##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-12749
 HARTFORD LIFE, INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    06-1470915
(I.R.S. Employer
Identification No.)
 200 Hopmeadow Street, Simsbury, Connecticut 06089
 (860) 547-5000
  þ o
  o o þ
 o þ




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##### Table of Contents



INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Statements of Operations  For the Three and Nine Months Ended September 30, 2006 and 2005
    
    
    4Condensed Consolidated Balance Sheets  As of September 30, 2006 and December 31, 2005
    
    
    5Condensed Consolidated Statements of Changes in Stockholders Equity  For the Nine Months Ended September 30, 2006 and 2005
    
    
    6Condensed Consolidated Statements of Cash Flows  For the Nine Months Ended September 30, 2006 and 2005
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 4. Controls and Procedures
    
    
    51PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    51Item 1A. Risk Factors
    
    
    52Item 6. Exhibits
    
    
    57Signature
    
    
    58Exhibits Index
    
    
    59EX-15.01: DELOITTE & TOUCHE LLP LETTER OF AWARENESSEX-31.01: CERTIFICATIONEX-31.02: CERTIFICATIONEX-32.01: CERTIFICATIONEX-32.02: CERTIFICATION
 2




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PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 
  
      
 3




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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 Three Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,(In millions)
    
    2006
    
    2005
    
    2006
    
    2005(Unaudited)
    
    
    
    
    
    (Unaudited)RevenuesFee income
    
    $
    1,149
    
    
    $
    1,026
    
    
    $
    3,423
    
    
    $
    2,936Earned premiums
    
    
    1,129
    
    
    
    1,045
    
    
    
    3,483
    
    
    
    3,091Net investment incomeSecurities available-for-sale and other
    
    
    802
    
    
    
    771
    
    
    
    2,359
    
    
    
    2,233Equity securities held for trading
    
    
    1,185
    
    
    
    1,500
    
    
    
    669
    
    
    
    2,024Total net investment income
    
    
    1,987
    
    
    
    2,271
    
    
    
    3,028
    
    
    
    4,257Net realized capital (losses) gains
    
    
    11
    
    
    
    (26
    )
    
    
    (265
    )
    
    
    57Total revenues
    
    
    4,276
    
    
    
    4,316
    
    
    
    9,669
    
    
    
    10,341Benefits, claims and expensesBenefits, claims and claim adjustment expenses
    
    
    2,738
    
    
    
    2,926
    
    
    
    5,384
    
    
    
    6,421Insurance expenses and other
    
    
    680
    
    
    
    607
    
    
    
    1,953
    
    
    
    1,802Amortization of deferred policy acquisition costs and present value of future profits
    
    
    308
    
    
    
    321
    
    
    
    913
    
    
    
    887Dividends to policyholders
    
    
    1
    
    
    
    14
    
    
    
    19
    
    
    
    35Interest expense
    
    
    22
    
    
    
    20
    
    
    
    62
    
    
    
    60Total benefits, claims and expenses
    
    
    3,749
    
    
    
    3,888
    
    
    
    8,331
    
    
    
    9,205Income before income tax expense
    
    
    527
    
    
    
    428
    
    
    
    1,338
    
    
    
    1,136Income tax expense
    
    
    113
    
    
    
    95
    
    
    
    294
    
    
    
    262Net income
    
    $
    414
    
    
    $
    333
    
    
    $
    1,044
    
    
    $
    874
 See Notes to Condensed Consolidated Financial Statements.
 4




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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 September 30,
    
    December 31,2006
    
    2005(In millions, except for share data)
    
    (Unaudited)AssetsInvestmentsFixed maturities, available-for-sale, at fair value (amortized cost of
$50,944 and $49,615)
    
    $
    51,909
    
    
    $
    50,812Equity securities, available-for-sale, at fair value (cost of $757 and $781)
    
    
    771
    
    
    
    800Equity securities, trading securities, at fair value (cost of $23,071 and $19,570)
    
    
    27,863
    
    
    
    24,034Policy loans, at outstanding balance
    
    
    2,057
    
    
    
    2,016Mortgage loans on real estate
    
    
    2,451
    
    
    
    1,513Other investments
    
    
    920
    
    
    
    609Total investments
    
    
    85,971
    
    
    
    79,784Cash
    
    
    1,198
    
    
    
    1,001Premiums receivable and agents balances
    
    
    378
    
    
    
    426Reinsurance recoverables
    
    
    805
    
    
    
    800Deferred policy acquisition costs and present value of future profits
    
    
    9,125
    
    
    
    8,567Deferred income taxes
    
    
    (685
    )
    
    
    (633
    )Goodwill
    
    
    796
    
    
    
    796Other assets
    
    
    2,596
    
    
    
    2,146Separate account assets
    
    
    162,901
    
    
    
    150,875Total assets
    
    $
    263,085
    
    
    $
    243,762LiabilitiesReserve for future policy benefits
    
    $
    13,662
    
    
    $
    12,777Other policyholder funds and benefits payable
    
    
    69,296
    
    
    
    64,452Short-term debt
    
    
    200
    
    
    
    Long-term debt
    
    
    648
    
    
    
    1,048Other liabilities
    
    
    5,999
    
    
    
    5,251Separate account liabilities
    
    
    162,901
    
    
    
    150,875Total liabilities
    
    
    252,706
    
    
    
    234,403Commitments and Contingencies (Note 6)
    
    
    
    
        
    Stockholders EquityCommon Stock  1,000 shares authorized, issued and outstanding;
par value $0.01
    
    
    
    
    
    
    Capital surplus
    
    
    3,303
    
    
    
    3,094Accumulated other comprehensive incomeNet unrealized capital gains on securities and hedging instruments, net of tax
    
    
    425
    
    
    
    608Foreign currency translation adjustments
    
    
    (43
    )
    
    
    (79
    )Total accumulated other comprehensive income
    
    
    382
    
    
    
    529Retained earnings
    
    
    6,694
    
    
    
    5,736Total stockholders equity
    
    
    10,379
    
    
    
    9,359Total liabilities and stockholders equity
    
    $
    263,085
    
    
    $
    243,762
 See Notes to Condensed Consolidated Financial Statements.
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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Changes in Stockholders Equity
 Nine Months Ended September 30, 2006
 Accumulated Other Comprehensive IncomeNet GainNet Unrealized
    
    (Loss) onCapital
    
    Cash Flow
    
    ForeignGains (Losses)
    
    Hedging
    
    Currency
    
    
    
    
    
    TotalCommon
    
    
    
    
    
    on Securities,
    
    Instruments,
    
    Translation
    
    Retained
    
    Stockholders(In millions) (Unaudited)
    
    Stock
    
    Capital Surplus
    
    Net of Tax
    
    Net of Tax
    
    Adjustments
    
    Earnings
    
    EquityBalance, December 31, 2005
    
    $
    
    
    
    $
    3,094
    
    
    $
    709
    
    
    $
    (101
    )
    
    $
    (79
    )
    
    $
    5,736
    
    
    $
    9,359Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,044
    
    
    
    1,044Other comprehensive income, net of tax (1)Net change in unrealized capital gains
on securities (2)
    
    
    
    
    
    
    
    
    
    
    (108
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108
    )Net loss on cash flow hedging
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    (75
    )Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    36Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    897Capital contribution
    
    
    
    
    
    
    209
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86
    )
    
    
    (86
    )Balance, September 30, 2006
    
    $
    
    
    
    $
    3,303
    
    
    $
    601
    
    
    $
    (176
    )
    
    $
    (43
    )
    
    $
    6,694
    
    
    $
    10,379
 Nine Months Ended September 30, 2005
 Accumulated Other Comprehensive IncomeNet GainNet Unrealized
    
    (Loss) onCapital
    
    Cash Flow
    
    ForeignGains (Losses)
    
    Hedging
    
    Currency
    
    
    
    
    
    TotalCommon
    
    
    
    
    
    on Securities,
    
    Instruments,
    
    Translation
    
    Retained
    
    Stockholders(In millions) (Unaudited)
    
    Stock
    
    Capital Surplus
    
    Net of Tax
    
    Net of Tax
    
    Adjustments
    
    Earnings
    
    EquityBalance, December 31, 2004
    
    $
    
    
    
    $
    3,094
    
    
    $
    1,348
    
    
    $
    (170
    )
    
    $
    16
    
    
    $
    4,884
    
    
    $
    9,172Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    874
    
    
    
    874Other comprehensive income, net of tax (1)Net change in unrealized capital gains
on securities (2)
    
    
    
    
    
    
    
    
    
    
    (504
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (504
    )Net gain on cash flow hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    66Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    (47
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (485
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    389Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (258
    )
    
    
    (258
    )Balance, September 30, 2005
    
    $
    
    
    
    $
    3,094
    
    
    $
    844
    
    
    $
    (104
    )
    
    $
    (31
    )
    
    $
    5,500
    
    
    $
    9,303
 (1)
    
    Net change in unrealized capital gains on securities is reflected net of tax benefit and
other items of $ 58 and $271 for the nine months ended September 30, 2006 and 2005,
respectively. Net gain (loss) on cash flow hedging instruments is net of tax (benefit)
provision of $(40) and $36 for the nine months ended September 30, 2006 and 2005,
respectively. Cumulative translation adjustments is net of tax benefit of $21 and $0 for the
nine months ended September 30, 2006 and 2005, respectively.(2)
    
    There were reclassification adjustments for after-tax (losses) gains realized in net income
of $(101) and $24 for the nine months ended September 30, 2006 and 2005, respectively.
 See Notes to Condensed Consolidated Financial Statements.
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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 Nine Months EndedSeptember 30,(In millions) (Unaudited)
    
    2006
    
    2005Operating ActivitiesNet income
    
    $
    1,044
    
    
    $
    874Adjustments to reconcile net income to net cash provided by operating activitiesAmortization of deferred policy acquisition costs and present value of future profits
    
    
    913
    
    
    
    887Additions to deferred policy acquisition costs and present value of future profits
    
    
    (1,420
    )
    
    
    (1,564
    )Change in:Reserve for future policy benefits
    
    
    729
    
    
    
    345Reinsurance recoverables
    
    
    (8
    )
    
    
    51Receivables
    
    
    (56
    )
    
    
    2Payables, accruals and other liabilities
    
    
    (277
    )
    
    
    127Accrued and deferred income taxes
    
    
    480
    
    
    
    42Net realized capital losses (gains)
    
    
    265
    
    
    
    (57
    )Net increase in equity securities, held for trading
    
    
    (3,875
    )
    
    
    (9,297
    )Net receipts from investment contracts credited to policyholder accounts associated
with equity securities, held for trading
    
    
    3,871
    
    
    
    9,477Depreciation and amortization
    
    
    284
    
    
    
    209Other, net
    
    
    109
    
    
    
    (32
    )Net cash provided by operating activities
    
    
    2,059
    
    
    
    1,064Investing ActivitiesProceeds from the sale/maturity/prepayment of:Fixed maturities, available-for-sale
    
    
    18,477
    
    
    
    20,780Equity securities, available-for-sale
    
    
    130
    
    
    
    18Mortgage loans
    
    
    232
    
    
    
    321Partnerships
    
    
    75
    
    
    
    56Payments for the purchase of:Fixed maturities, available-for-sale
    
    
    (20,062
    )
    
    
    (22,421
    )Equity securities, available-for-sale
    
    
    (203
    )
    
    
    (197
    )Mortgage loans
    
    
    (1,167
    )
    
    
    (576
    )Partnerships
    
    
    (427
    )
    
