##### 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 June 30, 2005
 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 þ




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INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Report of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Statements of Income  Three and Six Months Ended June 30, 2005 and 2004
    
    
    4Condensed Consolidated Balance Sheets  June 30, 2005 and December 31, 2004
    
    
    5Condensed Consolidated Statements of Changes in Stockholders Equity  Six Months Ended June 30, 2005 and 2004
    
    
    6Condensed Consolidated Statements of Cash Flows  Six Months Ended June 30, 2005 and 2004
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    40Item 6. Exhibits
    
    
    41Signature
    
    
    42Exhibits Index
    
    
    43EX-15.01: 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 Income
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,(In millions)
    
    2005
    
    2004
    
    2005
    
    2004(Unaudited)
    
    (Unaudited)RevenuesFee income
    
    $
    960
    
    
    $
    838
    
    
    $
    1,910
    
    
    $
    1,663Earned premiums
    
    
    1,047
    
    
    
    970
    
    
    
    2,046
    
    
    
    1,965Net investment income
    
    
    1,036
    
    
    
    810
    
    
    
    1,986
    
    
    
    1,972Net realized capital gains (losses)
    
    
    (16
    )
    
    
    26
    
    
    
    65
    
    
    
    102Total revenues
    
    
    3,027
    
    
    
    2,644
    
    
    
    6,007
    
    
    
    5,702Benefits, claims and expensesBenefits, claims and claim adjustment expenses
    
    
    1,756
    
    
    
    1,531
    
    
    
    3,495
    
    
    
    3,408Insurance expenses and other
    
    
    636
    
    
    
    506
    
    
    
    1,195
    
    
    
    1,020Amortization of deferred policy acquisition costs and present value of future
profits
    
    
    268
    
    
    
    233
    
    
    
    548
    
    
    
    466Dividends to policyholders
    
    
    3
    
    
    
    8
    
    
    
    21
    
    
    
    21Interest expense
    
    
    20
    
    
    
    22
    
    
    
    40
    
    
    
    57Total benefits, claims and expenses
    
    
    2,683
    
    
    
    2,300
    
    
    
    5,299
    
    
    
    4,972Income before income tax expense
and cumulative effect of
accounting change
    
    
    344
    
    
    
    344
    
    
    
    708
    
    
    
    730Income tax expense
    
    
    81
    
    
    
    89
    
    
    
    167
    
    
    
    194Income before cumulative effect of accounting change
    
    
    263
    
    
    
    255
    
    
    
    541
    
    
    
    536Cumulative effect of accounting change, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )Net income
    
    $
    263
    
    
    $
    255
    
    
    $
    541
    
    
    $
    513
 See Notes to Condensed Consolidated Financial Statements.
 4




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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 June 30,
    
    December 31,2005
    
    2004(In millions, except for share data)
    
    (Unaudited)AssetsInvestmentsFixed maturities, available-for-sale, at fair value (amortized cost of $49,239 and $47,962)
    
    $
    51,723
    
    
    $
    50,531Equity securities, available-for-sale, at fair value (cost of $772 and $506)
    
    
    793
    
    
    
    525Equity securities, held for trading, at fair value (cost of $16,466 and $12,514)
    
    
    17,955
    
    
    
    13,634Policy loans, at outstanding balance
    
    
    2,140
    
    
    
    2,662Other investments
    
    
    1,775
    
    
    
    1,364Total investments
    
    
    74,386
    
    
    
    68,716Cash
    
    
    771
    
    
    
    933Premiums receivable and agents balances
    
    
    418
    

    
    
    391Reinsurance recoverables
    
    
    752
    
    
    
    993Deferred policy acquisition costs and present value of future profits
    
    
    7,842
    
    
    
    7,437Deferred income taxes
    
    
    (979
    )
    
    
    (747
    )Goodwill
    
    
    796
    
    
    
    796Other assets
    
    
    1,944
    
    
    
    1,911Separate account assets
    
    
    142,774
    
    
    
    140,023Total assets
    
    $
    228,704
    
    
    $
    220,453LiabilitiesReserve for future policy benefits
    
    $
    12,467
    
    
    $
    12,250Other policyholder funds
    
    
    57,481
    
    
    
    52,833Long-term debt
    
    
    1,050
    
    
    
    1,050Other liabilities
    
    
    5,343
    
    
    
    5,125Separate account liabilities
    
    
    142,774
    
    
    
    140,023Total liabilities
    
    
    219,115
    
    
    
    211,281Commitments and Contingent Liabilities, Note 6
    
    
    
    
    
    
    Stockholders EquityCommon Stock  1,000 shares authorized, issued and outstanding;
par value $0.01
    
    
    
    
    
    
    Capital surplus
    
    
    3,094
    
    
    
    3,094Accumulated other comprehensive incomeNet unrealized capital gains on securities, net of tax
    
    
    1,295
    
    
    
    1,178Foreign currency
translation adjustments
    
    
    (23
    )
    
    
    16Total accumulated other comprehensive income
    
    
    1,272
    
    
    
    1,194Retained earnings
    
    
    5,223
    
    
    
    4,884Total stockholders equity
    
    
    9,589
    
    
    
    9,172Total liabilities and stockholders equity
    
    $
    228,704
    
    
    $
    220,453
 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
 Six Months Ended June 30, 2005
 Accumulated Other Comprehensive IncomeNet GainNet Unrealized
    
    (Loss) onCapital
    
    Cash Flow
    
    ForeignGains on
    
    Hedging
    
    Currency
    
    
    
    
    
    TotalCommon
    
    Capital
    
    Securities, Net
    
    Instruments,
    
    Translation
    
    Retained
    
    Stockholders(In millions) (Unaudited)
    
    Stock
    
    Surplus
    
    of Tax
    
    Net of Tax
    
    Adjustments
    
    Earnings
    
    EquityBalance, December 31, 2004
    
    $
    
    
    
    $
    3,094
    
    
    $
    1,348
    
    
    $
    (170
    )
    
    $
    16
    
    
    $
    4,884
    
    
    $
    9,172Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    541
    
    
    
    541Other comprehensive income, net of tax (1)Net change in unrealized capital losses
on securities (3)
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )Net gain on cash flow hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    154Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    619Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (202
    )
    
    
    (202
    )Balance, June 30, 2005
    
    $
    
    
    
    $
    3,094
    
    
    $
    1,311
    
    
    $
    (16
    )
    
    $
    (23
    )
    
    $
    5,223
    
    
    $
    9,589
 Six Months Ended June 30, 2004
 Accumulated Other Comprehensive IncomeNet GainNet Unrealized
    
    (Loss) onCapital
    
    Cash Flow
    
    ForeignGains on
    
    Hedging
    
    Currency
    
    
    
    
    
    TotalCommon
    
    Capital
    
    Securities, Net
    
    Instruments,
    
    Translation
    
    Retained
    
    Stockholders(In millions) (Unaudited)
    
    Stock
    
    Surplus
    
    of Tax
    
    Net of Tax
    
    Adjustments
    
    Earnings
    
    EquityBalance, December 31, 2003
    
    $
    
    
    
    $
    2,489
    
    
    $
    928
    
    
    $
    (25
    )
    
    $
    (43
    )
    
    $
    3,710
    
    
    $
    7,059Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    513
    
    
    
    513Other comprehensive income, net of tax (1)Cumulative effect of accounting change (2)
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Net change in unrealized capital (losses)
on securities (3)
    
    
    
    
    
    
    
    
    
    
    (575
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (575
    )Net loss on cash flow hedging instruments
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    
    
    
    
    (53
    )Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (337
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    (98
    )Capital contributions from parent
    
    
    
    
    
    
    605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    605Balance, June 30, 2004
    
    $
    
    
    
    $
    3,094
    
    
    $
    645
    
    
    $
    (78
    )
    
    $
    (44
    )
    
    $
    4,125
    
    
    $
    7,742
 (1)
    
    Net change in unrealized capital losses on securities is reflected net of tax benefit of
$(20) and $(310) for the six months ended June 30, 2005 and 2004, respectively. Net gain
(loss) on cash flow hedging instruments is net of tax provision (benefit) of $83 and $(29)
for the six months ended June 30, 2005 and 2004, respectively. There is no tax effect on
cumulative translation adjustments.(2)
    
    Represents the impact of the adoption of SOP 03-1. SOP 03-1 was effective for financial
statements for fiscal years beginning after December 15, 2003.(3)
    
