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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 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
    
    06-1470915(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 200 Hopmeadow Street, Simsbury, Connecticut 06089
 (860) 547-5000
 
 
  þ o
  o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



CONTENTS
 ITEM
    
    DESCRIPTION
    
    PAGEPART I
    
    1.
    
    Business. *
    
    
    31A.
    
    Risk Factors.
    
    
    131B.
    
    Unresolved Staff Comments.
    
    
    172.
    
    Properties. *
    
    
    173.
    
    Legal Proceedings.
    
    
    174.
    
    **PART II
    
    5.
    
    Market for Hartford Life's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
    
    
    186.
    
    **7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations. *
    
    
    197A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
    
    
    708.
    
    Financial Statements and Supplementary Data.
    
    
    719.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
    
    
    719A.
    
    Controls and Procedures.
    
    
    719B.
    
    Other Information.
    
    
    71PART III
    
    10.
    
    **11.
    
    **12.
    
    **13.
    
    **14.
    
    Principal Accounting Fees and Services.
    
    
    71PART IV
    
    15.
    
    Exhibits, Financial Statement Schedules.
    
    
    72Signatures.
    
    II-1Exhibits Index.
    
    II-2EX-3.01: AMENDED AND RESTATED CERTIFICATE OF INCORPORATIONEX-12.01: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGESEX-23.01: CONSENT OF DELOITTE & TOUCHE LLPEX-31.01: CERTIFICATIONEX-31.02: CERTIFICATIONEX-32.01: CERTIFICATIONEX-32.02: CERTIFICATION
  
 *
    
    Item prepared in accordance with General Instruction I (2) of Form 10-K**
    
    Item omitted in accordance with General Instruction I (2) of Form 10-K 2




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PART I
 
 Item 1. BUSINESS
 (Dollar amounts in millions, except for share data, unless otherwise stated)
 General
   Customer Service, Technology and Economies of Scale
  Risk Management
  3




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Reporting Segments
          Retail
    4




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Principal Products
 Individual Variable Annuities
   Fixed MVA Annuities
 Mutual Funds 
  5




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Marketing and Distribution
   Competition
  Retirement Plans
   Principal Products
 Governmental
 401(k)
 Institutional Mutual Funds
 6




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Marketing and Distribution
   Competition
   Institutional
    Principal Products
 Institutional Investment Products
 Structured Settlements
 Institutional Mutual Funds
 Stable Value Products
 7




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Institutional Annuities
 Variable PPLI Products
 Marketing and Distribution
       Competition
     8




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Individual Life
  Principal Products
  Variable Universal Life
 Universal Life and Interest Sensitive Whole Life
 Marketing and Distribution
  Competition
  Group Benefits
  9




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Principal Products
 Group Disability
  Group Life and Accident
 Other
 Marketing and Distribution
  Competition
  International
  10




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Principal Products
 Individual Variable Annuities
  Fixed MVA Annuities
 Marketing and Distribution
  Competition
  Reserves
  11




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Ceded Reinsurance
  Investment Operations
  Regulation and Premium Rates
    12




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Employees
  
 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 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.
  13




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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.
   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.
  14




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We may experience unfavorable judicial or legislative developments that would adversely affect our
results of operations 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.
   
    
    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.
  15




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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.
  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.
  16




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Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
  
 Item 3. LEGAL PROCEEDINGS
  Broker
Compensation Litigation
     17




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##### Table of Contents



PART II
 
 Item 5.
    
    MARKET FOR HARTFORD LIFES COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
   18




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Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (Dollar amounts in millions, unless otherwise stated)
   INDEX
 Overview
    
    
    19Critical Accounting Estimates
    
    
    26Consolidated Results of Operations
    
    
    30Retail
    
    
    33Retirement Plans
    
    
    35Institutional
    
    
    37Individual Life
    
    
    39Group Benefits
    
    
    41International
    
    
    43Other
    
    
    45Investments
    
    
    46Investment Credit Risk
    
    
    53Capital Markets Risk Management
    
    
    59Capital Resources and Liquidity
    
    
    66Impact of New Accounting Standards
    
    
    70
 OVERVIEW
   19




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Performance Measures
 Fee Income
  20




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As of and for the years ended December 31,Product/Key Indicator Information
    
    2005
    
    
    2004
    
    
    2003United States Individual Variable AnnuitiesAccount value, beginning of period
    
    $
    99,617
    
    
    $
    86,501
    
    
    $
    64,343Net flows
    
    
    (881
    )
    
    
    5,471
    
    
    
    7,709Change in market value and other
    
    
    6,578
    
    
    
    7,645
    
    
    
    14,449Account value, end of period
    
    $
    105,314
    
    
    $
    99,617
    
    
    $
    86,501Retail Mutual FundsAssets under management, beginning of period
    
    $
    25,240
    
    
    $
    20,301
    
    
    $
    14,079Net sales
    
    
    1,335
    
    
    
    2,505
    
    
    
    2,155Change in market value and other
    
    
    2,488
    
    
    
    2,434
    
    
    
    4,067Assets under management, end of period
    
    $
    29,063
    
    
    $
    25,240
    
    
    $
    20,301Retirement PlansAccount value, beginning of period
    
    $
    16,493
    
    
    $
    13,571
    
    
    $
    10,183Net flows
    
    
    1,618
    
    
    
    1,636
    
    
    
    1,560Change in market value and other
    
    
    1,206
    
    
    
    1,286
    
    
    
    1,828Account value, end of period
    
    $
    19,317
    
    
    $
    16,493
    
    
    $
    13,571Individual Life InsuranceVariable universal life account value, end of period
    
    $
    5,902
    
    
    $
    5,356
    
    
    $
    4,725Total life insurance inforce
    
    $
    150,801
    
    
    $
    139,889
    
    
    $
    130,798S&P500 IndexYear end closing value
    
    
    1,248
    
    
    
    1,212
    
    
    
    1,112Daily average value
    
    
    1,208
    
    
    
    1,131
    
    
    
    965Japan AnnuitiesAccount value, beginning of period
    
    $
    14,631
    
    
    $
    6,220
    
    
    $
    1,722Net flows
    
    
    10,857
    
    
    
    7,249
    
    
    
    3,490Change in market value and other
    
    
    616
    
    
    
    1,162
    
    
    
    1,008Account value, end of period
    
    $
    26,104
    
    
    $
    14,631
    
    
    $
    6,220
 
    
    The 2005 increase in U.S. variable annuity account values can be attributed to
market growth over the past four quarters.
    
    Net flows and net sales for the U.S. variable annuity and retail mutual fund
businesses, respectively, have decreased from prior year levels. In particular, variable
annuity net flows and mutual fund net sales were negatively affected due to lower sales
levels and higher surrenders due to increased competition.
    
    Changes in the market value is based on market conditions and investment
management performance.
    
    Japan annuity account values and net flows continue to grow as a result of
strong sales and significant market growth in 2005.
 Net Investment Income and Interest Credited
  21




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For the years ended December 31,2005
    
    
    2004
    
    
    2003 [1]Net Investment IncomeRetail
    
    $
    933
    
    
    $
    1,011
    
    
    $
    432Retirement Plans
    
    
    311
    
    
    
    306
    
    
    
    281Institutional
    
    
    802
    
    
    
    664
    
    
    
    581Individual Life
    
    
    305
    
    
    
    303
    
    
    
    263Group Benefits
    
    
    398
    
    
    
    373
    
    
    
    262International
    
    
    75
    
    
    
    11
    
    
    
    2Other
    
    
    4,021
    
    
    
    1,007
    
    
    
    220Total net investment income
    
    $
    6,845
    
    
    $
    3,675
    
    
    $
    2,041Interest Credited on General Account AssetsRetail
    
    $
    717
    
    
    $
    841
    
    
    $
    284Retirement Plans
    
    
    197
    
    
    
    186
    
    
    
    184Institutional
    
    
    383
    
    
    
    300
    
    
    
    253Individual Life
    
    
    225
    
    
    
    216
    
    
    
    192International
    
    
    14
    
    
    
    (1
    )
    
    
    Other
    
    
    4,135
    
    
    
    939
    
    
    
    170Total interest credited on general account assets
    
    $
    5,671
    
    
    $
    2,481
    
    
    $
    1,083
 [1]
    
    Amounts reported in 2003 are prior to the adoption of SOP 03-1.
 
    
    Net investment income and interest credited in Other increased for the year
ended December 31, 2005 due to a $3,847 increase 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 year ended December 31, 2005 due to lower assets under management
from surrenders on market value adjusted (MVA) fixed annuity products at the end of their
guarantee period. The increase for the year ended December 31, 2004 was largely due to the
adoption of Statement of Position 03-1: Accounting & Reporting by Insurance Enterprises
for Certain Nontraditional Long-Duration Contracts and for Separate Accounts (SOP 03-1).
    
    Net investment income and interest credited on general account assets in
Institutional increased as a result of the Companys funding agreement backed Investor
Notes program, and was partially offset by surrenders in the PPLI business.
    
    In addition to interest credited on general account assets, Institutional also
had other contract benefits for limited payment contracts of $292, $279 and $231 for the
years ended December 31, 2005, 2004 and 2003, respectively. These amounts need to be
deducted from net investment income to understand the net interest spread on these
businesses because these contracts are accounted for as traditional insurance products.
 Premiums
  For the years ended December 31,2005
    
    2004
    
    2003Group BenefitsTotal premiums and other considerations
    
    $
    3,810
    
    
    $
    3,652
    
    
    $
    2,362Fully insured ongoing sales (excluding buyouts)
    
    
    779
    
    
    
    632
    
    
    
    507Persistency [1]
    
    
    87
    %
    
    
    85
    %
    
    
    81
    %
 [1]
    
    The persistency rate represents the employer markets group life and disability business,
which accounts for, on average, 75% of inforce premiums
 
    
    Earned premiums and other considerations include $27, $4 and $40 in buyout premiums
for the years ended December 31, 2005, 2004 and 2003, respectively. The increase in
premiums and other considerations for Group Benefits in 2005 compared to 2004 was driven by
sales and favorable persistency.
 22




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Expenses
   For the years ended December 31,2005
    
    
    2004
    
    
    2003RetailGeneral insurance expense ratio (individual annuity)
    
    17.9
    bps
    
    18.3
    bps
    
    22.0
    bpsDAC amortization ratio (individual annuity)
    
    
    49.6
    %
    
    
    50.9
    %
    
    
    50.1
    %Insurance expenses, net of deferrals
    
    $
    869
    
    
    $
    687
    
    
    $
    560Individual LifeDeath benefits
    
    $
    241
    
    
    $
    245
    
    
    $
    224Insurance expenses, net of deferrals
    
    $
    167
    
    
    $
    164
    
    
    $
    161Group BenefitsTotal benefits and claims
    
    $
    2,794
    
    
    $
    2,703
    
    
    $
    1,862Loss ratio (excluding buyout premiums)
    
    
    73.1
    %
    
    
    74.0
    %
    
    
    78.5
    %Insurance expenses, net of deferrals
    
    $
    1,022
    
    
    $
    989
    
    
    $
    553Expense ratio (excluding buyout premiums)
    
    
    27.8
    %
    
    
    27.7
    %
    
    
    24.6
    %
 
    
    Individual annuitys expense ratio for the year ended December 31, 2005
continued to benefit from the Companys disciplined expense management and economies of
scale in the variable annuity business. Additionally, individual annuitys expense ratio
continues to be one of the lowest ratios of general insurance expenses as a percent of
assets under management in the industry, holding near 18 bps of average account value for
the year ended December 31, 2005. The Company expects this ratio to stay between 18-20
bps.
    
    The ratio of individual annuity DAC amortization over income before taxes and
DAC amortization declined for the year ended December 31, 2005 as a result of higher gross
profits and a lower amount of additional deposits received on existing business.
    
    Individual Life death benefits decreased for the year ended December 31, 2005
due to favorable mortality experience.
    
    The Group Benefits loss ratio, excluding buyouts, for the year ended December
31, 2005 decreased due to favorable morbidity and mortality experience.
    
    The Group Benefits expense ratio, excluding buyouts, increased slightly for
the year ended December 31, 2005 primarily due to higher operating expenses related to
business growth.
 Profitability
  Ratios
    
    2005
    
    
    2004
    
    
    2003RetailIndividual annuity return on assets (ROA)
    
    54.6
    bps
    
    44.8
    bps
    
    45.4
    bpsGroup BenefitsAfter-tax margin (excluding buyouts)
    
    
    7.2
    %
    
    
    6.3
    %
    
    
    6.4
    %
 
    
    Individual annuitys ROA increased for the year ended December 31, 2005,
compared to the prior year. In particular, variable annuity fees and fixed annuity general
account spreads each increased for the year ended December 31, 2005
compared to the prior year. The increase in the ROA can be attributed to the increase in
account values and resulting
 23




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increased fees including GMWB rider fees without a corresponding
increase in expenses; while the increase in fixed annuity general account spread resulted
from fixed annuity contracts that were repriced upon the contract reaching maturity. Also,
contributing to a higher ROA in 2005 is an increase in the separate account dividends
received deduction (DRD) tax benefit compared to 2004.
    
    The improvement in the Group Benefits after-tax margin for the year ended
December 31, 2005 was primarily due to favorable loss ratios and higher net investment
income as compared to 2004.
 Regulatory Developments
      24




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Broker Compensation
  25




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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
    Unlock and Sensitivity Analysis
  26




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Valuation of Guaranteed Minimum Withdrawal Benefit Derivatives
  Evaluation of Other-Than-Temporary Impairments on Available-for-Sale Securities
     28




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Contingencies Relating to Corporate Litigation and Regulatory Matters
   29




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CONSOLIDATED RESULTS OF OPERATIONS
 Life Operating Summary
    
    2005
    
    
    2004
    
    
    2003Earned premiums
    
    $
    4,203
    
    
    $
    4,072
    
    
    $
    3,086Fee income
    
    
    4,000
    
    
    
    3,464
    
    
    
    2,760Net investment incomeSecurities available-for-sale and other [2]
    
    
    2,998
    
    
    
    2,876
    
    
    
    2,041Equity securities held for trading [1]
    
    
    3,847
    
    
    
    799
    
    
    
    Total net investment income
    
    
    6,845
    
    
    
    3,675
    
    
    
    2,041Other revenues [2]
    
    
    
    
    
    
    
    
    
    
    131Net realized capital (losses) gains
    
    
    (25
    )
    
    
    164
    
    
    
    26Total revenues
    
    
    15,023
    
    
    
    11,375
    
    
    
    8,044Benefits, claims and claim adjustment expenses [1] [2]
    
    
    9,809
    
    
    
    6,630
    
    
    
    4,616Amortization of deferred policy acquisition costs and present value of future profits
    
    
    1,172
    
    
    
    993
    
    
    
    755Insurance operating costs and other expenses
    
    
    2,602
    
    
    
    2,242
    
    
    
    1,724Total benefits, claims and expenses
    
    
    13,583
    
    
    
    9,865
    
    
    
    7,095Income before income taxes and cumulative effect of accounting change
    
    
    1,440
    
    
    
    1,510
    
    
    
    949Income tax expense
    
    
    288
    
    
    
    168
    
    
    
    180Income before cumulative effect of accounting change
    
    
    1,152
    
    
    
    1,342
    
    
    
    769Cumulative effect of accounting change, net of tax [3]
    
    
    
    
    
    
    (23
    )
    
    
    Net income
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769
 [1]
    
    Includes dividend income and mark-to-market effects of trading securities 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.[2]

    
    Amounts reported in 2003 are prior to the adoption of SOP 03-1.[3]

    
    For the year ended December 31, 2004, represents the cumulative impact of the Companys
adoption of SOP 03-1.
         2005 Compared to 2004 
 30




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
    
    For the year ended December 31, 2005, the Company experienced realized capital
losses of $25 as compared to realized capital gains of $164 for the year ended December 31,
2004. See the Investments section for further discussion of investment results and related
realized capital gains and losses.
    
    Life recorded an after tax charge of $102 for the year ended December 31, 2005
to establish reserves for regulatory matters for investigations related to market timing by
the SEC and New York Attorney Generals Office, directed brokerage by the SEC, and single
premium group annuities by the New York Attorney Generals Office and the Connecticut
Attorney Generals Office.
    
    Life recorded an after-tax expense of $46 for the year ended December 31,
2005, which related to the termination of a provision of an agreement with a mutual fund
distribution partner of the Companys retail mutual funds.
  
    
    Net income in Retail increased during 2005, principally driven by higher fee
income from growth in the variable annuity and mutual fund businesses as a result of higher
assets under management as compared to the prior year.
    
    Institutional contributed higher earnings during 2005, driven by higher assets
under management.
    
    Individual Lifes net income increased during 2005, primarily driven by
business growth which resulted in increases in both higher life insurance inforce and
account values.
    
    Net income in Group Benefits increased during 2005, primarily due to a
non-recurring tax benefit of $9 related to the acquisition of the group life and accident,
and short-term and long-term disability businesses of CNA Financial Corporation (the CNA
Acquisition) and higher earned premiums and net investment income as well as a favorable
loss ratio as compared to the prior year period.
    
    Net income in International increased during 2005, primarily driven by the
increased fees from an increase in assets under management of the Japan annuity business.
Japans assets under management have grown to $26.1 billion at December 31, 2005 from $14.6
billion at December 31, 2004.
    
    Net investment income increased for all Life segments during 2005, driven by a
higher asset base and increased partnership income, as compared to the prior year.
    
    The effective tax rate was 20% for Life operations for the current year as
compared to an effective tax rate of 11% for Life operations for the respective prior year
period. The 2005 higher effective tax rate was attributed to the absence of the 2004 tax
benefit of $190 (as mentioned above) offset by an increase in the DRD tax benefit of $50.
 2004 Compared to 2003 
 
    
    Net income in Retail increased, principally driven by growth in the variable
annuity and mutual fund businesses as a result of increased assets under management.
    
    Net income in Retirement increased primarily due to higher fee income related
to the 401(k) business compared to the prior year.
    
    Net income in Group Benefits increased due primarily to increased earned
premiums and net investment income growth, primarily resulting from the CNA Acquisition.
In addition, Group Benefits was impacted by favorable persistency in most businesses and a
lower loss ratio.
    
    Net income in Institutional was higher as a result of a decrease in other
expenses related to private placement life insurance business compared to the respective
prior year. The decrease in other expenses for the current year is attributed to a $40
after-tax charge, recorded in the third quarter ended September 30, 2003, associated with
the settlement of the Bancorp Services, LLC (Bancorp) litigation.
    
    Individual Lifes earnings increase was primarily driven by improved net
investment spread income including the effects of prepayments and growth in account values
and life insurance in force.
    
    Net income in International 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 $14.6 billion at December 31, 2004 from $6.2 billion at
December 31, 2003. Also during 2004, Life introduced market value adjusted fixed annuity
products to provide a diversified product portfolio to customers in Japan.
    
    The effective tax rate was 11% for Life operations for the current year as
compared to an effective tax rate of 19% for Life operations for the respective prior year
period. The lower effective tax rate was attributed to tax related items, as discussed
above, of $190 and a 2004 tax year DRD benefit of $132, as compared to tax related items of
$30 and a 2003 tax year DRD benefit of $87 reported for the years ended December 31, 2004
and 2003, respectively.
 31




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
    
    Retail recorded lower spread income on market value adjusted (MVA) fixed annuities due
to the adoption of SOP 03-1 in 2004.
    
    Slightly offsetting the positive earnings drivers for the year ended December 31, 2004
was the cumulative effect of accounting change from the Companys adoption of SOP 03-1.
(For further discussion of the impact of the Companys adoption of SOP 03-1, see Note 1 of
Notes to Consolidated Financial Statements).
 Net Realized Capital Gains and Losses
  Income Taxes
    32




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##### Table of Contents



RETAIL
 Operating Summary
    
    2005
    
    
    2004
    
    
    2003Fee income and other
    
    $
    2,325
    
    
    $
    2,019
    
    
    $
    1,654Earned premiums
    
    
    (52
    )
    
    
    5
    
    
    
    (34
    )Net investment income
    
    
    933
    
    
    
    1,011
    
    
    
    432Net realized capital gains
    
    
    9
    
    
    
    
    
    
    
    8Total revenues
    
    
    3,215
    
    
    
    3,035
    
    
    
    2,060Benefits, claims and claim adjustment expenses
    
    
    895
    
    
    
    1,074
    
    
    
    519Insurance operating costs and other expenses
    
    
    869
    
    
    
    687
    
    
    
    560Amortization of deferred policy acquisition costs
and present value of future profits
    
    
    744
    
    
    
    647
    
    
    
    498Total benefits, claims and expenses
    
    
    2,508
    
    
    
    2,408
    
    
    
    1,577Income before income taxes and cumulative effect of
accounting change
    
    
    707
    
    
    
    627
    
    
    
    483Income tax expense
    
    
    85
    
    
    
    105
    
    
    
    71Income before cumulative effect of accounting change
    
    
    622
    
    
    
    522
    
    
    
    412Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    (19
    )
    
    
    Net income
    
    $
    622
    
    
    $
    503
    
    
    $
    412
 Assets Under Management
    
    2005
    
    
    2004
    
    
    2003Individual variable annuity account values
    
    $
    105,314
    
    
    $
    99,617
    
    
    $
    86,501Individual fixed annuity and other account values
    
    
    10,222
    
    
    
    11,384
    
    
    
    11,215Other retail products account values
    
    
    336
    
    
    
    182
    
    
    
    48Total account values [2]
    
    
    115,872
    
    
    
    111,183
    
    
    
    97,764Retail mutual fund assets under management
    
    
    29,063
    
    
    
    25,240
    
    
    
    20,301Other mutual fund assets under management
    
    
    1,004
    
    
    
    641
    
    
    
    369Total mutual fund assets under management
    
    
    30,067
    
    
    
    25,881
    
    
    
    20,670Total assets under management
    
    $
    145,939
    
    
    $
    137,064
    
    
    $
    118,434
 [1]

    
    Represents the cumulative impact of the Companys adoption of SOP 03-1.[2]

    
    Includes policyholders balances for investment contracts and reserve for future policy
benefits for insurance contracts.
  2005 Compared to 2004 
 
    
    The increase in fee income in the variable annuity business for the year ended December
31, 2005 was mainly a result of growth in average account values. The year-over-year
increase in average account values of 10% can be attributed to market appreciation of $6.3
billion during 2005. Variable annuities had net outflows of $881 for the year ended
December 31, 2005 compared to net inflows of $5.5 billion for the year ended December 31,
2004. The net outflows in 2005 were due to increased surrender activity and increased
sales competition, particularly as it relates to guaranteed living benefits riders offered
with variable annuity products.
    