    
    (181
    )Change in policy loans, net
    
    
    (42
    )
    
    
    653Change in payables for collateral under securities lending, net
    
    
    419
    
    
    
    (211
    )Change in other investments, net
    
    
    (453
    )
    
    
    984Additions to property and equipment, net
    
    
    (51
    )
    
    
    (1,007
    )Net cash used for investing activities
    
    
    (3,072
    )
    
    
    (1,781
    )Financing ActivitiesNet receipts from investment and universal life-type contracts
    
    
    1,274
    
    
    
    1,301Repayment of debt
    
    
    (200
    )
    
    
    Proceeds from issuance of consumer notes
    
    
    41
    
    
    
    Capital contribution
    
    
    209Dividends paid
    
    
    (127
    )
    
    
    (226
    )Net cash provided by financing activities
    
    
    1,197
    
    
    
    1,075Foreign exchange rate effect on cash
    
    
    13
    
    
    
    (68
    )Net increase in cash
    
    
    197
    
    
    
    290Cash - beginning of period
    
    
    1,001
    
    
    
    933Cash - end of period
    
    $
    1,198
    
    
    $
    1,223Supplemental Disclosure of Cash Flow Information  Net cash paid during the period forIncome taxes (received) paid
    
    $
    (196
    )
    
    $
    198Interest
    
    $
    61
    
    
    $
    59
 See Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollar amounts in millions, unless otherwise stated)
  1. Basis of Presentation and Accounting Policies
 Basis of Presentation
    Consolidation
  Reclassifications
  Use of Estimates
   Significant Accounting Policies
  8




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Income Taxes
      Adoption of New Accounting Standards
   Future Adoption of New Accounting Standards
  9




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2. Segment Information
   10




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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005RetailRealized gains (losses)
    
    $
    7
    
    
    $
    9
    
    
    $
    24
    
    
    $
    27Credit risk charge
    
    
    (6
    )
    
    
    (6
    )
    
    
    (19
    )
    
    
    (19
    )Retirement PlansRealized gains (losses)
    
    
    2
    
    
    
    1
    
    
    
    7
    
    
    
    4Credit risk charge
    
    
    (3
    )
    
    
    (2
    )
    
    
    (7
    )
    
    
    (6
    )InstitutionalRealized gains (losses)
    
    
    4
    
    
    
    4
    
    
    
    12
    
    
    
    10Credit risk charge
    
    
    (6
    )
    
    
    (5
    )
    
    
    (17
    )
    
    
    (14
    )Individual LifeRealized gains (losses)
    
    
    3
    
    
    
    2
    
    
    
    8
    
    
    
    8Credit risk charge
    
    
    (2
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    (5
    )Group BenefitsRealized gains (losses)
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    7Credit risk charge
    
    
    (2
    )
    
    
    (2
    )
    
    
    (7
    )
    
    
    (7
    )InternationalRealized gains (losses)
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Credit risk charge
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    OtherRealized gains (losses)
    
    
    (17
    )
    
    
    (18
    )
    
    
    (54
    )
    
    
    (56
    )Credit risk charge
    
    
    20
    
    
    
    17
    
    
    
    57
    
    
    
    51Total
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
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Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005RevenuesRetail
    
    $
    849
    
    
    $
    810
    
    
    $
    2,566
    
    
    $
    2,399Retirement Plans
    
    
    131
    
    
    
    118
    
    
    
    399
    
    
    
    348Institutional
    
    
    429
    
    
    
    358
    
    
    
    1,314
    
    
    
    997Individual Life
    
    
    271
    
    
    
    278
    
    
    
    817
    
    
    
    799Group Benefits
    
    
    1,137
    
    
    
    1,049
    
    
    
    3,398
    
    
    
    3,143International
    
    
    194
    
    
    
    141
    
    
    
    558
    
    
    
    356Other
    
    
    80
    
    
    
    62
    
    
    
    (52
    )
    
    
    275Total segment revenues
    
    
    3,091
    
    
    
    2,816
    
    
    
    9,000
    
    
    
    8,317Net investment income
on equity securities
held for trading [1]
    
    
    1,185
    
    
    
    1,500
    
    
    
    669
    
    
    
    2,024Total revenues
    
    $
    4,276
    
    
    $
    4,316
    
    
    $
    9,669
    
    
    $
    10,341
 [1]
    
    Management does not include dividend income and mark-to-market effects of trading
securities supporting the international variable annuity business in its segment revenues
since corresponding amounts credited to policyholders are included within benefits, claims
and claim adjustment expenses.
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net Income (Loss)Retail
    
    $
    184
    
    
    $
    172
    
    
    $
    526
    
    
    $
    447Retirement Plans
    
    
    21
    
    
    
    20
    
    
    
    64
    
    
    
    54Institutional
    
    
    24
    
    
    
    24
    
    
    
    75
    
    
    
    66Individual Life
    
    
    46
    
    
    
    45
    
    
    
    139
    
    
    
    123Group Benefits
    
    
    74
    
    
    
    68
    
    
    
    216
    
    
    
    191International
    
    
    47
    
    
    
    28
    
    
    
    145
    
    
    
    63Other
    
    
    18
    
    
    
    (24
    )
    
    
    (121
    )
    
    
    (70
    )Total net income
    
    $
    414
    
    
    $
    333
    
    
    $
    1,044
    
    
    $
    874
 3. Investments and Derivative Instruments
 September 30, 2006
    
    December 31, 2005Gross
    
    Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    ValueBonds and NotesAsset-backed securities (ABS)
    
    $
    6,580
    
    
    $
    49
    
    
    $
    (55
    )
    
    $
    6,574
    
    
    $
    6,819
    
    
    $
    48
    
    
    $
    (75
    )
    
    $
    6,792Collateralized mortgage
obligations (CMOs)Agency backed
    
    
    904
    
    
    
    12
    
    
    
    (5
    )
    
    
    911
    
    
    
    758
    
    
    
    3
    
    
    
    (5
    )
    
    
    756Non-agency backed
    
    
    100
    
    
    
    
    
    
    
    (1
    )
    
    
    99
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106Commercial mortgage-backed
securities (CMBS)Agency backed
    
    
    356
    
    
    
    7
    
    
    
    (1
    )
    
    
    362
    
    
    
    70
    
    
    
    1
    
    
    
    
    
    
    
    71Non-agency backed
    
    
    10,207
    
    
    
    168
    
    
    
    (77
    )
    
    
    10,298
    
    
    
    9,219
    
    
    
    174
    
    
    
    (97
    )
    
    
    9,296Corporate
    
    
    24,501
    
    
    
    963
    
    
    
    (258
    )
    
    
    25,206
    
    
    
    23,893
    
    
    
    1,178
    
    
    
    (259
    )
    
    
    24,812Government/Government agenciesForeign
    
    
    467
    
    
    
    25
    
    
    
    (4
    )
    
    
    488
    
    
    
    719
    
    
    
    50
    
    
    
    (4
    )
    
    
    765United States
    
    
    1,006
    
    
    
    11
    
    
    
    (6
    )
    
    
    1,011
    
    
    
    630
    
    
    
    24
    
    
    
    (5
    )
    
    
    649Mortgage-backed securities (MBS)
    
    
    2,004
    
    
    
    4
    
    
    
    (39
    )
    
    
    1,969
    
    
    
    2,794
    
    
    
    6
    
    
    
    (43
    )
    
    
    2,757States, municipalities and
political subdivisions
    
    
    3,372
    
    
    
    186
    
    
    
    (15
    )
    
    
    3,543
    
    
    
    3,256
    
    
    
    210
    
    
    
    (9
    )
    
    
    3,457Redeemable preferred stock
    
    
    15
    
    
    
    1
    
    
    
    
    
    
    
    16
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Short-term
    
    
    1,432
    
    
    
    
    
    
    
    
    
    
    
    1,432
    
    
    
    1,334
    
    
    
    
    
    
    
    
    
    
    
    1,334Total fixed maturities
    
    $
    50,944
    
    
    $
    1,426
    
    
    $
    (461
    )
    
    $
    51,909
    
    
    $
    49,615
    
    
    $
    1,694
    
    
    $
    (497
    )
    
    $
    50,812
 12




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##### Table of Contents



Variable Interest Entities
   Derivative Instruments
      September 30, 2006
    
    December 31, 2005Liability
    
    
    
    
    
    LiabilityAsset Values
    
    Values
    
    Asset Values
    
    ValuesOther investments
    
    $
    266
    
    
    $
    
    
    
    $
    179
    
    
    $
    Reinsurance recoverables
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    17Other policyholder funds and benefits payable
    
    
    35
    
    
    
    
    
    
    
    8
    
    
    
    Other liabilities
    
    
    
    
    
    
    501
    
    
    
    
    
    
    
    420Total
    
    $
    301
    
    
    $
    527
    
    
    $
    187
    
    
    $
    437
  September 30, 2006
    
    December 31, 2005Notional
    
    
    
    
    
    NotionalAmount
    
    Fair Value
    
    Amount
    
    Fair ValueCash flow hedge
    
    $
    6,922
    
    
    $
    (297
    )
    
    $
    7,197
    
    
    $
    (242
    )Fair value hedge
    
    
    2,618
    
    
    
    1
    
    
    
    1,707
    
    
    
    (1
    )Other investment and risk management activities
    
    
    64,136
    
    
    
    70
    
    
    
    54,161
    
    
    
    (7
    )Total
    
    $
    73,676
    
    
    $
    (226
    )
    
    $
    63,065
    
    
    $
    (250
    )
  13




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##### Table of Contents



4. Deferred Policy Acquisition Costs and Present Value of Future Profits
  2006
    
    2005Balance, January 1
    
    $
    8,567
    
    
    $
    7,437Capitalization
    
    
    1,420
    
    
    
    1,564Amortization  Deferred policy acquisition costs and present value of future profits
    
    
    (913
    )
    
    
    (887
    )Adjustments to unrealized gains and losses on securities available-for-sale and other
    
    
    54
    
    
    
    239Effect of currency translation adjustment
    
    
    (3
    )
    
    
    (103
    )Balance, September 30
    
    $
    9,125
    
    
    $
    8,250
 5. Separate Accounts, Death Benefits and Other Insurance Benefit Features
  14




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##### Table of Contents



U.S. GMDB [1]
    
    Japan GMDB/GMIB [1]Liability balance as of January 1, 2006
    
    $
    158
    
    
    $
    50Incurred
    
    
    92
    
    
    
    24Paid
    
    
    (84
    )
    
    
    (1
    )Currency translation adjustment
    
    
    
    
    
    
    Liability balance as of September 30, 2006
    
    $
    166
    
    
    $
    73
 [1]
    
    The reinsurance recoverable asset related to the U.S. GMDB was $32 as of September 30,
2006. The reinsurance recoverable asset related to the Japan GMDB was $3 as of September 30,
2006.
 U.S. GMDB [1]
    
    Japan GMDB/GMIBLiability balance as of January 1, 2005
    
    $
    174
    
    
    $
    28Incurred
    
    
    96
    
    
    
    23Paid
    
    
    (111
    )
    
    
    (1
    )Currency translation adjustment
    
    
    
    
    
    
    (4
    )Liability balance as of September 30, 2005
    
    $
    159
    
    
    $
    46
 [1]
    
    The reinsurance recoverable asset related to the U.S. GMDB was $42 as of September 30,
2005.
   Breakdown of Individual Variable and Group Annuity Account Value by GMDB/GMIB Type
 Retained Net
    