    There were reclassification adjustments for after-tax gains realized in net income of $32
and $44 for the six months ended June 30, 2005 and 2004, respectively.
 See Notes to Condensed Consolidated Financial Statements.
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HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 Six Months EndedJune 30,(In millions) (Unaudited)
    
    2005
    
    2004Operating ActivitiesNet income
    
    $
    541
    
    
    $
    513Adjustments to reconcile net income to net cash provided by operating activitiesNet realized capital (gains)
    
    
    (65
    )
    
    
    (102
    )Cumulative
effect of adoption of SOP 0 3-1
    
    
    
    
    
    
    23Amortization of deferred policy acquisition costs and present value of future profits
    
    
    548
    
    
    
    466Additions to deferred policy acquisition costs and present value of future profits
    
    
    (1,050
    )
    
    
    (971
    )Amortization of sales inducements
    
    
    19
    
    
    
    12Additions to deferred sales inducements
    
    
    (47
    )
    
    
    (63
    )Depreciation and amortization
    
    
    80
    
    
    
    61Increase in premiums receivable and agents balances
    
    
    (27
    )
    
    
    (44
    )Decrease (increase) in receivables
    
    
    85
    
    
    
    (209
    )Decrease in accrued liabilities and payables
    
    
    (41
    )
    
    
    (136
    )Decrease in other liabilities
    
    
    (81
    )
    
    
    (130
    )Decrease in accrued taxes
    
    
    (107
    )
    
    
    (2
    )Change in deferred income taxes
    
    
    177
    
    
    
    560Increase in liabilities for future policy benefits
    
    
    220
    
    
    
    342Net increase in equity securities, held for trading
    
    
    (5,527
    )
    
    
    (2,759
    )Net receipts from investment contracts credited to policyholder accounts associated with equity securities, held for
trading
    
    
    5,568
    
    
    
    3,072Decrease in reinsurance recoverables
    
    
    24
    
    
    
    61Other, net
    
    
    63
    
    
    
    283Net cash provided by operating activities
    
    
    380
    
    
    
    977Investing ActivitiesPurchases of fixed maturity and equity security investments, available-for-sale
    
    
    (14,248
    )
    
    
    (7,909
    )Sales of fixed maturity and equity security investments, available-for-sale
    
    
    12,100
    
    
    
    5,585Maturity of fixed maturity and equity security investments, available-for-sale
    
    
    1,232
    
    
    
    2,131Purchase price adjustment of Business/Affiliate
    
    
    
    
    
    
    (58
    )Decrease (increase) in other assets
    
    
    12
    
    
    
    (13
    )Net cash used for investing activities
    
    
    (904
    )
    
    
    (264
    )Financing ActivitiesCapital contributions
    
    
    
    
    
    
    605Repayment of short-term debt
    
    
    
    
    
    
    (505
    )Repayment of company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely parent
junior subordinated debentures
    
    
    
    
    
    
    (250
    )Dividends paid
    
    
    (170
    )
    
    
    (91
    )Net receipts (disbursements) from investment and universal life-type contracts credited to policyholder accounts
    
    
    584
    
    
    
    (227
    )Net cash provided by (used for) financing activities
    
    
    414
    
    
    
    (468
    )Net (decrease) increase in cash
    
    
    (110
    )
    
    
    245Impact of foreign exchange
    
    
    (52
    )
    
    
    (1
    )Cash - beginning of period
    
    
    933
    
    
    
    265Cash - end of period
    
    $
    771
    
    
    $
    509Supplemental Disclosure of Cash Flow InformationNet cash paid during the period forIncome taxes
    
    $
    125
    
    
    $
    21Interest
    
    $
    40
    
    
    $
    55
 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
    Reclassifications
  Use of Estimates
   Significant Accounting Policies
  Income Taxes
   8




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Future Adoption of Accounting Standards
  2. Segment Information
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Retail Products GroupRealized gains (losses)
    
    $
    9
    
    
    $
    3
    
    
    $
    19
    
    
    $
    9Credit risk fees
    
    
    (7
    )
    
    
    (6
    )
    
    
    (14
    )
    
    
    (12
    )Institutional Solutions GroupRealized gains (losses)
    
    
    5
    
    
    
    3
    
    
    
    10
    
    
    
    6Credit risk fees
    
    
    (6
    )
    
    
    (6
    )
    
    
    (13
    )
    
    
    (12
    )Individual LifeRealized gains (losses)
    
    
    3
    
    
    
    1
    
    
    
    6
    
    
    
    2Credit risk fees
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (3
    )Group BenefitsRealized gains (losses)
    
    
    4
    
    
    
    3
    
    
    
    5
    
    
    
    5Credit risk fees
    
    
    (4
    )
    
    
    (2
    )
    
    
    (5
    )
    
    
    (4
    )OtherRealized gains (losses)
    
    
    (21
    )
    
    
    (10
    )
    
    
    (40
    )
    
    
    (22
    )Credit risk fees
    
    
    18
    
    
    
    16
    
    
    
    35
    
    
    
    31Total
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 9




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Retail
    
    InstitutionalProducts
    
    Solutions
    
    Individual
    
    GroupJune 30, 2005
    
    Group
    
    Group
    
    Life
    
    Benefits
    
    Other [1]
    
    TotalThree Months EndedTotal revenues
    
    $
    848
    
    
    $
    465
    
    
    $
    260
    
    
    $
    1,048
    
    
    $
    406
    
    
    $
    3,027Net income
    
    
    136
    
    
    
    32
    
    
    
    39
    
    
    
    64
    
    
    
    (8
    )
    
    
    263June 30, 2004Three Months EndedTotal revenues
    
    $
    764
    
    
    $
    434
    
    
    $
    252
    
    
    $
    1,000
    
    
    $
    194
    
    
    $
    2,644Net income
    
    
    128
    
    
    
    28
    
    
    
    37
    
    
    
    48
    
    
    
    14
    
    
    
    255June 30, 2005Six Months EndedTotal revenues
    
    $
    1,685
    
    
    $
    889
    
    
    $
    522
    
    
    $
    2,094
    
    
    $
    817
    
    
    $
    6,007Net income
    
    
    292
    
    
    
    72
    
    
    
    78
    
    
    
    123
    
    
    
    (24
    )
    
    
    541June 30, 2004Six Months EndedTotal revenues
    
    $
    1,527
    
    
    $
    876
    
    
    $
    506
    
    
    $
    2,004
    
    
    $
    789
    
    
    $
    5,702Net income
    
    
    235
    
    
    
    56
    
    
    
    70
    
    
    
    95
    
    
    
    57
    
    
    
    513
 [1]
    
    The six months ended June 30, 2005 reflects a charge of $66to reserve
for investigations related to market timing by the SEC and New York Attorney Generals Office
and directed brokerage by the SEC as discussed in Note 7.
 3. Investments and Derivative Instruments
 June 30, 2005
    
    December 31, 2004Gross
    
    Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    ValueBonds and NotesAsset-backed securities (ABS)
    
    $
    6,779
    
    
    $
    62
    
    
    $
    (69
    )
    
    $
    6,772
    
    
    $
    6,346
    
    
    $
    76
    
    
    $
    (64
    )
    
    $
    6,358Commercial mortgage-backed
securities (CMBS)Agency backed
    
    
    72
    
    
    
    2
    
    
    
    (1
    )
    
    
    73
    
    
    
    72
    
    
    
    2
    
    
    
    (1
    )
    
    
    73Non-agency backed
    
    
    8,560
    
    
    
    319
    
    
    
    (22
    )
    
    
    8,857
    
    
    
    8,384
    
    
    
    368
    
    
    
    (19
    )
    
    
    8,733Collateralized mortgage
obligations (CMOs)Agency backed
    
    
    917
    
    
    
    9
    
    
    
    (3
    )
    
    
    923
    
    
    
    1,036
    
    
    
    11
    
    
    
    (3
    )
    
    
    1,044Non-agency backed
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48Corporate
    
    
    24,259
    
    
    
    1,859
    
    
    
    (80
    )
    
    
    26,038
    
    
    
    23,645
    
    
    
    1,957
    
    
    
    (70
    )
    
    
    25,532Government/Government agenciesForeign
    
    
    668
    
    
    
    62
    
    
    
    (1
    )
    
    
    729
    
    
    
    723
    
    
    
    67
    
    
    
    (2
    )
    
    
    788United States
    
    
    667
    
    
    
    39
    
    
    
    (6
    )
    
    
    700
    
    
    
    884
    
    
    
    19
    
    
    
    (5
    )
    
