargo	&	Co.	and	AT&T	Inc.	which	each	comprised	less	than	0.5%	of	total	invested	assets.

The	Company's	three	largest	exposures	by	sector	as	of	December	31,	2011	were	commercial	real	estate,	municipal	investments	and	U.S. Treasuries	 which	 comprised	 approximately	 10%,	 10%	 and	 7%,	 respectively,	 of	 total	 invested	 assets.	The	 Company's	 three	 largest exposures	by	sector	as	of	December	31,	2010	were	commercial	real	estate,	municipal	investments	and	U.S.	Treasuries	which	comprised approximately	10%,	9%	and	9%,	respectively,	of	total	invested	assets.

# Security	Unrealized	Loss	Aging

The	following	tables	present	the	Company's	unrealized	loss	aging	for	AFS	securities	by	type	and	length	of	time	the	security	was	in	a continuous	unrealized	loss	position.

|  | Less	Than	12	Months | Less	Than	12	Months | Less	Than	12	Months |  | 12	Months	or	More |  | Total | Total | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized |
|  | Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses |
| ABS | $629 | $594 | $(35) | $1,169 | $872 | $(297) | $1,798 | $1,466 | $(332) |
| CDOs | 81 | 59 | (22) | 2,709 | 2,383 | (326) | 2,790 | 2,442 | (348) |
| CMBS | 1,297 | 1,194 | (103) | 2,144 | 1,735 | (409) | 3,441 | 2,929 | (512) |
| Corporate\t[1] | 4,388 | 4,219 | (169) | 3,268 | 2,627 | (570) | 7,656 | 6,846 | (739) |
| Foreign\tgovt./govt. |  |  |  |  |  |  |  |  |  |
| agencies | 218 | 212 | (6) | 51 | 47 | (4) | 269 | 259 | (10) |
| Municipal | 299 | 294 | (5) | 627 | 560 | (67) | 926 | 854 | (72) |
| RMBS | 415 | 330 | (85) | 1,206 | 835 | (371) | 1,621 | 1,165 | (456) |
| U.S.\tTreasuries | 343 | 341 | (2) | — | — | — | 343 | 341 | (2) |
| Total\tfixed\tmaturities | 7,670 | 7,243 | (427) | 11,174 | 9,059 | (2,044) | 18,844 | 16,302 | (2,471) |
| Equity\tsecurities | 167 | 138 | (29) | 439 | 265 | (174) | 606 | 403 | (203) |
| Total\tsecurities\tin\tan |  |  |  |  |  |  |  |  |  |
| unrealized\tloss | $7,837 | $7,381 | $(456) | $11,613 | $9,324 | $(2,218) | $19,450 | $16,705 | $(2,674) |

|  |  |  |  |  | December	31,	2010 |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Less\tThan\t12\tMonths | Less\tThan\t12\tMonths | Less\tThan\t12\tMonths | 12\tMonths\tor\tMore | 12\tMonths\tor\tMore | 12\tMonths\tor\tMore | Total | Total | Total |
|  | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | Amortized | Fair | Unrealized |
|  | Cost | Value | Losses | Cost | Value | Losses | Cost | Value | Losses |
| ABS | $302 | $290 | $(12) | $1,410 | $1,026 | $(384) | $1,712 | $1,316 | $(396) |
| CDOs | 321 | 293 | (28) | 2,724 | 2,274 | (450) | 3,045 | 2,567 | (478) |
| CMBS | 556 | 530 | (26) | 3,962 | 3,373 | (589) | 4,518 | 3,903 | (615) |
| Corporate | 5,533 | 5,329 | (199) | 4,017 | 3,435 | (548) | 9,550 | 8,764 | (747) |
| Foreign\tgovt./govt. |  |  |  |  |  |  |  |  |  |
| agencies | 356 | 349 | (7) | 78 | 68 | (10) | 434 | 417 | (17) |
| Municipal | 7,485 | 7,173 | (312) | 1,046 | 863 | (183) | 8,531 | 8,036 | (495) |
| RMBS | 1,744 | 1,702 | (42) | 1,567 | 1,147 | (420) | 3,311 | 2,849 | (462) |
| U.S.\tTreasuries | 2,436 | 2,321 | (115) | 158 | 119 | (39) | 2,594 | 2,440 | (154) |
| Total\tfixed\tmaturities | 18,733 | 17,987 | (741) | 14,962 | 12,305 | (2,623) | 33,695 | 30,292 | (3,364) |
| Equity\tsecurities | 53 | 52 | (1) | 637 | 506 | (131) | 690 | 558 | (132) |
| Total\tsecurities\tin\tan\nunrealized\tloss | $18,786 | $18,039 | $(742) | $15,599 | $12,811 | $(2,754) | $34,385 | $30,850 | $(3,496) |

[1] 	 Unrealized	losses	exclude	the	change	in	fair	value	of	bifurcated	embedded	derivative	features	of	certain	securities.	Subsequent changes	in	fair	value	are	recorded	in	net	realized	capital	gains	(losses).

As	of	December	31,	2011,	AFS	securities	in	an	unrealized	loss	position,	comprised	of	2,549	securities,	primarily	related	to	corporate securities	 within	 the	 financial	 services	 sector,	 CMBS,	 and	 RMBS	 which	 have	 experienced	 significant	 price	 deterioration.	 As	 of December	31,	2011,	75%	of	these	securities	were	depressed	less	than	20%	of	cost	or	amortized	cost.	The	decline	in	unrealized	losses during	2011	was	primarily	attributable	to	a	decline	in	interest	rates,	partially	offset	by	credit	spread	widening.

Most	of	the	securities	depressed	for	twelve	months	or	more	relate	to	structured	securities	with	exposure	to	commercial	and	residential	real estate,	as	well	as	certain	floating	rate	corporate	securities	or	those	securities	with	greater	than	10	years	to	maturity,	concentrated	in	the financial	services	sector.	Current	market	spreads	continue	to	be	significantly	wider	for	structured	securities	with	exposure	to	commercial and	residential	real	estate,	as	compared	to	spreads	at	the	security's	respective	purchase	date,	largely	due	to	the	economic	and	market uncertainties	regarding	future	performance	of	commercial	and	residential	real	estate.	In	addition,	the	majority	of	securities	have	a	floating- rate	coupon	referenced	to	a	market	index	where	rates	have	declined	substantially.	The	Company	neither	has	an	intention	to	sell	nor	does	it expect	to	be	required	to	sell	the	securities	outlined	above.

# Mortgage	Loans

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amortized | Valuation | Carrying | Amortized | Valuation | Carrying |
|  | Cost\t[1] | Allowance | Value | Cost\t[1] | Allowance | Value |
| Commercial | $5,830 | $(102) | $5,728 | $4,492 | $(152) | $4,340 |
| Residential | — | — | — | 152 | (3) | 149 |
| Total\tmortgage\tloans | $5,830 | $(102) | $5,728 | $4,644 | $(155) | $4,489 |

As	of	December	31,	2011,	the	carrying	value	of	mortgage	loans	associated	with	the	valuation	allowance	was	$621.	Included	in	the	table above	are	mortgage	loans	held-for-sale	with	a	carrying	value	and	valuation	allowance	of	$74	and	$4,	respectively,	as	of	December	31, 2011,	and	$87	and	$7,	respectively,	as	of	December	31,	2010.	The	carrying	value	of	these	loans	is	included	in	mortgage	loans	in	the Company's	 Consolidated	 Balance	 Sheets.	These	 amounts	 do	 not	 include	 mortgage	 loans	 related	 to	 the	 divestiture	 of	 Federal	Trust Corporation.	For	further	information	on	Federal	Trust	Corporation,	see	Note	20.	As	of	December	31,	2011,	loans	within	the	Company's mortgage	loan	portfolio	that	have	had	extensions	or	restructurings	other	than	what	is	allowable	under	the	original	terms	of	the	contract	are immaterial.

The	following	table	presents	the	activity	within	the	Company's	valuation	allowance	for	mortgage	loans.	These	loans	have	been	evaluated both	individually	and	collectively	for	impairment.	Loans	evaluated	collectively	for	impairment	are	immaterial.

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Balance\tas\tof\tJanuary\t1 | $(155) | $(366) | $(26) |
| Additions | (26) | (157) | (408) |
| Deductions | 79 | 368 | 68 |
| Balance\tas\tof\tDecember\t31 | $(102) | $(155) | $(366) |

The	current	weighted-average	LTV	ratio	of	the	Company's	commercial	mortgage	loan	portfolio	was	68%	as	of	December	31,	2011,	while the	weighted-average	LTV	ratio	at	origination	of	these	loans	was	64%.	LTV	ratios	compare	the	loan	amount	to	the	value	of	the	underlying property	collateralizing	the	loan.	The	loan	values	are	updated	no	less	than	annually	through	property	level	reviews	of	the	portfolio. Factors	considered	in	the	property	valuation	include,	but	are	not	limited	to,	actual	and	expected	property	cash	flows,	geographic	market data	and	capitalization	rates.	DSCRs	compare	a	property's	net	operating	income	to	the	borrower's	principal	and	interest	payments.	The current	 weighted	 average	 DSCR	 of	 the	 Company's	 commercial	 mortgage	 loan	 portfolio	 was	 1.94x	 as	 of	 December	 31,	 2011.	The Company	held	only	two	delinquent	commercial	mortgage	loans	past	due	by	90	days	or	more.	The	total	carrying	value	and	valuation allowance	of	these	loans	totaled	$14	and	$60,	respectively,	as	of	December	31,	2011,	and	are	not	accruing	income.

The	following	table	presents	the	carrying	value	of	the	Company's	commercial	mortgage	loans	by	LTV	and	DSCR.

|  | Commercial	Mortgage	Loans	Credit	Quality | Commercial	Mortgage	Loans	Credit	Quality |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31,\t2011 | December\t31,\t2011 | December\t31,\t2010 | December\t31,\t2010 |
|  | Carrying | Avg.\tDebt-Service | Carrying | Avg.\tDebt-Service |
| Loan-to-value | Value | Coverage\tRatio | Value | Coverage\tRatio |
| Greater\tthan\t80% | $707 | 1.45x | $1,358 | 1.49x |
| 65%\t–\t80% | 2,384 | 1.60x | 1,829 | 1.93x |
| Less\tthan\t65% | 2,637 | 2.40x | 1,153 | 2.26x |
| Total\tcommercial\tmortgage\tloans | $5,728 | 1.94x | $4,340 | 1.87x |

The	following	tables	present	the	carrying	value	of	the	Company's	mortgage	loans	by	region	and	property	type.

|  | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- |
|  | Carrying | Percent\tof | Carrying | Percent\tof |
|  | Value | Total | Value | Total |
| East\tNorth\tCentral | $94 | 1.6% | $77 | 1.7% |
| Middle\tAtlantic | 508 | 8.9% | 428 | 9.5% |
| Mountain | 125 | 2.2% | 109 | 2.4% |
| New\tEngland | 294 | 5.1% | 259 | 5.8% |
| Pacific | 1,690 | 29.5% | 1,147 | 25.6% |
| South\tAtlantic | 1,149 | 20.1% | 1,177 | 26.3% |
| West\tNorth\tCentral | 30 | 0.5% | 36 | 0.8% |
| West\tSouth\tCentral | 224 | 3.9% | 231 | 5.1% |
| Other\t[1] | 1,614 | 28.2% | 1,025 | 22.8% |
| Total\tmortgage\tloans | $5,728 | 100.0% | $4,489 | 100.0% |

# [1] 	 Primarily	represents	loans	collateralized	by	multiple	properties	in	various	regions.

|  | Mortgage	Loans	by	Property	Type |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31,\t2011 | December\t31,\t2011 | December\t31,\t2010 | December\t31,\t2010 |
|  | Carrying\nValue | Percent\tof\nTotal | Carrying\nValue | Percent\tof\nTotal |
| Commercial |  |  |  |  |
| Agricultural | $249 | 4.3% | $315 | 7.0% |
| Industrial | 1,747 | 30.5% | 1,141 | 25.4% |
| Lodging | 93 | 1.6% | 132 | 2.9% |
| Multifamily | 1,070 | 18.7% | 713 | 15.9% |
| Office | 1,078 | 18.8% | 986 | 22.1% |
| Retail | 1,234 | 21.5% | 669 | 14.9% |
| Other | 257 | 4.6% | 384 | 8.5% |
| Residential | — | — | 149 | 3.3% |
| Total\tmortgage\tloans | $5,728 | 100.0% | $4,489 | 100.0% |

# Variable	Interest	Entities

The	Company	is	involved	with	various	special	purpose	entities	and	other	entities	that	are	deemed	to	be	VIEs	primarily	as	a	collateral manager	and	as	an	investor	through	normal	investment	activities,	as	well	as	a	means	of	accessing	capital.	A	VIE	is	an	entity	that	either has	investors	that	lack	certain	essential	characteristics	of	a	controlling	financial	interest	or	lacks	sufficient	funds	to	finance	its	own activities	without	financial	support	provided	by	other	entities.

The	Company	performs	ongoing	qualitative	assessments	of	its	VIEs	to	determine	whether	the	Company	has	a	controlling	financial	interest in	the	VIE	and	therefore	is	the	primary	beneficiary.	The	Company	is	deemed	to	have	a	controlling	financial	interest	when	it	has	both	the ability	to	direct	the	activities	that	most	significantly	impact	the	economic	performance	of	the	VIE	and	the	obligation	to	absorb	losses	or right	 to	 receive	 benefits	 from	 the	VIE	 that	 could	 potentially	 be	 significant	 to	 the	VIE.	 Based	 on	 the	 Company's	 assessment,	 if	 it determines	it	is	the	primary	beneficiary,	the	Company	consolidates	the	VIE	in	the	Company's	Consolidated	Financial	Statements.

# Consolidated	VIEs

The	following	table	presents	the	carrying	value	of	assets	and	liabilities,	and	the	maximum	exposure	to	loss	relating	to	the	VIEs	for	which the	Company	is	the	primary	beneficiary.	Creditors	have	no	recourse	against	the	Company	in	the	event	of	default	by	these	VIEs	nor	does the	Company	have	any	implied	or	unfunded	commitments	to	these	VIEs.	The	Company's	financial	or	other	support	provided	to	these VIEs	is	limited	to	its	investment	management	services	and	original	investment.

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Maximum |  |  | Maximum |
|  | Total | Total | Exposure | Total | Total | Exposure |
|  | Assets | Liabilities\t[1] | to\tLoss\t[2] | Assets | Liabilities\t[1] | to\tLoss\t[2] |
| CDOs\t[3] | $491 | $471 | $29 | $729 | $393 | $289 |
| Limited\tpartnerships | 7 | — | 7 | 14 | 1 | 13 |
| Total | $498 | $471 | $36 | $743 | $394 | $302 |

[1] Included	in	other	liabilities	in	the	Company's	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,	AFS,	and	fixed	maturities,	FVO,	in	the	Company's	Consolidated	Balance	Sheets.

CDOs	 represent	 structured	 investment	 vehicles	 for	 which	 the	 Company	 has	 a	 controlling	 financial	 interest	 as	 it	 provides	 collateral management	 services,	 earns	 a	 fee	 for	 those	 services	 and	 also	 holds	 investments	 in	 the	 securities	 issued	 by	 these	 vehicles.	 Limited partnerships	represent	one	hedge	fund	for	which	the	Company	holds	a	majority	interest	in	the	fund	as	an	investment.

# Non-Consolidated	VIEs

The	Company	holds	a	significant	variable	 interest	for	one	VIE	for	which	 it	 is	not	 the	primary	beneficiary	and,	 therefore,	was	not consolidated	on	the	Company's	Consolidated	Balance	Sheets.	This	VIE	represents	a	contingent	capital	facility	("facility")	that	has	been held	by	the	Company	since	February	2007	for	which	the	Company	has	no	implied	or	unfunded	commitments.	Assets	and	liabilities recorded	for	the	facility	were	$28	as	of	December	31,	2011	and	$32	as	of	December	31,	2010.	Additionally,	the	Company	has	a	maximum exposure	to	loss	of	$3	as	of	December	31,	2011	and	$4	as	of	December	31,	2010,	which	represents	the	issuance	costs	that	were	incurred	to establish	the	facility.	The	Company	does	not	have	a	controlling	financial	interest	as	it	does	not	manage	the	assets	of	the	facility	nor	does	it have	the	obligation	to	absorb	losses	or	the	right	to	receive	benefits	that	could	potentially	be	significant	to	the	facility,	as	the	asset	manager has	significant	variable	interest	in	the	vehicle.	The	Company's	financial	or	other	support	provided	to	the	facility	is	limited	to	providing ongoing	support	to	cover	the	facility's	operating	expenses.	For	further	information	on	the	facility,	see	Note	14.

In	addition,	the	Company,	through	normal	investment	activities,	makes	passive	investments	in	structured	securities	issued	by	VIEs	for which	the	Company	is	not	the	manager	which	are	included	in	ABS,	CDOs,	CMBS	and	RMBS	in	the	Available-for-Sale	Securities	table and	fixed	maturities,	FVO,	in	the	Company's	Consolidated	Balance	Sheets.	The	Company	has	not	provided	financial	or	other	support	with respect	to	these	investments	other	than	its	original	investment.	For	these	investments,	the	Company	determined	it	is	not	the	primary beneficiary	due	to	the	relative	size	of	the	Company's	investment	in	comparison	to	the	principal	amount	of	the	structured	securities	issued by	the	VIEs,	the	level	of	credit	subordination	which	reduces	the	Company's	obligation	to	absorb	losses	or	right	to	receive	benefits	and	the Company's	 inability	 to	 direct	 the	 activities	 that	 most	 significantly	 impact	 the	 economic	 performance	 of	 the	VIEs.	The	 Company's maximum	exposure	to	loss	on	these	investments	is	limited	to	the	amount	of	the	Company's	investment.

# Equity	Method	Investments

The	Company	has	investments	in	limited	partnerships	and	other	alternative	investments	which	include	hedge	funds,	mortgage	and	real estate	funds,	mezzanine	debt	funds,	and	private	equity	and	other	funds	(collectively,	"limited	partnerships").	These	 investments	are accounted	for	under	the	equity	method	and	the	Company's	maximum	exposure	to	loss	as	of	December	31,	2011	is	limited	to	the	total carrying	value	of	$2.5	billion.	In	addition,	the	Company	has	outstanding	commitments	totaling	$700	to	fund	limited	partnership	and	other alternative	investments	as	of	December	31,	2011.	The	Company's	investments	in	limited	partnerships	are	generally	of	a	passive	nature	in that	the	Company	does	not	take	an	active	role	in	the	management	of	the	limited	partnerships.	In	2011,	aggregate	investment	income (losses)	from	limited	partnerships	and	other	alternative	investments	exceeded	10%	of	the	Company's	pre-tax	consolidated	net	income. Accordingly,	the	Company	is	disclosing	aggregated	summarized	financial	data	for	the	Company's	limited	partnership	investments.	This aggregated	summarized	financial	data	does	not	represent	the	Company's	proportionate	share	of	limited	partnership	assets	or	earnings. Aggregate	 total	 assets	 of	 the	 limited	 partnerships	 in	 which	 the	 Company	 invested	 totaled	 $91.3	 billion	 and	 $93.9	 billion	 as	 of December	31,	2011	and	2010,	respectively.	Aggregate	total	liabilities	of	the	limited	partnerships	in	which	the	Company	invested	totaled $20.6	billion	and	$22.3	billion	as	of	December	31,	2011	and	2010,	respectively.	Aggregate	net	investment	income	(loss)	of	the	limited partnerships	in	which	the	Company	invested	totaled	$1.3	billion,	$857	and	($688)	for	the	periods	ended	December	31,	2011,	2010	and 2009,	 respectively.	 Aggregate	 net	 income	 (loss)	 of	 the	 limited	 partnerships	 in	 which	 the	 Company	 invested	 totaled	 $9.1	 billion, $10.3	billion	and	($9.1)	billion	for	the	periods	ended	December	31,	2011,	2010	and	2009,	respectively.	As	of,	and	for	the	period	ended, December	31,	2011,	the	aggregated	summarized	financial	data	reflects	the	latest	available	financial	information.

The	Company	utilizes	a	variety	of	over-the-counter	and	exchange	traded	derivative	instruments	as	a	part	of	its	overall	risk	management strategy,	as	well	as	to	enter	into	replication	transactions.	Derivative	instruments	are	used	to	manage	risk	associated	with	interest	rate, equity	market,	credit	spread,	issuer	default,	price,	and	currency	exchange	rate	risk	or	volatility.	Replication	transactions	are	used	as	an economical	means	to	synthetically	replicate	the	characteristics	and	performance	of	assets	that	would	otherwise	be	permissible	investments under	the	Company's	investment	policies.	The	Company	also	purchases	and	issues	financial	instruments	and	products	that	either	are accounted	for	as	free-standing	derivatives,	such	as	certain	reinsurance	contracts,	or	may	contain	features	that	are	deemed	to	be	embedded derivative	instruments,	such	as	the	GMWB	rider	included	with	certain	variable	annuity	products.

# Interest	rate	swaps

Interest	rate	swaps	are	primarily	used	to	convert	interest	receipts	on	floating-rate	fixed	maturity	securities	or	interest	payments	on	floating- rate	guaranteed	investment	contracts	to	fixed	rates.	These	derivatives	are	predominantly	used	to	better	match	cash	receipts	from	assets with	cash	disbursements	required	to	fund	liabilities.

The	Company	also	enters	into	forward	starting	swap	agreements	to	hedge	the	interest	rate	exposure	related	to	the	purchase	of	fixed-rate securities.	These	derivatives	are	primarily	structured	to	hedge	interest	rate	risk	inherent	in	the	assumptions	used	to	price	certain	liabilities.

# Foreign	currency	swaps

Foreign	currency	swaps	are	used	to	convert	foreign	currency-denominated	cash	flows	related	to	certain	investment	receipts	and	liability payments	to	U.S.	dollars	in	order	to	reduce	cash	flow	fluctuations	due	to	changes	in	currency	rates.

Interest	rate	swaps	are	used to	hedge the	changes in	fair	value	of	certain	fixed	rate liabilities	and	fixed	maturity	securities	due to fluctuations	in	interest	rates.

Foreign	currency	swaps	are	used	to	hedge	the	changes	in	fair	value	of	certain	foreign	currency-denominated	fixed	rate	liabilities	due	to changes	in	foreign	currency	rates	by	swapping	the	fixed	foreign	payments	to	floating	rate	U.S.	dollar	denominated	payments.

# Non-qualifying	strategies

# Interest	rate	swaps,	swaptions,	caps,	floors,	and	futures

The	Company	uses	interest	rate	swaps,	swaptions,	caps,	floors,	and	futures	to	manage	duration	between	assets	and	liabilities	in	certain investment	portfolios.	In	addition,	the	Company	enters	into	interest	rate	swaps	to	terminate	existing	swaps,	thereby	offsetting	the	changes in	value	of	the	original	swap.	As	of	December	31,	2011	and	2010,	the	notional	amount	of	interest	rate	swaps	in	offsetting	relationships was	$7.8	billion	and	$7.1	billion,	respectively.

# Foreign	currency	swaps	and	forwards

The	Company	enters	into	foreign	currency	swaps	and	forwards	to	convert	the	foreign	currency	exposures	of	certain	foreign	currency- denominated	fixed	maturity	investments	to	U.S.	dollars.

# Japan	3Win	foreign	currency	swaps

Prior	to	the	second	quarter	of	2009,	The	Company	offered	certain	variable	annuity	products	with	a	GMIB	rider	through	a	wholly-owned Japanese	subsidiary.	The	GMIB	rider	is	reinsured	to	a	wholly-owned	U.S.	subsidiary,	which	invests	in	U.S.	dollar	denominated	assets	to support	the	liability.	The	U.S.	subsidiary	entered	into	pay	U.S.	dollar,	receive	yen	swap	contracts	to	hedge	the	currency	and	interest	rate exposure	between	the	U.S.	dollar	denominated	assets	and	the	yen	denominated	fixed	liability	reinsurance	payments.

# Japanese	fixed	annuity	hedging	instruments

Prior	to	the	second	quarter	of	2009,	The	Company	offered	a	yen	denominated	fixed	annuity	product	through	a	wholly-owned	Japanese subsidiary	and	reinsured	to	a	wholly-owned	U.S.	subsidiary.	The	U.S.	subsidiary	invests	in	U.S.	dollar	denominated	securities	to	support the	yen	denominated	fixed	liability	payments	and	entered	into	currency	rate	swaps	to	hedge	the	foreign	currency	exchange	rate	and	yen interest	rate	exposures	that	exist	as	a	result	of	U.S.	dollar	assets	backing	the	yen	denominated	liability.

# Credit	derivatives	that	purchase	credit	protection

Credit	default	swaps	are	used	to	purchase	credit	protection	on	an	individual	entity	or	referenced	index	to	economically	hedge	against default	risk	and	credit-related	changes	in	value	on	fixed	maturity	securities.	These	contracts	require	the	Company	to	pay	a	periodic	fee	in exchange	for	compensation	from	the	counterparty	should	the	referenced	security	issuers	experience	a	credit	event,	as	defined	in	the contract.

# Credit	derivatives	that	assume	credit	risk

Credit	default	swaps	are	used	to	assume	credit	risk	related	to	an	individual	entity,	referenced	index,	or	asset	pool,	as	a	part	of	replication transactions.	These	contracts	entitle	the	Company	to	receive	a	periodic	fee	in	exchange	for	an	obligation	to	compensate	the	derivative counterparty	should	the	referenced	security	issuers	experience	a	credit	event,	as	defined	in	the	contract.	The	Company	is	also	exposed	to credit	 risk	 due	 to	 credit	 derivatives	 embedded	 within	 certain	 fixed	 maturity	 securities.	These	 securities	 are	 primarily	 comprised	 of structured	securities	that	contain	credit	derivatives	that	reference	a	standard	index	of	corporate	securities.

# Credit	derivatives	in	offsetting	positions

The	Company	enters	into	credit	default	swaps	to	terminate	existing	credit	default	swaps,	thereby	offsetting	the	changes	in	value	of	the original	swap	going	forward.

# Equity	index	swaps	and	options

The	Company	offers	certain	equity	indexed	products,	which	may	contain	an	embedded	derivative	that	requires	bifurcation.	The	Company enters	into	S&P	index	swaps	and	options	to	economically	hedge	the	equity	volatility	risk	associated	with	these	embedded	derivatives.	In addition,	during	the	third	quarter	of	2011,	the	Company	entered	into	equity	index	options	and	futures	with	the	purpose	of	hedging	the impact	of	an	adverse	equity	market	environment	on	the	investment	portfolio.

# U.S	GMWB	product	derivatives

The	Company	offers	certain	variable	annuity	products	with	a	GMWB	rider	in	the	U.S.	The	GMWB	is	a	bifurcated	embedded	derivative that	provides	the	policyholder	with	a	guaranteed	remaining	balance	("GRB")	if	the	account	value	is	reduced	to	zero	through	a	combination of	market	declines	and	withdrawals.	The	GRB	is	generally	equal	to	premiums	less	withdrawals.	Certain	contract	provisions	can	increase the	GRB	at	contractholder	election	or	after	the	passage	of	time.	The	notional	value	of	the	embedded	derivative	is	the	GRB.

# U.S.	GMWB	reinsurance	contracts

The	Company	has	entered	into	reinsurance	arrangements	to	offset	a	portion	of	its	risk	exposure	to	the	GMWB	for	the	remaining	lives	of covered	variable	annuity	contracts.	Reinsurance	contracts	covering	GMWB	are	accounted	for	as	free-standing	derivatives.	The	notional amount	of	the	reinsurance	contracts	is	the	GRB	amount.

# U.S.	GMWB	hedging	instruments

The	Company	enters	into	derivative	contracts	to	partially	hedge	exposure	associated	with	a	portion	of	the	GMWB	liabilities	that	are	not reinsured.	These	derivative	contracts	include	customized	swaps,	interest	rate	swaps	and	futures,	and	equity	swaps,	options,	and	futures,	on certain	indices	including	the	S&P	500	index,	EAFE	index,	and	NASDAQ	index.

The	following	table	represents	notional	and	fair	value	for	U.S.	GMWB	hedging	instruments.

|  | Notional	Amount | Notional	Amount | Fair	Value | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, | December\t31, | December\t31, | December\t31, |
|  | 2011 | 2010 | 2011 | 2010 |
| Customized\tswaps | $8,389 | $10,113 | $385 | $209 |
| Equity\tswaps,\toptions,\tand\tfutures | 5,320 | 4,943 | 498 | 391 |
| Interest\trate\tswaps\tand\tfutures | 2,697 | 2,800 | 11 | (133) |
| Total | $16,406 | $17,856 | $894 | $467 |

# U.S.	macro	hedge	program

The	Company	utilizes	equity	options	and	futures	contracts	to	partially	hedge	against	a	decline	in	the	equity	markets	and	the	resulting statutory	 surplus	 and	 capital	 impact	 primarily	 arising	 from	 guaranteed	 minimum	 death	 benefit	 ("GMDB"),	 GMIB	 and	 GMWB obligations.

The	following	table	represents	notional	and	fair	value	for	the	U.S.	macro	hedge	program.

|  | Notional	Amount | Notional	Amount | Fair	Value | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, | December\t31, | December\t31, | December\t31, |
|  | 2011 | 2010 | 2011 | 2010 |
| Equity\tfutures | $59 | $166 | $—\t $— | $—\t $— |
| Equity\toptions | 6,760 | 12,891 | 357 | 203 |
| Total | $6,819 | $13,057 | $357 | $203 |

# International	program	product	derivatives

The	Company	formerly	offered	certain	variable	annuity	products	with	GMWB	or	GMAB	riders	in	the	U.K.	and	Japan.	The	GMWB	and GMAB	are	bifurcated	embedded	derivatives.	The	GMWB	provides	the	policyholder	with	a	GRB	if	the	account	value	is	reduced	to	zero through	a	combination	of	market	declines	and	withdrawals.	The	GRB	is	generally	equal	to	premiums	less	withdrawals.	Certain	contract provisions	can	increase	the	GRB	at	contractholder	election	or	after	the	passage	of	time.	The	GMAB	provides	the	policyholder	with	their initial	deposit	in	a	lump	sum	after	a	specified	waiting	period.	The	notional	amount	of	the	embedded	derivatives	are	the	foreign	currency denominated	GRBs	converted	to	U.S.	dollars	at	the	current	foreign	spot	exchange	rate	as	of	the	reporting	period	date.

# International	program	hedging	instruments

The	Company	utilizes	equity	futures,	options	and	swaps,	and	currency	forwards	and	options	to	partially	hedge	against	a	decline	in	the debt	and	equity	markets	or	changes	in	foreign	currency	exchange	rates	and	the	resulting	statutory	surplus	and	capital	impact	primarily arising	from	GMDB,	GMIB	and	GMWB	obligations	issued	in	the	U.K.	and	Japan.	The	Company	also	enters	into	foreign	currency denominated	interest	rate	swaps	and	swaptions	to	hedge	the	interest	rate	exposure	related	to	the	potential	annuitization	of	certain	benefit obligations.

The	following	table	represents	notional	and	fair	value	for	the	international	program	hedging	instruments.

|  | Notional	Amount | Notional	Amount | Fair	Value | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
|  | December\t31, | December\t31, | December\t31, | December\t31, |
|  | 2011 | 2010 | 2011 | 2010 |
| Currency\tforwards | $8,622 | $4,951 | $446 | $166 |
| Currency\toptions\t[1] | 7,357 | 5,296 | 127 | 62 |
| Equity\tfutures | 3,835 | 1,002 | — | — |
| Equity\toptions | 1,565 | 1,073 | 74 | 4 |
| Equity\tswaps | 392 | 369 | (8) | 1 |
| Interest\trate\tfutures | 739 | — | — | — |
| Interest\trate\tswaps\tand\tswaptions | 11,216 | 2,182 | 111 | 21 |
| Total | $33,726 | $14,873 | $750 | $254 |

[1] 	 As	of	December	31,	2011	and	2010,	notional	amounts	include	$5.3	billion	and	$3.1	billion,	respectively,	related	to	long	positions and	$2.1	billion	and	$2.2	billion,	respectively,	related	to	short	positions.

