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 þ 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 April 23, 2010, there were outstanding 444,102,884 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 MARCH 31, 2010

TABLE OF CONTENTS

Item		Description		Page
		Part I. FINANCIAL INFORMATION
1.		Financial Statements
		Report of Independent Registered Public Accounting Firm			5
		Condensed Consolidated Statements of Operations — For the Three Months Ended March 31, 2010 and 2009			6
		Condensed Consolidated Balance Sheets — As of March 31, 2010 and December 31, 2009			7
		Condensed Consolidated Statements of Changes in Equity — For the Three Months Ended March 31, 2010 and 2009			8
		Condensed Consolidated Statements of Comprehensive Income (Loss) — For the Three Months Ended March 31, 2010 and 2009			9
		Condensed Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2010 and 2009			10
		Notes to Condensed Consolidated Financial Statements			11
2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			50
3.		Quantitative and Qualitative Disclosures About Market Risk			115
4.		Controls and Procedures			115
		Part II. OTHER INFORMATION
1.		Legal Proceedings			116
1A.		Risk Factors			116
2.		Unregistered Sales of Equity Securities and Use of Proceeds			120
6.		Exhibits			120
		Signature			121
		Exhibits Index			122
Exhibit 3.01
Exhibit 15.01
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Forward-Looking Statements

Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.

Forward-looking statements are based on our current expectations and assumptions regarding economic, competitive and legislative developments. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. They have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the “Company”). Future developments may not be in line with management’s expectations or have unanticipated effects. Actual results could differ materially from expectations, depending on the evolution of various factors, including those set forth in Part II, Item 1A. These important risks and uncertainties include:

•

significant risks and uncertainties related to the Company’s current operating environment, which reflects continued volatility in financial markets, constrained capital and credit markets and uncertainty about the timing and strength of an economic recovery and the impact of governmental budgetary and regulatory initiatives and whether management’s initiatives to address these risks will be effective;

•

the risk that our actual sources and uses of capital in a stress scenario may vary materially and adversely from our modeled projected sources and uses of capital that we disclosed in connection with our repurchase of the Series E Fixed Rate Cumulative Preferred Stock (the “Series E Preferred Stock”), whether as a result of one or more assumptions proving to be materially inaccurate or as a result of the Company’s exposure to other risks during stressed economic conditions that were not taken into account in preparing such modeled projections;

•

risks associated with our continued execution of steps to realign our business and reposition our investment portfolio, including the potential need to adjust our plans to take other restructuring actions, such as divestitures;

•

market risks associated with our business, including changes in interest rates, credit spreads, equity prices, foreign exchange rates, as well as challenging or deteriorating conditions in key sectors such as the commercial real estate market, that have pressured our results and are expected to continue to do so in 2010;

•

volatility in our earnings resulting from our adjustment of our risk management program to emphasize protection of statutory surplus;

•

the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;

•

risks to our business, financial position, prospects and results associated with negative ratings actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;

•

the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the valuation of the Company’s financial instruments that could result in changes to investment valuations;

•

the subjective determinations that underlie the Company’s evaluation of other-than-temporary impairments on available-for-sale securities;

•

losses due to nonperformance or defaults by others;

•

the potential for further acceleration of deferred policy acquisition cost amortization;

•

the potential for further impairments of our goodwill or the potential for establishing valuation allowances against deferred tax assets;

•

the possible occurrence of terrorist attacks and the Company’s ability to contain its exposure, including the effect of the absence or insufficiency of applicable terrorism legislation on coverage;

•

the difficulty in predicting the Company’s potential exposure for asbestos and environmental claims;

•

the possibility of a pandemic or other man-made disaster that may adversely affect the Company’s businesses and cost and availability of reinsurance;

•

weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain and snow;

•

the response of reinsurance companies under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;

•

the possibility of unfavorable loss development;

•

actions by our competitors, many of which are larger or have greater financial resources than we do;

•

the restrictions, oversight, costs and other consequences of being a savings and loan holding company, including from the supervision, regulation and examination by the Office of Thrift Supervision (the “OTS”), and arising from our participation in the Capital Purchase Program (the “CPP”), under the Emergency Economic Stabilization Act of 2008, certain elements of which will continue to apply to us for so long as the U.S. Department of the Treasury (“Treasury”), holds the warrant or shares of our common stock received on exercise of the warrant that we issued to Treasury as part of our participation in the CPP even after the Company’s repurchase of the preferred stock issued in connection therewith;

•

unfavorable judicial or legislative developments;

•

the potential effect of domestic and foreign regulatory developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels, including changes to statutory reserves and/or risk-based capital requirements related to secondary guarantees under universal life and variable annuity products;