    Mutual fund fee income increased for the year ended December 31, 2005 due to increased
assets under management driven by market appreciation of $2.6 billion and net sales of $1.3
billion. Despite the increase in assets under management, the amount of net sales has
declined for the year ended December 31, 2005 compared to the prior year. This decrease is
attributed to market competition and higher redemption amounts due to a higher lapse rate.
    
    The fixed annuity business contributed $66 of higher investment spread income in 2005
compared to 2004, excluding the cumulative effects of accounting change, due to improved
investment spreads from the MVA products.
    
    Benefits and claims and claim adjustment expenses have decreased for the year ended
December 31, 2005 due to an increase in reserves in the third quarter of 2004 related to
the acquisition of a block of acquired business from London Pacific Life and Annuity
Company in liquidation. The increase in reserves of $62 was offset by an equivalent
increase in earned premium. Also contributing to the decrease in benefits expense is a
decrease in interest credited as older fixed annuity MVA business with higher credited
rates matures and either lapse or renew at lower credited rates.
    
    The effective tax rate decreased for the year ended December 31, 2005 compared to the
prior year end due to an increase in the DRD benefit as a percentage of pre-tax income.
 33




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##### Table of Contents




    
    Throughout Retail, insurance operating costs and other expenses increased for the year
ended December 31, 2005 compared to the prior year. General insurance expenses increased
due to increased costs related to technology services as well as sales and marketing. In
addition, the Company recorded an after-tax expense of $46, for the termination of a
provision of an agreement with a mutual fund distribution partner.
    
    There was higher amortization of DAC, which resulted from higher gross profits due to
the positive earnings drivers as discussed above.
 2004 Compared to 2003 
 
    
    Fee income generated by the variable annuity operation increased, as average account
values were higher in 2004 as compared to the prior year. The increase in average account
values can be attributed to market appreciation of $7.6 billion and net flows of $5.5
billion during 2004.
    
    Retail mutual fund fee income increased as a result of an increase in assets under
management of 24% year over year principally due to net sales and market appreciation of
$2.5 billion each during 2004.
  
    
    There was higher amortization of DAC, due to higher gross profits and increased
subsequent deposit activity, primarily in individual annuity.
    
    Lower income from the fixed annuity business, due to lower investment spread from the
market value adjusted (MVA) product caused by the cumulative effect of accounting change
from the Companys adoption of SOP 03-1. With the adoption of SOP 03-1, the Company
includes the investment return from the fixed annuity product in net investment income and
includes interest credited to contract holders in the benefits, claims and claim adjustment
expenses. In prior years, the market value spread was reported as guaranteed separate
account income in fee income and other.
    
    The effective tax rate increased for the year ended December 31, 2004 due to the absence
of a prior year tax benefit recorded in 2003.
 Outlook
    34




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##### Table of Contents



RETIREMENT PLANS
 Operating Summary
    
    2005
    
    2004
    
    2003Fee income and other
    
    $
    152
    
    
    $
    121
    
    
    $
    83Earned premiums
    
    
    10
    
    
    
    10
    
    
    
    15Net investment income
    
    
    311
    
    
    
    306
    
    
    
    281Net realized capital (losses) gains
    
    
    (3
    )
    
    
    (3
    )
    
    
    1Total revenues
    
    
    470
    
    
    
    434
    
    
    
    380Benefits, claims and claim adjustment expenses
    
    
    231
    
    
    
    220
    
    
    
    226Insurance operating costs and other expenses
    
    
    115
    
    
    
    96
    
    
    
    79Amortization of deferred policy acquisition costs
    
    
    26
    
    
    
    29
    
    
    
    17Total benefits, claims and expenses
    
    
    372
    
    
    
    345
    
    
    
    322Income before income taxes and cumulative effect of account change
    
    
    98
    
    
    
    89
    
    
    
    58Income tax expense
    
    
    23
    
    
    
    22
    
    
    
    16Income before cumulative effect of accounting change
    
    
    75
    
    
    
    67
    
    
    
    42Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    (1
    )
    
    
    Net income
    
    $
    75
    
    
    $
    66
    
    
    $
    42
 Assets Under Management
    
    2005
    
    2004
    
    2003Governmental account values
    
    $
    10,475
    
    
    $
    9,962
    
    
    $
    8,965401(k) account values
    
    
    8,842
    
    
    
    6,531
    
    
    
    4,606Total account values
    
    
    19,317
    
    
    
    16,493
    
    
    
    13,571Government mutual fund assets under management
    
    
    163
    
    
    
    756
    
    
    
    770401(k) mutual fund assets under management
    
    
    947
    
    
    
    755
    
    
    
    585Total mutual fund assets under management
    
    
    1,110
    
    
    
    1,511
    
    
    
    1,355Total assets under management
    
    $
    20,427
    
    
    $
    18,004
    
    
    $
    14,926
 [1]

    
    Represents the cumulative impact of the Companys adoption of SOP 03-1.
  2005 Compared to 2004 
 
    
    401(k) fee income increased 39% or $30 for the year ended December 31, 2005 compared to
the prior year. This increase is a result of positive net flows from the 401(k) business
of $1.8 billion over the prior year driven by strong sales and increasing ongoing deposits
contributing to the growth in 401(k) assets under management of 34% to $9.8 billion. Total
401(k) deposits and net flows increased substantially by 32% and 26%, respectively, over
the prior year primarily due to the full year impact of 2004s expansion of wholesaling
capabilities and new product offerings.
    
    The DAC amortization rate decreased in 2005 compared to 2004 as a result of higher
profits.
  
    
    General account spread decreased for both 401(k) and Governmental businesses for the
year ended December 31, 2005 compared to prior year. The decrease is attributable to a
decrease in the net investment income earned rate for both businesses. Average general
account assets for the Retirement Plans segment increased approximately 7% in 2005 compared
to 2004, while net investment income increased 2% compared to the prior year. Benefits and
claims expense, which mainly consists of interest credited, increased 5% for the year ended
December 31, 2005 compared to prior year, which was driven by a 7% increase in
Governmentals general account business.
    
    An increase in insurance operating costs and other expenses of $19 during 2005 was
principally driven by the 401(k) business. The additional costs can be attributed to
greater sales and assets under management, resulting in a 20% increase in asset-based
commissions to third parties, technology expenditures, and marketing and servicing costs
supporting the segments business. However, the increase in 401(k) sales has driven down
the overall general insurance expense per case by over 4% compared to the prior year.
 2004 Compared to 2003 
 
    
    401(k) fee income increased 57% or $28 for year ended December 31, 2004 compared to the
prior year. This increase is a result of positive net flows from the 401(k) business of
$1.4 billion over the past four quarters driven by strong sales contributing to the
increase in 401(k) assets under management of 42% to $6.5 billion. Total deposits and net
flows
increased substantially by 45% and 42%, respectively, over the prior year primarily due to
the expansion of wholesaling capabilities and new product offerings.
 35




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##### Table of Contents




    
    The Governmental business contributed significantly higher income in 2004. The 11%
increase in net investment income in 2004 compared to 2003 as well as $9 of additional fee
income was attributed to the growth in the average account values as a result of positive
net flows of $230 and market appreciation of $767.
    
    The effective tax rate decreased for the year ended December 31, 2004 due to an increase
in the DRD benefit as a percentage of pre-tax income.
  
    
    Insurance operating costs and other expenses for 401(k) increased for the year ended
December 31, 2004 compared to the prior year mainly driven by greater sales and assets
under management, resulting in a 50% increase in commissions over prior year, in addition
to growth in investment technology services and sales and marketing costs.
 Outlook
  36




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##### Table of Contents



INSTITUTIONAL
 Operating Summary
    
    2005
    
    
    
    2004
    
    
    2003Fee income and other
    
    $
    119
    
    
    $
    161
    
    
    $
    154Earned premiums
    
    
    504
    
    
    
    463
    
    
    
    783Net investment income
    
    
    802
    
    
    
    664
    
    
    
    581Net realized capital (losses) gains
    
    
    (5
    )
    
    
    3
    
    
    
    4Total revenues
    
    
    1,420
    
    
    
    1,291
    
    
    
    1,522Benefits, claims and claim adjustment expenses
    
    
    1,212
    
    
    
    1,116
    
    
    
    1,344Insurance operating costs and expenses
    
    
    56
    
    
    
    55
    
    
    
    109Amortization of deferred policy acquisition costs and present value of future profits
    
    
    32
    
    
    
    26
    
    
    
    28Total benefits, claims and expenses
    
    
    1,300
    
    
    
    1,197
    
    
    
    1,481Income before income taxes and
cumulative effect of accounting
change
    
    
    120
    
    
    
    94
    
    
    
    41Income tax expense
    
    
    32
    
    
    
    26
    
    
    
    9Net income
    
    $
    88
    
    
    $
    68
    
    
    $
    32
 Assets Under Management
    
    2005
    
    
    2004
    
    
    2003Institutional account values
    
    $
    17,917
    
    
    $
    14,599
    
    
    $
    12,660Private Placement Life Insurance account values [1]
    
    
    23,836
    
    
    
    22,498
    
    
    
    20,992Mutual fund assets under management
    
    
    1,528
    
    
    
    676
    
    
    
    438Total assets under management
    
    $
    43,281
    
    
    $
    37,773
    
    
    $
    34,090
 [1]

    
    Includes policyholder balances for investment contracts and reserves for future policy benefits
for insurance contracts.
  2005 Compared to 2004 
 
    
    Total revenues increased in Institutional driven by positive net flows of $2.4 billion
during the past four quarters, which resulted in higher assets under management. Net flows
for Institutional increased for the year ended December 31, 2005 compared to the prior
year, primarily as a result of the Companys funding agreement backed Investor Notes
program, which was launched in the third quarter of 2004. Investor Note sales for the
years ended December 31, 2005 and 2004 were $2.0 billion and $643, respectively.
    
    General account spread is one of the main drivers of net income for the Institutional
line of business. An increase in spread income in 2005 was driven by higher assets under
management noted above, combined with improved partnership income and mortality gains
related to terminal funding and structured settlement contracts that include life
contingencies. For the year ended December 31, 2005 and 2004, gains related to mortality,
investments or other activity were $10 and $3 after-tax, respectively. During 2005, the
Company invested in more variable rate assets to back the increasing block of variable rate
liabilities sold under the stable value product line. This asset/liability matching
strategy has decreased portfolio yields,as variable rate assets have lower initial coupon
yields then fixed rate assets. At the same time the stable value variable rate
liabilities have lower crediting rates in the current period than stable value fixed rate
liabilities, which has allowed the Company to maintain-to-slightly-increase its general
account spread on a yield basis.
    
    PPLIs net income increased $3 or 17% compared to prior year primarily due to asset
growth in the variable business combined with favorable mortality experience.
  
    
    PPLIs cost of insurance charges has decreased due to reductions in the face amount of
certain cases. These face reductions have also resulted in lower death benefits. This
impact combined with favorable mortality, which increases the provision for future
experience rate credits has led to the year over year decrease in fee income and other.
 2004 Compared to 2003 
 
    
    The decrease in other expenses was primarily attributed to a PPLI $40 after-tax charge,
recorded in the third quarter ended September 30, 2003, associated with the settlement of a
certain litigation matter.
  
    
    Lower income from the IIP and PPLI businesses, excluding the aforementioned settlement of a certain litigation matter.
 37




---



##### Table of Contents




    
    The decrease in net income in IIP was due primarily to lower spread income and slightly
higher insurance operating costs for the year ended December 31, 2004 as compared to 2003.
In addition, IIP reported lower earnings for 2004 compared to the prior year due to
favorable mortality experience in 2003.
    
    Additionally, income tax expense was higher for 2004 due primarily to decreases in other
expenses related to the PPLI business, as discussed above. The effective tax rate
increased over the previous year-end because the percentage increase in tax preferred items
(DRD, tax-exempt interest) was not as great as the percentage increase in pre-tax income
from 2003 to 2004.
    
    Earned Premiums decreased for the year ended December 31, 2004 compared to 2003 due to
lower sales on limited payment contracts for the Structured Settlement and Terminal Funding
products, consistent with a corresponding decrease in Benefits, Claims and Claim Adjustment
Expenses.
 Outlook
   38




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##### Table of Contents



INDIVIDUAL LIFE
 Operating Summary
    
    2005
    
    
    2004
    
    
    2003Fee income and other
    
    $
    802
    
    
    $
    767
    
    
    $
    747Earned premiums
    
    
    (33
    )
    
    
    (21
    )
    
    
    (20
    )Net investment income
    
    
    305
    
    
    
    303
    
    
    
    263Net realized capital gains (losses)
    
    
    5
    
    
    
    7
    
    
    
    (7
    )Total revenues
    
    
    1,079
    
    
    
    1,056
    
    
    
    983Benefits, claims and claim adjustment expenses
    
    
    469
    
    
    
    480
    
    
    
    436Insurance operating costs and other expenses
    
    
    167
    
    
    
    164
    
    
    
    161Amortization of deferred policy acquisition costs and present value of future profits
    
    
    205
    
    
    
    185
    
    
    
    177Total benefits, claims and expenses
    
    
    841
    
    
    
    829
    
    
    
    774Income before income taxes and cumulative effect of accounting change
    
    
    238
    
    
    
    227
    
    
    
    209Income tax expense
    
    
    72
    
    
    
    71
    
    
    
    64Income before cumulative effect of accounting change
    
    
    166
    
    
    
    156
    
    
    
    145Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    (1
    )
    
    
    Net income
    
    $
    166
    
    
    $
    155
    
    
    $
    145
 Account Values
    
    2005
    
    
    2004
    
    
    2003Variable universal life insurance
    
    $
    5,902
    
    
    $
    5,356
    
    
    
    4,725Universal life/interest sensitive whole life
    
    
    3,696
    
    
    
    3,402
    
    
    
    3,259Modified guaranteed life and other
    
    
    716
    
    
    
    729
    
    
    
    742Total account values
    
    $
    10,314
    
    
    $
    9,487
    
    
    $
    8,726Life Insurance InforceVariable universal life insurance
    
    $
    71,365
    
    
    $
    69,089
    
    
    
    67,031Universal life/interest sensitive whole life
    
    
    41,714
    
    
    
    39,109
    
    
    
    38,320Modified guaranteed life and other
    
    
    37,722
    
    
    
    31,691
    
    
    
    25,447Total life insurance inforce
    
    $
    150,801
    
    
    $
    139,889
    
    
    
    130,798
 [1]

    
    Represents the cumulative impact of the Companys adoption of SOP 03-1.
  2005 Compared to 2004 
 
    
    Fee income increased $35 for the year ended December 31, 2005 as compared to the prior
year. Cost of insurance charges, a component of total fee income, increased $22 in 2005,
driven by business growth and aging of the prior year block of variable universal,
universal, and interest-sensitive whole life insurance inforce. Other fee income, another
component of total fee income, increased $7 in 2005 primarily due to growth and improved
product performance primarily in interest-sensitive whole life and variable universal life
insurance products. Variable fee income grew $6 in 2005, as equity market performance and
premiums in excess of withdrawals added to the variable universal life account value.
    
    Net investment income increased a moderate $2 for the year ended December 31, 2005 as
compared to the prior year due to increased general account assets from business growth,
partially offset by lower interest rates on new investments and reduced prepayments on
bonds in 2005.
    
    Benefits, claims and claim adjustment expenses decreased for the year ended December 31,
2005 as compared to the prior year.
    
    Income tax expense and the resulting tax rate for the year ended December 31, 2005 was
aided by a DRD tax benefit of $7, whereas income tax expense for the year ended December
31, 2004 includes a DRD tax benefit of $5.
  
    
    Amortization of DAC increased for the year ended December 31, 2005 compared to the prior
year primarily as a result of product mix and higher gross margins within variable
universal and interest-sensitive whole life insurance products.
    
    Insurance operating costs and other expenses increased $3 for the year ended December
31, 2005 compared to the prior year as a result of business growth.
 2004 Compared to 2003 
 
    
    Fee income increased for the year ended December 31, 2004 as compared to the prior year
primarily due to increased cost of insurance charges as life insurance inforce grew and
aged and variable universal life account values increased driven by
 39




---



##### Table of Contents



favorable equity
markets and new sales. Account values and life insurance inforce grew 9% and 7% from 2003
to 2004, respectively.
    
    Net investment income increased for the year ended December 31, 2004 as compared to the
prior year primarily due to the adoption of SOP 03-1, growth in general account values and
prepayments on bonds. The adoption of SOP 03-1 also resulted in increases in benefits,
claims and claim adjustment expenses and a decrease to fee income and other for the year
ended December 31, 2004 as compared to the prior year period for the segments Modified
Guarantee Life Insurance product, which was formerly classified as a separate account
product.
  
    
    Benefits, claims and claim adjustment expenses increased for the year ended December 31,
2004 as compared to the prior year primarily due to the absence in 2004 of the unusually
favorable mortality experienced in 2003, along with continued growth and aging of life
insurance inforce.
    
    Insurance operating costs and other expenses increased for the year ended December 31,
2004 as compared to the prior year as a result of business growth.
    
    Additionally, income tax expense was higher for the year ended December 31, 2004 as
compared to the prior year due primarily to earnings growth, as discussed above. Income
tax expense includes a DRD tax benefit of $5 related to the 2004 tax year, whereas, income
tax expense for 2003 includes a total DRD tax benefit of $6.
 Outlook
  40




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##### Table of Contents



GROUP BENEFITS
 Operating Summary
    
    2005
    
    
    2004
    
    
    2003Earned premiums and other
    
    $
    3,810
    
    
    $
    3,652
    
    
    $
    2,362Net investment income
    
    
    398
    
    
    
    373
    
    
    
    262Net realized capital gains
    
    
    1
    
    
    
    2
    
    
    
    Total revenues
    
    
    4,209
    
    
    
    4,027
    
    
    
    2,624Benefits, claims and claim adjustment expenses
    
    
    2,794
    
    
    
    2,703
    
    
    
    1,862Insurance operating costs and other expenses
    
    
    1,022
    
    
    
    989
    
    
    
    553Amortization of deferred policy acquisition costs
    
    
    31
    
    
    
    23
    
    
    
    18Total benefits, claims and expenses
    
    
    3,847
    
    
    
    3,715
    
    
    
    2,433Income before income taxes
    
    
    362
    
    
    
    312
    
    
    
    191Income tax expense
    
    
    90
    
    
    
    83
    
    
    
    43Net income
    
    $
    272
    
    
    $
    229
    
    
    $
    148Earned premiums and otherFully insured  ongoing premiums
    
    $
    3,747
    
    
    $
    3,611
    
    
    $
    2,302Buyout premiums
    
    
    27
    
    
    
    4
    
    
    
    40Other
    
    
    36
    
    
    
    37
    
    
    
    20Total earned premiums and other
    
    $
    3,810
    
    
    $
    3,652
    
    
    $
    2,362
   2005 Compared to 2004 
 
    
    Earned premiums, excluding buyouts, increased 4% driven by sales growth of
23%, particularly in disability, for the year ended December 31, 2005 and continued strong
persistency during 2005.
    
    Net investment income increased due to higher average asset balances as well
as slightly higher average investment yields.
    
    The segments loss ratio (defined as benefits, claims and claim adjustment
expenses as a percentage of premiums and other considerations excluding buyouts) was 73.1%
for the year ended December 31, 2005, down from 74.0% in the prior year due to improved
morbidity experience as well as favorable mortality experience. Excluding financial
institutions, the loss ratio was 77.3%, down from 78.7% in the prior year.
  
    
    Operating costs were higher for the year ended December 31, 2005 as compared to the
prior year primarily due to higher operating expenses related to business growth.
 2004 Compared to 2003 
 
    
    Earned premiums excluding buyouts, increased 57% for the year ended December 31, 2004 as
compared to the prior year driven by premium growth resulting from the CNA Acquisition,
sales growth of 25%, and favorable persistency.
    
    The segments loss ratio was 74.0% for the year ended December 31, 2004 as compared to
78.5% for the prior year, which contributed favorably to net income. The improvement in
loss ratio in 2004 was the result of improved mortality and morbidity experience.
Excluding financial institutions, the loss ratio was 78.7%, down from 79.5% in the prior
year.
  
    
    Higher commissions due to higher sales and premiums previously discussed.
    
    Operating costs increased due to business growth and the CNA Acquisition.
 41




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##### Table of Contents




    
    The segments ratio of insurance operating costs and other expenses to premiums and
other considerations (excluding buyouts) increased to 27.7% for the year ended December 31,
2004, from 24.6% for prior year. The increase in expense ratio was primarily attributed to
lower losses, which resulted in increased commissions, on a larger block of experience
rated financial institution business. Excluding the financial institution business, the
2004 expense ratio was 23.6% for the year ended December 31, 2004, down from 23.8% for the
prior year.
 Outlook
   42




---



##### Table of Contents



INTERNATIONAL
 Operating Summary
    
    2005
    
    
    2004
    
    
    2003Fee income and other
    
    $
    483
    
    
    $
    240
    
    
    $
    90Net investment income
    
    
    75
    
    
    
    11
    
    
    
    2Net realized capital losses
    
    
    (34
    )
    
    
    (1
    )
    
    
    (2
    )Total revenues
    
    
    524
    
    
    
    250
    
    
    
    90Benefits, claims and claim adjustment expenses
    
    
    42
    
    
    
    20
    
    
    
    1Insurance operating costs and other expenses
    
    
    188
    
    
    
    98
    
    
    
    42Amortization of deferred policy acquisition costs
and present value of future profits
    
    
    133
    
    
    
    77
    
    
    
    32Total benefits, claims and expenses
    
    
    363
    
    
    
    195
    
    
    
    75Income before income taxes and cumulative effect of accounting change
    
    
    161
    
    
    
    55
    
    
    
    15Income tax expense
    
    
    65
    
    
    
    12
    
    
    
    2Income before cumulative effect of accounting change
    
    
    96
    
    
    
    43
    
    
    
    13Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    (4
    )
    
    
    Net income
    
    $
    96
    
    
    $
    39
    
    
    $
    13
 Assets Under Management
    
    2005
    
    
    2004
    
    
    2003Japan variable annuity assets under management
    
    $
    24,641
    
    
    $
    14,129
    
    
    $
    6,220Japan MVA fixed annuity assets under management
    
    
    1,463
    
    
    
    502
    
    
    
    Total assets under management
    
    $
    26,104
    
    
    $
    14,631
    
    
    $
    6,220
 [1]

    
    Represents the cumulative impact of the Companys adoption of SOP 03-1.
  2005 Compared to 2004 
 
    
    The increase in fee income in 2005 was mainly a result of growth in Japans variable
annuity assets under management. As of December 31, 2005, Japans variable annuity assets
under management were $24.6 billion, a 74% increase from the prior year. The increase in
assets under management was driven by positive net flow of $9.8 billion and favorable
market appreciation of $3.4 billion, partially offset by a ($2.6) billion impact of foreign
currency exchange.
    