# Contingent	capital	facility	put	option

The	Company	entered	into	a	put	option	agreement	that	provides	the	Company	the	right	to	require	a	third-party	trust	to	purchase,	at	any time,	The	Hartford's	junior	subordinated	notes	in	a	maximum	aggregate	principal	amount	of	$500.	Under	the	put	option	agreement,	The Hartford	will	pay	premiums	on	a	periodic	basis	and	will	reimburse	the	trust	for	certain	fees	and	ordinary	expenses.

# Derivative	Balance	Sheet	Classification

The	table	below	summarizes	the	balance	sheet	classification	of	the	Company's	derivative	related	fair	value	amounts,	as	well	as	the	gross asset	and	liability	fair	value	amounts.	The	fair	value	amounts	presented	do	not	include	income	accruals	or	cash	collateral	held	amounts, which	are	netted	with	derivative	fair	value	amounts	to	determine	balance	sheet	presentation.	Derivatives	in	the	Company's	separate accounts	are	not	included	because	the	associated	gains	and	losses	accrue	directly	to	policyholders.	The	Company's	derivative	instruments are	held	for	risk	management	purposes,	unless	otherwise	noted	in	the	table	below.	The	notional	amount	of	derivative	contracts	represents the	basis	upon	which	pay	or	receive	amounts	are	calculated	and	is	presented	in	the	table	to	quantify	the	volume	of	the	Company's derivative	activity.	Notional	amounts	are	not	necessarily	reflective	of	credit	risk.

|  | Net	Derivatives | Net	Derivatives | Net	Derivatives | Net	Derivatives | Asset	Derivatives | Asset	Derivatives | Liability	Derivatives | Liability	Derivatives |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Notional\tAmount | Notional\tAmount | Fair\tValue | Fair\tValue | Fair\tValue | Fair\tValue | Fair\tValue | Fair\tValue |
|  | Dec.\t31, | Dec.\t31, | Dec.\t31, | Dec.\t31, | Dec.\t31, | Dec.\t31, | Dec.\t31, | Dec.\t31, |
| Hedge\tDesignation/\tDerivative\tType | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| Cash\tflow\thedges |  |  |  |  |  |  |  |  |
| Interest\trate\tswaps | $8,652 | $10,290 | $329 | $115 | $329 | $188 | $— | $(73) |
| Foreign\tcurrency\tswaps | 291 | 335 | 6 | 6 | 30 | 29 | (24) | (23) |
| Total\tcash\tflow\thedges | 8,943 | 10,625 | 335 | 121 | 359 | 217 | (24) | (96) |
| Fair\tvalue\thedges |  |  |  |  |  |  |  |  |
| Interest\trate\tswaps | 1,007 | 1,120 | (78) | (46) | — | 5 | (78) | (51) |
| Foreign\tcurrency\tswaps | 677 | 677 | (39) | (12) | 63 | 71 | (102) | (83) |
| Total\tfair\tvalue\thedges | 1,684 | 1,797 | (117) | (58) | 63 | 76 | (180) | (134) |
| Non-qualifying\tstrategies |  |  |  |  |  |  |  |  |
| Interest\trate\tcontracts |  |  |  |  |  |  |  |  |
| Interest\trate\tswaps,\tcaps, |  |  |  |  |  |  |  |  |
| floors,\tand\tfutures | 10,144 | 7,938 | (583) | (441) | 531 | 126 | (1,114) | (567) |
| Foreign\texchange\tcontracts |  |  |  |  |  |  |  |  |
| Foreign\tcurrency\tswaps\tand |  |  |  |  |  |  |  |  |
| forwards | 380 | 368 | (12) | (18) | 6 | 1 | (18) | (19) |
| Japan\t3Win\tforeign |  |  |  |  |  |  |  |  |
| currency\tswaps | 2,054 | 2,285 | 184 | 177 | 184 | 177 | — | — |
| Japanese\tfixed\tannuity |  |  |  |  |  |  |  |  |
| hedging\tinstruments | 1,945 | 2,119 | 514 | 608 | 540 | 608 | (26) | — |
| Credit\tcontracts |  |  |  |  |  |  |  |  |
| Credit\tderivatives\tthat |  |  |  |  |  |  |  |  |
| purchase\tcredit |  |  |  |  |  |  |  |  |
| protection | 1,721 | 2,559 | 36 | (9) | 56 | 29 | (20) | (38) |
| Credit\tderivatives\tthat |  |  |  |  |  |  |  |  |
| assume\tcredit\trisk\t[1] | 2,952 | 2,569 | (648) | (434) | 2 | 8 | (650) | (442) |
| Credit\tderivatives\tin |  |  |  |  |  |  |  |  |
| offsetting\tpositions | 8,189 | 8,367 | (57) | (75) | 164 | 98 | (221) | (173) |
| Equity\tcontracts |  |  |  |  |  |  |  |  |
| Equity\tindex\tswaps\tand |  |  |  |  |  |  |  |  |
| options | 1,501 | 189 | 27 | (10) | 40 | 5 | (13) | (15) |
| Variable\tannuity\thedge\tprogram |  |  |  |  |  |  |  |  |
| U.S.\tGMWB\tproduct |  |  |  |  |  |  |  |  |
| derivatives\t[2] | 34,569 | 40,255 | (2,538) | (1,611) | — | — | (2,538) | (1,611) |
| U.S.\tGMWB\treinsurance |  |  |  |  |  |  |  |  |
| contracts | 7,193 | 8,767 | 443 | 280 | 443 | 280 | — | — |
| U.S.\tGMWB\thedging |  |  |  |  |  |  |  |  |
| instruments | 16,406 | 17,856 | 894 | 467 | 1,022 | 647 | (128) | (180) |
| U.S.\tmacro\thedge\tprogram | 6,819 | 13,057 | 357 | 203 | 357 | 203 | — | — |
| International\tprogram |  |  |  |  |  |  |  |  |
| product\tderivatives\t[2] | 2,710 | 2,730 | (71) | (33) | — | 3 | (71) | (36) |
| International\tprogram |  |  |  |  |  |  |  |  |
| hedging\tinstruments | 33,726 | 14,873 | 750 | 254 | 887 | 265 | (137) | (11) |
| Other |  |  |  |  |  |  |  |  |
| Contingent\tcapital\tfacility\nput\toption | 500 | 500 | 28 | 32 | 28 | 32 | — | — |
| Total\tnon-qualifying\tstrategies | 130,809 | 124,432 | (676) | (610) | 4,260 | 2,482 | (4,936) | (3,092) |
| Total\tcash\tflow\thedges,\tfair\tvalue |  |  |  |  |  |  |  |  |
| hedges,\tand\tnon-qualifying |  |  |  |  |  |  |  |  |
| strategies | $141,436 | $136,854 | $(458) | $(547) | $4,682 | $2,775 | $(5,140) | $(3,322) |
| Balance\tSheet\tLocation |  |  |  |  |  |  |  |  |
| Fixed\tmaturities,\tavailable-for- |  |  |  |  |  |  |  |  |
| sale | $703 | $728 | $(72) | $(39) | $— | $— | $(72) | $(39) |
| Other\tinvestments | 60,227 | 55,948 | 2,331 | 1,524 | 3,165 | 2,105 | (834) | (581) |
| Other\tliabilities | 35,944 | 28,333 | (538) | (654) | 1,074 | 387 | (1,612) | (1,041) |
| Consumer\tnotes | 35 | 39 | (4) | (5) | — | — | (4) | (5) |
| Reinsurance\trecoverables | 7,193 | 8,767 | 443 | 280 | 443 | 280 | — | — |
| Other\tpolicyholder\tfunds\tand |  |  |  |  |  |  |  |  |
| benefits\tpayable | 37,334 | 43,039 | (2,618) | (1,653) | — | 3 | (2,618) | (1,656) |
| Total\tderivatives | $141,436 | $136,854 | $(458) | $(547) | $4,682 | $2,775 | $(5,140) | $(3,322) |

[1] 	 The	derivative	instruments	related	to	this	strategy	are	held	for	other	investment	purposes.

[2] 	 These	derivatives	are	embedded	within	liabilities	and	are	not	held	for	risk	management	purposes.

# Change	in	Notional	Amount

The	net	increase	in	notional	amount	of	derivatives	since	December	31,	2010,	was	primarily	due	to	the	following:

•	 During	2011,	the	Company	significantly	strengthened	its	hedge	protection	of	variable	annuity	products	offered	in	Japan.	As	such, the	notional	amount	related	to	the	international	program	hedging	instruments	increased	by	$18.9	billion	as	the	Company	entered	into additional	foreign	currency	denominated	interest	rate	swaps	and	swaptions,	currency	forwards,	currency	options	and	equity	futures.

•	 The	decrease	of	$8.7	billion	in	the	combined	GMWB	hedging	program,	which	includes	the	GMWB	product,	reinsurance,	and hedging	derivatives,	was	primarily	a	result	of	policyholder	lapses	and	withdrawals.

•	 The	U.S.	macro	hedge	program	notional	decreased	$6.2	billion	primarily	due	to	the	expiration	of	certain	out	of	the	money	options	in January	of	2011.

# Change	in	Fair	Value

The	improvement	in	the	total	fair	value	of	derivative	instruments	since	December	31,	2010,	was	primarily	related	to	the	following:

•	 The	fair	value	related	to	the	international	program	hedging	instruments	increased	as	a	result	of	the	additional	notional	added	during the	year,	as	well	as	strengthening	of	the	Japanese	yen,	lower	global	equity	markets,	and	a	decrease	in	interest	rates.

•	 The	decrease	in	the	combined	GMWB	hedging	program,	which	includes	the	GMWB	product,	reinsurance,	and	hedging	derivatives, was	primarily	a	result	of	a	general	decrease	in	long-term	interest	rates	and	higher	interest	rate	volatility.

For	derivative	instruments	that	are	designated	and	qualify	as	cash	flow	hedges,	the	effective	portion	of	the	gain	or	loss	on	the	derivative	is reported	as	a	component	of	OCI	and	reclassified	into	earnings	in	the	same	period	or	periods	during	which	the	hedged	transaction	affects earnings.	Gains	and	losses	on	the	derivative	representing	hedge	ineffectiveness	are	recognized	in	current	period	earnings.	All	components of	each	derivative's	gain	or	loss	were	included	in	the	assessment	of	hedge	effectiveness.

The	following	table	presents	the	components	of	the	gain	or	loss	on	derivatives	that	qualify	as	cash	flow	hedges:

# Derivatives	in	Cash	Flow	Hedging	Relationships

|  |  |  |  | Net	Realized	Capital	Gains	(Losses) | Net	Realized	Capital	Gains	(Losses) | Net	Realized	Capital	Gains	(Losses) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gain\t(Loss)\tRecognized\tin\tOCI | Gain\t(Loss)\tRecognized\tin\tOCI |  |  | Recognized\tin\tIncome |  |
|  | on\tDerivative\t(Effective\tPortion) | on\tDerivative\t(Effective\tPortion) | on\tDerivative\t(Effective\tPortion) | on\tDerivative\t(Ineffective\tPortion) | on\tDerivative\t(Ineffective\tPortion) | on\tDerivative\t(Ineffective\tPortion) |
|  | 2011 | 2010 | 2009 | 2011 | 2010 | 2009 |
| Interest\trate\tswaps | $337 | $294 | $(461) | $(4) | $2 | $(3) |
| Foreign\tcurrency\tswaps | (3) | 8 | (194) | — | (1) | 75 |
| Total | $334 | $302 | $(655) | $(4) | $1 | $72 |

# Gain	(Loss)	Reclassified	from	AOCI

|  |  | Gain	(Loss)	Reclassified	from	AOCI | Gain	(Loss)	Reclassified	from	AOCI |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | into\tIncome\t(Effective\tPortion) | into\tIncome\t(Effective\tPortion) |  |
|  |  | 2011 | 2010 | 2009 |
| Interest\trate\tswaps | Net\trealized\tcapital\tgains\t(losses) | $9 | $18 | \t $11 |
| Interest\trate\tswaps | Net\tinvestment\tincome\t(loss) | 126 | 94 | 47 |
| Foreign\tcurrency\tswaps | Net\trealized\tcapital\tgains\t(losses) | (3) | (7) | (119) |
| Foreign\tcurrency\tswaps | Net\tinvestment\tincome\t(loss) | — | — | 2 |
| Total |  | $132 | $105 | \t $(59) |

As	 of	 December	 31,	 2011,	 the	 before-tax	 deferred	 net	 gains	 on	 derivative	 instruments	 recorded	 in	AOCI	 that	 are	 expected	 to	 be reclassified	to	earnings	during	the	next	twelve	months	are	$111.	This	expectation	is	based	on	the	anticipated	interest	payments	on	hedged investments	in	fixed	maturity	securities	that	will	occur	over	the	next	twelve	months,	at	which	time	the	Company	will	recognize	the deferred	net	gains	(losses)	as	an	adjustment	to	interest	income	over	the	term	of	the	investment	cash	flows.	The	maximum	term	over	which the	Company	is	hedging	its	exposure	to	the	variability	of	future	cash	flows	(for	forecasted	transactions,	excluding	interest	payments	on existing	variable-rate	financial	instruments)	is	approximately	two	years.

During	 the	 year	 ended	 December	 31,	 2011,	 the	 Company	 had	 no	 net	 reclassifications	 from	AOCI	 to	 earnings	 resulting	 from	 the discontinuance	 of	 cash-flow	 hedges	 due	 to	 forecasted	 transactions	 that	 were	 no	 longer	 probable	 of	 occurring.	 For	 the	 years	 ended December	31,	2010	and	2009,	the	Company	had	less	than	$1	and	$1	of	net	reclassifications,	respectively,	from	AOCI	to	earnings	resulting from	the	discontinuance	of	cash-flow	hedges	due	to	forecasted	transactions	that	were	no	longer	probable	of	occurring.

For	derivative	instruments	that	are	designated	and	qualify	as	a	fair	value	hedge,	the	gain	or	loss	on	the	derivative,	as	well	as	the	offsetting loss	or	gain	on	the	hedged	item	attributable	to	the	hedged	risk	are	recognized	in	current	earnings.	The	Company	includes	the	gain	or	loss on	the	derivative	in	the	same	line	item	as	the	offsetting	loss	or	gain	on	the	hedged	item.	All	components	of	each	derivative's	gain	or	loss were	included	in	the	assessment	of	hedge	effectiveness.

The	Company	recognized	in	income	gains	(losses)	representing	the	ineffective	portion	of	fair	value	hedges	as	follows:

# Derivatives	in	Fair	Value	Hedging	Relationships

|  |  |  | Gain	(Loss)	Recognized	in	Income	[1] | Gain	(Loss)	Recognized	in	Income	[1] |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2011 | 2010 | 2010 | 2009 | 2009 |
|  | Derivative | Hedged\nItem | Derivative | Hedged\nItem | Derivative | Hedged\nItem |
| Interest\trate\tswaps |  |  |  |  |  |  |
| Net\trealized\tcapital\tgains |  |  |  |  |  |  |
| (losses) | $(73) | $70 | $(43) | $36 | $72 | $(68) |
| Benefits,\tlosses\tand\tloss |  |  |  |  |  |  |
| adjustment\texpenses | — | — | (1) | 3 | (37) | 40 |
| Foreign\tcurrency\tswaps |  |  |  |  |  |  |
| Net\trealized\tcapital\tgains |  |  |  |  |  |  |
| (losses) | (1) | 1 | 8 | (8) | 51 | (51) |
| Benefits,\tlosses\tand\tloss |  |  |  |  |  |  |
| adjustment\texpenses | (22) | 22 | (12) | 12 | 2 | (2) |
| Total | $(96) | $93 | $(48) | $43 | $88 | $(81) |

[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.

For	non-qualifying	strategies,	including	embedded	derivatives	that	are	required	to	be	bifurcated	from	their	host	contracts	and	accounted for	as	derivatives,	the	gain	or	loss	on	the	derivative	is	recognized	currently	in	earnings	within	net	realized	capital	gains	(losses).	The following	table	presents	the	gain	or	loss	recognized	in	income	on	non-qualifying	strategies:

# Gain	(Loss)	Recognized	within	Net	Realized	Capital	Gains	(Losses)

|  | 2011 | December	31,<br>2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Interest\trate\tcontracts |  |  |  |
| Interest\trate\tswaps,\tcaps,\tfloors,\tand\tforwards | $(22) | $45 | $31 |
| Foreign\texchange\tcontracts |  |  |  |
| Foreign\tcurrency\tswaps\tand\tforwards | 3 | (1) | (49) |
| Japan\t3Win\tforeign\tcurrency\tswaps\t[1] | 31 | 215 | (22) |
| Japanese\tfixed\tannuity\thedging\tinstruments\t[2] | 109 | 385 | (12) |
| Credit\tcontracts |  |  |  |
| Credit\tderivatives\tthat\tpurchase\tcredit\tprotection | (10) | (23) | (533) |
| Credit\tderivatives\tthat\tassume\tcredit\trisk | (174) | 196 | 167 |
| Equity\tcontracts |  |  |  |
| Equity\tindex\tswaps\tand\toptions | (89) | 5 | (3) |
| Warrants | — | — | 70 |
| Variable\tannuity\thedge\tprogram |  |  |  |
| U.S.\tGMWB\tproduct\tderivatives | (780) | 486 | 4,686 |
| U.S.\tGMWB\treinsurance\tcontracts | 131 | (102) | (988) |
| U.S.\tGMWB\thedging\tinstruments | 252 | (295) | (2,234) |
| U.S.\tmacro\thedge\tprogram | (216) | (445) | (733) |
| International\tprogram\tproduct\tderivatives | (25) | 26 | 67 |
| International\tprogram\thedging\tinstruments | 800 | (15) | (179) |
| Other |  |  |  |
| Contingent\tcapital\tfacility\tput\toption | (5) | (6) | (8) |
| Total | $5 | $471 | $260 |

[2] 	 The	associated	liability	is	adjusted	for	changes	in	spot	rates	through	realized	capital	gains	and	losses	and	was	($129),	($332)	and $67	for	the	years	ended	December	31,	2011,	2010	and	2009,	respectively.

For	the	year	ended	December	31,	2011,	the	net	realized	capital	gain	(loss)	related	to	derivatives	used	in	non-qualifying	strategies	was primarily	comprised	of	the	following:

•	 The	net	gain	associated	with	the	international	program	hedging	instruments	was	primarily	driven	by	strengthening	of	the	Japanese yen,	lower	global	equity	markets,	and	a	decrease	in	interest	rates.

•	 The	 loss	 related	 to	 the	 combined	 GMWB	 hedging	 program,	 which	 includes	 the	 GMWB	 product,	 reinsurance,	 and	 hedging derivatives,	was	primarily	a	result	of	a	general	decrease	in	long-term	interest	rates	and	higher	interest	rate	volatility.

•	 The	net	loss	on	the	U.S.	macro	hedge	program	was	primarily	driven	by	time	decay	and	a	decrease	in	equity	market	volatility	since the	purchase	date	of	certain	options	during	the	fourth	quarter.

•	 The	loss	on	credit	derivatives	that	assume	credit	risk	as	a	part	of	replication	transactions	resulted	from	credit	spread	widening.

For	the	year	ended	December	31,	2010,	the	net	realized	capital	gain	(loss)	related	to	derivatives	used	in	non-qualifying	strategies	was primarily	comprised	of	the	following:

•	 The	net	loss	associated	with	the	U.S.	macro	hedge	program	was	primarily	due	to	a	higher	equity	market	valuation,	time	decay,	and lower	implied	market	volatility.

•	 The	net	gain	on	the	Japanese	fixed	annuity	hedging	instruments	was	primarily	due	to	the	strengthening	of	the	Japanese	yen	in comparison	to	the	U.S.	dollar.

•	 The	net	gain	related	to	the	Japan	3Win	foreign	currency	swaps	was	primarily	due	to	the	strengthening	of	the	Japanese	yen	in comparison	to	the	U.S.	dollar,	partially	offset	by	the	decrease	in	long-term	U.S.	interest	rates.

•	 The	net	gain	associated	with	credit	derivatives	that	assume	credit	risk	as	a	part	of	replication	transactions	resulted	from	credit	spread tightening.

•	 The	 gain	 related	 to	 the	 combined	 GMWB	 hedging	 program,	 which	 includes	 the	 GMWB	 product,	 reinsurance,	 and	 hedging derivatives,	was	primarily	a	result	of	liability	model	assumption	updates	during	third	quarter,	lower	implied	market	volatility,	and outperformance	of	the	underlying	actively	managed	funds	as	compared	to	their	respective	indices,	partially	offset	by	a	general decrease	in	long-term	interest	rates	and	rising	equity	markets.

For	the	year	ended	December	31,	2009,	the	net	realized	capital	gain	(loss)	related	to	derivatives	used	in	non-qualifying	strategies	was primarily	due	to	the	following:

•	 The	gain	related	to	the	net	GMWB	product,	reinsurance,	and	hedging	derivatives	was	primarily	due	to	liability	model	assumption updates	given	favorable	trends	in	policyholder	experience,	the	relative	outperformance	of	the	underlying	actively	managed	funds	as compared	to	their	respective	indices,	and	the	impact	of	the	Company's	own	credit	standing.	Additional	net	gains	on	GMWB	related derivatives	include	lower	implied	market	volatility	and	a	general	increase	in	long-term	interest	rates,	partially	offset	by	rising	equity markets.

•	 The	net	loss	on	the	U.S.	macro	hedge	program	was	primarily	the	result	of	a	higher	equity	market	valuation	and	the	impact	of	trading activity.

•	 The	net	loss	on	credit	derivatives	that	purchase	credit	protection	to	economically	hedge	fixed	maturity	securities	and	the	net	gain	on credit	derivatives	that	assume	credit	risk	as	a	part	of	replication	transactions	resulted	from	credit	spreads	tightening.

Refer	to	Note	12	for	additional	disclosures	regarding	contingent	credit	related	features	in	derivative	agreements.

# Credit	Risk	Assumed	through	Credit	Derivatives

The	Company	enters	into	credit	default	swaps	that	assume	credit	risk	of	a	single	entity,	referenced	index,	or	asset	pool	in	order	to synthetically	replicate	investment	transactions.	The	Company	will	receive	periodic	payments	based	on	an	agreed	upon	rate	and	notional amount	and	will	only	make	a	payment	if	there	is	a	credit	event.	A	credit	event	payment	will	typically	be	equal	to	the	notional	value	of	the swap	contract	less	the	value	of	the	referenced	security	issuer's	debt	obligation	after	the	occurrence	of	the	credit	event.	A	credit	event	is generally	defined	as	a	default	on	contractually	obligated	interest	or	principal	payments	or	bankruptcy	of	the	referenced	entity.	The	credit default	swaps	in	which	the	Company	assumes	credit	risk	primarily	reference	investment	grade	single	corporate	issuers	and	baskets,	which include	standard	and	customized	diversified	portfolios	of	corporate	issuers.	The	diversified	portfolios	of	corporate	issuers	are	established within	sector	concentration	limits	and	may	be	divided	into	tranches	that	possess	different	credit	ratings.

The	following	tables	present	the	notional	amount,	fair	value,	weighted	average	years	to	maturity,	underlying	referenced	credit	obligation type	and	average	credit	ratings,	and	offsetting	notional	amounts	and	fair	value	for	credit	derivatives	in	which	the	Company	is	assuming credit	risk	as	of	December	31,	2011	and	2010.

|  |  |  | Weighted | Underlying	Referenced |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Average | Credit\tObligation(s)\t[1] | Credit\tObligation(s)\t[1] | Offsetting |  |
| Credit\tDerivative\ttype\tby\tderivative\nrisk\texposure | Notional\n\t Amount\t[2] | Fair\nValue | Years\tto\nMaturity | Type | Average\tCredit\nRating | Notional\nAmount\t[3] | Offsetting\nFair\tValue\t[3] |
| Single\tname\tcredit\tdefault\tswaps |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | $1,628 | $(34) | 3\tyears | Corporate\tCredit/\tForeign\tGov. | A+\t $ | 1,424 | $(15) |
| Below\tinvestment\tgrade\trisk | 170 | (7) | 2\tyears | Corporate\tCredit | BB- | 144 | (5) |
| exposure |  |  |  |  |  |  |  |
| Basket\tcredit\tdefault\tswaps\t[4] |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | 3,645 | (92) | 3\tyears | Corporate\tCredit | BBB+ | 2,001 | 29 |
| Investment\tgrade\trisk\texposure | 525 | (98) | 5\tyears | CMBS\tCredit | BBB+ | 525 | 98 |
| Below\tinvestment\tgrade\trisk | 553 | (509) | 3\tyears | Corporate\tCredit | BBB+ | — | — |
| exposure |  |  |  |  |  |  |  |
| Embedded\tcredit\tderivatives |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | 25 | 24 | 3\tyears | Corporate\tCredit | BBB- | — | — |
| Below\tinvestment\tgrade\trisk | 500 | 411 | 5\tyears | Corporate\tCredit | BB+ | — | — |
| exposure |  |  |  |  |  |  |  |
| Total | $7,046 | $(305) |  |  |  | \t\t $4,094 | $107 |

|  |  |  |  | Underlying	Referenced |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | Weighted | Credit\tObligation(s)\t[1] | Credit\tObligation(s)\t[1] |  |  |
|  |  |  | Average |  | Average | Offsetting |  |
| Credit\tDerivative\ttype\tby\tderivative\nrisk\texposure | Notional\nAmount\t[2] | Fair\tValue | Years\tto\nMaturity | Type | Credit\nRating | Notional\nAmount\t[3] | Offsetting\nFair\tValue\t[3] |
| Single\tname\tcredit\tdefault\tswaps |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | $1,562 | $(14) | 3\tyears | Corporate\tCredit/\tForeign\tGov. | A+\t $ | 1,447 | $(41) |
| Below\tinvestment\tgrade\trisk | 204 | (6) | 3\tyears | Corporate\tCredit | BB- | 168 | (13) |
| exposure |  |  |  |  |  |  |  |
| Basket\tcredit\tdefault\tswaps\t[4] |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | 3,145 | (1) | 4\tyears | Corporate\tCredit | BBB+ | 2,019 | (14) |
| Investment\tgrade\trisk\texposure | 525 | (50) | 6\tyears | CMBS\tCredit | BBB+ | 525 | 50 |
| Below\tinvestment\tgrade\trisk | 767 | (381) | 4\tyears | Corporate\tCredit | BBB+ | 25 | — |
| exposure |  |  |  |  |  |  |  |
| Embedded\tcredit\tderivatives |  |  |  |  |  |  |  |
| Investment\tgrade\trisk\texposure | 25 | 25 | 4\tyears | Corporate\tCredit | BBB- | — | — |
| Below\tinvestment\tgrade\trisk | 525 | 463 | 6\tyears | Corporate\tCredit | BB+ | — | — |
| exposure |  |  |  |  |  |  |  |
| Total | $6,753 | $36 |  |  |  | \t\t $4,184 | $(18) |

[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	$4.2	billion	and	$3.9	billion	as	of	December	31,	2011	and	2010,	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	$553	and	$542	as	of	December	31,	2011	and	2010,	respectively,	of	customized diversified	portfolios	of	corporate	issuers	referenced	through	credit	default	swaps.

# Collateral	Arrangements

The	Company	enters	into	various	collateral	arrangements	in	connection	with	its	derivative	instruments,	which	require	both	the	pledging and	 accepting	 of	 collateral.	As	 of	 December	 31,	 2011	 and	 2010,	 collateral	 pledged	 having	 a	 fair	 value	 of	 $1.1	 billion	 and	 $790, respectively,	was	included	in	fixed	maturities,	AFS,	in	the	Consolidated	Balance	Sheets.

From	time	to	time,	the	Company	enters	into	secured	borrowing	arrangements	as	a	means	to	increase	net	investment	income.	The	Company received	cash	collateral	of	$33	as	of	December	31,	2011	and	2010.

The	following	table	presents	the	classification	and	carrying	amount	of	loaned	securities	and	derivative	instruments	collateral	pledged.

|  | December	31,	2011 | December	31,	2010 |
| :--- | :--- | :--- |
| Fixed\tmaturities,\tAFS | $1,086 | $823 |
| Short-term\tinvestments | 199 | — |
| Total\tcollateral\tpledged | $1,285 | $823 |

As	of	December	31,	2011	and	2010,	the	Company	had	accepted	collateral	with	a	fair	value	of	$2.6	billion	and	$1.5	billion,	respectively,	of which	$2.0	billion	and	$1.1	billion,	respectively,	was	cash	collateral	which	was	invested	and	recorded	in	the	Consolidated	Balance	Sheets in	fixed	maturities	and	short-term	investments	with	corresponding	amounts	recorded	in	other	assets	and	other	liabilities.	The	Company	is only	permitted	by	contract	to	sell	or	repledge	the	noncash	collateral	in	the	event	of	a	default	by	the	counterparty.	As	of	December	31,	2011 and	2010,	noncash	collateral	accepted	was	held	in	separate	custodial	accounts	and	was	not	included	in	the	Company's	Consolidated Balance	Sheets.

# Securities	on	Deposit	with	States

The	Company	is	required	by	law	to	deposit	securities	with	government	agencies	in	states	where	it	conducts	business.	As	of	December	31, 2011	and	2010,	the	fair	value	of	securities	on	deposit	was	approximately	$1.6	billion	and	$1.4	billion,	respectively.

# Accounting	Policy

The	Company	cedes	insurance	to	affiliated	and	unaffiliated	insurers	in	order	to	limit	its	maximum	losses	and	to	diversify	its	exposures	and provide	statutory	surplus	relief.	Such	arrangements	do	not	relieve	 the	Company	of	 its	primary	 liability	 to	policyholders.	Failure	of reinsurers	to	honor	their	obligations	could	result	in	losses	to	the	Company.	The	Company	also	assumes	reinsurance	from	other	insurers and	is	a	member	of	and	participates	in	reinsurance	pools	and	associations.	Assumed	reinsurance	refers	to	the	Company's	acceptance	of certain	insurance	risks	that	other	insurance	companies	have	underwritten.

Reinsurance	accounting	is	followed	for	ceded	and	assumed	transactions	that	provide	indemnification	against	loss	or	liability	relating	to insurance	risk	(i.e.	risk	transfer).	To	meet	risk	transfer	requirements,	a	reinsurance	agreement	must	include	insurance	risk,	consisting	of underwriting,	investment,	and	timing	risk,	and	a	reasonable	possibility	of	a	significant	loss	to	the	reinsurer.	If	the	ceded	and	assumed transactions	do	not	meet	risk	transfer	requirements,	the	Company	accounts	for	these	transactions	as	financing	transactions.

Premiums,	benefits,	losses	and	loss	adjustment	expenses	reflect	the	net	effects	of	ceded	and	assumed	reinsurance	transactions.	Included	in other	assets	are	prepaid	reinsurance	premiums,	which	represent	the	portion	of	premiums	ceded	to	reinsurers	applicable	to	the	unexpired terms	of	the	reinsurance	contracts.	Included	in	reinsurance	recoverables	are	balances	due	from	reinsurance	companies	for	paid	and	unpaid losses	and	loss	adjustment	expenses	and	are	presented	net	of	an	allowance	for	uncollectible	reinsurance.

The	Company	also	is	a	member	of	and	participates	in	several	reinsurance	pools	and	associations.	The	Company	evaluates	the	financial condition	of	 its	reinsurers	and	concentrations	of	credit	risk.	Reinsurance	 is	placed	with	reinsurers	 that	meet	strict	financial	criteria established	by	the	Company.	As	of	December	31,	2011,	2010	and	2009,	the	Company	had	no	reinsurance-related	concentrations	of	credit risk	greater	than	10%	of	the	Company's	stockholders'	equity.

# Results

The	Company	is	involved	in	both	the	cession	and	assumption	of	insurance	with	affiliated	and	unaffiliated	insurers.	As	of	December	31, 2011,	2010	and	2009,	the	Company's	policy	for	the	largest	amount	of	life	insurance	retained	on	any	one	life	by	any	company	was	$10.