•

the Company’s ability to distribute its products through distribution channels, both current and future;

•

the uncertain effects of emerging claim and coverage issues;

•

the ability of the Company’s subsidiaries to pay dividends to the Company;

•

the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;

•

the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster or other unanticipated events;

•

the risk that our framework for managing business risks may not be effective in mitigating risk and loss to us that could adversely affect our businesses;

•

the potential for difficulties arising from outsourcing relationships;

•

the impact of potential changes in federal or state tax laws, including changes affecting the availability of the separate account dividend received deduction;

•

the impact of potential changes in accounting principles and related financial reporting requirements;

•

the Company’s ability to protect its intellectual property and defend against claims of infringement; and

•

other factors described in such forward-looking statements.

Any forward-looking statement made by us in this document speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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 March 31, 2010, and the related Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three-month periods ended March 31, 2010 and 2009 and Statements of Changes in Equity and Cash Flows for the three-month periods ended March 31, 2010 and 2009. 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, 2009, and the related consolidated statements of operations, changes in equity, comprehensive income (loss), and cash flows for the year then ended (not presented herein); and in our report dated February 23, 2010 (which report includes an explanatory paragraph relating to the Company’s change in its method of accounting and reporting for other-than-temporary impairments in 2009 and for the fair value measurement of financial instruments in 2008), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2009 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP
Hartford, Connecticut
April 29, 2010

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended
		March 31,
(In millions, except for per share data)		2010				2009
		(Unaudited)
Revenues
Earned premiums		$	3,527			$	3,829
Fee income			1,189				1,167
Net investment income (loss):
Securities available-for-sale and other			1,060				920
Equity securities, trading			701				(724	)
Total net investment income			1,761				196
Net realized capital gains (losses):
Total other-than-temporary impairment (“OTTI”) losses			(340	)			(224	)
OTTI losses recognized in other comprehensive income			188				—
Net OTTI losses recognized in earnings			(152	)			(224	)
Net realized capital gains (losses), excluding net OTTI losses recognized in earnings			(124	)			308
Total net realized capital gains (losses)			(276	)			84
Other revenues			118				118
Total revenues			6,319				5,394
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses			3,133				4,637
Benefits, losses and loss adjustment expenses — returns credited on International variable annuities			701				(724	)
Amortization of deferred policy acquisition costs and present value of future profits			651				2,259
Insurance operating costs and expenses			919				898
Interest expense			120				120
Goodwill impairment			—				32
Other expenses			260				189
Total benefits, losses and expenses			5,784				7,411
Income (loss) before income taxes			535				(2,017	)
Income tax expense (benefit)			216				(808	)
Net income (loss)		$	319			$	(1,209	)
Preferred stock dividends and accretion of discount			483				—
Net loss available to common shareholders		$	(164	)		$	(1,209	)
Earnings (Loss) per common share
Basic		$	(0.42	)		$	(3.77	)
Diluted		$	(0.42	)		$	(3.77	)
Weighted average common shares outstanding			393.7				320.8
Weighted average common shares outstanding and dilutive potential common shares			393.7				320.8
Cash dividends declared per common share		$	0.05			$	0.05

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		March 31,				December 31,
(In millions, except for share and per share data)		2010				2009
		(Unaudited)
Assets
Investments
Fixed maturities, available-for-sale, at fair value (amortized cost of $78,707 and $76,015) (includes variable interest entity assets, at fair value, of $953 as of March 31, 2010)		$	75,584			$	71,153
Equity securities, trading, at fair value (cost of $32,089 and $33,070)			32,053				32,321
Equity securities, available-for-sale, at fair value (cost of $1,197 and $1,333)			1,153				1,221
Mortgage loans (net of allowances for loan losses of $385 and $366)			5,162				5,938
Policy loans, at outstanding balance			2,177				2,174
Limited partnerships and other alternative investments (includes variable interest entity assets of $27 as of March 31, 2010)			1,736				1,790
Other investments			941				602
Short-term investments			8,545				10,357
Total investments			127,351				125,556
Cash			2,079				2,142
Premiums receivable and agents’ balances			3,402				3,404
Reinsurance recoverables			5,179				5,384
Deferred policy acquisition costs and present value of future profits			10,270				10,686
Deferred income taxes			3,322				3,940
Goodwill			1,204				1,204
Property and equipment, net			1,032				1,026
Other assets			3,245				3,981
Separate account assets			160,198				150,394
Total assets		$	317,282			$	307,717
Liabilities
Reserve for future policy benefits and unpaid losses and loss adjustment expenses
Property and casualty		$	21,560			$	21,651
Life			17,990				17,980
Other policyholder funds and benefits payable			45,388				45,852
Other policyholder funds and benefits payable — International variable annuities			32,027				32,296
Unearned premiums			5,293				5,221
Short-term debt			275				343
Long-term debt			6,597				5,496
Consumer notes			834				1,136
Other liabilities (includes variable interest entity liabilities of $423 as of March 31, 2010)			9,280				9,454
Separate account liabilities			160,198				150,394
Total liabilities			299,442				289,823
Commitments and Contingencies (Note 9)
Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 and 3,400,000 shares issued, liquidation preference $1,000 per share			556				2,960
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 469,769,804 and 410,184,182 shares issued			5				4
Additional paid-in capital			10,475				8,985
Retained earnings			11,006				11,164
Treasury stock, at cost — 25,842,652 and 27,177,019 shares			(1,825	)			(1,936	)
Accumulated other comprehensive loss, net of tax			(2,377	)			(3,312	)
Total stockholders’ equity			17,840				17,865
Noncontrolling interest			—				29
Total equity			17,840				17,894
Total liabilities and equity		$	317,282			$	307,717

