<PAGE> 1
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 September 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 November 13, 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.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income - Third Quarter and
Nine Months Ended September 30, 2000 and 1999 3
Consolidated Balance Sheets - September 30, 2000 and
December 31, 1999 4
Consolidated Statements of Changes in Stockholder's Equity -
Nine Months Ended September 30, 2000 and 1999 5
Consolidated Statements of Cash Flows - Nine Months Ended
September 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>
THIRD QUARTER NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------
(In millions) (Unaudited) 2000 1999 2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Premiums and other considerations $588 $513 $1,653 $1,517
Net investment income 338 333 979 1,019
Net realized capital gains (losses) (7) -- (44) 1
-----------------------------------------------------------------------------------
TOTAL REVENUES 919 846 2,588 2,537
-------------------------------------------------------------------------------
BENEFITS, CLAIMS AND EXPENSES
Benefits, claims and claim adjustment expenses 372 379 1,086 1,195
Amortization of deferred policy acquisition costs 163 141 462 396
Dividends to policyholders 7 70 53 97
Other expenses 188 105 456 432
-----------------------------------------------------------------------------------
TOTAL BENEFITS, CLAIMS AND EXPENSES 730 695 2,057 2,120
-------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 189 151 531 417
Income tax expense 60 51 144 144
-----------------------------------------------------------------------------------
NET INCOME $129 $100 $ 387 $ 273
===================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER
(In millions, except for share data) 2000 31, 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
(Unaudited)
ASSETS
Investments
Fixed maturities, available for sale, at fair value
(amortized cost of $13,851 and $13,923) $ 13,599 $ 13,499
Equity securities, at fair value 51 56
Policy loans, at outstanding balance 3,561 4,187
Other investments 727 342
-----------------------------------------------------------------------------------------------------
Total investments 17,938 18,084
Cash 95 55
Premiums receivable and agents' balances 23 29
Reinsurance recoverables 1,267 1,274
Deferred policy acquisition costs 4,242 4,013
Deferred income tax 462 459
Other assets 555 654
Separate account assets 118,333 110,397
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 142,915 $ 134,965
================================================================================================
LIABILITIES
Future policy benefits $ 4,643 $ 4,332
Other policyholder funds 14,796 16,004
Other liabilities 2,223 1,613
Separate account liabilities 118,333 110,397
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 139,995 132,346
================================================================================================
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 (156) (255)
------------------------------
Total accumulated other comprehensive loss (156) (255)
------------------------------
Retained earnings 2,025 1,823
-----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 2,920 2,619
================================================================================================
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 142,915 $ 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
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
-------------
NET
UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, RETAINED STOCKHOLDER'S
(In millions) (Unaudited) STOCK SURPLUS NET OF 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 387 387
-----------
Other comprehensive income (loss), net of tax
Net unrealized capital gains (losses) on securities (1) 99 99
-----------
Total other comprehensive income (loss) 99
-----------
Total comprehensive income (loss) 486
-----------
Dividends paid to parent (185) (185)
==================================================================================================================================
BALANCE, SEPTEMBER 30, 2000 $ 6 $ 1,045 $ (156) $ 2,025 $ 2,920
==================================================================================================================================
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
-------------
NET
UNREALIZED
CAPITAL GAINS
(LOSSES) ON TOTAL
COMMON CAPITAL SECURITIES, RETAINED STOCKHOLDER'S
(In millions) (Unaudited) STOCK SURPLUS NET OF 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 273 273
-----------
Other comprehensive income (loss), net of tax
Net unrealized capital gains (losses) on securities (1) (353) (353)
-----------
Total other comprehensive income (loss) (353)
-----------
Total comprehensive income (loss) (80)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 $ 6 $ 1,045 $ (169) $ 1,735 $ 2,617
==================================================================================================================================
</TABLE>
(1) Net unrealized capital gains (losses) on securities are reflected net
of tax provision (benefit) of $53 and $(190) for the nine months ended
September 30, 2000 and 1999, respectively. There were reclassification
adjustments for after-tax gains (losses) realized in net income of
$(29) and $1 for the nine months ended September 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>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
(In millions) (Unaudited) 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 387 $ 273
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation and amortization (20) (8)
Net realized capital losses (gains) 44 (1)
Decrease (increase) in premiums receivable and agents' balances 6 (15)
Increase (decrease) in other liabilities 169 (97)
Change in receivables, payables and accruals 40 142
Increase (decrease) in accrued tax 262 (200)
(Increase) decrease in deferred income tax (56) 164
Increase in deferred policy acquisition costs (229) (258)
Increase in future policy benefits 311 438
Decrease (increase) in reinsurance recoverables 27 (162)
Other, net 79 (100)
===================================================================================================
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,020 176
===================================================================================================
INVESTING ACTIVITIES
Purchases of investments (4,134) (5,132)
Sales of investments 3,458 6,434
Maturities and principal paydowns of fixed maturity investments 1,117 1,338
Purchase of affiliates and other 2 --
===================================================================================================
NET CASH PROVIDED BY INVESTING ACTIVITIES 443 2,640
===================================================================================================
FINANCING ACTIVITIES
Dividends paid to parent (185) --
Net disbursements for investment and universal life-type
contracts charged against policyholder accounts (1,238) (2,798)
---------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (1,423) (2,798)
===================================================================================================
Net increase in cash 40 18
Cash - beginning of period 55 17
---------------------------------------------------------------------------------------------------
CASH - END OF PERIOD $ 95 $ 35
===================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NET CASH PAID DURING THE PERIOD FOR
Income taxes $ 34 $ 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 October 2000, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
a Replacement of SFAS No. 125". SFAS No. 140 carries forward most of SFAS No.