Life	insurance	fees,	earned	premiums	and	other	were	comprised	of	the	following:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Gross\tfee\tincome,\tearned\tpremiums\tand\tother | $9,342 | $9,482 | $9,419 |
| Reinsurance\tassumed | 134 | 192 | 162 |
| Reinsurance\tceded | (524) | (576) | (484) |
| Net\tfee\tincome,\tearned\tpremiums\tand\tother | $8,952 | $9,098 | $9,097 |

The	Company	reinsures	certain	of	 its	risks	 to	other	reinsurers	under	yearly	renewable	 term,	coinsurance,	and	modified	coinsurance arrangements,	and	variations	thereto.	Yearly	renewable	term	and	coinsurance	arrangements	result	in	passing	all	or	a	portion	of	the	risk	to the	reinsurer.	Generally,	the	reinsurer	receives	a	proportionate	amount	of	the	premiums	less	an	allowance	for	commissions	and	expenses and	is	liable	for	a	corresponding	proportionate	amount	of	all	benefit	payments.	Modified	coinsurance	is	similar	to	coinsurance	except	that the	cash	and	investments	that	support	the	liabilities	for	contract	benefits	are	not	transferred	to	the	assuming	company,	and	settlements	are made	on	a	net	basis	between	the	companies.	Coinsurance	with	funds	withheld	is	a	form	of	coinsurance	except	that	the	investment	assets that	support	the	liabilities	are	withheld	by	the	ceding	company.

The	 cost	 of	 reinsurance	 related	 to	 long-duration	 contracts	 is	 accounted	 for	 over	 the	 life	 of	 the	 underlying	 reinsured	 policies	 using assumptions	consistent	with	those	used	to	account	for	the	underlying	policies.	Life	insurance	recoveries	on	ceded	reinsurance	agreements were	$224,	$275	and	$305	for	the	years	ended	December	31,	2011,	2010,	and	2009,	respectively.

In	addition,	the	Company	has	reinsured	a	portion	of	the	risk	associated	with	GMDB	and	GMWB	riders	of	U.S.	variable	annuities,	variable annuity	contract	and	rider	benefits	of	Hartford	Life	Insurance	KK	("HLIKK"),	an	indirect	wholly	owned	subsidiary,	and	GMDB	and GMWB	annuity	contract	and	rider	benefits	of	Hartford	Life	Limited	Ireland	("HLL"),	an	indirect	wholly	owned	subsidiary.

# 6.	Reinsurance	(continued)

The	effect	of	reinsurance	on	property	and	casualty	premiums	written	and	earned	was	as	follows:

| Premiums	Written | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Direct | $10,368 | $10,070 | $10,185 |
| Assumed | 226 | 234 | 238 |
| Ceded | (742) | (619) | (712) |
| Net | $9,852 | $9,685 | $9,711 |
| Premiums\tEarned |  |  |  |
| Direct | $10,337 | $10,105 | $10,386 |
| Assumed | 225 | 256 | 253 |
| Ceded | (688) | (668) | (778) |
| Net | $9,874 | $9,693 | $9,861 |

Reinsurance	recoverables	include	balances	due	from	reinsurance	companies	for	paid	and	unpaid	losses	and	loss	adjustment	expenses	and are	presented	net	of	an	allowance	for	uncollectible	reinsurance.	The	reinsurance	recoverables	balance	includes	an	estimate	of	the	amount of	gross	losses	and	loss	adjustment	expense	reserves	that	may	be	ceded	under	the	terms	of	the	reinsurance	agreements,	including	incurred but	not	reported	unpaid	losses.	The	Company's	estimate	of	losses	and	loss	adjustment	expense	reserves	ceded	to	reinsurers	is	based	on assumptions	that	are	consistent	with	those	used	in	establishing	the	gross	reserves	for	business	ceded	to	the	reinsurance	contracts.	The Company	calculates	its	ceded	reinsurance	projection	based	on	the	terms	of	any	applicable	facultative	and	treaty	reinsurance,	including	an estimate	of	how	 incurred	but	not	reported	 losses	will	ultimately	be	ceded	by	reinsurance	agreements.	Accordingly,	 the	Company's estimate	of	reinsurance	recoverables	is	subject	to	similar	risks	and	uncertainties	as	the	estimate	of	the	gross	reserve	for	unpaid	losses	and loss	adjustment	expenses.

The	allowance	for	uncollectible	reinsurance	was	$290	as	of	December	31,	2011	and	2010.	The	allowance	for	uncollectible	reinsurance reflects	management's	best	estimate	of	reinsurance	cessions	that	may	be	uncollectible	in	the	future	due	to	reinsurers'	unwillingness	or inability	to	pay.	The	Company	analyzes	recent	developments	in	commutation	activity	between	reinsurers	and	cedants,	recent	trends	in arbitration	and	litigation	outcomes	in	disputes	between	reinsurers	and	cedants	and	the	overall	credit	quality	of	the	Company's	reinsurers. Based	on	this	analysis,	the	Company	may	adjust	the	allowance	for	uncollectible	reinsurance	or	charge	off	reinsurer	balances	that	are determined	to	be	uncollectible.	Where	its	contracts	permit,	the	Company	secures	future	claim	obligations	with	various	forms	of	collateral, including	irrevocable	letters	of	credit,	secured	trusts,	funds	held	accounts	and	group-wide	offsets.

Due	to	the	inherent	uncertainties	as	to	collection	and	the	length	of	time	before	reinsurance	recoverables	become	due,	it	is	possible	that future	adjustments	to	the	Company's	reinsurance	recoverables,	net	of	the	allowance,	could	be	required,	which	could	have	a	material adverse	effect	on	the	Company's	consolidated	results	of	operations	or	cash	flows	in	a	particular	quarter	or	annual	period.

# 7.	Deferred	Policy	Acquisition	Costs	and	Present	Value	of	Future	Profits

The	Company	capitalizes	acquisition	costs	that	vary	with	and	are	primarily	related	to	the	acquisition	of	new	and	renewal	insurance business.	For	life	insurance	products,	the	DAC	asset,	which	includes	the	present	value	of	future	profits,	related	to	most	universal	life-type contracts	(including	variable	annuities)	is	amortized	over	the	estimated	life	of	the	contracts	acquired	in	proportion	to	the	present	value	of estimated	gross	profits	("EGPs").	EGPs	are	also	used	to	amortize	other	assets	and	liabilities	in	the	Company's	Consolidated	Balance Sheets,	such	as,	sales	inducement	assets	("SIA")	and	unearned	revenue	reserves	("URR").	Components	of	EGPs	are	used	to	determine reserves	for	universal	life	type	contracts	(including	variable	annuities)	with	death	or	other	insurance	benefits	such	as	guaranteed	minimum death,	guaranteed	minimum	income	and	universal	life	secondary	guarantee	benefits.	These	benefits	are	accounted	for	and	collectively referred	to	as	death	and	other	insurance	benefit	reserves	and	are	held	in	addition	to	the	account	value	liability	representing	policyholder funds.

For	most	contracts,	the	Company	estimates	gross	profits	over	20	years	as	EGPs	emerging	subsequent	to	that	timeframe	are	immaterial. Products	sold	in	a	particular	year	are	aggregated	into	cohorts.	Future	gross	profits	for	each	cohort	are	projected	over	the	estimated	lives	of the	 underlying	 contracts,	 based	 on	 future	 account	 value	 projections	 for	 variable	 annuity	 and	 variable	 universal	 life	 products.	 The projection	of	future	account	values	requires	the	use	of	certain	assumptions	including:	separate	account	returns;	separate	account	fund	mix; fees	assessed	against	the	contract	holder's	account	balance;	surrender	and	lapse	rates;	interest	margin;	mortality;	and	the	extent	and duration	of	hedging	activities	and	hedging	costs.

The	Company	determines	EGPs	from	a	single	deterministic	reversion	to	mean	("RTM")	separate	account	return	projection	which	is	an estimation	technique	commonly	used	by	insurance	entities	to	project	future	separate	account	returns.	Through	this	estimation	technique, the	Company's	DAC	model	is	adjusted	to	reflect	actual	account	values	at	the	end	of	each	quarter.	Through	consideration	of	recent	market returns,	the	Company	will	unlock,	or	adjust,	projected	returns	over	a	future	period	so	that	the	account	value	returns	to	the	long-term expected	rate	of	return,	providing	that	those	projected	returns	do	not	exceed	certain	caps	or	floors.	This	Unlock	for	future	separate account	returns	is	determined	each	quarter.

In	the	third	quarter	of	each	year,	the	Company	completes	a	comprehensive	non-market	related	policyholder	behavior	assumption	study and	incorporates	the	results	of	those	studies	into	its	projection	of	future	gross	profits.	Additionally,	throughout	the	year,	the	Company evaluates	 various	 aspects	 of	 policyholder	 behavior	 and	 periodically	 revises	 its	 policyholder	 assumptions	 as	 credible	 emerging	 data indicates	that	changes	are	warranted.	Upon	completion	of	an	assumption	study	or	evaluation	of	credible	new	information,	the	Company will	revise	its	assumptions	to	reflect	its	current	best	estimate.	These	assumption	revisions	will	change	the	projected	account	values	and	the related	EGPs	in	the	DAC,	SIA	and	URR	amortization	models,	as	well	as,	the	death	and	other	insurance	benefit	reserving	models.

All	assumption	changes	that	affect	the	estimate	of	future	EGPs	including	the	update	of	current	account	values,	the	use	of	the	RTM estimation	technique	and	policyholder	behavior	assumptions	are	considered	an	Unlock	in	the	period	of	revision.	An	Unlock	adjusts	the DAC,	SIA,	URR	and	death	and	other	insurance	benefit	reserve	balances	in	the	Consolidated	Balance	Sheets	with	an	offsetting	benefit	or charge	in	the	Consolidated	Statements	of	Operations	in	the	period	of	the	revision.	An	Unlock	that	results	in	an	after-tax	benefit	generally occurs	as	a	result	of	actual	experience	or	future	expectations	of	product	profitability	being	favorable	compared	to	previous	estimates.	An Unlock	that	results	in	an	after-tax	charge	generally	occurs	as	a	result	of	actual	experience	or	future	expectations	of	product	profitability being	unfavorable	compared	to	previous	estimates.

An	Unlock	revises	EGPs	to	reflect	the	Company's	current	best	estimate	assumptions.	The	Company	also	tests	the	aggregate	recoverability of	DAC	by	comparing	the	existing	DAC	balance	to	the	present	value	of	future	EGPs.

For	property	and	casualty	insurance	products,	costs	are	deferred	and	amortized	ratably	over	the	period	the	related	premiums	are	earned. Deferred	acquisition	costs	are	reviewed	to	determine	if	they	are	recoverable	from	future	income,	and	if	not,	are	charged	to	expense. Anticipated	investment	income	is	considered	in	the	determination	of	the	recoverability	of	DACs.	For	the	years	ended	December	31,	2011, 2010	and,	2009	no	amount	of	DAC	was	charged	to	expense	based	on	the	determination	of	recoverability.

# 7.	Deferred	Policy	Acquisition	Costs	and	Present	Value	of	Future	Profits	(continued)

Changes	in	the	DAC	balance	are	as	follows:

[1] 	 The	most	significant	contributors	 to	 the	Unlock	charge	recorded	during	 the	year	ended	December	31,	2011	were	assumption changes	which	reduced	expected	future	gross	profits	including	additional	costs	associated	with	implementing	the	Japan	hedging strategy	and	the	U.S.	variable	annuity	macro	hedge	program,	as	well	as	actual	separate	account	returns	below	our	aggregated estimated	return.

	 The	most	significant	contributors	to	the	Unlock	benefit	recorded	during	the	year	ended	December	31,	2010	were	actual	separate account	returns	being	above	our	aggregated	estimated	return.	Also	 included	 in	 the	benefit	are	assumption	updates	related	 to benefits	from	withdrawals	and	lapses,	offset	by	hedging,	annuitization	estimates	on	Japan	products,	and	long-term	expected	rate	of return	updates.

	 The	most	significant	contributors	to	the	Unlock	charge	recorded	during	the	year	ended	December	31,	2009	were	the	results	of	actual separate	account	returns	being	significantly	below	our	aggregated	estimated	return	for	the	first	quarter	of	2009,	partially	offset	by actual	returns	being	greater	than	our	aggregated	estimated	return	for	the	period	from	April	1,	2009	to	December	31,	2009.

[2] 	 The	most	significant	contributor	 to	 the	adjustments	was	 the	effect	of	declining	 interest	rates,	resulting	 in	unrealized	gains	on securities	classified	in	AOCI.	Other	includes	a	$34	decrease	as	a	result	of	the	disposition	of	DAC	from	the	sale	of	the	Hartford Investment	Canadian	Canada	in	2010.

[3] 	 For	the	year	ended	December	31,	2010	the	effect	of	adopting	new	accounting	guidance	for	embedded	credit	derivatives	resulted	in	a decrease	to	retained	earnings	and,	as	a	result,	a	DAC	benefit.	In	addition,	an	offsetting	amount	was	recorded	in	unrealized	losses	as unrealized	losses	decreased	upon	adoption	of	the	new	accounting	guidance.	For	the	year	ended	December	31,	2009	the	effect	of adopting	new	accounting	guidance	for	investments	other-	than-	temporarily	impaired	resulted	in	an	increase	to	retained	earnings and,	as	a	result,	a	DAC	charge.	In	addition,	an	offsetting	amount	was	recorded	in	unrealized	losses	as	unrealized	losses	increased upon	adoption	of	the	new	accounting	guidance.

# 8.	Goodwill	and	Other	Intangible	Assets

# Goodwill

Goodwill	 represents	 the	 excess	 of	 costs	 over	 the	 fair	 value	 of	 net	 assets	 acquired.	 Goodwill	 is	 not	 amortized	 but	 is	 reviewed	 for impairment	at	least	annually	or	more	frequently	if	events	occur	or	circumstances	change	that	would	indicate	that	a	triggering	event	for	a potential	impairment	has	occurred.	During	the	fourth	quarter	of	2011,	the	Company	changed	the	date	of	its	annual	impairment	test	for	all reporting	units	to	October	31st	from	January	1st	for	Wealth	Management	reporting	units,	June	30th	for	Federal	Trust	Corporation	within Corporate,	and	October	1st	for	Property	&	Casualty	Commercial	and	Consumer	Markets.	As	a	result,	all	reporting	units	performed	an impairment	test	on	October	31,	2011	in	addition	to	the	annual	impairment	tests	performed	on	January	1st	or	October	1st	as	applicable.	The change	was	made	to	be	consistent	across	all	reporting	units	and	to	more	closely	align	the	impairment	testing	date	with	the	long-range planning	 and	 forecasting	 process.	 The	 Company	 has	 determined	 that	 this	 change	 in	 accounting	 principle	 is	 preferable	 under	 the circumstances	and	does	not	result	in	any	delay,	acceleration	or	avoidance	of	impairment.	As	it	was	impracticable	to	objectively	determine projected	cash	flows	and	related	valuation	estimates	as	of	each	October	31	for	periods	prior	to	October	31,	2011,	without	applying information	 that	 has	 been	 learned	 since	 those	 periods,	 the	 Company	 has	 prospectively	 applied	 the	 change	 in	 the	 annual	 goodwill impairment	testing	date	from	October	31,	2011.

Goodwill	within	Corporate	is	primarily	attributed	to	the	Company's	"buy-back"	of	Hartford	Life,	Inc.	in	2000	and	was	allocated	to	each	of Hartford	Life's	reporting	units	based	on	the	reporting	unit's	fair	value	of	in-force	business	at	the	buy-back	date.	Although	this	goodwill was	allocated	to	each	reporting	unit,	it	is	held	in	Corporate	for	segment	reporting.

The	carrying	amount	of	goodwill	allocated	to	reporting	segments	is	as	follows:

|  | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2011 | December	31,	2010 | December	31,	2010 | December	31,	2010 | December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross | Accumulated\nImpairments | Discontinued\nOperations[1] | Carrying\nValue | Gross | Accumulated\nImpairments | Discontinued\nOperations[1] | Carrying\nValue |
| Commercial |  |  |  |  |  |  |  |  |
| Markets |  |  |  |  |  |  |  |  |
| Property\t&amp; |  |  |  |  |  |  |  |  |
| Casualty |  |  |  |  |  |  |  |  |
| Commercial | $30 | $(30) | $— | $— | $30 | $—\t $— | $—\t $— | $30 |
| Consumer\tMarkets | 119 | — | — | 119 | 119 | — | — | 119 |
| Wealth |  |  |  |  |  |  |  |  |
| Management |  |  |  |  |  |  |  |  |
| Individual\tLife | 224 | — | — | 224 | 224 | — | — | 224 |
| Retirement\tPlans | 87 | — | — | 87 | 87 | — | — | 87 |
| Mutual\tFunds | 159 | — | — | 159 | 159 | — | — | 159 |
| Total\tWealth |  |  |  |  |  |  |  |  |
| Management | 470 | — | — | 470 | 470 | — | — | 470 |
| Corporate | 787 | (355) | (15) | 417 | 940 | (355) | (153) | 432 |
| Total\tGoodwill | $ 1,406 | $(385) | $(15) | $1,006 | $ 1,559 | $(355) | $(153) | $1,051 |

[1] 	 Represents	goodwill	written	off	related	to	Federal	Trust	Corporation	which	is	currently	recorded	in	discontinued	operations.

# 8.	Goodwill	and	Other	Intangible	Assets	(continued)

The	Consumer	Markets	reporting	unit	completed	its	annual	goodwill	assessment	on	October	1,	2011	and	again	on	October	31,	2011, which	resulted	in	no	impairment	of	goodwill.	In	both	tests,	the	Consumer	Markets	reporting	unit	passed	the	first	step	of	the	annual impairment	tests	with	a	significant	margin.	The	annual	goodwill	assessment	for	the	Property	&	Casualty	Commercial	reporting	unit	that was	performed	on	October	1,	2011	resulted	in	a	write-down	of	goodwill	of	$30,	pre-tax	leaving	no	remaining	goodwill.	The	results	of	the discounted	cash	flow	calculations	indicated	that	the	fair	value	of	the	reporting	unit	was	less	than	the	carrying	value;	this	was	due	primarily to	a	decrease	in	future	expected	underwriting	cash	flows.	The	decrease	in	future	expected	underwriting	cash	flows	is	driven	by	an	expected reduction	in	written	premium	in	the	short	term	as	the	Company	maintains	pricing	discipline	in	a	downward	market	cycle,	while	retaining long	term	capabilities	for	future	opportunities.

The	Company	completed	its	annual	goodwill	assessment	for	the	individual	reporting	units	within	the	Wealth	Management	operating segment	and	Corporate,	except	for	the	FTC	reporting	unit,	as	noted	above,	on	January	1,	2011	and	October	31,	2011,	which	resulted	in	no impairment	of	goodwill.	In	both	tests,	the	reporting	units	passed	the	first	step	of	their	annual	impairment	tests	with	a	significant	margin with	the	exception	of	the	Individual	Life	reporting	unit	at	the	January	1,	2011	test.	The	Individual	Life	reporting	unit	had	a	margin	of	less than	10%	between	fair	value	and	book	value	on	January	1,	2011.	As	of	the	October	31,	2011	impairment	test,	the	Individual	Life reporting	unit	had	a	fair	value	in	excess	of	book	value	of	approximately	15%,	modest	improvement	from	January	1,	2011	results	due	to improving	cost	of	capital.

The	annual	goodwill	assessment	for	the	reporting	units	within	Property	&	Casualty	Commercial	and	Consumer	Markets	was	completed	on October	1,	2010,	which	resulted	in	no	write-downs	of	goodwill	for	the	year	ended	December	31,	2010.

The	Company	completed	its	annual	goodwill	assessment	for	the	individual	reporting	units	within	Wealth	Management	and	Corporate, except	for	the	FTC	reporting	unit,	on	January	1,	2010,	which	resulted	in	no	write-downs	of	goodwill	in	2010.	The	reporting	units	passed the	first	step	of	their	annual	impairment	tests	with	a	significant	margin	with	the	exception	of	the	Retirement	Plans	and	Individual	Life reporting	units.

The	Retirement	Plans	reporting	unit	passed	with	a	margin	of	less	than	10%	between	fair	value	and	book	value.	The	fair	value	is	based	on discounted	cash	flows	using	earnings	projections	on	in	force	business	and	future	business	growth.	There	could	be	a	positive	or	negative impact	on	the	result	of	step	one	in	future	periods	if	assumptions	change	about	the	level	of	economic	capital,	future	business	growth assumptions,	earnings	projections	or	the	weighted	average	cost	of	capital.

The	Individual	Life	reporting	unit	completed	the	second	step	of	the	annual	goodwill	impairment	test	resulting	in	an	implied	goodwill	value that	was	in	excess	of	its	carrying	value.	Even	though	the	fair	value	of	the	reporting	unit	was	lower	than	its	carrying	value,	the	implied level	of	goodwill	in	Individual	Life	exceeded	the	carrying	amount	of	goodwill.	In	the	hypothetical	purchase	accounting	required	by	the step	two	of	the	goodwill	impairment	test,	the	implied	present	value	of	future	profits	was	substantially	lower	than	that	of	the	DAC	asset removed	in	purchase	accounting.	A	higher	discount	rate	was	used	for	calculating	the	present	value	of	future	profits	as	compared	to	that used	for	calculating	the	present	value	of	estimated	gross	profits	for	DAC.	As	a	result,	in	the	hypothetical	purchase	accounting,	implied goodwill	exceeded	the	carrying	amount	of	goodwill.

The	Company	completed	its	annual	goodwill	assessment	for	the	Federal	Trust	Corporation	("FTC")	reporting	unit	within	Corporate	on June	30,	2010.	Downward	pressure	on	valuations	in	general	and	depressed	prices	in	the	banking	sector	in	particular	resulted	in	very	few unassisted	bank	deals	taking	place.	Thus,	the	Company's	annual	assessment	resulted	in	an	impairment	charge	of	$153	pre-tax.	This amount	was	reclassified	to	discontinued	operations	during	the	second	quarter	of	2011.

The	Company's	goodwill	impairment	test	on	January	1,	2009	for	the	individual	reporting	units	within	Wealth	Management	and	Corporate resulted	in	a	write-down	of	$32.	As	a	result	of	rating	agency	downgrades	of	the	Company's	financial	strength	ratings	during	the	first quarter	of	2009	and	high	credit	spreads	related	 to	 the	Company,	 the	Company	believed	 its	ability	 to	generate	new	business	 in	 the Institutional	reporting	unit	within	Corporate	would	remain	pressured	for	ratings-sensitive	products.	The	Company	believed	the	associated goodwill	was	impaired	due	to	the	pressure	on	new	sales	for	ratings-sensitive	business	and	the	significant	unrealized	losses	on	investment portfolios.	In	addition,	the	Company	completed	its	annual	goodwill	assessment	for	the	individual	reporting	units	within	Property	& Casualty	Commercial	and	Consumer	Markets	on	October	1,	2009,	which	resulted	in	no	write-downs	of	goodwill	for	the	year	ended December	31,	2009.

# Other	Intangible	Assets

Net	amortization	expense	for	other	intangible	assets	is	included	in	other	insurance	operating	and	other	expenses	in	the	Consolidated Statement	 of	 Operations.	Acquired	 intangible	 assets	 primarily	 consist	 of	 distribution	 agreements	 and	 servicing	 intangibles,	 and	 are included	in	other	assets	in	the	Consolidated	Balance	Sheets.	With	the	exception	of	Goodwill,	the	Company	has	no	intangible	assets	with indefinite	useful	lives.

Activity	in	acquired	intangible	assets	that	are	subject	to	amortization	is	as	follows:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Gross\tcarrying\tamount,\tbeginning\tof\tyear | $89 | $90 | $121 |
| Accumulated\tnet\tamortization | 25 | 18 | 47 |
| Net\tcarrying\tamount,\tbeginning\tof\tyear | 64 | 72 | 74 |
| Acquisition\tof\tbusiness | — | (1) | 6 |
| Amortization,\tnet\tof\tthe\taccretion\tof\tinterest | (9) | (7) | (8) |
| Net\tcarrying\tamount,\tend\tof\tyear | 55 | 64 | 72 |
| Accumulated\tnet\tamortization | 34 | 25 | 18 |
| Gross\tcarrying\tamount,\tend\tof\tyear | $89 | $89 | $90 |

In	2009,	the	Company	completed	two	acquisitions	that	resulted	in	additional	acquired	intangible	assets	of	$1	in	distribution	agreements and	 $5	 in	 other.	 In	 2009,	 the	 Company	 fully	 amortized	 acquired	 intangible	 assets	 for	 renewal	 rights	 and	 other	 of	 $22	 and	 $14, respectively.

For	the	years	ended	December	31,	2011,	2010	and	2009,	the	Company	did	not	capitalize	any	costs	to	extend	or	renew	the	term	of	a recognized	 intangible	 asset.	As	 of	 December	 31,	 2011,	 the	 weighted	 average	 amortization	 period	 was	 13	 years	 for	 total	 acquired intangible	assets.	Net	amortization	expense	for	other	intangibles	is	expected	to	be	approximately	$6	in	each	of	the	succeeding	five	years.

For	a	discussion	of	present	value	of	future	profits	that	continue	to	be	subject	to	amortization	and	aggregate	amortization	expense,	see	Note 7.

# 9.	Separate	Accounts,	Death	Benefits	and	Other	Insurance	Benefit	Features

The	Company	records	the	variable	portion	of	individual	variable	annuities,	401(k),	institutional,	403(b)/457,	private	placement	life	and variable	life	insurance	products	within	separate	accounts.	Separate	account	assets	are	reported	at	fair	value	and	separate	account	liabilities are	reported	at	amounts	consistent	with	separate	account	assets.	Investment	income	and	gains	and	losses	from	those	separate	account assets	accrue	directly	to	the	policyholder,	who	assumes	the	related	investment	risk,	and	are	offset	by	the	related	liability	changes	reported in	 the	 same	 line	 item	 in	 the	 Consolidated	 Statements	 of	 Operations.	The	 Company	 earns	 fees	 for	 investment	 management,	 certain administrative	expenses,	and	mortality	and	expense	risks	assumed	which	are	reported	in	fee	income.

Certain	contracts	classified	as	universal	life-type	include	death	and	other	insurance	benefit	features	including	GMDB	and	GMIB,	offered with	variable	annuity	contracts,	or	secondary	guarantee	benefits	offered	with	universal	life	("UL")	insurance	contracts.	GMDBs	and GMIBs	have	been	written	in	various	forms	as	described	in	this	note.	UL	secondary	guarantee	benefits	ensure	that	the	universal	life	policy will	not	terminate,	and	will	continue	to	provide	a	death	benefit,	even	if	there	is	insufficient	policy	value	to	cover	the	monthly	deductions and	charges.	These	death	and	other	insurance	benefit	features	require	an	additional	liability	be	held	above	the	account	value	liability representing	 the	policyholders'	funds.	This	 liability	 is	reported	 in	reserve	for	future	policy	benefits	 in	 the	Company's	Consolidated Balance	Sheets.	Changes	in	the	death	and	other	insurance	benefit	reserves	are	recorded	in	benefits,	losses	and	loss	adjustment	expenses	in the	Company's	Consolidated	Statements	of	Operations.

The	death	and	other	insurance	benefit	liability	is	determined	by	estimating	the	expected	present	value	of	the	benefits	in	excess	of	the policyholder's	expected	account	value	in	proportion	to	the	present	value	of	total	expected	assessments.	The	liability	is	accrued	as	actual assessments	are	recorded.	The	expected	present	value	of	benefits	and	assessments	are	generally	derived	from	a	set	of	stochastic	scenarios, that	have	been	calibrated	to	our	RTM	separate	account	returns,	and	assumptions	including	market	rates	of	return,	volatility,	discount	rates, lapse	rates	and	mortality	experience.	Consistent	with	the	Company's	policy	on	the	Unlock,	the	Company	regularly	evaluates	estimates used	and	adjusts	the	additional	liability	balance,	with	a	related	charge	or	credit	to	benefits,	losses	and	loss	adjustment	expense.	For	further information	on	the	Unlock,	see	Note	7	Deferred	Policy	Acquisition	Costs	and	Present	Value	of	Future	Benefits.

The	Company	reinsures	a	portion	of	its	in-force	GMDB	and	UL	secondary	guarantees.	The	death	and	other	insurance	benefit	reserves,	net of	reinsurance,	are	established	by	estimating	the	expected	value	of	net	reinsurance	costs	and	death	and	other	insurance	benefits	in	excess	of the	projected	account	balance.	The	additional	death	and	other	insurance	benefits	and	net	reinsurance	costs	are	recognized	ratably	over	the accumulation	period	based	on	total	expected	assessments.

# 9.	Separate	Accounts,	Death	Benefits	and	Other	Insurance	Benefit	Features	(continued)

# U.S.	GMDB,	International	GMDB/GMIB,	and	UL	Secondary	Guarantee	Benefits

Changes	in	the	gross	U.S.	GMDB,	International	GMDB/GMIB,	and	UL	secondary	guarantee	benefits	are	as	follows:

|  |  | International | UL	Secondary |
| :--- | :--- | :--- | :--- |
|  | U.S.\tGMDB | GMDB/GMIB | Guarantees |
| Liability\tbalance\tas\tof\tJanuary\t1,\t2011 | $1,053 | $696 | $113 |
| Incurred | 220 | 122 | 53 |
| Paid | (222) | (165) | — |
| Unlock | 53 | 287 | 62 |
| Currency\ttranslation\tadjustment | — | 35 | — |
| Liability\tbalance\tas\tof\tDecember\t31,\t2011 | $1,104 | $975 | $228 |
| Reinsurance\trecoverable\tasset,\tas\tof\tJanuary\t1,\t2011 | $686 | $36 | $30 |
| Incurred | 128 | 18 | (8) |
| Paid | (143) | (30) | — |
| Unlock | 53 | 15 | — |
| Currency\ttranslation\tadjustment | — | 1 | — |
| Reinsurance\trecoverable\tasset,\tas\tof\tDecember\t31,\t2011 | $724 | $40 | $22 |

|  |  | International | UL	Secondary |
| :--- | :--- | :--- | :--- |
|  | U.S.\tGMDB | GMDB/GMIB | Guarantees |
| Liability\tbalance\tas\tof\tJanuary\t1,\t2010 | $1,233 | $599 | $76 |
| Incurred | 239 | 103 | 39 |
| Paid | (294) | (134) | — |
| Unlock | (125) | 39 | (2) |
| Currency\ttranslation\tadjustment | — | 89 | — |
| Liability\tbalance\tas\tof\tDecember\t31,\t2010 | $1,053 | $696 | $113 |
| Reinsurance\trecoverable\tasset,\tas\tof\tJanuary\t1,\t2010 | $787 | $51 | $22 |
| Incurred | 139 | (26) | 8 |
| Paid | (176) | 1 | — |
| Unlock | (64) | 5 | — |
| Currency\ttranslation\tadjustment | — | 5 | — |
| Reinsurance\trecoverable\tasset,\tas\tof\tDecember\t31,\t2010 | $686 | $36 | $30 |

The	following	table	provides	details	concerning	GMDB	and	GMIB	exposure	as	of	December	31,	2011:

# Individual	Variable	and	Group	Annuity	Account	Value	by	GMDB/GMIB	Type

|  |  |  | Retained	Net |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Account | Net\tAmount | Amount | Weighted\tAverage |
|  | Value | at\tRisk | at\tRisk | Attained\tAge\tof |
| Maximum\tanniversary\tvalue\t("MAV")\t[1] | ("AV")\t[8] | ("NAR")\t[10] | ("RNAR")\t[10] | Annuitant |
| MAV\tonly | $20,718 | $5,998 | $1,500 | 68 |
| With\t5%\trollup\t[2] | 1,469 | 521 | 181 | 68 |
| With\tEarnings\tProtection\tBenefit\tRider\t("EPB")\t[3] | 5,378 | 940 | 104 | 65 |
| With\t5%\trollup\t&amp;\tEPB | 585 | 169 | 35 | 68 |
| Total\tMAV | 28,150 | 7,628 | 1,820 |  |
| Asset\tProtection\tBenefit\t("APB")\t[4] | 22,343 | 3,139 | 2,042 | 66 |
| Lifetime\tIncome\tBenefit\t("LIB")\t—\tDeath\tBenefit\t[5] | 1,095 | 120 | 120 | 64 |
| Reset\t[6]\t(5-7\tyears) | 3,139 | 307 | 304 | 68 |
| Return\tof\tPremium\t("ROP")\t[7]/Other | 21,512 | 876 | 850 | 65 |
| Subtotal\tU.S.\tGMDB | 76,239 | 12,070 | 5,136 | 67 |
| Less:\tGeneral\tAccount\tValue\twith\tU.S.\tGMDB | 7,251 |  |  |  |
| Subtotal\tSeparate\tAccount\tLiabilities\twith\tGMDB | 68,988 |  |  |  |
| Separate\tAccount\tLiabilities\twithout\tU.S.\tGMDB | 74,882 |  |  |  |
| Total\tSeparate\tAccount\tLiabilities | $143,870 |  |  |  |
| Japan\tGMDB\t[9],\t[11] | $29,234 | $10,857 | $9,413 | 70 |
| Japan\tGMIB\t[9],\t[11] | $27,282 | $7,502 | $7,502 | 69 |

[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	or	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	which	allows	for	free	withdrawal	of	earnings,	paid	through	a	fixed	payout	annuity,	after	a	minimum deferral	period	of	10,	15	or	20	years.	The	GRB	related	to	the	Japan	GMIB	was	$34.1	billion	and	$33.9	billion	as	of	December	31, 2011	and	December	31,	2010,	respectively.	The	GRB	related	to	the	Japan	GMAB	and	GMWB	was	$701	as	of	December	31,	2011 and	$707	as	of	December	31,	2010.	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	December	31,	2011,	55%	of	the	GMDB	RNAR	and	65%	of	the GMIB	NAR	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.	Additionally	Japan's	NAR	and RNAR	are	highly	sensitive	to	currency	movements	and	increase	when	the	Yen	strengthens.