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended
		March 31,
(In millions, except for share data)		2010				2009
		(Unaudited)
Preferred Stock
Balance at beginning of period		$	2,960			$	—
Issuance of mandatory convertible preferred stock			556				—
Accelerated accretion of discount from redemption of preferred stock issued to the U.S. Treasury			440				—
Redemption of preferred stock issued to the U.S. Treasury			(3,400	)			—
Balance at end of period			556				—
Common Stock			5				4
Additional Paid-in Capital
Balance at beginning of period			8,985				7,569
Issuance of shares under public offering			1,599				—
Issuance of shares under incentive and stock compensation plans			(103	)			(51	)
Reclassification of warrants from other liabilities to equity			—				93
Tax expense on employee stock options and awards			(6	)			(11	)
Balance at end of period			10,475				7,600
Retained Earnings
Balance at beginning of period, before cumulative effect of accounting change, net of tax			11,164				11,336
Cumulative effect of accounting change, net of tax			26				—
Balance at beginning of period, as adjusted			11,190				11,336
Net income (loss)			319				(1,209	)
Accelerated accretion of discount from redemption of preferred stock issued to the U.S. Treasury			(440	)			—
Dividends on preferred stock			(43	)			—
Dividends declared on common stock			(20	)			(16	)
Balance at end of period			11,006				10,111
Treasury Stock, at Cost
Balance at beginning of period			(1,936	)			(2,120	)
Issuance of shares under incentive and stock compensation plans from treasury stock			114				69
Return of shares under incentive and stock compensation plans to treasury stock			(3	)			(3	)
Balance at end of period			(1,825	)			(2,054	)
Accumulated Other Comprehensive Loss, Net of Tax
Balance at beginning of period			(3,312	)			(7,520	)
Total other comprehensive income (loss)			935				(281	)
Balance at end of period			(2,377	)			(7,801	)
Total Stockholders’ Equity			17,840				7,860
Noncontrolling Interest (Note 13)
Balance at beginning of period			29				92
Change in noncontrolling interest ownership			—				(64	)
Noncontrolling loss			—				(1	)
Recognition of noncontrolling interest in other liabilities			(29	)			—
Balance at end of period			—				27
Total Equity		$	17,840			$	7,887
Outstanding Preferred Shares (in thousands)
Balance at beginning of period			3,400				6,048
Conversion of preferred to common shares			—				(6,048	)
Issuance of mandatory convertible preferred shares			575				—
Redemption of preferred shares issued to the U.S. Treasury			(3,400	)			—
Balance at end of period			575				—
Outstanding Common Shares (in thousands)
Balance at beginning of period			383,007				300,579
Treasury stock acquired			—				(15	)
Conversion of preferred to common shares			—				24,194
Issuance of shares under public offering			59,590				—
Issuance of shares under incentive and stock compensation plans			1,455				860
Return of shares under incentive and stock compensation plans to treasury stock			(125	)			(183	)
Balance at end of period			443,927				325,435

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended
		March 31,
(In millions)		2010				2009
		(Unaudited)
Comprehensive Income (Loss)
Net income (loss)		$	319			$	(1,209	)
Other comprehensive income (loss)
Change in net unrealized loss on securities			859				(33	)
Change in OTTI losses recognized in other comprehensive income			32				—
Change in net gain (loss) on cash-flow hedging instruments			66				(48	)
Change in foreign currency translation adjustments			(36	)			(209	)
Amortization of prior service cost and actuarial net losses included in net periodic benefit costs			14				9
Total other comprehensive income (loss)			935				(281	)
Total comprehensive income (loss)		$	1,254			$	(1,490	)