125's provisions without amendment. However, it revises criteria for accounting
for certain transfers of financial assets and the reporting and disclosure
requirements for collateral arrangements. SFAS No. 140's disclosure requirements
must be applied for fiscal years ending after December 15, 2000. The other
provisions of SFAS No. 140 apply prospectively to transactions and commitments
occurring after March 31, 2001. Implementation of the accounting provisions of
SFAS No. 140 is not expected to have a material impact on the Company's
financial condition or results of operations.
In July 2000, the Emerging Issues Task Force (EITF) reached consensus on Issue
No. 99-20, "Recognition of Interest Income and Impairment on Certain
Investments". This pronouncement requires investors in certain asset-backed
securities to record changes in their estimated yield on a prospective basis and
to evaluate these securities for an other-than-temporary decline in value. This
consensus is effective for financial statements with fiscal quarters beginning
after December 15, 2000. While the Company is currently in the process of
quantifying the impact of EITF No. 99-20, the consensus provisions are not
expected to have a material impact on the Company's financial condition or
results of operations.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", which amended SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
established accounting and reporting requirements for derivative instruments,
including certain derivative instruments embedded in other contracts. SFAS No.
133 requires, among other things, that all derivatives be carried on the balance
sheet at fair value. SFAS No. 133 also specifies hedge accounting criteria under
which a derivative can qualify for special accounting. SFAS No. 138 amended SFAS
No. 133 so that for 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. Initial application of SFAS No. 133, as amended, for Hartford
Life Insurance Company will begin January 1, 2001. Implementation of SFAS No.
133, as amended, is not expected to have a material impact on the Company's
financial condition or results of operations. However, the FASB's Derivative
Implementation Group continues to deliberate on multiple issues, the resolution
of which could have a significant impact on the Company's expectations.
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.
7
<PAGE> 8
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. 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.
During the second quarter of 2000, 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
SEPTEMBER 30, 2000 Products Life COLI Other Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THIRD QUARTER ENDED
Total revenues $ 522 $ 141 $ 238 $ 18 $ 919
Net income 86 19 9 15 129
-------------------------------------------------------------------------------
NINE MONTHS ENDED
Total revenues $ 1,548 $ 405 $ 572 $ 63 $2,588
Net income 262 53 25 47 387
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investment Individual
SEPTEMBER 30, 1999 Products Life COLI Other Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THIRD QUARTER ENDED
Total revenues $ 468 $ 148 $ 220 $ 10 $ 846
Net income 69 19 7 5 100
-------------------------------------------------------------------------------
NINE MONTHS ENDED
Total revenues $ 1,403 $ 421 $ 659 $ 54 $2,537
Net income (loss) 228 51 20 (26) 273
-------------------------------------------------------------------------------
</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 September 30, 2000, compared with December 31, 1999, and its results of
operations for the third quarter and nine months ended September 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
Consolidated Results of Operations 9
Investment Products 10
Individual Life 10
Corporate Owned Life Insurance (COLI) 11
Regulatory Matters and Contingencies 11
Accounting Standards 12
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
OPERATING SUMMARY THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 919 $ 846 $ 2,588 $ 2,537
Expenses 790 746 2,201 2,264
--------------------------------------------------------------------------------
NET INCOME $ 129 $ 100 $ 387 $ 273
================================================================================
</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 increased $73, or 9%, and $51, or 2%, for the third quarter and nine
months ended September 30, 2000, respectively, as compared to the equivalent
1999 periods. The increases in revenues were 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. Additionally, for the third
quarter the COLI segment's revenues increased primarily due to fees generated
from strong sales. Partially offsetting the growth in the nine month period was
a decline in the COLI segment's revenues primarily due to the declining block of
leveraged COLI business.
Expenses increased $44, or 6%, for the third quarter, while expenses for the
nine month period decreased $63, or 3%, as compared to the equivalent prior year
periods due to the factors described above.
Net income increased $29, or 29%, and $114, or 42%, for the third quarter and
nine months ended September 30, 2000, respectively, as compared to the
equivalent 1999 periods primarily driven by increases in net income across each
of the Company's reportable segments for the nine months. The Company also
reported a benefit related to the settlement of certain federal tax matters of
$24 for the second quarter of 2000 (see Note 2 (b) of Notes to Consolidated
Financial Statements). This benefit, along with an $8 benefit related to state
income taxes in the first quarter of 2000, resulted in $32 of tax benefits for
the nine months ended September 30, 2000. Partially offsetting the increase for
the nine month period, the Company realized $29 of net realized capital losses,
primarily as a result of
9
<PAGE> 10
portfolio re-balancing. Excluding the tax items and the net realized capital
losses, net income increased $111, or 41%, for the nine months ended September
30, 2000.