    
    898Mortgage-backed securities (MBS)Agency backed
    
    
    2,468
    
    
    
    21
    
    
    
    (8
    )
    
    
    2,481
    
    
    
    1,771
    
    
    
    20
    
    
    
    (3
    )
    
    
    1,788States, municipalities and
political subdivisions
    
    
    3,142
    
    
    
    302
    
    
    
    (1
    )
    
    
    3,443
    
    
    
    2,780
    
    
    
    221
    
    
    
    (6
    )
    
    
    2,995Redeemable preferred stock
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    13Short-term investments
    
    
    1,620
    
    
    
    
    
    
    
    
    
    
    
    1,620
    
    
    
    2,261
    
    
    
    
    
    
    
    
    
    
    
    2,261Total fixed maturities
    
    $
    49,239
    
    
    $
    2,675
    
    
    $
    (191
    )
    
    $
    51,723
    
    
    $
    47,962
    
    
    $
    2,742
    
    
    $
    (173
    )
    
    $
    50,531
 10




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##### Table of Contents



Derivative Instruments
      June 30, 2005
    
    December 31, 2004Liability
    
    
    
    
    
    LiabilityAsset Values
    
    Values
    
    Asset Values
    
    ValuesOther investments
    
    $
    317
    
    
    $
    
    
    
    $
    185
    
    
    $
    Reinsurance recoverables
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    67Other policyholder funds and benefits payable
    
    
    59
    
    
    
    
    
    
    
    129
    
    
    
    Fixed maturities
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Other liabilities
    
    
    
    
    
    
    320
    
    
    
    
    
    
    
    518Total
    
    $
    376
    
    
    $
    366
    
    
    $
    318
    
    
    $
    585
  June 30, 2005
    
    December 31, 2004Notional
    
    
    
    
    
    NotionalAmount
    
    Fair Value
    
    Amount
    
    Fair ValueCash flow hedge
    
    $
    7,407
    
    
    $
    (135
    )
    
    $
    7,168
    
    
    $
    (374
    )Fair value hedge
    
    
    1,014
    
    
    
    (3
    )
    
    
    363
    
    
    
    (4
    )Net investment hedge
    
    
    408
    
    
    
    14
    
    
    
    401
    
    
    
    (23
    )Other investment and risk management activities
    
    
    51,162
    
    
    
    134
    
    
    
    45,931
    
    
    
    134Total
    
    $
    59,991
    
    
    $
    10
    
    
    $
    53,863
    
    
    $
    (267
    )
     11




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##### Table of Contents



4. Deferred Policy Acquisition Costs and Present Value of Future Profits
  2005
    
    2004Balance, January 1
    
    $
    7,437
    
    
    $
    6,623Capitalization
    
    
    1,053
    
    
    
    971Amortization  Deferred Policy Acquisitions costs
    
    
    (528
    )
    
    
    (446
    )Amortization  Present Value of Future Profits
    
    
    (20
    )
    
    
    (20
    )Amortization  Realized Capital (Gains)/Losses
    
    
    (18
    )
    
    
    (12
    )Adjustments to unrealized gains and losses on
securities available-for-sale and other
    
    
    (82
    )
    
    
    (43
    )Balance, June 30
    
    $
    7,842
    
    
    $
    7,073
 12




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##### Table of Contents



5. Separate Accounts, Death Benefits and Other Insurance Benefit Features
   U.S. GMDB [1]
    
    Japan GMDB/GMIBLiability balance as of January 1, 2005
    
    $
    174
    
    
    $
    28Incurred
    
    
    67
    
    
    
    14Paid
    
    
    (78
    )
    
    
    Currency translation adjustment
    
    
    
    
    
    
    (3
    )Liability balance as of June 30, 2005
    
    $
    163
    
    
    $
    39
 [1]
    
    The reinsurance recoverable asset, related to the U.S.
GMDB was $64 as of January 1, 2005 and $48 as of June 30, 2005.
 U.S. GMDB [1]
    
    Japan GMDB/GMIBLiability balance upon adoption  as
of January 1, 2004
    
    $
    217
    
    
    $
    8Incurred
    
    
    64
    
    
    
    9Paid
    
    
    (85
    )
    
    
    (1
    )Liability balance as of June 30, 2004
    
    $
    196
    
    
    $
    16
 [1]
    
    The reinsurance recoverable asset, related to the U.S. GMDB was $108 upon adoption of SOP 03-1 and $92 as of June 30, 2004.
  13




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##### Table of Contents



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
    
    $
    57,915
    
    
    $
    6,388
    
    
    $
    690
    
    
    
    64With 5% rollup [2]
    
    
    3,997
    
    
    
    603
    
    
    
    112
    
    
    
    62With Earnings Protection Benefit Rider (EPB) [3]
    
    
    5,143
    
    
    
    214
    
    
    
    45
    
    
    
    60With 5% rollup & EPB
    
    
    1,431
    
    
    
    123
    
    
    
    21
    
    
    
    61Total MAV
    
    
    68,486
    
    
    
    7,328
    
    
    
    868
    
    
    
    62Asset Protection Benefit (APB) [4]
    
    
    21,396
    
    
    
    28
    
    
    
    16
    
    
    
    61Ratchet [5] (5 years)
    
    
    34
    
    
    
    2
    
    
    
    
    
    
    
    66Reset [6] (5-7 years)
    
    
    7,569
    
    
    
    606
    
    
    
    606
    
    
    
    64Return of Premium [7]/Other
    
    
    8,530
    
    
    
    71
    
    
    
    71
    
    
    
    49Subtotal U.S. Guaranteed Minimum Death Benefits
    
    
    106,015
    
    
    
    8,035
    
    
    
    1,561
    
    
    
    62Japan Guaranteed Minimum Death and Income Benefit [8]
    
    
    18,440
    
    
    
    63
    
    
    
    63
    
    
    
    67Total at June 30, 2005
    
    $
    124,455
    
    
    $
    8,098
    
    
    $
    1,624Total at December 31, 2004
    
    $
    120,379
    
    
    $
    8,259
    
    
    $
    1,636
 [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]
    
    Ratchet: the death benefit is the greatest of current account value, net premiums
paid and the highest account value on any specified anniversary before age 85 (adjusted for
withdrawals).[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) as described above
and income benefits include a guarantee to return initial investment, adjusted for
earnings liquidity, 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 $11.4 billion and
$7.3 billion as of June 30, 2005 and December 31, 2004, respectively.
    14




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##### Table of Contents



6. Commitments and Contingencies
 Litigation
  Broker Compensation Litigation
     15




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##### Table of Contents



Regulatory Developments
      16




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##### Table of Contents



Other
  7. Transactions with Affiliates
  17




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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
    
    
    19Critical Accounting Estimates
    
    
    22Consolidated Results of Operations  Operating Summary
    
    
    25Retail Products Group
    
    
    27Institutional Solutions Group
    
    
    29Individual Life
    
    
    31Group Benefits
    
    
    32Investments
    
    
    33Investment Credit Risk
    
    
    35Capital Markets Risk Management
    
    
    37Capital Resources and Liquidity
    
    
    37Accounting Standards
    
    
    39
 18




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##### Table of Contents



OVERVIEW
   Performance Measures
 Fee Income
  As of and For the
    
    As of and For theThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Product/Key Indicator Information
    
    2005
    
    2004
    
    2005
    
    2004United States Variable AnnuitiesAccount value, beginning of period
    
    $
    98,071
    
    
    $
    90,386
    
    
    $
    99,617
    
    
    $
    86,501Net flows
    
    
    (59
    )
    
    
    1,668
    
    
    
    347
    
    
    
    3,853Change in market value and other
    
    
    1,735
    
    
    
    450
    
    
    
    (217
    )
    
    
    2,150Account value, end of period
    
    $
    99,747
    
    
    $
    92,504
    
    
    $
    99,747
    
    
    $
    92,504Retail Mutual FundsAssets under management, beginning of period
    
    $
    24,949
    
    
    $
    21,888
    
    
    $
    25,240
    
    
    $
    20,301Net sales
    
    
    322
    
    
    
    624
    
    
    
    703
    
    
    
    1,679Change in market value and other
    
    
    687
    
    
    
    222
    
    
    
    15
    
    
    
    754Assets under management, end of period
    
    $
    25,958
    
    
    $
    22,734
    
    
    $
    25,958
    
    
    $
    22,734Individual Life InsuranceVariable universal life account value, end of period
    
    $
    5,433
    
    
    $
    4,934
    
    
    $
    5,433
    
    
    $
    4,934Total life insurance inforce, end of period
    
    
    144,151
    
    
    
    134,420
    
    
    
    144,151
    
    
    
    134,420S&P 500 IndexPeriod end closing value
    
    
    1,191
    
    
    
    1,141
    
    
    
    1,191
    
    
    
    1,141Daily average value
    
    
    1,182
    
    
    
    1,123
    
    
    
    1,187
    
    
    
    1,128Japan AnnuitiesAccount value, end of period
    
    $
    19,726
    
    
    $
    9,277
    
    
    $
    19,726
    
    
    $
    9,277
 
    
    The increase in U.S. variable annuity assets under management and account values
can be attributed to market growth and net flows over the past four quarters, with most of
the market growth occurring in the fourth quarter of 2004.
    
