<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 2-89516
HARTFORD LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0974148
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 HOPMEADOW STREET, SIMSBURY, CONNECTICUT 06089
(Address of principal executive offices)
(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 [X] No[ ]
As of August 11, 2000 there were outstanding 1,000 shares of Common Stock,
$5,690 par value per share, of the registrant, all of which were directly owned
by Hartford Life and Accident Insurance Company.
The registrant meets the conditions set forth in General Instruction H (1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
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<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income - Second Quarter and
Six Months Ended June 30, 2000 and 1999 3
Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999 4
Consolidated Statements of Changes in Stockholder's Equity-
Six Months Ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
Signature 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------------------------------------------------------------------
(In millions) (Unaudited) 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Premiums and other considerations $ 543 $ 517 $ 1,065 $ 1,004
Net investment income 320 334 641 686
Net realized capital gains (losses) (32) 2 (37) 1
----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 831 853 1,669 1,691
---------------------------------------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 385 423 714 816
Amortization of deferred policy acquisition costs 146 136 299 255
Dividends to policyholders 5 10 46 27
Other expenses 146 153 268 327
----------------------------------------------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 682 722 1,327 1,425
---------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 149 131 342 266
Income tax expense 19 46 84 93
----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 130 $ 85 $ 258 $ 173
===============================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(In millions, except for share data) 2000 1999
-------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments
Fixed maturities, available for sale, at fair value (amortized cost of $13,412
and $13,923) $ 13,014 $ 13,499
Equity securities, at fair value 40 56
Policy loans, at outstanding balance 3,545 4,187
Other investments 671 342
-------------------------------------------------------------------------------------------------------------------------
Total investments 17,270 18,084
Cash 71 55
Premiums receivable and agents' balances 21 29
Reinsurance recoverables 1,255 1,274
Deferred policy acquisition costs 4,170 4,013
Deferred income tax 430 459
Other assets 449 654
Separate account assets 114,332 110,397
-------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 137,998 $ 134,965
=================================================================================================================
LIABILITIES
Future policy benefits $ 4,543 $ 4,332
Other policyholder funds 14,672 16,004
Other liabilities 1,663 1,613
Separate account liabilities 114,332 110,397
-------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 135,210 132,346
=================================================================================================================
STOCKHOLDER'S EQUITY
Common stock - 1,000 shares authorized, issued and outstanding,
par value $5,690 6 6
Capital surplus 1,045 1,045
Accumulated other comprehensive loss
Net unrealized capital losses on securities, net of tax (244) (255)
-------------------------------
Total accumulated other comprehensive loss (244) (255)
-------------------------------
Retained earnings 1,981 1,823
-------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,788 2,619
=================================================================================================================
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 137,998 $ 134,965
============================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME (LOSS)
---------------------
NET
UNREALIZED
CAPITAL
GAINS (LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, NET OF RETAINED STOCKHOLDER'S
(In millions) (Unaudited) STOCK SURPLUS TAX EARNINGS EQUITY
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $ 6 $ 1,045 $ (255) $ 1,823 $ 2,619
Comprehensive income (loss)
Net income 258 258
-----------------
Other comprehensive income (loss), net of tax
Net unrealized capital gains (losses) on
securities (1) 11 11
-----------------
Total other comprehensive income (loss) 11
-----------------
Total comprehensive income (loss) 269
-----------------
Dividends paid to parent (100) (100)
===============================================================================================================================
BALANCE, JUNE 30, 2000 $ 6 $ 1,045 $ (244) $ 1,981 $ 2,788
===============================================================================================================================
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE
INCOME (LOSS)
---------------------
NET
UNREALIZED
CAPITAL
GAINS (LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, NET OF RETAINED STOCKHOLDER'S
(In millions) (Unaudited) STOCK SURPLUS TAX EARNINGS EQUITY
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $ 6 $ 1,045 $ 184 $ 1,462 $ 2,697
Comprehensive income (loss)
Net income 173 173
----------------
Other comprehensive income (loss), net of tax
Net unrealized capital gains (losses) on
securities (1) (278) (278)
----------------
Total other comprehensive income (loss) (278)
----------------
Total comprehensive income (loss) (105)
===============================================================================================================================
BALANCE, JUNE 30, 1999 $ 6 $ 1,045 $ (94) $ 1,635 $ 2,592
===============================================================================================================================
</TABLE>
(1) Net unrealized capital gains (losses) on securities are reflected net of
tax provision (benefit) of $6 and $(150) for the six months ended June 30,
2000 and 1999, respectively. There were reclassification adjustments for
