UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number: 001-13958

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		13-3317783 (I.R.S. Employer Identification No.)

One Hartford Plaza, Hartford, Connecticut 06155

(Address of principal executive offices) (Zip Code)

(860) 547-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 22, 2009, there were outstanding 328,158,459 shares of Common Stock, $0.01 par value per share, of the registrant.

 

 

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009

TABLE OF CONTENTS

Item				Description		Page
				Part I. FINANCIAL INFORMATION
1.				Financial Statements
				Report of Independent Registered Public Accounting Firm			3
				Condensed Consolidated Statements of Operations — For the Three and Six Months Ended June 30, 2009 and 2008			4
				Condensed Consolidated Balance Sheets — As of June 30, 2009 and December 31, 2008			5
				Condensed Consolidated Statements of Changes in Equity — For the Six Months Ended June 30, 2009 and 2008			6
				Condensed Consolidated Statements of Comprehensive Income (Loss) — For the Three and Six Months Ended June 30, 2009 and 2008			7
				Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2009 and 2008			8
				Notes to Condensed Consolidated Financial Statements			9
2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			56
3.				Quantitative and Qualitative Disclosures About Market Risk			159
4.				Controls and Procedures			159
				Part II. OTHER INFORMATION
1.				Legal Proceedings			160
1A.				Risk Factors			162
2.				Unregistered Sales of Equity Securities and Use of Proceeds			165
4.				Submission of Matters to a Vote of Security Holders			167
6.				Exhibits			167
				Signature			168
				Exhibits Index			169
Exhibit 15.01
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Hartford Financial Services Group, Inc.
Hartford, Connecticut

We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the “Company”) as of June 30, 2009, and the related condensed consolidated statements of operations and comprehensive income (loss) for the three-month and six-month periods ended June 30, 2009 and 2008, and changes in equity, and cash flows for the six-month periods ended June 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2008, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive loss, and cash flows for the year then ended prior to retrospective adjustment for the adoption of FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, described in Note 1, (not presented herein); and in our report dated February 11, 2009 (which report includes an explanatory paragraph relating to the Company’s change in its method of accounting and reporting for the fair value measurement of financial instruments in 2008, and defined benefit pension and other postretirement plans in 2006), we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively adjust the December 31, 2008 consolidated balance sheet of the Company (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted condensed consolidated balance sheet as of December 31, 2008.

DELOITTE & TOUCHE LLP
Hartford, Connecticut
July 29, 2009

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions, except for per share data)		2009				2008				2009				2008
		(Unaudited)								(Unaudited)
Revenues
Earned premiums		$	3,592			$	3,891			$	7,421			$	7,734
Fee income			1,062				1,386				2,229				2,723
Net investment income (loss):
Securities available-for-sale and other			1,021				1,230				1,941				2,423
Equity securities, trading			2,523				1,153				1,799				(2,425	)
Total net investment income (loss)			3,544				2,383				3,740				(2	)
Net realized capital gains (losses):
Total other-than-temporary impairment (“OTTI”) losses			(562	)			(164	)			(786	)			(468	)
OTTI losses transferred to other comprehensive income			248				—				248				—
Net OTTI losses recognized in earnings			(314	)			(164	)			(538	)			(468	)
Net realized capital losses, excluding net OTTI losses recognized in earnings			(367	)			(118	)			(59	)			(1,185	)
Total net realized capital losses			(681	)			(282	)			(597	)			(1,653	)
Other revenues			120				125				238				245
Total revenues			7,637				7,503				13,031				9,047
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses			3,092				3,586				7,729				6,943
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities			2,523				1,153				1,799				(2,425	)
Amortization of deferred policy acquisition costs and present value of future profits			674				806				2,933				1,274
Insurance operating costs and expenses			959				1,047				1,857				1,997
Interest expense			119				77				239				144
Goodwill impairment			—				—				32				—
Other expenses			252				182				441				371
Total benefits, losses and expenses			7,619				6,851				15,030				8,304
Income (loss) before income taxes			18				652				(1,999	)			743
Income tax expense (benefit)			33				109				(775	)			55
Net income (loss)		$	(15	)		$	543			$	(1,224	)		$	688
Preferred stock dividends			3				—				3				—
Net income (loss) available to common shareholders		$	(18	)		$	543			$	(1,227	)		$	688
Earnings (Loss) per common share
Basic		$	(0.06	)		$	1.74			$	(3.80	)		$	2.20
Diluted		$	(0.06	)		$	1.73			$	(3.80	)		$	2.19
Weighted average common shares outstanding			325.4				311.7				323.1				312.7
Weighted average common shares outstanding and dilutive potential common shares			325.4				313.1				323.1				314.4
Cash dividends declared per common share		$	0.05			$	0.53			$	0.10			$	1.06