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

		Three Months Ended
		March 31,
(In millions)		2010				2009
		(Unaudited)
Operating Activities
Net income (loss)		$	319			$	(1,209	)
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			651				2,259
Additions to deferred policy acquisition costs and present value of future profits			(680	)			(734	)
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums			33				1,700
Change in reinsurance recoverables			45				(334	)
Change in receivables and other assets			(180	)			(21	)
Change in payables and accruals			(109	)			(396	)
Change in accrued and deferred income taxes			128				(276	)
Net realized capital (gains) losses			276				(84	)
Net disbursements from investment contracts related to policyholder funds — International variable annuities			(257	)			(387	)
Net decrease in equity securities, trading			268				449
Depreciation and amortization			144				137
Goodwill impairment			—				32
Other operating activities, net			(150	)			(126	)
Net cash provided by operating activities			488				1,010
Investing Activities
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale			11,534				22,195
Equity securities, available-for-sale			108				311
Mortgage loans			726				27
Partnerships			145				153
Payments for the purchase of:
Fixed maturities, available-for-sale			(11,973	)			(22,655	)
Equity securities, available-for-sale			(15	)			(207	)
Mortgage loans			(18	)			(20	)
Partnerships			(72	)			(81	)
Derivatives, net			(252	)			894
Change in policy loans, net			(3	)			11
Change in payables for collateral under securities lending, net			(23	)			(1,450	)
Other investing activities, net			(58	)			(189	)
Net cash provided by (used for) investing activities			99				(1,011	)
Financing Activities
Deposits and other additions to investment and universal life-type contracts			5,468				2,872
Withdrawals and other deductions from investment and universal life-type contracts			(5,614	)			(4,715	)
Net transfers from separate accounts related to investment and universal life-type contracts			124				2,136
Proceeds from issuance of long-term debt			1,090				—
Payments on capital lease obligations			(68	)			(24	)
Change in commercial paper			—				(21	)
Repayments at maturity or settlement of consumer notes			(302	)			(8	)
Net proceeds from issuance of mandatory convertible preferred stock			556				—
Net proceeds from issuance of shares under public offering			1,600				—
Redemption of preferred stock issued to the U.S. Treasury			(3,400	)			—
Proceeds from net issuance of shares under incentive and stock compensation plans and excess tax benefit			8				(7	)
Dividends paid on preferred stock			(64	)			(8	)
Dividends paid on common stock			(20	)			(99	)
Changes in bank deposits and payments on bank advances			(30	)			—
Net cash provided by (used for) financing activities			(652	)			126
Foreign exchange rate effect on cash			2				(85	)
Net increase (decrease) in cash			(63	)			40
Cash — beginning of period			2,142				1,811
Cash — end of period		$	2,079			$	1,851
Supplemental Disclosure of Cash Flow Information
Net Cash Paid (Received) During the Period For:
Income taxes		$	87			$	(598	)
Interest		$	61			$	70

See Notes to Condensed Consolidated Financial Statements.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

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 (collectively, “The Hartford” or the “Company”).

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 March 31, 2010, and for the three months ended March 31, 2010 and 2009 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 2009 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 required to consolidate. Entities in which the Company has significant influence over the operating and financing decisions but are not required to consolidate are reported using the equity method. Material intercompany transactions and balances between The Hartford and its subsidiaries and affiliates have been eliminated. For further discussions on variable interest entities see Note 5 and Note 13.

Reclassifications

Certain reclassifications have been made to prior period financial information to conform to the current period classifications.

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; evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on investments; living benefits required to be fair valued; goodwill impairment; valuation of investments and derivative instruments; pension and other postretirement benefit obligations; valuation allowance on deferred tax assets; and contingencies relating to corporate litigation and regulatory matters. 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.

Significant Accounting Policies

For a description of significant accounting policies, see Note 1 of the Notes to Consolidated Financial Statements included in The Hartford’s 2009 Form 10-K Annual Report, which 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