    Net flows and net sales for the U.S. variable annuity and retail mutual fund businesses,
respectively, have slowed. In particular, variable annuity net flows were impacted due to
lower sales levels and higher surrenders due to increased competition.
    
    The change in the market value will be based on market conditions.
    
    Japan annuity account values continue to grow as a result of strong sales.
 Net Investment Income and Interest Credited
  19




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##### Table of Contents




    
    Net investment income and interest credited on general account assets in Other increased
for the three months ended June 30, 2005 and decreased for the six months ended June 30,
2005 due to 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 the Retail
Products Group declined for the three and six months ended June 30, 2005 due to lower
assets under management from surrenders on market value adjusted (MVA) fixed annuity
products at the end of their guarantee period.
    
    Net investment income and interest credited on general account assets in Institutional
increased as a result of the Investor Notes program and was partially offset by surrenders
in the private placement life insurance (PPLI) business.
 Premiums
  For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,Group Benefits
    
    2005
    
    2004
    
    2005
    
    2004Earned premiums and other considerations
    
    $
    948
    
    
    $
    906
    
    
    $
    1,896
    
    
    $
    1,821Fully insured ongoing sales (excluding
buyouts)
    
    
    110
    
    
    
    104
    
    
    
    486
    
    
    
    445
 
    
    Earned premiums for the six months ended June 30, 2005 included $25 in buyout premiums
compared to $0 in the prior year comparable period
 Expenses
  For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,Retail Products Group
    
    2005
    
    2004
    
    2005
    
    2004Expense ratio, annualized (individual annuity)
    
    
    19.3
    bps
    
    
    18.3
    bps
    
    
    18.4
    bps
    
    
    18.5
    bpsDAC amortization ratio (individual annuity)
    
    
    48.4
    %
    
    
    49.8
    %
    
    
    49.2
    %
    
    
    50.6
    %Individual LifeDeath benefits
    
    $
    63
    
    
    $
    61
    
    
    $
    129
    
    
    $
    128Group BenefitsLoss ratio (excluding buyout premiums)
    
    
    73.4
    %
    
    
    76.2
    %
    
    
    74.5
    %
    
    
    75.5
    %Expense ratio (excluding buyout premiums)
    
    
    27.8
    %
    
    
    27.2
    %
    
    
    27.2
    %
    
    
    27.6
    %
 
    
    Individual annuitys expense ratio for the six months ended June 30, 2005 continued
to benefit from the Companys economies of scale in the variable annuity business.
Additionally, individual annuitys expense ratio continues to be among one of the lowest
ratios of general insurance expenses as a percent of assets under management in the
industry, holding steady at 18-20 bps of average account value. The increases for the
three months ended June 30, 2005 are primarily non-recurring costs related to
organizational changes.
    
    The ratio of Individual Annuity DAC amortization over income before taxes and DAC
improved for both the three and six months ended June 30, 2005 as a result of a lower
amount of additional deposits received on existing business.
    
    The Group Benefits loss ratio, excluding buyouts, decreased due to favorable life
mortality experience and improved disability experience.
 Profitability
  20




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##### Table of Contents



For the Three Months Ended
    
    For the Six Months EndedJune 30,
    
    June 30,Ratios
    
    2005
    
    2004
    
    2005
    
    2004Retail Products GroupIndividual
annuity return on
assets (ROA)
excluding
cumulative effect
of accounting
change
    
    
    51.8
    bps
    
    
    44.4
    bps
    
    
    50.6
    bps
    
    
    44.6
    bpsGroup BenefitsAfter-tax margin
    
    
    6.8
    %
    
    
    5.3
    %
    
    
    6.6
    %
    
    
    5.2
    %
 
    
    Individual Annuitys ROA increased for the three and six months ended June 30, 2005,
compared to the respective prior year periods. In particular, variable annuity fees and
fixed annuity general account spreads each increased for the three and six months ended
June 30, 2005 compared to the prior year period. The increase in the ROA can be attributed
to the increase in account values and resulting increased fees, while the increase in MVA
ROA resulted from increased spread as fixed annuity contracts were repriced upon maturity.
Also contributing to both periods results was a lower effective tax rate due to increased
tax benefits related to the Companys separate account business.
    
    The improvement in the Group Benefits after-tax margin was primarily due to higher net
investment income and favorable loss ratios compared to 2004.
 Regulatory Developments
      21




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##### Table of Contents



Broker Compensation
   CRITICAL ACOUNTING ESTIMATES
   22




---



##### Table of Contents



Deferred Policy Acquisition Costs and Present Value of Future Profits
       23




---



##### Table of Contents



Income Taxes
   Other Critical Accounting Estimates
  24




---



##### Table of Contents



CONSOLIDATED RESULTS OF OPERATIONS
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Operating Summary
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeFee income
    
    $
    960
    
    
    $
    838
    
    
    
    15
    %
    
    $
    1,910
    
    
    $
    1,663
    
    
    
    15
    %Earned premiums
    
    
    1,047
    
    
    
    970
    
    
    
    8
    %
    
    
    2,046
    
    
    
    1,965
    
    
    
    4
    %Net investment income [1]
    
    
    1,036
    
    
    
    810
    
    
    
    28
    %
    
    
    1,986
    
    
    
    1,972
    
    
    
    1
    %Net realized capital gains (losses)
    
    
    (16
    )
    
    
    26
    
    
    NM
    
    
    65
    
    
    
    102
    
    
    
    (36
    %)Total revenues
    
    
    3,027
    
    
    
    2,644
    
    
    
    14
    %
    
    
    6,007
    
    
    
    5,702
    
    
    
    5
    %Benefits, claims and claim adjustment expenses [1]
    
    
    1,756
    
    
    
    1,531
    
    
    
    15
    %
    
    
    3,495
    
    
    
    3,408
    
    
    
    3
    %Insurance operating costs and other expenses
    
    
    639
    
    
    
    514
    
    
    
    24
    %
    
    
    1,216
    
    
    
    1,041
    
    
    
    17
    %Amortization of deferred policy acquisition costs and
present value of future profits
    
    
    268
    
    
    
    233
    
    
    
    15
    %
    
    
    548
    
    
    
    466
    
    
    
    18
    %Interest expense
    
    
    20
    
    
    
    22
    
    
    
    (9
    %)
    
    
    40
    
    
    

    57
    
    
    
    (30
    %)Total benefits, claims and expenses
    
    
    2,683
    
    
    
    2,300
    
    
    
    17
    %
    
    
    5,299
    
    
    
    4,972
    
    
    
    7
    %Income before income taxes and cumulative effect
of accounting change
    
    
    344
    
    
    
    344
    
    
    
    
    
    
    
    708
    
    
    
    730
    
    
    
    (3
    %)Income tax expense
    
    
    81
    
    
    
    89
    
    
    
    (9
    %)
    
    
    167
    
    
    
    194
    
    
    
    (14
    %)Income before cumulative effect of accounting
change
    
    
    263
    
    
    
    255
    
    
    
    3
    %
    
    
    541
    
    
    
    536
    
    
    
    1
    %Cumulative effect of accounting change, net of tax [2]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    100
    %Net income
    
    $
    263
    
    
    $
    255
    
    
    
    3
    %
    
    $
    541
    
    
    $
    513
    
    
    
    5
    %
 [1]
    
    Included impact of mark to market effects of trading securities supporting the Japanese
variable annuity business, which are classified in net investment income and corresponding
amounts credited to policyholders within benefits, claims and claim adjustment expenses.[2]
    
    For the six months ended June 30, 2004, represents the cumulative impact of the Companys
adoption of SOP 03-1.
  2005 vs. 2004 Three and Six Month Comparison
  
    
    Net income in the Retail Products Group increased 6% and 24% for the three and six
months ended June 30, 2005, respectively, principally driven by higher fee income from
growth in the variable annuity and mutual fund businesses as a result of higher assets
under management compared to the prior year. Also contributing to both periods results
was a lower effective tax rate due to increased tax benefits related to the Companys
separate account business.
    