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		June 30,				December 31,
(In millions, except for share and per share data)		2009				2008
		(Unaudited)
Assets
Investments
Fixed maturities, available-for-sale, at fair value (amortized cost of $76,196 and $78,238)		$	64,868			$	65,112
Equity securities, trading, at fair value (cost of $32,889 and $35,278)			30,813				30,820
Equity securities, available-for-sale, at fair value (cost of $1,518 and $1,554)			1,308				1,458
Mortgage loans on real estate			6,522				6,469
Policy loans, at outstanding balance			2,204				2,208
Limited partnerships and other alternative investments			1,838				2,295
Other investments			1,107				1,723
Short-term investments			12,701				10,022
Total investments			121,361				120,107
Cash			2,558				1,811
Premiums receivable and agents’ balances			3,510				3,604
Reinsurance recoverables			5,848				6,357
Deferred policy acquisition costs and present value of future profits			11,780				13,248
Deferred income taxes			5,321				5,239
Goodwill			1,204				1,060
Property and equipment, net			1,024				1,075
Other assets			3,148				4,898
Separate account assets			133,946				130,184
Total assets		$	289,700			$	287,583
Liabilities
Reserve for future policy benefits and unpaid losses and loss adjustment expenses
Property and casualty		$	21,902			$	21,933
Life			18,153				16,747
Other policyholder funds and benefits payable			49,257				53,753
Other policyholder funds and benefits payable — International variable annuities			30,793				30,799
Unearned premiums			5,333				5,379
Short-term debt			342				398
Long-term debt			5,490				5,823
Consumer notes			1,199				1,210
Other liabilities			9,823				11,997
Separate account liabilities			133,946				130,184
Total liabilities			276,238				278,223
Commitments and Contingencies (Note 9)
Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 3,400,000 and 6,048,387 shares issued, liquidation preference $1,000 and $0.02 per share			2,921				—
Common stock, $0.01 par value — 1,500,000,000 and 750,000,000 shares authorized, 355,392,612 and 329,920,310 shares issued			4				3
Additional paid-in capital			8,190				7,569
Retained earnings			10,991				11,336
Treasury stock, at cost — 28,663,675 and 29,341,378 shares			(2,054	)			(2,120	)
Accumulated other comprehensive loss, net of tax			(6,610	)			(7,520	)
Total stockholders’ equity			13,442				9,268
Noncontrolling interest			20				92
Total equity			13,462				9,360
Total liabilities and equity		$	289,700			$	287,583

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Six Months Ended
		June 30,
(In millions, except for share data)		2009				2008
		(Unaudited)
Preferred Stock
Balance at beginning of period		$	—			$	—
Issuance of shares to U.S. Treasury			2,920				—
Accretion of preferred stock discount on issuance to U.S. Treasury			1				—
Balance at end of period			2,921				—
Common Stock			4				3
Additional Paid-in Capital
Balance at beginning of period			7,569				6,627
Issuance of warrants to U.S. Treasury			480				—
Issuance of shares under discretionary equity issuance plan			16				—
Issuance of shares under incentive and stock compensation plans			(50	)			(43	)
Reclassification of warrants from other liabilities to equity and extension of warrants’ term			186				—
Tax (expense) benefit on employee stock options and awards			(11	)			7
Balance at end of period			8,190				6,591
Retained Earnings
Balance at beginning of period, before cumulative effect of accounting change, net of tax			11,336				14,686
Cumulative effect of accounting change, net of tax			—				(3	)
Balance at beginning of period, as adjusted			11,336				14,683
Net income (loss)			(1,224	)			688
Cumulative effect of accounting change, net of tax			912				—
Accretion of preferred stock discount on issuance to U.S. Treasury			(1	)			—
Dividends on preferred stock			(2	)			—
Dividends declared on common stock			(30	)			(332	)
Balance at end of period			10,991				15,039
Treasury Stock, at Cost
Balance at beginning of period			(2,120	)			(1,254	)
Treasury stock acquired			—				(871	)
Issuance of shares under incentive and stock compensation plans from treasury stock			69				113
Return of shares under incentive and stock compensation plans to treasury stock			(3	)			(17	)
Balance at end of period			(2,054	)			(2,029	)
Accumulated Other Comprehensive Loss, Net of Tax
Balance at beginning of period			(7,520	)			(858	)
Cumulative effect of accounting change, net of tax			(912	)			—
Total other comprehensive income (loss)			1,822				(1,922	)
Balance at end of period			(6,610	)			(2,780	)
Total Stockholders’ Equity			13,442				16,824
Noncontrolling Interest (Note 13)
Balance at beginning of period			92				92
Change in noncontrolling interest ownership			(65	)			57
Noncontrolling loss			(7	)			(22	)
Balance at end of period			20				127
Total Equity		$	13,462			$	16,951
Outstanding Preferred Shares (in thousands)
Balance at beginning of period			6,048				—
Conversion of preferred to common shares			(6,048	)			—
Issuance of shares to U.S. Treasury			3,400				—
Balance at end of period			3,400				—
Outstanding Common Shares (in thousands)
Balance at beginning of period			300,579				313,842
Treasury stock acquired			(15	)			(11,675	)
Conversion of preferred to common shares			24,194				—
Issuance of shares under discretionary equity issuance plan			1,301				—
Issuance of shares under incentive and stock compensation plans			854				1,220
Return of shares under incentive and stock compensation plans to treasury stock			(184	)			(244	)
Balance at end of period			326,729				303,143