    Weighted AverageAccount
    
    Net Amount
    
    Amount
    
    Attained Age ofMaximum anniversary value (MAV) [1]
    
    Value
    
    at Risk
    
    at Risk
    
    AnnuitantMAV only
    
    $
    52,640
    
    
    $
    4,271
    
    
    $
    431
    
    
    
    64With 5% rollup [2]
    
    
    3,763
    
    
    
    433
    
    
    
    82
    
    
    
    63With Earnings Protection Benefit Rider (EPB) [3]
    
    
    5,382
    
    
    
    374
    
    
    
    64
    
    
    
    61With 5% rollup & EPB
    
    
    1,382
    
    
    
    135
    
    
    
    25
    
    
    
    63Total MAV
    
    
    63,167
    
    
    
    5,213
    
    
    
    602Asset Protection Benefit (APB) [4]
    
    
    33,561
    
    
    
    59
    
    
    
    31
    
    
    
    61Lifetime Income Benefit (LIB)  Death Benefit [5]
    
    
    2,535
    
    
    
    3
    
    
    
    3
    
    
    
    59Reset [6] (5-7 years)
    
    
    6,764
    
    
    
    319
    
    
    
    319
    
    
    
    65Return of Premium [7]/Other
    
    
    9,583
    
    
    
    32
    
    
    
    30
    
    
    
    53Subtotal U.S. Guaranteed Minimum Death Benefits
    
    
    115,610
    
    
    
    5,626
    
    
    
    985
    
    
    
    62Japan Guaranteed Minimum Death and Income Benefit [8]
    
    
    28,265
    
    
    
    113
    
    
    
    53
    
    
    
    66Total at September 30, 2006
    
    $
    143,875
    
    
    $
    5,739
    
    
    $
    1,038
 
 [1]
    
    MAV: the death benefit is the greatest of current account value, net premiums paid and
the highest account value on any anniversary before age 80 (adjusted for withdrawals).[2]
    
    Rollup: the death benefit is the greatest of the MAV, current account value, 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: the death benefit is the greatest of the MAV, current account value, or contract value
plus a percentage of the contracts growth. The contracts growth is account value less
premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.[4]
    
    APB: the death benefit is the greater of current account value or MAV, not to exceed current
account value plus 25% times the greater of net premiums and MAV (each adjusted for premiums
in the past 12 months).[5]
    
    LIB: the death benefit is the greater of current account value or MAV, net premiums paid, or
a benefit amount that rachets over time, generally based on market performance.[6]
    
    Reset: the death benefit is the greatest of current account value, net premiums paid and
the most recent five to seven year anniversary account value before age 80 (adjusted for
withdrawals).[7]
    
    Return of premium: the death benefit is the greater of current account value and net
premiums paid.[8]
    
    Death benefits include a Return of Premium and MAV (before age 75) death benefit and income
benefits include a guarantee to return initial investment, which is adjusted for earnings
liquidity or a maximum annual withdrawal of 3% of premiums, depending on the product, through
a fixed annuity after a minimum deferral period of 10, 15 or 20 years. The guaranteed
remaining balance related to the Japan GMIB was $19.4 billion and $15.2 billion as of
September 30, 2006 and December 31, 2005, respectively. 
 15




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##### Table of Contents



6. Commitments and Contingencies
 Litigation
  16




---



##### Table of Contents



Broker Compensation Litigation
     17




---



##### Table of Contents



Regulatory Developments
          18




---



##### Table of Contents



7. Stock Compensation Plans
   Stock Plan
    19




---



##### Table of Contents



Share Awards
  Employee Stock Purchase Plan
  8. Transactions with Affiliates
  9. Sale of Affiliates
   10. Debt
   20




---



##### Table of Contents



Consumer Notes
 SM SM
   21




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (Dollar amounts in millions, unless otherwise stated)
   INDEX
 Overview
    
    
    23Critical Accounting Estimates
    
    
    25Consolidated Results of Operations
    
    
    27Retail
    
    
    33Retirement Plans
    
    
    34Institutional
    
    
    35Individual Life
    
    
    36Group Benefits
    
    
    37International
    
    
    38Other
    
    
    39Investments
    
    
    40Investment Credit Risk
    
    
    44Capital Markets Risk Management
    
    
    45Capital Resources and Liquidity
    
    
    48Accounting Standards
    
    
    50
 22




---



##### Table of Contents



OVERVIEW
   Regulatory Developments
        23




---



##### Table of Contents



Broker Compensation
  24




---



##### Table of Contents



CRITICAL ACCOUNTING ESTIMATES
   Life Deferred Policy Acquisition Costs and Present Value of Future Profits Associated with Variable
Annuity and Other Universal Life-Type Contracts
 Accounting Policy and Assumptions
    25




---



##### Table of Contents



Unlock and Sensitivity Analysis
         26




---



##### Table of Contents



CONSOLIDATED RESULTS OF OPERATIONS
   27




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##### Table of Contents



Performance Measures
 Fee Income
  As of and For the Three
    
    As of and For the NineMonths Ended
    
    Months EndedSeptember 30,
    
    September 30,Product/Key Indicator Information
    
    2006
    
    2005
    
    2006
    
    2005U.S. Variable AnnuitiesAccount value, beginning of period
    
    $
    106,224
    
    
    $
    99,747
    
    
    $
    105,314
    
    
    $
    99,617Net flows
    
    
    (988
    )
    
    
    (348
    )
    
    
    (2,454
    )
    
    
    (1
    )Change in market value and other
    
    
    3,253
    
    
    
    4,193
    
    
    
    5,629
    
    
    
    3,976Account value, end of period
    
    $
    108,489
    
    
    $
    103,592
    
    
    $
    108,489
    
    
    $
    103,592Retail Mutual FundsAssets under management, beginning of period
    
    $
    32,611
    
    
    $
    25,958
    
    
    $
    29,063
    
    
    $
    25,240Net sales
    
    
    1,195
    
    
    
    73
    
    
    
    4,112
    
    
    
    776Change in market value and other
    
    
    914
    
    
    
    1,491
    
    
    
    1,545
    
    
    
    1,506Assets under management, end of period
    
    $
    34,720
    
    
    $
    27,522
    
    
    $
    34,720
    
    
    $
    27,522Retirement PlansAccount value, beginning of period
    
    $
    20,740
    
    
    $
    17,592
    
    
    $
    19,317
    
    
    $
    16,493Net flows
    
    
    442
    
    
    
    200
    
    
    
    1,837
    
    
    
    1,226Change in market value and other
    
    
    513
    
    
    
    673
    
    
    
    541
    
    
    
    746Account value, end of period
    
    $
    21,695
    
    
    $
    18,465
    
    
    $
    21,695
    
    
    $
    18,465Individual Life InsuranceVariable universal life account value, end of period
    
    $
    6,242
    
    
    $
    5,700
    
    
    $
    6,242
    
    
    $
    5,700Total life insurance inforce
    
    $
    160,010
    
    
    $
    147,278
    
    
    $
    160,010
    
    
    $
    147,278S&P500 IndexPeriod end closing value
    
    
    1,336
    
    
    
    1,229
    
    
    
    1,336
    
    
    
    1,229Daily average value
    
    
    1,288
    
    
    
    1,224
    
    
    
    1,284
    
    
    
    1,200Japan AnnuitiesAccount value, beginning of period
    
    $
    28,990
    
    
    $
    19,726
    
    
    $
    26,104
    
    
    $
    14,631Net flows
    
    
    877
    
    
    
    2,704
    
    
    
    3,675
    
    
    
    8,815Change in market value and other
    
    
    74
    
    
    
    869
    
    
    
    162
    
    
    
    (147
    )Account value, end of period
    
    $
    29,941
    
    
    $
    23,299
    
    
    $
    29,941
    
    
    $
    23,299
 
    
    The increase in U.S. variable annuity account values from
September 30, 2005 to September 30, 2006 can be attributed to
market growth over the past four quarters. Net flows for the
U.S. variable annuity business are negative and have
decreased from prior year levels resulting from higher
surrenders and lower sales due to increased competition.
 
    
    Mutual Fund net sales increased substantially over the prior
year period as a result of focused wholesaling efforts and
favorable fund and equity market performance both
contributing to sales and deposits.
 
    
    The increase in Retirement Plan account values from September
30, 2005 to September 30, 2006 can be mainly attributed to
positive net flows over the past four quarters and market
appreciation.
 
    
    Individual Life account value increased from September 30,
2005 due primarily to premiums and deposits. Life insurance
inforce increased from September 30, 2005 due to business
growth.
 
    
    Japan annuity account values as of September 30, 2006
continue to grow as a result of positive net flows and fund
performance, offset by a decline due to the effects of
currency translation. However, Japan net flows have
decreased due to increased competition.
 28




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##### Table of Contents



Net Investment Income and Interest Credited
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Net Investment Income
    
    2006
    
    2005
    
    2006
    
    2005Retail
    
    $
    208
    
    
    $
    229
    
    
    $
    639
    
    
    $
    709Retirement Plans
    
    
    82
    
    
    
    78
    
    
    
    242
    
    
    
    231Institutional
    
    
    256
    
    
    
    207
    
    
    
    729
    
    
    
    581Individual Life
    
    
    81
    
    
    
    77
    
    
    
    240
    
    
    
    226Group Benefits
    
    
    106
    
    
    
    99
    
    
    
    310
    
    
    
    297International
    
    
    32
    
    
    
    19
    
    
    
    91
    
    
    
    49Other
    
    
    1,222
    
    
    
    1,562
    
    
    
    777
    
    
    
    2,164Total net investment income
    
    $
    1,987
    
    
    $
    2,271
    
    
    $
    3,028
    
    
    $
    4,257
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Interest Credited on General Account Assets
    
    2006
    
    2005
    
    2006
    
    2005Retail
    
    $
    158
    
    
    $
    177
    
    
    $
    481
    
    
    $
    546Retirement Plans
    
    
    52
    
    
    
    50
    
    
    
    154
    
    
    
    146Institutional
    
    
    135
    
    
    
    99
    
    
    
    377
    
    
    
    273Individual Life
    
    
    59
    
    
    
    57
    
    
    
    175
    
    
    
    167International
    
    
    6
    
    
    
    3
    
    
    
    16
    
    
    
    10Other
    
    
    1,209
    
    
    
    1,526
    
    
    
    751
    
    
    
    2,216Total interest credited on general account assets
    
    $
    1,619
    
    
    $
    1,912
    
    
    $
    1,954
    
    
    $
    3,358
 
    
    Net investment income and interest credited in Other
decreased for the three and nine months ended September 30,
2006 due to a decrease in the mark-to-market effects of
trading account securities supporting the Japanese variable
annuity business.
    
    Net investment income and interest credited on general
account assets in Retail declined for the three and nine
months ended September 30, 2006 due to lower assets under
management as a result of surrenders on market value adjusted
(MVA) fixed annuity products at the end of their guarantee
period. Also contributing to the decline in assets under
management were transfers within variable annuity products
from the general account option to separate account funds.
    