Variable Interest Entities

In June 2009, the Financial Accounting Standards Board (“FASB”) updated the guidance which amends the consolidation requirements applicable to variable interest entities (“VIE”). Under this new guidance, an entity would consolidate a VIE when the entity has both (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. The FASB also issued an amendment to this guidance in February 2010 which defers application of this guidance to certain entities that apply specialized accounting guidance for investment companies. The Company adopted this guidance on January 1, 2010. As a result of adoption, in addition to those VIEs the Company consolidates under the previous guidance, the Company consolidated a Company sponsored Collateralized Debt Obligation (“CDO”), electing the fair value option, and a Company sponsored Collateralized Loan Obligation, at carrying values carried forward as if the Company had been the primary beneficiary from the date the Company entered into the VIE arrangement. The Company believes this will reflect a consolidated balance sheet which more appropriately reflects the economics of the entity. The impact on the Company’s Condensed Consolidated Balance Sheet as a result of adopting this new guidance is an increase in assets of $432, an increase in liabilities of $406, and in increase in January 1, 2010 retained earnings, net of tax, of $26. The Company has investments in mutual funds, limited partnerships and other alternative investments including hedge funds, mortgage and real estate funds, mezzanine debt funds, and private equity and other funds which may be VIEs. The accounting for these investments will remain unchanged as they fall within the scope of the deferral of this new consolidation guidance. See Note 5 for further discussion.

Future Adoption of New Accounting Standards

Embedded Credit Derivatives

In March 2010, the FASB issued guidance clarifying the scope exception for credit derivatives embedded within structured securities which may result in bifurcation of these credit derivatives. Embedded credit derivatives resulting only from subordination of one financial instrument to another continue to qualify for the exemption. As a result, entities that have investments with an embedded credit derivative in a form other than such subordination may need to separately account for the embedded credit derivative. Upon adoption, an entity may elect the fair value option, with changes in fair value recognized in earnings, rather than bifurcate the embedded credit derivative. The guidance is effective, on a prospective basis only, for fiscal years and interim periods within those fiscal years, beginning on or after June 15, 2010. The Company will adopt this guidance for the interim period ending on September 30, 2010. The Company has not yet determined the effect of the adoption of this guidance on the Company’s Condensed Consolidated Financial Statements.

Income Taxes

The effective tax rate for the three months ended March 31, 2010 and 2009 was 40%. In 2010, the rate reflected tax expense on pre-tax income and in 2009 the rate reflected a tax benefit on pre-tax losses. In 2010, 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, the separate account dividends received deduction (“DRD”), a valuation allowance on deferred tax benefits related to certain realized losses and a tax charge related to the recently enacted Healthcare legislation. In 2009, the principal causes of the rate differential were tax-exempt interest and the DRD, which increased the tax benefit on the pre-tax loss.

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 $39 and $38 in the three months ended March 31, 2010 and 2009, respectively.

The Company’s unrecognized tax benefits were unchanged during the three months ended March 31, 2010, remaining at $48 as of March 31, 2010. This entire amount, if it were recognized, would affect the effective tax rate.

The Company’s federal income tax returns are routinely audited by the Internal Revenue Service (“IRS”). Audits have been concluded for all years through 2006. The audit of 2007 and 2008 is expected to commence in the second quarter of 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 statement of operations.

The Company’s net deferred tax asset as of March 31, 2010 and December 31, 2009 includes a net deferred tax liability of $841 and $849, respectively, for the Company’s International subsidiary in Japan.

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

1. Basis of Presentation and Accounting Policies (continued)

The Company has recorded a deferred tax asset valuation allowance that 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 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, including subsidiaries. Such tax planning strategies are viewed by management as prudent and feasible and will be implemented if necessary to realize the deferred tax asset. An increase in interest rates can also impact the Company’s tax planning strategies and in particular the Company’s ability to utilize tax benefits to offset certain previously recognized realized capital losses. Realized losses on investment securities during the first three months of 2010 resulted in the recognition of an additional valuation allowance of $86.

Also, for the quarter ended March 31, 2010, the Company incurred a charge of $19 related to a decrease in deferred tax assets as a result of recent federal legislation that will reduce the tax deduction available to the Company related to retiree health care costs beginning in 2013.

2. Earnings (Loss) Per Share

The following table presents 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
		March 31,
(In millions, except for per share data)		2010				2009
Income (loss)
Net income (loss)		$	319			$	(1,209	)
Less: Preferred stock dividends and accretion of discount			483				—
Net loss available to common shareholders		$	(164	)		$	(1,209	)
Common shares
Basic
Weighted average common shares outstanding			393.7				320.8
Diluted
Weighted average shares outstanding and dilutive potential common shares			393.7				320.8
Earnings (loss) per common share
Basic		$	(0.42	)		$	(3.77	)
Diluted		$	(0.42	)		$	(3.77	)

On March 23, 2010, The Hartford issued 23 million depositary shares, each representing a 1/40th interest in The Hartford’s 7.25% mandatory convertible preferred stock, Series F. These shares and the related dividend adjustment are included in diluted earnings per share, if dilutive, using the if converted method. For additional information on the mandatory convertible preferred stock see Note 13.