[11]	 Policies	with	a	guaranteed	living	benefit	(GMIB	in	Japan)	also	have	a	guaranteed	death	benefit.	The	NAR	for	each	benefit	is	shown in	the	table	above,	however	these	benefits	are	not	additive.	When	a	policy	terminates	due	to	death,	any	NAR	related	to	GMWB	or GMIB	is	released.	Similarly,	when	a	policy	goes	into	benefit	status	on	a	GMWB	or	GMIB,	its	GMDB	NAR	is	released.

In	the	U.S.,	account	balances	of	contracts	with	guarantees	were	invested	in	variable	separate	accounts	as	follows:

| Asset	type | As	of	December	31,	2011 | As	of	December	31,	2010 |
| :--- | :--- | :--- |
| Equity\tsecurities\t(including\tmutual\tfunds) | $61,472 | $75,601 |
| Cash\tand\tcash\tequivalents | 7,516 | 8,365 |
| Total | $68,988 | $83,966 |

As	of	December	31,	2011	and	December	31,	2010,	approximately	17%	and	15%,	respectively,	of	the	equity	securities	above	were	invested in	fixed	income	securities	through	these	funds	and	approximately	83%	and	85%,	respectively,	were	invested	in	equity	securities.

See	Note	4	for	further	information	on	guaranteed	living	benefits	that	are	accounted	for	at	fair	value,	such	as	GMWB.

# 10.	Sales	Inducements

The	Company	currently	offers	enhanced	crediting	rates	or	bonus	payments	to	contract	holders	on	certain	of	its	individual	and	group annuity	products.	The	expense	associated	with	offering	a	bonus	is	deferred	and	amortized	over	the	life	of	the	related	contract	in	a	pattern consistent	with	the	amortization	of	deferred	policy	acquisition	costs.	Amortization	expense	associated	with	expenses	previously	deferred is	recorded	over	the	remaining	life	of	the	contract.	Consistent	with	the	Unlock,	the	Company	unlocked	the	amortization	of	the	sales inducement	asset.	See	Note	7	for	more	information	concerning	the	Unlock.

Changes	in	deferred	sales	inducement	activity	were	as	follows	for	the	years	ended	December	31:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Balance,\tbeginning\tof\tyear | $459 | $438 | $553 |
| Sales\tinducements\tdeferred | 20 | 31 | 59 |
| Amortization\tcharged\tto\tincome | (17) | (8) | (105) |
| Amortization\t—\tUnlock | (28) | (2) | (69) |
| Balance,\tend\tof\tyear | $434 | $459 | $438 |

# 11.	Reserves	for	Future	Policy	Benefits	and	Unpaid	Losses	and	Loss	Adjustment	Expenses

# Life	Insurance	Products	Accounting	Policy

Liabilities	for	future	policy	benefits	are	calculated	by	the	net	level	premium	method	using	interest,	withdrawal	and	mortality	assumptions appropriate	at	the	time	the	policies	were	issued.	The	methods	used	in	determining	the	liability	for	unpaid	losses	and	future	policy	benefits are	standard	actuarial	methods	recognized	by	the	American	Academy	of	Actuaries.	For	the	tabular	reserves,	discount	rates	are	based	on	the Company's	 earned	 investment	 yield	 and	 the	 morbidity/mortality	 tables	 used	 are	 standard	 industry	 tables	 modified	 to	 reflect	 the Company's	actual	experience	when	appropriate.	In	particular,	for	the	Company's	group	disability	known	claim	reserves,	the	morbidity table	for	the	early	durations	of	claim	is	based	exclusively	on	the	Company's	experience,	incorporating	factors	such	as	gender,	elimination period	and	diagnosis.	These	reserves	are	computed	such	that	they	are	expected	to	meet	the	Company's	future	policy	obligations.	Future policy	benefits	are	computed	at	amounts	that,	with	additions	from	estimated	premiums	to	be	received	and	with	interest	on	such	reserves compounded	annually	at	certain	assumed	rates,	are	expected	to	be	sufficient	to	meet	the	Company's	policy	obligations	at	their	maturities or	in	the	event	of	an	insured's	death.	Changes	in	or	deviations	from	the	assumptions	used	for	mortality,	morbidity,	expected	future premiums	and	interest	can	significantly	affect	the	Company's	reserve	levels	and	related	future	operations	and,	as	such,	provisions	for adverse	deviation	are	built	into	the	long-tailed	liability	assumptions.

Liabilities	for	the	Company's	group	life	and	disability	contracts,	as	well	as	its	individual	term	life	insurance	policies,	include	amounts	for unpaid	losses	and	future	policy	benefits.	Liabilities	for	unpaid	losses	include	estimates	of	amounts	to	fully	settle	known	reported	claims, as	well	as	claims	related	to	insured	events	that	the	Company	estimates	have	been	incurred	but	have	not	yet	been	reported.	These	reserve estimates	are	based	on	known	facts	and	interpretations	of	circumstances,	and	consideration	of	various	internal	factors	including	The Hartford's	experience	with	similar	cases,	historical	trends	involving	claim	payment	patterns,	loss	payments,	pending	levels	of	unpaid claims,	loss	control	programs	and	product	mix.	In	addition,	the	reserve	estimates	are	influenced	by	consideration	of	various	external factors	 including	court	decisions,	economic	conditions	and	public	attitudes.	The	effects	of	 inflation	are	 implicitly	considered	 in	 the reserving	process.

# 11.	Reserves	for	Future	Policy	Benefits	and	Unpaid	Losses	and	Loss	Adjustment	Expenses	(continued)

# Life	Insurance	Products	Unpaid	Losses	and	Loss	Adjustment	Expenses

A	rollforward	of	liabilities,	primarily	from	group	disability	products,	for	unpaid	losses	and	loss	adjustment	expenses	follows:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tgross | $6,388 | $6,131 | $6,066 |
| Reinsurance\trecoverables | 209 | 213 | 231 |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tnet | 6,179 | 5,918 | 5,835 |
| Add\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses |  |  |  |
| Current\tyear | 3,196 | 3,260 | 3,244 |
| Prior\tyears | 98 | 70 | (88) |
| Total\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | 3,294 | 3,330 | 3,156 |
| Less\tpayments |  |  |  |
| Current\tyear | 1,524 | 1,552 | 1,580 |
| Prior\tyears | 1,635 | 1,517 | 1,493 |
| Total\tpayments | 3,159 | 3,069 | 3,073 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tnet | 6,314 | 6,179 | 5,918 |
| Reinsurance\trecoverables | 233 | 209 | 213 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tgross | $6,547 | $6,388 | $6,131 |

The	unfavorable	prior	year	development	in	both	2011	and	2010	is	a	result	of	lower	claim	terminations,	particularly	in	long-term	disability.

The	favorable	prior	year	development	in	2009	was	principally	due	to	continued	disability	and	waiver	claims	management.

The	liability	for	future	policy	benefits	and	unpaid	losses	and	loss	adjustment	expenses	is	as	follows:

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| Group\tLife\tTerm,\tDisability\tand\tAccident\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | $6,547 | $6,388 |
| Group\tLife\tOther\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | 213 | 216 |
| Individual\tLife\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | 134 | 110 |
| Future\tPolicy\tBenefits | 12,572 | 11,859 |
| Future\tPolicy\tBenefits\tand\tUnpaid\tLosses\tand\tLoss\tAdjustment\tExpenses | $19,466 | $18,573 |

# Property	and	Casualty	Insurance	Products	Accounting	Policy

The	Hartford	establishes	property	and	casualty	insurance	products	reserves	to	provide	for	the	estimated	costs	of	paying	claims	under insurance	policies	written	by	the	Company.	These	reserves	include	estimates	for	both	claims	that	have	been	reported	and	those	that	have been	incurred	but	not	reported,	and	include	estimates	of	all	losses	and	loss	adjustment	expenses	associated	with	processing	and	settling these	claims.	Estimating	 the	ultimate	cost	of	future	 losses	and	 loss	adjustment	expenses	 is	an	uncertain	and	complex	process.	This estimation	process	is	based	significantly	on	the	assumption	that	past	developments	are	an	appropriate	predictor	of	future	events,	and involves	a	variety	of	actuarial	techniques	that	analyze	experience,	trends	and	other	relevant	factors.	The	uncertainties	involved	with	the reserving	process	have	become	increasingly	difficult	due	to	a	number	of	complex	factors	including	social	and	economic	trends	and changes	in	the	concepts	of	legal	liability	and	damage	awards.	Accordingly,	final	claim	settlements	may	vary	from	the	present	estimates, particularly	when	those	payments	may	not	occur	until	well	into	the	future.

The	Hartford	regularly	reviews	the	adequacy	of	its	estimated	losses	and	loss	adjustment	expense	reserves	by	line	of	business	within	the various	reporting	segments.	Adjustments	to	previously	established	reserves	are	reflected	in	the	operating	results	of	the	period	in	which	the adjustment	is	determined	to	be	necessary.	Such	adjustments	could	possibly	be	significant,	reflecting	any	variety	of	new	and	adverse	or favorable	trends.

Most	of	the	Company's	property	and	casualty	insurance	products	insurance	reserves	are	not	discounted.	However,	the	Company	has discounted	 liabilities	 funded	 through	 structured	 settlements	 and	 has	 discounted	 certain	 reserves	 for	 indemnity	 payments	 due	 to permanently	disabled	claimants	under	workers'	compensation	policies.	Structured	settlements	are	agreements	that	provide	fixed	periodic payments	to	claimants	and	include	annuities	purchased	to	fund	unpaid	losses	for	permanently	disabled	claimants	and,	prior	to	2008, agreements	that	funded	loss	run-offs	for	unrelated	parties.	Most	of	the	annuities	have	been	issued	by	the	Company	and	these	structured settlements	are	recorded	at	present	value	as	annuity	obligations,	either	within	the	reserve	for	future	policy	benefits	if	the	annuity	benefits are	life-contingent	or	within	other	policyholder	funds	and	benefits	payable	if	the	annuity	benefits	are	not	life-contingent.	If	not	funded through	an	annuity,	reserves	for	certain	indemnity	payments	due	to	permanently	disabled	claimants	under	workers'	compensation	policies are	recorded	as	property	and	casualty	insurance	products	reserves	and	were	discounted	to	present	value	at	an	average	interest	rate	of	4.4% in	2011	and	4.8%	in	2010.	As	of	December	31,	2011	and	2010,	property	and	casualty	insurance	products	reserves	were	discounted	by	a total	of	$542	and	$524,	respectively.	The	current	accident	year	benefit	from	discounting	property	and	casualty	insurance	products	reserves was	$58	in	2011,	$46	in	2010	and	$40	in	2009.	The	growth	in	discounting	benefit	over	the	past	three	years	is	due	to	growth	in	the workers'	compensation	line	of	business,	tempered	by	a	reduction	in	the	discount	rate,	reflecting	a	lower	risk-free	rate	of	return	over	this period.	Accretion	of	discounts	for	prior	accident	years	totaled	$38	in	2011,	$26	in	2010,	and	$24	in	2009.	For	annuities	issued	by	the Company	to	fund	certain	workers'	compensation	indemnity	payments	where	the	claimant	has	not	released	the	Company	of	its	obligation, the	Company	has	recorded	annuity	obligations	totaling	$867	as	of	December	31,	2011	and	$896	as	of	December	31,	2010.

# Property	and	Casualty	Insurance	products	Unpaid	Losses	and	Loss	Adjustment	Expenses

A	rollforward	of	liabilities	for	unpaid	losses	and	loss	adjustment	expenses	follows:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tgross | $21,025 | $21,651 | $21,933 |
| Reinsurance\tand\tother\trecoverables | 3,077 | 3,441 | 3,586 |
| Beginning\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tnet | 17,948 | 18,210 | 18,347 |
| Add\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses |  |  |  |
| Current\tyear | 7,420 | 6,768 | 6,596 |
| Prior\tyears | 367 | (196) | (186) |
| Total\tprovision\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses | 7,787 | 6,572 | 6,410 |
| Less\tpayments |  |  |  |
| Current\tyear | 3,181 | 2,952 | 2,776 |
| Prior\tyears | 4,037 | 3,882 | 3,771 |
| Total\tpayments | 7,218 | 6,834 | 6,547 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tnet | 18,517 | 17,948 | 18,210 |
| Reinsurance\tand\tother\trecoverables | 3,033 | 3,077 | 3,441 |
| Ending\tliabilities\tfor\tunpaid\tlosses\tand\tloss\tadjustment\texpenses,\tgross | $21,550 | $21,025 | $21,651 |

In	the	opinion	of	management,	based	upon	the	known	facts	and	current	law,	the	reserves	recorded	for	The	Hartford's	property	and casualty	insurance	products	at	December	31,	2011	represent	the	Company's	best	estimate	of	its	ultimate	liability	for	losses	and	loss adjustment	expenses	related	to	losses	covered	by	policies	written	by	the	Company.	Based	on	information	or	trends	that	are	not	presently known,	future	reserve	re-estimates	may	result	in	adjustments	to	these	reserves.	Such	adjustments	could	possibly	be	significant,	reflecting any	variety	of	new	and	adverse	or	favorable	trends.	Because	of	the	significant	uncertainties	surrounding	environmental	and	particularly asbestos	exposures,	it	is	possible	that	management's	estimate	of	the	ultimate	liabilities	for	these	claims	may	change	and	that	the	required adjustment	to	recorded	reserves	could	exceed	the	currently	recorded	reserves	by	an	amount	that	could	be	material	to	The	Hartford's results	of	operations,	financial	condition	and	liquidity.	For	a	further	discussion,	see	Note	12.

Examples	of	current	trends	affecting	frequency	and	severity	include	increases	in	medical	cost	inflation	rates,	the	changing	use	of	medical care	procedures,	the	introduction	of	new	products	and	changes	in	internal	claim	practices.	Other	trends	include	changes	in	the	legislative and	regulatory	environment	over	workers'	compensation	claims	and	evolving	exposures	to	claims	relating	to	molestation	or	abuse	and other	 mass	 torts.	 In	 the	 case	 of	 the	 reserves	 for	 asbestos	 exposures,	 factors	 contributing	 to	 the	 high	 degree	 of	 uncertainty	 include inadequate	loss	development	patterns,	plaintiffs'	expanding	theories	of	liability,	the	risks	inherent	in	major	litigation,	and	inconsistent emerging	legal	doctrines.	In	the	case	of	the	reserves	for	environmental	exposures,	factors	contributing	to	the	high	degree	of	uncertainty include	 expanding	 theories	 of	 liabilities	 and	 damages,	 the	 risks	 inherent	 in	 major	 litigation,	 inconsistent	 decisions	 concerning	 the existence	and	scope	of	coverage	for	environmental	claims,	and	uncertainty	as	to	the	monetary	amount	being	sought	by	the	claimant	from the	insured.

The	following	table	presents	prior	accident	years	reserve	development:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Auto\tliability | $(97) | $(169) | $(124) |
| Professional\tliability | 29 | (88) | (127) |
| Workers'\tcompensation | 171 | (70) | (92) |
| General\tliability | (40) | (108) | (112) |
| Package\tbusiness | (76) | (19) | 38 |
| Commercial\tproperty | (4) | (16) | — |
| Fidelity\tand\tsurety | (7) | (5) | 28 |
| Homeowners | (1) | 23 | 18 |
| Net\tenvironmental\treserves | 26 | 67 | 75 |
| Net\tasbestos\treserves | 294 | 189 | 138 |
| All\tother\tnon-A&amp;E | — | 11 | 35 |
| Uncollectible\treinsurance | — | (30) | (40) |
| Change\tin\tworkers'\tcompensation\tdiscount,\tincluding\taccretion | 38 | 26 | 24 |
| Catastrophes | 37 | 11 | (23) |
| Other\treserve\tre-estimates,\tnet | (3) | (18) | (24) |
| Total\tprior\taccident\tyears\tdevelopment | $367 | $(196) | $(186) |

Net	unfavorable	reserve	development	in	2011	primarily	included	the	following:

•a	strengthening	of	reserves	for	workers'	compensation	reserves,	for	accident	years	2008	to	2010;

•a	strengthening	of	asbestos	and	environmental	reserves;

•	 partially	offset	by	a	release	of	auto	liability	claims	for	accident	years	2006	to	2010;	and

•also	offset	by	a	release	of	package	business	liability	coverages	in	accident	years	2005	to	2009.

Net	favorable	reserve	development	in	2010	primarily	included	the	following:

•a	release	of	reserves	for	auto	liability,	claims,	for	accident	years	2002	to	2009;

•a	release	of	reserves	for	professional	liability	claims,	for	accident	years	2004	to	2008;

•a	release	of	general	liability	claims,	primarily	related	to	accident	years	2005	to	2008;

•a	release	of	workers'	compensation	reserves	related	to	accident	years	2006	and	2007;	and

•	 partially	offset	by	a	strengthening	of	asbestos	and	environmental	reserves.

•a	release	of	workers'	compensation	reserves;	and

# 12.	Commitments	and	Contingencies

Apart	from	the	inherent	difficulty	of	predicting	litigation	outcomes,	particularly	those	that	will	be	decided	by	a	jury,	many	of	the	matters specifically	identified	below	purport	to	seek	substantial	damages	for	unsubstantiated	conduct	spanning	a	multi-year	period	based	on	novel and	complex	legal	theories	and	damages	models.	The	alleged	damages	typically	are	not	quantified	or	factually	supported	in	the	complaint, and,	in	any	event,	the	Company's	experience	shows	that	demands	for	damages	often	bear	little	relation	to	a	reasonable	estimate	of potential	loss.	Most	are	in	the	earliest	stages	of	litigation,	with	few	or	no	substantive	legal	decisions	by	the	court	defining	the	scope	of	the claims,	the	class	(if	any),	or	the	potentially	available	damages.	In	many,	the	Company	has	not	yet	answered	the	complaint	or	asserted	its defenses,	and	fact	discovery	is	still	in	progress	or	has	not	yet	begun.	Accordingly,	unless	otherwise	specified	below,	management	cannot reasonably	estimate	the	possible	loss	or	range	of	loss,	if	any,	or	predict	the	timing	of	the	eventual	resolution	of	these	matters.

# 12.	Commitments	and	Contingencies	(continued)

The	Company	and	certain	of	its	present	or	former	officers	were	defendants	in	a	putative	securities	class	action	lawsuit	filed	in	the	United States	District	Court	for	the	Southern	District	of	New	York	in	March	2010.	The	operative	complaint,	filed	in	October	2010,	was	brought on	behalf	of	persons	who	acquired	Hartford	common	stock	during	the	period	of	July	28,	2008	through	February	5,	2009,	and	alleged	that the	defendants	violated	Section	10(b)	of	the	Securities	Exchange	Act	of	1934	and	Rule	10b-5,	by	making	false	or	misleading	statements during	the	alleged	class	period	about	the	Company's	valuation	of	certain	asset-backed	securities	and	its	effect	on	the	Company's	capital position.	In	September	2011,	the	district	court	dismissed	the	lawsuit	with	prejudice.	The	plaintiffs	did	not	appeal.

Fair	 Credit	 Reporting	Act	 Class	Action	—	In	February	2007,	the	United	States	District	Court	for	the	District	of	Oregon	gave	final approval	of	the	Company's	settlement	of	a	lawsuit	brought	on	behalf	of	a	class	of	homeowners	and	automobile	policy	holders	alleging that	the	Company	willfully	violated	the	Fair	Credit	Reporting	Act	by	failing	to	send	appropriate	notices	to	new	customers	whose	initial rates	were	higher	than	they	would	have	been	had	the	customer	had	a	more	favorable	credit	report.	The	Company	paid	approximately $84.3 to	eligible	claimants	and	 their	counsel	 in	connection	with	 the	settlement,	sought	reimbursement	from	 the	Company's	Excess Professional	Liability	Insurance	Program	for	the	portion	of	the	settlement	in	excess	of	the	Company's	$10	self-insured	retention,	and booked	an	insurance	recoverable	for	the	amount	paid	under	the	settlement	plus	the	cost	of	settlement	administration,	less	the	self-insured retention.	Certain	insurance	carriers	participating	in	that	program	disputed	coverage	for	the	settlement,	and	one	of	the	excess	insurers commenced	an	arbitration	that	resulted	in	an	award	in	the	Company's	favor	and	payments	to	the	Company	of	approximately	$30.1, thereby	exhausting	the	primary	and	first-layer	excess	policies.	As	a	result,	the	Company's	insurance	recoverable	was	reduced	to	$45.5.	In June	2009,	the	second-layer	excess	carriers	commenced	an	arbitration	to	resolve	the	dispute	over	coverage	for	the	remainder	of	the amounts	paid	by	the	Company.	The	Company	counterclaimed	for	coverage.	In	September	2011,	the	arbitrators	ruled	in	the	Company's favor	and	awarded	approximately	$50	plus	interest	of	$3.

# Asbestos	and	Environmental	Claims

The	Company	continues	to	receive	asbestos	and	environmental	claims.	Asbestos	claims	relate	primarily	to	bodily	injuries	asserted	by people	who	came	in	contact	with	asbestos	or	products	containing	asbestos.	Environmental	claims	relate	primarily	to	pollution	and	related clean-up	costs.

The	Company	wrote	several	different	categories	of	insurance	contracts	that	may	cover	asbestos	and	environmental	claims.	First,	the Company	wrote	primary	policies	providing	the	first	layer	of	coverage	in	an	insured's	liability	program.	Second,	the	Company	wrote excess	policies	providing	higher	layers	of	coverage	for	losses	that	exhaust	the	limits	of	underlying	coverage.	Third,	the	Company	acted	as a	reinsurer	assuming	a	portion	of	those	risks	assumed	by	other	insurers	writing	primary,	excess	and	reinsurance	coverages.	Fourth, subsidiaries	of	the	Company	participated	in	the	London	Market,	writing	both	direct	insurance	and	assumed	reinsurance	business.

Significant	uncertainty	limits	the	ability	of	insurers	and	reinsurers	to	estimate	the	ultimate	reserves	necessary	for	unpaid	losses	and expenses	related	to	environmental	and	particularly	asbestos	claims.	The	degree	of	variability	of	reserve	estimates	for	these	exposures	is significantly	greater	than	for	other	more	traditional	exposures.

In	 the	 case	 of	 the	 reserves	 for	 asbestos	 exposures,	 factors	 contributing	 to	 the	 high	 degree	 of	 uncertainty	 include	 inadequate	 loss development	patterns,	plaintiffs'	expanding	theories	of	liability,	the	risks	inherent	in	major	litigation,	and	inconsistent	emerging	legal doctrines.	Furthermore,	over	time,	insurers,	including	the	Company,	have	experienced	significant	changes	in	the	rate	at	which	asbestos claims	are	brought,	the	claims	experience	of	particular	insureds,	and	the	value	of	claims,	making	predictions	of	future	exposure	from	past experience	uncertain.	Plaintiffs	and	insureds	also	have	sought	to	use	bankruptcy	proceedings,	including	"pre-packaged"	bankruptcies,	to accelerate	and	increase	loss	payments	by	insurers.	In	addition,	some	policyholders	have	asserted	new	classes	of	claims	for	coverages	to which	 an	 aggregate	 limit	 of	 liability	 may	 not	 apply.	 Further	 uncertainties	 include	 insolvencies	 of	 other	 carriers	 and	 unanticipated developments	pertaining	to	the	Company's	ability	to	recover	reinsurance	for	asbestos	and	environmental	claims.	Management	believes these	issues	are	not	likely	to	be	resolved	in	the	near	future.

In	the	case	of	the	reserves	for	environmental	exposures,	factors	contributing	to	the	high	degree	of	uncertainty	include	expanding	theories of	liability	and	damages,	the	risks	inherent	in	major	litigation,	inconsistent	decisions	concerning	the	existence	and	scope	of	coverage	for environmental	claims,	and	uncertainty	as	to	the	monetary	amount	being	sought	by	the	claimant	from	the	insured.

The	reporting	pattern	for	assumed	reinsurance	claims,	including	those	related	to	asbestos	and	environmental	claims,	is	much	longer	than for	direct	claims.	In	many	instances,	it	takes	months	or	years	to	determine	that	the	policyholder's	own	obligations	have	been	met	and	how the	reinsurance	in	question	may	apply	to	such	claims.	The	delay	in	reporting	reinsurance	claims	and	exposures	adds	to	the	uncertainty	of estimating	the	related	reserves.

It	is	also	not	possible	to	predict	changes	in	the	legal	and	legislative	environment	and	their	effect	on	the	future	development	of	asbestos	and environmental	claims.

Given	the	factors	described	above,	the	Company	believes	the	actuarial	tools	and	other	techniques	it	employs	to	estimate	the	ultimate	cost of	 claims	 for	 more	 traditional	 kinds	 of	 insurance	 exposure	 are	 less	 precise	 in	 estimating	 reserves	 for	 certain	 of	 its	 asbestos	 and environmental	exposures.	For	this	reason,	the	Company	principally	relies	on	exposure-based	analysis	to	estimate	the	ultimate	costs	of these	claims	and	regularly	evaluates	new	account	 information	 in	assessing	 its	potential	asbestos	and	environmental	exposures.	The Company	supplements	this	exposure-based	analysis	with	evaluations	of	the	Company's	historical	direct	net	loss	and	expense	paid	and reported	experience,	and	net	loss	and	expense	paid	and	reported	experience	by	calendar	and/or	report	year,	to	assess	any	emerging	trends, fluctuations	or	characteristics	suggested	by	the	aggregate	paid	and	reported	activity.

As	of	December	31,	2011	and	December	31,	2010,	the	Company	reported	$1.9	billion	and	$1.8	billion	of	net	asbestos	reserves	and	$328 and	$339	of	net	environmental	reserves,	respectively.	The	Company	believes	that	its	current	asbestos	and	environmental	reserves	are appropriate.	However,	analyses	of	future	developments	could	cause	The	Hartford	to	change	its	estimates	and	ranges	of	its	asbestos	and environmental	reserves,	and	the	effect	of	these	changes	could	be	material	to	the	Company's	consolidated	operating	results,	financial condition,	and	liquidity.

# Lease	Commitments

[1] 	 Excludes	expected	future	minimum	sublease	income	of	approximately	$7and	$3	in	2012	and	2013,	respectively.

The	Company's	lease	commitments	consist	primarily	of	lease	agreements	on	office	space,	data	processing,	furniture	and	fixtures,	office equipment,	and	transportation	equipment	that	expire	at	various	dates.	Capital	lease	assets	are	included	in	property	and	equipment.

# Unfunded	Commitments

As	of	December	31,	2011,	the	Company	has	outstanding	commitments	totaling	$1.4	billion,	of	which	$700	is	committed	to	fund	limited partnership	and	other	alternative	investments,	which	may	be	called	by	the	partnership	during	the	commitment	period	(on	average	two	to four	years)	to	fund	the	purchase	of	new	investments	and	partnership	expenses.	Once	the	commitment	period	expires,	the	Company	is under	 no	 obligation	 to	 fund	 the	 remaining	 unfunded	 commitment	 but	 may	 elect	 to	 do	 so.	Additionally,	 $553	 is	 largely	 related	 to commercial	whole	loans	expected	to	fund	in	the	first	half	of	2012.	The	remaining	outstanding	commitments	are	related	to	various	funding obligations	associated	with	private	placement	securities.	These	have	a	commitment	period	of	one	month	to	one	year.

In	all	states,	insurers	licensed	to	transact	certain	classes	of	insurance	are	required	to	become	members	of	a	guaranty	fund.	In	most	states, in	the	event	of	the	insolvency	of	an	insurer	writing	any	such	class	of	insurance	in	the	state,	members	of	the	funds	are	assessed	to	pay certain	claims	of	the	insolvent	insurers.	A	particular	state's	fund	assesses	its	members	based	on	their	respective	written	premiums	in	the state	for	the	classes	of	insurance	in	which	the	insolvent	insurer	was	engaged.	Assessments	are	generally	limited	for	any	year	to	one	or	two percent	of	the	premiums	written	per	year	depending	on	the	state.

The	Hartford	accounts	for	guaranty	fund	and	other	related	assessments	in	accordance	with	Accounting	Standards	Codification	405-30, "Insurance-Related	Assessments."	Liabilities	for	guaranty	fund	and	other	insurance-related	assessments	are	accrued	when	an	assessment is	probable,	when	it	can	be	reasonably	estimated,	and	when	the	event	obligating	the	Company	to	pay	an	imposed	or	probable	assessment has	occurred.	Liabilities	for	guaranty	funds	and	other	insurance-related	assessments	are	not	discounted	and	are	included	as	part	of	other liabilities	in	the	Consolidated	Balance	Sheets.	As	of	December	31,	2011	and	2010,	the	liability	balance	was	$145	and	$118	respectively. As	of	December	31,	2011	and	2010,	$31	and	$14	related	to	premium	tax	offsets	were	included	in	other	assets.	In	2011,	The	Company recognized	$22	for	expected	assessments	related	to	the	Executive	Life	Insurance	Company	of	New	York	(ELNY)	insolvency.

The	Company	recognizes	taxes	payable	or	refundable	for	the	current	year	and	deferred	taxes	for	the	tax	consequences	of	differences between	the	financial	reporting	and	tax	basis	of	assets	and	liabilities.	Deferred	tax	assets	and	liabilities	are	measured	using	enacted	tax rates	expected	to	apply	to	taxable	income	in	the	years	the	temporary	differences	are	expected	to	reverse.

The	provision	(benefit)	for	income	taxes	consists	of	the	following:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Income\tTax\tExpense\t(Benefit) |  |  |  |
| Current\t-\tU.S.\tFederal | $(495) | $106 | $509 |
| -\tInternational | 22 | 69 | — |
| Total\tcurrent | (473) | 175 | 509 |
| Deferred\t-\tU.S.\tFederal\tExcluding\tNOL\tCarryforward | 900 | 133 | (1,584) |
| -\tNet\tOperating\tLoss\tCarryforward | (652) | 1 | 712 |
| -\tInternational | (121) | 303 | (475) |
| Total\tdeferred | 127 | 437 | (1,347) |
| Total\tincome\ttax\texpense\t(benefit) | $(346) | $612 | $(838) |

Deferred	tax	assets	(liabilities)	include	the	following	as	of	December	31:

| Deferred	Tax	Assets | 2011 | 2010 |
| :--- | :--- | :--- |
| Tax\tdiscount\ton\tloss\treserves | $632 | $647 |
| Tax\tbasis\tdeferred\tpolicy\tacquisition\tcosts | 528 | 579 |
| Unearned\tpremium\treserve\tand\tother\tunderwriting\trelated\treserves | 421 | 401 |
| Investment-related\titems | 1,159 | 1,454 |
| Insurance\tproduct\tderivatives | 913 | 1,792 |
| Employee\tbenefits | 523 | 555 |
| Net\tunrealized\tlosses\ton\tinvestments | — | 4 |
| Minimum\ttax\tcredit | 868 | 1,183 |
| Net\toperating\tloss\tcarryover | 747 | 88 |
| Other | 149 | 63 |
| Total\tDeferred\tTax\tAssets | 5,940 | 6,766 |
| Valuation\tAllowance | (95) | (173) |
| Deferred\tTax\tAssets,\tNet\tof\tValuation\tAllowance | 5,845 | 6,593 |
| Deferred\tTax\tLiabilities |  |  |
| Financial\tstatement\tdeferred\tpolicy\tacquisition\tcosts\tand\treserves | (3,094) | (2,721) |
| Net\tunrealized\tgains\ton\tinvestments | (1,210) | — |
| Other\tdepreciable\t&amp;\tamortizable\tassets | (104) | (42) |
| Other | (39) | (105) |
| Total\tDeferred\tTax\tLiabilities | (4,447) | (2,868) |
| Net\tDeferred\tTax\tAsset | $1,398 | $3,725 |

As	of	December	31,	2011	and	2010,	the	net	deferred	tax	asset	included	the	expected	tax	benefit	attributable	to	net	operating	losses	of $2,239	and	$327,	respectively,	consisting	of	U.S.	losses	of	$1,880	and	$17,	respectively,	and	foreign	losses	of	$359	and	$310.	The	U.S. losses	expire	from	2013-2031	and	the	foreign	losses	have	no	expiration.