    Higher fees in 2005 were also the result of increased surrender activity as customers
surrendered policies in order to take advantage of significant appreciation in their
account balances.
    
    The Japan MVA fixed annuity business contributed $13 of higher investment spread income,
including net periodic coupon settlements included in realized losses, in 2005 compared to
2004. This increase in investment spread was driven by higher assets under management. As
of December 31, 2005, Japans MVA assets under management increased to $1.5 billion
compared to $502 in the prior year. The increase in fixed annuity assets under management
can be attributed to sales of $1.2 billion for the year ending December 31, 2005 as
compared to $521 for the prior year.
  
    
    The increase in operating costs in 2005 was primarily due to the significant growth in
the Japan operation and the investment in our Ireland operation.
    
    DAC amortization was higher in the current year as compared to the prior year due to
higher EGPs consistent with the growth in the Japan operation.
    
    Tax rates increased in 2005 primarily due to a deferred tax valuation allowance
established for losses on the United Kingdom operation.
 2004 Compared to 2003 
 
    
    The increase in fee income was primarily attributed to higher variable annuity assets
under management in our Japan operations. As of December 31, 2004, Japans variable
annuity assets under management were $14.1 billion, a 127% increase from the previous year.
 43




---



##### Table of Contents




    
    At the end of the third quarter of 2004, the MVA fixed annuity product was introduced to
provided a diversified product portfolio to customers in Japan. Japan fixed annuity sales
and assets under management for the year ending December 31, 2004 were $521 and $502,
respectively.
 Outlook
     44




---



##### Table of Contents



OTHER
 Operating Summary
    
    2005
    
    
    2004
    
    
    2003Fee income and other
    
    $
    83
    
    
    $
    119
    
    
    $
    143Net investment income
    
    
    4,021
    
    
    
    1,007
    
    
    
    220Net realized capital gains
    
    
    2
    
    
    
    156
    
    
    
    22Total revenues
    
    
    4,106
    
    
    
    1,282
    
    
    
    385Benefits, claims and claim adjustment expenses
    
    
    4,166
    
    
    
    1,017
    
    
    
    228Insurance operating costs and other expenses
    
    
    185
    
    
    
    153
    
    
    
    220Amortization of deferred policy acquisition costs and present value of future profits
    
    
    1
    
    
    
    6
    
    
    
    (15
    )Total benefits, claims and expenses
    
    
    4,352
    
    
    
    1,176
    
    
    
    433Income before income taxes and cumulative effect of accounting change
    
    
    (246
    )
    
    
    106
    
    
    
    (48
    )Income tax benefit
    
    
    (79
    )
    
    
    (151
    )
    
    
    (25
    )(Loss) income before cumulative effect of accounting change
    
    
    (167
    )
    
    
    257
    
    
    
    (23
    )Cumulative effect of accounting change, net of tax [1]
    
    
    
    
    
    
    2
    
    
    
    Net income
    
    $
    (167
    )
    
    $
    259
    
    
    $
    (23
    )
 [1]

    
    Represents the cumulative impact of the Companys adoption of SOP 03-1.
  2005 Compared to 2004 
 
    
    Net realized capital gains decreased for the year ended December 31, 2005 due
to increasing interest rates and the realized loss associated with the GMWB derivatives.
    
    Income tax benefit decreased for the year ended December 31, 2005 due to the
absence of a $190 tax benefit recorded during 2004.
    
    Other than the impact of Japan interest credited, benefits, claims, and claim
adjustment expenses increased for the year ended December 31, 2005 primarily due to the
establishment of a $102 after-tax reserve for investigations related to market timing by the
SEC and the New York Attorney Generals Office, directed brokerage by the SEC and single
premium group annuities by the New York Attorney Generals Office and the Connecticut
Attorney Generals Office.
 2004 Compared to 2003 
 
    
    Net realized capital gains increased for the year ended December 31, 2004 due to net
gains on bond sales and lower impairments.
    
    Income tax benefit increased for the year ended December 31, 2004 due to a $190 tax
benefit recorded during 2004.
 45




---



##### Table of Contents



INVESTMENTS
 General
         Valuation of Investments and Derivative Instruments
  46




---



##### Table of Contents



Valuation of Fixed Maturities
    2005
    
    2004Percentage
    
    
    
    
    
    Percentageof Total
    
    
    
    
    
    of TotalFair Value
    
    Fair Value
    
    Fair Value
    
    Fair ValuePriced via independent market quotations
    
    $
    42,535
    
    
    
    83.7
    %
    
    $
    41,268
    
    
    
    81.7
    %Priced via broker quotations
    
    
    2,433
    
    
    
    4.8
    %
    
    
    3,343
    
    
    
    6.6
    %Priced via matrices
    
    
    4,359
    
    
    
    8.6
    %
    
    
    4,018
    
    
    
    7.9
    %Priced via other methods
    
    
    151
    
    
    
    0.3
    %
    
    
    31
    
    
    
    0.1
    %Short-term investments [1]
    
    
    1,334
    
    
    
    2.6
    %
    
    
    1,871
    
    
    
    3.7
    %Total
    
    $
    50,812
    
    
    
    100.0
    %
    
    $
    50,531
    
    
    
    100.0
    %
 [1]

    
    Short-term investments are primarily valued at amortized cost, which approximates fair
value.
  Valuation of Derivative Instruments
   47




---



##### Table of Contents



Composition of Invested Assets
 2005
    
    2004Amount
    
    Percent
    
    Amount
    
    PercentFixed maturities, available-for-sale, at fair value
    
    $
    50,812
    
    
    
    63.7
    %
    
    $
    50,531
    
    
    
    73.5
    %Equity securities, available-for-sale, at fair value
    
    
    800
    
    
    
    1.0
    %
    
    
    525
    
    
    
    0.8
    %Equity securities held for trading, at fair value
    
    
    24,034
    
    
    
    30.1
    %
    
    
    13,634
    
    
    
    19.8
    %Policy loans, at outstanding balance
    
    
    2,016
    
    
    
    2.5
    %
    
    
    2,662
    
    
    
    3.9
    %Mortgage loans, at amortized cost
    
    
    1,513
    
    
    
    1.9
    %
    
    
    923
    
    
    
    1.3
    %Limited partnerships, at fair value
    
    
    431
    
    
    
    0.6
    %
    
    
    256
    
    
    
    0.4
    %Other investments
    
    
    178
    
    
    
    0.2
    %
    
    
    185
    
    
    
    0.3
    %Total investments
    
    $
    79,784
    
    
    
    100.0
    %
    
    $
    68,716
    
    
    
    100.0
    %
  Investment Results
  (Before-tax)
    
    2005
    
    
    2004
    
    
    2003Net
investment income  excluding income on policy loans
and equity securities held for trading
    
    $
    2,854
    
    
    $
    2,690
    
    
    $
    1,831Equity securities held for trading [1]
    
    
    3,847
    
    
    
    799
    
    
    
    Policy loan income
    
    
    144
    
    
    
    186
    
    
    
    210Net
investment income  total
    
    $
    6,845
    
    
    $
    3,675
    
    
    $
    2,041Yield on average invested assets [2]
    
    
    5.7
    %
    
    
    5.8
    %
    
    
    6.0
    %Gross gains on sale
    
    $
    346
    
    
    $
    359
    
    
    $
    267Gross losses on sale
    
    
    (254
    )
    
    
    (147
    )
    
    
    (95
    )Impairments
    
    
    (37
    )
    
    
    (25
    )
    
    
    (162
    )Japanese fixed annuity contract hedges, net [3]
    
    
    (36
    )
    
    
    3
    
    
    
    Periodic net coupon settlements on credit derivatives/Japan
    
    
    (32
    )
    
    
    8
    
    
    
    3GMWB derivatives, net
    
    
    (46
    )
    
    
    8
    
    
    
    6Other, net [4]
    
    
    34
    
    
    
    (42
    )
    
    
    7Net realized capital gains (losses), before-tax
    
    $
    (25
    )
    
    $
    164
    
    
    $
    26
 [1]

    
    Represents the change in value of equity securities held for trading.[2]

    
    Represents annualized net investment income (excluding income related to equity securities held for trading) divided by
the monthly weighted average invested assets at cost or amortized cost, as applicable, excluding equity securities held
for trading, the collateral received associated with the securities lending program and consolidated variable interest
entity minority interests.[3]

    
    Relates to the Japanese fixed annuity product (product and related derivative hedging instruments excluding periodic
net coupon settlements).[4]
    
    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.
 2005 Compared to 2004
  48




---



##### Table of Contents




    
    The lower net gains on fixed maturity sales in 2005 were primarily
the result of rising interest rates and losses associated with a
major automotive manufacturer. See additional discussion of the
gross gains and losses on sales below. If interest rates remain
at current levels or rise during 2006, or credit spreads widen,
net realized capital gains on fixed maturity sales for 2006 will
likely be lower than the 2005 levels. The losses associated with
the GMWB derivatives were primarily driven by changes in the GMWB
rider valuation assumptions in the fourth quarter of 2005. For
further discussion of the GMWB rider valuation assumption, see the
Capital Markets Risk Management section of the MD&A under Market
Risk  Key Market Risk Exposures.
 
    
    The Japanese fixed annuity contract hedges amount consists of the
foreign currency transaction remeasurement associated with the yen
denominated fixed annuity contracts offered in Japan and the
corresponding off setting cross currency swaps. Although the
Japanese fixed annuity contracts are economically hedged, the net
realized capital losses result from the accounting treatment,
which requires fixed annuity liabilities to be recorded at cost
but the associated derivatives to be reported at fair value. The
net realized capital losses in 2005 resulted from rising Japanese
interest rates, and in the first half of the year, a decrease in
U.S. interest rates. (For additional discussion of the Japanese
fixed annuity contract hedges see the Capital Markets Risk
Management section of the MD&A under Market Risk  Key Market
Risk Exposures and Note 4 of Notes to Consolidated Financial
Statements.) 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 2005 is associated with the
Japan fixed annuity cross currency swaps and results from the
interest rate differential between U.S. and Japanese interest
rates. The Japanese fixed annuity product was first offered by
the Company in the fourth quarter 2004. The adverse change in
2005 in comparison to 2004 primarily resulted from a full year of
the Japanese fixed annuity product swap accruals in 2005.
   2004 Compared to 2003
 49




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##### Table of Contents



Separate Account Products
    Other-Than-Temporary Impairments
  50




---



##### Table of Contents



2005
    
    2004
    
    2003ABS
    
    $
    2
    
    
    $
    6
    
    
    $
    82Commercial mortgages
    
    
    
    
    
    
    3
    
    
    
    CMBS/ Collateralized mortgage obligations ( CMOs)
    
    
    1
    
    
    
    3
    
    
    
    5Corporate
    
    
    26
    
    
    
    4
    
    
    
    47Equity
    
    
    8
    
    
    
    7
    
    
    
    21MBS  interest only securities
    
    
    
    
    
    
    2
    
    
    
    7Total other-than-temporary impairments
    
    $
    37
    
    
    $
    25
    
    
    $
    162
    2005
  
    
    Approximately $14 of other-than-temporary impairments recorded on
corporate securities related to three Canadian paper companies.
These companies operations have recently suffered from high
energy prices and falling demand, in part due to the appreciation
of the Canadian dollar in comparison to the U.S. dollar. These
investments continue to perform in accordance with the contractual
terms of the securities. As of December 31, 2005, the Company
held approximately $92 of securities issued by these three
companies in a total net unrealized loss position of $5.
Substantially all of the securities in an unrealized loss
position, as of December 31, 2005, were depressed only to a minor
extent and, as a result, the unrealized losses were deemed to be
temporary in nature.
 
    
    Also included in the corporate securities other-than-temporary
impairment amount for 2005 was $6 recorded on securities related
to two major automotive manufacturers. The market values of these
securities had fallen due to a downward adjustment in earnings and
cash flow guidance primarily due to sluggish sales, rising
employee and retiree benefit costs and an increased debt service
burden. These investments continue to perform in accordance with
the contractual terms of the securities. As of December 31, 2005,
the Company held approximately $70 of securities issued by these
two companies in a total net unrealized loss position of $5.
Substantially all of the securities in an unrealized loss
position, as of December 31, 2005, were depressed only to a minor
extent and, as a result, the unrealized losses were deemed to be
temporary in nature.
 2004
  51




---



##### Table of Contents



2003
  
    
    Approximately $25 of impairments on corporate fixed maturities were within the food and
beverage sector and related to securities issued by the Italian dairy concern, Parmalat
SpA. Parmalat filed for bankruptcy in December 2003 due to liquidity problems when it was
discovered that 4 billion euros of liquid investments previously reported on its balance
sheet were non-existent.
  
    
    Within ABS other-than-temporary impairments, there were approximately $29 of aircraft
lease receivables and $21 of collaterized debt obligations (CDOs). The aircraft lease
receivable impairments primarily consisted of investments in lower tranches of four
transactions. These securities are supported by aircraft leases and enhanced equipment
trust certificates issued by multiple airlines that had sustained a steep decline in market
value and adverse change in expected cash flows due to continued lower aircraft lease
rates, airline bankruptcies and the prolonged decline in airline travel. The CDO
impairments consisted of approximately eight securities, the majority of which were
interests in the lower tranches of securities backed by high yield corporate debt. These
impairments were primarily the result of continued high default rates in 2003 and lower
expected recovery rates on the CDOs underlying collateral.
    
    The $21 of the other-than-temporary impairments recorded on equity securities primarily
related to various diversified mutual funds. The market values of these funds had fallen
since the date of purchase due to declines in primarily the equity markets and were not
expected to recover within a reasonable period of time. Due to the severity of the price
depression and length of time the holdings were in an unrealized loss position, these
securities were deemed to be other-than-temporarily impaired.
 52




---



##### Table of Contents



INVESTMENT CREDIT RISK
    Derivative Instruments
   
    
    Total return swaps and credit spreadlocks involve the periodic
exchange of payments with other parties, at specified intervals,
calculated using the agreed upon index and notional principal
amounts. Generally, no cash or principal payments are exchanged
at the inception of the contract. Typically, at the time a swap
is entered into, the cash flow streams exchanged by the
counterparties are equal in value. As of December 31, 2005 and
2004, the notional value of total return swaps and credit
spreadlocks totaled $1.4 billion and $1.1 billion, respectively,
and the fair value totaled $4 and $5, respectively.
 
    
    Credit default swaps involve a transfer of credit risk from one
party to another in exchange for periodic payments. One party to
the contract will make a payment based on an agreed upon rate and
a notional amount. The second party, who assumes credit exposure,
will only make a payment when there is a credit event and such
payment will be equal to the notional value of the swap contract
less the value of the referenced security issuer debt obligation.
A credit event is generally defined as default on contractually
obligated interest or principal payments or bankruptcy. As of
December 31, 2005 and 2004, the notional value of these credit
default swaps, which exposed the Company to credit risk, totaled
$585 and $307, respectively, and the swap fair value totaled $(3)
and $2, respectively. As of December 31, 2005, the average S&P
rating for these referenced security issuer debt obligations is A-.
 
    
    The Company also uses credit default swaps to reduce its credit
exposure by entering into agreements in which the Company pays a
derivative counterparty a periodic fee in exchange for
compensation from the counterparty should a credit event occur on
the part of the referenced security issuer. Alternatively, the
derivative counterparty may be required to purchase the referenced
security at a predetermined value. The Company enters into these
agreements as an efficient means to reduce credit exposure to the
specified issuers. As of December 31, 2005 and 2004, the notional
value of these credit default swaps totaled $189 and $175,
respectively, and the swap fair value totaled $2 and $(1),
respectively. As of December 31, 2005, the average S&P
rating for these referenced securities issuers is BBB.
 53




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##### Table of Contents



Fixed Maturities
  Fixed Maturities by Type
 2005
    
    2004Percent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentof Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of TotalAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    Value
    
    ValueABS
    
    $
    6,819
    
    
    $
    48
    
    
    $
    (75
    )
    
    $
    6,792
    
    
    
    13.4
    %
    
    $
    6,346
    
    
    $
    76
    
    
    $
    (64
    )
    
    $
    6,358
    
    
    
    12.6
    %CMBS
    
    
    9,289
    
    
    
    175
    
    
    
    (97
    )
    
    
    9,367
    
    
    
    18.4
    %
    
    
    8,456
    
    
    
    370
    
    
    
    (20
    )
    
    
    8,806
    
    
    
    17.4
    %CMOs
    
    
    864
    
    
    
    3
    
    
    
    (5
    )
    
    
    862
    
    
    
    1.7
    %
    
    
    1,084
    
    
    
    11
    
    
    
    (3
    )
    
    
    1,092
    
    
    
    2.2
    %CorporateBasic industry
    
    
    2,296
    
    
    
    87
    
    
    
    (36
    )
    
    
    2,347
    
    
    
    4.6
    %
    
    
    2,420
    
    
    
    192
    
    
    
    (6
    )
    
    
    2,606
    
    
    
    5.2
    %Capital goods
    
    
    1,701
    
    
    
    91
    
    
    
    (18
    )
    
    
    1,774
    
    
    
    3.5
    %
    
    
    1,566
    
    
    
    126
    
    
    
    (6
    )
    
    
    1,686
    
    
    
    3.3
    %Consumer cyclical
    
    
    2,186
    
    
    
    71
    
    
    
    (37
    )
    
    
    2,220
    
    
    
    4.4
    %
    
    
    2,447
    
    
    
    163
    
    
    
    (8
    )
    
    
    2,602
    
    
    
    5.2
    %Consumer non-cyclical
    
    
    2,294
    
    
    
    124
    
    
    
    (24
    )
    
    
    2,394
    
    
    
    4.7
    %
    
    
    2,506
    
    
    
    207
    
    
    
    (6
    )
    
    
    2,707
    
    
    
    5.4
    %Energy
    
    
    1,068
    
    
    
    104
    
    
    
    (7
    )
    
    
    1,165
    
    
    
    2.3
    %
    
    
    1,251
    
    
    
    122
    
    
    
    (1
    )
    
    
    1,372
    
    
    
    2.7
    %Financial services
    
    
    6,768
    
    
    
    302
    
    
    
    (54
    )
    
    
    7,016
    
    
    
    13.8
    %
    
    
    6,549
    
    
    
    482
    
    
    
    (22
    )
    
    
    7,009
    
    
    
    13.9
    %Technology and
communications
    
    
    2,982
    
    
    
    193
    
    
    
    (32
    )
    
    
    3,143
    
    
    
    6.2
    %
    
    
    3,570
    
    
    
    342
    
    
    
    (11
    )
    
    
    3,901
    
    
    
    7.7
    %Transportation
    
    
    638
    
    
    
    29
    
    
    
    (6
    )
    
    
    661
    
    
    
    1.3
    %
    
    
    624
    
    
    
    44
    
    
    
    (1
    )
    
    
    667
    
    
    
    1.3
    %Utilities
    
    
    2,804
    
    
    
    154
    
    
    
    (30
    )
    
    
    2,928
    
    
    
    5.7
    %
    
    
    2,317
    
    
    
    230
    
    
    
    (7
    )
    
    
    2,540
    
    
    
    5.0
    %Other
    
    
    1,156
    
    
    
    23
    
    
    
    (15
    )
    
    
    1,164
    
    
    
    2.3
    %
    
    
    785
    
    
    
    49
    
    
    
    (2
    )
    
    
    832
    
    
    
    1.6
    %Government/Government
agenciesForeign
    
    
    719
    
    
    
    50
    
    
    
    (4
    )
    
    
    765
    
    
    
    1.5
    %
    
    
    723
    
    
    
    67
    
    
    
    (2
    )
    
    
    788
    
    
    
    1.6
    %United States
    
    
    630
    
    
    
    24
    
    
    
    (5
    )
    
    
    649
    
    
    
    1.3
    %
    
    
    884
    
    
    
    19
    
    
    
    (5
    )
    
    
    898
    
    
    
    1.8
    %MBS  agency
    
    
    2,794
    
    
    
    6
    
    
    
    (43
    )
    
    
    2,757
    
    
    
    5.4
    %
    
    
    1,771
    
    
    
    20
    
    
    
    (3
    )
    
    
    1,788
    
    
    
    3.5
    %MunicipalTaxable
    
    
    948
    
    
    
    47
    
    
    
    (4
    )
    
    
    991
    
    
    
    2.0
    %
    
    
    700
    
    
    
    30
    
    
    
    (5
    )
    
    
    725
    
    
    
    1.4
    %Tax-exempt
    
    
    2,308
    
    
    
    163
    
    
    
    (5
    )
    
    
    2,466
    
    
    
    4.9
    %
    
    
    2,080
    
    
    
    191
    
    
    
    (1
    )
    
    
    2,270
    
    
    
    4.5
    %Redeemable preferred
stock
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    13
    
    
    
    Short-term
    
    
    1,334
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    2.6
    %
    
    
    1,871
    
    
    
    
    
    
    
    
    
    
    
    1,871
    
    
    
    3.7
    %Total fixed maturities
    
    $
    49,615
    
    
    $
    1,694
    
    
    $
    (497
    )
    
    $
    50,812
    
    
    
    100.0
    %
    
    $
    47,962
    
    
    $
    2,742
    
    
    $
    (173
    )
    
    $
    50,531
    
    
    
    100.0
    %
     54




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##### Table of Contents



Fixed Maturities by Credit Quality
 2005
    
    2004Percent of
    
    
    