    The Institutional Solutions Group contributed higher earnings, increasing 14% and 29%
for the three and six months ended June 30, 2005, respectively, driven by higher assets
under management and recognition of a deferred gain that resulted from two leveraged COLI
surrenders in the first quarter of 2005.
    
    Individual Life earnings increased for both periods primarily driven by growth in
account values and life insurance inforce.
    
    Net income in Group Benefits increased 33% and 29% for the three and six months ended
June 30, 2005, respectively, primarily due to higher net investment income, and favorable
loss ratios for both periods as compared to the respective prior year periods.
Additionally, net income was higher due to a favorable expense ratio for the six months
ended June 30, 2005 as compared to the respective prior year period.
    
    Net income for the international operations, which is included in the Other category,
increased over the prior year primarily driven by the increase in assets under management
of the Japan annuity business. Japans assets under management have grown to $19.7 billion
at June 30, 2005 from $9.3 billion at June 30, 2004.
  
    
    The Company recorded a charge of $66 for the six months ended June 30, 2005, in the
Other category, to establish reserves for regulatory matters.
 25




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##### Table of Contents




    
    For the three months ended June 30, 2005, the Company experienced realized losses as
compared to realized gains for the three months ended June 30, 2004. For the six months
ended June 30, 2005, realized gains decreased by 36% as compared to the respective prior
year period. See the Investments section for further discussion of investment results and
related realized capital gains and losses.
    
    During the second quarter, the Company recorded an after-tax expense of $24, which is an
estimate of the termination value of a provision of an agreement with a distribution
partner of the Companys retail mutual funds. Management is currently in discussions with
the distributor concerning this matter. The ultimate cost of resolution may vary from
managements estimate.
 Outlook
  
    
    Due to gains in the equity markets and positive net flows, assets under management grew
13% resulting in increased fee income earned on those assets. The growth and
profitability of the Company in the future is dependent to a large degree on the
performance of the equity markets as well as its ability to attract new customers and
attract and retain assets under management.
    
    While variable annuity account values continue to grow within the individual annuity
business, U.S. sales have decreased during the first six months of 2005 compared to 2004
due to increased sales competition particularly related to guaranteed living benefits,
which is likely to continue in the future.
    
    Also, contributing to the Companys performance thus far in 2005 is increased earnings
in the international operations which are included in the Other category, which was
primarily the result of the growth in assets under management in the Companys
international operations. This growth was driven by record sales of $6.5 billion and
positive net flows in Japan for the first six months of 2005, which increased assets under
management to $19.7 billion at June 30, 2005 from $9.3 billion at June 30, 2004.
Although the Companys international operations experienced significant growth in the
first six months of 2005, the fiscal year end for the Japan business was March 31, 2005.
Due to the seasonality and the possibility of increased competition, sales for the second
half of the year may be lower than the first six months.
 26




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##### Table of Contents



Retail Products Group
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Operating Summary
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeFee income
    
    $
    592
    
    
    $
    513
    
    
    
    15
    %
    
    $
    1,172
    
    
    $
    1,019
    
    
    
    15
    %Earned premiums
    
    
    (2
    )
    
    
    (17
    )
    
    
    88
    %
    
    
    (16
    )
    
    
    (31
    )
    
    
    48
    %Net investment income
    
    
    256
    
    
    
    266
    
    
    
    (4
    %)
    
    
    521
    
    
    
    538
    
    
    
    (3
    %)Net realized capital gains
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    8
    
    
    
    1
    
    
    NMTotal revenues
    
    
    848
    
    
    
    764
    
    
    
    11
    %
    
    
    1,685
    
    
    
    1,527
    
    
    
    10
    %Benefits, claims and claim adjustment expenses
    
    
    250
    
    
    
    259
    
    
    
    (3
    %)
    
    
    497
    
    
    
    516
    
    
    
    (4
    %)Insurance operating costs and other expenses
    
    
    252
    
    
    
    180
    
    
    
    40
    %
    
    
    458
    
    
    
    355
    
    
    
    29
    %Amortization of deferred policy acquisition costs and
present value of future profits
    
    
    181
    
    
    
    160
    
    
    
    13
    %
    
    
    368
    
    
    
    327
    
    
    
    13
    %Total benefits, claims and expenses
    
    
    683
    
    
    
    599
    
    
    
    14
    %
    
    
    1,323
    
    
    
    1,198
    
    
    
    10
    %Income before income taxes and cumulative effect
of accounting change
    
    
    165
    
    
    
    165
    
    
    
    
    
    
    
    362
    
    
    
    329
    
    
    
    10
    %Income tax expense
    
    
    29
    
    
    
    37
    
    
    
    (22
    %)
    
    
    70
    
    
    
    75
    
    
    
    (7
    %)Income before cumulative effect of accounting
change
    
    
    136
    
    
    
    128
    
    
    
    6
    %
    
    
    292
    
    
    
    254
    
    
    
    15
    %Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    100
    %Net income
    
    $
    136
    
    
    $
    128
    
    
    
    6
    %
    
    $
    292
    
    
    $
    235
    
    
    
    24
    %Assets Under ManagementIndividual variable annuity account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    99,747
    
    
    $
    92,504
    
    
    
    8
    %Individual fixed annuity and other account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,553
    
    
    
    11,372
    
    
    
    (7
    %)Other retail products account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,781
    
    
    
    5,588
    
    
    
    39
    %Total account values [2]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,081
    
    
    
    109,464
    
    
    
    8
    %Retail mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,958
    
    
    
    22,734
    
    
    
    14
    %Other mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,579
    
    
    
    1,163
    
    
    
    36
    %Total mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,537
    
    
    
    23,897
    
    
    
    15
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    145,618
    
    
    $
    133,361
    
    
    
    9
    %
 [1]
    
    For the six months ended June 30, 2004, represents the cumulative impact of the Companys adoption of SOP 03-1.[2]
    
    Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
 2005 vs. 2004 Three and Six Month Comparison
  
    
    Fee income in the variable annuity business increased for the three and six months ended
June 30, 2005 primarily due to growth in average account values driven by improved equity
markets and positive net flows. The year-over-year increase in average account values of
8% can be attributed to market appreciation of $5.3 billion over the past four quarters,
with most of the growth occurring in the fourth quarter of 2004, and approximately $1.9
billion of net flows over the past four quarters. The amount of net flows has declined
significantly for the three and six months ended June 30, 2005 compared to the respective
prior year periods due to challenging market conditions and increased sales competition,
particularly as it relates to living benefits.
    
    Mutual fund fee income increased for the three and six months ended June 30, 2005
compared to the respective prior year periods due to increased assets under management
driven by net sales of $1.5 billion and market appreciation of $1.8 billion during the past
four quarters. Despite the increase in assets under management, the amount of net sales
has declined in the three and six months ended June 30, 2005 compared to the respective
prior year periods. This decrease is attributed to lower gross sales due to market
competition and slightly higher redemption amounts
related to higher assets under management.
    
    401(k) and other retail products fee income increased for the three and six months ended
June 30, 2005 compared to the respective prior year periods as a result of positive net
flows of $1.6 billion over the past four quarters driven by strong sales contributing to
the increase in assets under management of 36% to $8.3 billion. Total deposits and net
flows increased
 27




---



##### Table of Contents



substantially by 31% and 33%, respectively, over the prior year six month period primarily
due to the expansion of wholesaling capabilities and new product offerings. Net flows
continued to remain strong through the second quarter of 2005, considering the seasonality of
the 401(k) business, as the majority of takeover deposits are received in the first quarter
of each year.
    
    The fixed annuity business contributed higher net income, excluding the cumulative
effects of accounting change in 2004, due to improved investment spreads from the MVA
products.
    
    Also contributing to both periods results was a lower effective tax rate due to
increased tax benefits related to the Companys separate account business.
  
    
    Higher amortization of deferred acquisitions costs, which resulted from increased gross
profits due to the positive earnings drivers.
    