# 13.	Income	Tax	(continued)

The	Company	has	recorded	a	deferred	tax	asset	valuation	allowance	that	is	adequate	to	reduce	the	total	deferred	tax	asset	to	an	amount that	will	be	more	likely	than	not	realized.	The	deferred	tax	asset	valuation	allowance	was	$95,	relating	mostly	to	foreign	net	operating losses	as	of	December	31,	2011	and	was	$173	as	of	December	31,	2010.	In	assessing	the	need	for	a	valuation	allowance,	management considered	 future	 taxable	 temporary	 difference	 reversals,	 future	 taxable	 income	 exclusive	 of	 reversing	 temporary	 differences	 and carryforwards,	taxable	income	in	open	carry	back	years,	as	well	as	other	tax	planning	strategies.	These	tax	planning	strategies	include holding	a	portion	of	debt	securities	with	market	value	losses	until	recovery,	altering	the	level	of	tax	exempt	securities,	selling	appreciated securities	 to	offset	capital	 losses,	business	considerations	such	as	asset-liability	matching,	and	 the	sales	of	certain	corporate	assets. Management	views	such	tax	planning	strategies	as	prudent	and	feasible,	and	would	implement	them,	if	necessary,	to	realize	the	deferred tax	asset.	Based	on	the	availability	of	additional	tax	planning	strategies	identified	in	the	second	quarter	of	2011,	the	Company	released $86,	or	100%	of	the	valuation	allowance	associated	with	investment	realized	capital	losses.	Future	economic	conditions	and	debt	market volatility,	 including	 increases	 in	 interest	 rates,	 can	 adversely	 impact	 the	 Company's	 tax	 planning	 strategies	 and	 in	 particular	 the Company's	ability	to	utilize	tax	benefits	on	previously	recognized	realized	capital	losses.

Included	in	the	Company's	December	31,	2011	$1.4	billion	net	deferred	tax	asset	is	$1.8	billion	relating	to	items	treated	as	ordinary	for federal	income	tax	purposes,	and	a	$361	net	deferred	tax	liability	for	items	classified	as	capital	in	nature.	The	$361	capital	items	are comprised	of	$847	of	gross	deferred	tax	assets	related	to	realized	capital	losses	and	$1,208	of	gross	deferred	tax	liabilities	related	to	net unrealized	capital	gains.

As	of	December	31,	2011	the	Company	had	a	current	income	tax	receivable	of	$459,	which	is	net	of	a	$46	payable	related	to	Japan	and due	to	a	foreign	jurisdiction.	As	of	December	31,	2010	the	company	had	a	current	income	tax	payable	of	$78,	of	which	$30	was	related	to Japan	and	payable	to	a	foreign	jurisdiction.

The	Company	or	one	or	more	of	its	subsidiaries	files	income	tax	returns	in	the	U.S.	federal	jurisdiction,	and	various	state	and	foreign jurisdictions.	The	Company	is	no	longer	subject	to	U.S.	federal,	state	and	local,	or	non-U.S.	income	tax	examinations	for	years	prior	to 2007.	The	audit	of	the	years	2007-2009	commenced	during	2010	and	is	expected	to	conclude	by	the	end	of	2012,	with	no	material	impact on	the	consolidated	financial	condition	or	results	of	operations.	In	addition,	in	the	second	quarter	of	2011	the	Company	recorded	a	tax benefit	of	$52	as	a	result	of	a	resolution	of	a	tax	matter	with	the	IRS	for	the	computation	of	the	dividends-received	deduction	("DRD")	for years	1998,	2000	and	2001.	Management	believes	that	adequate	provision	has	been	made	in	the	financial	statements	for	any	potential assessments	that	may	result	from	tax	examinations	and	other	tax-related	matters	for	all	open	tax	years.

A	reconciliation	of	the	beginning	and	ending	amount	of	unrecognized	tax	benefits	is	as	follows:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Balance,\tat\tJanuary\t1 | $48 | $48 | 91 |
| Additions\tbased\ton\ttax\tpositions\trelated\tto\tthe\tcurrent\tyear | — | — | — |
| Additions\tfor\ttax\tpositions\tfor\tprior\tyears | — | — | — |
| Reductions\tfor\ttax\tpositions\tfor\tprior\tyears | — | — | (35) |
| Settlements | — | — | (8) |
| Balance,\tat\tDecember\t31 | $48 | $48 | 48 |

The	entire	balance	of	the	unrecognized	tax	benefit,	if	it	were	recognized,	would	affect	the	effective	tax	rate	in	the	period	it	is	released.

The	Company	classifies	interest	and	penalties	(if	applicable)	as	income	tax	expense	in	the	financial	statements.	During	the	year	ended December	31,	2011,	the	Company	recognized	interest	income	of	$5,	and	during	the	years	ended	December	31,	2010	and	2009,	the Company	recognized	interest	expense	of	$2,	and	$7,	respectively.	The	Company	had	approximately	$6	and	$1	of	interest	receivable accrued	at	December	31,	2011	and	2010,	respectively.	The	Company	does	not	believe	it	would	be	subject	to	any	penalties	in	any	open	tax years	and,	therefore,	has	not	booked	any	accrual	for	penalties.

A	reconciliation	of	the	tax	provision	at	the	U.S.	Federal	statutory	rate	to	the	provision	for	income	taxes	is	as	follows:

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Tax\tprovision\tat\tU.S.\tFederal\tstatutory\trate | $81 | 825 | (602) |
| Tax-exempt\tinterest | (148) | (152) | (149) |
| Dividends\treceived\tdeduction | (206) | (154) | (188) |
| Nondeductible\tcosts\tassociated\twith\twarrants | — | — | 78 |
| Valuation\tallowance | (78) | 87 | 30 |
| Goodwill | — | — | 12 |
| Other | 5 | 6 | (19) |
| Provision\tfor\tincome\ttaxes | $(346) | 612 | (838) |

The	Hartford's	long-term	debt	securities	are	issued	by	either	The	Hartford	Financial	Services	Group,	Inc.	("HFSG	Holding	Company")	or Hartford	Life,	Inc.	("HLI"),	an	indirect	wholly	owned	subsidiary,	and	are	unsecured	obligations	of	HFSG	Holding	Company	or	HLI	and rank	on	a	parity	with	all	other	unsecured	and	unsubordinated	indebtedness	of	HFSG	Holding	Company	or	HLI.

Debt	is	carried	net	of	discount.	The	following	table	presents	short-term	and	long-term	debt	by	issuance	as	of	December	31,	2011	and 2010.

| Short-Term	Debt | 2011 | 2010 |
| :--- | :--- | :--- |
| Current\tmaturities\tof\tlong-term\tdebt\tand\tcapital\tlease\tobligations | $— | $400 |
| Total\tShort-Term\tDebt | $— | $400 |
| Long-Term\tDebt |  |  |
| Senior\tNotes\tand\tDebentures |  |  |
| 4.625%\tNotes,\tdue\t2013 | 320 | 320 |
| 4.75%\tNotes,\tdue\t2014 | 200 | 200 |
| 4.0%\tNotes,\tdue\t2015 | 300 | 300 |
| 7.3%\tNotes,\tdue\t2015 | 200 | 200 |
| 5.5%\tNotes,\tdue\t2016 | 300 | 300 |
| 5.375%\tNotes,\tdue\t2017 | 499 | 499 |
| 6.3%\tNotes,\tdue\t2018 | 500 | 500 |
| 6.0%\tNotes,\tdue\t2019 | 500 | 500 |
| 5.5%\tNotes,\tdue\t2020 | 499 | 499 |
| 7.65%\tNotes,\tdue\t2027 | 149 | 149 |
| 7.375%\tNotes,\tdue\t2031 | 92 | 92 |
| 5.95%\tNotes,\tdue\t2036 | 298 | 298 |
| 6.625%\tNotes,\tdue\t2040 | 299 | 299 |
| 6.1%\tNotes,\tdue\t2041 | 325 | 324 |
| Total\tSenior\tNotes\tand\tDebentures | 4,481 | 4,480 |
| Junior\tSubordinated\tDebentures |  |  |
| 3\tmonth\tLIBOR\tplus\t295\tbasis\tpoints,\tNotes\tdue\t2033 | — | 5 |
| 8.125%\tNotes,\tdue\t2068 | 500 | 500 |
| 10.0%\tNotes,\tdue\t2068 | 1,235 | 1,222 |
| Total\tJunior\tSubordinated\tDebentures | 1,735 | 1,727 |
| Total\tLong-Term\tDebt | $6,216 | $6,207 |

The	effective	interest	rates	on	the	6.1%	senior	notes	due	2041	and	the	10.0%	junior	subordinated	debentures	due	2068	are	7.9%	and 15.3%,	respectively.	The	effective	interest	rate	on	the	remaining	notes	does	not	differ	materially	from	the	stated	rate.

# Interest	Expense

The	following	table	presents	interest	expense	incurred	for	2011,	2010,	and	2009,	respectively.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Short-term\tdebt | $—\t $— | $—\t $— | $3 |
| Long-term\tdebt | 508 | 508 | 473 |
| Total\tinterest\texpense | $508 | $508 | $476 |

# Short-Term	Debt

# 14.	Debt	(continued)

# Senior	Notes

# Junior	Subordinated	Debentures

On	June	6,	2008,	the	Company	issued	$500	aggregate	principal	amount	of	8.125%	fixed-to-floating	rate	junior	subordinated	debentures (the	 "8.125%	 debentures")	 due	 June	 15,	 2068	 for	 net	 proceeds	 of	 approximately	 $493,	 after	 deducting	 underwriting	 discounts	 and expenses	from	the	offering.	The	debentures	bear	interest	at	an	annual	fixed	rate	of	8.125%	from	the	date	of	issuance	to,	but	excluding, June	15,	2018,	payable	semi-annually	in	arrears	on	June	15	and	December	15.	From	and	including	June	15,	2018,	the	debentures	will	bear interest	at	an	annual	rate,	reset	quarterly,	equal	to	three-month	LIBOR	plus	4.6025%,	payable	quarterly	in	arrears	on	March	15,	June	15, September	15	and	December	15	of	each	year.	The	Company	has	the	right,	on	one	or	more	occasions,	to	defer	the	payment	of	interest	on the	debentures.	The	Company	may	defer	interest	for	up	to	ten	consecutive	years	without	giving	rise	to	an	event	of	default.	Deferred interest	will	accumulate	additional	interest	at	an	annual	rate	equal	to	the	annual	interest	rate	then	applicable	to	the	8.125%	debentures.	If the	Company	defers	interest	for	five	consecutive	years	or,	if	earlier,	pays	current	interest	during	a	deferral	period,	which	may	be	paid from	any	source	of	funds,	the	Company	will	be	required	to	pay	deferred	interest	from	proceeds	from	the	sale	of	certain	qualifying securities.

The	8.125%	debentures	carry	a	scheduled	maturity	date	of	June	15,	2038	and	a	final	maturity	date	of	June	15,	2068.	During	the	180-day period	ending	on	a	notice	date	not	more	than	fifteen	and	not	less	than	ten	business	days	prior	to	the	scheduled	maturity	date,	the	Company is	required	to	use	commercially	reasonable	efforts	to	sell	certain	qualifying	replacement	securities	sufficient	to	permit	repayment	of	the debentures	at	the	scheduled	maturity	date.	If	any	8.125%	debentures	remain	outstanding	after	the	scheduled	maturity	date,	the	unpaid amount	will	remain	outstanding	until	the	Company	has	raised	sufficient	proceeds	from	the	sale	of	qualifying	replacement	securities	to permit	the	repayment	in	full	of	the	debentures.	If	there	are	remaining	8.125%	debentures	at	the	final	maturity	date,	the	Company	is required	to	redeem	the	8.125%	debentures	using	any	source	of	funds.

Subject	to	the	replacement	capital	covenant	described	below,	the	Company	can	redeem	the	8.125%	debentures	at	its	option,	in	whole	or	in part,	at	any	time	on	or	after	June	15,	2018	at	a	redemption	price	of	100%	of	the	principal	amount	being	redeemed	plus	accrued	but	unpaid interest.	The	Company	can	redeem	the	8.125%	debentures	at	its	option	prior	to	June	15,	2018	(a)	in	whole	at	any	time	or	in	part	from	time to	time	or	(b)	in	whole,	but	not	in	part,	in	the	event	of	certain	tax	or	rating	agency	events	relating	to	the	8.125%	debentures,	at	a redemption	price	equal	to	the	greater	of	100%	of	the	principal	amount	being	redeemed	and	the	applicable	make-whole	amount,	in	each case	plus	any	accrued	and	unpaid	interest.

In	connection	with	the	offering	of	the	8.125%	debentures,	the	Company	entered	into	a	"replacement	capital	covenant"	for	the	benefit	of holders	of	one	or	more	designated	series	of	the	Company's	indebtedness,	initially	the	Company's	6.1%	notes	due	2041.	Under	the	terms of	the	replacement	capital	covenant,	if	the	Company	redeems	the	8.125%	debentures	at	any	time	prior	to	June	15,	2048	it	can	only	do	so with	the	proceeds	from	the	sale	of	certain	qualifying	replacement	securities.

On	October	17,	2008,	the	Company	entered	into	an	Investment	Agreement	(the	"Investment	Agreement"),	with	Allianz	SE	("Allianz") under	which,	among	other	things,	the	Company	agreed	to	issue	and	sell	$1.75	billion	of	the	Company's	10%	Fixed-to-Floating	Rate Junior	Subordinated	Debentures	due	2068	(the	"10%	debentures")	in	a	private	placement	to	Allianz.

The	10%	debentures	due	2068	bear	interest	at	an	annual	fixed	rate	of	10%	from	the	date	of	issuance	to,	but	excluding,	October	15,	2018, payable	semi-annually	in	arrears	on	April	15	and	October	15.	From	and	including	October	15,	2018,	the	10%	debentures	will	bear	interest at	an	annual	rate,	reset	quarterly,	equal	to	three-month	LIBOR	plus	6.824%,	payable	quarterly	in	arrears.	The	Company	has	the	right,	on one	or	more	occasions,	to	defer	the	payment	of	interest	on	the	10%	debentures.	The	Company	may	defer	interest	for	up	to	ten	consecutive years	without	giving	rise	to	an	event	of	default.	Deferred	interest	will	accumulate	additional	interest	at	an	annual	rate	equal	to	the	annual interest	rate	then	applicable	to	the	10%	debentures.	If	the	Company	defers	interest	for	five	consecutive	years	or,	if	earlier,	pays	current interest	during	a	deferral	period,	which	may	be	paid	from	any	source	of	funds,	the	Company	will	be	required	to	pay	deferred	interest	from proceeds	from	the	sale	of	certain	qualifying	securities.

In	connection	with	the	offering	of	the	10%	debentures,	the	Company	entered	into	a	"Replacement	Capital	Covenant"	for	the	benefit	of holders	of	one	or	more	designated	series	of	the	Company's	indebtedness,	initially	the	Company's	6.1%	notes	due	2041.	Under	the	terms of	the	Replacement	Capital	Covenant,	if	the	Company	redeems	the	10%	debentures	at	any	time	prior	to	October	15,	2048	it	can	only	do	so with	the	proceeds	from	the	sale	of	certain	qualifying	replacement	securities.	Subject	to	the	Replacement	Capital	Covenant,	the	Company can	redeem	the	10%	debentures	at	its	option,	in	whole	or	in	part,	at	any	time	on	or	after	October	15,	2018	at	a	redemption	price	of	100% of	the	principal	amount	being	redeemed	plus	accrued	but	unpaid	interest.

# Long-Term	Debt	Maturities

# The	following	table	reflects	the	Company's	long-term	debt	maturities.

|  |  |  | Maximum	Available	As	of | Maximum	Available	As	of | Outstanding	As	of | Outstanding	As	of |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Effective | Expiration | December\t31, | December\t31, | December\t31, | December\t31, |
| Description | Date | Date | 2011 | 2010 | 2011 | 2010 |
| Commercial\tPaper |  |  |  |  |  |  |
| The\tHartford | 11/10/86 | N/A | $2,000 | $2,000 | $— | $— |
| Revolving\tCredit\tFacility |  |  |  |  |  |  |
| 5-year\trevolving\tcredit\tfacility | 8/9/07 | 8/9/12 | 1,900 | 1,900 | — | — |
| Total\tCommercial\tPaper\tand\nRevolving\tCredit\tFacility |  |  | $3,900 | $3,900 | $— | $— |

While	the	Company's	maximum	borrowings	available	under	its	commercial	paper	program	are	$2.0	billion,	the	Company	is	dependent upon	market	conditions	to	access	short-term	financing	through	the	issuance	of	commercial	paper	to	investors.	As	of	December	31,	2011, the	Company	has	no	commercial	paper	outstanding.

Of	the	total	availability	under	the	Credit	Facility,	up	to	$250	is	available	to	support	letters	of	credit	issued	on	behalf	of	the	Company	or subsidiaries	of	the	Company.	Under	the	Credit	Facility,	the	Company	must	maintain	a	minimum	level	of	consolidated	net	worth	of $16	billion.	The	minimum	level	of	consolidated	net	worth,	as	defined,	will	be	adjusted,	upon	the	adoption	of	new	DAC	guidance,	see Note	 1,	in	 the	first	quarter	of	2012,	by	 the	 lesser	of	approximately	$1.0	billion,	after-tax	representing	70%	of	 the	adoption-related estimated	DAC	charge	or	$1.7	billion.	The	definition	of	consolidated	net	worth	under	the	terms	of	the	Credit	Facility,	excludes	AOCI	and includes	the	Company's	outstanding	junior	subordinated	debentures	and	perpetual	preferred	securities,	net	of	discount.	In	addition,	the Company's	maximum	ratio	of	consolidated	total	debt	to	consolidated	total	capitalization	is	35%,	and	the	ratio	of	consolidated	total	debt	of subsidiaries	to	consolidated	total	capitalization	is	limited	to	10%.	The	Company	will	certify	compliance	with	the	financial	covenants	for the	syndicate	of	participating	financial	institutions	on	a	quarterly	basis.

The	Hartford's	Japan	operations	also	maintain	two	lines	of	credit	in	support	of	the	subsidiary	operations.	Both	lines	of	credit	are	in	the amount	of	$65,	or	¥5	billion,	and	individually	have	expiration	dates	of	September	30,	2012	and	January	3,	2013.

# Consumer	Notes

The	Company	issued	consumer	notes	through	its	Retail	Investor	Notes	Program	prior	to	2009.	A	consumer	note	is	an	investment	product distributed	through	broker-dealers	directly	to	retail	investors	as	medium-term,	publicly	traded	fixed	or	floating	rate,	or	a	combination	of fixed	and	floating	rate,	notes.	Consumer	notes	are	part	of	the	Company's	spread-based	business	and	proceeds	are	used	to	purchase investment	products,	primarily	fixed	rate	bonds.	Proceeds	are	not	used	for	general	operating	purposes.	Consumer	notes	maturities	may extend	up	to	30	years	and	have	contractual	coupons	based	upon	varying	interest	rates	or	indexes	(e.g.	consumer	price	index)	and	may include	a	call	provision	that	allows	the	Company	to	extinguish	the	notes	prior	to	its	scheduled	maturity	date.	Certain	Consumer	notes	may be	redeemed	by	the	holder	in	the	event	of	death.	Redemptions	are	subject	to	certain	limitations,	including	calendar	year	aggregate	and individual	limits.	The	aggregate	limit	is	equal	to	the	greater	of	$1	or	1%	of	the	aggregate	principal	amount	of	the	notes	as	of	the	end	of	the prior	year.	The	individual	limit	is	$250	thousand	per	individual.	Derivative	instruments	are	utilized	to	hedge	the	Company's	exposure	to market	risks	in	accordance	with	Company	policy.	As	of	December	31,	2011,	these	consumer	notes	have	interest	rates	ranging	from	4%	to 5%	for	fixed	notes	and,	for	variable	notes,	based	on	December	31,	2011	rates,	either	consumer	price	index	plus	100	to	260	basis	points,	or indexed	to	the	S&P	500,	Dow	Jones	Industrials,	foreign	currency,	or	the	Nikkei	225.	The	aggregate	maturities	of	Consumer	Notes	are	as follows:	$155	in	2012,	$78	in	2013,	$13	in	2014,	$30	in	2015,	$18	in	2016,	and	$20	thereafter.	For	2011,	2010	and	2009,	interest	credited to	holders	of	consumer	notes	was	$15,	$25,	and	$51,	respectively.

# Issuance	of	Common	Stock

On	March	23,	2010,	The	Hartford	issued	approximately	59.6	million	shares	of	common	stock	at	a	price	to	the	public	of	$27.75	per	share and	received	net	proceeds	of	$1.6	billion.

# Issuance	of	Series	F	Preferred	Stock

On	March	23,	2010,	The	Hartford	issued	23	million	depositary	shares,	each	representing	a	1/40th	interest	in	The	Hartford's	7.25% mandatory	convertible	preferred	stock,	Series	F,	at	a	price	of	$25	per	depositary	share	and	received	net	proceeds	of	approximately	$556. The	Company	will	pay	cumulative	dividends	on	each	share	of	the	mandatory	convertible	preferred	stock	at	a	rate	of	7.25%	per	annum	on the	initial	liquidation	preference	of	$1,000	per	share.	Dividends	will	accrue	and	cumulate	from	the	date	of	issuance	and,	to	the	extent	that the	Company	is	legally	permitted	to	pay	dividends	and	its	board	of	directors	declares	a	dividend	payable,	the	Company	will,	from	July	1, 2010	until	and	including	January	1,	2013	pay	dividends	on	each	January	1,	April	1,	July	1	and	October	1,	in	cash	and	(whether	or	not declared	prior	to	that	date)	on	April	1,	2013	will	pay	or	deliver,	as	the	case	may	be,	dividends	in	cash,	shares	of	its	common	stock,	or	a combination	thereof,	at	its	election.	Dividends	on	and	repurchases	of	the	Company's	common	stock	will	be	subject	to	restrictions	in	the event	that	the	Company	fails	to	declare	and	pay,	or	set	aside	for	payment,	dividends	on	the	Series	F	preferred	stock.

The	575,000	shares	of	mandatory	convertible	preferred	stock,	Series	F,	will	automatically	convert	 into	shares	of	common	stock	on April	1,	2013,	if	not	earlier	converted	at	the	option	of	the	holder,	at	any	time,	or	upon	the	occurrence	of	a	fundamental	change.	The number	of	shares	issuable	upon	mandatory	conversion	of	each	share	of	mandatory	convertible	preferred	stock	will	be	a	variable	amount based	on	the	average	of	the	daily	volume	weighted	average	price	per	share	of	the	Company's	common	stock	during	a	specified	period	of 20	 consecutive	 trading	 days	 with	 the	 number	 of	 shares	 of	 common	 stock	 ranging	 from	 29.536	 to	 36.036	 per	 share	 of	 mandatory convertible	preferred	stock,	subject	to	anti-dilution	adjustments.

# Preferred	Stock

The	Company	has	50,000,000	shares	of	preferred	stock	authorized.	See	discussion	below	on	the	Company's	participation	in	the	Capital Purchase	Program.

In	connection	with	the	Company's	investment	agreement	with	Allianz	SE,	Allianz	was	issued	6,048,387	shares	of	the	Company's	Series	D Non-Voting	Contingent	Convertible	Preferred	Stock.	Each	share	of	preferred	stock	was	initially	convertible	into	four	shares	of	common stock.	On	January	9,	2009,	Allianz	converted	its	6,048,387	shares	of	Series	D	Preferred	Stock	into	24,193,548	shares	of	common	stock.

# 15.	Equity	(continued)

# Allianz	SE	Warrants

In	connection	with	the	Company's	October	17,	2008	investment	agreement	with	Allianz	SE,	Allianz	was	issued	warrants,	with	an	initial term	of	seven	years,	to	purchase	the	Company's	Series	B	Non-Voting	Contingent	Convertible	Preferred	Stock	and	Series	C	Non-Voting Contingent	Convertible	Preferred	Stock,	structured	to	entitle	Allianz,	upon	receipt	of	necessary	approvals,	to	purchase	69,115,324	shares of	common	stock	at	an	initial	exercise	price	of	$25.32	per	share.

The	warrants	were	immediately	exercisable,	pending	the	receipt	of	specified	regulatory	approvals,	for	the	Series	B	Preferred	Stock,	which were	initially	convertible,	in	the	aggregate,	into	34,806,452	shares	of	common	stock.

In	addition	to	the	receipt	of	specified	regulatory	approvals,	the	conversion	into	34,308,872	shares	of	common	stock	of	the	Series	C Preferred	 Stock	 underlying	 certain	 of	 the	 warrants	 was	 subject	 to	 the	 approval	 of	 the	 Company's	 stockholders	 in	 accordance	 with applicable	regulations	of	the	New	York	Stock	Exchange.	Under	the	investment	agreement,	the	Company	was	obligated	to	pay	a	cash payment	to	Allianz	if	such	stockholder	approval	was	not	obtained	at	the	first	or	second	stockholder	meetings	to	consider	such	approval. Because	the	conversion	of	the	Series	C	Preferred	Stock	was	subject	to	stockholder	approval	and	the	related	payment	provision	represents a	form	of	net	cash	settlement	outside	the	Company's	control,	the	warrants	to	purchase	the	Series	C	Preferred	Stock	and	the	stockholder approval	payment	were	recorded	as	a	derivative	liability	at	issuance.

On	March	26,	2009,	the	Company's	shareholders	approved	the	conversion	of	the	Series	C	Preferred	Stock.	As	a	result	of	this	shareholder approval,	the	Company	was	not	obligated	to	pay	Allianz	any	cash	payment	related	to	these	warrants	and	therefore	these	warrants	no longer	provide	for	any	form	of	net	cash	settlement	outside	the	Company's	control.	As	such,	the	warrants	to	purchase	the	Series	C Preferred	Stock	were	reclassified	from	other	liabilities	to	equity	at	their	fair	value.	As	of	March	26,	2009,	the	fair	value	of	these	warrants was	$93.	For	the	year	ended	December	31,	2009,	the	Company	recognized	a	gain	of	$70,	representing	the	change	in	fair	value	of	the warrants	through	March	26,	2009.

The	discretionary	equity	issuance	program	that	the	Company	announced	on	June12,	2009	triggered	an	anti-dilution	provision	in	the investment	agreement	with	Allianz,	which	resulted	in	an	adjustment	of	the	warrant	exercise	price	to	$25.25	from	$25.32	and	to	the number	of	shares	that	may	be	purchased	to	69,314,987	from	69,115,324.	The	exercise	price	under	the	warrants	is	subject	to	adjustment	in certain	circumstances.

The	issuance	of	warrants	to	the	U.S.	Department	of	the	Treasury	triggered	a	contingency	payment	in	the	investment	agreement	related	to additional	investors.	Upon	receipt	of	preliminary	approval	to	participate	in	the	Capital	Purchase	Program,	The	Hartford	negotiated	with Allianz	to	modify	the	form	of	the	contingency	payment.	The	settlement	of	the	contingency	payment	was	negotiated	to	allow	Allianz	a	one- time	extension	of	the	exercise	period	of	its	outstanding	warrants	from	seven	to	ten	years	and	a	$200	cash	payment	on	October	15,	2009. The	Hartford	recorded	a	 liability	for	 the	cash	payment	and	an	adjustment	 to	additional	paid-in	capital	for	 the	warrant	modification resulting	in	a	net	realized	capital	loss	of	approximately	$300	for	the	year	ended	December	31,	2009.

Additionally,	 the	 issuance	 of	 common	 and	 preferred	 stock	 during	 the	 first	 quarter	 of	 2010	 triggered	 an	 anti-dilution	 provision	 in investment	agreement	with	Allianz,	which	resulted	in	an	adjustment	to	the	warrant	exercise	price	to	$25.23	from	$25.25	and	to	the	number of	shares	that	may	be	purchased	to	69,351,806	from	69,314,987.

# The	Company's	Participation	in	the	Capital	Purchase	Program

On	June	26,	2009,	as	part	of	the	Capital	Purchase	Program	("CPP")	established	by	the	U.S.	Department	of	the	Treasury	("Treasury") under	 the	 Emergency	 Economic	 Stabilization	Act	 of	 2008	 (the	 "EESA"),	 the	 Company	 entered	 into	 a	 Private	 Placement	 Purchase Agreement	with	Treasury	pursuant	to	which	the	Company	issued	and	sold	to	Treasury	3,400,000	shares	of	the	Company's	Fixed	Rate Cumulative	Perpetual	Preferred	Stock,	Series	E,	having	a	liquidation	preference	of	$1,000	per	share	(the	"Series	E	Preferred	Stock"),	and a	ten-year	warrant	to	purchase	up	to	52,093,973	shares	of	the	Company's	common	stock,	par	value	$0.01	per	share,	at	an	exercise	price	of $9.79	per	share,	for	an	aggregate	purchase	price	of	$3.4	billion.

Cumulative	dividends	on	the	Series	E	Preferred	Stock	accrued	on	the	liquidation	preference	at	a	rate	of	5%	per	annum.	The	Series	E Preferred	Stock	had	no	maturity	date	and	ranked	senior	to	the	Company's	common	stock.	The	Series	E	Preferred	Stock	was	non-voting.

Upon	issuance,	the	fair	values	of	the	Series	E	Preferred	Stock	and	the	associated	warrants	were	computed	as	if	the	instruments	were issued	on	a	stand	alone	basis.	The	fair	value	of	the	Series	E	Preferred	stock	was	estimated	based	on	a	five-year	holding	period	and	cash flows	discounted	at	a	rate	of	13%	resulting	in	a	fair	value	estimate	of	approximately	$2.5	billion.	The	Company	used	a	Black-Scholes options	pricing	model	including	an	adjustment	for	American-style	options	to	estimate	the	fair	value	of	the	warrants,	resulting	in	a	stand alone	fair	value	of	approximately	$400.	The	most	significant	and	unobservable	assumption	in	this	valuation	was	the	Company's	share price	volatility.	The	Company	used	a	long-term	realized	volatility	of	the	Company's	stock	of	62%.	In	addition,	the	Company	assumed	a dividend	yield	of	1.72%.

The	individual	fair	values	were	then	used	to	record	the	Preferred	Stock	and	associated	warrants	on	a	relative	fair	value	basis	of	$2.9	billion and	$480,	respectively.	The	warrants	of	$480	were	recorded	to	additional	paid-in	capital	as	permanent	equity.	The	preferred	stock	amount was	recorded	at	the	liquidation	value	of	$1,000	per	share	or	$3.4	billion,	net	of	discount	of	$480.	The	discount	was	amortized	from	the date	of	issuance,	using	the	effective	yield	method	and	recorded	as	a	direct	reduction	to	retained	earnings	and	deducted	from	income available	to	common	stockholders	in	the	calculation	of	earnings	per	share.	The	amortization	of	discount	totaled	$40	for	the	year	ended December	31,	2009.

On	March	31,	2010,	the	Company	repurchased	all	3.4	million	shares	of	Series	E	preferred	stock	issued	to	the	Treasury	for	an	aggregate purchase	price	of	$3.4	billion	and	made	a	final	dividend	payment	of	$22	on	the	Series	E	preferred	stock.	The	Company	recorded	a	$440 charge	to	retained	earnings	representing	the	acceleration	of	the	accretion	of	the	remaining	discount	on	the	Series	E	preferred	stock.