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In millions)		2009				2008				2009				2008
		(Unaudited)								(Unaudited)
Comprehensive Income (Loss)
Net income (loss)		$	(15	)		$	543			$	(1,224	)		$	688
Other comprehensive income (loss)
Change in net unrealized loss on securities			2,373				(420	)			2,340				(2,026	)
Other-than-temporary impairment losses transferred to Other Comprehensive Income			(125	)			—				(125	)			—
Change in net gain/loss on cash-flow hedging instruments			(320	)			(76	)			(368	)			14
Change in foreign currency translation adjustments			164				(68	)			(45	)			74
Amortization of prior service cost and actuarial net losses included in net periodic benefit costs			11				9				20				16
Total other comprehensive income (loss)			2,103				(555	)			1,822				(1,922	)
Total comprehensive income (loss)		$	2,088			$	(12	)		$	598			$	(1,234	)

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Six Months Ended
		June 30,
(In millions)		2009				2008
		(Unaudited)
Operating Activities
Net income (loss)		$	(1,224	)		$	688
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Amortization of deferred policy acquisition costs and present value of future profits			2,933				1,274
Additions to deferred policy acquisition costs and present value of future profits Change in:			(1,450	)			(1,903	)
Reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums			1,333				576
Reinsurance recoverables			(111	)			78
Receivables and other assets			249				399
Payables and accruals			(389	)			(690	)
Accrued and deferred income taxes			(343	)			(68	)
Net realized capital losses			597				1,653
Net receipts to investment contracts related to policyholder funds -International variable annuities			(892	)			(1,290	)
Net decrease in equity securities, trading			885				1,235
Depreciation and amortization			259				476
Goodwill impairment			32				—
Other, net			107				(167	)
Net cash provided by operating activities			1,986				2,261
Investing Activities
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale			33,229				12,595
Equity securities, available-for-sale			482				144
Mortgage loans			297				214
Partnerships			239				107
Derivatives			29				—
Payments for the purchase of:
Fixed maturities, available-for-sale			(35,015	)			(14,455	)
Equity securities, available-for-sale			(251	)			(496	)
Mortgage loans			(214	)			(686	)
Partnerships			(136	)			(402	)
Derivatives			—				(219	)
Proceeds from business sold			7				—
Purchase price of businesses acquired			(15	)			(94	)
Change in policy loans, net			4				(85	)
Change in payables for collateral under securities lending, net			(2,262	)			(199	)
Change in all other securities, net			107				(556	)
Additions to property and equipment, net			(58	)			(185	)
Net cash used for investing activities			(3,557	)			(4,317	)
Financing Activities
Deposits and other additions to investment and universal life-type contracts			7,323				11,345
Withdrawals and other deductions from investment and universal life-type contracts			(11,516	)			(13,694	)
Net transfers from separate accounts related to investment and universal life-type contracts			3,646				3,725
Proceeds from issuance of long-term debt			—				1,487
Payments on capital lease obligations			(24	)			(37	)
Change in short-term debt			(375	)			—
Proceeds from issuance of consumer notes			—				304
Repayments at maturity or settlement of consumer notes			(11	)			—
Proceeds from issuance of preferred stock and warrants to U.S. Treasury			3,400				—
Net proceeds from issuance of shares under discretionary equity issuance plan			14				—
Proceeds from issuance of shares under incentive and stock compensation plans			7				34
Excess tax benefit on stock-based compensation			—				2
Treasury stock acquired			—				(811	)
Return of shares under incentive and stock compensation plans to treasury stock			(3	)			(17	)
Dividends paid on preferred stock			(8	)			—
Dividends paid on common stock			(115	)			(336	)
Net cash provided by financing activities			2,338				2,002
Foreign exchange rate effect on cash			(20	)			127
Net increase in cash			747				73
Cash — beginning of period			1,811				2,011
Cash — end of period		$	2,558			$	2,084
Supplemental Disclosure of Cash Flow Information
Net Cash Paid (Received) During the Period For:
Income taxes		$	(468	)		$	65
Interest		$	243			$	128

See Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, except for per share data, unless otherwise stated)
(Unaudited)

1. Basis of Presentation and Accounting Policies

Basis of Presentation

The Hartford Financial Services Group, Inc. is a financial holding company for a group of subsidiaries that provide investment products and life and property and casualty insurance to both individual and business customers in the United States and internationally (collectively, “The Hartford” or the “Company”). During the second quarter of 2009, the Company acquired Federal Trust Corporation and became a savings and loan holding company, see Note 16 for further information on the acquisition.

The condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”), which differ materially from the accounting practices prescribed by various insurance regulatory authorities.

The accompanying condensed consolidated financial statements and notes as of June 30, 2009, and for the three and six months ended June 30, 2009 and 2008 are unaudited. These financial statements reflect all adjustments (consisting only of normal accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in The Hartford’s 2008 Form 10-K Annual Report. The results of operations for the interim periods should not be considered indicative of the results to be expected for the full year.