    Net investment income and interest credited on general
account assets in Institutional increased as a result of
sales in the Companys funding agreement backed Investor
Notes program.
 Premiums
  For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,Group Benefits
    
    2006
    
    2005
    
    2006
    
    2005Total premiums and other considerations
    
    $
    1,032
    
    
    $
    950
    
    
    $
    3,092
    
    
    $
    2,846Fully insured ongoing sales (excluding buyouts)
    
    $
    175
    
    
    $
    157
    
    
    $
    750
    
    
    $
    643
 
    
    Earned premiums and other considerations include $0 and $1 and $5 and $26 in buyout
premiums for the three and nine months ended September 30, 2006 and 2005, respectively. The
increase in premiums and other considerations for Group Benefits in 2006 compared to 2005 was
driven by sales growth of 17%.
 29




---



##### Table of Contents



Expenses
  For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,Retail
    
    2006
    
    2005
    
    2006
    
    2005General insurance expense ratio (individual annuity)
    
    18.1 bps
    
    16.8 bps
    
    17.1 bps
    
    17.7 bpsDAC amortization ratio (individual annuity)
    
    
    50.1
    %
    
    
    48.5
    %
    
    
    50.4
    %
    
    
    48.9
    %Individual LifeDeath benefits
    
    $
    62
    
    
    $
    54
    
    
    $
    194
    
    
    $
    183Insurance expenses, net of deferrals
    
    $
    44
    
    
    $
    43
    
    
    $
    132
    
    
    $
    125Group BenefitsTotal benefits, claims and claim adjustment expenses
    
    $
    745
    
    
    $
    688
    
    
    $
    2,252
    
    
    $
    2,106Loss ratio (excluding buyout premiums)
    
    
    72.2
    %
    
    
    72.4
    %
    
    
    72.8
    %
    
    
    73.8
    %Insurance expenses, net of deferrals
    
    $
    281
    
    
    $
    258
    
    
    $
    819
    
    
    $
    752Expense ratio, (excluding buyout premiums)
    
    
    28.2
    %
    
    
    28.0
    %
    
    
    27.5
    %
    
    
    27.4
    %
 
    
    Individual annuitys expense ratio increased for the three months
ended September 30, 2006 primarily due to higher technology and
service costs. Asset growth for the nine months ended September
30, 2006 decreased individual annuitys expense ratio to a level
lower than prior year periods. Management expects the 2006 full
year ratio to be between 17-18 bps.
 
    
    The ratio of individual annuity DAC amortization over income
before taxes and DAC amortization, while relatively stable, was
influenced by true-ups recorded in the respective periods as
actual gross profits emerged.
 
    
    Individual Life death benefits increased for the three months
ended September 30, 2006 primarily due to unusually favorable
mortality experience in the third quarter of 2005, and increased
6% for the nine months ended September 30, 2006 primarily due to a
larger insurance inforce.
 
    
    The Group Benefits loss ratio, excluding buyouts, for the three
and nine months ended September 30, 2006 was relatively stable.
Movements in the loss ratio were caused by period over period
minor fluctuations in mortality and morbidity experience.
 Profitability
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Ratios
    
    2006
    
    2005
    
    2006
    
    2005RetailIndividual annuity return on assets (ROA)
    
    58.0 bps
    
    56.7 bps
    
    55.3 bps
    
    52.0 bpsGroup BenefitsAfter-tax margin (excluding buyouts)
    
    
    7.2
    %
    
    
    7.2
    %
    
    
    7.0
    %
    
    
    6.8
    %
 
    
    Individual annuitys ROA increased for the three and
nine months ended September 30, 2006 compared to the prior
year periods. In particular, variable annuity fees and the
DRD and other tax benefits each increased for the three and
nine months ended September 30, 2006 compared to the prior
year period. The increase in the ROA pertaining to fees can
be attributed to the increase in account values and resulting
increased fees including GMWB rider fees. Additionally,
general insurance expenses were also favorable as a
percentage of total assets.
    
    The improvement in the Group Benefits after-tax margin
for the nine months ended September 30, 2006 was primarily
due to an improvement in the expense ratio excluding the
financial institution business. (Financial institution
business is experience rated. Under the terms of this
business, loss experience will inversely affect the
commission expenses incurred.)
 30




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    1,149
    
    
    $
    1,026
    
    
    
    12
    %
    
    $
    3,423
    
    
    $
    2,936
    
    
    
    17
    %Earned premiums
    
    
    1,129
    
    
    
    1,045
    
    
    
    8
    %
    
    
    3,483
    
    
    
    3,091
    
    
    
    13
    %Net investment incomeSecurities available-for-sale and other
    
    
    802
    
    
    
    771
    
    
    
    4
    %
    
    
    2,359
    
    
    
    2,233
    
    
    
    6
    %Equity securities held for trading [1]
    
    
    1,185
    
    
    
    1,500
    
    
    
    (21
    %)
    
    
    669
    
    
    
    2,024
    
    
    
    (67
    %)Total net investment income
    
    
    1,987
    
    
    
    2,271
    
    
    
    (13
    %)
    
    
    3,028
    
    
    
    4,257
    
    
    
    (29
    %)Net realized capital (losses) gains
    
    
    11
    
    
    
    (26
    )
    
    NM
    
    
    (265
    )
    
    
    57
    
    
    NMTotal revenues
    
    
    4,276
    
    
    
    4,316
    
    
    
    (1
    %)
    
    
    9,669
    
    
    
    10,341
    
    
    
    (6
    %)Benefits, claims and claim adjustment expenses [1]
    
    
    2,738
    
    
    
    2,926
    
    
    
    (6
    %)
    
    
    5,384
    
    
    
    6,421
    
    
    
    (16
    %)Amortization of deferred policy acquisition costs
and present value of future profits
    
    
    308
    
    
    
    321
    
    
    
    (4
    %)
    
    
    913
    
    
    
    887
    
    
    
    3
    %Insurance operating costs and other expenses
    
    
    703
    
    
    
    641
    
    
    
    10
    %
    
    
    2,034
    
    
    
    1,897
    
    
    
    7
    %Total benefits, claims and expenses
    
    
    3,749
    
    
    
    3,888
    
    
    
    (4
    %)
    
    
    8,331
    
    
    
    9,205
    
    
    
    (10
    %)Income before income tax expense
    
    
    527
    
    
    
    428
    
    
    
    23
    %
    
    
    1,338
    
    
    
    1,136
    
    
    
    18
    %Income tax expense
    
    
    113
    
    
    
    95
    
    
    
    19
    %
    
    
    294
    
    
    
    262
    
    
    
    12
    %Net income
    
    $
    414
    
    
    $
    333
    
    
    
    24
    %
    
    $
    1,044
    
    
    $
    874
    
    
    
    19
    %
 [1]
    
    Includes investment income and mark-to-market effects of equity securities held for trading
supporting the international variable annuity business, which are classified in net investment
income with corresponding amounts credited to policyholders within benefits, claims and claim
adjustment expenses.
  Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Net income increased primarily due to growth in assets
under management resulting from market growth and sales,
along with higher earned premiums in Group Benefits.
    
    Net realized capital gains occurred in the third quarter
of 2006 compared to net realized capital losses in the prior
year period due to realized gains from the Japan fixed
annuity contract hedges due to movements in interest rates
and net realized gains on GMWB derivatives, primarily driven
by net changes in policyholder behavior assumptions made in
the third quarter, partially offset by losses on
non-qualifying derivatives due to rising interest rates in
2006 and other than temporary impairments. Net realized
capital losses occurred in the first nine months of 2006
compared to net realized capital gains in the prior year
period due to increased other-than-temporary impairments (see
the Other-Than-Temporary Impairments discussion within
Investment Results for more information on the increase in
impairments), realized losses associated with GMWB
derivatives, primarily driven by liability modeling
refinements and assumption updates reflecting in-force
demographics, losses on non-qualifying derivatives and net
losses on sales of investments, both due to rising interest
rates in 2006.
    
    During the first quarter of 2006 and 2005, the Company
recorded a $7 after-tax reserve and a $66 after-tax reserve,
respectively for regulatory investigations.
    
    During the first quarter of 2006, the Company achieved
favorable settlements in several cases brought against the
Company by policyholders regarding their purchase of
broad-based leveraged corporate owned life insurance
(leveraged COLI) policies in the early to mid-1990s. The
Company ceased offering this product in 1996. Based on the
favorable outcome of these cases, together with the Companys
current assessment of the few remaining leveraged COLI cases,
the Company reduced its estimate of the ultimate cost of
these cases during the three months ended March 31, 2006.
This reserve reduction, recorded in insurance operating costs
and other expenses, resulted in an after-tax benefit of $34
in the three months ended March 31, 2006.
    
    During the second quarter of 2005, the Company recorded
an after-tax expense of $24, which was, at the time, an
estimate of the termination value of a provision of an
agreement with a distribution partner of the Companys retail
mutual funds. The agreement was ultimately terminated in
late 2005.
 31




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##### Table of Contents



Income Taxes
      32




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##### Table of Contents



RETAIL
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    663
    
    
    $
    594
    
    
    
    12
    %
    
    $
    1,981
    
    
    $
    1,717
    
    
    
    15
    %Earned premiums
    
    
    (23
    )
    
    
    (15
    )
    
    
    (53
    %)
    
    
    (58
    )
    
    
    (35
    )
    
    
    (66
    %)Net investment income
    
    
    208
    
    
    
    229
    
    
    
    (9
    %)
    
    
    639
    
    
    
    709
    
    
    
    (10
    %)Net realized capital gains
    
    
    1
    
    
    
    2
    
    
    
    (50
    %)
    
    
    4
    
    
    
    8
    
    
    
    (50
    %)Total revenues
    
    
    849
    
    
    
    810
    
    
    
    (5
    %)
    
    
    2,566
    
    
    
    2,399
    
    
    
    7
    %Benefits, claims and claim adjustment expenses
    
    
    197
    
    
    
    218
    
    
    
    (10
    %)
    
    
    611
    
    
    
    689
    
    
    
    (11
    %)Insurance operating costs and other expenses
    
    
    245
    
    
    
    199
    
    
    
    23
    %
    
    
    729
    
    
    
    621
    
    
    
    17
    %Amortization of deferred policy acquisition
costs and present value of future profits
    
    
    201
    
    
    
    187
    
    
    
    7
    %
    
    
    607
    
    
    
    546
    
    
    
    11
    %Total benefits, claims and expenses
    
    
    643
    
    
    
    604
    
    
    
    6
    %
    
    
    1,947
    
    
    
    1,856
    
    
    
    5
    %Income before income tax expense
    
    
    206
    
    
    
    206
    
    
    
    
    
    
    
    619
    
    
    
    543
    
    
    
    14
    %Income tax expense
    
    
    22
    
    
    
    34
    
    
    
    (35
    %)
    
    
    93
    
    
    
    96
    
    
    
    (3
    %)Net income
    
    $
    184
    
    
    $
    172
    
    
    
    7
    %
    
    $
    526
    
    
    $
    447
    
    
    
    18
    %Assets Under ManagementIndividual variable annuity account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    108,489
    
    
    $
    103,592
    
    
    
    5
    %Individual fixed annuity and other account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,888
    
    
    
    10,323
    
    
    
    (4
    %)Other retail products account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    454
    
    
    
    286
    
    
    
    59
    %Total account values[1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,831
    
    
    
    114,201
    
    
    
    4
    %Retail mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,720
    
    
    
    27,522
    
    
    
    26
    %Other mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,314
    
    
    
    901
    
    
    
    46
    %Total mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,034
    
    
    
    28,423
    
    
    
    27
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    154,865
    
    
    $
    142,624
    
    
    
    9
    %
 [1]
    
    Includes policyholder balances for investment contracts and reserves for future policy benefits
for insurance contracts.
 Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    The increase in fee income in the variable annuity business for the three and nine
months ended September 30, 2006 occurred primarily as the result of growth in
average account values. The year-over-year increase in average account values can
be attributed to market appreciation of $8.2 billion over the past four quarters.
Variable annuity had net outflows of $2.5 billion for the nine months ended
September 30, 2006 compared to net outflows of $1 for the prior year period. Net
outflows from additional surrender activity were due to increased sales
competition, particularly from competitors offering variable annuity products with
guaranteed living benefits.
 