after-tax gains (losses) realized in net income of $(24) and $1 for the
six months ended June 30, 2000 and 1999, respectively.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
(In millions) (Unaudited) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 258 $ 173
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization (12) (4)
Net realized capital losses (gains) 24 (1)
Decrease (increase) in premiums receivable and agents' balances 9 (10)
Decrease in other liabilities (130) (58)
Change in receivables, payables and accruals 73 72
Increase (decrease) in accrued tax 159 (200)
Decrease in deferred income tax 23 119
Increase in deferred policy acquisition costs (157) (173)
Increase in future policy benefits 211 126
Decrease (increase) in reinsurance recoverables 31 (118)
Other, net 76 34
-------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 565 (40)
===================================================================================================================
INVESTING ACTIVITIES
Purchases of investments (2,775) (4,010)
Sales of investments 2,906 5,545
Maturities and principal paydowns of fixed maturity investments 764 979
-------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 895 2,514
===================================================================================================================
FINANCING ACTIVITIES
Dividends paid to parent (100) --
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (1,344) (2,417)
-------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (1,444) (2,417)
===================================================================================================================
Net increase in cash 16 57
Cash - beginning of period 55 17
-------------------------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 71 $ 74
===================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NET CASH (RECEIVED) PAID DURING THE PERIOD FOR
Income taxes $ (74) $ 111
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, unless otherwise stated)
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Hartford Life
Insurance Company and subsidiaries ("Hartford Life Insurance Company" or the
"Company"), a wholly-owned subsidiary of Hartford Life and Accident Insurance
Company (its parent), a wholly-owned subsidiary of Hartford Life, Inc., have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures which are normally
included in financial statements prepared on the basis of accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to those rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.
In the opinion of management, these statements include all adjustments which
were normal recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows for the periods presented. For a
description of significant accounting policies, see Note 2 of Notes to
Consolidated Financial Statements in Hartford Life Insurance Company's 1999 Form
10-K Annual Report.
Certain reclassifications have been made to prior year financial information to
conform to the current year classification of transactions and accounts.
(b) NEW ACCOUNTING STANDARDS
In June 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which amends
SFAS Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". Specifically, it amends SFAS No. 133 so that in interest rate
hedges, a company may designate as the hedged risk, the risk of changes only
in a benchmark interest rate. Also, credit risk is newly defined as the
company-specific spread over the benchmark interest rate and may be hedged
separately from or in combination with the benchmark interest rate. For
companies that have not adopted SFAS No. 133 before June 15, 2000, SFAS No.
138 must be adopted concurrently with the company's adoption of SFAS No.
133. Initial application of both SFAS No. 133 and SFAS No. 138 for Hartford
Life Insurance Company will begin January 1, 2001.
Hartford Life Insurance Company has reviewed its derivative holdings and is in
the process of quantifying the impact of SFAS No. 133, as amended by SFAS No.
138. The Company is also assessing what actions, if any, need to be taken to
minimize potential volatility, while at the same time maintaining the economic
protection needed to support the goals of its business.
Effective January 1, 2000, Hartford Life Insurance Company adopted Statement of
Position (SOP) No. 98-7, "Accounting for Insurance and Reinsurance Contracts
That Do Not Transfer Insurance Risk". This SOP provides guidance on the method
of accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. Adoption of this SOP
did not have a material impact on the Company's financial condition or results
of operations.
2. COMMITMENTS AND CONTINGENT LIABILITIES
(a) LITIGATION
Hartford Life Insurance Company is involved in pending and threatened litigation
in the normal course of its business in which claims for alleged economic and
punitive damages have been asserted. Some of these cases have been filed as
purported class actions and some cases have been filed in certain jurisdictions
that permit punitive damage awards disproportionate to the actual damages
incurred. Although there can be no assurances, at the present time the Company
does not anticipate that the ultimate liability arising from such pending or
threatened litigation, after consideration of provisions made for estimated
losses and costs of defense, will have a material adverse effect on the
financial condition or operating results of the Company.
(b) TAX MATTERS
Hartford Life, Inc.'s federal income tax returns are routinely audited by the
Internal Revenue Service. Hartford Life, Inc.'s 1996-1997 federal income tax
returns are currently under audit by the Internal Revenue Service. Management
believes that sufficient provision has been made in the financial statements for
issues that may result from tax examinations and other tax related matters for
all open years.
7
<PAGE> 8
During the second quarter, Hartford Life, Inc. reached a settlement with the
Internal Revenue Service with respect to certain tax matters for the 1993-1995
years. This settlement resulted in a $24 tax benefit being recorded in Hartford
Life Insurance Company's second quarter results of operations.