    
    
    
    
    
    
    Percent ofAmortized
    
    
    
    
    
    Total Fair
    
    Amortized
    
    
    
    
    
    Total FairCost
    
    Fair Value
    
    Value
    
    Cost
    
    Fair Value
    
    ValueUnited States Government/Government agencies
    
    $
    4,252
    
    
    $
    4,232
    
    
    
    8.3
    %
    
    $
    3,762
    
    
    $
    3,803
    
    
    
    7.5
    %AAA
    
    
    10,558
    
    
    
    10,746
    
    
    
    21.1
    %
    
    
    9,920
    
    
    
    10,282
    
    
    
    20.4
    %AA
    
    
    6,352
    
    
    
    6,490
    
    
    
    12.8
    %
    
    
    5,258
    
    
    
    5,509
    
    
    
    10.9
    %A
    
    
    13,276
    
    
    
    13,865
    
    
    
    27.3
    %
    
    
    12,694
    
    
    
    13,682
    
    
    
    27.1
    %BBB
    
    
    12,191
    
    
    
    12,490
    
    
    
    24.6
    %
    
    
    12,603
    
    
    
    13,452
    
    
    
    26.6
    %BB & below
    
    
    1,652
    
    
    
    1,655
    
    
    
    3.3
    %
    
    
    1,854
    
    
    
    1,932
    
    
    
    3.8
    %Short-term
    
    
    1,334
    
    
    
    1,334
    
    
    
    2.6
    %
    
    
    1,871
    
    
    
    1,871
    
    
    
    3.7
    %Total fixed maturities
    
    $
    49,615
    
    
    $
    50,812
    
    
    
    100.0
    %
    
    $
    47,962
    
    
    $
    50,531
    
    
    
    100.0
    %
   BIG Fixed Maturities by Type
 2005
    
    2004Percent of
    
    
    
    
    
    
    
    
    
    Percent ofAmortized
    
    
    
    
    
    Total Fair
    
    Amortized
    
    
    
    
    
    Total FairCost
    
    Fair Value
    
    Value
    
    Cost
    
    Fair Value
    
    ValueABS
    
    $
    243
    
    
    $
    214
    
    
    
    12.9
    %
    
    $
    224
    
    
    $
    198
    
    
    
    10.2
    %CMBS
    
    
    60
    
    
    
    71
    
    
    
    4.3
    %
    
    
    92
    
    
    
    101
    
    
    
    5.2
    %CorporateBasic industry
    
    
    222
    
    
    
    218
    
    
    
    13.2
    %
    
    
    191
    
    
    
    204
    
    
    
    10.6
    %Capital goods
    
    
    98
    
    
    
    97
    
    
    
    5.9
    %
    
    
    122
    
    
    
    122
    
    
    
    6.3
    %Consumer cyclical
    
    
    199
    
    
    
    196
    
    
    
    11.8
    %
    
    
    124
    
    
    
    132
    
    
    
    6.8
    %Consumer non-cyclical
    
    
    148
    
    
    
    154
    
    
    
    9.3
    %
    
    
    160
    
    
    
    169
    
    
    
    8.7
    %Energy
    
    
    88
    
    
    
    85
    
    
    
    5.1
    %
    
    
    55
    
    
    
    59
    
    
    
    3.1
    %Financial services
    
    
    10
    
    
    
    10
    
    
    
    0.6
    %
    
    
    22
    
    
    
    23
    
    
    
    1.2
    %Technology and communications
    
    
    191
    
    
    
    200
    
    
    
    12.1
    %
    
    
    315
    
    
    
    337
    
    
    
    17.5
    %Transportation
    
    
    21
    
    
    
    19
    
    
    
    1.1
    %
    
    
    8
    
    
    
    8
    
    
    
    0.4
    %Utilities
    
    
    137
    
    
    
    141
    
    
    
    8.5
    %
    
    
    293
    
    
    
    311
    
    
    
    16.1
    %Foreign government
    
    
    220
    
    
    
    235
    
    
    
    14.2
    %
    
    
    219
    
    
    
    240
    
    
    
    12.4
    %Other
    
    
    15
    
    
    
    15
    
    
    
    1.0
    %
    
    
    29
    
    
    
    28
    
    
    
    1.5
    %Total fixed maturities
    
    $
    1,652
    
    
    $
    1,655
    
    
    
    100.0
    %
    
    $
    1,854
    
    
    $
    1,932
    
    
    
    100.0
    %
  55




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##### Table of Contents



Unrealized Loss Aging of Total Available-for-Sale Securities
 2005
    
    2004Amortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    UnrealizedCost
    
    Value
    
    Loss
    
    Cost
    
    Value
    
    LossThree months or less
    
    $
    11,416
    
    
    $
    11,234
    
    
    $
    (182
    )
    
    $
    5,560
    
    
    $
    5,528
    
    
    $
    (32
    )Greater than three months to six months
    
    
    3,551
    
    
    
    3,465
    
    
    
    (86
    )
    
    
    474
    
    
    
    470
    
    
    
    (4
    )Greater than six months to nine months
    
    
    861
    
    
    
    843
    
    
    
    (18
    )
    
    
    2,277
    
    
    
    2,237
    
    
    
    (40
    )Greater than nine months to twelve months
    
    
    2,123
    
    
    
    2,057
    
    
    
    (66
    )
    
    
    399
    
    
    
    383
    
    
    
    (16
    )Greater than twelve months
    
    
    3,236
    
    
    
    3,086
    
    
    
    (150
    )
    
    
    1,415
    
    
    
    1,323
    
    
    
    (92
    )Total
    
    $
    21,187
    
    
    $
    20,685
    
    
    $
    (502
    )
    
    $
    10,125
    
    
    $
    9,941
    
    
    $
    (184
    )
     Total Available-for-Sale Securities with Unrealized Loss Greater Than Six Months by Type
 2005
    
    2004Percent of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percent ofTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalAmortized Cost
    
    Fair Value
    
    Unrealized Loss
    
    Unrealized Loss
    
    Amortized Cost
    
    Fair Value
    
    Unrealized Loss
    
    Unrealized LossABSAircraft lease receivables
    
    $
    175
    
    
    $
    127
    
    
    $
    (48
    )
    
    
    20.5
    %
    
    $
    194
    
    
    $
    144
    
    
    $
    (50
    )
    
    
    33.8
    %CDOs
    
    
    25
    
    
    
    24
    
    
    
    (1
    )
    
    
    0.4
    %
    
    
    63
    
    
    
    60
    
    
    
    (3
    )
    
    
    2.0
    %Credit card receivables
    
    
    109
    
    
    
    107
    
    
    
    (2
    )
    
    
    0.8
    %
    
    
    65
    
    
    
    64
    
    
    
    (1
    )
    
    
    0.7
    %Other ABS
    
    
    559
    
    
    
    549
    
    
    
    (10
    )
    
    
    4.3
    %
    
    
    397
    
    
    
    392
    
    
    
    (5
    )
    
    
    3.3
    %CMBS
    
    
    1,305
    
    
    
    1,270
    
    
    
    (35
    )
    
    
    15.0
    %
    
    
    614
    
    
    
    603
    
    
    
    (11
    )
    
    
    7.4
    %CorporateBasic industry
    
    
    365
    
    
    
    350
    
    
    
    (15
    )
    
    
    6.4
    %
    
    
    260
    
    
    
    256
    
    
    
    (4
    )
    
    
    2.8
    %Consumer cyclical
    
    
    308
    
    
    
    292
    
    
    
    (16
    )
    
    
    6.8
    %
    
    
    179
    
    
    
    174
    
    
    
    (5
    )
    
    
    3.3
    %Consumer non-cyclical
    
    
    273
    
    
    
    261
    
    
    
    (12
    )
    
    
    5.1
    %
    
    
    221
    
    
    
    215
    
    
    
    (6
    )
    
    
    4.1
    %Financial services
    
    
    1,260
    
    
    
    1,228
    
    
    
    (32
    )
    
    
    13.8
    %
    
    
    850
    
    
    
    824
    
    
    
    (26
    )
    
    
    17.5
    %Technology and communications
    
    
    287
    
    
    
    273
    
    
    
    (14
    )
    
    
    6.0
    %
    
    
    262
    
    
    
    250
    
    
    
    (12
    )
    
    
    8.1
    %Transportation
    
    
    30
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17
    
    
    
    
    
    
    
    Utilities
    
    
    112
    
    
    
    107
    
    
    
    (5
    )
    
    
    2.1
    %
    
    
    155
    
    
    
    149
    
    
    
    (6
    )
    
    
    4.1
    %Other
    
    
    327
    
    
    
    311
    
    
    
    (16
    )
    
    
    6.8
    %
    
    
    169
    
    
    
    163
    
    
    
    (6
    )
    
    
    4.1
    %Other securities
    
    
    1,085
    
    
    
    1,057
    
    
    
    (28
    )
    
    
    12.0
    %
    
    
    645
    
    
    
    632
    
    
    
    (13
    )
    
    
    8.8
    %Total
    
    $
    6,220
    
    
    $
    5,986
    
    
    $
    (234
    )
    
    
    100.0
    %
    
    $
    4,091
    
    
    $
    3,943
    
    
    $
    (148
    )
    
    
    100.0
    %
  56




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##### Table of Contents



Aircraft lease receivables
 CMBS
 Financial services
    Unrealized Loss Aging of Available-for-Sale BIG and Equity Securities
 2005
    
    2004Amortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    UnrealizedCost
    
    Value
    
    Loss
    
    Cost
    
    Value
    
    LossThree months or less
    
    $
    381
    
    
    $
    363
    
    
    $
    (18
    )
    
    $
    206
    
    
    $
    203
    
    
    $
    (3
    )Greater than three months to six months
    
    
    127
    
    
    
    123
    
    
    
    (4
    )
    
    
    14
    
    
    
    13
    
    
    
    (1
    )Greater than six months to nine months
    
    
    121
    
    
    
    117
    
    
    
    (4
    )
    
    
    128
    
    
    
    120
    
    
    
    (8
    )Greater than nine months to twelve months
    
    
    71
    
    
    
    68
    
    
    
    (3
    )
    
    
    79
    
    
    
    73
    
    
    
    (6
    )Greater than twelve months
    
    
    270
    
    
    
    230
    
    
    
    (40
    )
    
    
    225
    
    
    
    184
    
    
    
    (41
    )Total
    
    $
    970
    
    
    $
    901
    
    
    $
    (69
    )
    
    $
    652
    
    
    $
    593
    
    
    $
    (59
    )
  57




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##### Table of Contents



Available-for-Sale BIG and Equity Securities with Unrealized Loss Greater Than Six Months by Type
 2005
    
    2004Percent of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percent ofTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalAmortized
    
    Fair
    
    Unrealized
    
    Unrealized
    
    Amortized
    
    Fair
    
    Unrealized
    
    UnrealizedCost
    
    Value
    
    Loss
    
    Loss
    
    Cost
    
    Value
    
    Loss
    
    LossABSAircraft lease receivables
    
    $
    98
    
    
    $
    69
    
    
    $
    (29
    )
    
    
    61.6
    %
    
    $
    109
    
    
    $
    79
    
    
    $
    (30
    )
    
    
    54.5
    %CDOs
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    23
    
    
    
    (2
    )
    
    
    3.6
    %Credit card receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8
    
    
    
    
    
    
    
    Other ABS
    
    
    12
    
    
    
    10
    
    
    
    (2
    )
    
    
    4.3
    %
    
    
    4
    
    
    
    3
    
    
    
    (1
    )
    
    
    1.8
    %CorporateBasic industry
    
    
    56
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    12
    
    
    
    
    
    
    
    Consumer cyclical
    
    
    61
    
    
    
    58
    
    
    
    (3
    )
    
    
    6.4
    %
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    Consumer non-cyclical
    
    
    13
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Financial services
    
    
    74
    
    
    
    71
    
    
    
    (3
    )
    
    
    6.4
    %
    
    
    138
    
    
    
    128
    
    
    
    (10
    )
    
    
    18.2
    %Technology and communications
    
    
    40
    
    
    
    38
    
    
    
    (2
    )
    
    
    4.3
    %
    
    
    62
    
    
    
    56
    
    
    
    (6
    )
    
    
    10.9
    %Utilities
    
    
    26
    
    
    
    24
    
    
    
    (2
    )
    
    
    4.3
    %
    
    
    37
    
    
    
    34
    
    
    
    (3
    )
    
    
    5.5
    %Other
    
    
    81
    
    
    
    75
    
    
    
    (6
    )
    
    
    12.7
    %
    
    
    27
    
    
    
    24
    
    
    
    (3
    )
    
    
    5.5
    %Other securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Total
    
    $
    462
    
    
    $
    415
    
    
    $
    (47
    )
    
    
    100.0
    %
    
    $
    432
    
    
    $
    377
    
    
    $
    (55
    )
    
    
    100.0
    %
  58




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##### Table of Contents



CAPITAL MARKETS RISK MANAGEMENT
  Market Risk
  Interest Rate Risk
      Equity Risk
  59




---



##### Table of Contents



Foreign Currency Exchange Risk
  Derivative Instruments
         Key Market Risk Exposures
   60




---



##### Table of Contents



Interest Rate Risk
  Fixed Maturity Investments
  Liabilities
     Derivatives
    61




---



##### Table of Contents



Calculated Interest Rate Sensitivity
  Change in Net Economic Value As of December 31,2005
    
    2004Basis point shift
    
    
    -100
    
    
    
    + 100
    
    
    
    -100
    
    
    
    + 100Amount
    
    $
    (48
    )
    
    $
    10
    
    
    $
    (73
    )
    
    $
    15
   Change in Fair Value As of December 31,2005
    
    2004Basis point shift
    
    
    - 100
    
    
    
    + 100
    
    
    
    - 100
    
    
    
    + 100Amount
    
    $
    471
    
    
    $
    (451
    )
    
    $
    501
    
    
    $
    (491
    )
  Equity Risk
   62




---



##### Table of Contents



63




---



##### Table of Contents



Foreign Currency Exchange Risk
    64




---



##### Table of Contents



65




---



##### Table of Contents



CAPITAL RESOURCES AND LIQUIDITY
  Liquidity Requirements
       66




---



##### Table of Contents



Sources of Liquidity
 Shelf Registration
   Contractual Obligations and Commitments
  Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    year
    
    1-3 years
    
    3-5 years
    
    5 yearsLong-term debt [1] [2]
    
    $
    2,911
    
    
    $
    78
    
    
    $
    335
    
    
    $
    128
    
    
    $
    2,370Operating leases
    
    
    288
    
    
    
    73
    
    
    
    116
    
    
    
    83
    
    
    
    16Policyholder obligations [3]
    
    
    334,460
    
    
    
    21,974
    
    
    
    47,105
    
    
    
    47,973
    
    
    
    217,408Purchase obligations [4]
    
    
    44,933
    
    
    
    1,160
    
    
    
    20,553
    
    
    
    
    
    
    
    23,220Other long-term liabilities [5]
    
    
    1,784
    
    
    
    1,742
    
    
    
    
    
    
    
    42
    
    
    
    Total
    
    $
    384,376
    
    
    $
    25,027
    
    
    $
    68,109
    
    
    $
    48,226
    
    
    $
    243,014
 [1]
    
    Includes contractual interest and principal payments. Payments exclude amounts associated
with fair-value hedges of certain of the Companys long-term debt. All long-term debt
obligations have fixed rates of interest.[2]
    
    Long-term debt obligations also includes principal and interest payments of $200 and $676,
respectively, related to junior subordinated debentures which are callable beginning in 2006.[3]
    
    Estimated life, annuity and disability obligations include death and disability
claims, policy surrenders, policyholder dividends      , and trail commissions
offset by expected future deposits and premiums on in-force contracts. Estimated
contractual policyholder obligations are based on mortality, morbidity and lapse assumptions
comparable with Lifes historical experience, modified for recent observed trends. Life has
also assumed market growth and interest crediting consistent with assumptions used in
amortizing deferred acquisition costs. In contrast to this table, the majority of
Lifes obligations are recorded on the balance sheet at the current account value, as
described in Critical Accounting Estimates, and do not incorporate an expectation of
future market growth, interest crediting, or future deposits . Therefore, the
estimated contractual policyholder obligations presented in this table significantly
exceed the liabilities recorded in reserve for future policy benefits and unpaid
claims and claim adjustment expenses, other policyholder funds and benefits payable
and separate account liabilities. Due to the significance of the assumptions used, the
amounts presented could materially differ from actual results. As separate
account obligations are legally insulated from general account obligations, the separate
account obligations will be fully funded by cash flows from separate account assets. Life
expects to fully fund the general account obligations from cash flows from general account
investments and future deposits and premiums.[4]
    
    Includes $562 in commitments to purchase investments, including $265 of limited
partnerships and $297 of mortgage loans in less than one year, since the timing of funding the
limited partnership commitments cannot be estimated. Payables for securities purchased of
$301, which are reflected on the consolidated balance sheet, are also included.[5]
    
    As of December 31, 2005, the Company has accepted cash collateral of $60 and securities
lending collateral of $819 in connection with the Companys derivative instruments. Since the
timing of the return of the collateral is uncertain, the return of the collateral has been
included in the payments due in less than one year. 67




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##### Table of Contents



Capitalization
  2005
    
    2004Short-term debt (includes current maturities of long-term debt)
    
    $
    
    
    
    $
    Long-term debt (1)
    
    
    1,050
    
    
    
    1,050Total debt
    
    $
    1,050
    
    
    $
    1,050Equity excluding net unrealized capital gains on securities, net of tax
    
    $
    8,751
    
    
    
    7,994Net unrealized capital gains on securities, net of tax
    
    
    608
    
    
    
    1,178Total stockholders equity
    
    $
    9,359
    
    
    $
    9,172Total capitalization
    
    $
    10,409
    
    
    $
    10,222Debt to equity
    
    
    11
    %
    
    
    11
    %Debt to capitalization
    
    
    10
    %
    
    
    10
    %
 (1)
    
    Includes junior subordinated debentures.  Debt
  Dividends
  Cash Flow
 2005
    
    2004
    
    2003Cash provided by operating activities
    
    $
    1,539
    
    
    $
    1,674
    
    
    $
    1,425Cash used for investing activities
    
    
    (2,474
    )
    
    
    (1,679
    )
    
    
    (4,424
    )Cash provided by financing activities
    
    
    1,105
    
    
    
    673
    
    
    
    3,089Cash  end of year
    
    
    1,001
    
    
    
    933
    
    
    
    265
 2005
Compared to 2004
 2004 Compared to 2003 
 68




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##### Table of Contents



Equity Markets
  Ratings
   Standard &A.M. Best
    
    Fitch
    
    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
    
    AMB-1
    
    
    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
  NAIC Developments
 Changes to the NAIC RBC Requirements for Variable Annuities with Guarantees  C-3 Phase II Capital
   69




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##### Table of Contents



Contingencies
 Legal Proceedings
 Dependence on Certain Third Party Relationships 
  Regulatory Developments
    Legislative Initiatives
   IMPACT OF NEW ACCOUNTING STANDARDS
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  70




---



##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures
  Changes in internal control over financial reporting
  
 Item 9B. OTHER INFORMATION
  
 PART III
 
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended
    
    
    Year EndedDecember 31, 2005
    
    
    December 31, 2004(1) Audit fees
    
    $
    7,017,089
    
    
    $
    5,779,019(2) Audit-related fees(a)
    
    
    57,152
    
    
    
    475,546(3) Tax fees(b)
    
    
    12,456
    
    
    
    40,952(4) All other fees(c)
    
    
    
    
    
    
    20,000
      71




---



##### Table of Contents



PART IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  (1)
    
    Consolidated Financial Statements.See Index to Consolidated Financial Statements and
Schedules elsewhere herein.(2)
    
    Consolidated Financial Statement Schedules.See Index to Consolidated Financial
Statement Schedules elsewhere herein.(3)
    
    Exhibits.See Exhibit Index elsewhere herein.
 72




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
 Page(s)Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Statements of Income for the three years ended December 31, 2005
    
    F-3Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    F-4Consolidated Statements of Changes in Stockholders Equity for the three years ended
December 31, 2005
    
    F-5Consolidated Statements of Cash Flows for the three years ended December 31, 2005
    
    F-6Notes to Consolidated Financial Statements
    
    F-749Schedule I 3⁄4 Summary of Investments  Other Than Investments in Affiliates
    
    S-1Schedule II 3⁄4 Condensed Financial Information of Hartford Life, Inc.
    