As a result of the net loss available to common shareholders for the three months ended March 31, 2010, the Company is required to use basic weighted average common shares outstanding in the calculation of the three months ended March 31, 2010 diluted loss per share, since the inclusion of 1.2 million shares for stock compensation plans, 33.6 million shares for warrants and 3.4 million shares for mandatory convertible preferred shares, along with the related dividend adjustment, would have been antidilutive to the earnings per share calculation. In the absence of the net loss available to common shareholders and assuming the impact of the mandatory convertible preferred shares was not antidilutive, weighted average common shares outstanding and dilutive potential common shares would have totaled 431.9 million.

As a result of the net loss in the three months ended March 31, 2009, the Company is required to use basic weighted average common shares outstanding in the calculation of the three months ended March 31, 2009 diluted loss per share, since the inclusion of 0.7 million shares for stock compensation plans would have been antidilutive to the earnings per share calculation. In the absence of the net loss, weighted average common shares outstanding and dilutive potential common shares would have totaled 321.5 million. Additionally, since the average market price of The Hartford’s common stock did not exceed the exercise price of the Allianz warrants for the three months ended March 31, 2009, the 321.5 million includes no dilutive effect for these warrants.

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

Effective for first quarter 2010 reporting, Life made changes to its segments as described below. Life changed its reporting structure to realign mutual funds businesses into Retirement from Global Annuity – U.S (formerly the Retail Products Group or “Retail”). In addition, certain fee income and commission expenses associated with sales of non-proprietary products by broker-dealer subsidiaries have been moved from Global Annuity – U.S. to Life Other, with no impact on net income in either Global Annuity – U.S. or Life Other. The impact of these changes on the annual periods presented in The Hartford’s 2009 Annual Report on Form 10-K, which annual periods are not contained in the accompanying interim financial statements, is disclosed in the following tables:

		As Reported in the				Realignment of				Movement of				Segment
		2009 Annual Report				Mutual Fund				Non-Proprietary				Results,
Revenues		on Form 10-K				Businesses				Product Results				As Revised
For the year ended December 31, 2009
Global Annuity — U.S. (formerly Retail)		$	2,132			$	(517	)		$	(149	)		$	1,466
Retirement			324				517				—				841
Life Other			58				—				149				207
For the year ended December 31, 2008
Global Annuity — U.S. (formerly Retail)		$	2,753			$	(666	)		$	(150	)		$	1,937
Retirement			338				666				—				1,004
Life Other			60				—				150				210
For the year ended December 31, 2007
Global Annuity — U.S. (formerly Retail)		$	3,055			$	(688	)		$	(140	)		$	2,227
Retirement			242				688				—				930
Life Other			67				—				140				207

		As Reported in the				Realignment of				Segment
		2009 Annual Report				Mutual Fund				Results,
Net Income (Loss)		on Form 10-K				Businesses				As Revised
For the year ended December 31, 2009
Global Annuity — U.S. (formerly Retail)		$	(410	)		$	(34	)		$	(444	)
Retirement			(222	)			34				(188	)
For the year ended December 31, 2008
Global Annuity — U.S. (formerly Retail)		$	(1,399	)		$	(37	)		$	(1,436	)
Retirement			(157	)			37				(120	)
For the year ended December 31, 2007
Global Annuity — U.S. (formerly Retail)		$	812			$	(65	)		$	747
Retirement			61				65				126

Life is now organized into six reporting segments, Global Annuity — U.S. (formerly Retail), Global Annuity — International (formerly International), Retirement, Individual Life, Group Benefits, and Institutional.

Global Annuity — U.S. offers individual variable and fixed market value adjusted (“MVA”) annuities.

Global Annuity — International provides investments, retirement savings and other insurance and savings products to individuals and groups outside the United States. The Company’s Japan operation is the largest component of the Global Annuity — International segment.

Retirement provides products and services to corporations pursuant to Section 401(k) and products and services to municipalities and not-for-profit organizations under Section 457 and 403(b) of the IRS code, as well as Retail mutual funds, Insurance Product mutual funds, Investment-Only mutual funds and 529 college savings plans.

Individual Life sells a variety of life insurance products, including variable universal life, universal life, and term life.

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

3. Segment Information (continued)

Group Benefits provides employers, associations, affinity groups and financial institutions with group life, accident and disability coverage, along with other products and services, including voluntary benefits, and group retiree health.

Institutional, primarily offers institutional liability products, such as variable Private Placement Life Insurance (“PPLI”) owned by corporations and high net worth individuals and stable value products. Institutional continues to service existing customers of its discontinued businesses, which includes Leveraged PPLI, structured settlements and institutional annuities (primarily terminal funding cases).