On	September	27,	2010,	the	Treasury	sold	its	warrants	to	purchase	approximately	52	million	shares	of	The	Hartford's	common	stock	in	a secondary	public	offering	for	net	proceeds	of	approximately	$706.	The	Hartford	did	not	receive	any	proceeds	from	this	sale.	The	warrants are	exercisable,	in	whole	or	in	part,	at	any	time	and	from	time	to	time	until	June	26,	2019	at	an	initial	exercise	price	of	$9.79.	The	exercise price	will	be	paid	by	the	withholding	by	The	Hartford	of	a	number	of	shares	of	common	stock	issuable	upon	exercise	of	the	warrants equal	to	the	value	of	the	aggregate	exercise	price	of	the	warrants	so	exercised	determined	by	reference	to	the	closing	price	of	The Hartford's	common	stock	on	the	trading	day	on	which	the	warrants	are	exercised	and	notice	is	delivered	to	the	warrant	agent.	The Hartford	did	not	purchase	any	of	the	warrants	sold	by	the	Treasury.

Subsequently,	the	declaration	of	a	quarterly	common	stock	dividend	of	$0.10	during	the	first,	second,	third	and	fourth	quarters	of	2011 triggered	a	provision	in	The	Hartford's	Warrant	Agreement	with	The	Bank	of	New	York	Mellon,	resulting	in	an	adjustment	to	the	warrant exercise	price.	The	warrant	exercise	price	was	$9.699	at	December	31,	2011.

# Stock	Repurchase	Program

On	 July	 27,	 2011	 the	 Company's	 Board	 of	 Directors	 authorized	 a	 $500	 stock	 repurchase	 program.	 The	 Company's	 repurchase authorization,	which	expires	on	August	5,	2014,	permits	purchases	of	common	stock,	as	well	as	warrants	or	other	derivative	securities. Repurchases	 may	 be	 made	 in	 the	 open	 market,	 through	 derivative,	 accelerated	 share	 repurchase	 and	 other	 privately	 negotiated transactions,	and	through	plans	designed	to	comply	with	Rule	10b5-1(c)	under	the	Securities	Exchange	Act	of	1934,	as	amended.	The timing	of	any	future	repurchases	will	be	dependent	upon	several	factors,	including	the	market	price	of	the	Company's	securities,	the Company's	capital	position,	consideration	of	the	effect	of	any	repurchases	on	the	Company's	financial	strength	or	credit	ratings,	and	other corporate	considerations.	The	repurchase	program	may	be	modified,	extended	or	terminated	by	the	Board	of	Directors	at	any	time.	The Hartford	repurchased	$51	of	its	common	stock,	or	3.2	million	shares,	under	this	program	for	the	year	ended	December	31,	2011.

# Increase	in	Authorized	Common	Shares

On	May	27,	2009,	at	the	Company's	annual	meeting	of	shareholders,	shareholders	approved	an	increase	in	the	aggregate	authorized number	of	shares	of	common	stock	from	750	million	to	1.5	billion.

# Discretionary	Equity	Issuance	Program

On	June	12,	2009,	the	Company	announced	that	it	had	commenced	a	discretionary	equity	issuance	program,	and	in	accordance	with	that program	entered	into	an	equity	distribution	agreement	pursuant	to	which	it	would	offer	up	to	60	million	shares	of	its	common	stock	from time	to	time	for	aggregate	sales	proceeds	of	up	to	$750.

On	August	5,	2009,	the	Company	increased	the	aggregate	sales	proceeds	from	$750	to	$900.

On	 August	 6,	 2009,	 the	 Company	 announced	 the	 completion	 of	 the	 discretionary	 equity issuance	 program.	 The	 Hartford issued 56.1	million	shares	of	common	stock	and	received	net	proceeds	of	$887	under	this	program.

# Noncontrolling	Interests

Noncontrolling	interest	includes	VIEs	in	which	the	Company	has	concluded	that	it	is	the	primary	beneficiary,	see	Note	5	for	further discussion	of	the	Company's	involvement	in	VIEs,	and	general	account	mutual	funds	where	the	Company	holds	the	majority	interest	due to	seed	money	investments.

In	2009,	the	Company	recorded	noncontrolling	interest	as	a	component	of	equity.	The	noncontrolling	interest	within	these	entities	is	likely to	change,	as	these	entities	represent	investment	vehicles	whereby	investors	may	frequently	redeem	or	contribute	to	these	investments.	As such,	the	change	in	noncontrolling	ownership	interest	represented	in	the	Company's	Consolidated	Statement	of	Changes	in	Equity	will primarily	represent	redemptions	and	additional	subscriptions	within	these	investment	vehicles.

In	2010,	the	Company	recognized	the	noncontrolling	interest	in	these	entities	in	other	liabilities	since	these	entities	represent	investment vehicles	whereby	the	noncontrolling	interests	may	redeem	these	investments	at	any	time.

# Statutory	Results	(Unaudited)

The	domestic	insurance	subsidiaries	of	The	Hartford	prepare	their	statutory	financial	statements	in	conformity	with	statutory	accounting practices	 prescribed	 or	 permitted	 by	 the	 applicable	 state	 insurance	 department	 which	 vary	 materially	 from	 U.S.	 GAAP.	 Prescribed statutory	accounting	practices	include	publications	of	the	National	Association	of	Insurance	Commissioners	("NAIC"),	as	well	as	state laws,	 regulations	 and	 general	 administrative	 rules.	 The	 differences	 between	 statutory	 financial	 statements	 and	 financial	 statements prepared	in	accordance	with	U.S.	GAAP	vary	between	domestic	and	foreign	jurisdictions.	The	principal	differences	are	that	statutory financial	statements	do	not	reflect	deferred	policy	acquisition	costs	and	limit	deferred	income	taxes,	life	benefit	reserves	predominately use	interest	rate	and	mortality	assumptions	prescribed	by	the	NAIC,	bonds	are	generally	carried	at	amortized	cost	and	reinsurance	assets and	liabilities	are	presented	net	of	reinsurance.

The	statutory	net	income	amounts	for	the	years	ended	December	31,	2011,	2010	and	2009,	and	the	statutory	surplus	amounts	as	of December	31,	2011	and	2010	in	the	table	below	are	based	on	actual	statutory	filings	with	the	applicable	U.S.	regulatory	authorities.

| Statutory	Net	Income	(Loss) | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| U.S.\tlife\tinsurance\tsubsidiaries,\tincludes\tdomestic\tcaptive\tinsurance |  |  |  |
| subsidiaries | $(1,272) | $(140) | $1,714 |
| Property\tand\tcasualty\tinsurance\tsubsidiaries | 514 | 1,477 | 889 |
| Total | $(758) | $1,337 | $2,603 |

|  | As	of	December	31, | As	of	December	31, |
| :--- | :--- | :--- |
| Statutory\tSurplus | 2011 | 2010 |
| U.S.\tlife\tinsurance\tsubsidiaries,\tincludes\tdomestic\tcaptive\tinsurance\tsubsidiaries | $7,388 | $7,731 |
| Property\tand\tcasualty\tinsurance\tsubsidiaries | 7,412 | 7,721 |
| Total | $14,800 | $15,452 |

# 16.	Accumulated	Other	Comprehensive	Income	(Loss),	Net	of	Tax

The	components	of	AOCI	were	as	follows:

|  | Unrealized<br>Gain	(Loss)<br>on	Securities | Net	Gain<br>(Loss)	on<br>Cash-Flow<br>Hedging<br>Instruments | Foreign<br>Currency<br>Translation<br>Adjustments | Pension	and<br>Other<br>Postretirement<br>Plan<br>Adjustment | Accumulated<br>Other<br>Comprehensive<br>Income	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2011 |  |  |  |  |  |
| Balance,\tbeginning\tof\tyear | $(696) | $385 | $488 | $(1,178) | $(1,001) |
| Unrealized\tgain\ton\tsecurities\t[1]\t[2] | 1,979 | — | — | — | 1,979 |
| Change\tin\tother-than-temporary |  |  |  |  |  |
| impairment\tlosses\trecognized\tin |  |  |  |  |  |
| other\tcomprehensive\tincome\t[1] | 9 | — | — | — | 9 |
| Change\tin\tnet\tloss\ton\tcash-flow |  |  |  |  |  |
| hedging\tinstruments\t[1]\t[3] | — | 131 | — | — | 131 |
| Change\tin\tforeign\tcurrency |  |  |  |  |  |
| translation\tadjustments\t[1] | — | — | 112 | — | 112 |
| Change\tin\tpension\tand\tother |  |  |  |  |  |
| postretirement\tplan\tadjustment |  |  |  |  |  |
| [1] | — | — | — | (73) | (73) |
| Balance,\tend\tof\tyear | $1,292 | $516 | $600 | $(1,251) | $1,157 |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2010 |  |  |  |  |  |
| Balance,\tbeginning\tof\tyear | $(2,713) | $257 | $199 | $(1,055) | $(3,312) |
| Unrealized\tgain\ton\tsecurities\t[1]\t[2] | 1,707 | — | — | — | 1,707 |
| Change\tin\tother-than-temporary |  |  |  |  |  |
| impairment\tlosses\trecognized\tin |  |  |  |  |  |
| other\tcomprehensive\tincome\t[1] | 116 | — | — | — | 116 |
| Cumulative\teffect\tof\taccounting |  |  |  |  |  |
| change | 194 | — | — | — | 194 |
| Change\tin\tnet\tloss\ton\tcash-flow |  |  |  |  |  |
| hedging\tinstruments\t[1]\t[3] | — | 128 | — | — | 128 |
| Change\tin\tforeign\tcurrency |  |  |  |  |  |
| translation\tadjustments\t[1] | — | — | 289 | — | 289 |
| Change\tin\tpension\tand\tother |  |  |  |  |  |
| postretirement\tplan\tadjustment |  |  |  |  |  |
| [1] | — | — | — | (123) | (123) |
| Balance,\tend\tof\tyear | $(696) | $385 | $488 | $(1,178) | $(1,001) |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2009 |  |  |  |  |  |
| Balance,\tbeginning\tof\tyear | $(7,486) | $644 | $222 | $(900) | $(7,520) |
| Unrealized\tgain\ton\tsecurities\t[1]\t[2] | 5,909 | — | — | — | 5,909 |
| Change\tin\tother-than-temporary |  |  |  |  |  |
| impairment\tlosses\trecognized\tin |  |  |  |  |  |
| other\tcomprehensive\tincome\t[1] | (224) | — | — | — | (224) |
| Cumulative\teffect\tof\taccounting |  |  |  |  |  |
| change | (912) | — | — | — | (912) |
| Change\tin\tnet\tloss\ton\tcash-flow |  |  |  |  |  |
| hedging\tinstruments\t[1]\t[3] | — | (387) | — | — | (387) |
| Change\tin\tforeign\tcurrency |  |  |  |  |  |
| translation\tadjustments\t[1] | — | — | (23) | — | (23) |
| Change\tin\tpension\tand\tother |  |  |  |  |  |
| postretirement\tplan\tadjustment |  |  |  |  |  |
| [1] | — | — | — | (155) | (155) |
| Balance,\tend\tof\tyear | $(2,713) | $257 | $199 | $(1,055) | $(3,312) |

[1] Included	in	the	unrealized	gain	(loss)	balance	as	of	December	31,	2011,	2010	and	2009	was	net	unrealized	gains	(losses)	credited	to policyholders	of	$(65),	$(87),	and	$(82),	respectively.	Included	in	the	AOCI	components	were	the	following:

•	 Change	in	other-than-temporary	impairment	losses	recognized	in	other	comprehensive	income	is	net	of	changes	in	the	fair value	of	non-credit	impaired	securities	of	$112,	$647	and	$244	for	the	years	ended	December	31,	2011,	2010	and	2009,

# 17.	Employee	Benefit	Plans

The	Company	maintains	a	qualified	defined	benefit	pension	plan	(the	"Plan")	that	covers	substantially	all	employees.	Effective	for	all employees	who	joined	the	Company	on	or	after	January	1,	2001,	a	new	component	or	formula	was	applied	under	the	Plan	referred	to	as the	"cash	balance	formula".	The	Company	began	using	the	cash	balance	formula	to	calculate	future	pension	benefits	for	services	rendered on	or	after	January	1,	2009	for	all	employees	hired	before	January	1,	2001.	These	amounts	are	in	addition	to	amounts	earned	by	those employees	through	December	31,	2008	under	the	traditional	final	average	pay	formula.

The	Company	also	maintains	non-qualified	pension	plans	to	accrue	retirement	benefits	in	excess	of	Internal	Revenue	Code	limitations.

The	Company	provides	certain	health	care	and	life	insurance	benefits	for	eligible	retired	employees.	The	Company's	contribution	for health	care	benefits	will	depend	upon	the	retiree's	date	of	retirement	and	years	of	service.	In	addition,	the	plan	has	a	defined	dollar	cap	for certain	retirees	which	limits	average	Company	contributions.	The	Hartford	has	prefunded	a	portion	of	the	health	care	obligations	through a	trust	fund	where	such	prefunding	can	be	accomplished	on	a	tax	effective	basis.	Effective	January	1,	2002,	Company-subsidized	retiree medical,	retiree	dental	and	retiree	life	insurance	benefits	were	eliminated	for	employees	with	original	hire	dates	with	the	Company	on	or after	January	1,	2002.

# Assumptions

Pursuant	to	accounting	principles	related	to	the	Company's	pension	and	other	postretirement	obligations	to	employees	under	its	various benefit	plans,	the	Company	is	required	to	make	a	significant	number	of	assumptions	in	order	to	calculate	the	related	liabilities	and expenses	each	period.	The	two	economic	assumptions	that	have	the	most	impact	on	pension	and	other	postretirement	expense	are	the discount	rate	and	the	expected	long-term	rate	of	return	on	plan	assets.	In	determining	the	discount	rate	assumption,	the	Company	utilizes	a discounted	cash	flow	analysis	of	the	Company's	pension	and	other	postretirement	obligations	and	currently	available	market	and	industry data.	The	yield	curve	utilized	in	the	cash	flow	analysis	is	comprised	of	bonds	rated	Aa	or	higher	with	maturities	primarily	between	zero and	thirty	years.	Based	on	all	available	information,	it	was	determined	that	4.75%	and	4.50%	were	the	appropriate	discount	rates	as	of December	31,	2011	to	calculate	the	Company's	pension	and	other	postretirement	obligations,	respectively.	Accordingly,	the	4.75%	and 4.50%	discount	rates	will	also	be	used	to	determine	the	Company's	2012	pension	and	other	postretirement	expense,	respectively.

The	 Company	 determines	 the	 expected	 long-term	 rate	 of	 return	 assumption	 based	 on	 an	 analysis	 of	 the	 Plan	 portfolio's	 historical compound	rates	of	return	since	1979	(the	earliest	date	for	which	comparable	portfolio	data	is	available)	and	over	5	year	and	10	year periods.	The	Company	selected	these	periods,	as	well	as	shorter	durations,	to	assess	the	portfolio's	volatility,	duration	and	total	returns	as they	 relate	 to	 pension	 obligation	 characteristics,	 which	 are	 influenced	 by	 the	 Company's	 workforce	 demographics.	 In	 addition,	 the Company	also	applies	long-term	market	return	assumptions	to	an	investment	mix	that	generally	anticipates	60%	fixed	income	securities, 20%	equity	securities	and	20%	alternative	assets	to	derive	an	expected	long-term	rate	of	return.	Based	upon	these	analyses,	management maintained	the	long-term	rate	of	return	assumption	at	7.30%	as	of	December	31,	2011.	This	assumption	will	be	used	to	determine	the Company's	2012	expense.

Weighted	 average	 assumptions	 used	 in	 calculating the benefit obligations and the net amount recognized for the years ended December	31,	2011	and	2010	were	as	follows:

# 17.	Employee	Benefit	Plans	(continued)

Weighted	average	assumptions	used	in	calculating	the	net	periodic	benefit	cost	for	the	Company's	pension	plans	were	as	follows:

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Discount\trate | 5.50% | 6.00% | 6.25% |
| Expected\tlong-term\trate\tof\treturn\ton\tplan\tassets | 7.30% | 7.30% | 7.30% |
| Rate\tof\tincrease\tin\tcompensation\tlevels | 4.00% | 4.00% | 4.25% |

Weighted	average	assumptions	used	in	calculating	the	net	periodic	benefit	cost	for	the	Company's	other	postretirement	plans	were	as follows:

|  | For	the	years	ended	December	31, | For	the	years	ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 |
| Discount\trate | 5.25% | 5.75% | 6.25% |
| Expected\tlong-term\trate\tof\treturn\ton\tplan\tassets | 7.30% | 7.30% | 7.30% |
| Assumed\thealth\tcare\tcost\ttrend\trates\twere\tas\tfollows: |  |  |  |
|  |  | As\tof\tDecember\t31, |  |
|  | 2011 | 2010 | 2009 |
| Pre-65\thealth\tcare\tcost\ttrend\trate | 8.95% | 9.70% | 9.05% |
| Post-65\thealth\tcare\tcost\ttrend\trate | 7.75% | 8.25% | 7.60% |
| Rate\tto\twhich\tthe\tcost\ttrend\trate\tis\tassumed\tto\tdecline\t(the\tultimate\ttrend\trate) | 5.00% | 5.00% | 5.00% |
| Year\tthat\tthe\trate\treaches\tthe\tultimate\ttrend\trate | 2019 | 2018 | 2018 |

A	one-percentage	point	change	in	assumed	health	care	cost	trend	rates	would	have	an	insignificant	effect	on	the	amounts	reported	for other	postretirement	plans.

# Obligations	and	Funded	Status

The	following	tables	set	forth	a	reconciliation	of	beginning	and	ending	balances	of	the	benefit	obligation	and	fair	value	of	plan	assets,	as well	as	the	funded	status	of	The	Hartford's	defined	benefit	pension	and	postretirement	health	care	and	life	insurance	benefit	plans	for	the years	ended	December	31,	2011	and	2010.	International	plans	represent	an	immaterial	percentage	of	total	pension	assets,	liabilities	and expense	and,	for	reporting	purposes,	are	combined	with	domestic	plans.

During	2010	the	amount	of	lump	sum	benefit	payments	exceeded	the	amount	of	service	and	interest	cost	in	the	Company's	non-qualified pension	plan	resulting	in	a	settlement.	The	settlement	below	represents	lump	sum	payments	made	from	the	non-qualified	pension	plan	in 2010.

In	addition	to	the	discount	rate	change,	the	Company's	benefit	obligation	also	increased	due	to	the	use	of	an	updated	mortality	table.

|  | Pension	Benefits | Pension	Benefits | Benefits | Benefits |
| :--- | :--- | :--- | :--- | :--- |
| Change\tin\tBenefit\tObligation | 2011 | 2010 | 2011 | 2010 |
| Benefit\tobligation\t—\tbeginning\tof\tyear | $4,795 | $4,283 | $408 | $401 |
| Service\tcost\t(excluding\texpenses) | 102 | 102 | 5 | 7 |
| Interest\tcost | 259 | 252 | 20 | 22 |
| Plan\tparticipants'\tcontributions | — | — | 18 | 15 |
| Actuarial\tloss\t(gain) | 43 | 86 | (15) | (7) |
| Settlements | — | (43) | — | — |
| Change\tin\tassumptions | 497 | 348 | 37 | 17 |
| Benefits\tpaid | (230) | (234) | (52) | (49) |
| Retiree\tdrug\tsubsidy | — | — | 3 | 2 |
| Foreign\texchange\tadjustment | (1) | 1 |  | — |
| Benefit\tobligation\t—\tend\tof\tyear | $5,465 | $4,795 | $424 | $408 |

|  |  |  | Other	Postretirement | Other	Postretirement |
| :--- | :--- | :--- | :--- | :--- |
|  | Pension\tBenefits | Pension\tBenefits | Benefits | Benefits |
| Change\tin\tPlan\tAssets | 2011 | 2010 | 2011 | 2010 |
| Fair\tvalue\tof\tplan\tassets\t—\tbeginning\tof\tyear | $3,922 | $3,526 | $190 | $175 |
| Actual\treturn\ton\tplan\tassets | 613 | 434 | 13 | 15 |
| Employer\tcontributions | 201 | 201 | — | — |
| Benefits\tpaid | (210) | (228) | — | — |
| Expenses\tpaid | (12) | (12) | — | — |
| Foreign\texchange\tadjustment | (1) | 1 | — | — |
| Fair\tvalue\tof\tplan\tassets\t—\tend\tof\tyear | $4,513 | $3,922 | $203 | $190 |
| Funded\tstatus\t—\tend\tof\tyear | $(952) | $(873) | $(221) | $(218) |

The	fair	value	of	assets	for	pension	benefits,	and	hence	the	funded	status,	presented	in	the	table	above	exclude	assets	of	$109	and	$107 held	in	rabbi	trusts	and	designated	for	the	non-qualified	pension	plans	as	of	December	31,	2011	and	2010,	respectively.	The	assets	do	not qualify	as	plan	assets;	however,	the	assets	are	available	to	pay	benefits	for	certain	retired,	terminated	and	active	participants.	Such	assets are	available	to	the	Company's	general	creditors	in	the	event	of	insolvency.	The	assets	consist	of	equity	and	fixed	income	investments.	To the	extent	the	fair	value	of	these	rabbi	trusts	were	included	in	the	table	above,	pension	plan	assets	would	have	been	$4,622	and	$4,029	as of	December	31,	2011	and	2010,	respectively,	and	the	funded	status	of	pension	benefits	would	have	been	$(843)	and	$(766)	as	of December	31,	2011	and	2010,	respectively.

The	accumulated	benefit	obligation	for	all	defined	benefit	pension	plans	was	$5,413	and	$4,753	as	of	December	31,	2011	and	2010, respectively.

The	following	table	provides	information	for	The	Hartford's	defined	benefit	pension	plans	with	an	accumulated	benefit	obligation	in excess	of	plan	assets	as	of	December	31,	2011	and	2010.

|  | 2011 | 2010 |
| :--- | :--- | :--- |
| Projected\tbenefit\tobligation | $5,441 | $4,771 |
| Accumulated\tbenefit\tobligation | 5,394 | 4,733 |
| Fair\tvalue\tof\tplan\tassets | 4,492 | 3,901 |

Amounts	recognized	in	the	Consolidated	Balance	Sheets	consist	of:

|  | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2011 | 2010 |
| Other\tAssets |  |  |  |  |
| Noncurrent\tassets | $— | $— | $— | $— |
| Other\tLiabilities |  |  |  |  |
| Current\tliabilities | 21 | 19 | 34 | 34 |
| Noncurrent\tliabilities | 931 | 854 | 187 | 184 |
| Total | $952 | $873 | $221 | $218 |

Components	of	Net	Periodic	Benefit	Cost	and	Other	Amounts	Recognized	in	Other	Comprehensive	Income	(Loss)

In	the	Company's	non-qualified	pension	plan	the	amount	of	lump	sum	benefit	payments	exceeded	the	amount	of	service	and	interest	cost for	the	year	ended	December	31,	2010.	As	a	result,	the	Company	recorded	settlement	expense	of	$20	to	recognize	the	actuarial	loss associated	with	the	pro-rata	portion	of	the	obligation	that	has	been	settled.

Total	net	periodic	benefit	cost	for	the	years	ended	December	31,	2011,	2010	and	2009	include	the	following	components:

|  | Pension	Benefits | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2009 | 2011 | 2010 | 2009 |
| Service\tcost | $102 | $102 | $105 | $5 | $7 | $6 |
| Interest\tcost | 259 | 252 | 243 | 20 | 22 | 24 |
| Expected\treturn\ton\tplan\tassets | (298) | (286) | (276) | (14) | (13) | (11) |
| Amortization\tof\tprior\tservice\tcredit | (9) | (9) | (9) | (1) | (1) | (1) |
| Amortization\tof\tactuarial\tloss | 159 | 107 | 74 | — | — | — |
| Settlements | — | 20 | — | — | — | — |
| Net\tperiodic\tbenefit\tcost | $213 | $186 | $137 | $10 | $15 | $18 |

Amounts	recognized	in	other	comprehensive	income	(loss)	for	the	years	ended	December	31,	2011	and	2010	were	as	follows:

|  | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2011 | 2010 |
| Amortization\tof\tactuarial\tloss | $(159) | $(107) | $—\t $— | $—\t $— |
| Settlement\tloss | — | (20) | — | — |
| Amortization\tof\tprior\tservice\tcredit | 9 | 9 | 1 | 1 |
| Net\tloss\tarising\tduring\tthe\tyear | 237 | 298 | 24 | 7 |
| Total | $87 | $180 | $25 | $8 |

Amounts	in	accumulated	other	comprehensive	income	(loss)	on	a	before	tax	basis	that	have	not	yet	been	recognized	as	components	of	net periodic	benefit	cost	consist	of:

|  | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2011 | 2010 |
| Net\tloss | $1,930 | $1,852 | $39 | $17 |
| Prior\tservice\tcredit | (21) | (30) | 1 | — |
| Transition\tobligation | — | — | 2 | — |
| Total | $1,909 | $1,822 | $42 | $17 |

The	estimated	net	loss	and	prior	service	credit	for	the	defined	benefit	pension	plans	that	will	be	amortized	from	accumulated	other comprehensive	income	(loss)	into	net	periodic	benefit	cost	during	2012	are	$216	and	$(9),	respectively.	The	estimated	net	loss	for	the other	postretirement	benefit	plans	that	will	be	amortized	from	accumulated	other	comprehensive	income	(loss)	into	net	periodic	benefit cost	during	2012	is	$(1).	The	estimated	prior	service	credit	for	the	other	postretirement	plans	that	will	be	amortized	from	accumulated other	comprehensive	income	into	net	periodic	benefit	cost	during	2012	is	an	insignificant	amount.

# Plan	Assets

# Investment	Strategy	and	Target	Allocation

The	overall	investment	strategy	of	the	Plan	is	to	maximize	total	investment	returns	to	provide	sufficient	funding	for	present	and	anticipated future	benefit	obligations	within	the	constraints	of	a	prudent	level	of	portfolio	risk	and	diversification.	With	respect	to	asset	management, the	oversight	responsibility	of	the	Plan	rests	with	The	Hartford's	Pension	Fund	Trust	and	Investment	Committee	composed	of	individuals whose	 responsibilities	 include	 establishing	 overall	 objectives	 and	 the	 setting	 of	 investment	 policy;	 selecting	 appropriate	 investment options	and	ranges;	reviewing	the	asset	allocation	mix	and	asset	allocation	targets	on	a	regular	basis;	and	monitoring	performance	to determine	whether	or	not	the	rate	of	return	objectives	are	being	met	and	that	policy	and	guidelines	are	being	followed.	The	Company believes	that	the	asset	allocation	decision	will	be	the	single	most	important	factor	determining	the	long-term	performance	of	the	Plan.

The	Company's	pension	plan	and	other	postretirement	benefit	plans'	target	allocation	by	asset	category	is	presented	in	the	table	below.

|  | Target	Asset	Allocation |  |
| :--- | :--- | :--- |
|  | Pension\tPlans | Other\tPostretirement\tPlans |
| Equity\tsecurities | 10%\t–\t32% | 15%\t–\t35% |
| Fixed\tincome\tsecurities | 50%\t–\t70% | 55%\t–\t85% |
| Alternative\tassets | 10%\t–\t25% | — |

Divergent	market	performance	among	different	asset	classes	may,	from	time	to	time,	cause	the	asset	allocation	to	deviate	from	the	desired asset	allocation	ranges.	The	asset	allocation	mix	is	reviewed	on	a	periodic	basis.	If	it	is	determined	that	an	asset	allocation	mix	rebalancing is	required,	future	portfolio	additions	and	withdrawals	will	be	used,	as	necessary,	to	bring	the	allocation	within	tactical	ranges.

The	Company's	pension	plan	and	other	postretirement	benefit	plans'	weighted	average	asset	allocation	at	December	31,	2011	and	2010	is presented	in	the	table	below.

|  | Percentage	of	Pension	Plans	Assets | Percentage	of	Pension	Plans	Assets | Percentage	of	Other	Postretirement	Plans | Percentage	of	Other	Postretirement	Plans |
| :--- | :--- | :--- | :--- | :--- |
|  | At\tFair\tValue\tas\tof\tDecember\t31, | At\tFair\tValue\tas\tof\tDecember\t31, | Assets\tat\tFair\tValue\tas\tof\tDecember\t31, | Assets\tat\tFair\tValue\tas\tof\tDecember\t31, |
|  | 2011 | 2010 | 2011 | 2010 |
| Equity\tsecurities | 20% | 22% | 22% | 22% |
| Fixed\tincome\tsecurities | 62% | 61% | 78% | 78% |
| Alternative\tAssets | 18% | 17% | — | — |
| Total | 100% | 100% | 100% | 100% |

The	Plan	assets	are	invested	primarily	in	separate	portfolios	managed	by	HIMCO,	a	wholly-owned	subsidiary	of	the	Company.	These portfolios	encompass	multiple	asset	classes	reflecting	the	current	needs	of	the	Plan,	the	investment	preferences	and	risk	tolerance	of	the Plan	and	the	desired	degree	of	diversification.	These	asset	classes	include	publicly	traded	equities,	bonds	and	alternative	investments	and are	made	up	of	individual	investments	in	cash	and	cash	equivalents,	equity	securities,	debt	securities,	asset-backed	securities	and	hedge funds.	Hedge	fund	investments	represent	a	diversified	portfolio	of	partnership	investments	in	absolute-return	investment	strategies.

In	addition,	the	Company	uses	U.S.	Treasury	bond	futures	contracts	and	U.S.	Treasury	STRIPS	in	a	duration	overlay	program	to	adjust	the duration	of	Plan	assets	to	better	match	the	duration	of	the	benefit	obligation.

# Investment	Valuation

For	further	discussion	on	the	valuation	of	investments,	see	Note	4.

# Pension	Plan	Assets

The	fair	values	of	the	Company's	pension	plan	assets	at	December	31,	2011,	by	asset	category	are	as	follows:

| Asset	Category | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments: | $119 | $549 | $— | $668 |
| Fixed\tIncome\tSecurities: |  |  |  |  |
| Corporate | — | 741 | 3 | 744 |
| RMBS | — | 334 | 11 | 345 |
| U.S.\tTreasuries | 59 | 819 | — | 878 |
| Foreign\tgovernment | — | 53 | 3 | 56 |
| CMBS | — | 117 | — | 117 |
| Other\tfixed\tincome\t[1] | — | 70 | 4 | 74 |
| Equity\tSecurities: |  |  |  |  |
| Large-cap\tdomestic | — | 570 | — | 570 |
| Mid-cap\tdomestic | 52 | — | — | 52 |
| Small-cap\tdomestic | 38 | — | — | 38 |
| International | 217 | — | — | 217 |
| Other\tequities | — | 1 | — | 1 |
| Other\tinvestments: |  |  |  |  |
| Hedge\tfunds | — | — | 759 | 759 |
| Total\tpension\tplan\tassets\tat\tfair\tvalue\t[2] | $485 | $3,254 | $780 | $4,519 |

[1] Includes	ABS	and	municipal	bonds.

[2] 	 Excludes	approximately	$43	of	investment	payables	net	of	investment	receivables	that	are	not	carried	at	fair	value.	Also	excludes approximately	$37	of	interest	receivable	carried	at	fair	value.

The	fair	values	of	the	Company's	pension	plan	assets	at	December	31,	2010,	by	asset	category	are	as	follows:

|  | Pension	Plan	Assets	at	Fair	Value	as	of	December	31,	2010 | Pension	Plan	Assets	at	Fair	Value	as	of	December	31,	2010 | Pension	Plan	Assets	at	Fair	Value	as	of	December	31,	2010 | Pension	Plan	Assets	at	Fair	Value	as	of	December	31,	2010 |
| :--- | :--- | :--- | :--- | :--- |
| Asset\tCategory | Level\t1 | Level\t2 | Level\t3 | Total |
| Short-term\tinvestments:\t[1] | $75 | $406 | $— | $481 |
| Fixed\tIncome\tSecurities: |  |  |  |  |
| Corporate | — | 882 | 3 | 885 |
| RMBS | — | 450 | 9 | 459 |
| U.S.\tTreasuries | 7 | 330 | — | 337 |
| Foreign\tgovernment | — | 61 | 2 | 63 |
| CMBS | — | 174 | 1 | 175 |
| Other\tfixed\tincome\t[2] | — | 56 | 7 | 63 |
| Equity\tSecurities: |  |  |  |  |
| Large-cap\tdomestic | — | 496 | — | 496 |
| Mid-cap\tdomestic | 62 | — | — | 62 |
| Small-cap\tdomestic | 47 | — | — | 47 |
| International | 248 | — | — | 248 |
| Other\tinvestments: |  |  |  |  |
| Hedge\tfunds | — | — | 635 | 635 |
| Total\tpension\tplan\tassets\tat\tfair\tvalue\t[3] | $439 | $2,855 | $657 | $3,951 |

[1] Includes	$30	of	initial	margin	requirements	related	to	the	Plan's	duration	overlay	program.