    S-23Schedule III 3⁄4 Supplementary Insurance Information
    
    S-4Schedule IV 3⁄4 Reinsurance
    
    S-5Schedule V 3⁄4 Valuation and Qualifying Accounts
    
    S-6
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 F-2




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Income
 For the years ended December 31,(In millions)
    
    2005
    
    2004
    
    2003RevenuesFee income and other
    
    $
    4,000
    
    
    $
    3,464
    
    
    $
    2,891Earned premiums
    
    
    4,203
    
    
    
    4,072
    
    
    
    3,086Net investment incomeSecurities available-for-sale and other
    
    
    2,998
    
    
    
    2,876
    
    
    
    2,041Equity securities held for trading
    
    
    3,847
    
    
    
    799
    
    
    
    Total net investment income
    
    
    6,845
    
    
    
    3,675
    
    
    
    2,041Net realized capital (losses) gains
    
    
    (25
    )
    
    
    164
    
    
    
    26Total revenues
    
    
    15,023
    
    
    
    11,375
    
    
    
    8,044Benefits, claims and expensesBenefits, claims and claim adjustment expenses
    
    
    9,809
    
    
    
    6,630
    
    
    
    4,616Insurance expenses and other
    
    
    2,485
    
    
    
    2,116
    
    
    
    1,544Amortization of deferred policy acquisition costs and present
value of future profits
    
    
    1,172
    
    
    
    993
    
    
    
    755Dividends to policyholders
    
    
    37
    
    
    
    29
    
    
    
    63Interest expense
    
    
    80
    
    
    
    97
    
    
    
    117Total benefits, claims and expenses
    
    
    13,583
    
    
    
    9,865
    
    
    
    7,095Income before income tax expense
and cumulative effect of
accounting changes
    
    
    1,440
    
    
    
    1,510
    
    
    
    949Income tax expense
    
    
    288
    
    
    
    168
    
    
    
    180Income before cumulative effect of
accounting changes
    
    
    1,152
    
    
    
    1,342
    
    
    
    769Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    (23
    )
    
    
    Net income
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769
 See Notes to Consolidated Financial Statements.
 F-3




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 As of December 31,(In millions, except for share data)
    
    2005
    
    2004AssetsInvestmentsFixed maturities, available for sale, at fair value (amortized cost of $49,615
and $47,962)
    
    $
    50,812
    
    
    $
    50,531Equity securities, available for sale, at fair value (cost of $781 and $506)
    
    
    800
    
    
    
    525Equity securities, trading securities, at fair value (cost of $19,570 and $12,514)
    
    
    24,034
    
    
    
    13,634Policy loans, at outstanding balance
    
    
    2,016
    
    
    
    2,662Mortgage loans on real estate
    
    
    1,513
    
    
    
    923Other investments
    
    
    609
    
    
    
    441Total investments
    
    
    79,784
    
    
    
    68,716Cash
    
    
    1,001
    
    
    
    933Premiums receivable and agents balances
    
    
    426
    
    
    
    391Reinsurance recoverables
    
    
    800
    
    
    
    993Deferred policy acquisition costs and present value of future profits
    
    
    8,567
    
    
    
    7,437Deferred income taxes
    
    
    (633
    )
    
    
    (747
    )Goodwill
    
    
    796
    
    
    
    796Other assets
    
    
    2,148
    
    
    
    1,911Separate account assets
    
    
    150,875
    
    
    
    140,023Total assets
    
    $
    243,764
    
    
    $
    220,453LiabilitiesReserve for future policy benefits
    
    $
    12,777
    
    
    $
    12,250Other policyholder funds
    
    
    64,452
    
    
    
    52,833Long-term debt
    
    
    1,050
    
    
    
    1,050Other liabilities
    
    
    5,251
    
    
    
    5,125Separate account liabilities
    
    
    150,875
    
    
    
    140,023Total liabilities
    
    
    234,405
    
    
    
    211,281Commitments and Contingent Liabilities, Note 12
    
    
    
    
    
    
    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
    
    
    608
    
    
    
    1,178Foreign currency translation adjustments
    
    
    (79
    )
    
    
    16Total accumulated other comprehensive income
    
    
    529
    
    
    
    1,194Retained earnings
    
    
    5,736
    
    
    
    4,884Total stockholders equity
    
    
    9,359
    
    
    
    9,172Total liabilities and stockholders equity
    
    $
    243,764
    
    
    $
    220,453
 See Notes to Consolidated Financial Statements.
 F-4




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Changes in Stockholders Equity
 Accumulated Other Comprehensive IncomeNet GainNet Unrealized
    
    (Loss) onCapital
    
    Cash Flow
    
    ForeignGains on
    
    Hedging
    
    Currency
    
    
    
    
    
    TotalCommon
    
    Capital
    
    Securities,
    
    Instruments,
    
    Translation
    
    Retained
    
    Stockholders(In millions)
    
    Stock
    
    Surplus
    
    Net of Tax
    
    Net of Tax
    
    Adjustments
    
    Earnings
    
    Equity2005Balance, December 31, 2004
    
    $
    
    
    
    $
    3,094
    
    
    $
    1,348
    
    
    $
    (170
    )
    
    $
    16
    
    
    $
    4,884
    
    
    $
    9,172Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,152
    
    
    
    1,152Other comprehensive income, net of tax (1)Net change in unrealized capital gains
on securities (3)
    
    
    
    
    
    
    
    
    
    
    (639
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (639
    )Net loss on cash flow hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    (95
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (665
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    487Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    (300
    )Balance, December 31, 2005
    
    $
    
    
    
    $
    3,094
    
    
    $
    709
    
    
    $
    (101
    )
    
    $
    (79
    )
    
    $
    5,736
    
    
    $
    9,3592004Balance, December 31, 2003
    
    $
    
    
    
    $
    2,489
    
    
    $
    928
    
    
    $
    (25
    )
    
    $
    (43
    )
    
    $
    3,710
    
    
    $
    7,059Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,319
    
    
    
    1,319Other comprehensive income, net of tax (1)Cumulative effect of accounting change (2)
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292Net change in unrealized capital gains
on securities (3)
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128Net loss on cash flow hedging instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145
    )
    
    
    
    
    
    
    
    
    
    
    (145
    )Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,653Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145
    )
    
    
    (145
    )Capital contribution from parent
    
    
    
    
    
    
    605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    605Balance, December 31, 2004
    
    $
    
    
    
    $
    3,094
    
    
    $
    1,348
    
    
    $
    (170
    )
    
    $
    16
    
    
    $
    4,884
    
    
    $
    9,1722003Balance, December 31, 2002
    
    $
    
    
    
    $
    1,970
    
    
    $
    621
    
    
    $
    126
    
    
    $
    (39
    )
    
    $
    3,010
    
    
    $
    5,688Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    769
    
    
    
    769Other comprehensive income, net of tax (1)Net change in unrealized capital gains
on securities (3)
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307Net gain on cash flow hedging
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )
    
    
    
    
    
    
    
    
    
    
    (151
    )Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    152Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    921Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    (69
    )Capital contribution from parent
    
    
    
    
    
    
    519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519Balance, December 31, 2003
    
    $
    
    
    
    $
    2,489
    
    
    $
    928
    
    
    $
    (25
    )
    
    $
    (43
    )
    
    $
    3,710
    
    
    $
    7,059
 (1)
    
    Net change in unrealized capital gain on securities is reflected net of tax provision of
$(344), $69, and $165 for the years ended December 31, 2005, 2004 and 2003, respectively.
Net (loss) gain on cash flow hedging instruments is net of tax (benefit) provision of $37 and
$(86) for the years ended December 31, 2005 and 2004, respectively. There is no tax effect
on cumulative translation adjustments.(2)
    
    Net change in unrealized capital gain on securities, net of tax, includes cumulative effect
of accounting change of $(23) to net income and $20 to net gain on cash flow hedging
instruments.(3)
    
    There were reclassification adjustments for after-tax gains (losses) realized in net income
of $20, $ 97, and $24 for the years ended December 31, 2005, 2004 and 2003, respectively.
 See Notes to Consolidated Financial Statements.
 F-5




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 For the years ended December 31,(In millions)
    
    2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769Adjustments to reconcile net income to net cash provided by operating activitiesNet realized capital (gains) losses
    
    
    25
    
    
    
    (164
    )
    
    
    (26
    )Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    23
    
    
    
    Amortization of deferred policy acquisition costs and present value of future
profits
    
    
    1,171
    
    
    
    993
    
    
    
    755Additions to deferred policy acquisition costs and present value of future profits
    
    
    (2,071
    )
    
    
    (1,968
    )
    
    
    (1,626
    )Depreciation and amortization (accretion)
    
    
    355
    
    
    
    (39
    )
    
    
    137Decrease (increase) in premiums receivable and agents balances
    
    
    (34
    )
    
    
    (56
    )
    
    
    1Increase (decrease) in other liabilities
    
    
    522
    
    
    
    (83
    )
    
    
    467Increase in receivables
    
    
    30
    
    
    
    (290
    )
    
    
    (65
    )Increase in accrued liabilities and payables
    
    
    37
    
    
    
    235
    
    
    
    298(Decrease) increase in accrued tax
    
    
    (157
    )
    
    
    (31
    )
    
    
    (36
    )Decrease (increase) in deferred income tax
    
    
    175
    
    
    
    291
    
    
    
    153Amortization of sales inducements
    
    
    39
    
    
    
    30
    
    
    
    68Additions to deferred sales inducements
    
    
    (85
    )
    
    
    (141
    )
    
    
    (136
    )Increase in future policy benefits
    
    
    487
    
    
    
    872
    
    
    
    928Net increase in equity securities, held for trading
    
    
    (12,872
    )
    
    
    (7,409
    )
    
    
    Net receipts from investment contracts credited to policyholder accounts
associated with equity securities, held for trading
    
    
    13,087
    
    
    
    7,909
    
    
    
    Decrease (increase) in reinsurance recoverables
    
    
    14
    
    
    
    (41
    )
    
    
    35(Increase) decrease in other assets
    
    
    (336
    )
    
    
    224
    
    
    
    (297
    )Net cash provided by operating activities
    
    
    1,539
    
    
    
    1,674
    
    
    
    1,425Investing ActivitiesPurchases of investments
    
    
    (24,288
    )
    
    
    (19,882
    )
    
    
    (15,286
    )Sales of investments
    
    
    19,166
    
    
    
    14,788
    
    
    
    7,787Maturity and principal paydowns of fixed maturity investments
    
    
    2,733
    
    
    
    3,506
    
    
    
    3,540Purchase of business/affiliate, net of cash acquired
    
    
    
    
    
    
    (58
    )
    
    
    (464
    )Other
    
    
    (85
    )
    
    
    (33
    )
    
    
    (1
    )Net cash used for investing activities
    
    
    (2,474
    )
    
    
    (1,679
    )
    
    
    (4,424
    )Financing ActivitiesCapital contribution from parent
    
    
    
    
    
    
    605
    
    
    
    519Repayment of short term debt
    
    
    
    
    
    
    (505
    )
    
    
    Proceeds from issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    230Repayments of company obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely parent junior subordinated debentures
    
    
    
    
    
    
    (250
    )
    
    
    Dividends paid
    
    
    (282
    )
    
    
    (139
    )
    
    
    (69
    )Net receipts
from investment and universal lifetype contracts
    
    
    1,387
    
    
    
    962
    
    
    
    2,409Net cash provided by financing activities
    
    
    1,105
    
    
    
    673
    
    
    
    3,089Net increase in cash
    
    
    170
    
    
    
    668
    
    
    
    90Impact of foreign exchange
    
    
    (102
    )
    
    
    
    
    
    
    (4
    )Cash  beginning of year
    
    
    933
    
    
    
    265
    
    
    
    179Cash  end of year
    
    $
    1,001
    
    
    $
    933
    
    
    $
    265Supplemental Disclosure of Cash Flow InformationNet cash paid (received) during the year for:Income taxes
    
    $
    240
    
    
    $
    66
    
    
    $
    50Interest
    
    $
    79
    
    
    $
    94
    
    
    $
    115
 See Notes to Consolidated Financial Statements
 F-6




---



##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollar amounts in millions, unless otherwise stated)
 Note 1. Organization and Description of Business
  Note 2. Basis of Presentation and Accounting Policies
 Basis of Presentation
   Use of Estimates
  Reclassifications
  Adoption of New Accounting Standards
  F-7




---



##### Table of Contents




    
    Recognizing expenses for a variety of contracts and
contract features, including guaranteed minimum death
benefits (GMDB), certain death benefits on universal-life
type contracts and annuitization options, on an accrual basis
versus the previous method of recognition upon payment;
    
    Reporting and measuring assets and liabilities of
certain separate account products as general account assets
and liabilities when specified criteria are not met;
    
    Reporting and measuring the Companys interest in its
separate accounts as general account assets based on the
insurers proportionate beneficial interest in the separate
accounts underlying assets; and
    
    Capitalizing sales inducements that meet specified
criteria and amortizing such amounts over the life of the
contracts using the same methodology as used for amortizing
deferred acquisition costs (DAC).
  Components of Cumulative Effect of Adoption
    
    Net Income
    
    Other Comprehensive IncomeEstablishing GMDB and other benefit reserves for annuity contracts
    
    $
    (54
    )
    
    $
    Reclassifying certain separate accounts to general account
    
    
    30
    
    
    
    294Other
    
    
    1
    
    
    
    (2
    )Total cumulative effect of adoption
    
    $
    (23
    )
    
    $
    292
   F-8




---



##### Table of Contents



Future Adoption of New Accounting Standards
    F-9




---



##### Table of Contents



Stock-Based Compensation
    Investments
  Valuation of Fixed Maturities
   F-10




---



##### Table of Contents



2005
    
    2004Percentage
    
    
    
    
    
    Percentageof Total Fair
    
    
    
    
    
    of Total FairFair Value
    
    Value
    
    Fair Value
    
    ValuePriced via independent market quotations
    
    $
    42,535
    
    
    
    83.7
    %
    
    $
    41,268
    
    
    
    81.7
    %Priced via broker quotations
    
    
    2,433
    
    
    
    4.8
    %
    
    
    3,343
    
    
    
    6.6
    %Priced via matrices
    
    
    4,359
    
    
    
    8.6
    %
    
    
    4,018
    
    
    
    7.9
    %Priced via other methods
    
    
    151
    
    
    
    0.3
    %
    
    
    31
    
    
    
    0.1
    %Short-term investments [1]
    
    
    1,334
    
    
    
    2.6
    %
    
    
    1,871
    
    
    
    3.7
    %Total
    
    $
    50,812
    
    
    
    100.0
    %
    
    $
    50,531
    
    
    
    100.0
    %
 [1]
    
    Short-term investments are primarily valued at amortized cost, which approximates fair
value.
  Other-Than-Temporary Impairments on Available-for-Sale Securities
    F-11




---



##### Table of Contents



Mortgage Loan Impairments
  Net Realized Capital Gains and Losses
  Net Investment Income
   Derivative Instruments
 Overview
   Accounting and Financial Statement Presentation of Derivative Instruments and Hedging
Activities
  F-12




---



##### Table of Contents



Fair-Value Hedges
  Cash-Flow Hedges
  Foreign-Currency Hedges
  Net Investment in a Foreign Operation Hedges
  Other Investment and Risk Management Activities
  Hedge Documentation and Effectiveness Testing
  Discontinuance of Hedge Accounting
  F-13




---



##### Table of Contents



Embedded Derivatives
  Credit Risk
  Product Derivatives and Risk Management
  F-14




---



##### Table of Contents



Separate Accounts
  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
   F-15




---



##### Table of Contents



Unlock Analysis
      Reserve for Future Policy Benefits and Unpaid Claims and Claim Adjustment Expenses
  F-16




---



##### Table of Contents



Other Policyholder Funds and Benefits Payable
   Revenue Recognition
  Foreign Currency Translation
  Dividends to Policyholders
   Mutual Funds
  F-17




---



##### Table of Contents



Reinsurance
  Income Taxes
  Note 3. Segment Information
          F-18




---



##### Table of Contents



2005
    
    2004
    
    2003Retail Products GroupRealized gains (losses)
    
    $
    34
    
    
    $
    24
    
    
    $
    1Credit risk fees
    
    
    (26
    )
    
    
    (22
    )
    
    
    (14
    )Retirement PlansRealized gains (losses)
    
    
    6
    
    
    
    5
    
    
    
    5Credit risk fees
    
    
    (8
    )
    
    
    (8
    )
    
    
    (7
    )Institutional Solutions GroupRealized gains (losses)
    
    
    13
    
    
    
    9
    
    
    
    7Credit risk fees
    
    
    (19
    )
    
    
    (17
    )
    
    
    (14
    )Individual LifeRealized gains (losses)
    
    
    11
    
    
    
    13
    
    
    
    0Credit risk fees
    
    
    (6
    )
    
    
    (6
    )
    
    
    (6
    )Group BenefitsRealized gains (losses)
    
    
    10
    
    
    
    8
    
    
    
    7Credit risk fees
    
    
    (9
    )
    
    
    (9
    )
    
    
    (5
    )OtherRealized gains (losses)
    
    
    (74
    )
    
    
    (59
    )
    
    
    (20
    )Credit risk fees
    
    
    68
    
    
    
    62
    
    
    
    46Total
    
    $
    
    
    
    $
    
    
    
    $
    
 F-19




---



##### Table of Contents



For the years ended December 31,Revenues by Product Line
    
    2005
    
    2004
    
    2003RevenuesEarned premiums, fees, and other considerationsRetailIndividual annuity
    
    $
    1,780
    
    
    $
    1,618
    
    
    $
    1,310Retail mutual funds
    
    
    416
    
    
    
    393
    
    
    
    303Other
    
    
    77
    
    
    
    13
    
    
    
    7Total Retail
    
    
    2,273
    
    
    
    2,024
    
    
    
    1,620Retirement Plans401(k)
    
    
    111
    
    
    
    81
    
    
    
    52Governmental
    
    
    51
    
    
    
    50
    
    
    
    46Total Retirement Plans
    
    
    162
    
    
    
    131
    
    
    
    98InstitutionalInstitutional
    
    
    518
    
    
    
    474
    
    
    
    790PPLI
    
    
    105
    
    
    
    150
    
    
    
    147Total Institutional
    
    
    623
    
    
    
    624
    
    
    
    937Individual LifeTotal Individual Life
    
    
    769
    
    
    
    746
    
    
    
    727Group BenefitsGroup disability
    
    
    1,749
    
    
    
    1,602
    
    
    
    1,010Group life
    
    
    1,643
    
    
    
    1,655
    
    
    
    1,012Other
    
    
    418
    
    
    
    395
    
    
    
    340Total Group Benefits
    
    
    3,810
    
    
    
    3,652
    
    
    
    2,362InternationalTotal International
    
    
    483
    
    
    
    240
    
    
    
    90Other
    
    
    83
    
    
    
    119
    
    
    
    143Total Life premiums, fees, and other considerations
    
    
    8,203
    
    
    
    7,536
    
    
    
    5,977Net investment income [1]
    
    
    6,845
    
    
    
    3,675
    
    
    
    2,041Net realized capital gains (losses)
    
    
    (25
    )
    
    
    164
    
    
    
    26Total
    
    $
    15,023
    
    
    $
    11,375
    
    
    $
    8,044
 [1]
    
    Amounts reported in 2003 are prior to the adoption of SOP 03-1.
 For the years ended December 31,Net Income (Loss)
    
    2005
    
    2004
    
    2003Retail
    
    $
    622
    
    
    $
    503
    
    
    $
    412Retirement Plans
    
    
    75
    
    
    
    66
    
    
    
    42Institutional [1]
    
    
    88
    
    
    
    68
    
    
    
    32Individual Life
    
    
    166
    
    
    
    155
    
    
    
    145Group Benefits
    
    
    272
    
    
    
    229
    
    
    
    148International
    
    
    96
    
    
    
    39
    
    
    
    13Other [2] [3]
    
    
    (167
    )
    
    
    259
    
    
    
    (23
    )Total
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769
 [1]
    
    2003 includes $40 of after-tax expense related to the settlement of certain litigation.[2]
    
    For the year ended December 31, 2004 Life includes a $190 tax benefit recorded
in its Other category, which relates to an agreement with the IRS on the
resolution of matters pertaining to tax years prior to 2004. For further
discussion of this tax benefit, see Note 12.[3]
    
    For the year ended December 31, 2005, reflects an after-tax charge of $102 to
reserve for investigations related to market timing by the SEC and New York
Attorney Generals Office directed brokerage by the SEC and single premium
group annuities by the New York Attorney Generals Office and the Connecticut
Attorney Generals Office, as discussed in Note 12.
 F-20




---



##### Table of Contents



For the years ended December 31,Amortization of deferred policy acquisition costs and present value of future profits
    
    2005
    
    2004
    
    2003Retail
    
    $
    744
    
    
    $
    647
    
    
    $
    498Retirement Plans
    
    
    26
    
    
    
    29
    
    
    
    17Institutional
    
    
    32
    
    
    
    26
    
    
    
    28Individual Life
    
    
    205
    
    
    
    185
    
    
    
    177Group Benefits
    
    
    31
    
    
    
    23
    
    
    
    18International
    
    
    133
    
    
    
    77
    
    
    
    32Other
    
    
    1
    
    
    
    6
    
    
    
    (15
    )Total
    
    $
    1,172
    
    
    $
    993
    
    
    $
    755
 For the years ended December 31,Income tax expense (benefit)
    
    2005
    
    2004
    
    2003Retail
    
    $
    85
    
    
    $
    105
    
    
    $
    71Retirement Plans
    
    
    23
    
    
    
    22
    
    
    
    16Institutional
    
    
    32
    
    
    
    26
    
    
    
    9Individual Life
    
    
    72
    
    
    
    71
    
    
    
    64Group Benefits
    
    
    90
    
    
    
    83
    
    
    
    43International
    
    
    65
    
    
    
    12
    
    
    
    2Other [1]
    
    
    (79
    )
    
    
    (151
    )
    
    
    (25
    )Total
    
    $
    288
    
    
    $
    168
    
    
    $
    180
 [1]
    
    Life includes tax benefits reflecting the impact of audit settlements of $190 for the year
ended December 31, 2004.
 Geographical Segment Information
    
    For the years ended December 31,Revenues
    
    2005
    
    2004
    
    2003North America
    
    $
    10,652
    
    
    $
    10,326
    
    
    $
    7,954Other
    
    
    4,371
    
    
    
    1,049
    
    
    
    90Total revenues
    
    $
    15,023
    
    
    $
    11,375
    
    
    $
    8,044
 As of December 31,Assets
    
    2005
    
    2004Retail
    
    $
    120,438
    
    
    $
    115,504Retirement Plans
    
    
    20,064
    
    
    
    17,142Institutional
    
    
    48,751
    
    
    
    44,914Individual Life
    
    
    12,950
    
    
    
    12,328Group Benefits
    
    
    8,438
    
    
    
    8,243International
    
    
    27,822
    
    
    
    16,088Other
    
    
    5,301
    
    
    
    6,234Total
    
    $
    243,764
    
    
    $
    220,453
 As of December 31,DAC
    
    2005
    
    2004Retail
    
    $
    4,714
    
    
    $
    4,401Retirement Plans
    
    
    405
    
    
    
    264Institutional
    
    
    81
    
    
    
    57Individual Life
    
    
    1,975
    
    
    
    1,807Group Benefits
    
    
    95
    
    
    
    70International
    
    
    1,281
    
    
    
    821Other
    
    
    16
    
    
    
    17Total
    
    $
    8,567
    
    
    $
    7,437
 F-21




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##### Table of Contents



4. Investments and Derivative Instruments
 For the years ended December 31,Components of Net Investment Income
    
    2005
    
    2004
    
    2003Fixed maturities
    
    $
    2,659
    
    
    $
    2,493
    
    
    $
    1,673Equity securities held for trading
    
    
    3,847
    
    
    
    799
    
    
    
    Policy loans
    
    
    144
    
    
    
    186
    
    
    
    210Other investments
    
    
    241
    
    
    
    232
    
    
    
    181Gross investment income
    
    
    6,891
    
    
    