    
    Mutual fund fee income increased 21% and 25% for the three and nine months ended
September 30, 2006, respectively, due to increased assets under management driven
by market appreciation of $2.6 billion and net sales of $4.7 billion during the
past four quarters. Net sales grew to $4.1 billion for the nine months ended
September 30, 2006 compared to $776 for the prior year period. This increase was
primarily attributable to focused wholesaling efforts.
 
    
    Despite stable general account investment spread over the past four quarters, net
investment income has steadily declined for the three and nine months ended
September 30, 2006 due to variable annuity transfers from the fixed account to the
separate account combined with surrenders in the fixed MVA contracts. Despite
these outflows, a more favorable interest rate environment throughout 2006 has
resulted in increased sales and a lower surrender rate resulting in net outflows
for the nine months ended September 30, 2006 decreasing $1.1 billion compared to
the same prior year period. Benefits, claims and claim adjustment expenses have
decreased for the three and nine months ended September 30, 2006 due to a decline
in interest credited also due to a decline in fixed annuity account values.
 
    
    Insurance operating costs and other expenses increased for the three and nine
months ended September 30, 2006 primarily due to an increase in mutual fund
commissions due to significant growth in sales. In addition, variable annuity
asset based commissions increased due to 5% growth in assets under management, as
well as an increase in the number of contracts reaching anniversaries when trail
commission payments begin. During the second quarter of 2005, the Company recorded
an after-tax expense of $24, which was, at the time, an estimate of the termination
value of a provision of an agreement with a distribution partner of the
Companys retail mutual funds. The agreement was ultimately terminated in late 2005.
 33




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##### Table of Contents




    
    Higher amortization of DAC resulted from higher actual gross profits due to the
positive earnings drivers discussed above. The DAC amortization rate as a
percentage of pre-tax, pre-amortization profits remained fairly stable.
 
    
    The effective tax rate decreased for the three and nine months ended September 30,
2006 compared to the prior period due to an increase in the net foreign tax credit
estimate from $2 in 2005 to $12 in 2006 as well as an increase in the DRD. The DRD
increased $4 and $23 for the three and nine months ended September 30, 2006 over
the respective prior year periods, resulting from true-ups related to prior years tax
returns. For the three months ended September 30, 2005, the Companys DRD also
included a tax benefit of $4 related to the 2005 year.
 RETIREMENT PLANS
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    48
    
    
    $
    40
    
    
    
    20
    %
    
    $
    139
    
    
    $
    111
    
    
    
    25
    %Earned premiums
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    17
    
    
    
    8
    
    
    
    113
    %Net investment income
    
    
    82
    
    
    
    78
    
    
    
    5
    %
    
    
    242
    
    
    
    231
    
    
    
    5
    %Net realized capital gains (losses)
    
    
    
    
    
    
    (1
    )
    
    
    100
    %
    
    
    1
    
    
    
    (2
    )
    
    NMTotal revenues
    
    
    131
    
    
    
    118
    
    
    
    11
    %
    
    
    399
    
    
    
    348
    
    
    
    15
    %Benefits, claims and claim adjustment expenses
    
    
    61
    
    
    
    57
    
    
    
    7
    %
    
    
    189
    
    
    
    172
    
    
    
    10
    %Insurance operating costs and other expenses
    
    
    36
    
    
    
    32
    
    
    
    13
    %
    
    
    102
    
    
    
    88
    
    
    
    16
    %Amortization of deferred policy acquisition costs
    
    
    6
    
    
    
    5
    
    
    
    20
    %
    
    
    22
    
    
    
    17
    
    
    
    29
    %Total benefits, claims and expenses
    
    
    103
    
    
    
    94
    
    
    
    10
    %
    
    
    313
    
    
    
    277
    
    
    
    13
    %Income before income taxes
    
    
    28
    
    
    
    24
    
    
    
    17
    %
    
    
    86
    
    
    
    71
    
    
    
    21
    %Income tax expense
    
    
    7
    
    
    
    4
    
    
    
    75
    %
    
    
    22
    
    
    
    17
    
    
    
    29
    %Net income
    
    $
    21
    
    
    $
    20
    
    
    
    5
    %
    
    $
    64
    
    
    $
    54
    
    
    
    19
    %Assets Under ManagementGovernmental account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,691
    
    
    $
    10,162
    
    
    
    5
    %401(k) account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,004
    
    
    
    8,303
    
    
    
    33
    %Total account values[1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,695
    
    
    
    18,465
    
    
    
    17
    %Governmental mutual fund assets under management [2]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147
    
    
    
    (100
    %)401(k) mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,036
    
    
    
    872
    
    
    
    19
    %Total mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,036
    
    
    
    1,019
    
    
    
    2
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    22,731
    
    
    $
    19,484
    
    
    
    17
    %
 [1]
    
    Includes policyholder balances for investment contracts and reserves for future policy
benefits for insurance contracts[2]
    
    Government Mutual Fund assets declined to zero due to a large case surrender in 2005 and
the remaining business being transferred to the Institutional segment.
 Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Fee income for 401(k) increased 28%, or $8 and 37%, or $28, for
the three and nine months ended September 30, 2006, respectively,
due to the growth in average account values. This growth is
primarily driven by positive net flows of $2.0 billion over the
past four quarters resulting from strong sales and increased
ongoing deposits. Total 401(k) deposits increased by 14% and 25%
for the three and nine months ended September 30, 2006,
respectively. The increase in average account values can also be
attributed to market appreciation of $699 over the past four
quarters.
 
    
    General account spread remained stable for the three and nine
months ended September 30, 2006 compared to the respective prior
year periods. Overall, net investment income and the associated
interest credited within benefits, claims and claim adjustment
expenses each increased as a result of the growth in general
account assets under management. Additionally, benefits, claims
and claim adjustment expenses increased for the nine months ended
September 30, 2006 compared to the respective prior year period
due to a large case annuitization in the 401(k) business which
also resulted in an increase in premiums of $12 for the nine
months ended September 30, 2006.
 
    
    Insurance operating costs and other expenses increased for the
three and nine months ended September 30, 2006 primarily driven by
the 401(k) business. The additional costs can be attributed to
greater assets under management resulting in higher trail
commissions and maintenance expenses.
 
    
    Higher amortization of DAC resulted from higher actual gross
profits due to positive earnings drivers combined with a higher
amortization rate for the nine months ended September 30, 2006
compared to the respective prior year period.
 34




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##### Table of Contents



INSTITUTIONAL
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    32
    
    
    $
    26
    
    
    
    23
    %
    
    $
    87
    
    
    $
    96
    
    
    
    (9
    %)Earned premiums
    
    
    143
    
    
    
    126
    
    
    
    13
    %
    
    
    502
    
    
    
    323
    
    
    
    55
    %Net investment income
    
    
    256
    
    
    
    207
    
    
    
    24
    %
    
    
    729
    
    
    
    581
    
    
    
    25
    %Net realized capital losses
    
    
    (2
    )
    
    
    (1
    )
    
    
    (100
    %)
    
    
    (4
    )
    
    
    (3
    )
    
    
    (33
    %)Total revenues
    
    
    429
    
    
    
    358
    
    
    
    20
    %
    
    
    1,314
    
    
    
    997
    
    
    
    32
    %Benefits, claims and claim adjustment expenses
    
    
    375
    
    
    
    300
    
    
    
    25
    %
    
    
    1,137
    
    
    
    841
    
    
    
    35
    %Insurance operating costs and other expenses
    
    
    18
    
    
    
    15
    
    
    
    20
    %
    
    
    53
    
    
    
    42
    
    
    
    26
    %Amortization of deferred policy acquisition costs
    
    
    6
    
    
    
    9
    
    
    
    (33
    %)
    
    
    22
    
    
    
    23
    
    
    
    (4
    %)Total benefits, claims and expenses
    
    
    399
    
    
    
    324
    
    
    
    23
    %
    
    
    1,212
    
    
    
    906
    
    
    
    34
    %Income before income taxes
    
    
    30
    
    
    
    34
    
    
    
    (12
    %)
    
    
    102
    
    
    
    91
    
    
    
    12
    %Income tax expense
    
    
    6
    
    
    
    10
    
    
    
    (40
    %)
    
    
    27
    
    
    
    25
    
    
    
    8
    %Net income
    
    $
    24
    
    
    $
    24
    
    
    
    
    
    
    $
    75
    
    
    $
    66
    
    
    
    14
    %Assets Under ManagementInstitutional Investment Product account values [1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    21,010
    
    
    $
    17,174
    
    
    
    22
    %Private Placement Life Insurance account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,125
    
    
    
    23,538
    
    
    
    7
    %Mutual fund assets under management [2]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,204
    
    
    
    1,324
    
    
    
    66
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    48,339
    
    
    $
    42,036
    
    
    
    15
    %
 [1]
    
    Institutional investment product account values include transfers from Retirement Plans of
$413 during the three months ended March 31, 2006 and from Retail of $350 during the three
months ended September 30, 2006.[2]
    
    Mutual fund assets under management include transfers from Retirement Plans of $178 during
the three months ended March 31, 2006.
 Three and nine months ended September 30, 2006 compared to the three and nine months
ended September 30, 2005
  
    
    Total revenues increased in IIP as a result of higher assets under
management, driven by positive net flows of $2.0 billion during
the past four quarters. Net flows for IIP were strong primarily as
a result of the Companys funding agreement backed Investor Notes
program. Investor Notes sales for the four quarters ended
September 30, 2006 were $1.3 billion.
 
    
    General account spread is the main driver of net income for IIP.
Spread income declined for the three months ended September 30,
2006 compared to the respective prior period as a result of
investment income. For the three months ended September 30, 2006
and 2005, income related to partnership investments was $2 and $3
after-tax, respectively. An increase in spread income for the nine
months ended September 30, 2006 compared to the respective prior
period was driven by higher assets under management noted above
along with favorable investment results. For the nine months
ended September 30, 2006 and 2005, income related to partnership
investments was $9 and $4 after-tax, respectively.
 
    
    IIP had less favorable mortality experience on structured
settlement and terminal funding contracts for both the three
months and nine months ended September 30, 2006 compared to the
respective prior period.
 