    During the second quarter, the Company recorded an after-tax expense of $24, which is an
estimate of the termination value of a provision of an agreement with a distribution
partner of the Companys retail mutual funds. Management is currently in discussions with
the distributor concerning this matter. The ultimate cost of resolution may vary from
managements estimate.
 28




---



##### Table of Contents



INSTITUTIONAL
SOLUTIONS GROUP
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Operating Summary
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeFee income and other
    
    $
    67
    
    
    $
    76
    
    
    
    (12
    %)
    
    $
    134
    
    
    $
    150
    
    
    
    (11
    %)Earned premiums
    
    
    116
    
    
    
    95
    
    
    
    22
    %
    
    
    200
    
    
    
    204
    
    
    
    (2
    %)Net investment income
    
    
    282
    
    
    
    262
    
    
    
    8
    %
    
    
    555
    
    
    
    519
    
    
    
    7
    %Net realized capital gains
    
    
    
    
    
    
    1
    
    
    
    (100
    %)
    
    
    
    
    
    
    3
    
    
    
    (100
    %)Total revenues
    
    
    465
    
    
    
    434
    
    
    
    7
    %
    
    
    889
    
    
    
    876
    
    
    
    1
    %Benefits, claims and claim adjustment expenses
    
    
    376
    
    
    
    357
    
    
    
    5
    %
    
    
    692
    
    
    
    712
    
    
    
    (3
    %)Insurance operating costs and other expenses
    
    
    31
    
    
    
    19
    
    
    
    63
    %
    
    
    57
    
    
    
    44
    
    
    
    30
    %Dividends to policyholders
    
    
    3
    
    
    
    8
    
    
    
    (63
    %)
    
    
    20
    
    
    
    20
    
    
    
    Amortization of deferred policy acquisition costs and
present value of future profits
    
    
    10
    
    
    
    10
    
    
    
    
    
    
    
    19
    
    
    
    19
    
    
    
    Total benefits, claims and expenses
    
    
    420
    
    
    
    394
    
    
    
    7
    %
    
    
    788
    
    
    
    795
    
    
    
    (1
    %)Income before income taxes and cumulative effect of
accounting change
    
    
    45
    
    
    
    40
    
    
    
    13
    %
    
    
    101
    
    
    
    81
    
    
    
    25
    %Income tax expense
    
    
    13
    
    
    
    12
    
    
    
    8
    %
    
    
    29
    
    
    
    24
    
    
    
    21
    %Income before cumulative effect of accounting change
    
    
    32
    
    
    
    28
    
    
    
    14
    %
    
    
    72
    
    
    
    57
    
    
    
    26
    %Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (100
    %)Net income
    
    $
    32
    
    
    $
    28
    
    
    
    14
    %
    
    $
    72
    
    
    $
    56
    
    
    
    29
    %Assets Under ManagementInstitutional account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    16,076
    
    
    $
    13,377
    
    
    
    20
    %Governmental account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,054
    
    
    
    9,445
    
    
    
    6
    %PPLI account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    %Variable products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,056
    
    
    
    21,592
    
    
    
    7
    %Leveraged COLI
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,953
    
    
    
    2,508
    
    
    
    (22
    %)Total account values [2]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,139
    
    
    
    46,922
    
    
    
    9
    %Mutual fund assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,874
    
    
    
    1,272
    
    
    
    47
    %Total assets under management
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    53,013
    
    
    $
    48,194
    
    
    
    10
    %
 [1]
    
    For the six months ended June 30, 2004, represents the cumulative impact of the Companys adoption of SOP 03-1.[2]
    
    Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Net Flows and Net Sales
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeInstitutional
    
    $
    270
    
    
    $
    323
    
    
    
    (16
    %)
    
    $
    1,062
    
    
    $
    368
    
    
    
    189
    %Governmental
    
    
    7
    
    
    
    106
    
    
    
    (93
    %)
    
    
    48
    
    
    
    210
    
    
    
    (77
    %)PPLI
    
    
    159
    
    
    
    95
    
    
    
    67
    %
    
    
    (374
    )
    
    
    183
    
    
    NMMutual Funds net sales
    
    
    252
    
    
    
    4
    
    
    NM
    
    
    384
    
    
    
    70
    
    
    NMTotal Net Flows and Net Sales
    
    $
    688
    
    
    $
    528
    
    
    
    30
    %
    
    $
    1,120
    
    
    $
    831
    
    
    
    35
    %
 2005 vs. 2004 Three and Six Month Comparison
  
    
    Earnings increased in the institutional business driven by positive net flows of $1.7
during the past four quarters, which resulted in higher assets under management. While the
net flows were down for the three months ended June 30, 2005 compared to the prior year
period, net flows for the six months ended June 30, 2005 increased $694 to $1.1 billion
compared to the prior year period primarily as a result of the Investor Notes program,
which was launched in the third quarter of 2004.
    
    Additionally, net income for the institutional business increased for the three and six
months ended June 30, 2005 due to favorable mortality experience on structured settlement
contracts.
 29




---



##### Table of Contents




    
    Net income for the PPLI business increased for the three and six months ended June 30,
2005 primarily due to favorable mortality experience on both the leveraged COLI and
variable products. In addition, net income for the six months ended June 30, 2005
increased compared to the respective prior year period due to the recognition of a $6
after-tax deferred gain that resulted from two leveraged COLI surrenders totaling $572 in
the first quarter of 2005.
  
    
    An increase in insurance operating costs and other expenses of $12 for the six months
ended June 30, 2005 was principally driven by experience-rated refunds occurring within the
PPLI business. Additionally, increased amortization related to higher information
technology expenditures supporting the Institutional segments business, as well as costs
attributed to marketing contributed to the increase for the three and six months ended June
30, 2005.
    
    Net investment income decreased in the PPLI business due to the tightening of investment
spreads. The impact of the lower investment yields combined with the surrenders in the
first quarter of 2005 resulted in slightly lower net investment income in the second
quarter of 2005.
 30




---



##### Table of Contents



Individual Life
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Operating Summary
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeFee income
    
    $
    191
    
    
    $
    181
    
    
    
    6
    %
    
    $
    386
    
    
    $
    367
    
    
    
    5
    %Earned premiums
    
    
    (7
    )
    
    
    (5
    )
    
    
    (40
    %)
    
    
    (15
    )
    
    
    (10
    )
    
    
    (50
    %)Net investment income
    
    
    76
    
    
    
    76
    
    
    
    
    
    
    
    151
    
    
    
    149
    
    
    
    1
    %Total revenues
    
    
    260
    
    
    
    252
    
    
    
    3
    %
    
    
    522
    
    
    
    506
    
    
    
    3
    %Benefits, claims and claim adjustment expenses
    
    
    120
    
    
    
    120
    
    
    
    
    
    
    
    240
    
    
    
    245
    
    
    
    (2
    %)Insurance operating costs and other expenses
    
    
    42
    
    
    
    39
    
    
    
    8
    %
    
    
    82
    
    
    
    79
    
    
    
    4
    %Amortization of deferred policy acquisition costs
and present value of future profits
    
    
    41
    
    
    
    40
    
    
    
    3
    %
    
    
    86
    
    
    
    79
    
    
    
    9
    %Total benefits, claims and expenses
    
    
    203
    
    
    
    199
    
    
    
    2
    %
    
    
    408
    
    
    
    403
    
    
    
    1
    %Income before income taxes and cumulative
effect of accounting change
    
    
    57
    
    
    
    53
    
    
    
    8
    %
    
    
    114
    
    
    
    103
    
    
    
    11
    %Income tax expense
    
    
    18
    
    
    

    16
    
    
    
    13
    %
    
    
    36
    
    
    
    32
    
    
    
    13
    %Income before cumulative effect of accounting change
    
    
    39
    
    
    
    37
    
    
    
    5
    %
    
    
    78
    
    
    
    71
    
    
    
    10
    %Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    100
    %Net income
    
    $
    39
    
    
    $
    37
    
    
    
    5
    %
    
    $
    78
    
    
    $
    70
    
    
    
    11
    %Account ValuesVariable universal life insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,433
    
    
    $
    4,934
    
    
    
    10
    %Universal life/interest sensitive whole life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,485
    
    
    
    3,321
    
    
    
    5
    %Modified guaranteed life and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    737
    
    
    
    (2
    %)Total account values
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,641
    
    
    $
    8,992
    
    
    
    7
    %Life Insurance InforceVariable universal life insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    69,979
    
    
    $
    67,537
    
    
    
    4
    %Universal life/interest sensitive whole life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,777
    
    
    
    38,554
    
    
    
    3
    %Modified guaranteed life and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,395
    
    
    
    28,329
    
    
    
    21
    %Total life insurance inforce
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    144,151
    
    
    $
    134,420
    
    
    
    7
    %
 [1]
    
    For the six months ended June 30, 2004, represents the cumulative impact of the Companys
adoption of SOP 03-1. 2005 vs. 2004 Three and Six Month Comparison
  
    
    Driven by business growth and aging in the variable universal, universal, and
interest-sensitive whole life insurance inforce, fee income increased for the three and six
months ended June 30, 2005. Cost of insurance charges, a component of fee income,
increased $6 and $10 for the three and six months ended June 30, 2005, respectively.
Variable fee income grew $2 and $4 for the three and six months ended June 30, 2005,
respectively, as favorable equity markets and increased premiums over withdrawals added to
the variable universal life account value.
  