Consolidation

The condensed consolidated financial statements include the accounts of The Hartford Financial Services Group, Inc., companies in which the Company directly or indirectly has a controlling financial interest and those variable interest entities in which the Company is the primary beneficiary. The Company determines if it is the primary beneficiary using both qualitative and quantitative analyses. Entities in which The Hartford does not have a controlling financial interest but in which the Company has significant influence over the operating and financing decisions are reported using the equity method. Material intercompany transactions and balances between The Hartford and its subsidiaries and affiliates have been eliminated.

Use of Estimates

The preparation of financial statements, in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining property and casualty reserves, net of reinsurance; life estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts; living benefits required to be fair valued; valuation of investments and derivative instruments; evaluation of other-than-temporary impairments on available-for-sale securities; pension and other postretirement benefit obligations; contingencies relating to corporate litigation and regulatory matters; and goodwill impairment. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the condensed consolidated financial statements.

Subsequent Events

The Hartford has evaluated events subsequent to June 30, 2009, and through the condensed consolidated financial statement issuance date of July 29, 2009. The Company has not evaluated subsequent events after that date for presentation in these condensed consolidated financial statements.

Significant Accounting Policies

For a description of significant accounting policies, see Note 1 of Notes to Consolidated Financial Statements included in The Hartford’s 2008 Form 10-K Annual Report, which, accordingly, should be read in conjunction with these accompanying condensed consolidated financial statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

Adoption of New Accounting Standards

Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). This statement amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements”. Noncontrolling interest refers to the minority interest portion of the equity of a subsidiary that is not attributable directly or indirectly to a parent. SFAS 160 establishes accounting and reporting standards that require for-profit entities that prepare consolidated financial statements to: (a) present noncontrolling interests as a component of equity, separate from the parent’s equity, (b) separately present the amount of consolidated net income attributable to noncontrolling interests in the income statement, (c) consistently account for changes in a parent’s ownership interests in a subsidiary in which the parent entity has a controlling financial interest as equity transactions, (d) require an entity to measure at fair value its remaining interest in a subsidiary that is deconsolidated, and (e) require an entity to provide sufficient disclosures that identify and clearly distinguish between interests of the parent and interests of noncontrolling owners. SFAS 160 applies to all for-profit entities that prepare consolidated financial statements, and affects those for-profit entities that have outstanding noncontrolling interests in one or more subsidiaries or that deconsolidate a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 with earlier adoption prohibited. The Company adopted SFAS 160 on January 1, 2009. Upon adoption, the Company reclassified $92 of noncontrolling interest, recorded in other liabilities, to equity as of January 1, 2008. See the Company’s Condensed Consolidated Statement of Changes in Equity. The adoption of SFAS 160 did not have a material effect on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and the adoption of SFAS 160 did not impact the Company’s accounting for separate account assets and liabilities. The FASB has added the following topic to the Emerging Issues Task Force (“EITF”) agenda, “Consideration of an Insurer’s Accounting for Majority Owned Investments When the Ownership Is Through a Separate Account”. This topic will be discussed at a future EITF meeting. The FASB has expressed three separate views on the treatment of noncontrolling interest in majority owned separate accounts, upon implementation of SFAS 160, all of which are acceptable to the United States Securities and Exchange Commission (“SEC”). The Company follows one of these three acceptable views and currently excludes the noncontrolling interest from its majority owned separate accounts. The resolution of this EITF agenda item on the Company’s accounting for separate account assets and liabilities is not known at this time.

Fair Value

In April 2009, the FASB issued Financial Statement of Position (“FSP”) No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 clarifies that the measurement objective in determining fair value when the volume and level of activity for the asset or liability have significantly decreased, is the price that would be received to sell the asset in an orderly transaction between willing market participants under current market conditions, and not the value in a hypothetical active market. The FSP includes additional factors for determining whether there has been a significant decrease in the volume and level of activity for an asset or liability compared to normal activity for that asset or liability (or similar assets or liabilities) and provides additional guidance in estimating fair value in those instances. The FSP requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. The FSP expands fair value disclosures for quarterly financial statements and further requires an entity to disclose any change in valuation techniques, the related inputs, and the effects resulting from the application of the FSP. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of the FSP for its interim reporting period ending on June 30, 2009 and the adoption did not have a material effect on the Company’s condensed consolidated financial statements. See Note 4 for expanded interim disclosures.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”), which expands the disclosure requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to interim financial statements. FSP FAS 107-1 also requires entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments in the financial statements on an interim basis and to highlight any changes of the method(s) and significant assumptions from prior periods. The disclosures in FSP FAS 107-1 are effective for interim reporting periods ending after June 15, 2009, and are not required for earlier periods that are presented for comparative purposes at initial adoption. In periods after initial adoption, FSP FAS 107-1 requires comparative disclosures only for periods ending after initial adoption. The Company adopted the FSP for its interim reporting period ending on June 30, 2009. See Note 4 for expanded interim disclosures.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