    
    For the nine months ended September 30, 2006, earned premiums
increased as a result of two large terminal funding cases that
were sold during the period. This increase in earned premiums was
offset by a corresponding increase in benefits, claims and claim
adjustment expenses.
 35




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##### Table of Contents



INDIVIDUAL LIFE
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    200
    
    
    $
    207
    
    
    
    (3
    %)
    
    $
    610
    
    
    $
    593
    
    
    
    3
    %Earned premiums
    
    
    (11
    )
    
    
    (8
    )
    
    
    (38
    %)
    
    
    (36
    )
    
    
    (23
    )
    
    
    (57
    %)Net investment income
    
    
    81
    
    
    
    77
    
    
    
    5
    %
    
    
    240
    
    
    
    226
    
    
    
    6
    %Net realized capital gains
    
    
    1
    
    
    
    2
    
    
    
    (50
    %)
    
    
    3
    
    
    
    3
    
    
    
    Total revenues
    
    
    271
    
    
    
    278
    
    
    
    (3
    %)
    
    
    817
    
    
    
    799
    
    
    
    2
    %Benefits, claims and claim adjustment expenses
    
    
    124
    
    
    
    112
    
    
    
    11
    %
    
    
    375
    
    
    
    352
    
    
    
    7
    %Insurance operating costs and other expenses
    
    
    44
    
    
    
    43
    
    
    
    2
    %
    
    
    132
    
    
    
    125
    
    
    
    6
    %Amortization of deferred policy acquisition
costs and present value of future profits
    
    
    38
    
    
    
    59
    
    
    
    (36
    %)
    
    
    110
    
    
    
    144
    
    
    
    (24
    %)Total benefits, claims and expenses
    
    
    206
    
    
    
    214
    
    
    
    (4
    %)
    
    
    617
    
    
    
    621
    
    
    
    (1
    %)Income before income taxes
    
    
    65
    
    
    
    64
    
    
    
    2
    %
    
    
    200
    
    
    
    178
    
    
    
    12
    %Income tax expense
    
    
    19
    
    
    
    19
    
    
    
    
    
    
    
    61
    
    
    
    55
    
    
    
    11
    %Net income
    
    $
    46
    
    
    $
    45
    
    
    
    2
    %
    
    $
    139
    
    
    $
    123
    
    
    
    13
    %Account ValuesVariable universal life insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,242
    
    
    $
    5,700
    
    
    
    10
    %Universal life/interest sensitive whole life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,932
    
    
    
    3,599
    
    
    
    9
    %Modified guaranteed life and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    703
    
    
    
    716
    
    
    
    (2
    %)Total account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,877
    
    
    $
    10,015
    
    
    
    9
    %Life Insurance InforceVariable universal life insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    73,126
    
    
    $
    70,569
    
    
    
    4
    %Universal life/interest sensitive whole life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,069
    
    
    
    40,694
    
    
    
    8
    %Modified guaranteed life and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,815
    
    
    
    36,015
    
    
    
    19
    %Total life insurance inforce
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    160,010
    
    
    $
    147,278
    
    
    
    9
    %
 Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Cost of insurance charges, the largest component of fee income, increased $7 and $22 for the three and nine months
ended September 30, 2006, driven by growth in the variable universal, universal, and interest-sensitive whole life
insurance inforce. Variable fee income increased, consistent with the growth in the variable universal life insurance
account value. Other fee income, another component of total fee income, decreased $15 and $10 for the three and nine
months ended September 30, 2006, due primarily to lower amortization of deferred revenues consistent with the mix of
products and the level and mix of product profitability. In total, fee income decreased for the three months ended and
increased for the nine months ended September 30, 2006.
 
    
    Amortization of DAC decreased for the three and nine months ended September 30, 2006, which includes $13 of revisions
(reflected in the first half of 2006) to estimates made at December 31, 2005 and March 31, 2006. Excluding these
revisions, the amortization of DAC decreased $21 for both the three and nine months ended September 30, 2006,
consistent with the mix of products and the level and mix of product profitability.
 
    
    Net investment income increased primarily due to increased general account assets from sales growth.
 
    
    Earned premiums, which include premiums for ceded reinsurance, decreased primarily due to increased ceded reinsurance
premiums for the three and nine months ended September 30, 2006.
 
    
    Benefits, claims and claim adjustment expenses increased $12 and $23 for the three and nine months ended September 30,
2006 respectively, consistent with the growth in account values and life insurance inforce, and also reflect favorable
mortality experience in the third quarter of 2005, the lowest level of mortality since fourth quarter 2003.
 36




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##### Table of Contents



GROUP BENEFITS
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeEarned premiums and other
    
    $
    1,032
    
    
    $
    950
    
    
    
    9
    %
    
    $
    3,092
    
    
    $
    2,846
    
    
    
    9
    %Net investment income
    
    
    106
    
    
    
    99
    
    
    
    7
    %
    
    
    310
    
    
    
    297
    
    
    
    4
    %Net realized capital losses
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    Total revenues
    
    
    1,137
    
    
    
    1,049
    
    
    
    8
    %
    
    
    3,398
    
    
    
    3,143
    
    
    
    8
    %Benefits, claims and claim adjustment expenses
    
    
    745
    
    
    
    688
    
    
    
    8
    %
    
    
    2,252
    
    
    
    2,106
    
    
    
    7
    %Insurance operating costs and other expenses
    
    
    281
    
    
    
    258
    
    
    
    9
    %
    
    
    819
    
    
    
    752
    
    
    
    9
    %Amortization of deferred policy acquisition costs
    
    
    10
    
    
    
    8
    
    
    
    25
    %
    
    
    30
    
    
    
    22
    
    
    
    36
    %Total benefits, claims and expenses
    
    
    1,036
    
    
    
    954
    
    
    
    9
    %
    
    
    3,101
    
    
    
    2,880
    
    
    
    8
    %Income before income taxes
    
    
    101
    
    
    
    95
    
    
    
    6
    %
    
    
    297
    
    
    
    263
    
    
    
    13
    %Income tax expense
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    81
    
    
    
    72
    
    
    
    13
    %Net income
    
    $
    74
    
    
    $
    68
    
    
    
    9
    %
    
    $
    216
    
    
    $
    191
    
    
    
    13
    %Earned premiums and otherFully insured  ongoing premiums
    
    $
    1,022
    
    
    $
    940
    
    
    
    9
    %
    
    $
    3,059
    
    
    $
    2,792
    
    
    
    10
    %Buyout premiums
    
    
    
    
    
    
    1
    
    
    
    (100
    %)
    
    
    5
    
    
    
    26
    
    
    
    (81
    %)Other
    
    
    10
    
    
    
    9
    
    
    
    11
    %
    
    
    28
    
    
    
    28
    
    
    
    Total earned premiums and other
    
    $
    1,032
    
    
    $
    950
    
    
    
    9
    %
    
    $
    3,092
    
    
    $
    2,846
    
    
    
    9
    %
  Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Earned premiums increased driven by year-to-date sales (excluding
buyouts) growth of 17%, particularly in group life insurance.
 
    
    The loss ratio (defined as benefits, claims and claim adjustment
expenses as a percentage of premiums and other considerations
excluding buyouts) was 72.2% for the three months ended September
30, 2006, down from 72.4% in the prior year period. For the nine
months ended September 30, 2006, the loss ratio was 72.8%, down
from 73.8% in the prior year period. Excluding financial
institutions, the loss ratio was 77.5% for the three months ended
September 30, 2006 as compared to 77.1% in the prior year period.
For the nine months ended September 30, 2006, the loss ratio
excluding financial institutions was 77.8% as compared to 77.7% in
the prior year period.
 
    
    The expense ratio was 28.2% for the three months ended September
30, 2006 as compared to 28.0% in the prior year period. For the
nine months ended September 30, 2006, the expense ratio was 27.5%
compared to 27.4% in the prior year period. Excluding financial
institutions, the expense ratio for the three months ended
September 30, 2006 was 22.9%, down from 23.8% in the prior year
period. For the nine months ended September 30, 2006, the expense
ratio excluding financial institutions was 22.6% as compared to
23.9% for the prior year period. The decline in expense ratio
excluding financial institutions for both the three and nine month
periods ended September 30, 2006 was due to growth in premiums
outpacing growth in expenses.
 37




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##### Table of Contents



INTERNATIONAL
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    181
    
    
    $
    129
    
    
    
    40
    %
    
    $
    519
    
    
    $
    329
    
    
    
    58
    %Earned premiums
    
    
    (3
    )
    
    
    
    
    
    NM
    
    
    (6
    )
    
    
    
    
    
    NMNet investment income
    
    
    32
    
    
    
    19
    
    
    
    68
    %
    
    
    91
    
    
    
    49
    
    
    
    86
    %Net realized capital losses
    
    
    (16
    )
    
    
    (7
    )
    
    
    (129
    %)
    
    
    (46
    )
    
    
    (22
    )
    
    
    (109
    %)Total revenues
    
    
    194
    
    
    
    141
    
    
    
    38
    %
    
    
    558
    
    
    
    356
    
    
    
    57
    %Benefits, claims and claim adjustment expenses
    
    
    11
    
    
    
    12
    
    
    
    8
    %
    
    
    35
    
    
    
    32
    
    
    
    9
    %Insurance operating costs and other expenses
    
    
    55
    
    
    
    43
    
    
    
    28
    %
    
    
    149
    
    
    
    121
    
    
    
    23
    %Amortization of deferred policy acquisition costs
    
    
    54
    
    
    
    42
    
    
    
    29
    %
    
    
    151
    
    
    
    105
    
    
    
    44
    %Total benefits, claims and expenses
    
    
    120
    
    
    
    97
    
    
    
    24
    %
    
    
    335
    
    
    
    258
    
    
    
    30
    %Income before income taxes
    
    
    74
    
    
    
    44
    
    
    
    68
    %
    
    
    223
    
    
    
    98
    
    
    
    128
    %Income tax expense
    
    
    27
    
    
    
    16
    
    
    
    69
    %
    
    
    78
    
    
    
    35
    
    
    
    123
    %Net income
    
    $
    47
    
    
    $
    28
    
    
    
    68
    %
    
    $
    145
    
    
    $
    63
    
    
    
    130
    %Assets Under ManagementJapan variable annuity assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    28,265
    
    
    $
    21,892
    
    
    
    29
    %Japan MVA fixed annuity assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,676
    
    
    
    1,407
    
    
    
    19
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    29,941
    
    
    $
    23,299
    
    
    
    29
    %
 Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Fee income increased $52 or 40%, and $190 or 58%, for the three and nine months ended September 30, 2006,
respectively. As of September 30, 2006, Japans variable annuity assets under management were $28.3
billion, a 29% increase from the prior year period. The increase in assets under management was driven by
positive net flows of $5.4 billion and market appreciation of $1.9 billion, partially offset by ($922) of
foreign currency exchange over the past four quarters. The amount of variable annuity sales has declined
for the three and nine months ended September 30, 2006, by 58% and 44%, respectively, compared to the prior
year periods primarily due to increased competition and changes in key distribution relationships.
 
    
    Also contributing to the higher fee income was increased surrender activity as customers surrendered
policies in order to take advantage of significant appreciation in their account balances. For the three
and nine months ended September 30, 2006, surrender fees increased by $2 and $20, respectively, from the
prior year periods.
 
    
    The increase in fixed annuity assets under management can be attributed to positive net flows of $305 over
the past four quarters.
 
    
    Further contributing to higher net income in the three and nine months ended September 30, 2006 was a
cumulative benefit of $2 and $6, respectively, due to a change in the effective tax rate on Japan earnings
resulting from a change in managements intent under APB 23. For a further discussion of this change, see
Note 1 of Notes to Condensed Consolidated Financial Statements and Other section of Managements Discussion
and Analysis.
  
    
    DAC amortization was higher due to higher actual gross profits consistent with growth in the Japan operation.
 