3. SEGMENT INFORMATION
Hartford Life Insurance Company is organized into three reportable operating
segments which include Investment Products, Individual Life and Corporate Owned
Life Insurance (COLI). Investment Products offers individual fixed and variable
annuities, retirement plan services and other investment products. Individual
Life sells a variety of life insurance products, including variable life,
universal life, interest sensitive whole life and term life insurance. COLI
primarily offers variable products used by employers to fund non-qualified
benefits or other post-employment benefit obligations as well as leveraged COLI.
The Company includes in "Other" corporate items not directly allocable to any of
its reportable operating segments, as well as certain group benefit products
including group life and disability insurance that is directly written by the
Company and is substantially ceded to its parent.
The accounting policies of the reportable operating segments are the same as
those described in the summary of significant accounting policies in Note 2 of
Notes to Consolidated Financial Statements in Hartford Life Insurance Company's
1999 Form 10-K Annual Report. Hartford Life Insurance Company evaluates
performance of its segments based on revenues, net income and the segment's
return on allocated capital. The Company charges direct operating expenses to
the appropriate segment and allocates the majority of indirect expenses to the
segments based on an intercompany expense arrangement. Intersegment revenues are
not significant and primarily occur between corporate and the operating
segments. These amounts include interest income on allocated surplus and the
allocation of net realized capital gains and losses through net investment
income utilizing the duration of the segment's investment portfolios. The
following tables present summarized financial information concerning the
Company's segments.
<TABLE>
<CAPTION>
Investment Individual
JUNE 30, 2000 Products Life COLI Other Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECOND QUARTER ENDED
Total revenues $ 511 $ 132 $ 169 $ 19 $ 831
Net income 93 16 8 13 130
------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
Total revenues $ 1,026 $ 264 $ 334 $ 45 $ 1,669
Net income 176 34 16 32 258
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Individual
JUNE 30, 1999 Products Life COLI Other Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SECOND QUARTER ENDED
Total revenues $ 474 $ 140 $ 215 $ 24 $ 853
Net income (loss) 81 17 7 (20) 85
------------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
Total revenues $ 935 $ 273 $ 439 $ 44 $ 1,691
Net income (loss) 159 32 13 (31) 173
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollar amounts in millions, unless otherwise stated)
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of Hartford Life Insurance
Company and subsidiaries ("Hartford Life Insurance Company" or the "Company") as
of June 30, 2000, compared with December 31, 1999, and its results of operations
for the second quarter and six months ended June 30, 2000 compared with the
equivalent periods in 1999. This discussion should be read in conjunction with
the MD&A included in the Company's 1999 Form 10-K Annual Report.
Certain statements contained in this discussion, other than statements of
historical fact, are forward-looking statements. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and include estimates and assumptions related to economic,
competitive and legislative developments. These forward-looking statements are
subject to change and uncertainty which are, in many instances, beyond the
Company's control and have been made based upon management's expectations and
beliefs concerning future developments and their potential effect on the
Company. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on Hartford Life Insurance Company will be those anticipated by
management. Actual results could differ materially from those expected by the
Company, depending on the outcome of certain factors, including the possibility
of general economic, business and legislative conditions that are less favorable
than anticipated, changes in interest rates or the stock markets, stronger than
anticipated competitive activity and those described in the forward-looking
statements.
INDEX
<TABLE>
<S> <C>
Consolidated Results of Operations 9
Investment Products 10
Individual Life 10
Corporate Owned Life Insurance (COLI) 11
Regulatory Matters and Contingencies 11
Accounting Standards 11
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS
OPERATING SUMMARY
<TABLE>
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ----------------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 831 $ 853 $ 1,669 $ 1,691
Expenses 701 768 1,411 1,518
---------------------------------------------------------------------------------------------------
NET INCOME $ 130 $ 85 $ 258 $ 173
===================================================================================================
</TABLE>
Hartford Life Insurance Company has the following reportable segments:
Investment Products, Individual Life and Corporate Owned Life Insurance (COLI).
The Company reports in "Other" corporate items not directly allocable to any of
its segments, as well as certain group benefits business, including group life
and disability insurance that is directly written by the Company and is
substantially ceded to its parent, Hartford Life and Accident Insurance Company
(HLA).
Revenues decreased slightly for the respective second quarter and six month
periods. Excluding net realized capital gains (losses) and the COLI segment,
where revenues decreased primarily due to the declining block of leveraged COLI
business, revenues increased $58, or 9%, and $121, or 10%, for the second
quarter and six months ended June 30, 2000, respectively, as compared to the
equivalent 1999 periods. The increase in revenues was primarily attributable to
growth in the Investment Products segment which was, for the most part, due to
higher fee income related to the individual annuity operation which is directly
attributable to increased assets under management.