Recognition and Presentation of Other-Than-Temporary Impairments

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2”). FSP FAS 115-2 is effective for interim and annual reporting periods ending after June 15, 2009. The Company adopted FSP FAS 115-2 for its interim reporting period ending on June 30, 2009 which modifies the recognition of other-than-temporary impairment (“impairment”) losses for debt securities. This new FSP is also applied to certain equity securities with debt-like characteristics (collectively “debt securities”). Effective with the adoption of this FSP, a debt security is deemed to be other-than-temporarily impaired if the Company intends to sell or it is more likely than not the Company will be required to sell the security before a recovery in value. If a debt security meets either of these conditions, a charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security. For those debt securities for which the Company does not expect to recover the entire amortized cost basis, the difference between the security’s amortized cost basis and the fair value is separated into the portion representing a credit impairment, which is recorded in net realized capital losses, and the remaining impairment, which is recorded in other comprehensive income (“OCI”). Generally, the Company determines a security’s credit impairment as the difference between its amortized cost basis and its best estimate of expected future cash flows discounted at the security’s effective yield prior to impairment. The previous amortized cost basis less the impairment recognized in net realized capital losses becomes the security’s new cost basis. The Company accretes the new cost basis to the estimated future cash flows over the expected remaining life of the security by prospectively adjusting the security’s yield, if necessary.

The Company evaluates whether it expects to recover the entire amortized cost basis of a debt security or if a credit impairment exists, by considering primarily the following factors: (a) the length of time and extent to which the fair value has been less than the amortized cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated interest and principal payments, (d) changes in the financial condition of the security’s underlying collateral and (e) the payment structure of the security. The Company’s best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the security. The Company’s best estimate of future cash flows includes assumptions including, but not limited to, various performance indicators, such as historical default and recovery rates, credit ratings, current delinquency rates, and loan-to-value ratios. In addition, for securitized debt securities, the Company considers factors including, but not limited to, commercial and residential property value declines that vary by property type and location and average cumulative collateral loss rates that vary by vintage year. These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries. In addition, projections of expected future debt security cash flows may change based upon new information regarding the performance of the issuer and/or underlying collateral.

FSP FAS 115-2 does not impact the evaluation for impairment for equity securities. For those equity securities where the decline in the fair value is deemed to be other-than-temporary, a charge is recorded in net realized capital losses equal to the difference between the fair value and cost basis of the security. The previous cost basis less the impairment becomes the security’s new cost basis. The Company asserts its intent and ability to retain those equity securities deemed to be temporarily impaired until the price recovers. Once identified, these securities are systematically restricted from trading unless approved by a committee of investment and accounting professionals (“the committee”). The committee will only authorize the sale of these securities based on predefined criteria that relate to events that could not have been reasonably foreseen. Examples of the criteria include, but are not limited to, the deterioration in the issuer’s financial condition, security price declines, a change in regulatory requirements or a major business combination or major disposition.

The primary factors considered in evaluating whether an impairment exists for an equity security include, but are not limited to: (a) the length of time and extent to which the fair value has been less than the cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on contractually obligated payments and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery.

The FSP also expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities. As a result of the adoption of FSP FAS 115-2, the Company recognized a $912, net of tax and deferred acquisition costs, increase to Retained Earnings with an offsetting decrease in Accumulated Other Comprehensive Income (“AOCI”). See the Company’s Condensed Consolidated Statement of Changes in Equity and Consolidated Statements of Operations and Comprehensive Loss. See Notes 4 and 5 for expanded interim disclosures.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

Subsequent Events

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes principles and disclosure requirements for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, the Statement sets forth (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS 165 for its interim reporting period ending on June 30, 2009. See Basis of Presentation within this Note 1 for expanded interim disclosures.

Future Adoption of New Accounting Standards

Accounting for Transfers of Financial Assets

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets, an Amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 amends the derecognition guidance in Statement 140 and eliminates the concept of a qualifying special-purpose entities (“QSPEs”). SFAS 166 is effective for fiscal years and interim periods beginning after November 15, 2009. Early adoption of SFAS 166 is prohibited. The Company will adopt SFAS 166 on January 1, 2010 and has not yet determined the effect of the adoption on its consolidated financial statements.

Amendments to FASB Interpretation No. 46(R)

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”) which amends the consolidation guidance applicable to variable interest entities (“VIE”s). An entity would consolidate a VIE, as the primary beneficiary, when the entity has both of the following characteristics: (a) The power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) The obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Ongoing reassessment of whether an enterprise is the primary beneficiary of a VIE is required. SFAS 167 amends interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a VIE. This Statement is effective for fiscal years and interim periods beginning after November 15, 2009. The Company will adopt SFAS 167 on January 1, 2010 and has not yet determined the effect of the adoption on its consolidated financial statements.

FASB Accounting Standards Codification

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”). This standard identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with U.S. GAAP. The Statement establishes the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. GAAP. Codification does not create new accounting and reporting guidance rather it reorganizes U.S. GAAP pronouncements into approximately 90 topics within a consistent structure. All guidance contained in the Codification carries an equal level of authority. Relevant portions of authoritative content, issued by the SEC, for SEC registrants, have been included in the Codification. After the effective date of this Statement, all nongrandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed nonauthoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will adopt SFAS 168 on September 30, 2009 and will update all disclosures to reference Codification in its September 30, 2009 quarterly report.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

Income Taxes

The effective tax rate for the three months ended June 30, 2009 and 2008 was 183% and 17%, respectively. The effective tax rate for the six months ended June 30, 2009 and 2008 was 39% and 7%, respectively. The principal causes of the difference between the effective rate and the U.S. statutory rate of 35% were tax-exempt interest earned on invested assets and the separate account dividends received deduction (“DRD”), offset in 2009 by a non-deductible expense related to a contingent obligation to Allianz as a result of the issuance of warrants to the federal government in connection with the Company’s participation in the Capital Purchase Program.