    
    Insurance operating costs and other expenses increased for the three and nine months ended September 30,
2006 by 28% and 23%, respectively. These increases are due to higher maintenance costs and asset-based
commissions resulting from the growth in the Japan operation.
 38




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##### Table of Contents



OTHER
 Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,Operating Summary
    
    2006
    
    2005
    
    Change
    
    2006
    
    2005
    
    ChangeFee income
    
    $
    15
    
    
    $
    21
    
    
    
    (29
    %)
    
    $
    59
    
    
    $
    62
    
    
    
    (5
    %)Net investment incomeSecurities available-for-sale and other
    
    
    37
    
    
    
    62
    
    
    
    (40
    %)
    
    
    108
    
    
    
    140
    
    
    
    (23
    %)Equity securities held for trading
    
    
    1,185
    
    
    
    1,500
    
    
    
    (21
    %)
    
    
    669
    
    
    
    2,024
    
    
    
    (67
    %)Total net investment income
    
    
    1,222
    
    
    
    1,562
    
    
    
    (22
    %)
    
    
    777
    
    
    
    2,164
    
    
    
    (64
    %)Net realized capital (losses) gains
    
    
    28
    
    
    
    (21
    )
    
    NM
    
    
    (219
    )
    
    
    73
    
    
    NMTotal revenues
    
    
    1,265
    
    
    
    1,562
    
    
    
    (19
    %)
    
    
    617
    
    
    
    2,299
    
    
    
    (73
    %)Benefits, claims and claim adjustment expenses
    
    
    1,225
    
    
    
    1,539
    
    
    
    (20
    %)
    
    
    785
    
    
    
    2,229
    
    
    
    (65
    %)Insurance operating costs and other expenses
    
    
    24
    
    
    
    51
    
    
    
    (53
    %)
    
    
    50
    
    
    
    148
    
    
    
    (66
    %)Amortization of deferred policy acquisition costs
    
    
    (7
    )
    
    
    11
    
    
    NM
    
    
    (29
    )
    
    
    30
    
    
    NMTotal benefits, claims and expenses
    
    
    1,242
    
    
    
    1,601
    
    
    
    (22
    %)
    
    
    806
    
    
    
    2,407
    
    
    
    (67
    %)Loss before income taxes
    
    
    23
    
    
    
    (39
    )
    
    NM
    
    
    (189
    )
    
    
    (108
    )
    
    
    (75
    %)Income tax expense (benefit)
    
    
    5
    
    
    
    (15
    )
    
    NM
    
    
    (68
    )
    
    
    (38
    )
    
    
    (79
    %)Net income (loss)
    
    $
    18
    
    
    $
    (24
    )
    
    NM
    
    $
    (121
    )
    
    $
    (70
    )
    
    
    (73
    %)
 Three and nine months ended September 30, 2006 compared to the three and nine months ended
September 30, 2005
  
    
    Net realized capital gains occurred in the third quarter
of 2006 compared to net realized capital losses in the prior
year period due to realized gains from the Japan fixed
annuity contract hedges due to movements in interest rates
and net realized gains on GMWB derivatives, primarily driven
by net changes in policyholder behavior assumptions made in
the third quarter, partially offset by losses on
non-qualifying derivatives due to rising interest rates in
2006 and other than temporary impairments. Net realized
capital losses occurred in the first nine months of 2006
compared to net realized capital gains in the prior year
period due to increased other-than-temporary impairments (see
the Other-Than-Temporary Impairments discussion within
Investment Results for more information on the increase in
impairments), realized losses associated with GMWB
derivatives, primarily driven by liability modeling
refinements and assumption updates reflecting in-force
demographics, losses on non-qualifying derivatives and net
losses on sales of investments, both due to rising interest
rates in 2006.
    
    During the first quarter of 2006 and 2005, the Company
recorded a $7 after-tax reserve and a $66 after-tax reserve,
respectively for regulatory investigations.
    
    During the first quarter of 2006, the Company achieved
favorable settlements in several cases brought against the
Company by policyholders regarding their purchase of
broad-based leveraged corporate owned life insurance
(leveraged COLI) policies in the early to mid-1990s. The
Company ceased offering this product in 1996. Based on the
favorable outcome of these cases, together with the Companys
current assessment of the few remaining leveraged COLI cases,
the Company reduced its estimate of the ultimate cost of
these cases during the three months ended March 31, 2006.
This reserve reduction, recorded in insurance operating costs
and other expenses, resulted in an after-tax benefit of $34
in the three months ended March 31, 2006.
    
    Also contributing to the insurance operating costs and
other expenses decreases for the three and nine months ended
September 30, 2006 was a lower level of dividends to
leveraged COLI policyholders.
    
    During the second quarter of 2006, the Company concluded
that it no longer met the indefinite reversal criteria of APB
Opinion No. 23 with respect to undistributed earnings
associated with Hartford Life K.K. The impact in Other, due
to losses on Japan activities reported in Other, was a tax
benefit of $2 and $0 for the three and nine months ended
September 30, 2006, respectively.
 39




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##### Table of Contents



INVESTMENTS
 General
       Composition of Invested Assets
 September 30, 2006
    
    December 31, 2005Amount
    
    Percent
    
    Amount
    
    PercentFixed maturities, available-for-sale, at fair value
    
    $
    51,909
    
    
    
    60.3
    %
    
    $
    50,812
    
    
    
    63.7
    %Equity securities, available-for-sale, at fair value
    
    
    771
    
    
    
    0.9
    %
    
    
    800
    
    
    
    1.0
    %Equity securities held for trading, at fair value
    
    
    27,863
    
    
    
    32.4
    %
    
    
    24,034
    
    
    
    30.1
    %Policy loans, at outstanding balance
    
    
    2,057
    
    
    
    2.4
    %
    
    
    2,016
    
    
    
    2.5
    %Mortgage loans, at amortized cost
    
    
    2,451
    
    
    
    2.9
    %
    
    
    1,513
    
    
    
    1.9
    %Limited partnerships, at fair value
    
    
    679
    
    
    
    0.8
    %
    
    
    431
    
    
    
    0.6
    %Other investments
    
    
    241
    
    
    
    0.3
    %
    
    
    178
    
    
    
    0.2
    %Total investments
    
    $
    85,971
    
    
    
    100.0
    %
    
    $
    79,784
    
    
    
    100.0
    %
  40




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##### Table of Contents



Investment Results
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(before-tax)
    
    2006
    
    2005
    
    2006
    
    2005Net Investment IncomeNet investment income  excluding equity securities held
for trading and policy loans
    
    $
    765
    
    
    $
    735
    
    
    $
    2,253
    
    
    $
    2,125Equity securities held for trading [1]
    
    
    1,185
    
    
    
    1,500
    
    
    
    669
    
    
    
    2,024Policy loan income
    
    
    37
    
    
    
    36
    
    
    
    106
    
    
    
    108Total net investment income
    
    $
    1,987
    
    
    $
    2,271
    
    
    $
    3,028
    
    
    $
    4,257Yield on average invested assets [2]
    
    
    5.8
    %
    
    
    5.8
    %
    
    
    5.7
    %
    
    
    5.7
    %Net Realized Capital Gains (Losses)Gross gains on sale
    
    $
    61
    
    
    $
    89
    
    
    $
    150
    
    
    $
    310Gross losses on sale
    
    
    (66
    )
    
    
    (72
    )
    
    
    (207
    )
    
    
    (204
    )ImpairmentsCredit related
    
    
    (3
    )
    
    
    (12
    )
    
    
    (3
    )
    
    
    (17
    )Other [3]
    
    
    (14
    )
    
    
    (4
    )
    
    
    (66
    )
    
    
    (5
    )Total impairments
    
    
    (17
    )
    
    
    (16
    )
    
    
    (69
    )
    
    
    (22
    )Japanese fixed annuity contract hedges, net [4]
    
    
    38
    
    
    
    (32
    )
    
    
    (20
    )
    
    
    (36
    )Periodic net coupon settlements on credit derivatives/Japan
    
    
    (12
    )
    
    
    (8
    )
    
    
    (34
    )
    
    
    (21
    )GMWB derivatives, net
    
    
    9
    
    
    
    (1
    )
    
    
    (26
    )
    
    
    7Other, net [5]
    
    
    (2
    )
    
    
    14
    
    
    
    (59
    )
    
    
    23Net realized capital gains (losses), before-tax
    
    $
    11
    
    
    $
    (26
    )
    
    $
    (265
    )
    
    $
    57
 
 [1]
    
    Represents the change in value of equity securities held for trading.[2]
    
    Represents annualized net investment income (excluding equity securities held for trading) divided by the monthly weighted average invested
assets primarily at cost or amortized cost, as applicable, excluding equity securities held for trading, collateral received associated with
the securities lending program and reverse repurchase agreements as well as consolidated variable interest entity minority interests.[3]
    
    Primarily relates to fixed maturity impairments for which the Company was uncertain of its intent to retain the investment for a period of
time sufficient to allow for a recovery to amortized cost. These impairments do not relate to security issuers for which the Company has
current concerns regarding their ability to pay future interest and principal amounts based upon the securities contractual terms.[4]
    
    Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic net coupon settlements).[5]
    
    Primarily consists of changes in fair value on non-qualifying derivatives, changes in fair value of certain derivatives in fair value hedge
relationships and hedge ineffectiveness on qualifying derivative instruments.     41




---



##### Table of Contents




    
    The net losses on fixed maturity sales for the three and nine months ended September 30, 2006, were primarily the
result of rising interest rates from the date of security purchase and, to a lesser extent, credit spread widening
on certain issuers that were sold. For further discussion of gross gains and losses, see below.
 
    
    See the Other-Than-Temporary Impairments section that follows for information on impairment losses.
 
    
    The Japanese fixed annuity contract hedges, net amount consists of the foreign currency transaction remeasurements
associated with the Yen denominated fixed annuity contracts offered in Japan and the corresponding offsetting cross
currency swaps. Although the Japanese fixed annuity contracts are economically hedged, the net realized capital
gains and losses result from the mixed attribute accounting model, which requires fixed annuity liabilities to be
recorded at cost and remeasured only for foreign currency exchange rates but the associated derivatives to be
reported at fair value. The net realized capital gains for the three months ended September 30, 2006, resulted
primarily from a decline in Japanese interest rates and the net realized capital losses for the nine months ended
September 30, 2006, resulted primarily from rising Japanese interest rates.
 
    
    The periodic net coupon settlements on credit derivatives and the Japan fixed annuity cross currency swaps includes
the net periodic income/expense or coupon associated with the swap contracts. The net loss for the three and nine
months ended September 30, 2006, is primarily associated with the Japan fixed annuity cross currency swaps and
resulted from the interest rate differential between U.S. and Japanese interest rates.
 