SEGMENT RESULTS
Below is a summary of net income (loss) by segment.
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Products $ 86 $ 69 $ 262 $ 228
Individual Life 19 19 53 51
Corporate Owned Life Insurance (COLI) 9 7 25 20
Other 15 5 47 (26)
--------------------------------------------------------------------------------
NET INCOME $ 129 $ 100 $ 387 $ 273
================================================================================
</TABLE>
The sections that follow analyze each segment's results.
INVESTMENT PRODUCTS
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 522 $ 468 $ 1,548 $ 1,403
Expenses 436 399 1,286 1,175
-------------------------------------------------------------------------------
NET INCOME $ 86 $ 69 $ 262 $ 228
===============================================================================
</TABLE>
Revenues in the Investment Products segment increased $54, or 12%, and $145, or
10%, for the third quarter and nine months ended September 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 $58, or 22%, and $149, or 19%, for the respective
third quarter and nine month periods, as related account values grew $14.7
billion, or 19%, from September 30, 1999. This substantial growth was mostly due
to strong individual annuity sales (including $8.5 billion for the first nine
months of 2000) and equity market appreciation.
Due to the continued growth in this segment, particularly the individual annuity
operation, expenses increased $37, or 9%, or $111, or 9%, for the third quarter
and nine months ended September 30, 2000, respectively, as compared to the
equivalent 1999 periods. These increases were primarily driven by amortization
of deferred policy acquisition costs, which grew $24, or 23%, and $61, or 20%,
for the respective third quarter and nine month periods and other expenses which
increased $9, or 10%, and $43, or 17%, over the respective prior year levels.
The segment's operating expenses as a percentage of average assets under
management declined slightly for the third quarter and nine months ended versus
the respective prior year periods.
Net income increased $17, or 25%, and $34, or 15%, for the third quarter and
nine months ended September 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>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------
2000 1999 2000 1999
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 141 $ 148 $ 405 $ 421
Expenses 122 129 352 370
-------------------------------------------------------------------------------
NET INCOME $ 19 $ 19 $ 53 $ 51
===============================================================================
</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 $16, or 13%, and $53, or 15%, for the third quarter and nine months
ended September 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 $13, or 15%, and $53, or 22%, for the respective third quarter and
nine month periods, as variable life account values increased $918, or 44%, and
variable life insurance in force increased $9.7 billion, or 46%, from September
30, 1999.
Excluding the recapture described above, expenses increased $14, or 13%, and
$47, or 15%, for the third quarter and nine months ended September 30, 2000,
respectively, as compared to the equivalent 1999 periods. The increases in
expenses were primarily due to a $4, or 9%, and $12, or 8%, increase in
benefits, claims and claim adjustment expenses for the respective third quarter
and nine month periods and other expenses which increased $7, or 40%, and $16,
or 29%, over the respective prior year levels. These increases were associated
with the growth in this segment as indicated above. Additionally, for the nine
month period, amortization of deferred policy acquisition costs increased $15,
or 19%, primarily associated with the growth in this segment's variable
business. Excluding the recapture described above, net income increased $2, or
12%, and $6, or 13%, for the respective periods, primarily due to the higher fee
income as year-to-date mortality was essentially in line with prior year.
CORPORATE OWNED LIFE INSURANCE (COLI)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 238 $ 220 $ 572 $ 659
Expenses 229 213 547 639
--------------------------------------------------------------------------------
NET INCOME $ 9 $ 7 $ 25 $ 20
================================================================================
</TABLE>
COLI revenues increased $18, or 8%, for the third quarter ended September 30,
2000, from the respective prior year period, while for the nine month period,
revenues decreased $87, or 13%. The revenue increase in the third quarter was
primarily due to an increase in fee income of $22, or 19%, associated with
strong sales of $2.5 billion in the third quarter 2000.
For the nine month period, revenues decreased primarily due to a decline in net
investment income of $59, or 18%. This decline was primarily due to the
leveraged COLI block of business, as related account values decreased $786, or
14%, as a result of the downsizing caused by the Health Insurance Portability
and Accountability Act of 1996.
Expenses increased $16, or 8%, for the third quarter, while expenses for the
nine month period decreased $92, or 14%, respectively, as compared to the
equivalent prior year periods due to the factors described above.
Net income increased $2, or 29%, and $5, or 25%, for the third quarter and nine
months ended September 30, 2000, respectively, as compared to the equivalent
prior year periods. The increase was primarily attributable to the variable COLI
business where account values increased $3.5 billion, or 29%, as well as
increased earnings associated with a block of leveraged COLI business recaptured
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. Hartford Life Insurance Company and its subsidiaries' domiciliary state
has adopted 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.
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ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 of Notes to Consolidated
Financial Statements.
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. 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
NOVEMBER 13, 2000
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HARTFORD LIFE INSURANCE COMPANY AND SUBSIDIARIES
FORM 10-Q
EXHIBITS INDEX
EXHIBIT # DESCRIPTION
27 Financial Data Schedule is filed herewith.
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