[1] 1997 includes a $368 equity gain resulting from the initial public offering of HLI.
Written premiums increased $327, or 17%, in 1998 compared with 1997. The acquisition of Omni accounted for $167, or 9%, of the written premiums increase. As of December 31, 1998, non-standard auto coverage through Omni was available in 19 states compared with 13 states at the time of acquisition. Favorable underwriting experience was passed through to AARP members in reduced rates, and the program posted a written premiums increase of $65, or 5%, contributing 3% to the segment's total written premium growth in 1998. Agency experienced substantial premium growth improvement in 1998 with an increase of $67, or 11%, contributing 4% to the segment's total written premium growth. A primary driver of this premium growth was the strategic shift from homeowners to automobile coverages which began in 1997. The Affinity unit, which is still in a start-up phase, experienced growth of $28, or 105%, in 1998, contributing 1% to the segment's total written premium growth.
The COLI operation includes life insurance products sold for funding of other post employment benefits and other non-qualified benefit programs provided by corporations, and also includes business sold on a leveraged basis.
Management believes that it has developed and implemented strategies to maintain and enhance its position as a market leader within the financial services industry, to continue the
Invested assets, excluding separate accounts, totaled $24.9 billion at December 31, 1998 and were comprised of $17.7 billion of fixed maturities, $6.7 billion of policy loans and other investments of $503. At December 31, 1997, invested assets totaled $21.0 billion and were comprised of $16.8 billion of fixed maturities, $3.8 billion of policy loans and other investments of $363. Policy loans, which had a weighted-average interest rate of 9.9% and 11.2% as of December 31, 1998 and 1997, respectively, increased primarily as a result of the MBL Recapture. These loans are secured by the cash value of the life policy and do not mature in a conventional sense, but expire in conjunction with the related policy liabilities.
The investment objectives of the International segment are to generate appropriate after-tax income and sufficient liquidity to meet corporate and policyholder obligations. The International segment primarily comprises the investment activities of Zwolsche, ITT Ercos and People's Insurance (acquired in January 1998) which are engaged in property and casualty and life insurance operations. Investment results of London & Edinburgh were reflected in income until its sale in November 1998. Investments are made with durations and in currencies that reflect the nature of each company's liabilities.
While the allocation to major market types remained consistent from 1997 to 1998, total equities has decreased due to the redeployment from equity securities to fixed maturities.
The NAIC developed several model laws and regulations, including a Model Investment Law and amendments to the Model Holding Company System Regulatory Act (the "Holding Act Amendments"). The Model Investment Law defines the investments which are permissible for property and casualty and life insurers to hold, and the Holding Act Amendments address the types of activities in which subsidiaries and affiliates may engage. The NAIC adopted these models in 1997 and 1996, but the laws have not been enacted for insurance companies domiciled in the State of Connecticut, such as Hartford Fire Insurance Company. Even if enacted in Connecticut or other states in which The Hartford's subsidiaries are domiciled, it is expected that these laws will neither significantly change The Hartford's investment strategies nor have any material adverse effect on The Hartford's liquidity or financial position.
The integrity and reliability of The Hartford's IT systems, as well as the reliability of its non-IT systems, are integral aspects of The Hartford's business. The Hartford issues insurance policies, annuities, mutual funds and other financial products to individual and business customers, nearly all which contain date sensitive data, such as policy expiration dates, birth dates and premium payment dates. In addition, various IT systems support communications and other systems that integrate The Hartford's various business segments and field offices, including The Hartford's foreign operations. The Hartford also has business relationships with numerous third parties that affect virtually all aspects of The Hartford's business, including, without limitation, suppliers, computer hardware and software vendors, insurance agents and brokers, securities broker-dealers and other distributors of financial products, many of which provide date sensitive data to The Hartford, and whose operations are important to The Hartford's business.