    
    Interest-sensitive products experienced lower spread income of $3 for both the three and
six months ended June 30, 2005, respectively, as compared to the respective prior year
periods, as a result of lower interest rate levels.
    
    Amortization of DAC increased primarily as a result of higher gross margins.
    
    Operating costs increased over the corresponding prior year periods as a result of business growth.
 31




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##### Table of Contents



Group Benefits
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,Operating Summary
    
    2005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeEarned premiums and other
    
    $
    948
    
    
    $
    906
    
    
    
    5
    %
    
    $
    1,896
    
    
    $
    1,821
    
    
    
    4
    %Net investment income
    
    
    100
    
    
    
    93
    
    
    
    8
    %
    
    
    198
    
    
    
    182
    
    
    
    9
    %Net realized capital gains
    
    
    
    
    
    
    1
    
    
    
    (100
    %)
    
    
    
    
    
    
    1
    
    
    
    (100
    %)Total revenues
    
    
    1,048
    
    
    
    1,000
    
    
    
    5
    %
    
    
    2,094
    
    
    
    2,004
    
    
    
    4
    %Benefits, claims and claim adjustment expenses
    
    
    696
    
    
    
    690
    
    
    
    1
    %
    
    
    1,418
    
    
    
    1,374
    
    
    
    3
    %Insurance operating costs and other expenses
    
    
    257
    
    
    
    240
    
    
    
    7
    %
    
    
    494
    
    
    
    492
    
    
    
    Amortization of deferred policy acquisition
costs and present value of future profits
    
    
    7
    
    
    
    6
    
    
    
    17
    %
    
    
    14
    
    
    
    11
    
    
    
    27
    %Total benefits, claims and expenses
    
    
    960
    
    
    
    936
    
    
    
    3
    %
    
    
    1,926
    
    
    
    1,877
    
    
    
    3
    %Income before income taxes
    
    
    88
    
    
    
    64
    
    
    
    38
    %
    
    
    168
    
    
    
    127
    
    
    
    32
    %Income tax expense
    
    
    24
    
    
    
    16
    
    
    
    50
    %
    
    
    45
    
    
    
    32
    
    
    
    41
    %Net income
    
    $
    64
    
    
    $
    48
    
    
    
    33
    %
    
    $
    123
    
    
    $
    95
    
    
    
    29
    %Earned Premiums and OtherFully insured  ongoing premiums
    
    $
    940
    
    
    $
    897
    
    
    
    5
    %
    
    $
    1,852
    
    
    $
    1,802
    
    
    
    3
    %Buyout premiums
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    Other
    
    
    8
    
    
    
    9
    
    
    
    (11
    %)
    
    
    19
    
    
    
    19
    
    
    
    Total earned premiums and other
    
    $
    948
    
    
    $
    906
    
    
    
    5
    %
    
    $
    1,896
    
    
    $
    1,821
    
    
    
    4
    %
  2005 vs. 2004 Three Month Comparison
  
    
    Earned premiums increased driven by sales (excluding buyouts) growth of 6% for the three
months ended June 30, 2005.
    
    The segments loss ratio (defined as benefits, claims and claim adjustment expenses as a
percentage of premiums and other considerations excluding buyouts) was 73%, down from 76%
in the second quarter 2004 due to favorable life mortality experience as well as improved
disability experience. Excluding financial institutions, the loss ratio was 77%, down from
81% in the second quarter of 2004.
  
    
    The segments expense ratio (defined as insurance operating costs and other expenses as
a percentage of premiums and other considerations excluding buyouts) increased to 28%, from
27% in the second quarter of 2004 due to higher operating expenses for the three months
ended June 30, 2005 due principally to increased staffing related to growth in the
business.
 2005 vs. 2004 Six Month Comparison
  
    
    Earned premiums increased driven by sales (excluding buyouts) growth, particularly in
disability, of 9% for the six months ended June 30, 2005.
    
    The segments loss ratio (defined as benefits, claims and claim adjustment expenses as a
percentage of premiums and other considerations excluding buyouts) was 75% for the six
months ended June 30, 2005, down from 76% in the prior year period due to favorable life
mortality experience as well as improved disability experience. Excluding financial
institutions, the loss ratio was 78%, down from 80% in the prior year period.
    
    The segments expense ratio (defined as insurance operating costs and other expenses as
a percentage of premiums and other
 32




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##### Table of Contents



considerations excluding buyouts) decreased for the six
months ended June 30, 2005 to 27%, from 28% in the prior year period. This decrease in
expense ratio was primarily attributed to higher losses on the experience rated financial
institution business. Excluding financial institutions, the expense ratio was 24% in both
periods.
  INVESTMENTS
 General
       Composition of Invested AssetsJune 30, 2005
    
    December 31, 2004Amount
    
    Percent
    
    Amount
    
    PercentFixed maturities, available-for-sale, at fair value
    
    $
    51,723
    
    
    
    69.5
    %
    
    $
    50,531
    
    
    
    73.5
    %Equity securities, available-for-sale, at fair value
    
    
    793
    
    
    
    1.1
    %
    
    
    525
    
    
    
    0.8
    %Equity securities, held for trading, at fair value
    
    
    17,955
    
    
    
    24.1
    %
    
    
    13,634
    
    
    
    19.8
    %Policy loans, at outstanding balance
    
    
    2,140
    
    
    
    2.9
    %
    
    
    2,662
    
    
    
    3.9
    %Mortgage loans, at cost
    
    
    1,148
    
    
    
    1.6
    %
    
    
    923
    
    
    
    1.3
    %Limited partnerships, at fair value
    
    
    309
    
    
    
    0.4
    %
    
    
    256
    
    
    
    0.4
    %Other investments
    
    
    318
    
    
    
    0.4
    %
    
    
    185
    
    
    
    0.3
    %Total investments
    
    $
    74,386
    
    
    
    100.0
    %
    
    $
    68,716
    
    
    
    100.0
    %
  Investment Results
 33




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(before-tax)
    
    2005
    
    2004
    
    2005
    
    2004Net investment income-excluding
income on policy loans and trading securities
    
    $
    697
    
    
    $
    662
    
    
    $
    1,390
    
    
    $
    1,323Policy loan income
    
    
    36
    
    
    
    47
    
    
    
    72
    
    
    
    92Trading securities income [1]
    
    
    303
    
    
    
    101
    
    
    
    524
    
    
    
    557Net investment income  total
    
    $
    1,036
    
    
    $
    810
    
    
    $
    1,986
    
    
    $
    1,972Yield on average invested assets [2]
    
    
    5.6
    %
    
    
    5.8
    %
    
    
    5.6
    %
    
    
    5.8
    %Gross gains on sale
    
    $
    123
    
    
    $
    84
    
    
    $
    221
    
    
    $
    184Gross losses on sale
    
    
    (84
    )
    
    
    (70
    )
    
    
    (132
    )
    
    
    (88
    )Impairments
    
    
    (5
    )
    
    
    (4
    )
    
    
    (6
    )
    
    
    (12
    )GMWB derivatives, net
    
    
    1
    
    
    
    6
    
    
    
    8
    
    
    
    4Other, net [3]
    
    
    (51
    )
    
    
    10
    
    
    
    (26
    )
    
    
    14Net realized capital gains (losses)
    
    $
    (16
    )
    
    $
    26
    
    
    $
    65
    
    
    $
    102
 [1]
    
    Represents the change in value of securities classified as trading.[2]
    
    Represents annualized net investment income (excluding the change in fair value of trading securities) divided by the
monthly weighted average invested assets at cost or amortized cost, as applicable, excluding trading securities, the
collateral received associated with the securities lending program and consolidated variable interest entity minority
interests.[3]
    
    Primarily consists of changes in fair value on non-qualifying derivatives and hedge ineffectiveness on qualifying
derivative instruments, foreign currency transaction remeasurements, as well as the amortization of deferred
acquisition costs related to realized capital gains.       34