    
    The gains for the three months ended September 30, 2006, associated with the GMWB derivatives, were primarily
driven by net changes in policyholder behavior assumptions made in the third quarter of 2006. The losses for the
nine months ended September 30, 2006, associated with the GMWB derivatives were primarily driven by liability model
refinements and assumption updates reflecting in-force demographics.
      42




---



##### Table of Contents



Other-Than-Temporary Impairments
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,(before-tax)
    
    2006
    
    2005
    
    2006
    
    2005Asset-backed securities (ABS)
    
    $
    3
    
    
    $
    1
    
    
    $
    3
    
    
    $
    2CMBS
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    CorporateBasic industry
    
    
    4
    
    
    
    3
    
    
    
    13
    
    
    
    5Capital goods
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    Consumer cyclical
    
    
    2
    
    
    
    
    
    
    
    13
    
    
    
    1Consumer non-cyclical
    
    
    2
    
    
    
    4
    
    
    
    9
    
    
    
    4Energy
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Technology and communications
    
    
    6
    
    
    
    
    
    
    
    13
    
    
    
    2Utilities
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Total Corporate
    
    
    14
    
    
    
    7
    
    
    
    63
    
    
    
    12Equity
    
    
    
    
    
    
    8
    
    
    
    2
    
    
    
    8Total other-than-temporary impairments
    
    $
    17
    
    
    $
    16
    
    
    $
    69
    
    
    $
    22
     Variable Interest Entities
   43




---



##### Table of Contents



INVESTMENT CREDIT RISK
     Fixed Maturities by Type
 September 30, 2006
    
    December 31, 2005Percent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of TotalAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    Value
    
    ValueABS
    
    $
    6,580
    
    
    $
    49
    
    
    $
    (55
    )
    
    $
    6,574
    
    
    
    12.7
    %
    
    $
    6,819
    
    
    $
    48
    
    
    $
    (75
    )
    
    $
    6,792
    
    
    
    13.4
    %CMBS
    
    
    10,563
    
    
    
    175
    
    
    
    (78
    )
    
    
    10,660
    
    
    
    20.5
    %
    
    
    9,289
    
    
    
    175
    
    
    
    (97
    )
    
    
    9,367
    
    
    
    18.4
    %Collateralized mortgage
obligations (CMOs)
    
    
    1,004
    
    
    
    12
    
    
    
    (6
    )
    
    
    1,010
    
    
    
    1.9
    %
    
    
    864
    
    
    
    3
    
    
    
    (5
    )
    
    
    862
    
    
    
    1.7
    %CorporateBasic industry
    
    
    1,974
    
    
    
    62
    
    
    
    (19
    )
    
    
    2,017
    
    
    
    3.9
    %
    
    
    2,296
    
    
    
    87
    
    
    
    (36
    )
    
    
    2,347
    
    
    
    4.6
    %Capital goods
    
    
    1,793
    
    
    
    91
    
    
    
    (14
    )
    
    
    1,870
    
    
    
    3.6
    %
    
    
    1,701
    
    
    
    91
    
    
    
    (18
    )
    
    
    1,774
    
    
    
    3.5
    %Consumer cyclical
    
    
    2,238
    
    
    
    70
    
    
    
    (32
    )
    
    
    2,276
    
    
    
    4.4
    %
    
    
    2,186
    
    
    
    71
    
    
    
    (37
    )
    
    
    2,220
    
    
    
    4.4
    %Consumer non-cyclical
    
    
    2,311
    
    
    
    78
    
    
    
    (28
    )
    
    
    2,361
    
    
    
    4.5
    %
    
    
    2,294
    
    
    
    124
    
    
    
    (24
    )
    
    
    2,394
    
    
    
    4.7
    %Energy
    
    
    1,125
    
    
    
    67
    
    
    
    (9
    )
    
    
    1,183
    
    
    
    2.3
    %
    
    
    1,068
    
    
    
    104
    
    
    
    (7
    )
    
    
    1,165
    
    
    
    2.3
    %Financial services
    
    
    7,358
    
    
    
    248
    
    
    
    (58
    )
    
    
    7,548
    
    
    
    14.4
    %
    
    
    6,768
    
    
    
    302
    
    
    
    (54
    )
    
    
    7,016
    
    
    
    13.8
    %Technology and
communications
    
    
    2,886
    
    
    
    152
    
    
    
    (33
    )
    
    
    3,005
    
    
    
    5.8
    %
    
    
    2,982
    
    
    
    193
    
    
    
    (32
    )
    
    
    3,143
    
    
    
    6.2
    %Transportation
    
    
    645
    
    
    
    19
    
    
    
    (8
    )
    
    
    656
    
    
    
    1.3
    %
    
    
    638
    
    
    
    29
    
    
    
    (6
    )
    
    
    661
    
    
    
    1.3
    %Utilities
    
    
    2,897
    
    
    
    146
    
    
    
    (40
    )
    
    
    3,003
    
    
    
    5.8
    %
    
    
    2,804
    
    
    
    154
    
    
    
    (30
    )
    
    
    2,928
    
    
    
    5.7
    %Other
    
    
    1,274
    
    
    
    30
    
    
    
    (17
    )
    
    
    1,287
    
    
    
    2.5
    %
    
    
    1,156
    
    
    
    23
    
    
    
    (15
    )
    
    
    1,164
    
    
    
    2.3
    %Government/Government
agenciesForeign
    
    
    467
    
    
    
    25
    
    
    
    (4
    )
    
    
    488
    
    
    
    0.9
    %
    
    
    719
    
    
    
    50
    
    
    
    (4
    )
    
    
    765
    
    
    
    1.5
    %United States
    
    
    1,006
    
    
    
    11
    
    
    
    (6
    )
    
    
    1,011
    
    
    
    2.0
    %
    
    
    630
    
    
    
    24
    
    
    
    (5
    )
    
    
    649
    
    
    
    1.3
    %MBS
    
    
    2,004
    
    
    
    4
    
    
    
    (39
    )
    
    
    1,969
    
    
    
    3.8
    %
    
    
    2,794
    
    
    
    6
    
    
    
    (43
    )
    
    
    2,757
    
    
    
    5.4
    %MunicipalTaxable
    
    
    1,055
    
    
    
    26
    
    
    
    (14
    )
    
    
    1,067
    
    
    
    2.1
    %
    
    
    948
    
    
    
    47
    
    
    
    (4
    )
    
    
    991
    
    
    
    2.0
    %Tax-exempt
    
    
    2,317
    
    
    
    160
    
    
    
    (1
    )
    
    
    2,476
    
    
    
    4.8
    %
    
    
    2,308
    
    
    
    163
    
    
    
    (5
    )
    
    
    2,466
    
    
    
    4.9
    %Redeemable preferred
stock
    
    
    15
    
    
    
    1
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Short-term
    
    
    1,432
    
    
    
    
    
    
    
    
    
    
    
    1,432
    
    
    
    2.8
    %
    
    
    1,334
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    2.6
    %Total fixed maturities
    
    $
    50,944
    
    
    $
    1,426
    
    
    $
    (461
    )
    
    $
    51,909
    
    
    
    100.0
    %
    
    $
    49,615
    
    
    $
    1,694
    
    
    $
    (497
    )
    
    $
    50,812
    
    
    
    100.0
    %
  44




---



##### Table of Contents



CMBS
 Financial services
 ABS
     CAPITAL MARKETS RISK MANAGEMENT
  Market Risk
  45




---



##### Table of Contents



Derivative Instruments
  Interest Rate Risk
  Equity Risk
      46




---



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47




---



##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
  Liquidity Requirements
   48




---



##### Table of Contents



Debt
   Consumer Notes
   Sources of Capital
 Revolving Credit Facilities
  Ratings
   49




---



##### Table of Contents



Standard &A.M. Best
    
    Fitch
    
    Poors
    
    MoodysInsurance RatingsHartford Life Insurance Company
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life and Accident Insurance Company
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life Group Insurance Company
    
    
    A+
    
    
    AA
    
    
    
    
    
    
    Hartford Life and Annuity Insurance Company
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life Insurance KK (Japan)
    
    
    
    
    
    
    
    
    
    AA-
    
    
    Hartford Life Limited (Ireland)
    
    
    
    
    
    
    
    
    
    AA-
    
    
    Other RatingsHartford Life, Inc.Senior debt
    
    
    a-
    
    
    
    A
    
    
    
    A
    
    
    
    A2Commercial paper
    
    AMB-1
    
    
    F1
    
    
    
    A-1
    
    
    P
    -1Hartford Life Insurance Company:Short Term Rating
    
    
    
    
    
    
    
    
    
    
    A-1+
    
    
    P
    -1
   Contingencies
 Legal Proceedings
 Dependence on Certain Third Party Relationships 
  Regulatory Developments
  Legislative
Initiatives
    ACCOUNTING STANDARDS
  50




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##### Table of Contents



Item 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
  Changes in internal control over financial reporting
  
 Part II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
   Broker Compensation Litigation
    51




---



##### Table of Contents



Item 1A. RISK FACTORS
  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, consolidated operating
results, financial condition or liquidity.
  We may incur losses due to our reinsurers being unwilling or unable to meet their obligations under
reinsurance contracts and the availability, pricing and adequacy of reinsurance may not be
sufficient to protect us against losses.
  52




---



##### Table of Contents



We are exposed to significant capital markets risk related to changes in interest rates, equity
prices and foreign exchange rates which may adversely affect our results of operations, financial
condition or cash flows.
  We may be unable to effectively mitigate the impact of equity market volatility on our financial
position and results of operations arising from obligations under annuity product guarantees, which
may affect our consolidated results of operations, financial condition or cash flows.
  Regulatory proceedings or private claims relating to incentive compensation or payments made to
brokers or other producers, alleged anti-competitive conduct and other sales practices could have a
material adverse effect on us.
   53




---



##### Table of Contents



Regulatory and market-driven changes may affect our practices relating to the payment of incentive
compensation to brokers and other producers, including changes that have been announced and those
which may occur in the future, and could have a material adverse effect on us in the future.
  Competitive activity may adversely affect our market share and profitability, which could have an
adverse effect on our business, results of operations or financial condition.
  We may experience unfavorable judicial or legislative developments that would adversely affect our
business, results of operations, financial condition or liquidity.
  Potential changes in domestic and foreign regulation may increase our business costs and required
capital levels, which could adversely affect our business, consolidated operating results,
financial condition or liquidity.
   54




---



##### Table of Contents




    
    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;
    
    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;
    
    restricting the payment of dividends and other transactions between affiliates; and
    
    regulating the types, amounts and valuation of investments.
  Our business, results of operations and financial condition may be adversely affected by general
domestic and international economic and business conditions that are less favorable than
anticipated.
  We may experience difficulty in marketing and distributing products through our current and future
distribution channels.
  55




---



##### Table of Contents



We may experience a downgrade in our financial strength or credit ratings which may make our
products less attractive, increase our cost of capital, and inhibit our ability to refinance our
debt, which would have an adverse effect on our business, consolidated operating results, financial
condition and liquidity.
  Limits on the ability of our insurance subsidiaries to pay dividends to us may adversely affect our
liquidity.
  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 other unanticipated events, our ability to conduct business
may be compromised, which may have a material adverse effect on our business, consolidated results
of operations, financial condition or cash flows.
  We are particularly vulnerable to losses from the incidence and severity of catastrophes, both
natural and man-made, the occurrence of which may have a material adverse effect on our financial
condition, consolidated results of operations or cash flows in a particular quarterly or annual
period.
  56




---



##### Table of Contents



Potential changes in Federal or State tax laws could adversely affect our business, consolidated
operating results or financial condition.
   
 Item 6. EXHIBITS
  57




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##### Table of Contents



SIGNATURE
  HARTFORD LIFE, INC./s/ Ernest M. McNeill Jr.Ernest M. McNeill Jr.Senior Vice President and
Chief Accounting Officer
  58




---



##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
 
 EXHIBITS INDEX
 Exhibit #
 10.01
    
    First Amendment, dated September 7, 2006, among the Company, Hartford Life, Inc., the lenders named therein,
 and BANK OF AMERICA, N.A., as administrative agent for the lenders, to the Five-Year Competitive Advance and Revolving
 Credit Facility Agreement dated as of September 7, 2005, among the Company, Hartford Life, Inc. and a syndicate of financial
 institutions, including Bank of America, N.A., as administrative
agent, JPMorgan Chase Bank, N.A. and Citibank, N.A., as
 syndication agents, and Wachovia Bank, N.A., as Documentation Agent (incorporated herein by reference to Exhibit 10.08 of the
 Companys Current Report on
Form 8-K filed September 12, 2006).15.01
    
    Deloitte & Touche LLP Letter of Awareness31.01
    
    Certification of Thomas M. Marra pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.02
    
    Certification of Glenn D. Lammey pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.01
    
    Certification of Thomas M. Marra pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.02
    
    Certification of Glenn D. Lammey pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 59