The separate account DRD is estimated for the current year using information from the prior year-end, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments. The actual current year DRD can vary from estimates based on, but not limited to, changes in eligible dividends received by the mutual funds, amounts of distribution from these mutual funds, amounts of short-term capital gains at the mutual fund level and the Company’s taxable income before the DRD. Given recent financial markets’ volatility, the Company is reviewing its DRD computations on a quarterly basis. The Company recorded benefits related to the separate account DRD of $37 and $67 in the three months ended June 30, 2009 and 2008, and $75 and $108 in the six months ended June 30, 2009 and 2008, respectively.

The Company’s unrecognized tax benefits decreased by $8 during the six months ended June 30, 2009 as a result of the settlement of the 2002-2003 Internal Revenue Service (“IRS”) audit, bringing the total unrecognized tax benefits to $83 as of June 30, 2009. This entire amount, if it were recognized, would decrease the effective tax rate for the applicable periods.

The Company’s federal income tax returns are routinely audited by the IRS. During the first quarter of 2009, the Company received notification of the approval by the Joint Committee on Taxation of the results of the 2002 through 2003 examination. As a result, the Company recorded a tax benefit of $7. The 2004 through 2006 examination began during the second quarter of 2008, and is expected to close in early 2010. In addition, the Company is working with the IRS on a possible settlement of a DRD issue related to prior periods which, if settled, may result in the booking of tax benefits. Such benefits are not expected to be material to the condensed consolidated statement of operations.

The Company’s deferred tax asset valuation allowance has been determined pursuant to the provisions of FASB SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”), including the Company’s estimation of future taxable income, if necessary, and is adequate to reduce the total deferred tax asset to an amount that will more likely than not be realized. In assessing the need for a valuation allowance, management considered future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, and taxable income in prior carry back years as defined in SFAS 109, as well as tax planning strategies that include holding debt securities with market value losses until recovery, selling appreciated securities to offset capital losses, and sales of certain corporate assets. Such tax planning strategies are viewed by management as prudent and feasible and will be implemented if necessary to realize the deferred tax asset. However, future realized losses on investment securities could result in the recognition of a valuation allowance, if additional tax planning strategies are not available.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Earnings (Loss) Per Share

The following tables present a reconciliation of net income (loss) and shares used in calculating basic earnings (loss) per common share to those used in calculating diluted earnings (loss) per common share.

		Three Months Ended												Six Months Ended
		June 30, 2009												June 30, 2009
										Per												Per
										Common												Common
		Net								Share				Net								Share
(Shares in millions)		Loss				Shares				Amount				Loss				Shares				Amount
Basic Loss per Common Share
Net loss		$	(15	)										$	(1,224	)
Less: Preferred stock dividends			3												3
Net loss available to common shareholders			(18	)			325.4			$	(0.06	)			(1,227	)			323.1			$	(3.80	)
Diluted Loss per Common Share [1]
Warrants			—				—								—				—
Stock compensation plans			—				—								—				—
Net loss available to common shareholders plus assumed conversions		$	(18	)			325.4			$	(0.06	)		$	(1,227	)			323.1			$	(3.80	)

		Three Months Ended												Six Months Ended
		June 30, 2008												June 30, 2008
										Per												Per
										Common												Common
		Net								Share				Net								Share
(Shares in millions)		Income				Shares				Amount				Income				Shares				Amount
Basic Earnings per Common Share
Net income available to common shareholders		$	543				311.7			$	1.74			$	688				312.7			$	2.20
Diluted Earnings per Common Share
Stock compensation plans			—				1.4								—				1.7
Net income available to common shareholders plus assumed conversions		$	543				313.1			$	1.73			$	688				314.4			$	2.19

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information

The Hartford is organized into two major operations: Life and Property & Casualty, each containing reporting segments. Within the Life and Property & Casualty operations, The Hartford conducts business principally in eleven reporting segments. Corporate primarily includes the Company’s debt financing and related interest expense, as well as other capital raising activities, banking operations and certain purchase accounting adjustments.

Life

Life is organized into four groups which are comprised of six reporting segments: The Retail Products Group (“Retail”) and Individual Life segments make up the Individual Markets Group. The Retirement Plans and Group Benefits segments make up the Employer Markets Group. The Institutional Solutions Group (“Institutional”) and International segments each make up their own group.

Life charges direct operating expenses to the appropriate segment and allocates the majority of indirect expenses to the segments based on an intercompany expense arrangement. Inter-segment revenues primarily occur between Life’s Other category and the reporting segments. These amounts primarily include interest income on allocated surplus and interest charges on excess separate account surplus. In addition, during the first quarter of 2009, Institutional and International entered into a $1.5 billion funding agreement. The resulting interest income and interest expense in International and Institutional, respectively, are eliminated in consolidation.