Expenses decreased $67, or 9%, and $107, or 7%, for the second quarter and six
months ended June 30, 2000, respectively, as compared to the equivalent 1999
periods. Excluding tax benefits (described below) and the COLI segment where
expenses decreased primarily due to the declining block of leveraged COLI
business, expenses increased slightly for both periods. The increase in expenses
was lower than the growth in revenues as the Company continues to create
operating leverage by expanding its distribution platform to accelerate sales
volume while utilizing technology and prudent expense management to increase
productivity.
Net income increased $45, or 53%, and $85, or 49%, for the second quarter and
six months ended June 30, 2000, respectively, as compared to the equivalent 1999
periods driven by increases in net income across each of the Company's
reportable segments for the six months. The Company also reported a benefit
related to federal income taxes of $24 for the second quarter of 2000 (see Note
2 (b) of Notes to Consolidated Financial Statements). This, along with an $8
benefit related to state income taxes in the first quarter of 2000,
9
<PAGE> 10
resulted in a $32 increase to net income for the six months ended June 30, 2000.
Partially offsetting this increase, the Company realized $21 and $24 of net
realized capital losses during the respective periods, primarily as a result of
portfolio re-balancing. Excluding the tax items and the net realized capital
gains (losses), net income was up $44, or 53%, and $78, or 45%, for the
respective second quarter and six month periods.
SEGMENT RESULTS
Below is a summary of net income (loss) by segment.
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------------- -------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Products $ 93 $ 81 $ 176 $ 159
Individual Life 16 17 34 32
Corporate Owned Life Insurance (COLI) 8 7 16 13
Other 13 (20) 32 (31)
--------------------------------------------------------------------------------------------
NET INCOME $ 130 $ 85 $ 258 $ 173
============================================================================================
</TABLE>
The sections that follow analyze each segment's results.
INVESTMENT PRODUCTS
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------- --------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 511 $ 474 $1,026 $ 935
Expenses 418 393 850 776
---------------------------------------------------------------------------------------------
NET INCOME $ 93 $ 81 $ 176 $ 159
=============================================================================================
</TABLE>
Revenues in the Investment Products segment increased $37, or 8%, and $91, or
10%, for the second quarter and six months ended June 30, 2000, respectively, as
compared to the equivalent 1999 periods, primarily due to higher fee income in
the individual annuity operation. Fee income generated by individual annuities
increased $37, or 13%, and $91, or 17%, for the respective second quarter and
six month periods, as related account values grew $11.8 billion, or 15%, from
June 30, 1999. The growth in individual annuity account values was mostly due to
strong sales (including $5.8 billion for the first six months of 2000) and
equity market appreciation.
Due to the continued growth in this segment, particularly the individual annuity
operation, expenses increased $25, or 6%, or $74, or 10%, for the second quarter
and six months ended June 30, 2000, respectively, as compared to the equivalent
1999 periods. These increases were primarily driven by amortization of deferred
policy acquisition costs, which grew $15, or 15%, and $37, or 18%, for the
respective second quarter and six month periods and other expenses which
increased $23, or 28%, and $34, or 20%, over the respective prior year levels.
The segment's operating expenses as a percentage of average assets under
management were relatively consistent for the second quarter and six month
periods versus the equivalent prior year periods.
Net income increased $12, or 15%, and $17, or 11%, for the second quarter and
six months ended June 30, 2000, respectively, as compared to the equivalent 1999
periods, primarily due to the growth in revenues associated with the increase in
assets under management across the entire segment. Additionally, the Investment
Products segment continued to maintain its profit margins related to its primary
businesses thus contributing to the segment's earnings growth.
INDIVIDUAL LIFE
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------- --------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 132 $ 140 $ 264 $ 273
Expenses 116 123 230 241
---------------------------------------------------------------------------------------------
NET INCOME $ 16 $ 17 $ 34 $ 32
=============================================================================================
</TABLE>
The slight decrease in revenues and expenses in the Individual Life segment is
primarily due to HLA's December 1, 1999 recapture of an in force block of
individual life insurance previously ceded to the Company. (For a discussion of
the recapture, see Note 9 of Notes to Consolidated Financial Statements in
Hartford Life Insurance Company's 1999 Form 10-K Annual Report.)
10
<PAGE> 11
Excluding the recapture described above, revenues in the Individual Life segment
increased $15, or 13%, and $37, or 16%, for the second quarter and six months
ended June 30, 2000, respectively, as compared to the equivalent 1999 periods.