Life includes within its Other category corporate items not directly allocated to any of its reportable operating segments; intersegment eliminations; the mark-to-mark adjustment for the Global Annuity — International variable annuity assets that are classified as equity securities, trading, reported in net investment income and the related change in interest credited reported as a component of benefits, losses and loss adjustment expenses; and includes certain fee income and commission expenses associated with sales of non-proprietary products by broker-dealer subsidiaries.

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.

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 March 31, 2010 and 2009, AARP accounted for earned premiums of $715 and $703, respectively, 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
Net assumed (ceded) earned premiums under		March 31,
inter-segment arrangements		2010				2009
Personal Lines		$	(1	)		$	(1	)
Small Commercial			(6	)			(6	)
Middle Market			(5	)			(6	)
Specialty Commercial			12				13
Total		$	—			$	—

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

3. Segment Information (continued)

Financial Measures and Other Segment Information

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. Net income is also 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 (loss).

		Three Months Ended
		March 31,
Revenues by Product Line		2010				2009
Life
Earned premiums, fees, and other considerations
Global Annuity — U.S.
Variable annuity		$	402			$	414
Fixed MVA annuity [1]			3				(1	)
Total Global Annuity — U.S.			405				413
Global Annuity — International
Variable annuity			198				168
Fixed MVA annuity			8				6
Other			4				8
Total Global Annuity — International			210				182
Retirement
401(k)			76				63
403(b)/457			11				10
Retail mutual funds			142				106
Other [2]			31				2
Total Retirement			260				181
Individual Life
Variable life			102				164
Universal life			105				97
Term / Other life			13				12
Total Individual Life			220				273
Group Benefits
Group disability			531				529
Group life and accident			512				544
Other			59				65
Total Group Benefits			1,102				1,138
Institutional
Institutional investment products			13				214
PPLI [3]			40				34
Total Institutional			53				248
Other			43				47
Total earned premiums, fees, and other considerations			2,293				2,482
Net investment income (loss)
Securities available-for-sale and other			744				689
Equity securities, trading			701				(724	)
Total net investment income (loss)			1,445				(35	)
Net realized capital gains (losses)			(236	)			365
Total Life		$	3,502			$	2,812

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

3. Segment Information (continued)

		Three Months Ended
		March 31,
Revenues by Product Line (continued)		2010				2009
Property & Casualty
Ongoing Operations
Earned premiums
Personal Lines
Automobile		$	712			$	704
Homeowners			283				275
Total Personal Lines			995				979
Small Commercial
Workers’ Compensation			292				296
Package Business			279				283
Automobile			66				73
Total Small Commercial			637				652
Middle Market
Workers’ Compensation			212				213
Property			132				146
Automobile			65				77
Liability			92				112
Total Middle Market			501				548
Specialty Commercial
Workers’ Compensation			71				65
Property			8				16
Automobile			22				22
Liability			47				58
Fidelity and surety			56				67
Professional Liability			83				104
Total Specialty Commercial			287				332
Total Ongoing Operations			2,420				2,511
Other Operations			—				—
Total earned premiums			2,420				2,511
Other revenues [1]			118				118
Net investment income			309				225
Net realized capital losses			(40	)			(323	)
Total Property & Casualty			2,807				2,531
Corporate			10				51
Total revenues		$	6,319			$	5,394

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

3. Segment Information (continued)

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

		Three Months Ended
		March 31,
Net Income (Loss)		2010				2009
Life
Global Annuity — U.S.		$	153			$	(746	)
Global Annuity — International			23				(293	)
Retirement			20				(86	)
Individual Life			16				(18	)
Group Benefits			51				69
Institutional			(88	)			(174	)
Other			11				(10	)
Total Life			186				(1,258	)
Property & Casualty
Ongoing Operations
Underwriting results
Personal Lines			54				75
Small Commercial			83				87
Middle Market			12				69
Specialty Commercial			52				23
Total Ongoing Operations underwriting results			201				254
Net servicing income [1]			7				8
Net investment income			268				185
Net realized capital losses			(36	)			(289	)
Other expenses			(54	)			(50	)
Income before income taxes			386				108
Income tax expense (benefit)			148				(3	)
Ongoing Operations			238				111
Other Operations			19				1
Total Property & Casualty			257				112
Corporate			(124	)			(63	)
Net income (loss)		$	319			$	(1,209	)

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

4. Fair Value Measurements — Financial Instruments Excluding Guaranteed Living Benefits

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”), equity securities, trading, short-term investments, freestanding and embedded derivatives, separate account assets and certain other liabilities.