Property & Casualty

Property & Casualty is organized into five reporting segments: the underwriting segments of Personal Lines, Small Commercial, Middle Market and Specialty Commercial (collectively, “Ongoing Operations”); and the Other Operations segment. For the three months ended June 30, 2009 and 2008, AARP accounted for earned premiums of $709 and $691, respectively, in Personal Lines. For both the six months ended June 30, 2009 and 2008, AARP accounted for earned premiums of $1.4 billion in Personal Lines.

Through inter-segment arrangements, Specialty Commercial reimburses Personal Lines, Small Commercial and Middle Market for losses incurred from uncollectible reinsurance and losses incurred under certain liability claims. Earned premiums assumed (ceded) under the inter-segment arrangements were as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Net assumed (ceded) earned premiums under inter-segment arrangements		2009				2008				2009				2008
Personal Lines		$	(2	)		$	(2	)		$	(3	)		$	(3	)
Small Commercial			(6	)			(7	)			(12	)			(15	)
Middle Market			(5	)			(8	)			(11	)			(16	)
Specialty Commercial			13				17				26				34
Total		$	—			$	—			$	—			$	—

Financial Measures and Other Segment Information

For further discussion of the types of products offered by each segment, see Note 3 of Notes to Consolidated Financial Statements included in The Hartford’s 2008 Form 10-K Annual Report.

One of the measures of profit or loss used by The Hartford’s management in evaluating the performance of its Life segments is net income. Within Property & Casualty, net income is a measure of profit or loss used in evaluating the performance of Ongoing Operations and the Other Operations segment. Within Ongoing Operations, the underwriting segments of Personal Lines, Small Commercial, Middle Market and Specialty Commercial are evaluated by The Hartford’s management primarily based upon underwriting results. Underwriting results represent premiums earned less incurred losses, loss adjustment expenses and underwriting expenses. The sum of underwriting results, net servicing income, net investment income, net realized capital gains and losses, other expenses, and related income taxes is net income.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information (continued)

The following table presents revenues by segment.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Revenues		2009				2008				2009				2008
Life
Retail		$	647			$	872			$	1,852			$	1,048
Individual Life			255				285				574				541
Total Individual Markets Group			902				1,157				2,426				1,589
Retirement Plans			80				170				171				292
Group Benefits			1,135				1,176				2,367				2,320
Total Employer Markets Group			1,215				1,346				2,538				2,612
International [1]			222				266				694				413
Institutional			237				472				440				776
Other [1]			7				46				21				57
Total Life segment revenues			2,583				3,287				6,119				5,447
Net investment income (loss) on equity securities, trading [2]			2,523				1,153				1,799				(2,425	)
Total Life			5,106				4,440				7,918				3,022
Property & Casualty
Ongoing Operations
Earned premiums
Personal Lines			985				980				1,964				1,963
Small Commercial			643				683				1,295				1,370
Middle Market			538				575				1,086				1,168
Specialty Commercial			311				346				643				696
Ongoing Operations earned premiums			2,477				2,584				4,988				5,197
Net investment income			239				334				424				644
Other revenues [3]			120				125				238				245
Net realized capital losses			(80	)			(53	)			(369	)			(187	)
Total Ongoing Operations			2,756				2,990				5,281				5,899
Other Operations			44				61				50				99
Total Property & Casualty			2,800				3,051				5,331				5,998
Corporate			(269	)			12				(218	)			27
Total revenues		$	7,637			$	7,503			$	13,031			$	9,047

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information (continued)

The following table presents net income (loss) by segment. Underwriting results are presented for the Personal Lines, Small Commercial, Middle Market and Specialty Commercial segments, while net income (loss) is presented for each of Life’s reporting segments, total Property & Casualty, Ongoing Operations, Other Operations and Corporate.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Net Income (Loss)		2009				2008				2009				2008
Life
Retail		$	192			$	170			$	(552	)		$	93
Individual Life			16				30				(2	)			50
Total Individual Markets Group			208				200				(554	)			143
Retirement Plans			(40	)			31				(128	)			26
Group Benefits			14				62				83				108
Total Employer Markets Group			(26	)			93				(45	)			134
International [1]			119				72				(174	)			80
Institutional [1]			(66	)			(30	)			(240	)			(150	)
Other [1]			(59	)			(1	)			(69	)			(28	)
Total Life			176				334				(1,082	)			179
Property & Casualty
Ongoing Operations
Underwriting results
Personal Lines			(10	)			18				65				123
Small Commercial			74				69				161				188
Middle Market			56				3				125				58
Specialty Commercial			36				18				59				57
Total Ongoing Operations underwriting results			156				108				410				426
Net servicing income [2]			7				8				15				7
Net investment income			239				334				424				644
Net realized capital losses			(80	)			(53	)			(369	)			(187	)
Other expenses			(48	)			(65	)			(98	)			(122	)
Income before income taxes			274				332				382				768
Income tax expense			(52	)			(86	)			(49	)			(210	)
Ongoing Operations			222				246				333				558
Other Operations			(49	)			3				(48	)			17
Total Property & Casualty			173				249				285				575
Corporate			(364	)			(40	)			(427	)			(66	)
Net income (loss)		$	(15	)		$	543			$	(1,224	)		$	688

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements

The following financial instruments are carried at fair value in the Company’s condensed consolidated financial statements: fixed maturities and equity securities, available-for-sale (“AFS”), short-term investments, freestanding and embedded derivatives, and separate account assets. These fair value disclosures include the fair value measurement and disclosure requirements of SFAS 157 and related FSPs including FSP FAS 157-4 and FSP FAS 107-1.