The	tables	below	provide	a	fair	value	level	3	roll	forward	for	the	twelve	months	ended	December	31,	2011	and	2010	for	the	Pension	Plan Assets	for	which	significant	unobservable	inputs	(Level	3)	are	used	in	the	fair	value	measurement	on	a	recurring	basis.	The	Plan	classifies the	fair	value	of	financial	instruments	within	Level	3	if	there	are	no	observable	markets	for	the	instruments	or,	in	the	absence	of	active markets,	if	one	or	more	of	the	significant	inputs	used	to	determine	fair	value	are	based	on	the	Plan's	own	assumptions.	Therefore,	the gains	and	losses	in	the	tables	below	include	changes	in	fair	value	due	partly	to	observable	and	unobservable	factors.

# Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3)

|  |  |  | Foreign | Other	fixed | Hedge |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Assets | Corporate | RMBS | government | income | funds | Totals |
| Fair\tValue\tas\tof\tJanuary\t1,\t2011 | $3 | $9 | $2 | $8 | $635 | $657 |
| Actual\treturn\ton\tplan\tassets |  |  |  |  |  |  |
| Relating\tto\tassets\tstill\theld\tat\tthe |  |  |  |  |  |  |
| reporting\tdate | 1 | — | — | 2 | 21 | 24 |
| Purchases | 2 | 10 | 3 | 1 | 223 | 239 |
| Sales | (1) | (9) | (2) | (4) | (120) | (136) |
| Transfers\tinto\tLevel\t3 | 1 | 1 | 6 | 2 | — | 10 |
| Transfers\tout\tof\tLevel\t3 | (3) | — | (6) | (5) | — | (14) |
| Fair\tValue\tas\tof\tDecember\t31,\t2011 | $3 | $11 | $3 | $4 | $759 | $780 |

The	transfers	in	and	out	of	level	3	were	due	to	a	change	in	the	pricing	source.

| Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3) | Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3) | Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3) | Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3) | Pension	Plan	Asset	Fair	Value	Measurements	Using	Significant	Unobservable	Inputs	(Level	3) |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Other\tfixed |  |  |
|  |  |  | Foreign | income\tand | Hedge |  |
| Assets | Corporate | RMBS | government | CMBS | funds | Totals |
| Fair\tValue\tas\tof\tJanuary\t1,\t2010 | $12 | $24 | $2 | $8 | $501 | $547 |
| Actual\treturn\ton\tplan\tassets |  |  |  |  |  |  |
| Relating\tto\tassets\tstill\theld\tat\tthe |  |  |  |  |  |  |
| reporting\tdate | (1) | — | — | 1 | 29 | 29 |
| Relating\tto\tassets\tsold\tduring\tthe |  |  |  |  |  |  |
| period | 1 | — | — | — | 4 | 5 |
| Purchases | 6 | 62 | 2 | 9 | 200 | 279 |
| Sales | (12) | (77) | — | (5) | (99) | (193) |
| Transfers\tinto\tLevel\t3 | 2 | — | — | 2 | — | 4 |
| Transfers\tout\tof\tLevel\t3 | (5) | — | (2) | (7) | — | (14) |
| Fair\tValue\tas\tof\tDecember\t31,\t2010 | $3 | $9 | $2 | $8 | $635 | $657 |

There	was	no	Company	common	stock	included	in	the	Plan's	assets	as	of	December	31,	2011	and	2010.

# Other	Postretirement	Plan	Assets

The	fair	value	of	the	Company's	other	postretirement	plan	assets	at	December	31,	2011,	by	asset	category	are	as	follows:

| Asset	Category | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments | $— | $9 | $— | $9 |
| Fixed\tIncome\tSecurities: |  |  |  |  |
| Corporate | — | 53 | — | 53 |
| RMBS | — | 48 | — | 48 |
| U.S.\tTreasuries | — | 28 | — | 28 |
| Foreign\tgovernment | — | 2 | — | 2 |
| CMBS | — | 18 | — | 18 |
| Other\tfixed\tincome | — | 4 | — | 4 |
| Equity\tSecurities: |  |  |  |  |
| Large-cap | — | 43 | — | 43 |
| Total\tother\tpostretirement\tplan\tassets\tat\tfair\tvalue\t[1] | $— | $205 | $— | $205 |

The	fair	value	of	the	Company's	other	postretirement	plan	assets	at	December	31,	2010,	by	asset	category	are	as	follows:

|  |  | Other	Postretirement	Plan	Assets | Other	Postretirement	Plan	Assets |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | at\tFair\tValue\tas\tof\tDecember\t31,\t2010 | at\tFair\tValue\tas\tof\tDecember\t31,\t2010 |  |
| Asset\tCategory | Level\t1 | Level\t2 | Level\t3 | Total |
| Short-term\tinvestments | $— | $10 | $— | $10 |
| Fixed\tIncome\tSecurities: |  |  |  |  |
| Corporate | — | 57 | — | 57 |
| RMBS | — | 44 | — | 44 |
| U.S.\tTreasuries | — | 19 | — | 19 |
| CMBS | — | 17 | — | 17 |
| Other\tfixed\tincome | — | 6 | — | 6 |
| Equity\tSecurities: |  |  |  |  |
| Large-cap | — | 43 | — | 43 |
| Total\tother\tpostretirement\tplan\tassets\tat\tfair\tvalue\t[1] | $— | $196 | $— | $196 |

There	was	no	Company	common	stock	included	in	the	other	postretirement	benefit	plan	assets	as	of	December	31,	2011	and	2010.

# Concentration	of	Risk

In	order	 to	minimize	risk,	 the	Plan	maintains	a	 listing	of	permissible	and	prohibited	 investments.	In	addition,	 the	Plan	has	certain concentration	limits	and	investment	quality	requirements	imposed	on	permissible	investment	options.	Permissible	investments	include U.S.	equity,	international	equity,	alternative	asset	and	fixed	income	investments	including	derivative	instruments.	Derivative	instruments include	future	contracts,	options,	swaps,	currency	forwards,	caps	or	floors	and	will	be	used	to	control	risk	or	enhance	return	but	will	not be	used	for	leverage	purposes.

Securities	 specifically	 prohibited	 from	 purchase	 include,	 but	 are	 not	 limited	 to:	 shares	 or	 fixed	 income	 instruments	 issued	 by	The Hartford,	short	sales	of	any	type	within	long-only	portfolios,	non-derivative	securities	involving	the	use	of	margin,	leveraged	floaters	and inverse	floaters,	including	money	market	obligations,	natural	resource	real	properties	such	as	oil,	gas	or	timber	and	precious	metals.

Other	than	U.S.	government	and	certain	U.S.	government	agencies	backed	by	the	full	faith	and	credit	of	the	U.S.	government,	the	Plan does	not	have	any	material	exposure	to	any	concentration	risk	of	a	single	issuer.

# Cash	Flows

The	following	table	illustrates	the	Company's	prior	contributions.

| Employer	Contributions | Pension	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- |
| 2011 | $201 | $— |
| 2010 | $201 | — |

In	2011,	the	Company,	at	its	discretion,	made	$200	in	contributions	to	the	U.S.	qualified	defined	benefit	pension	plan.	The	Company presently	anticipates	contributing	approximately	$200	 to	 its	U.S.	qualified	defined	benefit	pension	plan	 in	2012	based	upon	certain economic	and	business	assumptions.	These	assumptions	include,	but	are	not	limited	to,	equity	market	performance,	changes	in	interest rates	and	the	Company's	other	capital	requirements.	For	2012,	the	Company	does	not	have	a	required	minimum	funding	contribution	for the	Plan	and	the	funding	requirements	for	all	of	the	pension	plans	are	expected	to	be	immaterial.

Employer	contributions	in	2011	and	2010	were	made	in	cash	and	did	not	include	contributions	of	the	Company's	common	stock.

# Benefit	Payments

The	following	table	sets	forth	amounts	of	benefits	expected	to	be	paid	over	the	next	ten	years	from	the	Company's	pension	and	other postretirement	plans	as	of	December	31,	2011:

| postretirement	plans	as	of	December	31,	2011: |  |  |
| :--- | :--- | :--- |
|  | Pension\tBenefits | Other\tPostretirement\tBenefits |
| 2012 | $272 | $38 |
| 2013 | 291 | 40 |
| 2014 | 309 | 40 |
| 2015 | 325 | 40 |
| 2016 | 341 | 39 |
| 2017-2021 | 1,888 | 183 |
| Total | $3,426 | $380 |

In	addition,	the	following	table	sets	forth	amounts	of	other	postretirement	benefits	expected	to	be	received	under	the	Medicare	Part	D Subsidy	over	the	next	ten	years	as	of	December	31,	2011:

# Investment	and	Savings	Plan

Substantially	all	U.S.	employees	are	eligible	 to	participate	 in	The	Hartford's	Investment	and	Savings	Plan	under	which	designated contributions	may	be	invested	in	common	stock	of	The	Hartford	or	certain	other	investments.	These	contributions	are	matched,	up	to	3% of	base	salary,	by	the	Company.	In	2011,	employees	who	had	earnings	of	less	than	$110,000	in	the	preceding	year	received	a	contribution of	1.5%	of	base	salary	and	employees	who	had	earnings	of	$110,000	or	more	in	the	preceding	year	received	a	contribution	of	0.5%	of	base salary.	The	cost	to	The	Hartford	for	this	plan	was	approximately	$59,	$62,	and	$64	for	2011,	2010,	and	2009,	respectively.	Additionally, The	Hartford	has	established	defined	contribution	pension	plans	for	certain	employees	of	the	Company's	international	subsidiaries.	Under this	plan,	the	Company	contributes	5%	of	base	salary	to	the	participant	accounts.	The	cost	to	The	Hartford	in	2011,	2010,	and	2009	for this	plan	was	$1,	$1	and	$2,	respectively.

# 18.	Stock	Compensation	Plans

The	Company	has	three	primary	stock-based	compensation	plans	which	are	described	below.	Shares	issued	in	satisfaction	of	stock-based compensation	may	be	made	available	from	authorized	but	unissued	shares,	shares	held	by	 the	Company	 in	 treasury	or	from	shares purchased	in	the	open	market.	In	2011	and	2010,	the	Company	issued	shares	from	treasury	in	satisfaction	of	stock-based	compensation.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Stock-based\tcompensation\tplans\texpense | $53 | $94 | $72 |
| Income\ttax\tbenefit | (19) | (33) | (20) |
| Total\tstock-based\tcompensation\tplans\texpense,\tafter-tax | $34 | $61 | $52 |

The	Company	did	not	capitalize	any	cost	of	stock-based	compensation.	As	of	December	31,	2011,	the	total	compensation	cost	related	to non-vested	awards	not	yet	recognized	was	$60,	which	is	expected	to	be	recognized	over	a	weighted	average	period	of	1.5	years.

# Stock	Plan

On	May	19,	2010	at	the	Company's	Annual	Meeting	of	Shareholders,	the	shareholders	of	The	Hartford	approved	The	Hartford	2010 Incentive	Stock	Plan	(the	"2010	Stock	Plan"),	which	supersedes	and	replaces	The	Hartford	2005	Incentive	Stock	Plan.	The	terms	of	the 2010	Stock	Plan	are	substantially	similar	to	the	terms	of	the	superseded	plan.	However,	the	2010	Stock	Plan	provides	for	an	increased maximum	number	of	shares	that	may	be	awarded	to	employees	of	the	Company,	to	non-employee	members	of	the	Board	of	Directors	of the	Company	and	also	permits	awards	to	be	made	to	third	party	service	providers,	and	permits	additional	forms	of	stock-based	awards.

The	 2010	 Stock	 Plan	 provides	 for	 awards	 to	 be	 granted	 in	 the	 form	 of	 non-qualified	 or	 incentive	 stock	 options	 qualifying	 under Section	422	of	the	Internal	Revenue	Code,	stock	appreciation	rights,	performance	shares,	restricted	stock	or	restricted	stock	units,	or	any other	form	of	stock-based	award.	The	aggregate	number	of	shares	of	stock,	which	may	be	awarded,	is	subject	to	a	maximum	limit	of 18,000,000	shares	applicable	to	all	awards	for	the	ten-year	duration	of	the	2010	Stock	Plan.	If	any	award	under	the	prior	The	Hartford Incentive	Stock	Plan	(as	approved	by	the	Company's	shareholders	in	2000)	or	under	the	prior	The	Hartford	2005	Incentive	Stock	Plan	(as approved	by	the	Company's	shareholders	in	2005)	that	was	outstanding	as	of	March	31,	2010,	is	forfeited,	terminated,	surrendered, exchanged,	expires	unexercised,	or	is	settled	in	cash	in	lieu	of	stock	(including	to	effect	tax	withholding)	or	for	the	net	issuance	of	a	lesser number	of	shares	than	the	number	subject	to	the	award,	the	shares	of	stock	subject	to	such	award	(or	the	relevant	portion	thereof)	shall	be available	for	awards	under	the	2010	Stock	Plan	and	such	shares	shall	be	added	to	the	maximum	limit.	As	of	December	31,	2011,	there were	14,652,180	shares	available	for	future	issuance.

The	fair	values	of	awards	granted	under	the	2010	Stock	Plan	are	measured	as	of	the	grant	date	and	expensed	ratably	over	the	awards' vesting	periods,	generally	three	years.	For	stock	option	awards	granted	or	modified	in	2006	and	later,	the	Company	began	expensing awards	to	retirement-eligible	employees	immediately	or	over	a	period	shorter	than	the	stated	vesting	period	because	the	employees	receive accelerated	vesting	upon	retirement	and	therefore	the	vesting	period	is	considered	non-substantive.	All	awards	provide	for	accelerated vesting	upon	a	change	in	control	of	the	Company	as	defined	in	the	2010	Stock	Plan.

# 18.	Stock	Compensation	Plans	(continued)

# Stock	Option	Awards

Under	the	2010	Stock	Plan,	all	options	granted	have	an	exercise	price	at	least	equal	to	the	market	price	of	the	Company's	common	stock on	the	date	of	grant,	and	an	option's	maximum	term	is	not	to	exceed	ten	years.	Under	the	2010	Stock	Plan,	options	will	generally	become exercisable	as	determined	at	the	time	of	grant.	For	any	year,	no	individual	employee	may	receive	an	award	of	options	for	more	than 2,000,000	shares	under	the	2010	Stock	Plan.	Under	the	2005	Stock	Plan,	certain	options	become	exercisable	over	a	three	year	period commencing	one	year	from	the	date	of	grant,	while	certain	other	options	become	exercisable	at	the	later	of	three	years	from	the	date	of grant	or	upon	specified	market	appreciation	of	the	Company's	common	shares.

The	Company	uses	a	hybrid	lattice/Monte-Carlo	based	option	valuation	model	(the	"valuation	model")	that	incorporates	the	possibility	of early	exercise	of	options	into	the	valuation.	The	valuation	model	also	incorporates	the	Company's	historical	termination	and	exercise experience	to	determine	the	option	value.

The	valuation	model	incorporates	ranges	of	assumptions	for	inputs,	and	therefore,	those	ranges	are	disclosed	below.	The	term	structure	of volatility	is	generally	constructed	utilizing	implied	volatilities	from	exchange-traded	options	and	CPP	warrants	related	to	the	Company's stock,	historical	volatility	of	the	Company's	stock	and	other	factors.	The	Company	uses	historical	data	to	estimate	option	exercise	and employee	termination	within	the	valuation	model,	and	accommodates	variations	in	employee	preference	and	risk-tolerance	by	segregating the	grantee	pool	into	a	series	of	behavioral	cohorts	and	conducting	a	fair	valuation	for	each	cohort	individually.	The	expected	term	of options	granted	is	derived	from	the	output	of	the	option	valuation	model	and	represents,	in	a	mathematical	sense,	the	period	of	time	that options	are	expected	to	be	outstanding.	The	risk-free	rate	for	periods	within	the	contractual	life	of	the	option	is	based	on	the	U.S.	Constant Maturity	Treasury	yield	curve	in	effect	at	the	time	of	grant.	There	were	no	stock	option	awards	granted	in	2010.

|  | 2011 | 2009 |
| :--- | :--- | :--- |
| Expected\tdividend\tyield | 1.3% | 3.2% |
| Expected\tannualized\tspot\tvolatility | 35.8%\t–\t47.1% | 57.8%\t–\t57.8% |
| Weighted\taverage\tannualized\tvolatility | 41.7% | 57.8% |
| Risk-free\tspot\trate | 0.1%\t–\t3.5% | 0.3%\t–\t4.2% |
| Expected\tterm | 5.7\tyears | 7.3\tyears |

A	summary	of	the	status	of	non-qualified	stock	options	included	in	the	Company's	Stock	Plans	as	of	December	31,	2011	and	changes during	the	year	ended	December	31,	2011	is	presented	below:

|  |  | Weighted | Remaining |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Number\tof\tOptions | Average | Contractual | Aggregate |
|  | (in\tthousands) | Exercise\tPrice | Term | Intrinsic\tValue |
| Outstanding\tat\tbeginning\tof\tyear | 5,279 | $52.90 | 2.9 | $— |
| Granted | 1,189 | 27.90 |  |  |
| Exercised | (232) | 15.41 |  |  |
| Forfeited | (537) | 44.09 |  |  |
| Expired | (860) | 62.11 |  |  |
| Outstanding\tat\tend\tof\tyear | 4,839 | 47.89 | 3.7 | — |
| Exercisable\tat\tend\tof\tyear | 3,641 | $55.52 | 2.0 | — |

# Share	Awards

Share	awards	are	valued	equal	to	the	market	price	of	the	Company's	common	stock	on	the	date	of	grant,	less	a	discount	for	those	awards that	do	not	provide	for	dividends	during	the	vesting	period.	Share	awards	granted	under	the	Stock	Plans	and	outstanding	include	restricted stock	units,	restricted	stock	and	performance	shares.	Generally,	restricted	stock	units	vest	at	or	over	three	years	and	restricted	stock	vests in	three	to	five	years.	Performance	shares	become	payable	within	a	range	of	0%	to	200%	of	the	number	of	shares	initially	granted	based upon	 the	attainment	of	specific	performance	goals	achieved	over	a	specified	period,	generally	 three	years.	The	maximum	award	of restricted	stock	units,	restricted	stock	or	performance	shares	for	any	individual	employee	in	any	year	under	the	2010	Stock	Plan	is 500,000	shares	or	units.

A	summary	of	the	status	of	the	Company's	non-vested	share	awards	as	of	December	31,	2011,	and	changes	during	the	year	ended December	31,	2011,	is	presented	below:

|  | Shares | Weighted-Average |
| :--- | :--- | :--- |
| Non-vested\tShares | (in\tthousands) | Grant-Date\tFair\tValue |
| Non-vested\tat\tbeginning\tof\tyear | 1,889 | $35.83 |
| Granted | 3,400 | 28.22 |
| Decrease\tfor\tchange\tin\testimated\tperformance\tfactors | (232) | — |
| Vested | (637) | 46.00 |
| Forfeited | (256) | 34.14 |
| Non-vested\tat\tend\tof\tyear | 4,164 | $27.60 |

The	total	fair	value	of	shares	vested	during	the	years	ended	December	31,	2011,	2010	and	2009	was	$20,	$13	and	$8,	respectively,	based on	estimated	performance	factors.	The	Company	did	not	make	cash	payments	in	settlement	of	stock	compensation	during	the	years	ended December	31,	2011	and	2010	and	2009.

# Restricted	Unit	awards

In	2010	and	2009,	The	Hartford	issued	restricted	units	as	part	of	The	Hartford's	2005	Stock	Plan.	Restricted	stock	unit	awards	under	the plan	have	historically	been	settled	in	shares,	but	under	this	award	will	be	settled	in	cash	and	are	thus	referred	to	as	"Restricted	Units".	The economic	value	recipients	will	ultimately	realize	will	be	identical	to	the	value	that	would	have	been	realized	if	the	awards	had	been	settled in	shares,	i.e.,	upon	settlement,	recipients	will	receive	cash	equal	to	The	Hartford's	share	price	multiplied	by	the	number	of	restricted	units awarded.	Because	Restricted	Units	will	be	settled	in	cash,	the	awards	are	remeasured	at	the	end	of	each	reporting	period	until	settlement. Awards	granted	in	2009	vest	after	a	three	year	period.	Awards	granted	in	2010	include	both	graded	and	cliff	vesting	restricted	units	which vest	over	a	three	year	period.	The	graded	vesting	attribution	method	is	used	to	recognize	the	expense	of	the	award	over	the	requisite service	period.	For	example,	 the	graded	vesting	attribution	method	views	one	 three-year	grant	with	annual	graded	vesting	as	 three separate	sub-grants,	each	representing	one	third	of	the	total	number	of	awards	granted.	The	first	sub-grant	vests	over	one	year,	the	second sub-grant	vests	over	two	years	and	the	third	sub-grant	vests	over	three	years.

# Deferred	Stock	Unit	Plan

Effective	July	31,	2009,	the	Compensation	and	Management	Development	Committee	of	the	Board	authorized	The	Hartford	Deferred Stock	Unit	Plan	("Deferred	Stock	Unit	Plan"),	and,	on	October	22,	2009,	it	was	amended.	The	Deferred	Stock	Unit	Plan	provides	for contractual	rights	to	receive	cash	payments	based	on	the	value	of	a	specified	number	of	shares	of	stock.	The	Deferred	Stock	Unit	Plan provides	for	two	award	types,	Deferred	Units	and	Restricted	Units.	Deferred	Units	are	earned	ratably	over	a	year,	based	on	the	number	of regular	pay	periods	occurring	during	such	year.	Deferred	Units	are	credited	to	the	participants	account	on	a	quarterly	basis	based	on	the market	price	of	the	Company's	common	stock	on	the	date	of	grant	and	are	fully	vested	at	all	times.	Deferred	Units	credited	to	employees prior	to	January	1,	2010	(other	than	senior	executive	officers	hired	on	or	after	October	1,	2009)	are	not	paid	until	after	two	years	from their	grant	date.	Deferred	Units	credited	on	or	after	January	1,	2010	(and	any	credited	to	senior	executive	officers	hired	on	or	after October	1,	2009)	are	paid	in	three	equal	installments	after	the	first,	second	and	third	anniversaries	of	their	grant	date.	Restricted	Units	are intended	to	be	incentive	compensation	and	unlike	Deferred	Units,	vest	over	time,	generally	three	years,	and	are	subject	to	forfeiture.	The Deferred	Stock	Unit	Plan	is	structured	consistent	with	the	limitations	and	restrictions	on	employee	compensation	arrangements	imposed by	the	Emergency	Economic	Stabilization	Act	of	2008	and	the	TARP	Standards	for	Compensation	and	Corporate	Governance	Interim Final	Rule	issued	by	the	U.S.	Department	of	Treasury	on	June	10,	2009.

There	were	no	deferred	stock	units	awarded	in	2011.

A	summary	of	the	status	of	the	Company's	non-vested	awards	under	the	Deferred	Stock	Unit	Plan	as	of	December	31,	2011,	is	presented below:

|  | Restricted	Units | Weighted-Average |
| :--- | :--- | :--- |
| Non-vested\tUnits | (in\tthousands) | Grant-Date\tFair\tValue |
| Non-vested\tat\tbeginning\tof\tyear | 648 | $24.70 |
| Granted | — | — |
| Vested | (49) | 24.27 |
| Forfeited | (108) | 24.31 |
| Non-vested\tat\tend\tof\tyear | 491 | $24.84 |

# Employee	Stock	Purchase	Plan

In	1996,	the	Company	established	The	Hartford	Employee	Stock	Purchase	Plan	("ESPP").	Beginning	in	2010	under	this	plan,	eligible employees	of	The	Hartford	purchased	common	stock	of	the	Company	at	a	discount	rate	of	5%	of	the	market	price	per	share	on	the	last trading	day	of	the	offering	period.	In	2009	and	prior	years,	eligible	employees	of	The	Hartford	purchased	common	stock	of	the	Company at	a	15%	discount	from	the	lower	of	the	closing	market	price	at	the	beginning	or	end	of	the	offering	period.	Employees	purchase	a	variable number	of	shares	of	stock	through	payroll	deductions	elected	as	of	the	beginning	of	the	offering	period.	The	Company	may	sell	up	to 15,400,000	shares	of	stock	to	eligible	employees	under	the	ESPP.	As	of	December	31,	2011,	there	were	6,472,280	shares	available	for future	 issuance.	 During	 the	 years	 ended	 December	 31,	 2011,	 2010	 and	 2009,	 768,380,	 729,598,	 and	 2,557,893	 shares	 were	 sold, respectively.	The	weighted	average	per	share	fair	value	of	the	discount	under	the	ESPP	was	$1.03,	$1.24	and	$5.99	during	the	years	ended December	31,	2011,	2010	and	2009,	respectively.	In	2011	and	2010,	the	fair	value	is	estimated	based	on	the	5%	discount	off	the	market price	per	share	on	the	last	trading	day	of	the	offering	period.	In	2009	and	prior	years,	the	fair	value	was	estimated	based	on	the	15% discount	off	of	the	beginning	stock	price	plus	the	value	of	six-month	European	call	and	put	options	on	shares	of	stock	at	the	beginning stock	price	calculated	using	the	Black-Scholes	model	and	the	following	weighted	average	valuation	assumptions:

Implied	volatility	was	derived	from	exchange-traded	options	on	the	Company's	stock.	The	risk-free	rate	is	based	on	the	U.S.	Constant Maturity	Treasury	yield	curve	in	effect	at	the	time	of	grant.	The	total	intrinsic	value	of	the	discounts	at	purchase	was	$5	for	the	year	ended December	31,	2009.	Additionally,	The	Hartford	has	established	employee	stock	purchase	plans	for	certain	employees	of	the	Company's international	subsidiaries.	Under	these	plans,	participants	may	purchase	common	stock	of	The	Hartford	at	a	fixed	price.	The	activity	under these	programs	is	not	material.

# 19.	Sale	of	Assets,	Joint	Venture	and	Subsidiary

# Servicing	Agreement	of	Hartford	Life	Private	Placement	LLC

On	November	22,	2011,	the	Company	entered	into	an	agreement	with	Philadelphia	Financial	Group,	Inc.	("Philadelphia	Financial") whereby	Philadelphia	Financial	will	acquire	certain	assets	that	are	used	to	administer	the	Company's	private	placement	life	insurance ("PPLI")	businesses	currently	administered	by	Hartford	Life	Private	Placement,	LLC	("HLPP"),	a	subsidiary	of	the	Company.	The	PPLI business	administered	by	HLPP	includes	life	insurance	owned	by	banks,	corporations	and	high	net	worth	individuals,	and	group	annuity policies.	The	transaction	is	expected	to	close	in	the	second	quarter	of	2012,	subject	to	regulatory	approvals	and	closing	conditions.	Upon closing,	Philadelphia	Financial	and	the	Company	will	enter	into	a	servicing	agreement	whereby	Philadelphia	Financial	will	service	the PPLI	businesses	administered	by	HLPP.	The	Company	will	retain	certain	corporate	functions	associated	with	this	business	as	well	as	the mortality	risk	on	the	insurance	policies.	Under	the	terms	of	the	transaction,	Philadelphia	Financial	will	receive	certain	future	income	from the	policies	and	pay	the	Company	$118	at	closing,	resulting	in	an	estimated	deferred	gain	between	$65and	$75	after-tax,	which	will	be amortized	over	the	estimated	life	of	the	underlying	insurance	policies.	The	actual	amount	may	be	different.	The	deferred	gain	is	not expected	to	have	a	material	impact	on	the	Company's	results	of	operations	in	future	periods.	The	assets	and	liabilities	of	the	PPLI	business are	included	in	the	Life	Other	Operations	segment.

# Sale	of	Joint	Venture	Interest	in	ICATU	Hartford	Seguros,	S.A.

On	November	23,	2009,	the	Company	entered	into	a	Share	Purchase	Agreement	to	sell	its	joint	venture	interest	in	ICATU	Hartford Seguros,	S.A.	("IHS"),	its	Brazilian	insurance	operation,	to	its	partner,	ICATU	Holding	S.A.,	for	$135.	The	transaction	closed	in	2010, and	the	Company	received	cash	proceeds	of	$130,	which	was	net	of	capital	gains	tax	withheld	of	$5.	The	investment	in	IHS	was	reported as	an	equity	method	investment	in	Other	assets.	As	a	result	of	the	Share	Purchase	Agreement,	the	Company	recorded	in	2009,	an	asset impairment	charge,	net	of	unrealized	capital	gains	and	foreign	currency	translation	adjustments,	in	net	realized	capital	losses	of	$44,	after- tax.

# Sale	of	First	State	Management	Group

On	 March	 31,	 2009,	 the	 Company	 sold	 First	 State	 Management	 Group,	 Inc.	 ("FSMG"),	 its	 core	 excess	 and	 surplus	 lines	 property business,	to	Beazley	Group	PLC	("Beazley")	for	$27,	resulting	in	a	gain	on	sale	of	$12,	after-tax.	Included	in	the	sale	was	approximately $4	in	net	assets	of	FSMG.	The	net	assets	sold	to	Beazley	did	not	include	invested	assets,	unearned	premium	or	deferred	policy	acquisition costs	related	to	the	in-force	book	of	business.	Rather,	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.	Under	the	terms	of	the	purchase	and sale	agreement,	the	Company	continues	to	be	obligated	for	all	losses	and	loss	adjustment	expenses	incurred	on	or	before	March	31,	2009. The	retained	net	loss	and	loss	adjustment	expense	reserves	totaled	$66	and	$87	as	of	December	31,	2011	and	2010,	respectively.

See	Note	20	for	sale	of	subsidiaries	that	met	the	criteria	for	discontinued	operations.

# 20.	Discontinued	Operations

On	 November	 1,	 2011,	 the	 Company	 completed	 a	 merger	 with	 CenterState	 Banks,	 Inc.	 ("CBI"),	 pursuant	 to	 which	 Federal	 Trust Corporation	("FTC"),	a	wholly	owned	subsidiary	of	the	Company,	was	merged	with	and	into	CBI,	and	Federal	Trust	Bank	("FTB"),	a federally	chartered,	FDIC-insured	thrift	and	wholly	owned	subsidiary	of	FTC,	was	merged	with	and	into	CenterState	Bank	of	Florida, N.A.	("CenterState	Bank"),	a	wholly	owned	subsidiary	of	CBI.	At	the	time	of	the	mergers,	FTC	and	FTB	held	net	assets	including	cash, certain	 mortgage	 loans,	 property	 and	 other	 assets	 equivalent	 to	 liabilities	 assumed	 including	 deposits	 and	 other	 liabilities,	 totaling approximately	$200.	The	Company	recorded	an	after-tax	charge	of	$74	to	net	realized	capital	losses	in	the	second	quarter	of	2011	for	the estimated	loss	on	disposal,	including	the	write	off	of	remaining	goodwill	of	$10,	after-tax,	and	losses	on	certain	FTC	and	FTB	assets	and liabilities,	which	were	not	transferred	to	CenterState	Bank.	Upon	final	closing	with	CBI,	the	Company	recorded	a	benefit	of	$6,	after	tax, in	the	fourth	quarter	of	2011	related	to	the	divestiture.	The	Company	purchased	certain	assets	and	assumed	certain	liabilities	from	FTC and	FTB	that	were	not	part	of	the	transactions	with	CBI	and	CenterState	Bank	on	November	1,	2011.	As	of	December	31,	2011,	the carrying	value	of	those	assets	and	liabilities	were	$3,	and	$19,	respectively	and	included	in	other	assets	and	other	liabilities.	The	Company anticipates	disposing	of	these	assets	and	liabilities	within	twelve	months	after	closing,	and	thus	any	income	or	expense	related	to	these assets	and	liabilities	will	be	temporary	in	nature.	FTC	is	included	in	the	Corporate	category	for	segment	reporting.

In	 the	first	quarter	of	2011,	 the	Company	completed	 the	sale	of	 its	wholly-owned	subsidiary	Specialty	Risk	Services	("SRS")	and recorded	a	net	realized	capital	gain	of	$150,	after-tax.	SRS	is	a	third-party	claims	administration	business	that	provides	self-insured, insured,	and	alternative	market	clients	with	customized	claims	services.	The	Company	is	required	to	provide	certain	services	to	SRS	for	up to	24	months	under	a	Transition	Services	Agreement.	During	the	fourth	quarter	2011	the	Company	recorded	a	charge	of	$4,	after-tax, attributed	to	asset	disposals.	SRS	is	included	in	the	Property	&	Casualty	Commercial	reporting	segment.