This increase in revenues is attributable to higher fee income associated with
the growing block of variable life insurance. Fee income increased $17, or 21%,
and $40, or 27%, for the respective second quarter and six month periods, as
variable life account values increased $827, or 41%, and variable life insurance
in force increased $9.1 billion, or 47%, from June 30, 1999.
Excluding the recapture described above, expenses increased $14, or 14%, and
$33, or 17%, for the second quarter and six months ended June 30, 2000,
respectively, as compared to the equivalent 1999 periods. The increase in
expenses for the second quarter was principally due to a $7, or 15%, increase in
benefits, claims and claim adjustment expenses related to the growing block of
business. The increase in expenses for the six month period was primarily due to
a $15, or 33%, increase in amortization of deferred policy acquisition costs
which was also associated with the growth in this segment's variable life
business. Excluding the recapture described above, net income increased $1, or
7%, and $4, or 12%, for the respective periods, primarily due to the higher fee
income previously discussed, and favorable mortality experience as death
benefits through six months remained level with 1999, while life insurance in
force increased 12%.
CORPORATE OWNED LIFE INSURANCE (COLI)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------- --------------------
2000 1999 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 169 $ 215 $ 334 $ 439
Expenses 161 208 318 426
--------------------------------------------------------------------------------------------
NET INCOME $ 8 $ 7 $ 16 $ 13
=============================================================================================
</TABLE>
COLI revenues decreased $46, or 21%, and $105, or 24%, for the second quarter
and six months ended June 30, 2000, respectively, as compared to the equivalent
prior year periods. Net investment income decreased $21, or 20%, and $55, or
24%, for the respective second quarter and six month periods primarily due to
the leveraged COLI block of business, as related account values decreased $1.2
billion, or 20%, as result of the downsizing caused by the Health Insurance
Portability and Accountability Act of 1996. Revenues also decreased due to lower
sales in 2000 as compared to 1999.
Expenses decreased $47, or 23%, and $108, or 25%, for the second quarter and six
months ended June 30, 2000, respectively, as compared to the equivalent prior
year periods due to the factors described above. Net income increased $1, or
14%, and $3, or 23%, for the respective second quarter and six month periods.
These increases were primarily attributable to the variable COLI business where
account values increased $1.1 billion, or 9%, as well as increased earnings
associated with a block of leveraged COLI business recaptured (MBL Recapture) in
1998. (For a discussion of the MBL Recapture, see the Capital Resources and
Liquidity section in Hartford Life Insurance Company's 1999 Form 10-K Annual
Report.)
REGULATORY MATTERS AND CONTINGENCIES
NAIC PROPOSALS
The NAIC adopted the Codification of Statutory Accounting Principles (SAP) in
March 1998. The effective date for the statutory accounting guidance is January
1, 2001. It is expected that Hartford Life Insurance Company and its
subsidiaries' domiciliary state will adopt the SAP and the Company will make the
necessary changes required for implementation. The Company has not yet
determined the impact that the SAP will have on the statutory financial
statements of Hartford Life Insurance Company and its subsidiaries.
DEPENDENCE ON CERTAIN THIRD PARTY RELATIONSHIPS
Hartford Life Insurance Company distributes its annuity and life insurance
products through a variety of distribution channels, including broker-dealers,
banks, wholesalers, its own internal sales force and other third party marketing
organizations. The Company periodically negotiates provisions and renewals of
these relationships and there can be no assurance that such terms will remain
acceptable to the Company or such service providers. An interruption in the
Company's continuing relationship with certain of these third parties could
materially affect the Company's ability to market its products.
ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Consolidated
Financial Statements.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Hartford Life Insurance Company is involved in pending and threatened litigation
in the normal course of its business in which claims for alleged economic and
punitive damages have been asserted. Some of these cases have been filed as
purported class actions and some cases have been filed in certain jurisdictions
that permit punitive damage awards disproportionate to the actual damages
incurred. Although there can be no assurances, at the present time the Company
does not anticipate that the ultimate liability arising from such pending or
threatened litigation, after consideration of provisions made for estimated
losses and costs of defense, will have a material adverse effect on the
financial condition or operating results of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibits Index.
(b) Reports on Form 8-K - None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARTFORD LIFE INSURANCE COMPANY
/s/ Mary Jane B. Fortin
----------------------------------
Mary Jane B. Fortin
Vice President and Chief
Accounting Officer
AUGUST 11, 2000
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HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
FORM 10-Q
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT # DESCRIPTION
--------- -----------
<S> <C>
27 Financial Data Schedule is filed herewith.
</TABLE>
14