The following section and Note 4a apply the fair value hierarchy and disclosure requirements for the Company’s financial instruments that are carried at fair value. The fair value hierarchy 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. Treasuries, money market funds and exchange traded equity, open-ended mutual funds reported in separate account assets and derivative securities, including futures and certain option contracts.

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 fixed maturities and preferred stocks, including those reported in separate account assets, 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 have no significant 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”), commercial real estate (“CRE”) collateralized debt obligations (“CDOs”), residential mortgage-backed securities (“RMBS”) primarily backed by below- prime loans, and private placement securities. Also included in Level 3 are guaranteed product embedded and reinsurance derivatives and other complex derivative securities, including customized guaranteed minimum withdrawal benefit (“GMWB”) hedging derivatives (see Note 4a for further information on GMWB product related financial instruments), equity derivatives, long dated derivatives, swaps with optionality, certain complex credit derivatives and certain other liabilities. 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 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. Transfers of securities among the levels occur at the beginning of the reporting period. Transfers between Level 1 and Level 2 were not material for the three months ended March 31, 2010. 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 (i.e. below-prime RMBS).

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

4. Fair Value Measurements — Financial Instruments Excluding Guaranteed Living Benefits (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 hierarchy level, excluding those related to the Company’s living benefits and associated hedging programs, which are reported in Note 4a.

		March 31, 2010
						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		$	2,885			$	—			$	2,352			$	533
CDOs			2,790				—				41				2,749
CMBS			8,716				—				8,274				442
Corporate			38,593				—				29,981				8,612
Foreign government/government agencies			1,483				—				1,424				59
States, municipalities and political subdivisions (“Municipal”)			12,349				—				12,027				322
RMBS			4,389				—				3,215				1,174
U.S. Treasuries			4,379				1,270				3,109				—
Total fixed maturities, AFS			75,584				1,270				60,423				13,891
Equity securities, trading			32,053				2,331				29,722				—
Equity securities, AFS			1,153				263				825				65
Derivative assets
Credit derivatives			8				—				(22	)			30
Equity derivatives			3				—				—				3
Foreign exchange derivatives			207				—				207				—
Interest rate derivatives			107				—				100				7
Other derivative contracts			35				—				—				35
Total derivative assets [1]			360				—				285				75
Short-term investments			8,545				2,713				5,832				—
Separate account assets [2]			150,210				115,740				33,515				955
Total assets accounted for at fair value on a recurring basis		$	267,905			$	122,317			$	130,602			$	14,986
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
Institutional notes		$	(7	)		$	—			$	—			$	(7	)
Equity linked notes			(9	)			—				—				(9	)
Total other policyholder funds and benefits payable			(16	)			—				—				(16	)
Derivative liabilities
Credit derivatives			(610	)			—				(89	)			(521	)
Equity derivatives			(4	)			—				—				(4	)
Foreign exchange derivatives			(45	)			—				(45	)			—
Interest rate derivatives			(42	)			—				(29	)			(13	)
Total derivative liabilities [3]			(701	)			—				(163	)			(538	)
Other liabilities			(22	)			—				—				(22	)
Consumer notes [4]			(5	)			—				—				(5	)
Total liabilities accounted for at fair value on a recurring basis		$	(744	)		$	—			$	(163	)		$	(581	)

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

4. Fair Value Measurements — Financial Instruments Excluding Guaranteed Living Benefits (continued)

		December 31, 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		$	2,523			$	—			$	1,943			$	580
CDOs			2,892				—				57				2,835
CMBS			8,544				—				8,237				307
Corporate			35,243				—				27,216				8,027
Foreign government/government agencies			1,408				—				1,315				93
Municipal			12,065				—				11,803				262
RMBS			4,847				—				3,694				1,153
U.S. Treasuries			3,631				526				3,105				—
Total fixed maturities, AFS			71,153				526				57,370				13,257
Equity securities, trading			32,321				2,443				29,878				—
Equity securities, AFS			1,221				259				904				58
Derivative assets [1]			178				—				97				81
Short-term investments			10,357				6,846				3,511				—
Separate account assets [2]			147,432				112,877				33,593				962
Total assets accounted for at fair value on a recurring basis		$	262,662			$	122,951			$	125,353			$	14,358
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
Institutional notes		$	(2	)		$	—			$	—			$	(2	)
Equity linked notes			(10	)			—				—				(10	)
Total other policyholder funds and benefits payable			(12	)			—				—				(12	)
Derivative liabilities [3]			(214	)			—				56				(270	)
Consumer notes [4]			(5	)			—				—				(5	)
Total liabilities accounted for at fair value on a recurring basis		$	(231	)		$	—			$	56			$	(287	)