In	addition,	during	the	fourth	quarter	of	2010,	the	Company	completed	the	sales	of	its	indirect	wholly-owned	subsidiaries	Hartford Investments	Canada	Corporation	("HICC")	and	Hartford	Advantage	Investment,	Ltd.	("HAIL")	and	recorded	net	realized	gains	(losses)	of $41	and	$(4),	respectively.	HICC	and	HAIL	were	transferred	from	Mutual	Funds	to	Life	Other	Operations,	effective	January	1,	2009. HICC	was	transferred	from	Life	Other	Operations	to	Mutual	Funds,	effective	January	1,	2010.

The	following	table	summarizes	the	amounts	related	to	discontinued	operations	in	the	Consolidated	Statements	of	Operations.

|  | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Revenues |  |  |  |
| Fee\tincome\tand\tother | $— | $36 | $29 |
| Net\tinvestment\tincome | 17 | 28 | 14 |
| Net\trealized\tcapital\tgains\t(losses) | (6) | (5) | (6) |
| Other\trevenues | 48 | 213 | 231 |
| Total\trevenues | 59 | 272 | 268 |
| Benefits,\tlosses\tand\texpenses |  |  |  |
| Amortization\tof\tdeferred\tpolicy\tacquisition\tcosts\tand\tpresent\tvalue\tof\tfuture |  |  |  |
| profits | — | 17 | 10 |
| Insurance\toperating\tand\tother\texpenses | 54 | 256 | 265 |
| Goodwill\tImpairment | — | 153 | — |
| Total\tbenefits,\tlosses\tand\texpenses | 54 | 426 | 275 |
| Income\t(loss)\tbefore\tincome\ttaxes | 5 | (154) | (7) |
| Income\ttax\texpense\t(benefit) | 1 | (53) | (3) |
| Income\t(loss)\tfrom\toperations\tof\tdiscontinued\toperations,\tnet\tof\ttax | 4 | (101) | (4) |
| Net\trealized\tcapital\tgain\ton\tdisposal,\tnet\tof\ttax | 82 | 37 | — |
| Income\t(loss)\tfrom\tdiscontinued\toperations,\tnet\tof\ttax | $86 | $(64) | $(4) |

# 21.	Restructuring,	Severance	and	Other	Costs

During	the	year	ended	December	31,	2011,	the	Company	implemented	restructuring	activities	across	several	areas	aimed	at	reducing overall	expense	levels.

During	the	year	ended	December	31,	2009,	the	Company	completed	a	review	of	several	strategic	alternatives	with	a	goal	of	preserving capital,	reducing	risk	and	stabilizing	its	ratings.	These	alternatives	included	the	potential	restructuring,	discontinuation	or	disposition	of various	business	lines.	Following	that	review,	the	Company	announced	that	it	would	suspend	all	new	sales	in	the	Japanese	and	European operations	currently	included	in	the	Life	Other	Operations	segment.	The	Company	has	also	executed	on	plans	to	change	the	management structure	of	the	organization	and	reorganized	the	nature	and	focus	of	certain	of	the	Company's	operations.	These	activities	resulted	in termination	benefits	to	current	employees,	costs	to	terminate	leases	and	other	contracts	and	asset	impairment	charges.	The	Company completed	these	restructuring	activities	and	executed	final	payment	during	the	year	ended	December	31,	2010.

The	following	pre-tax	charges	were incurred	during the	years	ended	December	31,	2011,	2010	and	2009 in	connection	with these restructuring	activities:

The	amounts	incurred	during	the	year	ended	December	31,	2011,	2010	and	2009	were	recorded	in	Insurance	operating	costs	and	other expenses	within	Corporate.

|  | March	31, | March	31, | June	30, | June	30, | September	30, | September	30, | December	31, | December	31, |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| Revenues | $6,308 | $6,257 | $5,401 | $3,265 | $4,520 | $6,602 | $5,638 | $5,930 |
| Benefits,\tlosses\tand\texpenses | 5,898 | 5,722 | 5,566 | 3,121 | 4,624 | 5,685 | 5,546 | 5,171 |
| Income\t(loss)\tfrom\tcontinuing |  |  |  |  |  |  |  |  |
| operations,\tnet\tof\ttax | 351 | 319 | 104 | 175 | (3) | 665 | 126 | 584 |
| Income\t(loss)\tfrom\tdiscontinued |  |  |  |  |  |  |  |  |
| operations,\tnet\tof\ttax | 160 | — | (80) | (99) | 3 | 1 | 1 | 35 |
| Net\tincome\t(loss)\t[1] | 511 | 319 | 24 | 76 | — | 666 | 127 | 619 |
| Less:\tPreferred\tstock\tdividends |  |  |  |  |  |  |  |  |
| and\taccretion\tof\tdiscount | 10 | 483 | 11 | 11 | 10 | 10 | 11 | 11 |
| Net\tincome\t(loss)\tavailable\tto |  |  |  |  |  |  |  |  |
| common\tshareholders | $501 | $(164) | $13 | $65 | $(10) | $656 | $116 | $608 |
| Basic\tearnings\t(losses)\tper |  |  |  |  |  |  |  |  |
| common\tshare | $1.13 | $(0.42) | $0.03 | $0.15 | $(0.02) | $1.48 | $0.26 | $1.37 |
| Diluted\tearnings\t(losses)\tper |  |  |  |  |  |  |  |  |
| common\tshare\t[1] | $1.01 | $(0.42) | $0.03 | $0.14 | $(0.02) | $1.34 | $0.25 | $1.24 |
| Weighted\taverage\tcommon |  |  |  |  |  |  |  |  |
| shares\toutstanding,\tbasic | 444.6 | 393.7 | 445.1 | 443.9 | 445.3 | 444.1 | 445.1 | 444.3 |
| Weighted\taverage\tshares |  |  |  |  |  |  |  |  |
| outstanding\tand\tdilutive |  |  |  |  |  |  |  |  |
| potential\tcommon\tshares | 508.2 | 393.7 | 482.4 | 480.2 | 445.3 | 495.3 | 468.9 | 497.8 |

[1] In	periods	of	a	net	loss	available	to	common	shareholders,	the	Company	uses	basic	weighted	average	common	shares	outstanding	in the	calculation	of	diluted	loss	per	common	share,	since	the	inclusion	of	shares	for	warrants,	stock	compensation	plans	and	the assumed	conversion	of	the	preferred	shares	to	common	would	have	been	antidilutive	to	the	earnings	per	common	share	calculation. In	 the	 absence	 of	 the	 net	 loss	 available	 to	 common	 shareholders,	 weighted	 average	 common	 shares	 outstanding	 and	 dilutive potential	common	shares	would	have	totaled	428.5	million	and	473.4	million	for	the	three	months	ended	March	31,	2010	and September	30,	2011,	respectively.	In	addition,	assuming	the	impact	of	mandatory	convertible	preferred	shares	was	not	antidilutive, weighted	 average	 common	 shares	 outstanding	 and	 dilutive	 potential	 common	 shares	 would	 have	 totaled	 431.9	 million,

# SCHEDULE	I

# SUMMARY	OF	INVESTMENTS	—	OTHER	THAN	INVESTMENTS	IN	AFFILIATES

# (In	millions)

|  |  |  | Amount	at |
| :--- | :--- | :--- | :--- |
|  |  |  | which\tshown\ton |
| Type\tof\tInvestment | Cost | Fair\tValue | Balance\tSheet |
| Fixed\tMaturities |  |  |  |
| Bonds\tand\tnotes |  |  |  |
| U.S.\tgovernment\tand\tgovernment\tagencies\tand\tauthorities\t(guaranteed |  |  |  |
| and\tsponsored) | $8,901 | $9,364 | $9,364 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions | 12,557 | 13,260 | 13,260 |
| Foreign\tgovernments | 2,030 | 2,161 | 2,161 |
| Public\tutilities | 8,236 | 9,055 | 9,055 |
| All\tother\tcorporate\tbonds | 32,925 | 34,956 | 34,956 |
| All\tother\tmortgage-backed\tand\tasset-backed\tsecurities | 14,329 | 13,013 | 13,013 |
| Total\tfixed\tmaturities,\tavailable-for-sale | 78,978 | 81,809 | 81,809 |
| Fixed\tmaturities,\tat\tfair\tvalue\tusing\tfair\tvalue\toption | 1,501 | 1,328 | 1,328 |
| Total\tfixed\tmaturities | 80,479 | 83,137 | 83,137 |
| Equity\tSecurities |  |  |  |
| Common\tstocks |  |  |  |
| Industrial,\tmiscellaneous\tand\tall\tother | 420 | 443 | 443 |
| Non-redeemable\tpreferred\tstocks | 636 | 478 | 478 |
| Total\tequity\tsecurities,\tavailable-for-sale | 1,056 | 921 | 921 |
| Equity\tsecurities,\ttrading | 32,928 | 30,499 | 30,499 |
| Total\tequity\tsecurities | 33,984 | 31,420 | 31,420 |
| Mortgage\tloans | 5,728 | 5,977 | 5,728 |
| Policy\tloans | 2,001 | 2,153 | 2,001 |
| Investments\tin\tpartnerships\tand\ttrusts | 2,532 | 2,532 | 2,532 |
| Futures,\toptions\tand\tmiscellaneous | 1,316 | 2,394 | 2,394 |
| Short-term\tinvestments | 7,736 | 7,736 | 7,736 |
| Total\tinvestments | $133,776 | $135,349 | $134,948 |

# SCHEDULE	II

# CONDENSED	FINANCIAL	INFORMATION	OF

(Registrant)

| Condensed	Balance	Sheets | 2011 | 2010 |
| :--- | :--- | :--- |
| Assets |  |  |
| Fixed\tmaturities,\tavailable-for-sale,\tat\tfair\tvalue | $152 | $251 |
| Other\tinvestments | 28 | 31 |
| Short-term\tinvestments | 1,425 | 1,762 |
| Investment\tin\taffiliates | 27,575 | 25,227 |
| Deferred\tincome\ttaxes | 1,109 | 885 |
| Unamortized\tIssue\tCosts | 51 | 55 |
| Other\tassets | 31 | 22 |
| Total\tassets | $30,371 | $28,233 |
| Liabilities\tand\tStockholders'\tEquity |  |  |
| Net\tpayable\tto\taffiliates | $283 | $430 |
| Short-term\tdebt\t(includes\tcurrent\tmaturities\tof\tlong-term\tdebt) | — | 400 |
| Long-term\tdebt | 5,975 | 5,961 |
| Other\tliabilities | 1,203 | 1,131 |
| Total\tliabilities | 7,461 | 7,922 |
| Total\tstockholders'\tequity | 22,910 | 20,311 |
| Total\tliabilities\tand\tstockholders'\tequity | $30,371 | $28,233 |

| Condensed	Statements	of	Operations | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Net\tinvestment\tincome | $2 | $5 | $8 |
| Net\trealized\tcapital\tgains\t(losses) | (5) | (5) | (231) |
| Total\trevenues | (3) | — | (223) |
| Interest\texpense | 490 | 489 | 457 |
| Other\texpenses | (41) | 11 | 8 |
| Total\texpenses | 449 | 500 | 465 |
| Loss\tbefore\tincome\ttaxes\tand\tearnings\t(losses)\tof\tsubsidiaries | (452) | (500) | (688) |
| Income\ttax\tbenefit | (154) | (170) | (157) |
| Loss\tbefore\tearnings\t(losses)of\tsubsidiaries | (298) | (330) | (531) |
| Earnings\t(losses)\tof\tsubsidiaries | 960 | 2,010 | (356) |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |

# The	condensed	financial	statements	should	be	read	in	conjunction	with the	consolidated	financial	statements	and	notes	thereto.

# THE	HARTFORD	FINANCIAL	SERVICES	GROUP,	INC.	(continued)

| Condensed	Statements	of	Cash	Flows | 2011 | 2010 | 2009 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities |  |  |  |
| Net\tincome\t(loss) | $662 | $1,680 | $(887) |
| Undistributed\tearnings\t(losses)\tof\tsubsidiaries | (961) | (1,004) | 1,307 |
| Change\tin\toperating\tassets\tand\tliabilities | 625 | (21) | (590) |
| Cash\tprovided\tby\t(used\tfor)\toperating\tactivities | 326 | 655 | (170) |
| Investing\tActivities |  |  |  |
| Net\tsales\t(purchases)\tof\tshort-term\tinvestments | 432 | 233 | (412) |
| Purchase\tprice\tof\tbusiness\tacquired | — | — | (10) |
| Capital\tcontributions\tto\tsubsidiaries | (126) | (311) | (3,115) |
| Cash\tprovided\tby\t(used\tfor)\tinvesting\tactivities | 306 | (78) | (3,537) |
| Financing\tActivities |  |  |  |
| Issuance\tof\tlong-term\tdebt | — | 1,090 | — |
| Repayments\tat\tmaturity\tof\tlong-term\tdebt | (400) | (275) | — |
| Change\tin\tcommercial\tpaper | — | — | (375) |
| Net\tproceeds\tfrom\tissuance\tof\tmandatory\tconvertible\tpreferred\tstock | — | 556 | — |
| Net\tproceeds\tfrom\tissuance\tof\tcommon\tshares\tunder\tpublic\toffering | — | 1,600 | — |
|  | — | — | 3,400 |
| Redemption\tof\tpreferred\tstock\tissued\tto\tthe\tU.S.\tTreasury | — | (3,400) | — |
| Net\tproceeds\tfrom\tissuance\tof\tcommon\tshares\tunder\tdiscretionary\tequity |  |  |  |
| issuance\tplan | — | — | 887 |
| Treasury\tstock\tacquired | (46) | — | — |
| Proceeds\tfrom\tnet\tissuances\tof\tcommon\tshares\tunder\tincentive\tand\tstock |  |  |  |
| compensation\tplans\tand\texcess\ttax\tbenefits | 9 | 22 | 17 |
| Dividends\tpaid\t—\tPreferred\tshares | (42) | (85) | (73) |
| Dividends\tpaid\t—\tCommon\tShares | (153) | (85) | (149) |
| Cash\tprovided\tby\t(used\tfor)\tfinancing\tactivities | (632) | (577) | 3,707 |
| Net\tchange\tin\tcash | — | — | — |
| Cash\t—\tbeginning\tof\tyear | — | — | — |
| Cash\t—\tend\tof\tyear | $— | $— | $— |
| Supplemental\tDisclosure\tof\tCash\tFlow\tInformation |  |  |  |
| Interest\tPaid | $483 | $465 | $454 |
| Dividends\tReceived\tfrom\tSubsidiaries | $976 | $1,006 | $243 |

# The	condensed	financial	statements	should	be	read	in	conjunction	with

# the	consolidated	financial	statements	and	notes	thereto.

# SCHEDULE	III

# SUPPLEMENTARY	INSURANCE	INFORMATION

| Segment | Acquisition	Costs<br>and	Present<br>Value	of	Future<br>Profits | Future	Policy	Benefits,<br>Unpaid	Losses	and	Loss<br>Adjustment	Expenses | Unearned<br>Premiums | Other<br>Policyholder<br>Funds	and<br>Benefits	Payable |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t31,\t2011 |  |  |  |  |
| Property\t&amp;\tCasualty\tCommercial | $611 | $15,438 | $3,235 | $— |
| Group\tBenefits | 60 | 6,796 | 76 | 266 |
| Consumer\tMarkets | 650 | 2,060 | 1,803 | — |
| Individual\tAnnuity | 2,802 | 2,538 | 29 | 17,017 |
| Individual\tLife | 2,558 | 1,061 | 1 | 7,413 |
| Retirement\tPlans | 714 | 436 | 2 | 7,959 |
| Mutual\tFunds | 27 | — | — | 4 |
| Life\tOther\tOperations | 1,322 | 8,635 | 74 | 43,414 |
| Property\t&amp;\tCasualty\tOther\tOperations | — | 4,053 | 1 | — |
| Corporate | — | (1) | 1 | — |
| Consolidated | $8,744 | $41,016 | $5,222 | $76,073 |
| As\tof\tDecember\t31,\t2010 |  |  |  |  |
| Property\t&amp;\tCasualty\tCommercial | $603 | 14,727 | 3,126 | — |
| Group\tBenefits | 67 | 6,640 | 76 | 320 |
| Consumer\tMarkets | 660 | 2,177 | 1,875 | — |
| Individual\tAnnuity | 3,216 | 2,270 | 22 | 16,871 |
| Individual\tLife | 2,627 | 898 | 1 | 6,765 |
| Retirement\tPlans | 842 | 458 | 3 | 6,841 |
| Mutual\tFunds | 43 | — | — | 4 |
| Life\tOther\tOperations | 1,799 | 8,307 | 72 | 46,542 |
| Property\t&amp;\tCasualty\tOther\tOperations | — | 4,122 | 1 | — |
| Corporate | — | (1) | — | — |
| Consolidated | $9,857 | $39,598 | $5,176 | $77,343 |

# SUPPLEMENTARY	INSURANCE	INFORMATION	(continued)

|  |  |  |  | Amortization	of | Insurance |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Deferred\tPolicy | Operating |  |
|  | Earned |  | Benefits,\tLosses | Acquisition\tCosts | Costs\tand |  |
|  | Premiums, | Net | and\tLoss | and\tPresent | Other |  |
|  | Fee\tIncome | Investment | Adjustment | Value\tof\tFuture | Expenses | Net\tWritten |
| Segment | and\tOther | Income | Expenses | Profits | [1] | Premiums |
| For\tthe\tyear\tended |  |  |  |  |  |  |
| December\t31,\t2011 |  |  |  |  |  |  |
| Property\t&amp;\tCasualty |  |  |  |  |  |  |
| Commercial | $6,224 | $910 | $4,584 | $1,356 | $726 | $6,176 |
| Group\tBenefits | 4,147 | 411 | 3,306 | 55 | 1,104 | N/A |
| Consumer\tMarkets | 3,903 | 187 | 2,886 | 639 | 578 | 3,675 |
| Individual\tAnnuity | 1,660 | 768 | 1,106 | 483 | 536 | N/A |
| Individual\tLife | 899 | 456 | 816 | 221 | 182 | N/A |
| Retirement\tPlans | 380 | 396 | 308 | 134 | 354 | N/A |
| Mutual\tFunds | 649 | (3) | — | 47 | 448 | N/A |
| Life\tOther\tOperations | 1,020 | (386) | (54) | 492 | 274 | N/A |
| Property\t&amp;\tCasualty\tOther |  |  |  |  |  |  |
| Operations | — | 151 | 317 | — | 24 | 1 |
| Corporate | 209 | 23 | (3) | — | 710 | N/A |
| Consolidated | $19,091 | $2,913 | $13,266 | $3,427 | $4,936 | $9,852 |
| For\tthe\tyear\tended |  |  |  |  |  |  |
| December\t31,\t2010 |  |  |  |  |  |  |
| Property\t&amp;\tCasualty |  |  |  |  |  |  |
| Commercial | $5,840 | $935 | $3,370 | $1,353 | $665 | $5,796 |
| Group\tBenefits | 4,278 | 429 | 3,331 | 61 | 1,111 | N/A |
| Consumer\tMarkets | 4,119 | 187 | 2,951 | 667 | 493 | 3,886 |
| Individual\tAnnuity | 1,716 | 814 | 1,054 | (56) | 542 | N/A |
| Individual\tLife | 856 | 400 | 644 | 119 | 181 | N/A |
| Retirement\tPlans | 359 | 364 | 278 | 27 | 340 | N/A |
| Mutual\tFunds | 664 | (8) | — | 51 | 458 | N/A |
| Life\tOther\tOperations | 1,049 | 225 | 374 | 305 | 262 | N/A |
| Property\t&amp;\tCasualty\tOther |  |  |  |  |  |  |
| Operations | 1 | 163 | 251 | — | 30 | 2 |
| Corporate | 188 | 81 | (2) | — | 833 | 1 |
| Consolidated | $19,070 | $3,590 | $12,251 | $2,527 | $4,915 | $9,685 |
| For\tthe\tyear\tended |  |  |  |  |  |  |
| December\t31,\t2009 |  |  |  |  |  |  |
| Property\t&amp;\tCasualty |  |  |  |  |  |  |
| Commercial | $6,006 | $755 | $3,266 | 1,393 | 645 | 5,715 |
| Group\tBenefits | 4,350 | 403 | 3,196 | 61 | 1,120 | N/A |
| Consumer\tMarkets | 4,113 | 178 | 2,902 | 674 | 475 | 3,995 |
| Individual\tAnnuity | 1,465 | 771 | 1,310 | 1,339 | 505 | N/A |
| Individual\tLife | 940 | 335 | 640 | 314 | 188 | N/A |
| Retirement\tPlans | 324 | 315 | 269 | 56 | 346 | N/A |
| Mutual\tFunds | 518 | (21) | — | 50 | 395 | N/A |
| Life\tOther\tOperations | 1,293 | 4,135 | 5,042 | 370 | 350 | N/A |
| Property\t&amp;\tCasualty\tOther |  |  |  |  |  |  |
| Operations | — | 161 | 241 | — | 23 | 4 |
| Corporate | 223 | 173 | 153 | — | 831 | (3) |
| Consolidated | $19,232 | $7,205 | $17,019 | $4,257 | $4,878 | $9,711 |

[1] Includes	interest	expense	and	goodwill	impairment.

N/A	 —	Not	applicable	to	life	insurance	pursuant	to	Regulation	S-X.

# SCHEDULE	IV

|  | Gross<br>Amount | Ceded	to	Other<br>Companies | Assumed<br>From	Other<br>Companies | Net<br>Amount | of	Amount<br>Assumed<br>to	Net |
| :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2011 |  |  |  |  |  |
| Life\tinsurance\tin-force | $992,921 | $139,590 | $47,365 | $900,696 | 5% |
| Insurance\trevenues |  |  |  |  |  |
| Property\tand\tcasualty\tinsurance | $10,337 | 688 | 225 | 9,874 | 2% |
| Life\tinsurance\tand\tannuities | 7,220 | 463 | 71 | 6,828 | 1% |
| Accident\tand\thealth\tinsurance | 2,122 | 61 | 63 | 2,124 | 3% |
| Total\tinsurance\trevenues | $19,679 | $1,212 | $359 | $18,826 | 2% |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2010 |  |  |  |  |  |
| Life\tinsurance\tin-force | $987,104 | $135,269 | $43,999 | $895,834 | 5% |
| Insurance\trevenues |  |  |  |  |  |
| Property\tand\tcasualty\tinsurance | $10,105 | 668 | 256 | 9,693 | 3% |
| Life\tinsurance\tand\tannuities | 7,261 | 518 | 128 | 6,871 | 2% |
| Accident\tand\thealth\tinsurance | 2,221 | 58 | 64 | 2,227 | 3% |
| Total\tinsurance\trevenues | $19,587 | $1,244 | $448 | $18,791 | 2% |
| For\tthe\tyear\tended\tDecember\t31, |  |  |  |  |  |
| 2009 |  |  |  |  |  |
| Life\tinsurance\tin-force | $970,455 | $128,144 | $49,273 | $891,584 | 6% |
| Insurance\trevenues |  |  |  |  |  |
| Property\tand\tcasualty\tinsurance | $10,386 | $778 | $253 | $9,861 | 3% |
| Life\tinsurance\tand\tannuities | 7,216 | 433 | 91 | 6,874 | 1% |
| Accident\tand\thealth\tinsurance | 2,203 | 51 | 71 | 2,223 | 3% |
| Total\tinsurance\trevenues | $19,805 | $1,262 | $415 | $18,958 | 2% |

# SCHEDULE	V

# VALUATION	AND	QUALIFYING	ACCOUNTS

|  | Balance<br>January	1, | Charged	to<br>Costs	and<br>Expenses | Translation<br>Adjustment | Write-offs/<br>Payments/<br>Other | Balance<br>December	31, |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2011 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts\tand |  |  |  |  |  |
| other | $119 | $45 | $— | $(45) | $119 |
| Allowance\tfor\tuncollectible |  |  |  |  |  |
| reinsurance | 290 | 5 | — | (5) | 290 |
| Valuation\tallowance\ton\tmortgage |  |  |  |  |  |
| loans | 155 | 26 | — | (79) | 102 |
| Valuation\tallowance\tfor\tdeferred |  |  |  |  |  |
| taxes | 173 | (78) | — | — | 95 |
| 2010 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts\tand |  |  |  |  |  |
| other | $121 | $53 | $— | $(55) | $119 |
| Allowance\tfor\tuncollectible |  |  |  |  |  |
| reinsurance | 335 | 11 | — | (56) | 290 |
| Valuation\tallowance\ton\tmortgage |  |  |  |  |  |
| loans | 366 | 157 | — | (368) | 155 |
| Valuation\tallowance\tfor\tdeferred |  |  |  |  |  |
| taxes | 86 | 87 | — | — | 173 |
| 2009 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts\tand |  |  |  |  |  |
| other | $125 | $53 | $— | $(57) | $121 |
| Allowance\tfor\tuncollectible |  |  |  |  |  |
| reinsurance | 379 | 11 | — | (55) | 335 |
| Valuation\tallowance\ton\tmortgage |  |  |  |  |  |
| loans | 26 | 408 | — | (68) | 366 |
| Valuation\tallowance\tfor\tdeferred |  |  |  |  |  |
| taxes | 75 | 11 | — | — | 86 |

# SCHEDULE	VI

# SUPPLEMENTAL	INFORMATION	CONCERNING

# PROPERTY	AND	CASUALTY	INSURANCE	OPERATIONS

[1] 	 Reserves for	 permanently	 disabled claimants	 and certain structured settlement contracts that fund loss run-offs	 have	 been discounted	using	the	weighted	average	interest	rates	of	4.4%,	4.8%,	and	5.0%	for	2011,	2010,	and	2009,	respectively.

# SIGNATURES

	 Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report to	be	signed	on	its	behalf	by	the	undersigned,	thereunto	duly	authorized.

Beth	A.	Bombara

Senior	Vice	President	and	Controller

(Chief	Accounting	Officer	and	duly	authorized	signatory)

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf of	the	registrant	and	in	the	capacities	and	on	the	dates	indicated.

# EXHIBITS	INDEX

The	exhibits	attached	to	this	Form	10-K	are	those	that	are	required	by	Item	601	of	Regulation	S-K.

3.04 Amended	and	Restated	By-Laws	of	The	Hartford,	amended	effective	October	21,	2010	(incorporated	herein	by reference	to	Exhibit	3.1	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	October	27,	2010).

4.01 Amended	and	Restated	Certificate	of	Incorporation	and	Amended	and	Restated	By-Laws	of	The	Hartford (incorporated	by	reference	as	indicated	in	Exhibits	3.01	and	3.04	hereto,	respectively).

4.06 Senior	Indenture,	dated	as	of	March	9,	2004,	between	The	Hartford	and	JPMorgan	Chase	Bank,	as	Trustee (incorporated	herein	by	reference	to	Exhibit	4.1	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	March	12,	2004).

4.13 Form	of	Series	B	Warrant	to	Purchase	Shares	of	Non-Voting	Contingent	Convertible	Preferred	Stock	(incorporated	by reference	to	Exhibit	4.2	to	the	Company's	Current	Report	on	Form	8-K/A	filed	on	October	17,	2008).

4.16 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).

4.17 Warrant	to	Purchase	Shares	of	Common	Stock	of	The	Hartford	Financial	Services	Group,	Inc.,	dated	June	26,	2009 (incorporated	herein	by	reference	to	Exhibit	4.1	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	June	26,	2009).

10.01 Form	of	Depository	Receipt	for	the	Depositary	Shares	(included	as	Exhibit	A	to	Exhibit	4.06)	(incorporated	herein	by reference	to	Exhibit	4.7	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	on	March	9,	2010).

10.03 Letter	Agreement,	dated	as	of	June	9,	2009,	by	and	between	The	Hartford	Financial	Services	Group,	Inc.,	Allianz	SE and	Allianz	Finance	II	Luxembourg	S.a.r.l.	(incorporated	herein	by	reference	to	Exhibit	10.1	to	The	Hartford's	Current Report	on	Form	8-K,	filed	June	12,	2009).

10.05 Four-Year	Revolving	Credit	Facility	Agreement,	dated	January	6,	2012,	among	The	Hartford	Financial	Services Group,	Inc.,	Bank	of	America,	N.A.,	as	administrative	agent,	JPMorgan	Chase	Bank,	N.A.	and	Citibank,	N.A.,	as syndication	agents,	and	the	lenders	referred	to	therein	(incorporated	herein	by	reference	to	Exhibit	10.1	to	The Hartford's	Current	Report	on	Form	8-K,	filed	January	6,	2012).

10.06 Investment	Agreement,	dated	as	of	October	17,	2008	between	The	Hartford	and	Allianz	SE	(incorporated	herein	by reference	to	Exhibit	10.1	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	October	17,	2008).

10.07 Written	Summary	of	Compensation-related	Arrangement	with	a	Named	Executive	Officer	effective	May	18,	2011 (incorporated	by	reference	to	Exhibit	10.01	to	The	Hartford's	Quarterly	Report	on	Form	10-Q	for	the	second	quarter ended	June	30,	2011).

*10.17 Employment	Agreement	between	The	Hartford	and	Christopher	J.	Swift	dated	February	14,	2010	(incorporated	by reference	to	Exhibit	10.16	of	The	Hartford's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	2009).

*10.22 The	Hartford	2005	Incentive	Stock	Plan	Forms	of	Individual	Award	Agreements	(incorporated	herein	by	reference	to Exhibit	10.2	to	The	Hartford's	Current	Report	on	Form	8-K,	filed	May	24,	2005).

*10.23 The	Hartford	Incentive	Stock	Plan,	as	amended	(incorporated	herein	by	reference	to	Exhibit	10.09	to	The	Hartford's Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2008).

*10.24 The	Hartford	Deferred	Restricted	Stock	Unit	Plan,	as	amended	(incorporated	herein	by	reference	to	Exhibit	10.12	to The	Hartford's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2005).

*10.25 The	Hartford	Deferred	Compensation	Plan,	as	amended	(incorporated	herein	by	reference	to	Exhibit	10.12	to	The Hartford's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2008).

*10.26 The	Hartford	Planco	Non-Employee	Option	Plan,	as	amended	(incorporated	herein	by	reference	to	Exhibit	10.19	to The	Hartford's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2002).

*10.27 The	Hartford	Employee	Stock	Purchase	Plan,	as	amended	(incorporated	by	reference	to	Exhibit	10.16	of	The Hartford's	Annual	Report	on	Form	10-K	for	the	fiscal	year	ended	December	31,	2008).

10.29 Put	Option	Agreement,	dated	February	12,	2007,	among	The	Hartford,	Glen	Meadow	ABC	Trust	and	LaSalle	Bank, N.A.	(incorporated	herein	by	reference	to	Exhibit	10.1	to	The	Hartford's	Current	Report	on	Form	8-K,	filed February	16,	2007).

18.01 Preferability	letter	from	Deloitte	&	Touche	LLP	regarding	change	in	accounting	principle.**

12.01 Statement	Re:	Computation	of	Ratio	of	Earnings	to	Fixed	Charges.	**

23.01 Consent	of	Deloitte	&	Touche	LLP	to	the	incorporation	by	reference	into	The	Hartford's	Registration	Statements	on Form	S-8	and	Form	S-3	of	the	report	of	Deloitte	&	Touche	LLP	contained	in	this	Form	10-K	regarding	the	audited financial	statements	is	filed	herewith.	**

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.	**

101.PRE XBRL	Taxonomy	Extension	Presentation	Linkbase.

* 	 Management	contract,	compensatory	plan	or	arrangement.

** 	 Filed	with	the	Securities	and	Exchange	Commission	as	an	exhibit	to	this	report.

† 	 Confidential	treatment	has	been	requested	for	the	redacted	portions	of	this	agreement.	A	complete	copy	of	this	agreement,	including the	redacted	portions,	has	been	filed	separately	with	the	Securities	and	Exchange	Commission.



Question: of the total net reserves , what portion is related to london market?
Calculation: london_market_percent = 57
total_reserves = 320
london_market_percent = london_market_percent / total_reserves
answer = london_market_percent * 100
Answer: 17.8%