    3,710
    
    
    
    2,064Less: Investment expenses
    
    
    46
    
    
    
    35
    
    
    
    23Net investment income
    
    $
    6,845
    
    
    $
    3,675
    
    
    $
    2,041Components of Net Realized Capital Gains (Losses)Fixed maturities
    
    $
    51
    
    
    $
    181
    
    
    $
    19Equity securities
    
    
    4
    
    
    
    5
    
    
    
    (7
    )Foreign currency transaction remeasurements
    
    
    157
    
    
    
    (6
    )
    
    
    Derivatives and other [1]
    
    
    (237
    )
    
    
    (16
    )
    
    
    14Net realized capital gains (losses)
    
    $
    (25
    )
    
    $
    164
    
    
    $
    26
 [1]
    
    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.
 For the years ended December 31,Components of Net Unrealized Gains (Losses) on Available-for-Sale Securities
    
    2005
    
    2004
    
    2003Fixed maturities
    
    $
    1,197
    
    
    $
    2,569
    
    
    $
    1893Equity securities
    
    
    19
    
    
    
    19
    
    
    
    22Net unrealized gains credited to policyholders
    
    
    (9
    )
    
    
    (20
    )
    
    
    (63
    )Net unrealized gains
    
    
    1,207
    
    
    
    2,568
    
    
    
    1,852Deferred income taxes and other items
    
    
    498
    
    
    
    1,220
    
    
    
    924Net unrealized gains, net of tax  end of year
    
    
    709
    
    
    
    1,348
    
    
    
    928Net unrealized gains, net of tax  beginning of year
    
    
    1,348
    
    
    
    928
    
    
    
    621Change in unrealized gains (losses) on available-for-sale securities
    
    $
    (639
    )
    
    $
    420
    
    
    $
    307
  F-22




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##### Table of Contents



Components of Fixed Maturity Investments
 As of December 31, 2005
    
    As of December 31, 2004Gross
    
    Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    Amortized
    
    Unrealized
    
    Unrealized
    
    FairCost
    
    Gains
    
    Losses
    
    Value
    
    Cost
    
    Gains
    
    Losses
    
    ValueBonds and NotesABS
    
    $
    6,819
    
    
    $
    48
    
    
    $
    (75
    )
    
    $
    6,792
    
    
    $
    6,346
    
    
    $
    76
    
    
    $
    (64
    )
    
    $
    6,358Collateralized mortgage
obligations (CMOs)Agency backed
    
    
    758
    
    
    
    3
    
    
    
    (5
    )
    
    
    756
    
    
    
    1,036
    
    
    
    11
    
    
    
    (3
    )
    
    
    1,044Non-agency backed
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48CMBSAgency backed
    
    
    70
    
    
    
    1
    
    
    
    
    
    
    
    71
    
    
    
    72
    
    
    
    2
    
    
    
    (1
    )
    
    
    73Non-agency backed
    
    
    9,219
    
    
    
    174
    
    
    
    (97
    )
    
    
    9,296
    
    
    
    8,384
    
    
    
    368
    
    
    
    (19
    )
    
    
    8,733Corporate
    
    
    23,893
    
    
    
    1,178
    
    
    
    (259
    )
    
    
    24,812
    
    
    
    24,035
    
    
    
    1,957
    
    
    
    (70
    )
    
    
    25,922Government/Government agenciesForeign
    
    
    719
    
    
    
    50
    
    
    
    (4
    )
    
    
    765
    
    
    
    723
    
    
    
    67
    
    
    
    (2
    )
    
    
    788United States
    
    
    630
    
    
    
    24
    
    
    
    (5
    )
    
    
    649
    
    
    
    884
    
    
    
    19
    
    
    
    (5
    )
    
    
    898Mortgage-backed securities
(MBS) agency backed
    
    
    2,794
    
    
    
    6
    
    
    
    (43
    )
    
    
    2,757
    
    
    
    1,771
    
    
    
    20
    
    
    
    (3
    )
    
    
    1,788States, municipalities and
political subdivisions
    
    
    3,256
    
    
    
    210
    
    
    
    (9
    )
    
    
    3,457
    
    
    
    2,780
    
    
    
    221
    
    
    
    (6
    )
    
    
    2,995Redeemable preferred stock
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    13Short-term investments
    
    
    1,334
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    1,871
    
    
    
    
    
    
    
    
    
    
    
    1,871Total fixed maturities
    
    $
    49,615
    
    
    $
    1,694
    
    
    $
    (497
    )
    
    $
    50,812
    
    
    $
    47,962
    
    
    $
    2,742
    
    
    $
    (173
    )
    
    $
    50,531
  Maturity
    
    Amortized Cost
    
    Fair ValueOne year or less
    
    $
    4,696
    
    
    $
    4,690Over one year through five years
    
    
    14,580
    
    
    
    14,827Over five years through ten years
    
    
    13,355
    
    
    
    13,467Over ten years
    
    
    16,984
    
    
    
    17,828Total
    
    $
    49,615
    
    
    $
    50,812
 Sales of Fixed Maturity and Available-for-Sale Equity Security Investments
 For the years ended December 31,2005
    
    2004
    
    2003Sale of Fixed MaturitiesSale proceeds
    
    $
    18,044
    
    
    $
    14,317
    
    
    $
    7,036Gross gains
    
    
    334
    
    
    
    338
    
    
    
    236Gross losses
    
    
    (254
    )
    
    
    (139
    )
    
    
    (75
    )Sale of Available-for-Sale Equity SecuritiesSale proceeds
    
    $
    68
    
    
    $
    114
    
    
    $
    169Gross gains
    
    
    12
    
    
    
    17
    
    
    
    14Gross losses
    
    
    
    
    
    
    (5
    )
    
    
    
 Concentration of Credit Risk
   F-23




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##### Table of Contents



Trading Securities
  Security Unrealized Loss Aging
   2005Less Than 12 Months
    
    12 Months or More
    
    TotalAmortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    UnrealizedCost
    
    Value
    
    Losses
    
    Cost
    
    Value
    
    Losses
    
    Cost
    
    Value
    
    LossesABS
    
    $
    1,651
    
    
    $
    1,633
    
    
    $
    (18
    )
    
    $
    549
    
    
    $
    492
    
    
    $
    (57
    )
    
    $
    2,200
    
    
    $
    2,125
    
    
    $
    (75
    )CMOsAgency backed
    
    
    335
    
    
    
    332
    
    
    
    (3
    )
    
    
    228
    
    
    
    226
    
    
    
    (2
    )
    
    
    563
    
    
    
    558
    
    
    
    (5
    )Non-agency backed
    
    
    18
    
    
    
    18
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    19
    
    
    
    19
    
    
    
    CMBSAgency backed
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    11
    
    
    
    11
    
    
    
    
    
    
    
    13
    
    
    
    13
    
    
    
    Non-agency backed
    
    
    4,431
    
    
    
    4,355
    
    
    
    (76
    )
    
    
    614
    
    
    
    593
    
    
    
    (21
    )
    
    
    5,045
    
    
    
    4,948
    
    
    
    (97
    )Corporate
    
    
    8,487
    
    
    
    8,284
    
    
    
    (203
    )
    
    
    1,475
    
    
    
    1,419
    
    
    
    (56
    )
    
    
    9,962
    
    
    
    9,703
    
    
    
    (259
    )Government/Government agenciesForeign
    
    
    187
    
    
    
    184
    
    
    
    (3
    )
    
    
    36
    
    
    
    35
    
    
    
    (1
    )
    
    
    223
    
    
    
    219
    
    
    
    (4
    )United States
    
    
    276
    
    
    
    273
    
    
    
    (3
    )
    
    
    71
    
    
    
    69
    
    
    
    (2
    )
    
    
    347
    
    
    
    342
    
    
    
    (5
    )MBS  U.S. Government/Government
agencies
    
    
    1,829
    
    
    
    1,795
    
    
    
    (34
    )
    
    
    197
    
    
    
    188
    
    
    
    (9
    )
    
    
    2,026
    
    
    
    1,983
    
    
    
    (43
    )States, municipalities and political
subdivisions
    
    
    483
    
    
    
    474
    
    
    
    (9
    )
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    485
    
    
    
    476
    
    
    
    (9
    )Short-term investments
    
    
    149
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    149
    
    
    
    Total fixed maturities
    
    
    17,848
    
    
    
    17,499
    
    
    
    (349
    )
    
    
    3,184
    
    
    
    3,036
    
    
    
    (148
    )
    
    
    21,032
    
    
    
    20,535
    
    
    
    (497
    )Common stock
    
    
    5
    
    
    
    5
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    6
    
    
    
    6
    
    
    
    Non-redeemable preferred stock
    
    
    98
    
    
    
    95
    
    
    
    (3
    )
    
    
    51
    
    
    
    49
    
    
    
    (2
    )
    
    
    149
    
    
    
    144
    
    
    
    (5
    )Total equity
    
    
    103
    
    
    
    100
    
    
    
    (3
    )
    
    
    52
    
    
    
    50
    
    
    
    (2
    )
    
    
    155
    
    
    
    150
    
    
    
    (5
    )Total temporarily impaired securities
    
    $
    17,951
    
    
    $
    17,599
    
    
    $
    (352
    )
    
    $
    3,236
    
    
    $
    3,086
    
    
    $
    (150
    )
    
    $
    21,187
    
    
    $
    20,685
    
    
    $
    (502
    )
  F-24




---



##### Table of Contents



ABS
 CMBS
 Financial services
  F-25




---



##### Table of Contents



2004Less Than 12 Months
    
    12 Months or More
    
    TotalAmortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    Unrealized
    
    Amortized
    
    Fair
    
    UnrealizedCost
    
    Value
    
    Losses
    
    Cost
    
    Value
    
    Losses
    
    Cost
    
    Value
    
    LossesABS
    
    $
    1,260
    
    
    $
    1,247
    
    
    $
    (13
    )
    
    $
    365
    
    
    $
    314
    
    
    $
    (51
    )
    
    $
    1,625
    
    
    $
    1,561
    
    
    $
    (64
    )CMOsAgency backed
    
    
    521
    
    
    
    518
    
    
    
    (3
    )
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    523
    
    
    
    520
    
    
    
    (3
    )Non-agency backed
    
    
    39
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    39
    
    
    
    CMBSAgency backed
    
    
    26
    
    
    
    25
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    25
    
    
    
    (1
    )Non-agency backed
    
    
    1,894
    
    
    
    1,878
    
    
    
    (16
    )
    
    
    75
    
    
    
    72
    
    
    
    (3
    )
    
    
    1,969
    
    
    
    1,950
    
    
    
    (19
    )Corporate
    
    
    3,411
    
    
    
    3,368
    
    
    
    (43
    )
    
    
    798
    
    
    
    771
    
    
    
    (27
    )
    
    
    4,209
    
    
    
    4,139
    
    
    
    (70
    )Government/Government agenciesForeign
    
    
    134
    
    
    
    133
    
    
    
    (1
    )
    
    
    27
    
    
    
    26
    
    
    
    (1
    )
    
    
    161
    
    
    
    159
    
    
    
    (2
    )United States
    
    
    525
    
    
    
    520
    
    
    
    (5
    )
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    532
    
    
    
    527
    
    
    
    (5
    )MBS  U.S. Government/Government
agencies
    
    
    474
    
    
    
    472
    
    
    
    (2
    )
    
    
    25
    
    
    
    24
    
    
    
    (1
    )
    
    
    499
    
    
    
    496
    
    
    
    (3
    )States, municipalities and political
subdivisions
    
    
    276
    
    
    
    270
    
    
    
    (6
    )
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    278
    
    
    
    272
    
    
    
    (6
    )Short-term investments
    
    
    74
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    74
    
    
    
    Total fixed maturities
    
    
    8,634
    
    
    
    8,544
    
    
    
    (90
    )
    
    
    1,301
    
    
    
    1,218
    
    
    
    (83
    )
    
    
    9,935
    
    
    
    9,762
    
    
    
    (173
    )Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Non-redeemable preferred stock
    
    
    76
    
    
    
    74
    
    
    
    (2
    )
    
    
    113
    
    
    
    104
    
    
    
    (9
    )
    
    
    189
    
    
    
    178
    
    
    
    (11
    )Total equity
    
    
    76
    
    
    
    74
    
    
    
    (2
    )
    
    
    114
    
    
    
    105
    
    
    
    (9
    )
    
    
    190
    
    
    
    179
    
    
    
    (11
    )Total temporarily impaired securities
    
    $
    8,710
    
    
    $
    8,618
    
    
    $
    (92
    )
    
    $
    1,415
    
    
    $
    1,323
    
    
    $
    (92
    )
    
    $
    10,125
    
    
    $
    9,941
    
    
    $
    (184
    )
 Mortgage Loans
  Variable Interest Entities
    F-26




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##### Table of Contents



Derivative Instruments
  Asset Values
    
    Liability Values2005
    
    2004
    
    2005
    
    2004Other investments
    
    $
    179
    
    
    $
    185
    
    
    $
    
    
    
    $
    Reinsurance recoverables
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    67Other policyholder funds and benefits payable
    
    
    8
    
    
    
    129
    
    
    
    
    
    
    
    Fixed maturities
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    Other liabilities
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    518Total
    
    $
    187
    
    
    $
    318
    
    
    $
    437
    
    
    $
    585
 F-27




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##### Table of Contents



Notional Amount
    
    Fair Value
    

Hedge
Ineffectiveness, After-taxHedging Strategy
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Cash-Flow HedgesInterest rate swapsInterest rate swaps are primarily used to convert
interest receipts on floating-rate fixed maturity
securities to fixed rates. These derivatives are
predominantly used to better match cash receipts
from assets with cash disbursements required to fund
liabilities. The Company also enters into forward
starting swap agreements to hedge the interest rate
exposure on anticipated fixed-rate asset purchases
due to changes in the benchmark interest rate,
London-Interbank Offered Rate (LIBOR). These
derivatives were structured to hedge interest rate
exposure inherent in the assumptions used to price
primarily certain long-term disability products.Interest rate swaps are also used to hedge a portion
of the Companys floating rate guaranteed investment
contracts. These derivatives convert the floating
rate guaranteed investment contract payments to a
fixed rate to better match the cash receipts earned
from the supporting investment portfolio.
    
    $5,753
    
    $5,794
    
    $(18)
    
    $56
    
    $(11)
    
    $(11)Foreign currency swapsForeign currency swaps are used to convert foreign
denominated cash flows associated with certain
foreign denominated fixed maturity investments to
U.S. dollars. The foreign fixed maturities are
primarily denominated in euros and are swapped to
minimize cash flow fluctuations due to changes in
currency rates.
    
    1,444
    
    1,374
    
    (224)
    
    (430)
    
    4
    
    Fair-Value HedgesInterest rate swapsA portion of the Companys fixed debt is hedged
against increases in LIBOR, the designated benchmark
interest rate. In addition, interest rate swaps are
used to hedge the changes in fair value of certain
fixed rate liabilities and fixed maturity securities
due to changes in LIBOR.
    
    1,707
    
    201
    
    (1)
    
    (4)
    
    2
    
    Interest rate caps and floorsInterest rate caps and floors are used to offset the
changes in fair value related to corresponding
interest rate caps and floors that exist in certain
of the Companys variable-rate fixed maturity
investments and are not required to be bifurcated.
    
    
    
    148
    
    
    
    (1)
    
    
    
    SwaptionsSwaption arrangements are utilized to offset the
change in the fair value of call options embedded,
not requiring bifurcation, in certain municipal
fixed maturity securities. The swaptions give the
Company the option to enter into a received fixed
swap. The purpose of the swaptions is to mitigate
re-investment risk arising from the call option
embedded in the municipal security, providing for a
fixed return over the original term to maturity.
    
    
    
    14
    
    
    
    1
    
    
    
    Net Investment HedgesForwardsYen denominated forwards are used to hedge the net
investment in the Japanese Life operation from
potential volatility in the yen to U.S. dollar
exchange rate.
    
    
    
    401
    
    
    
    (23)
    
    
    
    Total cash-flow, fair-value and net investment hedges
    
    $8,904
    
    $7,932
    
    $(243)
    
    $(401)
    
    $(5)
    
    $(11)
 F-28




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##### Table of Contents



DerivativeNotional Amount
    
    Fair Value
    

Change
in Value, After-taxHedging Strategy
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Other Investment and Risk Management ActivitiesInterest rate caps and swaption contractsThe Company is exposed to policyholder
surrenders during a rising interest rate
environment. Interest rate cap and
swaption contracts are used to mitigate the
Companys loss in a rising interest rate
environment. The increase in yield from
the cap and swaption contract in a rising
interest rate environment may be used to
raise credited rates, thereby increasing
the Companys competitiveness and reducing
the policyholders incentive to surrender.
These derivatives are also used to reduce
the duration risk in certain investment
portfolios. These derivative instruments
are structured to hedge the durations of
fixed maturity investments to match certain
life products in accordance with the
Companys asset and liability management
policy.
    
    $1,116
    
    $1,466
    
    $1
    
    $2
    
    $
    
    $(5)Interest rate swaps and floorsThe Company uses interest rate swaps and
floors to manage duration risk between
assets and liabilities. In addition, the
Company enters into interest rate swaps to
terminate existing swaps in hedging
relationships, thereby offsetting the
changes in value of the original swap.
    
    1,978
    
    2,206
    
    (4)
    
    (13)
    
    1
    
    3Foreign currency swaps and forwardsThe Company enters into foreign currency
swaps and forwards and purchases foreign
put options and writes foreign call options
to hedge the foreign currency exposures in
certain of its foreign fixed maturity
investments.
    
    565
    
    362
    
    (8)
    
    (74)
    
    20
    
    (23)Credit default and total return swapsThe Company enters into swap agreements in
which the Company assumes credit exposure
of an individual entity, referenced index
or asset pool. The Company assumes credit
exposure to individual entities through
credit default swaps. These contracts
entitle the company to receive a periodic
fee in exchange for an obligation to
compensate the derivative counterparty
should a credit event occur on the part of
the referenced security issuer. Credit
events typically include failure on the
part of the referenced security issuer to
make a fixed dollar amount of contractual
interest or principal payments or
bankruptcy. The maximum potential future
exposure to the Company is the notional
value of the swap contracts, $381 and $200,
after-tax, as of December 31, 2005 and
2004, respectively.The Company also assumes exposure to the
change in value of indices or asset pools
through total return swaps and credit
spreadlocks. As of December 31, 2005 and
2004, the maximum potential future exposure
to the Company from such contracts is $606
and $571, after-tax, respectively.The Company enters into credit default swap
agreements, in which the Company pays a
derivative counterparty a periodic fee in
exchange for compensation from the
counterparty should a credit event occur on
the part of the referenced security issuer.
The Company entered into these agreements
as an efficient means to reduce credit
exposure to specified issuers or sectors.
In addition, the Company enters into option
contracts to receive protection should a
credit event occur on the part of the
referenced security issuer.
    
    2,209
    
    1,613
    
    3
    
    6
    
    11
    
    17
 F-29




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##### Table of Contents



DerivativeNotional Amount
    
    Fair Value
    

Change
in Value, After-taxHedging Strategy
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004OptionsThe Company writes option contracts for a premium to
monetize the bifurcated option embedded in certain
of its fixed maturity investments. The written
option grants the holder the ability to call the
bond at a predetermined strike value. The maximum
potential future economic exposure is represented by
the then fair value of the bond in excess of the
strike value, which is expected to be entirely
offset by the appreciation in the value of the
embedded long option.
    
    $12
    
    $95
    
    $
    
    $1
    
    $(1)
    
    $(1)Yen fixed annuity hedging instrumentsThe Company enters into currency rate swaps and
forwards to mitigate the foreign currency exchange
rate and yen interest rate exposures associated with
the yen denominated individual fixed annuity
compound rate contract product. For further
discussion, see below. Additionally, forward
settling fixed maturity investments are traded to
manage duration and foreign currency risk associated
with this product.
    
    1,675
    
    611
    
    (179)
    
    10
    
    (143)
    
    4Product derivativesThe Company offers certain variable annuity products
with a GMWB rider. The GMWB is a bifurcated
embedded derivative that provides the policyholder
with a GRB if the account value is reduced to zero
through a combination of market declines and
withdrawals. The GRB is generally equal to premiums
less withdrawals. The policyholder also has the
option, after a specified time period, to reset the
GRB to the then-current account value, if greater.
For a further discussion, see the Derivative
Instruments section of Note 2. The notional value
of the embedded derivative is the GRB balance.
    
    31,803
    
    25,433
    
    8
    
    129
    
    (42)
    
    35Reinsurance contractsReinsurance arrangements are used to offset the
Companys exposure to the GMWB embedded derivative
for the lives of the host variable annuity
contracts. The notional amount of the reinsurance
contracts is the GRB amount.
    
    8,575
    
    9,107
    
    (17)
    
    (67)
    
    19
    
    1GMWB hedging instrumentsThe Company enters into interest rate futures, S&P
500 and NASDAQ index futures contracts and put and
call options, as well as interest rate and EAFE
index swap contracts to economically hedge exposure
to the volatility associated with the portion of the
GMWB liabilities which are not reinsured.In addition, the Company periodically enters into
forward starting S&P500 put options as well as S&P
index futures and interest rate swap contracts to
economically hedge the equity volatility risk
exposure associated with anticipated future sales of
the GMWB rider. [1]
    
    5,086
    
    3,117
    
    175
    
    108
    
    1
    
    (31)Statutory reserve hedging instrumentsThe Company purchased one and two year S&P500 put
option contracts to economically hedge the statutory
reserve impact of equity exposure arising primarily
from GMDB obligations against a decline in the
equity markets.
    