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##### Table of Contents



Other-Than-Temporary Impairments
     INVESTMENT CREDIT RISK
     35




---



##### Table of Contents



Fixed Maturities by TypeJune 30, 2005
    
    December 31, 2004Percent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of TotalAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    Value
    
    ValueABS
    
    $
    6,779
    
    
    $
    62
    
    
    $
    (69
    )
    
    $
    6,772
    
    
    
    13.1
    %
    
    $
    6,346
    
    
    $
    76
    
    
    $
    (64
    )
    
    $
    6,358
    
    
    
    12.6
    %CMBS
    
    
    8,632
    
    
    
    321
    
    
    
    (23
    )
    
    
    8,930
    
    
    
    17.3
    %
    
    
    8,456
    
    
    
    370
    
    
    
    (20
    )
    
    
    8,806
    
    
    
    17.5
    %Collateralized mortgage
obligations (CMOs)
    
    
    990
    
    
    
    9
    
    
    
    (3
    )
    
    
    996
    
    
    
    1.9
    %
    
    
    1,084
    
    
    
    11
    
    
    
    (3
    )
    
    
    1,092
    
    
    
    2.2
    %CorporateBasic industry
    
    
    2,373
    
    
    
    154
    
    
    
    (12
    )
    
    
    2,515
    
    
    
    4.9
    %
    
    
    2,412
    
    
    
    192
    
    
    
    (6
    )
    
    
    2,598
    
    
    
    5.1
    %Capital goods
    
    
    1,685
    
    
    
    145
    
    
    
    (4
    )
    
    
    1,826
    
    
    
    3.5
    %
    
    
    1,554
    
    
    
    126
    
    
    
    (6
    )
    
    
    1,674
    
    
    
    3.3
    %Consumer cyclical
    
    
    2,285
    
    
    
    125
    
    
    
    (15
    )
    
    
    2,395
    
    
    
    4.6
    %
    
    
    2,426
    
    
    
    163
    
    
    
    (8
    )
    
    
    2,581
    
    
    
    5.1
    %Consumer non-cyclical
    
    
    2,427
    
    
    
    208
    
    
    
    (5
    )
    
    
    2,630
    
    
    
    5.1
    %
    
    
    2,506
    
    
    
    207
    
    
    
    (6
    )
    
    
    2,707
    
    
    
    5.4
    %Energy
    
    
    1,214
    
    
    
    139
    
    
    
    (4
    )
    
    
    1,349
    
    
    
    2.6
    %
    
    
    1,251
    
    
    
    122
    
    
    
    (1
    )
    
    
    1,372
    
    
    
    2.7
    %Financial services
    
    
    6,812
    
    
    
    450
    
    
    
    (24
    )
    
    
    7,238
    
    
    
    14.0
    %
    
    
    6,202
    
    
    
    482
    
    
    
    (22
    )
    
    
    6,662
    
    
    
    13.2
    %Technology and
communications
    
    
    3,175
    
    
    
    326
    
    
    
    (9
    )
    
    
    3,492
    
    
    
    6.7
    %
    
    
    3,570
    
    
    
    342
    
    
    
    (11
    )
    
    
    3,901
    
    
    
    7.7
    %Transportation
    
    
    607
    
    
    
    45
    
    
    
    
    
    
    
    652
    
    
    
    1.3
    %
    
    
    622
    
    
    
    44
    
    
    
    (1
    )
    
    
    665
    
    
    
    1.3
    %Utilities
    
    
    2,619
    
    
    
    227
    
    

    
    (5
    )
    
    
    2,841
    
    
    
    5.5
    %
    
    
    2,317
    
    
    
    230
    
    
    
    (7
    )
    
    
    2,540
    
    
    
    5.0
    %Other
    
    
    1,062
    
    
    
    40
    
    
    
    (2
    )
    
    
    1,100
    
    
    
    2.1
    %
    
    
    785
    
    
    
    49
    
    
    
    (2
    )
    
    
    832
    
    
    
    1.6
    %Government/Government
agenciesForeign
    
    
    668
    
    
    
    62
    
    
    
    (1
    )
    
    
    729
    
    
    
    1.4
    %
    
    
    723
    
    
    
    67
    
    
    
    (2
    )
    
    
    788
    
    
    
    1.6
    %United States
    
    
    667
    
    
    
    39
    
    
    
    (6
    )
    
    
    700
    
    
    
    1.4
    %
    
    
    884
    
    
    
    19
    
    
    
    (5
    )
    
    
    898
    
    
    
    1.8
    %MBS  agency
    
    
    2,468
    
    
    
    21
    
    
    
    (8
    )
    
    
    2,481
    
    
    
    4.8
    %
    
    
    1,771
    
    
    
    20
    
    
    
    (3
    )
    
    
    1,788
    
    
    
    3.5
    %MunicipalTaxable
    
    
    873
    
    
    
    92
    
    
    
    
    
    
    
    965
    
    
    
    1.9
    %
    
    
    700
    
    
    
    30
    
    
    
    (5
    )
    
    
    725
    
    
    
    1.4
    %Tax-exempt
    
    
    2,269
    
    
    
    210
    
    
    
    (1
    )
    
    
    2,478
    
    
    
    4.8
    %
    
    
    2,080
    
    
    
    191
    
    
    
    (1
    )
    
    
    2,270
    
    
    
    4.5
    %Redeemable preferred
stock
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    13
    
    
    
    Short-term
    
    
    1,620
    
    
    
    
    
    
    
    
    
    
    
    1,620
    
    
    
    3.1
    %
    
    
    2,261
    
    
    
    
    
    
    
    
    
    
    
    2,261
    
    
    
    4.5
    %Total fixed maturities
    
    $
    49,239
    
    
    $
    2,675
    
    
    $
    (191
    )
    
    $
    51,723
    
    
    
    100.0
    %
    
    $
    47,962
    
    
    $
    2,742
    
    
    $
    (173
    )
    
    $
    50,531
    
    
    
    100.0
    %
   Aircraft lease receivables
 Financial services
 CMBS
 36




---



##### Table of Contents



CAPITAL MARKETS RISK MANAGEMENT
   CAPITAL RESOURCES AND LIQUIDITY
 Liquidity Requirements
    37




---



##### Table of Contents



Ratings
   A.M. Best
    
    Fitch
    
    Standard &
Poors
    
    MoodysInsurance RatingsHartford Life Insurance Company
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life and Accident
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life Group Insurance Company
    
    
    A+
    
    
    AA
    
    
    
    
    
    
    Hartford Life and Annuity
    
    
    A+
    
    
    AA
    
    AA-
    
    Aa3Hartford Life Insurance KK (Japan)
    
    
    
    
    
    
    
    
    
    AA-
    
    
    Hartford Life Limited (Ireland)
    
    
    
    
    
    
    
    
    
    AA-
    
    
    Other RatingsHartford Life, Inc.Senior debt
    
    
    a-
    
    
    
    A
    
    
    
    A-
    
    
    
    A3Commercial paper
    
    
    
    
    
    
    F1
    
    
    
    A-2
    
    
    P
    -2Hartford Life, Inc.Capital II Trust preferred securities
    
    bbb
    
    
    A-
    
    
    BBB
    
    Baa1Hartford Life Insurance Company:Short Term Rating
    
    
    
    
    
    
    
    
    
    
    A-1+
    
    
    P
    -1
  Risk-Based Capital
  38




---



##### Table of Contents



NAIC Developments
 Proposed Changes to NAIC RBC Requirements for Variable Annuities with Guarantees   C-3 Phase II
Capital
    Contingencies
 Regulatory Developments
   Other 
   ACCOUNTING STANDARDS
  
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
  39




---



##### Table of Contents



Changes in internal control over financial reporting
  
 Part II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  Broker Compensation Litigation
     40




---



##### Table of Contents



Item 6. EXHIBITS
  41




---



##### Table of Contents



SIGNATURE
  HARTFORD LIFE, INC./s/ Ernest M. McNeill Jr.Ernest M. McNeill Jr.
Vice President and Chief Accounting OfficerAugust 4, 2005
 42




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2005
 
 EXHIBITS INDEX
 Exhibit #15.01
    
    Deloitte & Touche LLP Letter of Awareness31.01
    
    Section 302 Certification of Thomas M. Marra31.02
    
    Section 302 Certification of Lizabeth H. Zlatkus32.01
    
    Section 906 Certification of Thomas M. Marra32.02
    
    Section 906 Certification of Lizabeth H. Zlatkus
 43