The following section applies the SFAS 157 fair value hierarchy and disclosure requirements for the Company’s financial instruments that are carried at fair value. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs in the valuation techniques used to measure fair value into three broad Levels (Level 1, 2 or 3).

Level 1		Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 1 securities include highly liquid U.S. Treasury securities, money market funds, certain mortgage backed securities, and exchange traded equity and derivative securities.
Level 2		Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Most debt securities and preferred stocks are model priced by vendors using observable inputs and are classified within Level 2. Also included in the Level 2 category are derivative instruments that are priced using models with significant observable market inputs, including interest rate, foreign currency and certain credit swap contracts and no or insignificant unobservable market inputs.
Level 3		Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Level 3 securities include less liquid securities such as highly structured and/or lower quality asset-backed securities (“ABS”), commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) primarily backed by sub-prime loans, and private placement debt and equity securities. Collateralized debt obligations (“CDOs”) included in Level 3 primarily represent commercial real estate (“CRE”) CDOs and collateralized loan obligations (“CLOs”) which are primarily priced by independent brokers due to the illiquidity of this sector. Embedded derivatives and complex derivatives securities, including equity derivatives, longer dated interest rate swaps and certain complex credit derivatives are also included in Level 3. Because Level 3 fair values, by their nature, contain unobservable market inputs as there is little or no observable market for these assets and liabilities, considerable judgment is used to determine the SFAS 157 Level 3 fair values. Level 3 fair values represent the Company’s best estimate of an amount that could be realized in a current market exchange absent actual market exchanges.

In many situations, inputs used to measure the fair value of an asset or liability position may fall into different levels of the fair value hierarchy. In these situations, the Company will determine the level in which the fair value falls based upon the lowest level input that is significant to the determination of the fair value. In most cases, both observable (e.g., changes in interest rates) and unobservable (e.g., changes in risk assumptions) inputs are used in the determination of fair values that the Company has classified within Level 3. Consequently, these values and the related gains and losses are based upon both observable and unobservable inputs. The Company’s fixed maturities included in Level 3 are classified as such as they are primarily priced by independent brokers and/or within illiquid markets. Corporate securities included in Level 3 primarily relate to private placement securities which are thinly traded and priced using a pricing matrix which includes significant non-observable inputs. RMBS included in Level 3 primarily represent sub-prime and Alt-A securities which are classified as Level 3 due to the lack of liquidity in the market.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

These disclosures provide information as to the extent to which the Company uses fair value to measure financial instruments and information about the inputs used to value those financial instruments to allow users to assess the relative reliability of the measurements. The following tables present assets and (liabilities) carried at fair value by SFAS 157 Hierarchy Level.

		June 30, 2009
						Quoted Prices
						in Active				Significant				Significant
						Markets for				Observable				Unobservable
						Identical Assets				Inputs				Inputs
		Total				(Level 1)				(Level 2)				(Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS		$	2,450			$	—			$	1,948			$	502
CDOs			2,563				—				1				2,562
CMBS			8,290				—				8,092				198
Corporate			30,835				—				24,305				6,530
Government/government agencies
Foreign			1,031				—				963				68
United States			4,240				271				3,969				—
RMBS			4,506				—				3,153				1,353
States, municipalities and political subdivisions			10,953				—				10,739				214
Total fixed maturities, AFS			64,868				271				53,170				11,427
Equity securities, trading			30,813				2,285				28,528				—
Equity securities, AFS			1,308				241				839				228
Other investments
Variable annuity hedging derivatives			604				—				3				601
Other derivatives[1]			342				—				305				37
Total other investments			946				—				308				638
Short-term investments			12,701				10,478				2,223				—
Reinsurance recoverable for U.S. Guaranteed Minimum Withdrawal Benefit (“GMWB”)			632				—				—				632
Separate account assets [2]			131,069				98,229				32,167				673
Total assets accounted for at fair value on a recurring basis		$	242,337			$	111,504			$	117,235			$	13,598
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
Guaranteed living benefits		$	(3,344	)		$	—			$	—			$	(3,344	)
Institutional notes			2				—				—				2
Equity linked notes			(6	)			—				—				(6	)
Total other policyholder funds and benefits payable			(3,348	)			—				—				(3,348	)
Other liabilities [3]
Variable annuity hedging derivatives			391				—				(143	)			534
Other liabilities			(579	)			—				(260	)			(319	)
Total other liabilities			(188	)			—				(403	)			215
Consumer notes [4]			(4	)			—				—				(4	)
Total liabilities accounted for at fair value on a recurring basis		$	(3,540	)		$	—			$	(403	)		$	(3,137	)