    1,142
    
    1,921
    
    14
    
    32
    
    (20)
    
    (2)Total other investment and risk management activities
    
    54,161
    
    45,931
    
    (7)
    
    134
    
    (154)
    
    (2)Total derivatives [2]
    
    $63,065
    
    $53,863
    
    $(250)
    
    $(267)
    
    $(159)
    
    $(13)
 
 [1]
    
    The after-tax net gain related to derivatives purchased to hedge the
anticipatory sales of the GMWB rider is $8 for the year ended December
31, 2005.[2]
    
    Derivative change in value includes hedge ineffectiveness for
cash-flow, fair-value and net investment hedges and total change in
value of other investment and risk management activities.  F-30




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##### Table of Contents



Securities Lending and Collateral Arrangements
   F-31




---



##### Table of Contents



Loaned Securities and Collateral Pledged
    
    2005
    
    
    2004ABS
    
    $
    26
    
    
    $
    40CMBS
    
    
    156
    
    
    
    173Corporate
    
    
    656
    
    
    
    773MBS
    
    
    125
    
    
    
    Government/Government AgenciesForeign
    
    
    26
    
    
    
    17United States
    
    
    189
    
    
    
    451Total
    
    $
    1,178
    
    
    $
    1,454
   Securities on Deposit with States
  Note 5. Fair Value of Financial Instruments
         F-32




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##### Table of Contents



2005
    
    
    2004Carrying Amount
    
    
    Fair Value
    
    
    Carrying Amount
    
    
    Fair ValueAssetsFixed maturities
    
    $
    50,812
    
    
    $
    50,812
    
    
    $
    50,531
    
    
    $
    50,531Equity securities, available for sale
    
    
    800
    
    
    
    800
    
    
    
    525
    
    
    
    525Equity securities, trading
    
    
    24,034
    
    
    
    24,034
    
    
    
    13,634
    
    
    
    13,634Policy loans
    
    
    2,016
    
    
    
    2,016
    
    
    
    2,662
    
    
    
    2,662Limited partnerships [1]
    
    
    431
    
    
    
    431
    
    
    
    256
    
    
    
    256Mortgage loans on real estate
    
    
    1,513
    
    
    
    1,504
    
    
    
    923
    
    
    
    944Other investments [2]
    
    
    178
    
    
    
    178
    
    
    
    185
    
    
    
    185LiabilitiesOther policyholder funds [3]
    
    
    11,691
    
    
    
    11,278
    
    
    $
    9,249
    
    
    $
    9,081Long-term debt
    
    
    1,050
    
    
    
    1,209
    
    
    
    1,050
    
    
    
    1,194Derivative related liabilities [4]
    
    
    420
    
    
    
    420
    
    
    
    518
    
    
    
    518
 [1]
    
    Included in other investments on the balance sheet.[2]
    
    2005 and 2004 include $179 and $185 of derivative related assets, respectively.[3]
    
    Excludes group accident and health and universal life insurance contracts, including corporate owned life insurance.[4]
    
    Included in other liabilities on the consolidated balance sheets. Note 6. Reinsurance
  
 For the years ended December 31,2005
    
    
    2004
    
    
    2003Gross fee income,
earned premiums and
other
    
    $
    8,194
    
    
    $
    7,223
    
    
    $
    6,247Reinsurance assumed
    
    
    464
    
    
    
    811
    
    
    
    195Reinsurance ceded
    
    
    (455
    )
    
    
    (498
    )
    
    
    (465
    )Net fee income,
earned premiums
and other
    
    $
    8,203
    
    
    $
    7,536
    
    
    $
    5,977
    F-33




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##### Table of Contents



Note 7. Deferred Policy Acquisition Costs and Present Value of Future Profits
  2005
    
    
    2004
    
    
    2003Balance, January 1
    
    $
    7,437
    
    
    $
    6,623
    
    
    $
    5,758Capitalization
    
    
    2,071
    
    
    
    1,968
    
    
    
    1,626Amortization  Deferred policy acquisitions costs and
present value of future profits
    
    
    (1,172
    )
    
    
    (993
    )
    
    
    (755
    )Adjustments to unrealized gains and losses on
securities available-for-sale and other
    
    
    380
    
    
    
    (75
    )
    
    
    (59
    )Cumulative effect of accounting changes (SOP 03-1)
    
    
    
    
    
    
    (105
    )
    
    
    Effect of currency translation
    
    
    (149
    )
    
    
    72
    
    
    
    Acquisition of Harford Life Group Insurance Company [1]
    
    
    
    
    
    
    (53
    )
    
    
    53Balance, December 31
    
    $
    8,567
    
    
    $
    7,437
    
    
    $
    6,623
 
 [1]
    
    For the year ended December 31, 2004, reflects the purchase price adjustment related to the
acquisition of CNA Group Life Assurance Company.  For the year ended December 31,2006
    
    $
    292007
    
    $
    292008
    
    $
    262009
    
    $
    242010
    
    $
    22
 Note 8. Goodwill and Other Intangible Assets
    F-34




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##### Table of Contents



Note 9. Separate Accounts, Death Benefits and Other Insurance Benefit Features
    U.S. GMDB [1]
    
    
    Japan GMDB/GMIBLiability balance as of January 1, 2005
    
    $
    174
    
    
    $
    28Incurred
    
    
    123
    
    
    
    29Paid
    
    
    (139
    )
    
    
    (1
    )Currency translation adjustment
    
    
    
    
    
    
    (6
    )Liability balance as of December 31, 2005
    
    $
    158
    
    
    $
    50
 
 [1]
    
    The reinsurance recoverable asset related to the U.S. GMDB was $64 as of January 1, 2005 and
$40 as of December 31, 2005. U.S. GMDB [1]
    
    
    Japan GMDB/GMIBLiability balance upon adoption  as of January 1, 2004
    
    $
    217
    
    
    $
    8Incurred
    
    
    123
    
    
    
    21Paid
    
    
    (166
    )
    
    
    (2
    )Currency translation adjustment
    
    
    
    
    
    
    1Liability balance as of December 31, 2004
    
    $
    174
    
    
    $
    28
 
 [1]
    
    The reinsurance recoverable asset related to the U.S. GMDB was $108 upon adoption of SOP 03-1 and $64 as of December 31,2004   U.S. GMDB:
 
    
    1,000 stochastically generated investment performance scenarios for 2005 and 2004 issue
years; 250 stochastically generated investment performance scenarios for issue year 2003 and
prior.
 F-35




---



##### Table of Contents




    
    Separate account returns representing the Companys long-term assumptions varied by asset class with a low of 3% for
cash, a high of 9.5% and 11% for aggressive equities, and a weighted average of 7.8% and 9% for December 31, 2005
and 2004, respectively.
    
    Volatilities also varied by asset class with a low of 1% for cash, a high of 15% for aggressive equities, and a
weighted average of 12%
    
    80% of the 1983 GAM mortality table was used for mortality assumptions
    
    Lapse rates by calendar year vary from a low of 8% to a high of 14%, with an average of 12%
    
    Discount rate of 5.6% for 2005 issue year, 7% for issue years 2004 and 2003 and 7.5% for issue year 2002 and prior
 Japan GMDB and GMIB:
 
    
    1,000 stochastically generated investment performance scenarios.
    
    Separate account returns representing the Companys long-term assumptions varied by asset class with a low of 2.6%
for Japan bonds, a high of 8.8% for foreign equities and a weighted average of 4.9%.
    
    Volatilities also varied by asset class with a low of 5.6% for Japan bonds, a high of 21.3% for foreign equities and
a weighted average of 13.4%
    
    70% of the 1996 Japan Standard Mortality Table was used for mortality assumptions
    
    Lapse rates by age vary from a low of 1% to a high of 6%, with an average of 4%
    
    Average discount rate of 2.6%
  Breakdown of Variable Annuity Account Value by GMDB/GMIB Type at December 31, 2005
 Retained Net
    
    
    Weighted AverageAccount
    
    
    Net Amount
    
    
    Amount
    
    
    Attained Age ofMaximum anniversary value (MAV) [1]
    
    Value
    
    
    at Risk
    
    
    at Risk
    
    
    AnnuitantMAV only
    
    $
    57,445
    
    
    $
    5,040
    
    
    $
    507
    
    
    
    64With 5% rollup [2]
    
    
    4,032
    
    
    
    497
    
    
    
    91
    
    
    
    63With Earnings Protection Benefit Rider (EPB) [3]
    
    
    5,358
    
    
    
    313
    
    
    
    57
    
    
    
    60With 5% rollup & EPB
    
    
    1,445
    
    
    
    132
    
    
    
    24
    
    
    
    62Total MAV
    
    
    68,280
    
    
    
    5,982
    
    
    
    679Asset Protection Benefit (APB) [4]
    
    
    26,880
    
    
    
    25
    
    
    
    13
    
    
    
    61Lifetime Income Benefit (LIB) [5]
    
    
    251
    
    
    
    
    
    
    
    
    
    
    
    59Reset [6] (5-7 years)
    
    
    7,419
    
    
    
    435
    
    
    
    435
    
    
    
    65Return of Premium [7] /Other
    
    
    9,235
    
    
    
    37
    
    
    
    35
    
    
    
    49Subtotal U.S. Guaranteed Minimum Death Benefits
    
    
    112,065
    
    
    
    6,479
    
    
    
    1,162
    
    
    
    62Japan Guaranteed Minimum Death and Income Benefit [8]
    
    
    24,641
    
    
    
    9
    
    
    
    9
    
    
    
    66Total
    
    $
    136,706
    
    
    $
    6,488
    
    
    $
    1,171
 [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 greatest of the current account value, 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) 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 $15.2 billion and $7.3 billion
as of December 31, 2005 and 2004, respectively.  F-36




---



##### Table of Contents



Asset type
    
    As of December 31, 2005Equity securities (including mutual funds)
    
    $
    94,419Cash and cash equivalents
    
    
    8,609Total
    
    $
    103,028
   F-37




---



##### Table of Contents



Note 10. Sales Inducements
   2005
    
    
    2004Balance, beginning of period
    
    $
    309
    
    
    
    198Sales inducements deferred
    
    
    85
    
    
    
    141Amortization charged to income
    
    
    (39
    )
    
    
    (30
    )Balance, end of period
    
    $
    355
    
    
    
    309
 Note 11. Reserves for Claims and Claim Adjustment Expenses
    For the years ended December 31,2005
    
    
    2004
    
    
    2003Beginning claim reserves-gross
    
    $
    4,714
    
    
    $
    4,480
    
    
    $
    2,914Purchase of CNA Group Life Assurance Company
    
    
    
    
    
    
    20
    
    
    
    Reinsurance recoverables
    
    
    297
    
    
    
    250
    
    
    
    275Beginning claim reserves-net
    
    
    4,417
    
    
    
    4,210
    
    
    
    2,639Incurred expenses related to:Current year
    
    
    1,994
    
    
    
    1,864
    
    
    
    1,149Prior years
    
    
    (112
    )
    
    
    (73
    )
    
    
    (10
    )Total incurred expenses
    
    
    1,882
    
    
    
    1,791
    
    
    
    1,139Paid expenses related to:Current year
    
    
    645
    
    
    
    564
    
    
    
    376Prior years
    
    
    1,060
    
    
    
    1,020
    
    
    
    669Total paid expenses
    
    
    1,705
    
    
    
    1,584
    
    
    
    1,045Ending claim reserves-net
    
    
    4,594
    
    
    
    4,417
    
    
    
    2,733Acquisition of claim reserves
    
    
    
    
    
    
    
    
    
    
    1,497Reinsurance recoverable, December 31
    
    
    238
    
    
    
    297
    
    
    
    250Ending claim reserves-gross
    
    $
    4,832
    
    
    $
    4,714
    
    
    $
    4,480
  F-38




---



##### Table of Contents



2005
    
    
    2004Group Disability and Accident and Other unpaid claims and claim adjustment expenses
    
    $
    4,832
    
    
    $
    4,714Group Life unpaid claims and claim adjustment expenses
    
    
    910
    
    
    
    885Individual Life unpaid claims and claim adjustment expenses
    
    
    84
    
    
    
    88Future Policy Benefits
    
    
    6,951
    
    
    
    6,563Future Policy Benefits and Unpaid Claim and Claim Adjustment Expenses
    
    $
    12,777
    
    
    $
    12,250
  2005
    
    
    2004RetailIndividual annuity  variable
    
    $
    171
    
    
    $
    173Individual annuity  fixed
    
    
    575
    
    
    
    529Other
    
    
    1
    
    
    
    5Total Retail
    
    
    747
    
    
    
    707Retirement Plans401(k)
    
    
    56
    
    
    
    54Governmental
    
    
    310
    
    
    
    333Total Retirement Plans
    
    
    366
    
    
    
    387InstitutionalStructured settlements
    
    
    2,890
    
    
    
    2,502Institutional annuities
    
    
    2,095
    
    
    
    2,025PPLI
    
    
    120
    
    
    
    149Total Institutional
    
    
    5,105
    
    
    
    4,676Individual LifeVariable universal life
    
    
    15
    
    
    
    21Universal life/other interest sensitive
    
    
    81
    
    
    
    87Term insurance and other
    
    
    490
    
    
    
    536Total Individual Life
    
    
    586
    
    
    
    644Group BenefitsGroup disability
    
    
    4,544
    
    
    
    4,162Group life and accident
    
    
    1,058
    
    
    
    1,334Other
    
    
    226
    
    
    
    188Total Group Benefits
    
    
    5,828
    
    
    
    5,684InternationalVariable
    
    
    51
    
    
    
    28Total International
    
    
    51
    
    
    
    28Other
    
    
    94
    
    
    
    124Total
    
    $
    12,777
    
    
    $
    12,250
 F-39




---



##### Table of Contents



2005
    
    
    2004RetailIndividual annuity  variable
    
    $
    6,861
    
    
    $
    7,452Individual annuity  fixed
    
    
    9,539
    
    
    
    10,952Other
    
    
    10
    
    
    
    20Total Retail
    
    
    16,410
    
    
    
    18,424Retirement Plans401(k)
    
    
    1,181
    
    
    
    1,075Governmental
    
    
    4,013
    
    
    
    3,715Total Retirement Plans
    
    
    5,194
    
    
    
    4,790InstitutionalStructured settlements
    
    
    1,731
    
    
    
    1,501Stable value/Funding agreements
    
    
    4,142
    
    
    
    2,115GICs
    
    
    3,117
    
    
    
    3,180PPLI [1]
    
    
    232
    
    
    
    489Institutional annuities
    
    
    11
    
    
    
    9Total Institutional
    
    
    9,233
    
    
    
    7,294Individual LifeVariable universal life
    
    
    474
    
    
    
    425Universal life/other interest sensitive
    
    
    4,284
    
    
    
    4,059Other
    
    
    232
    
    
    
    192Total Individual Life
    
    
    4,990
    
    
    
    4,676Group BenefitsGroup life and accident
    
    
    535
    
    
    
    558Total Group Benefits
    
    
    535
    
    
    
    558International [1]Variable
    
    
    24,641
    
    
    
    14,129Fixed
    
    
    1,461
    
    
    
    521Total International
    
    
    26,102
    
    
    
    14,650Other
    
    
    1,988
    
    
    
    2,441Total Life
    
    $
    64,452
    
    
    $
    52,833
 12. Commitments and Contingencies
 Litigation
  Broker Compensation Litigation
  F-40




---



##### Table of Contents



Regulatory Developments
   F-41




---



##### Table of Contents



F-42




---



##### Table of Contents



Lease Commitments
  2006
    
    $
    732007
    
    
    652008
    
    
    512009
    
    
    442010
    
    
    39Thereafter
    
    
    16Total
    
    $
    288
 Tax Matters
   Unfunded Commitments
  F-43




---



##### Table of Contents



Guaranty fund and Other Insurance-Related Assessments
   Note 13. Income Tax
   For the years ended December 31,2005
    
    
    2004
    
    
    2003Current  U.S. Federal
    
    $
    106
    
    
    $
    (10
    )
    
    $
    (2
    ) Foreign
    
    
    
    
    
    
    
    
    
    
    Total Current Taxes
    
    
    106
    
    
    
    (10
    )
    
    
    (2
    )Deferred
 U.S. Federal
    
    
    153
    
    
    
    157
    
    
    
    176 Foreign
    
    
    29
    
    
    
    21
    
    
    
    6Total Deferred Taxes
    
    
    182
    
    
    
    178
    
    
    
    182Income tax expense
    
    $
    288
    
    
    $
    168
    
    
    $
    180
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Tax Provision at the U.S. statutory rate
    
    $
    504
    
    
    $
    529
    
    
    $
    332Tax-exempt interest
    
    
    (33
    )
    
    
    (31
    )
    
    
    (29
    )Dividends received deduction
    
    
    (186
    )
    
    
    (134
    )
    
    
    (112
    )IRS audit settlement
    
    
    
    
    
    
    (190
    )
    
    
    Foreign related investments
    
    
    6
    
    
    
    (7
    )
    
    
    (5
    )Other
    
    
    (3
    )
    
    
    1
    
    
    
    (6
    )Provision for income tax
    
    $
    288
    
    
    $
    168
    
    
    $
    180
 F-44




---



##### Table of Contents



2005
    
    
    2004Deferred tax assetsTax basis deferred policy acquisition costs and reserves
    
    $
    622
    
    
    $
    648Net operating loss carryovers
    
    
    184
    
    
    
    234Minimum tax credit
    
    
    245
    
    
    
    154Foreign tax credit carryovers
    
    
    31
    
    
    
    7Other
    
    
    24
    
    
    
    36Total deferred tax assets
    
    
    1,106
    
    
    
    1,079Valuation allowance
    
    
    (17
    )
    
    
    (7
    )Net deferred tax assets
    
    
    1,089
    
    
    
    1,072Deferred tax liabilitiesFinancial statement deferred policy acquisition costs and reserves
    
    
    (1,195
    )
    
    
    (838
    )Net unrealized gains on securities
    
    
    (386
    )
    
    
    (799
    )Employee benefits
    
    
    (19
    )
    
    
    (10
    )Other investment-related items
    
    
    (52
    )
    
    
    (107
    )Depreciable and amortizable assets
    
    
    (70
    )
    
    
    (65
    )Total deferred tax liabilities
    
    
    (1,722
    )
    
    
    (1,819
    )Total deferred tax asset (liability)
    
    $
    (633
    )
    
    $
    (747
    )
    Note 14. Debt
 Long Term Debt
    
    December 31, 2005
    
    
    December 31, 2004Senior Notes7.10% Notes, due 2007
    
    $
    200
    
    
    $
    2007.65% Notes, due 2027
    
    
    250
    
    
    
    2507.375% Notes, due 2031
    
    
    400
    
    
    
    400Total Senior Notes
    
    
    850
    
    
    
    850Junior Subordinated Debentures7.625% Notes, due 2050
    
    
    200
    
    
    
    200Total Long-Term Debt
    
    $
    1,050
    
    
    $
    1,050
 F-45




---



##### Table of Contents



Shelf Registrations
  Short-Term Debt
   Junior Subordinated Debentures
   ($ in millions except for per security data)
    
    Hartford Life Capital IIJunior Subordinated Debentures [1] [2]Principal amount owed
    
    $
    200Balance December 31, 2005
    
    $
    200Balance December 31, 2004
    
    $
    200Coupon rate
    
    
    7.625
    %Interest payable
    
    QuarterlyMaturity date
    
    Feb. 15, 2050Redeemable by issuer on or after
    
    Mar. 6, 2006Trust Preferred SecuritiesIssuance date
    
    Mar. 6, 2001Securities issued
    
    
    8,000,000Liquidation preference per security (in dollars)
    
    $
    25Liquidation value
    
    $
    200Coupon rate
    
    
    7.625
    %Distribution payable
    
    QuarterlyDistribution guaranteed by
    
    HLI
 
 [1]
    
    For each of the respective debentures, The Hartford or HLI, has the right at any time, and
from time to time, to defer payments of interest on the Junior Subordinated Debentures for a
period not exceeding 20 consecutive quarters up to the debentures maturity date. During any
such period, interest will continue to accrue and The Hartford or HLI may not declare or pay
any cash dividends or distributions on, or purchase, The Hartfords or HLIs capital stock nor
make any principal, interest or premium payments on or repurchase any debt securities that
rank equally with or junior to the Junior Subordinated Debentures. The Hartford or HLI will
have the right at any time to dissolve the Trust and cause the Junior Subordinated Debentures
to be distributed to the holders of the Preferred Securities. Related Party Debt
  F-46




---



##### Table of Contents



Interest Expense
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Short and Long-term debt
    
    $
    65
    
    
    $
    70
    
    
    $
    77Series A Preferred Securities and Series B Preferred Securities
    
    
    15
    
    
    
    26
    
    
    
    34Related Party debt
    
    
    
    
    
    
    1
    
    
    
    6Total interest expense
    
    $
    80
    
    
    $
    97
    
    
    $
    117
 Note 15. Stockholders Equity
 Statutory Results
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Statutory Net Income (Loss)Life operations
    
    $
    821
    
    
    $
    1,048
    
    
    $
    1,026
 As of December 31,2005
    
    
    2004Statutory SurplusLife operations
    
    $
    4,364
    
    
    $
    5,119Japan life operations [1]
    
    
    1,017
    
    
    
    Total
    
    $
    5,381
    
    
    $
    5,119
 
 [1]
    
    Japan Life Operation was valued in accordance with prescribed statutory accounting
practices and was included in U.S. statutory surplus prior to September 1, 2005.  F-47




---



##### Table of Contents



Note 16. Pension Plans, Postretirement, Health Care and Life Insurance Benefit and Savings
Plans
 Pension Plans
  Investment and Savings Plan
  Note 17. Stock Compensation Plans
      F-48




---



##### Table of Contents



Note 18. Transactions with Affiliates
     Note 19. Acquisitions
  Note
20. Quarterly Results for 2005 and 2004 (unaudited)
 Three Months EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    2,991
    
    
    $
    3,062
    
    
    $
    3,034
    
    
    $
    2,653
    
    
    $
    4,316
    
    
    $
    2,500
    
    
    $
    4,682
    
    
    $
    3,160Benefits, claims and expenses
    
    
    2,627
    
    
    
    2,676
    
    
    
    2,690
    
    
    
    2,309
    
    
    
    3,888
    
    
    
    2,104
    
    
    
    4,378
    
    
    
    2,776Net income [1]
    
    
    278
    
    
    
    258
    
    
    
    263
    
    
    
    255
    
    
    
    333
    
    
    
    499
    
    
    
    278
    
    
    
    307
 
 [1]
    
    Included in the quarter ended September 30, 2004 is a $190 tax benefit which relates
to tax years prior to 2004. F-49




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE I
 SUMMARY OF INVESTMENTS  OTHER THAN INVESTMENTS IN AFFILIATES
 (In millions)
    
    As of December 31, 2005Amount at whichshown on BalanceType of Investment
    
    Cost
    
    Fair Value
    
    SheetFixed MaturitiesBonds and NotesU.S. Government and Government agencies and
authorities (guaranteed and sponsored)
    
    $
    630
    
    
    $
    649
    
    
    $
    649U.S. Government and Government agencies and
authorities (guaranteed and sponsored) 
asset-backed
    
    
    3,622
    
    
    
    3,584
    
    
    
    3,584States, municipalities and political subdivisions
    
    
    3,256
    
    
    
    3,457
    
    
    
    3,457International governments
    
    
    719
    
    
    
    765
    
    
    
    765Public utilities
    
    
    2,804
    
    
    
    2,928
    
    
    
    2,928All other corporate including international
    
    
    21,089
    
    
    
    21,884
    
    
    
    21,884All other corporate  asset-backed
    
    
    16,144
    
    
    
    16,194
    
    
    
    16,194Short-term investments
    
    
    1,334
    
    
    
    1,334
    
    
    
    1,334Redeemable preferred stock
    
    
    17
    
    
    
    17
    
    
    
    17Total fixed maturities
    
    
    49,615
    
    
    
    50,812
    
    
    
    50,812Equity SecuritiesCommon stocksBanks, trusts & insurance companies
    
    
    
    
    
    
    1
    
    
    
    1Industrial, miscellaneous and all other
    
    
    19,837
    
    
    
    24,294
    
    
    
    24,294Nonredeemable preferred stocks
    
    
    514
    
    
    
    539
    
    
    
    539Total equity securities
    
    
    20,351
    
    
    
    24,834
    
    
    
    24,834Total fixed maturities and equity securities
    
    
    69,966
    
    
    
    75,646
    
    
    
    75,646Other InvestmentsMortgage loans on real estate
    
    
    1,513
    
    
    
    1,504
    
    
    
    1,513Policy loans
    
    
    2,016
    
    
    
    2,016
    
    
    
    2,016Investments in partnerships and trusts
    
    
    436
    
    
    
    431
    
    
    
    431Other invested assets
    
    
    224
    
    
    
    178
    
    
    
    178Total other investments
    
    
    4,189
    
    
    
    4,129
    
    
    
    4,138Total investments
    
    $
    74,155
    
    
    $
    79,775
    
    
    $
    79,784
 S-1




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE II
 CONDENSED FINANCIAL INFORMATION OF HARTFORD LIFE, INC.
(Registrant)
 As of December 31,Condensed Balance Sheets
    
    2005
    
    
    2004AssetsFixed maturities, available for sale, at fair value
(amortized cost of $20 and $1)
    
    $
    5
    
    
    $
    20Investment in subsidiaries
    
    
    10,408
    
    
    
    10,310Other assets
    
    
    161
    
    
    
    78Total assets
    
    
    10,574
    
    
    
    10,408Liabilities and Stockholders EquityLong-term debt
    
    
    1,050
    
    
    
    1,050Other liabilities
    
    
    165
    
    
    
    186Total liabilities
    
    
    1,215
    
    
    
    1,236Total stockholders equity
    
    
    9,359
    
    
    
    9,172Total liabilities and stockholders equity
    
    $
    10,574
    
    
    $
    10,408
 For the years ended December 31,Condensed Statements of Income
    
    2005
    
    
    2004
    
    
    2003Earnings of subsidiaries
    
    $
    1,592
    
    
    $
    1,607
    
    
    $
    1,066Interest
expense and other
    
    
    152
    
    
    
    97
    
    
    
    117Income before income tax expense and cumulative
effect of accounting change
    
    
    1,440
    
    
    
    1,510
    
    
    
    949Income tax expense
    
    
    288
    
    
    
    168
    
    
    
    180Income before cumulative effect of accounting change
    
    
    1,152
    
    
    
    1,342
    
    
    
    769Cumulative effect of accounting change
    
    
    
    
    
    
    (23
    )
    
    
    Net income
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769
 The financial information of Hartford Life, Inc. (parent company of Hartford Life) should be
read in conjunction with the Consolidated Financial Statements and Notes to Consolidated
Financial Statements.
 S-2




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE II
 CONDENSED FINANCIAL INFORMATION OF HARTFORD LIFE, INC. (continued)
(Registrant)
 Condensed Statements of Cash Flows
    
    For the years ended December 31,2005
    
    
    2004
    
    
    2003Operating ActivitiesNet income
    
    $
    1,152
    
    
    $
    1,319
    
    
    $
    769Undistributed earnings of subsidiaries
    
    
    (642
    )
    
    
    (1,064
    )
    
    
    (699
    )Change in other assets and liabilities
    
    
    (135
    )
    
    
    53
    
    
    
    (1
    )Cash provided by operating activities
    
    
    375
    
    
    
    308
    
    
    
    69Investing ActivitiesSales (purchases) of investments
    
    
    15
    
    
    
    (19
    )
    
    
    Capital contribution to subsidiary
    
    
    (108
    )
    
    
    
    
    
    
    (749
    )Cash used for investing activities
    
    
    (93
    )
    
    
    (19
    )
    
    
    (749
    )Financing Activities(Repayment of) proceeds from short-term debt
    
    
    
    
    
    
    (505
    )
    
    
    230Repayment of company obligated mandatorilyRedeemable preferred securities of subsidiary trust holding
solely parent junior subordinated debentures
    
    
    
    
    
    
    (250
    )
    
    
    Capital contribution from parent
    
    
    
    
    
    
    605
    
    
    
    519Dividends paid
    
    
    (282
    )
    
    
    (139
    )
    
    
    (69
    )Cash (used for) provided by financing activities
    
    
    (282
    )
    
    
    (289
    )
    
    
    680Net change in cash
    
    
    
    
    
    
    
    
    
    
    Cash  beginning of year
    
    
    
    
    
    
    
    
    
    
    Cash  end of year
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental Disclosure of Cash Flow InformationNet Cash Activity During the Year For:Interest expense paid
    
    $
    79
    
    
    $
    94
    
    
    $
    115Income taxes paid
    
    $
    240
    
    
    $
    66
    
    
    $
    50
 S-3




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE III
 SUPPLEMENTARY INSURANCE INFORMATION
For the years ended December 31, 2005, 2004 and 2003
 Net
    
    Benefits,
    
    
    
    
    
    AmortizationFee
    
    
    
    
    
    
    
    
    
    Realized
    
    Claims and
    
    
    
    
    
    of Deferredincome
    
    
    
    
    
    Net
    
    Capital
    
    Claim
    
    Insurance
    
    Policy
    
    Dividendsand
    
    Earned
    
    Investment
    
    Gains/
    
    Adjustment
    
    Expenses
    
    Acquisition
    
    to Policy-
    
    InterestSegment
    
    Other
    
    Premiums
    
    Income
    
    (Losses)
    
    Expenses
    
    and other
    
    Costs
    
    holders
    
    Expense2005Retail Products Group
    
    $
    2,325
    
    
    $
    (52
    )
    
    $
    933
    
    
    $
    9
    
    
    $
    895
    
    
    $
    869
    
    
    $
    744
    
    
    $
    
    
    
    $
    Retirement Plans
    
    
    152
    
    
    
    10
    
    
    
    311
    
    
    
    (3
    )
    
    
    231
    
    
    
    115
    
    
    
    26
    
    
    
    
    
    
    
    Institutional
Solutions Group
    
    
    119
    
    
    
    504
    
    
    
    802
    
    
    
    (5
    )
    
    
    1,212
    
    
    
    56
    
    
    
    32
    
    
    
    
    
    
    
    Individual Life
    
    
    802
    
    
    
    (33
    )
    
    
    305
    
    
    
    5
    
    
    
    469
    
    
    
    164
    
    
    
    205
    
    
    
    3
    
    
    
    Group Benefits
    
    
    36
    
    
    
    3,774
    
    
    
    398
    
    
    
    1
    
    
    
    2,794
    
    
    
    1,022
    
    
    
    31
    
    
    
    
    
    
    
    International
    
    
    483
    
    
    
    
    
    
    
    75
    
    
    
    (34
    )
    
    
    42
    
    
    
    188
    
    
    
    133
    
    
    
    
    
    
    
    Other
    
    
    83
    
    
    
    
    
    
    
    4,021
    
    
    
    2
    
    
    
    4,166
    
    
    
    71
    
    
    
    1
    
    
    
    34
    
    
    
    80Consolidated
    
    $
    4,000
    
    
    $
    4,203
    
    
    $
    6,845
    
    
    $
    (25
    )
    
    $
    9,809
    
    
    $
    2,485
    
    
    $
    1,172
    
    
    $
    37
    
    
    $
    802004Retail Products Group
    
    $
    2,019
    
    
    $
    5
    
    
    $
    1,011
    
    
    $
    
    
    
    $
    1,074
    
    
    $
    687
    
    
    $
    647
    
    
    $
    
    
    
    $
    Retirement Plans
    
    
    121
    
    
    
    10
    
    
    
    306
    
    
    
    (3
    )
    
    
    220
    
    
    
    96
    
    
    
    29
    
    
    
    
    
    
    
    Institutional
Solutions Group
    
    
    161
    
    
    
    463
    
    
    
    664
    
    
    
    3
    
    
    
    1,116
    
    
    
    55
    
    
    
    26
    
    
    
    
    
    
    
    Individual Life
    
    
    767
    
    
    
    (21
    )
    
    
    303
    
    
    
    7
    
    
    
    480
    
    
    
    162
    
    
    
    185
    
    
    
    2
    
    
    
    Group Benefits
    
    
    37
    
    
    
    3,615
    
    
    
    373
    
    
    
    2
    
    
    
    2,703
    
    
    
    989
    
    
    
    23
    
    
    
    
    
    
    
    International
    
    
    240
    
    
    
    
    
    
    
    11
    
    
    
    (1
    )
    
    
    20
    
    
    
    98
    
    
    
    77
    
    
    
    
    
    
    
    Other
    
    
    119
    
    
    
    
    
    
    
    1,007
    
    
    
    156
    
    
    
    1,017
    
    
    
    29
    
    
    
    6
    
    
    
    27
    
    
    
    97Consolidated
    
    $
    3,464
    
    
    $
    4,072
    
    
    $
    3,675
    
    
    $
    164
    
    
    $
    6,630
    
    
    $
    2,116
    
    
    $
    993
    
    
    $
    29
    
    
    $
    972003Retail Products Group
    
    $
    1,654
    
    
    $
    (34
    )
    
    $
    432
    
    
    $
    8
    
    
    $
    519
    
    
    $
    560
    
    
    $
    498
    
    
    $
    
    
    
    $
    Retirement Plans
    
    
    83
    
    
    
    15
    
    
    
    281
    
    
    
    1
    
    
    
    226
    
    
    
    79
    
    
    
    17
    
    
    
    
    
    
    
    Institutional
Solutions Group
    
    
    154
    
    
    
    783
    
    
    
    581
    
    
    
    4
    
    
    
    1,344
    
    
    
    109
    
    
    
    28
    
    
    
    
    
    
    
    Individual Life
    
    
    747
    
    
    
    (20
    )
    
    
    263
    
    
    
    (7
    )
    
    
    436
    
    
    
    158
    
    
    
    177
    
    
    
    3
    
    
    
    Group Benefits
    
    
    20
    
    
    
    2,342
    
    
    
    262
    
    
    
    
    
    
    
    1,862
    
    
    
    553
    
    
    
    18
    
    
    
    
    
    
    
    International
    
    
    90
    
    
    
    
    
    
    
    2
    
    
    
    (2
    )
    
    
    1
    
    
    
    42
    
    
    
    32
    
    
    
    
    
    
    
    Other
    
    
    143
    
    
    
    
    
    
    
    220
    
    
    
    22
    
    
    
    228
    
    
    
    43
    
    
    
    (15
    )
    
    
    60
    
    
    
    117Consolidated
    
    $
    2,891
    
    
    $
    3,086
    
    
    $
    2,041
    
    
    $
    26
    
    
    $
    4,616
    
    
    $
    1,544
    
    
    $
    755
    
    
    $
    63
    
    
    $
    117
 S-4




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE IV
 REINSURANCE
 AssumedCeded to
    
    From
    
    
    
    
    
    Percentage ofGross
    
    Other
    
    Other
    
    Net
    
    Amount AssumedAmount
    
    Companies
    
    Companies
    
    Amount
    
    to NetFor the year ended December 31, 2005Life insurance inforce
    
    $
    764,293
    
    
    $
    251,853
    
    
    $
    51,274
    
    
    $
    563,714
    
    
    
    9.1
    %Fee income, earned premiums and otherLife insurance and annuities
    
    $
    6,072
    
    
    $
    403
    
    
    $
    348
    
    
    $
    6,017
    
    
    
    5.8
    %Accident and health insurance
    
    
    2,122
    
    
    
    52
    
    
    
    116
    
    
    
    2,186
    
    
    
    5.3
    %Total fee income, earned
premiums and other
    
    $
    8,194
    
    
    $
    455
    
    
    $
    464
    
    
    $
    8,203
    
    
    
    5.7
    %For the year ended December 31, 2004Life insurance in force
    
    $
    778,134
    
    
    $
    300,627
    
    
    $
    75,050
    
    
    
    552,557
    
    
    
    13.6
    %Fee income, earned premiums and otherLife insurance and annuities
    
    $
    5,392
    
    
    $
    415
    
    
    $
    542
    
    
    $
    5,519
    
    
    
    10.2
    %Accident and health insurance
    
    
    1,831
    
    
    
    83
    
    
    
    269
    
    
    
    2,017
    
    
    
    13.3
    %Total fee income, earned
premiums and other
    
    $
    7,223
    
    
    $
    498
    
    
    $
    811
    
    
    $
    7,536
    
    
    
    11.1
    %For the year ended December 31, 2003Life insurance in force
    
    $
    737,837
    
    
    $
    288,758
    
    
    $
    28,800
    
    
    $
    477,879
    
    
    
    6.0
    %Fee income, earned premiums and otherLife insurance and annuities
    
    $
    4,762
    
    
    $
    364
    
    
    $
    122
    
    
    $
    4,520
    
    
    
    2.7
    %Accident and health insurance
    
    
    1,485
    
    
    
    101
    
    
    
    73
    
    
    
    1,457
    
    
    
    4.8
    %Total fee income, earned
premiums and other
    
    $
    6,247
    
    
    $
    465
    
    
    $
    195
    
    
    $
    5,977
    
    
    
    3.3
    %
 S-5




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
 SCHEDULE V
 VALUATION AND QUALIFYING ACCOUNTS
 Additions
    
    DeductionsCharged toBalance
    
    Costs and
    
    Translation
    
    Write-offs/
    
    BalanceJanuary 1,
    
    Expenses
    
    Adjustment
    
    Payments/Other
    
    December 31,2005Accumulated depreciation of plant,
property and equipment
    
    $
    259
    
    
    $
    71
    
    
    $
    
    
    
    $
    (9
    )
    
    
    321Valuation allowance on deferred tax asset
    
    
    7
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    172004Accumulated depreciation of plant,
property and equipment
    
    $
    256
    
    
    $
    64
    
    
    $
    
    
    
    $
    (61
    )
    
    
    259Valuation allowance on deferred tax asset
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    72003Accumulated depreciation of plant,
property and equipment
    
    $
    249
    
    
    $
    52
    
    
    $
    
    
    
    $
    (45
    )
    
    
    256Valuation allowance on deferred tax asset
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
 S-6




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##### Table of Contents



SIGNATURES
  HARTFORD LIFE, INC.By: /s/ Ernest M. McNeill Jr.Ernest M. McNeill Jr.Senior Vice President and Chief
Accounting Officer
   Signature
    
    Title
    
    Date/s/ Ramani Ayer
    
    Chairman and Director
    
    February 24, 2006Ramani Ayer/s/ Thomas M. Marra

Thomas M. Marra
    
    President, Chief Operating Officer
and Director
    
    February 24, 2006/s/ Lizabeth H. Zlatkus

Lizabeth H. Zlatkus
    
    Executive Vice President
and Chief Financial Officer
    
    February 24, 2006/s/ Ernest M. McNeill Jr.

Ernest M. McNeill Jr.
    
    Senior Vice President
and Chief Accounting Officer
    
    February 24, 2006/s/ David K. Zwiener

David K. Zwiener
    
    Director
    
    February 24, 2006
 II-1




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##### Table of Contents



HARTFORD LIFE, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
 
 EXHIBITS INDEX
 Exhibit
#3.01
    
    Amended and Restated Certificate of Incorporation of
Hartford Life, Inc. (Hartford Life or the Company), is
filed herewith.3.02
    
    Amended and Restated By-Laws of the Company, effective June
27, 2000 were filed as Exhibit 3.02 to the Companys Form
10-Q filed for the second quarter ended June 30, 2000 and is
incorporated herein by reference.4.01
    
    Amended and Restated Certificate of Incorporation and
By-Laws of the Company (included as Exhibits 3.01 and 3.02,
respectively).4.02
    
    Indenture, dated as of May 19, 1997, between the Company and
Citibank, N.A., as Trustee, with respect to the Companys
7.10% Notes due June 15, 2007, and 7.65% Debentures due June
15, 2027, was filed as Exhibit 4.3 to the Companys
Registration Statement on Form S-3 (Amendment No. 2) dated
May 23, 1997, and is incorporated herein by reference.4.03
    
    Subordinated Indenture between Hartford Life and Wilmington
Trust Company, as Trustee, dated as of June 1, 1998, was
filed as Exhibit 4.03 to the Companys Form 10-K for the
fiscal year ended December 31, 1998 and is incorporated
herein by reference.4.04
    
    Second Supplemental Indenture between Hartford Life and Wilmington
Trust Company, as Trustee, dated as of March 6, 2001, with respect
to 7.625% Junior Subordinated Deferred Interest Debentures, due
February 15, 2050, was filed as Exhibit 4.02 to the Companys Form
8-A dated March 13, 2001, and is incorporated herein by reference.4.05
    
    Form of 7.625% Junior Subordinated Deferrable Interest Debenture,
Series A, due February 15, 2050, was filed as Exhibit A to Exhibit
4.02 of the Companys Form 8-A dated March 13, 2001, and is
incorporated herein by reference.4.06
    
    Declaration of Trust of Hartford Life Capital II, dated as of June
3, 1998, between Hartford Life, as Sponsor, and Wilmington Trust
Company, as Trustee, was filed as Exhibit 4.13 to the Companys
Registration Statement on Form S-3 (Registration No. 333-56283)
filed with the Securities and Exchange Commission on June 18, 1998
by Hartford Life, Inc., Hartford Life Capital I, Hartford Life
Capital II and Hartford Life Capital III, as amended, and is
incorporated herein by reference.4.07
    
    Form of Amended and Restated Declaration of Trust of Hartford Life
Capital II between Hartford Life, as Sponsor, and Wilmington Trust
Company, as Indenture Trustee and Delaware Trustee, was filed as
Exhibit 4.19 to the Companys Registration Statement on Form S-3
(Registration No. 333-56283) filed with the Securities and Exchange
Commission on June 18, 1998 by Hartford Life, Hartford Life Capital
I, Hartford Life Capital II and Hartford Life Capital III, as
amended, and is incorporated herein by reference.4.08
    
    Form of Guarantee Agreement between Hartford Life, as Guarantor,
and Wilmington Trust Company, as Guarantee Trustee, was filed as
Exhibit 4.21 to the Companys Registration Statement on Form S-3
(Registration No. 333-56283) filed with the Securities and Exchange
Commission on June 18, 1998 by Hartford Life, Hartford Capital I,
Hartford Capital II and Hartford Capital III, as amended, and is
incorporated herein by reference.4.09
    
    Form of Preferred Security Certificate for Hartford Life Capital II
was filed as Exhibit 4.20 to the
 II-2




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##### Table of Contents



Exhibit
#Companys Registration Statement
on Form S-3 (Registration No. 333-56283) filed with the Securities
and Exchange Commission on June 18, 1998 by Hartford Life, Hartford
Life Capital I, Hartford Life Capital II and Hartford Life Capital
III, as amended, and is incorporated herein by reference.4.10
    
    Form of 7.375% Senior Notes due March 1, 2031 was filed as Exhibit
3 to the Companys Form 8-A dated February 28, 2001, and is
incorporated herein by reference.10.01
    
    Master Intercompany Agreement, dated May 19, 1997, among the
Company, The Hartford Financial Services Group, Inc. (formerly
known as ITT Hartford Group, Inc.) (The Hartford) and with
respect to Articles VI and XII, Hartford Fire Insurance Company,
was filed as Exhibit 10.1 to the Companys Form 10-Q filed for the
quarterly period ended June 30, 1997 and is incorporated herein by
reference.10.02
    
    Management Agreement, dated March 31, 1997, among Hartford Life
Insurance Company and Hartford Investment Management Company, was
filed as Exhibit 10.3 to the Companys Form 10-Q filed for the
quarterly period ended June 30, 1997 and is incorporated herein by
reference.10.03
    
    Management Agreement, dated March 31, 1997, among certain
subsidiaries of the Company and Hartford Investment Services, Inc.,
was filed as Exhibit 10.4 to the Companys Form 10-Q filed for the
quarterly period ended June 30, 1997 and is incorporated herein by
reference.10.04
    
    Sublease Agreement , dated May 19, 1997, between Hartford Fire
Insurance Company and the Company, was filed as Exhibit 10.5 to the
Companys Form 10-Q filed for the quarterly period ended June 30,
1997 and is incorporated herein by reference.10.05
    
    Five-Year Competitive Advance and Revolving Credit Facility
Agreement among The Hartford, the Company, the Lenders named
therein, Bank of America, N.A., as Administrative Agent, JPMorgan
Chase Bank, N.A. and Citibank, N.A. as Syndication Agents, and
Wachovia Bank, National Association, as Documentation Agent
(incorporated herein by reference to Exhibit 10.1 to the Companys
Report to Form 8-K, filed September 13, 2005.12.01
    
    Computation of Ratio of Earnings to Fixed Charges is filed herewith.23.01
    
    Consent of Deloitte & Touche LLP is filed herewith.31.01
    
    Section 302 Certification of Thomas M. Marra is filed herewith.31.02
    
    Section 302 Certification of Lizabeth H. Zlatkus is filed herewith.32.01
    
    Section 906 Certification of Thomas M. Marra is filed herewith.32.02
    
    Section 906 Certification of Lizabeth H. Zlatkus is filed herewith.
 II-3